The opinion of the court was delivered by: CAMPBELL
CAMPBELL, District Judge.
This is a suit for the recovery of $31,473.27 alleged to have been illegally collected from the plaintiff as estate taxes upon the estate of Elizabeth C. G. Russell, deceased.
An indenture of trust executed by the decedent granted to her sister a life estate upon the decedent's death; the decedent reserved the right to dispose of the corpus of the trust by her last will and testament.
The question here presented is whether or not the life estate of the sister is subject to estate taxes as a gift to take effect in possession or enjoyment at or after death, within the meaning of Section 302(c) of the Revenue Act of 1926, 26 U.S.C.A. Int.Rev. Acts, page 227.
The Statute involved is Revenue Act of 1926, c. 27, Stat. 9:
"Sec. 302. The value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated --
"(c) To the extent of any interest therein of which the decedent has at any time made a transfer, by trust or otherwise, in contemplation of or intended to take effect in possession or enjoyment at or after his death, except in case of a bona fide sale for an adequate and full consideration in money or money's worth. * * *"
By an indenture dated January 3, 1928, the decedent placed in trust a substantial amount of property. Under the terms of the trust the trustee was directed to pay the net income from the corpus to the decedent during her lifetime and, upon her death, to pay the net income to her sister, Sarah B. Russell, for life. Indenture further provided upon the death of the grantor's sister, Sarah B. Russell, or if grantor's sister, Sarah B. Russell, predeceased the grantor, then upon the death of the grantor to transfer and pay over the principal of said trust fund as the grantor may, by her last will and testament, appoint, and in default of such appointment, the same shall constitute and be disposed of as a part of the estate of the grantor.
The decedent died on April 4, 1939, leaving a last will and testament, dated July 27, 1932, which was duly admitted to probate, by which she disposed of the corpus of the trust.
The executor, in its federal estate tax return, excluded from the decedent's gross estate the value of the sister's life estate.
The Commissioner determined that the life estate to the sister was a gift to take effect in possession or enjoyment at death, and that its value was properly includible in the taxable estate. Consequently, he assessed a deficiency in the amount sought to be recovered, which was paid by the estate.
A claim for repayment of the amount so paid was made to the Commissioner, which he rejected, and this action followed.
The plaintiff herein, as executor of the estate of Elizabeth C. G. Russell, contends that the trust inter vivos was irrevocable, and not subject to power of modification or control by the settlor, and was completely vested in Sarah B. Russell, at the time of the ...