The opinion of the court was delivered by: MOSCOWITZ
Motions for summary judgment under Rule 56 of the Federal Rules of Civil Procedure 28 U.S.C.A.following section 723c, have been made by both parties. The action is brought by the executor of Henry Hill, deceased, to recover the sum of $ 9,353.98 with interest, representing the portion of the federal estate tax paid under protest by that estate.
Henry Hill died on August 11, 1941. Under date of November 1, 1934, the decedent executed a trust indenture, transferring to the Fifth Avenue Bank of New York, as trustee, the sum of $ 100,000, the material portions of the said instrument reading as follows:
'First: (a) To hold, manage, invest and reinvest the same and to collect and receive the rents, issues, profits, interests and other income therefrom, and after the deduction of all taxes, other proper charges and expenses incident to the administration of the trust to pay the net income therefrom in quarter annual installments to Henry Hill Vidal, daughter of the Grantor, during her lifetime.
'(b) Upon the death of said Louise Hill Vidal, thereafter to pay the net income in quarter annual installments to Henry Hill Vidal, grandson of the Grantor for and during his lifetime.
'Second: Upon the death of said Henry Hill Vidal, if he shall survive the said Louise Hill Vidal, or upon the death of said Louise Hill Vidal, if the said Henry Hill Vidal shall predecease her, then to assign, transfer and pay over the principal of said trust, to the issue of said Henry Hill Vidal, in shares per stirpes and not per capita, or if the said Henry Hill Vidal leave no issue him surviving, then to pay over such principal to Eunice Hill Weber, niece of the Grantor, if living, or if she be dead, then to her issue and the issue of her brother and sister, then living, in equal shares per capita and not per stirpes.
'Third: During the lifetime of the Grantor the Trustee is hereby authorized and empowered to invest in such securities as it may deem best, and shall not be limited to investments prescribed by the Laws of the State of New York for trustees, except however, that during the existence of this trust the Trustee shall not invest in stocks, bonds or other securities of railroad corporations or their subsidiaries. After the death of the Grantor the Trustee is authorized and empowered to retain the property and securities then comprising the trust fund, or any part thereof, or to convert the same, or any part thereof, into cash and to invest and reinvest the proceeds in such securities as are prescribed by the Laws of the State of New York for trustees. The Trustee shall not be liable for any depreciation in value or loss occasioned by the retention, purchase or sale of securities by it. The Grantor hereby reserves the right to amend or alter the provisions of this paragraph, but no amendment or alteration shall be made which shall, in any way, increase the obligations of the Trustee hereunder.'
The parties have stipulated that the ages of the settlor and of the persons in whom interests were created by the trust agreement were at the time of its execution as follows: Henry Hill, settlor, 71 years; Louise Hill Vidal, first life beneficiary, 49 years; Henry Hill Vidal, second life beneficiary, 14 years; Eunice Hill Weber, niece of the settlor, 33 years; Lawson Rutherford, 2 years, and Howard Hill Weber, Jr., 9 years, being issue of the brother and sister of the settlor's niece, Eunice Hill Weber.
The disputed tax was assessed under authority of the Internal Revenue Act of 1926, as amended, Section 302 of which specifies what shall be included in the gross estate of a decedent for the purpose of determining the estate tax to be paid. It is the defendant's view that the tax applies to the property transferred during the decedent's lifetime in 1934 to the trustee and never in fact recovered by the settlor for two reasons which will be considered separately.
Firstly, it is the defendant's view that this trust comes within the provisions of Section 302(c),
which reads as follows:
'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 * * *
'(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, or of which he has at any time made a transfer, by trust or otherwise, under which he has retained for his life or for any period not ascertainable without reference to his death or for any period which does not in fact end before his death (1) the possession or enjoyment of, or the right to the income from, the property, or (2) the right, either alone or in conjunction with any person, to designate the persons who shall possess or enjoy the property or the income therefrom; except in case of a bona fide sale for an adequate and full consideration in money or money's worth. * * * '
Assuming the trust to be irrevocable, it is argued that the settlor has made no provision for the disposition of the corpus in case all the named contingent remaindermen predeceased him or the life tenants, in which event the corpus would revert to the settlor or to his estate upon the death of the two life beneficiaries, and that this possibility of reverter would not be terminated until the settlor's death, thus being a 'transfer to take effect in possession or enjoyment at or after (the) death' of the grantor. Under this view the defendant contends that the corpus of the trust is taxable, minus the value of the vested life estate to Louise Hill Vidal.
The case of Helvering v. Hallock, 309 U.S. 106, 60 S. Ct. 444, 84 L. Ed. 604, 125 A.L.R. 1368, is relied upon by the defendant but the factual situation is far from analogous to that before this Court and decisions since the Hallock case have confined the application of its holding to its own particular facts. There the decedent had created an inter vivos trust, income to be paid to his wife during her life, corpus to be returned upon her death to the grantor if he was still living or to his children if he were not alive. The Supreme Court merely approved its decision in 1931 involving almost identical facts (Klein v. United States, 283 U.S. 231, 51 S. Ct. 398, 75 L. Ed. 996) and relieved it of technical distinctions based on the form of conveyancing subsequently ...