The opinion of the court was delivered by: MURPHY
On this motion, the government seeks dismissal of the complaint pursuant to Rule 12(b), Federal Rules of Civil Procedure, 28 U.S.C.A. The motion is based upon two sections of the Internal Revenue Codes of 1939 and of 1954, one being a statute of limitations,
the other a provision that where a taxpayer applies to the Tax Court to review a deficiency determined by the Commissioner of Internal Revenue, he cannot bring an action in the District Court for refund.
A third ground for the motion, added later,
is the time bar of Section 207(b) of the Technical Changes Act of 1953.
Plaintiff's claim arises out of proper valuation of the corpus of an inter vivos trust under § 302(c) of the Revenue Act of 1926.
The decedent, Lester Field, died on November 16, 1937, in Paris, France, as a citizen of the United States. On June 8, 1922, the decedent transferred to a trustee certain assets valued at the time of his death at $ 157,452.82. The material portions of the trust and events have been thus summarized:
'1. The trust was to continue for the joint lives of two nieces and the life of the survivor of them unless terminated earlier under 4, infra.
'2. The income was to be paid to the decedent for his life unless the trust terminated before his death.
'3. If the decedent died prior to the termination of the trust leaving issue, the trust property was to be held in trust for the children or their issue, subject to decedent's right to reduce or cancel the amounts of the gifts by will or written instrument. Provisions were also made for a $ 150,000 trust for the widow which is not in issue in this case.
'4. During the continuance of the trusts the income was to be paid to the beneficiary named and upon the death of the beneficiary during the continuance of the trust the corpus was to be paid to the beneficiary's issue surviving, but if there be none, to the issue of the decedent surviving; if none, then to decedent's brother or sister or their issue.
'5. Upon termination of the trust before the death of the decedent the corpus was to be paid over to decedent.
'6. Upon termination of the trust after the death of the decedent but during the existence of any trust the corpus was to be paid to the life beneficiary.
'The decedent at no time had any issue. At his death in 1937 at the age of 52, he was survived by the two nieces whose lives were to measure the maximum life of the trust. These nieces were then aged 18 and 25 respectively. He was also survived by his widow, a sister and issue of a deceased brother.'
Various deficiencies were assessed against the estate of Lester Field because of plaintiff's failure to include in its estate tax returns the assets covered by the deed of 1922. Plaintiff petitioned the Tax Court for review. An adverse determination there
was reversed by the Court of Appeals, which remanded the case to the Tax Court with directions to include in the gross estate only $ 24,930.76 -- the value at time of death of a remainder of $ 157,452.82 payable at all events upon death of the survivor of two females, aged 18 and 25 respectively.
The Supreme Court reversed, thus affirming the Tax Court, observing:
'The trust here was limited in duration to the lives of the decedent's two nieces. But if both nieces died before the decedent, the corpus would have been paid to the decedent rather than to the beneficiaries named in the trust instrument (in this instance the decedent's sister and the issue of his deceased brother). Thus until decedent's death it was uncertain whether any of the corpus would pass to the beneficiaries or whether it would revert to the decedent. Decedent retaining a string attached to all the property until death severed it, the entire corpus was swept into the gross estate and was taxable accordingly.'
This claim is based on Section 607 of the Revenue Act of 1951, 26 U.S.C.A. § 811 note, which provides:
'Transfers conditioned upon survivorship. In the case of property transferred by a decedent dying after March 18, 1937, and before February 11, 1939, the determination of whether such property is to be included in his gross estate under section 302(c) of the Revenue Act of 1926 (44 Stat. 70) as a transfer intended to take effect in possession or enjoyment at or after his death shall be made in conformity with Treasury Regulations in force at the time of his death.'
The government concedes that, for purposes of this motion, plaintiff's claim would be allowable under the 'Treasury Regulations in force at the time of his death.'