Colorado National Bank v. Commissioner

Delivered the opinion of the Court.

Edwin B. Hendrie of Denver, Colorado, January 26, 1925, executed a will wherein he gave his property, with relatively small exceptions, to trustees to be held for the benefit of his daughter, Gertrude Hendrie Grant, and her children. January 7, 1927, when eighty years old and in good health, he irrevocably conveyed in trust to the Colorado National Bank, securities of large value — perhaps $800,000. The deed among other things provided that the income should be accumulated during the donor’s life; after his death and during the life of his daughter Gertrude so much thereof as she asked should be paid to her and the remainder added to the principal; upon her death the corpus should be distributed to her descendants, etc.

Hendrie died July 15,1932. His 1925 will was duly probated and under it property worth some $900,000 passed. The Commissioner ruled that the 1927 trust was set up in contemplation of death within the meaning of § 302 (c), Revenue Act of 1926, as amended, treated the property in the trustee’s hands as part of the gross estate, and assessed taxes thereon accordingly.

The Board of Tax Appeals considered the relevant facts and held the conveyance of 1927 “was not made in contemplation of death within the meaning of the statute as explained in United States v. Wells, 283 U. S. 102.”

The Circuit Court of Appeals ruled that the transfer was in contemplation of death, and reversed the Board’s decision. We think this was error. The decision of the Board should have been approved.

The court declared — “Each case must be determined by its own facts and circumstances. ... It is settled law that a finding of fact made by the Board of Tax Appeals will not be disturbed on review if it is supported by substantial evidence. But whether there is substantial evidence to support a finding is a question of law. . . . And a finding not thus supported will be set aside.” These statements are hi accord with our holdings.

Also it said — “The test lies in the motive for the transfer. If the generating source of the motive is associated with life, the transfer is not made in contemplation of death. But if the generating inducement is associated with death, either immediate or distant, the transfer is made in such contemplation. A gift is made in contemplation of death where the dominant motive of the donor is to make proper provision for the object of his bounty-after the death of the donor.”

Following a review of the evidence it said — “The dominant purpose was to make provision for his descendants after his death, in the event his speculations proved tragic. It was to place that substantial amount of property in an asylum of immunity from adverse consequences of speculation, in order to make certain that it would be used for his daughter and her children after his death. . . . The purpose was a commendable one, but the generating motive for a transfer made in such circumstances is associated with death.”

In the light of the views so stated the court concluded there was no substantial evidence to establish that the transfer was not made in contemplation of death. One judge, dissenting, declared — “It seems clear from the un-contradicted testimony that Mr. Hendrie’s gift to his daughter and her children was not made in contemplation of death but in order that he might speculate upon the stock market for the remainder of his life more actively than he had in the past without fear that the part of his fortune thus given might be lost. He manifested no other intent and purpose in that respect.”

There was evidence which the Board thought adequate, and which we deem substantial, to support its conclusion. Dominant purpose was a question of fact for determination by the Board.

The court’s opinion seems to rest upon an erroneous interpretation of the term “in contemplation of death.” The meaning of this was much discussed in United States v. Wells, supra. We adhere to what was there said. The mere purpose to make provision for children after a donor’s death is not enough conclusively ta establish that action to that end was “in contemplation of death.” Broadly speaking, thoughtful men habitually act with regard to ultimate death, but something more than this is required in order to show that a conveyance comes within the ambit of the statute.

Here, the Board having before it all the circumstances, including the provisions of the will, concluded that they disclosed an effective motive not directly springing from apprehension of death. And as pointed out by the dissenting judge there was substantial basis for that view. Its action is in accord with principles accepted by us in Shukert v. Allen, 273 U. S. 545, Reinecke v. Northern Trust Co., 278 U. S. 339, May v. Heiner, 281 U. S. 238, McCormick v. Burnet, 283 U. S. 784, Becker v. St. Louis Union Trust Co., 296 U. S. 48.

The judgment of the Circuit Court of Appeals must be reversed. The decision of the Board of Tax Appeals is approved.

Reversed.

Mr. Justice Reed concurs on the ground that the conclusion of the Board that the transfer was not made in contemplation of death was justified. There was substantial evidence of a life motive and the Board did not find an effective motive in contemplation of death.

Revenue Act of 1926, c. 27, 44 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—

“(a) To the extent of the interest therein of the decedent at the time of his death;

“(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, . . .” (U. S. C., Title 26, § 411.)