U.S. Court of Appeals for the Second Circuit, 1950

Reeves' Estate v. Commissioner

U.S. Court of Appeals for the Second Circuit · Decided March 17, 1950 · Frank

180 F.2d 829 (Federal Reporter, Second Series)

Counsel

Lee McCanliss, New York City (Fred L. Van Dolsen, Washington, D. C., John E. Higgiston, Jr., New York City, of counsel) for petitioners., C. Oliphant, Washington, D. C., Theron Lamar Caudle, Washington, D. C. (Ellis N. Slack, A. F. Prescott and Carlton Fox, Washington, D. C., of counsel) for respondent.

Cases that cite this one

3 later published cases cite this decision.

Estate of Halbach v. Commissioner (United States Tax Court 1980)
Estate of Ridgely v. United States (Court of Claims 1967)
Reeves' Estate v. Commissioner of Internal Revenue (2d Cir. 1950)

This list shows which later cases cite this one. It does not say how they treated it, and no review of that has been done. Not a substitute for Shepard’s or KeyCite — verify before relying.

Opinion of the Court

FRANK, Circuit Judge.

Transfers intended as substitutes for testamentary disposition are, of course, “in contemplation of death.”1 And the burden of disproving the Commissioner’s determination was on the petitioners. First Trust & Deposit Co. v. Shaughnessy, 2 Cir., 134 F.2d 940.

His determination here rested upon the fact that Reeves Brothers, Inc., did not pay any dividends on its common stock until after decedent’s death, although the company’s earnings statements and balance-sheets strongly suggest an ability to do so. From this fact, and from decedent’s always powerful, if not always mathematically controlling, interest in the corporation, the Commissioner referred an intent not to pay dividends so long as decedent managed the affairs of the corporation. In the light of this intent, the Commissioner argued, decedent’s transfer of his stock to the trusts can only be construed as a substitute for testamentary disposition.

*832The Commissioner’s inference might have been disproved in a number of ways: Petitioners might have demonstrated, for example, that business reasons -forbade payment of dividends, or that after decedent transferred the stock to the trust he lost effective control of the corporation. But the record is bare of any explanation which makes the Commissioner’s position seem unreasonable.

Nor does such a conclusion imply that decedent, by holding back dividends, betrayed his fiduciary obligations to the minority stockholders. For all that the record shows, the minority stockholders might have been quite content to leave their holdings as a cumulating investment.

Affirmed.

. United States v. Wells, 283 U.S. 102, 116, 51 S.Ct. 446, 75 L.Ed. 867; Allen v. Trust Co. of Georgia, 326 U.S. 630, 635, 66 S.Ct. 389, 90 L.Ed. 367.

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