The Revenue Act of 1926, § 302(d) , provides:
'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-* *
'(d) To the extent of any interest therein of which the decedent has at any time made a transfer, by trust or otherwise, where the enjoyment thereof was subject at the date of his death to any change through the exercise of a power, either by the decedent alone or in conjunction with any person, to alter, amend, or revoke.'
The questions for decision are whether the section requires inclusion in the gross estate of the value of the corpus of a trust established in 1930 where the creator reserved a power to revoke or modify, to be exercised jointly with a beneficiary and the trustee; and whether, if such value is to be included in the gross estate, the section offends the Fifth Amendment.
By a writing dated February 21, 1930, Gertrude Feldman James, a nonresident citizen, transferred securities to the respondent as trustee; the trust to last during the lives of her two daughters or the survivor of them. The income was to be paid to her until her death, or until the termination of the trust, whichever should first occur. After her death, her husband surviving, the income was to be paid to him. If he did not outlive her, or upon his death, the income was to be distributed amongst their issue per stirpes. At the termination of the trust, the corpus was to be delivered to the husband, if he were alive; if not, to the settlor, if living, or, if she were dead, to the beneficiaries at that time entitled to receive the income; if there were none such, to the heirs at law of the husband. The trust was irrevocable save that the settlor reserved the right to modify, alter, or revoke it, in whole or in part, or to change any beneficial interest; any such revocation or alteration to be effected with the written consent of the trustee and her husband, or, if the husband were dead, of the trustee and her husband's brother. If they could not agree, the decision of the husband or of the brother, as the case might be, was to be final. Samuel James, the husband, survived the grantor, whose death occurred before the termination of the trust, and he is in receipt of the income.
The petitioner included the value of the corpus of the trust in Mr. James' gross estate and determined a deficiency of tax. The Board of Tax Appeals reversed, holding that section 302(d) did not apply. The Circuit Court of Appeals affirmed the Board's decision. We granted the writ of certiorari because the decision below conflicts with that in another circuit. We hold that the section covers this case, and, as so applied, is valid.
The Circuit Court of Appeals thought our decision in Reinecke v. Northern Trust Company, 278 U.S. 339, 49 S.Ct. 123, 73 L.Ed. 410, 66 A.L.R. 397, required the language of the act to be construed as tantamount to in conjunction 'with any person not a beneficiary.' So limited, it is inapplicable to the trust in question.
The Reinecke Case involved section 402(c) of the Revenue Act of 1921 (substantially section 302(c) of the Revenue Act of 1926, 26 USCA § 1094(c), which directed the inclusion in the gross estate of all property 'to the extent of any interest therein of which the decedent has at any time made a transfer, or with respect to which he has at any time created a trust, in contemplation of or intended to take effect in possession or enjoyment at or after his death.' It was held that a gift beyond the power of the grantor to alter, amend, or revoke could not be said to take effect in possession or enjoyment at or after his death. Conversely, one which he alone held the power to revoke or modify came within the section, since, at his death, substantial interests passed from his control and were for the first time confirmed in others. The case involved nothing more than a determination whether the transfers were complete when made. If they were, the statute did not reach them. Here we have a different problem, for section 302(d) of the 1926 act on its face embraces Mrs. James' transfer, although complete when made and thereafter beyond her own unfettered control.