This is another case under the gift tax provisions of the Revenue Act of 1932, §§ 501, 506, 26 U.S.C.A. Int.Rev.Acts, pages 580, 588, which, while presenting certain variants on the questions decided today in Smith v. Shaughnessy, 318 U.S. 176, 63 S.Ct. 545, 87 L.Ed. --, is in other respects analogous to and controlled by that case.
In 1936, the petitioner, Elise Paumgarten (nee Robinson), was thirty years of age and was contemplating marriage; her mother, Meta Biddle Robinette, was 55 years of age and was married to the stepfather of Miss Robinson. The three, daughter, mother and stepfather, had a conference with the family attorney, with a view to keeping the daughter's fortune within the family. An agreement was made that the daughter should place her property in trust, receiving a life estate in the income for herself, and creating a second life estate in the income for her mother and stepfather if she should predecease them. The remainder was to go to her issue upon their reaching the age of 21, with the further arrangement for the distribution of the property by the will of the last surviving life tenant if no issue existed. Her mother created a similar trust, reserving a life estate to herself and her husband and a second or contingent life estate to her daughter. She also assigned the remainder to the daughter's issue. The stepfather made a similar arrangement by will. The mother placed $193,000 worth of property in the trust she created, and the daughter did likewise with $680,000 worth of property.
The parties agree that the secondary life estates in the income are taxable gifts, and this tax has been paid. The issue is whether there has also been a taxable gift of the remainders of the two trusts. The Commissioner determined that the remainders were taxable, the Board of Tax Appeals reversed the Commissioner, and the Circuit Court of Appeals reversed the Board of Tax Appeals. 129 F.2d 832; 44 B.T.A. 701.
The petitioner argues that the grantors have not relinquished economic control and that this transaction should not be subject both to the estate and to the gift tax. What we have said in the Smith case determines these questions adversely to the petitioner. However, the petitioners emphasize certain other special considerations.
First. Petitioner argues that since there were no donees in existence on the date of the creation of the trust who could accept the remainders, the transfers cannot be completed gifts. The gift tax law itself has no such qualifications. It imposes a tax 'upon the transfer * * * of property by gift.' And Treasury Regulation 79, Art. 3, provides that 'The tax is a primary and personal liability of the donor, is an excise upon his act of making the transfer, is measured by thevalue of the property passing from the donor, and attaches regardless of the fact that the identity of the donee may not then be known or ascertainable.' We are asked to strike down this regulation as being invalid because inconsistent with he statute. We do not think it is. As pointed out in the Smith case, the effort of Congress was to reach every kind and type of transfer by gift. The statute 'is aimed at transfers of the title that have the quality of a gift'. Burnet v. Guggenheim, 288 U.S. 280, 286, 53 S.Ct. 369, 371, 77 L.Ed. 748. The instruments created by these grantors purported on their face wholly to divest the grantors of all dominion over the property; it could not be returned to them except because of contingencies beyond their control. Gifts of future interests are taxable under the Act, § 504 (b), 26 U.S.C.A. Int.Rev.Acts, page 586, and they do not lose this quality merely because of the indefiniteness of the eventual recipient. The petitioners purported to give the property to someone whose identity could be later ascertained and this was enough.