Frazier, William R.

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Federal Estate Tax: The Reciprocal Trust Device

University of Florida Levin College of Law

Florida Law Review Volume 1 Issue 2 Article 14 March 2021 Federal Estate Tax: The Reciprocal Trust Device William R. Frazier Follow this and additional works at: https://scholarship.law.ufl.edu/flr  Part of the Law Commons Recommended Citation William R. Frazier, Federal Estate Tax: The Reciprocal Trust Device, 1 Fla. L. Rev. 298 (2021). Available at: https://scholarship.law.ufl.edu/flr/vol1/iss2/14 This Case Comment is brought to you for free and open access by UF Law Scholarship Repository. It has been accepted for inclusion in Florida Law Review by an authorized editor of UF Law Scholarship Repository. For more information, please contact kaleita@law.ufl.edu. UNIVERSITY OF FLORIDA LAW REVIEWThe language of the court in the principal case, " . . . and provide it assoon as it does for applicants of any other groups.. .,"11 indicates thatequality is not provided if the Negro must wait until a separate institu-tion is established.Mandamus is the proper remedy to enforce compliance with the man-date of an appellate court. 12 However, the issue developed is solelywhether the district court's order was in compliance with the UnitedStates Supreme Court's mandate. Apparently the section of the orderwhich petitioner attacks as a violation of the mandate is that which per-mitted the Board of Regents to enroll the petitioner in a separate school,petitioner evidently taking the position that such an alternative couldnot provide equal educational facilities. Inasmuch as the order requiredthat the facilities be substantially equal, and since the only issue raised bythe present motion was the validity of the order, the decision of the courtwas dearly correct.' sThe district court has retained jurisdiction to hear any issue arisingfrom its order.14 Therefore, if the petitioner desires to raise the questionof whether, in fact, substantially equal facilities were provided by the Boardof Regents acting under the state district court's order, a proper pro-cedure would be contempt proceedings in the district court.'3Wn.LIAm REECE SMMH, JR.FEDERAL ESTATE TAX: THE RECIPROCAL TRUST DEVICEIn re Leuders' Estate, 164 F2d 316 (C. C. A. 3rd 1947)In 1930 the husband of the decedent created an irrevocable trust bythe terms of which decedent was to receive the income for life, with thepower in her as beneficiary to terminate the trust and take the corpus.Some fifteen months later the decedent created a reciprocal trust of identi-"FIsher v. Hurst, 68 Sup. Ct. 389 (1948)."Favour v. Hill, 136 F.2d 489 (C. C. A. 9th 1943); Wrighten v. Board ofTrustees, 72 F. Supp. 948 (1947)."Cases cited supra note 7."See opinion p. 390."CRANDALL, FLORIDA Com.moN LAW PRAcncz §471 at pp. 637, 651 (Ist ed. 1928).1Frazier: Federal Estate Tax: The Reciprocal Trust DevicePublished by UF Law Scholarship Repository, 2021CASE COMMENTScal terms. Upon her death the Commissioner of Internal Revenue de-termined an estate tax deficiency by including in the decedent's grossestate the value at death of the trust created in decedent's favor by herhusband. A divided Tax Court sustained the Commissionerl on theauthority of Lehman v. Commissioner of Internal Revenue.2 On appeal,HEW, in the absence of a finding of an agreement, expressed or implied,to make a reciprocal transfer of property, the Tax Court's finding thatthe trust created by the husband constituted consideration for the wife'strust was without substantial basis. Judgment reversed.The Internal Revenue Code provides that a trust in which the settlorretains the power to alter, amend, or revoke shall be included in the tax-able estate of the settlor.3 The Lehman doctrine, founded upon asettled rule of trusts, provides that a person who furnishes the considera-tion for the creation of a trust is the settlor, though in form the trust iscreated by another. 4 Consideration is the decisive factor and must bepresent in order to make the Lehman Doctrine applicable. 5 The majorityof the court considered that the failure of the Tax Court to make aspecific finding of fact that an understanding or agreement to makereciprocal transfers existed, made its ultimate finding that the decedenthad furnished the consideration for her trust without substantial basis inevidence, in view of the fact that the trusts were created fifteen monthsapart.Cases in which the Lehman Doctrine has been squarely before thecourts indicate that the following factors are important in determiningwhether or not an agreement existed to execute reciprocal trusts: simul-2In re Leuders' Estate, 6 T. C. 587 (1946).-iLehman v. Commissioner, 109 F2d 99 (C. C. A. 2d 1940), cert. denied, 310U. S. 637 (1940); Note, 24 MINN. L. RrLv. 884 (1940); Note 52 HaRv. L. REv.1015 (1939).3INT. REv. CODE §811. "The value of the gross estate of the decedent shall be de-termined by including the value at time of his death of all property ... to the extentof any interest . . . the decedent . . . made transfer . . . where enjoyment thereofwas subject at date of his death to any change through the exercise of a power... toalter, amend, or revoke . . 2''Blackman v. United States, 48 F. Supp. 362 (1943); Estate of George W.Sweeney, 4 T. C. 265 (1944); Iversen v. Commissioner, 3 T. C. 756, 774 (1944); 1Sconr, Tumr §156.3 (1939).WMcLean v. Commissioner, 41 B. T. A. 1266 (1940).2Florida Law Review, Vol. 1, Iss. 2 [2021], Art. 14https://scholarship.law.ufl.edu/flr/vol1/iss2/14

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Federal Estate Tax: The Reciprocal Trust Device

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