## Facts

- Jacob Gidwitz died in 1944, survived by his wife and three adult sons.
- In 1936, at age 72, Gidwitz created an irrevocable trust and transferred 83.33 shares of closely held corporate stock (about one-sixth of the company) to the trust.
- The corporation planned a large dividend; a purpose of the trust was to have dividend income paid to the trust rather than to Gidwitz, reducing his personal income-tax liability.
- The trust arrangement separated the stock corpus from the right to income and postponed the sons’ enjoyment of the property until after Gidwitz’s death.
- The Commissioner asserted an estate-tax deficiency, treating the 1936 transfer as made “in contemplation of death” under then-§ 811(c)(1)(A).
- The Tax Court held the transfer was in contemplation of death and included the value of the transferred property in the gross estate, but excluded income earned and accumulated by the trust between the 1936 transfer and the 1944 death.
- The estate sought review of the “contemplation of death” finding; the Commissioner sought inclusion of the pre-death trust income.

## Issues

1. Whether the 1936 transfer to an irrevocable trust was made “in contemplation of death” so that the transferred property was includible in the gross estate under § 811(c)(1)(A).
2. If includible as a contemplation-of-death transfer, whether the gross estate also includes income earned and accumulated by the trust after the transfer but before the decedent’s death.

## Decision

- The court affirmed the Tax Court that the 1936 transfer was made in contemplation of death and that the value of the property transferred was includible in the gross estate.
- The court also affirmed that post-transfer income earned and accumulated by the trust before death was not includible in the gross estate under § 811(c).
- Both the Commissioner’s petition and the estate’s cross-petition were denied.

## Legal Principles

- Whether a transfer is made “in contemplation of death” turns on the transferor’s dominant motivating cause and is a factual determination reviewed deferentially on appeal.
- A transfer that functions as a substitute for a testamentary disposition—particularly where enjoyment by beneficiaries is deferred until the transferor’s death—may be treated as made in contemplation of death even if tax or business motives also exist.
- When § 811(c) applies, the gross estate includes the value of the “property transferred” (and the rights in that property surrendered at the transfer), measured as of the time of transfer, not later earnings or accumulations realized by the transferee.
- Income accrued after the transfer belongs to the trust/beneficiaries; absent statutory authorization, it is not treated as property owned by the decedent at death for estate-tax inclusion.

## Conclusion

The Seventh Circuit upheld inclusion of the 1936 trust transfer as a contemplation-of-death substitute for a testamentary disposition, but rejected the government’s attempt to add the trust’s post-transfer, pre-death income to the gross estate, limiting inclusion to the value of the property actually transferred.


Comm’r v. Est. of Gidwitz, 196 F.2d 813 (7th Cir. 1952)