Helvering v. Helmholz

Irene Helmholz conveyed 999 shares of the Patrick Cudahy Family Company to a trustee, who was to pay the income from those shares to Mrs. Helmholz for life, and then to a beneficiary she could appoint by will, and then to her issue. The trust instrument, which had been created by Mrs. Helmholz, her parents, and her siblings, stated that one of the ways that the trust could be terminated was by the written notice of all the then-beneficiaries of the trust. That provision was no more expansive than Wisconsin law, which allowed all interested parties to terminate a trust. Mrs. Helmholz bequeathed all of her estate to her husband, Waldemar Helmholz (defendant). After Mrs. Helmholz’s death, the value of the 999 shares was not included in her estate-tax return. The Internal Revenue Service (IRS) (plaintiff) found that the value of the 999 shares should have been included in Mrs. Helmholz’s gross estate under § 2038 of the Internal Revenue Code. Section 2038 stated that assets transferred by a decedent must still be counted as a part of that decedent’s estate if the decedent held a power to revoke, alter, or amend the transfer at the time of her death, individually or jointly with other parties. The IRS determined that by allowing the trust to be terminated upon the written notice of all the then-living beneficiaries, Mrs. Helmholz had retained the power to jointly alter, amend, or revoke the transfer of her shares, which allowed the shares to be included in the gross estate under § 2038. The Board of Tax Appeals (board) disagreed with the IRS interpretation, and on appeal, the United States Court of Appeals for the District of Columbia affirmed the board’s decision. The IRS appealed.