Robinette v. Helvering

Elise Robinson (plaintiff) was 30 years old in 1936 and was to be married. Her mother, Meta Robinette (plaintiff), was 55 years old and was married to Robinson’s stepfather. To try to keep Elise Robinson’s fortune within her family, the three agreed that Elise would establish a trust. Elise placed $680,000 worth of property in the trust, from which she was to receive a life estate in the income, with a second life estate for her mother and stepfather should she predecease them. The remainder of the trust was to go to Elise Robinson’s children once they reached age 21, with further arrangements made if there were no children. Meta Robinette placed $193,000 worth of property in a similar trust, and Mr. Robinette made a similar arrangement by will. The secondary life estates in the income from the trusts were considered taxable gifts, and those taxes had been paid. However, the Commissioner of Internal Revenue (the commissioner) (defendant) determined that the remainders of the two trusts were also taxable. The United States Board of Tax Appeals reversed, and the United States Court of Appeals for the Third Circuit reversed again, finding for the commissioner. Robinette and Robinson appealed, arguing that the grantors had not relinquished economic control of the trusts and that the remainders should not be subject to both estate and gift taxes. Although precedent indicated that the remainders were in fact subject to both taxes, Robinette and Robinson pleaded special circumstances in opposition to such a finding. They argued that because no donees presently existed on creation of the trusts, the transfers could not be considered completed gifts. They also argued that the trusts were not gifts at all but were supported by full consideration as a mutual business dealing. Finally, Robinson and Robinette argued that the reversionary interest to the grantors should be considered in determining the value of the trust remainders.