Cooke

I dissent.

Mrs. Cooke filed two income tax returns for the year 1942, one a fiduciary and the other an individual return. In each she reported the capital gain here involved and in each she disputed any liability. However, she paid the tax computed thereon. The tax was computed against her individually and as life tenant. Thereafter, she filed with the Commissioner a claim for refund. The claim being disallowed, the instant actions were instituted.

The majority hold that the instrument under which Mrs. Cooke received the property did not create a trust since she was not as trustee required to conserve it “ ‘as customarily required under ordinary rules applied in chancery and probate courts.’ ” The sweeping provisions of the agreement, emphasized by the majority, vested in her ownership and control and removed it from an “ordinary trust”. In addition to the provisions pointed out by the majority, she had during her lifetime “ ‘the right to use all income therefrom’ ” and “ ‘my wife shall have full authority to sell, transfer and exchange said property * * * and to exercise all rights and powers of ownership with respect thereto’ ”.

The burden was on Mrs. Cooke to establish her…

The United States appeals from a judgment of the United States District Court for the District of Hawaii, holding Mrs. Dagmar Cooke entitled to recover capital gains tax paid by her on the difference in value of 2,000 shares in a corporation, Charles M. Cooke Ltd., when she received them, and the greater value of the property she -received on the dissolution and distribution of the property of that corporation. The 2,000 shares she held under a conveyance of the shares to her as life tenant with other persons as remaindermen, the terms of which are later considered.

The United States contends that under the federal law Mrs. Cooke’s holding of the property as life tenant creates a trust in her 1 and that she is liable for the tax on the capital gain in the shares. It relies upon 26 U.S.C. § 161 (a) as follows:

Strangely the United States, in discussing the word “trust”, ignores the limitation of the tax laws to a particular kind of trust covered by the regulations under Sec. 3791 of the Internal Revenue Code, 26 U.S.C. § 3791 , a limitation relied upon by appellee. Regulation 118, Sec. 39.3797 limits the term “trust” as follows:

(Emphasis added.)

Assuming but not deciding that…