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MONROE v. UNITED STATES

May 23, 1969

Mary Snyder Monroe, Plaintiff,
v.
United States of America, Defendant


Powell, District Judge.


The opinion of the court was delivered by: POWELL

This opinion concerns two tax cases consolidated for trial. One is for a refund of income taxes and the other for a refund of gift taxes. Both arise from the same undisputed facts.

 On July 14, 1937 James V. Monroe, husband of the plaintiff, executed his Last Will and Testament. Paragraph V of the will provided:

 The testator died March 27, 1939 and the will was admitted to probate. His widow duly qualified as executrix.

 On October 26, 1940 the Superior Court of the State of Washington for Yakima County entered an Order Approving Final Account, Determining Heirs of Decedent, Decreeing Distribution and Discharging Executrix. That order in part provided:

 
"That all of the property of said estate hereinabove set forth, as well as any property hereinafter disclosed belonging to said estate be and is hereby distributed, according to the terms of the Last Will and Testament of James V. Monroe, deceased, to-wit, to Mary Snyder Monroe, during the period of the minority of said Joan Vincent Monroe and to Mary Monroe Davis in equal undivided portions, all of which property, however, subject to a life estate in Mary Snyder Monroe, who shall be during her lifetime entitled to enjoy the full benefits of said estate for her comfort, enjoyment, support, maintenance or expenditure in such manner as in her discretion will cause the remainder of her life to be most useful, giving her full right to all income from said estate or such portion thereof as she desires to use and expend and such portion of the principal of said estate as Mary Snyder Monroe may desire to expend or dissipate in her own discretion."

 To facilitate the management, conservation and growth of the estate, many of the assets were converted to cash and invested in securities which were deposited with the Puget Sound National Bank of Tacoma. The bank carried the assets in its Trust Agency Account D-168. To formalize this transfer the bank and the heirs entered into a Safekeeping Agreement. This instrument was signed on April 14, 1940 by Mary Snyder Monroe individually and as trustee for that portion of the remainder of the estate belonging to Joan Vincent Monroe, a minor. Mary Monroe Davis, an adult, signed on her own behalf.

 On May 30, 1943 Joan Vincent Monroe died. Mary Snyder Monroe was her sole heir and became the owner of her interest in Trust Agency Account D-168 at Puget Sound National Bank of Tacoma. The Safekeeping Agreement continued for the benefit of Mary Snyder Monroe and Mary Monroe Davis. After the death of Joan Vincent Monroe, her mother owned a life estate in one-half of the Trust Agency Account D-168 and was the full owner of the remaining one-half.

 Mary Snyder Monroe believed the interests of the estate would best be served if she gave up her right to invade the corpus of the remainder of the account funds belonging to Mary Monroe Davis. To accomplish this purpose the plaintiff on October 28, 1948 executed a document entitled "Release of Power of Appointment." The essential provisions of that instrument are as follows:

 
"* * * the undersigned widow of James V. Monroe, deceased, for the purpose of conforming to the intent of her late husband and thus avoid all gift and estate taxes on the life estate of the undersigned, does hereby express her intention to release her right to invade the corpus of said life estate, and does hereby release all her rights to appropriate or consume the principal of the life estate and does release said power to appoint in favor of said Mary Snyder Monroe as life tenant of the estate, and does reserve to herself only the right to the income from said life estate and the property contained therein for and during the term of her natural life. This release is executed for good and valuable consideration and upon notice to and acceptance by the remainderman."

 In the years that followed the account prospered and grew. It was diminished only by occasional withdrawals of income by the plaintiff. Periodic purchases of securities were authorized by Mrs. Monroe to assure proper growth of the account.

 On February 2, 1963 a Renunciation and Release was executed by Mary Snyder Monroe in which it was stated:

 
"That MARY SNYDER MONROE, widow of James V. Monroe, whose date of death was the 27th day of March, 1939, does hereby renounce and release any and all rights she has under any general power of attorney [sic] created by the Will of James V. Monroe and/or by the decrees of distribution of the estate of ...

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