United States v. Byrum

PETITIONER: United States
LOCATION: Christian County, Kentucky

DOCKET NO.: 71-308
DECIDED BY: Burger Court (1972-1975)
LOWER COURT: United States Court of Appeals for the Sixth Circuit

CITATION: 408 US 125 (1972)
ARGUED: Mar 01, 1972
DECIDED: Jun 26, 1972

Larry H. Snyder - for respondent
Matthew J. Zinn - for the petitioner

Facts of the case


Media for United States v. Byrum

Audio Transcription for Oral Argument - March 01, 1972 in United States v. Byrum

Warren E. Burger:

We’ll hear arguments next in 71-308, United States against Byrum.

Mr. Zinn.

Matthew J. Zinn:

Mr. Chief Justice and may it please the Court.

The estate planners have long sort of method whereby majority owners of closely held corporate stock could maintain control of their corporations throughout their lifetimes but nevertheless be able to pass on their businesses a debt without payment of estate tax.

This federal estate tax case presents an attempt which has less far been successful to achieve these two most desirable goals.

Here, the method employed was a transfer of a portion of the majority owner stock into a trust with the owner retaining a sure lifetime control of these corporations by reserving the right to vote the stock he transferred in trust and the right to veto any sale of that stock by the trustee.

We brought this case hereon certiorari to the Court of Appeals for the Sixth Circuit because of our concern with its effect on the administration of the federal estate tax laws.

The specific facts are these.

The decedent, Mr. Byrum owned controlling stock interest in three corporations.

Late in 1958, he created an irrevocable trust naming a bank as trustee to which he there have to transferred stock in the three corporations.

The trustee had power until Mr. Byrum’s youngest child reached the age 21 to distribute trust income and principal to the beneficiaries in its discretion when the youngest child reached age 21, separate trusts would be establish for each child or for the surviving issue of any deceased child.

Each child’s separate trust was to terminate when that child reached age 35.

The trust instruments specifically provided that Mr. Byrum would retain for his lifetime, the right to vote all unlisted stocks such as the stock in the three corporations he transferred and the right to veto sale of that stock by the trustee.

On page 4 of our opening brief, there appears a small chart showing the percentage of each corporation’s stock owned by Mr. Byrum and by the trust at the time of Mr. Byrum’s death.

In the case of the first corporation which is Byrum Lithographing Company, you can see that the total originally owned by Mr. Byrum was 71% of the corporation’s stock.

He transferred 12% of the stock in trust and retained 59% in his own name.

Harry A. Blackmun:


Matthew J. Zinn:

Yes sir, he did.

Harry A. Blackmun:

Are there any (inaudible) and there was a veto?

Matthew J. Zinn:

This case came on, on cross motions for a summary judgment Mr. Justice Blackmun and the record doesn’t reveal any such instance.

The situation that obtained with Byrum Lithographing then so far as the record discloses, is that at all times Mr. Byrum owned the seven -- was able to vote 71% of the stock of the corporation and at all times until his death was in control of the corporation.

Looking at the second and third corporations, Graphic Realty and Bychrome, the situation is the same.

He originally owned 83% and 88% of the stock of those corporations transferred the portion in trust and by retaining the right to vote that stock for his lifetime and the right to veto any sale of the stock which assured lifetime control of those corporations as well as Byrum Lithographing.

Potter Stewart:

The trusts have been in existence less than six years at the time of his death.

Matthew J. Zinn:

The trust was created in December 1958.

Potter Stewart:

He died on September of 64?

Matthew J. Zinn:

That’s right.

Potter Stewart:

And these were series of transfers, it wasn’t just one transfer.

Matthew J. Zinn:

That’s correct the --

Potter Stewart:

The creation of a trust in 58 and then a series of transfers over the so many years until his death?