Taxation – Federal Estate Tax – Effect of Presidential Freezing Orders on the Creation of Excludable Bank Deposits for Nonresident Aliens

Decedent, a citizen and resident of France, was the sole income beneficiary of a trust fund held in New York by the plaintiff as trustee. An executive order, issued pursuant to the Trading with the Enemy Act, prohibited remittance of trust income to the decedent from 1940 to the time of her death in 1946. As this income accrued, the plaintiff’s trust department transferred it to the plaintiff’s general banking department in its own name as trustee and subject to its order out of current banking funds. In an action by the executor of the decedent-beneficiary’s estate to recover an amount paid as an estate tax deficiency on the money so deposited, held, recovery granted. The impounded income, being “moneys deposited … by or for a nonresident not a citizen” within the meaning of section 863 (b) of the 1939 Internal Revenue Code, was not property within the United States for federal estate tax purposes. City Bank Farmers Trust Company v. United States, (S.D. N.Y. 1959) 174 F. Supp. 583.