(High Court of Australia) In 1908 the deceased had transferred and conveyed a piece of land to each of her three sons; on the same date as, but subsequently to, the execution of the transfers and conveyances there had been executed by the deceased and each of her sons a lease back for a term of five years of the land which had been transferred and conveyed to him; and the transfers and conveyances and leases had been executed after discussion and arrangement between the deceased and her three sons and after she had explained to them that she desired to make fixed and permanent provision for them and at the same time to take from them leases at whatever might be a reasonable rental for grazing purposes having regard to the conditions of the leases, those conditions and the amounts of the rents having been discussed and agreed before the execution of any of the documents. The rents reserved were in each case fair and reasonable and after the execution of the documents the whole of the land continued to be occupied by the deceased and was used by her for grazing purposes. On the deceased’s death in 1910, before the expiration of the leases, a claim for death duties was made in respect of the freehold.
Held: The claim was upheld. Section 102 requires people to define what they give away what they retain. If an interest is given away, they may not receive back any benefits from that interest. The policy was to avoid the ‘delay, expense and uncertainty’ of requiring the revenue to investigate whether a gift was genuine or pretended. If the donor continued to derive any benefit from the property in which an interest had been given, it would be treated as a pretended gift unless the benefit could be shown to be referable to a specific proprietary interest which he had retained. This is probably the most plausible explanation. Isaacs J: ‘But there must be no misunderstanding as to what is meant by the transaction … in the relevant sense it means that you regard the substantial effect of the ‘conveyance, assignment, gift, delivery or transfer’, by which the gift was made. If by an instrument, as in this case, you look at the instrument by which the property passes from the donor to the donee, and, disregarding mere form, ascertain its real effect. What does it give, not how does it give it? In this case the gift is made by the indenture executed by Henrietta Lang, and by that the whole of her estate in the lands was given without any exception or reservation whatever. That was the transaction of gift – complete in itself and unqualified. No other construction is possible. It had to be complete before the donee could execute to her the lease of the property. A lease is a conveyance; and it is more than form, it is substance, when the donor’s interest has to be vested in the donee before the donee can convey a smaller interest. That smaller interest was comprised in the gift itself, it was part of it, and is quite different from the case of Re Cochrane , where the trust of surplus income and the ultimate contingent trust of corpus were expressly retained by the donor for himself on the face of the instrument, and never in any shape or form included in what he gave.’
Judges:
Griffith CJ, Barton and Isaacs JJ
Citations:
(1912) 13 CLR 503
Links:
Jurisdiction:
Australia
Cited by:
Cited – Commissioners of Inland Revenue v Eversden Eversden (As Executors of the Will of Greenstock Deceased) CA 15-May-2003
The executors challenged the assessment to Inheritance tax on the estate. The commissioners claimed that a gift of property into a trust included a sufficient reservation of benefit to disallow it as an exempt transfer.
Held: The scheme was . .
Cited – Ingram and Palmer-Tomkinson (Executors of the Estate of Lady Jane Lindsay Morgan Ingram Deceased) v Commissioners of Inland Revenue CA 28-Jul-1997
The deceased had first conveyed property to her solicitor. Leases back were then created in her favour, and then the freeholds were conveyed at her direction to her children and grandchildren. They were potentially exempt transfers.
Held: . .
Cited – Ingram and Palmer-Tomkinson (Executors of the Estate of Lady Jane Lindsay Morgan Ingram Deceased) v Commissioners of Inland Revenue CA 28-Jul-1997
The deceased had first conveyed property to her solicitor. Leases back were then created in her favour, and then the freeholds were conveyed at her direction to her children and grandchildren. They were potentially exempt transfers.
Held: . .
Cited – Ingram and Another v Commissioners of Inland Revenue HL 10-Dec-1998
To protect her estate from Inheritance Tax, the deceased gave land to her solicitor, but then took back a lease. The solicitor then conveyed the land on freehold on to members of her family.
Held: The lease-back by the nominee was not void as . .
Lists of cited by and citing cases may be incomplete.
Taxes – Other
Updated: 16 May 2022; Ref: scu.182744
