AS THE MONEY BURNS

Podcast by Nicki Woodard

 

Episode 124 – Plucked

 

Outline

Tonsils

Taxes

 

 

Series Tag

 

00:00

[Music – My Heart Belongs to Daddy by Billy Cotton, Album The Great British Dance Bands]

 

AS THE MONEY BURNS is an original podcast by Nicki Woodard.  Based on historical research, this is a deep exploration into what happened to a set of actual heirs and heiresses to some of America’s most famous fortunes when the Great Depression hits.

 

Each episode has three primary sections.  Section 1 is a narrative story.  Section 2 goes deeper into the historical facts.  Section 3 focuses on contemporary, emotional, and personal connections.   

 

00:31

Story Recap

 

While Jakey Astor and Alfy Vanderbilt both turn 21, Wooly Donahue is the first to be officially engaged.

 

Now back to AS THE MONEY BURNS

 

Title

 

00:46

Plucked

 

[Music Fade Out]

 

 

Episode Tag

 

Another day, another danger as an heiress finds herself in double trouble, but a minor medical emergency is nothing compared to the tax man.

 

 

01:05

[Music – Temptation Rag by Harry Roy, Album The Great British Dance Bands]

 

Section 1 – Story

 

[Music Fade Out]

 

 

01:23

Money always comes with lots of attention.  The littlest things get noticed and amplified.  So what happens when bigger things come into focus?

 

Nothing catches more attention than a sudden unexpected visit to the hospital.

 

01:39

Monday, September 23^rd, 1933, Manhattan

 

Word from St. Luke’s hospital, tall no longer awkward young heiress Doris Duke is recovering from a minor operation. 

 

Her socially ambitious mother Nanaline Duke meets briefly with the press and states, “It was just a simple tonsil operation.  Doris is feeling fine and will leave the hospital tomorrow.”

 

The devoted mother has been a daily visitor at her daughter’s bedside.  But with all the recent precautionary measures instituted after Doris received kidnapping threats this last summer, it seems odd to publicly announce her location or plans.  Yet the press reports her whereabouts over something as trivial as having her tonsils plucked.

 

02:29

More dreadful along with this news, the press likes to remind everyone that Doris might have inherited nearly $100 million (close $2.14 billion in 2025) upon the death of her father James Buchanan “Buck” Duke in 1925.

 

Now the latter – the amount of inheritance – becomes an even bigger focus.  There is always speculation on one’s net worth, and rarely would the actual amount be available for public record.

 

However the young Miss Duke might have a circumstance really exposing at least a portion of her fortune to the public.  A lawsuit with none other than the IRS.

 

03:12

Her father Buck Duke most adamantly did not like the introduction of the Bureau of Internal Revenue (later renamed the Internal Revenue Service) back in 1913.  No sooner than it had formed, the first targets are naturally the robber barons from the Gilded Age with their vast fortunes.  In fact, the first richest list is essentially compiled to assess taxation and includes the likes back then as #1 John D. Rockefeller, #2 Andrew Carnegie, #3 J.P. Morgan, #4 Vincent Astor, and only a little further down the list #9 Buck Duke.  Thus the public fascination with millionaires is first born.

 

03:53

Of course, no man of industry would willingly give up his money, much less if he questioned the government’s spending.  Buck is aware that the temporary taxation on personal income will likely be extended indefinitely as it would create a “breeder bureaucracy” of an ever-growing government.  Rumors circulate that Buck is considering becoming a tax exile, buying a peerage, and potentially giving up his American citizenship especially after renting a London home in 1914, but Buck returns with the outbreak of World War I.

 

04:27

By the end of the war in 1917, Buck sets up two trusts where the beneficiaries are solely his daughter Doris and himself, depending on who survives the other.  These are intended to circumvent that tax system and any future changes that might become more egregious.  Nearly 7 years later, Buck is right as the tax laws change again and a new set of taxes are levied in 1924.  Thus the next year around the time of his death, Buck astutely reassesses and transfers his remaining estate into multiple trusts that will go primarily to the Duke Foundation and his only child Doris.  This move also thwarts his second wife Nanaline’s greedy intent to give the Duke fortune over to her oldest non-Duke son Walker Inman from her first marriage.  Only at the reading of the will are Buck’s final changes revealed.

 

05:22

This tax case is not the first lawsuit Doris has fought over her fortune.  An earlier one being against her own mother when Nanaline tried to divest the estate of certain properties which Doris associates with her beloved father.

 

In 1925, Buck dies leaving behind an estate of $101,606,000 (today $1.821 billion).  A tax case will arise claiming that there is a deficiency in collecting taxes for that tax year on the original 1917 trusts.  The trusts in dispute are reportedly worth $30,364,000 (the 2025 estimate value essentially $544 million if dated to 1925 or $723 million if dated to 1933).  The IRS seeks to collect taxes and interest from back then totaling $9 million dollars (which would be $217 million today). 

 

06:20

There have been several attempts to collect this amount.  In the meantime, the circuit court from the tax board refuses to place a levy on the estate until the dispute is resolved.  The arguments are over Buck’s intention of the original trusts and thus when they would have become activated, or hence taxable.  Within the trusts, there are strict conditions that the trusts revert to Doris upon his death and back to him if Doris precedes him in death.  The argument lies within are the trusts active as of 1917 when created or upon the death of Buck or Doris.  A circular argument for sure, however the Commissioner of Internal Revenue is trying to claim that the trusts would have been activated upon Buck’s death in 1925 and thus must be taxed at the increased Revenue Act of 1924 rate versus on date of 1917 when no such taxes could be levied.

 

07:15

The Commissioner’s claim has been denied and appealed multiple times to the Board of Tax Appeals and Third Circuit Court of Tax Appeals.  As Doris is not 21 for another few weeks until November 1933, her trusts are overseen by executors including Nanaline, Buck’s business associate George Allen, and attorney William Perkins.

 

As far back as July 1931, Doris has won each attempt and appeal.  However Uncle Sam is unwilling to forfeit such a large amount and thus tries again to overthrow that ruling.

 

Then in spring 1933, the Supreme Court announces the few select cases it will review this year, and Doris’s tax case is one of them.

 

07:59

Monday, October 23^rd, 1933

 

Nearly 8 years after Buck’s death on October 10^th, 1925, the Supreme Court rules against the additional taxation.  The vote is 4 – 4 vote with Chief Justice Hughes not participating in the final vote.  While that would appear to be a tie, a majority vote is needed to overthrow a lower circuit ruling, which in this case had favored Doris.  Hence by default, Doris finally wins the matter once and for all.  Buck would have been so proud of his daughter’s steely might in enduring this endless battle.

 

08:39

Not only is it her win, but a victory for many who fear the increasing taxation that is occurring under the new Franklin Roosevelt administration.  Had Buck lived, he most certainly would have shared the views of his contemporaries towards the increasing federal government.  Among them, J.P. Morgan Jr. is a vocal opponent of taxation and a target for tax review.

 

09:01

Another tax opponent, the highest taxpayer in Philadelphia, and potential dodger, financier E.T. Stotesbury takes note.  The formidable Doris is impressive, not only does she have a vast fortune but the strength to defend it and relatively so unfrivolous in her lifestyle choices.  If only she could become his daughter-in-law through stepson James H.R. Cromwell, aka “Jimmy.”  E.T. has overpampered those around him, especially his much younger wife Eva Stotesbury and by extension her children.  All those that depend on E.T. are unaware of his rapidly dwindling fortune.  Dwindling more like evaporating,… He has no intention of letting the IRS eat his estate and plans to spend every penny before his own death.  E.T. also takes a more hostile view towards his stepson Jimmy and his affiliation with Roosevelt and the New Deal.  Buck too would not have liked Jimmy’s politics and financial proposals.

 

10:00

Regardless of the temporary victory, the perpetual attention on Doris and her fortune makes her the target of envy, greed, and kidnapping.  Some might try to woo her, others appeal to her sympathies, while a select few would willingly take more criminal measures to acquire a fraction of her gold.

 

 

Nothing is more certain than death and taxes.  Though it looks like the latter for once could be circumvented.  The former not so much a concern, at least this time,…