* Motion for rehearing denied, without costs, on January 10, 1950. The proceeding was for the review of the decision and order of the Wisconsin board of tax appeals determining the extent of a gift effected by an instrument executed in 1945 *Page 464 by I. Stanley Stone and his divorced wife, Marie A. Stone, amending a trust agreement of 1931. The taxpayers contend that the instrument of amendment conveyed a life interest in the trust reserved to the settlor, I. Stanley Stone, and a contingent interest of the wife, Marie Stone. The Department of Taxation contends that the trust agreement of 1931 did not constitute a complete gift of any portion of the trust and that the amendment of 1945 constitutes a gift of the entire corpus of the trust. From a judgment in favor of the Wisconsin Department of Taxation, the settlor and the beneficiaries of the trust appeal.
In 1931, I. Stanley Stone, being then of the approximate age of thirty-five years, in anticipation of divorce from his wife, Marie Stone, approximately thirty-three years of age, established a trust of one hundred fifty shares of the capital stock of Herzfeld-Phillipson Company. The settlor reserved to himself the power, (1) to direct the sale of any stock, property, or securities comprising the trust corpus; (2) to substitute securities, cash, or life insurance of the value of $300,000; (3) to receive all of the net income of the trust; (4) to vote all corporate stocks; (5) to revoke in whole or in part and to amend or add to from time to time any of the provisions of the trust indenture by an instrument in writing signed and acknowledged by the settlor and by Marie A. Stone and delivered to the trustees, provided that the duties and responsibilities of the trustees should not be changed without their consent; (6) to revoke the trust without consent of Marie A. Stone in case Marie, Stanley, Jr., and Philip predeceased settlor; (7) to partially revoke the trust by withdrawing one third of the corpus therefrom in the event that Marie predeceased settlor or remarried and received from settlor $50,000 alimony settlement.
It was provided that the trust was to continue during the life of Marie and in any event until Stanley, Jr., and Philip should reach the age of thirty-five years or died before *Page 465 attaining that age. The income from the trust was to be paid to the wife and children only in the event of the death of the settlor.
In 1945, all parties to the trust being still alive, the trust agreement was amended by instrument in writing dated June 25th providing for division of the trust corpus into two segments, one to be designated by the trustees as the trust of Stanley, Jr., and the other, the trust of Philip, and each thereafter to be managed separately by the trustees. By such agreement I. Stanley Stone and Marie Stone waived all right to income or corpus. Sec. 72.75 (1), Stats., provides for taxes upon transfers of property, real, personal, or mixed, subsequent to July 1, 1933, and prior to July 1, 1947. Sub. (2) (g) thereof provides a gift shall be complete for tax purposes when the donor has divested himself of all beneficial interest in the property transferred and has no power to revest any such interest in himself or his estate.
The issue in this case arises over the extent of the gift in 1945. Should it be measured upon the value of the life income to the settlor and the beneficial interest of Marie Stone, as contended by the taxpayers, or upon the entire corpus of the trust, as contended by the Department of Taxation?
The taxpayers contend that settlor could not give more in 1945 than he owned. There is no dispute over this basic statement. There is, however, a real controversy between the *Page 466 parties upon the question of what interest in the trust the settlor owned in 1945. In order to determine what the settlor owned in 1945 we must examine the effect of the trust indenture of 1931.
The law pertaining to gifts is well established, as stated in 38 C.J.S., Gifts, p. 799, sec. 20:
"In order to constitute an effectual delivery the donor must not only have parted with the possession of the property, but he must also have relinquished to the donee all present and future dominion and control over it, beyond any power on his part to recall. The surrender must be so full and complete that, if the donor should resume control over the property without the consent of the donee, he would be answerable in damages as a trespasser. The retention of control in the hands of the donor over the subject of the gift, or the reservation by the donor of any right to retake the property or appropriate it to other purposes, avoids the gift."
The taxpayers seem to concede that in the event the settlor had reserved the right to revoke by his own act alone, there would be no possible contention that the gift was complete in 1931. They contend, however, that since Marie Stone had a substantial adverse interest to that of the settlor and because her act was necessary to make revocation possible, the gift was complete in all respects except as to the interests reserved to the settlor and to her.
It would appear obvious that the reason for reserving the right to revoke the trust would be for possible need of the settlor of the property conveyed to the trustees to meet his own requirements at some time in the future. It must be that he had confidence in Marie Stone and was satisfied that if a need arose which would impel him to revoke the trust, she would join in such revocation. Under the circumstances which existed in 1945 at the time of the waiver of the revocation it is apparent that if the needs of the settlor had required use of the corpus for his own benefit, the needs of Marie might *Page 467 likewise have been dependent upon the same fund, and their interests in revocation would very likely have been identical.
At all events the gift to the boys did not vest by reason of the 1931 agreement since it was subject to revocation by the joint act of the settlor and Marie Stone.
Counsel for appellants argue that because of Marie's own beneficial interest in the trust and because of her natural interest in the welfare of the sons who were conditional beneficiaries, she would not likely revoke. It is true that the revocation was perhaps made less likely by the necessity that she join, but the power to revoke remained in the settlor and, if required by conditions, he had the right to exercise it with Marie's consent.
In Burnet v. Guggenheim (1933), 288 U.S. 280, 284,53 Sup. Ct. 369, 77 L. Ed. 748, in considering a trust where the donor had reserved to himself the right to revoke, the supreme court said:
"By the execution of deeds and the creation of trusts, the settlor did indeed succeed in divesting himself of title and transferring it to others (Stone v. Hackett, 12 Gray [Mass.] 227; Van Cott v. Prentice, 104 N.Y. 45, 10 N.E. 257;National Newark Essex Banking Co. v. Rosahl, 97 N.J. Eq. 74,128 A. 586; Jones v. Clifton, 101 U.S. 225), but the substance of his dominion was the same as if these forms had been omitted. Corliss v. Bowers, supra. [281 U.S. 376.] He was free at any moment, with reason or without, to revest title in himself, except as to any income then collected or accrued. As to the principal of the trusts and as to income to accrue thereafter, the gifts were formal and unreal. They acquired substance and reality for the first time in July, 1925, when the deeds became absolute through the cancellation of the power."
The only difference between the absolute power of revocation and the necessity that the settlor's former wife and mother of the beneficiaries join in the revocation is that the two were required to agree that cause for revocation existed. This does *Page 468 not make the gift in 1931 complete. We are of the opinion the trial court correctly held that the gift tax must be levied upon the entire corpus of the trust.
Because we determine that the gift of 1931 was incomplete, it is unnecessary to consider other issues raised upon this appeal.
By the Court. — Judgment affirmed.