dissenting: Election by decedent to accept a lesser annuity for himself so his wife might receive a survivorship annuity of $7,000 did not, in my view, constitute a transfer of property by him falling within the provisions of section 811 (c) of the code. At the time of his election decedent held only a vested option to choose between two annuity retirement plans by virtue of Group Contract No. 103 between Socony-Vacuum Oil Co. and the Metropolitan Life Insurance Co. The first plan provided decedent with $21,750 annuity for life upon his retirement. The second plan provided a lesser annuity for decedent which would be continued after his death to a designated dependent should such person survive him. Prior to the normal date of decedent’s retirement, namely, January 1, 1934, the obligation of the insurance company to pay decedent an annuity of $21,750 was not absolute, but was subject to the election of decedent under authority of the contract to request that the full retirement benefits be paid only in part to him and in part to his wife in succession. At the time of his election decedent did not have a specific property interest in either type of retirement annuity. Thus his choice of a lesser annuity for himself with a survivorship annuity of $7,000 for his wife could not operate as a transfer of property by him to Mrs. Higgs, but constituted merely the relinquishment of his right to select the larger annuity for himself alone.
In no sense may the election by decedent be considered a surrender of the larger annuity for a small annuity, for he had no ownership over the larger annuity at the time. There is no basis in law for the proposition that he constructively received the full annuity and then returned part of it to the insurance company in consideration for an annuity for his wife. Cf. Charles L. Jones, 2 T. C. 924, involving the same group contract and the identical option. Only by means of exercising the option did Higgs receive any property interest in a specific retirement annuity. To say that by the very act whereby he first received an interest in an annuity he at the same time transferred part interest in an alternative type of annuity to his wife is illogical. Certainly there was no formal conveyance of a part of an interest in an annuity by decedent to his wife, and it is difficult to see how this was accomplished indirectly when decedent merely exercised a right to accept one type of annuity over another.
Under comparable facts an analogous problem arose in Brown v. Routzahn, 63 Fed. (2d) 914; certiorari denied, 290 U. S. 641. In that case a donee rejected a testamentary gift before distribution of the estate, making the gift subject to a residuary trust, and the Court held this did not constitute a transfer under section 403 (c) of the Kevenue Act of 1921 (comparable to section 811 (c) of the code). The cited case goes on the theory that there can be no transfer of an interest in property for purposes of the estate tax where there has been no prior receipt of the property by the alleged transferor, but merely receipt of an option to accept such property. It holds that the mere exercise of a choice does not constitute a transfer of property. The reasoriing of the court in Brown v. Routzahn, supra, p. 916, applies equally to the facts of the instant case and supports the conclusion I have reached:
While it has been held that taxing statutes of this character concern themselves, not so much with title as with command over the property * * * we cannot think that within the scope of that purpose the statute here in question contemplates the taxing of the renunciation of testamentary gifts. Specifically stated, it is our view that, had Elizabeth Brown died in January of 1920, the renunciation here involved, made the following April, could not be held to be a transfer under the statute, even though it'were made in contemplation of death. If in that case the renunciation would not be a transfer neither is it here. The decedent never owned nor had control of the property as donee. All that he had was a right to accept. Coupled with this right was an equal right to reject. * * * Its [the government’s] right, as claimed, grew out of the act said to give rise to the tax liability, the exercise of an option. What it did was to collect a tax, not upon a transfer of an interest in property, but upon the exercise of a right to refuse a gift of property. This we think it had no right to do.
The right to a survivorship annuity which Mrs. Higgs acquired when decedent chose the lesser annuity for himself arose directly out of the original contract between the employer and the insurance company and not as a result of any separate transaction between decedent and the insurance company or between decedent and his wife which could be considered a transfer. This view is sustained by the conclusions reached by this Court in Katharine C. Pierce, 2 T. C. 832; affd., 146 Fed. (2d) 388, regarding an election made by a beneficiary of an insurance contract among several options granted her therein. The Court said (pp. 837-838):
* * * Immediately upon the insured’s death the petitioner was vested with several distinct and valuable property rights. Latterman v. Guardian Life Insurance Co. of America, 280 N. Y. 102; 19 N. E. (2d) 978. Among these rights was the right to demand a lump sum payment or to require the insurance company to pay her in accordance with one or more of the options. These property rights stem from the policy itself and not from the instrument in which she indicated her election under date of May 4, 1940. That instrument created no new rights. It merely advised the insurance company of her choice between her several rights, thus authorizing it to discharge its obligation to her in the manner stipulated in option C. Since the petitioner’s rights flowed directly from the policy, it necessarily follows that all payments received by her in satisfaction of those rights were made by reason of the provisions of the policy which matured on the death of the insured.
See also George H. Thornley, 2 T. C. 220; reversed on other grounds, 147 Fed. (2d) 416; and Law v. Rothensies, 57 Fed. Supp. 447; affd., 155 Fed. (2d) 13.
Decedent’s election did not change the insurance company’s obligation to pay the full value of the retirement benefits provided in the contract in any manner. Eegardless of whether decedent had chosen one or the other of the alternate retirement plans, the execution by the insurance company of the provision elected was incipiently required by its contract obligation. By his selection the obligation of the insurance company became automatically fixed under the terms of the contract to pay only the specified reduced amount of the annuity to the decedent plus a complementary survivorship annuity to his wife. Such election by decedent operated, in accordance with the terms of the contract, to designate the method of payment in the annuity contract. Once selected, the method of payment chosen determined db initio the contract, the annuitants, and the portion of the retirement benefits each was to receive. Conformably with such decision, the insurance company performed its contract with the employer, and the resulting payments first to Higgs and then to his wife were fruits from this same tree.
Nor did such election entail any additional consideration to cover the cost of the annuity for decedent’s wife, since this was included in the original purchase price of the annuity contract paid for entirely by the employer. Notwithstanding this fact, the majority holding charges the cost thereof to decedent. No part of the purchase price money so paid was transferred by decedent to secure an annuity for his wife, for the obvious reason that he had no property right in or control over such purchase price. It was the payment for the annuity contract by the employer which effectuated the transfer of a property interest in an annuity to decedent’s wife. Such purchase money became the sole property of the insurance company. Neither the Socony-Vacuum Oil Co. nor decedent had any property right in the money so paid, nor did such payment create an obligation of debt for repayment thereof in any form by the insurance company. George H. Thornley, supra, p. 233, and authorities cited therein.
After the exercise of the option by decedent, his wife was on an equal footing with him as an annuitant under and by virtue of the provisions of the annuity contract. No assignment or transfer by decedent to Mrs. Higgs of a property interest in the annuity contract or in the retirement benefits therein provided was required by the terms of the contract to be made or was made in order for the wife to acquire a survivorship annuity. In other words, decedent’s wife received a survivorship annuity not by the assignment, transfer, purchase, or gift thereof by decedent, but solely from and under the provisions of the annuity contract between the employer and the insurance company. His choice of a lesser annuity simply served to designate and activate particular provisions of the contract.
Therefore, decedent did not by his election assign or transfer any property or interest in an annuity to or for the benefit of his wife. Thus, in my view, there was no transfer of property taxable in the gross estate of decedent under the provisions of section 811 (c) of the code.
AruNdell, ArNold, and Harron, JJ., agree with this dissent.