*1089OPINION.
Korner, Chairman: This Board has recently held in Appeal of Peter Beinberg Estate, 1 B. T. A. 953, that it has jurisdiction of an appeal from a determination of the Commissioner, made subsequent to the enactment of the Revenue Act of 1924, denying a claim in abatement of estate taxes assessed prior to the date of such enactment. The facts in that appeal relative to the jurisdiction of this Board are substantially on all fours with the facts in the instant appeal. On the authority of that decision the motion of the Commissioner to dismiss the taxpayer’s petition herein is denied.
The second question presented by the record in this appeal is whether or not the $63,000, representing the difference between the original obligation of $288,000 owing to Francis S. Smithers by his son and the promissory note executed and delivered by the son to Francis S. Smithers pursuant to the agreement of February 26,1919, constitutedj at the death of Francis S. Smithers, a part of his gross estate within the meaning of section 402 (c) of the Revenue Act of 1918. That part of section 402 (c) of the Revenue Act of 1918 pertinent here is as follows:
Sec. 402. That the value of tbe gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated—
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(e) To the extent of any interest therein of which the decedent has at any time made a transfer, or with respect to which he has at any time created a trust, in contemplation of or -intended to take effect in possession or enjoyment at or after his death (whether such transfer or trust is made or created before or after the passage of this Act), except in case of a bona fide sale for a fair consideration in money or money’s worth. * * *
There is nothing in the record indicating in any way that the transfer under consideration was made in contemplation of death; the *1090Commissioner concedes that it was not so made. It is therefore only necessary for ns to inquire whether or not the transfer was intended to take effect in possession or enjoyment at or after the death of Francis S. Smithers, and, if it was so intended, whether or not it was a bona fide sale for a fair consideration in money or money’s worth. Counsel for the taxpayer contend that the transfer was made to take effect in immediate possession and enjoyment, and hence that the value of the interest transferred is not properly to be included in the gross estate of the deceased transferor. The contention of the Commissioner is that the transfer was not a bona fide sale, for a fair consideration in money or money’s worth; and that, since the decedent reserved to himself during his life the income from the property, or an annuity equal to interest thereon, the value of the property should be included in the gross estate of the decedent.
Upon a careful consideration of the evidence in this case, in the light of the arguments and briefs of counsel, we are unable to agree with the contention of the Commissioner that the transfer involved here was intended to take effect in possession or enjoyment at or after the death of Francis S. Smithers. We are convinced that this transfer took effect at the time it was made. The evidence shows that H. B. Smithers was indebted to his father in the amount of $288,000, which indebtedness was evidenced by a promissory note. The father, for reasons which are not pertinent here, decided to forego part of his claim against his son, and authorized and directed his son to cancel and destroy the evidence of the debt for $288,000, upon the execution and delivery to him by his son of a new note for $225,000 and an agreement or promise on the part of the son to pay to him, the father, annually, so long as he lived, an amount equal to áy2 per cent of $63,000. Upon the execution of the new note and written agreement, the contract, so far as the father was concerned, was fully executed. On the part of the son, the transfer comprehended in the cancellation of an indebtedness of $63,000 was likewise fully executed. The written agreement of the son to pay certain money to his father was executory in that the son was thereby obligated to pay to his father each year an amount equal to 4% per cent of $63,000. The son was wholly and completely released from the obligation to pay the principal sum of $63,000. The father no longer had any interest in the principal sum, and, upon failure of the son to make the annual payment provided for in the subsequent agreement, the father' would have had no right of action to recover the $63,000 or any part thereof. Fie would have been limited to an action to collect the amount of the yearly payment provided by the contract of February 26, 1919, if and when such amount accrued under that contract.
In the case of Levy v. Wardell, 258 U. S. 542, the court had under consideration a transfer of property similar to the transfer involved herein. It was held not subject to tax because it had been made prior to the enactment of the Revenue Act of 1916, under which the tax was sought to be assessed. Flowever, the language used by Mr. Justice McKenna, who delivered the opinion of the court, is enlightening here. He said :
The transfers of the stock to plaintiffs were complete and there were no agreements or stipulations by which Henriette Levy would be entitled to a return of the stock except that the plaintiffs promised and agreed to pay to *1091her the dividends accruing thereon during her lifetime, she, however, retaining no testamentary disposition or any legal right whatsoever over the stock or any of it, or any right of revocation.
Henriette Levy at the time of the transfers was in good health and made them to get rid of the care and worry of business and to vest in plaintiffs definite and irrevocable present rights of ownership in the stocJc, and the transfers were not in contemplation of, or intended to take effect in possession or enjoyment at or after her death. (Italics ours.)
The reference to contemplation of death is not germane to this inquiry, but the italicized portion of the above quotation does have a direct bearing here.
The case of Polk v. Miles, 268 Fed. 175, is saliently in point here, In that case the court was called upon to decide whether or not a transfer by a father to his son of $105,000, in consideration of an agreement by the son to pay to the father during life, 4 per cent interest on the amount transferred, was such a transfer as to enable the estate of the father, on his decease, to eliminate the amount mentioned from the gross estate. The case arose under section 202(b) of the Revenue Act of 1916, which is identical with section 402(c) of the Revenue Act of 1918, except that the latter section contains the additional words “whether such transfer or trust is made or created before or after the passage of this Act.” The court held that the property transferred did not constitute part of the decedent’s gross estate for purposes of the Federal estate tax. The court said, on page 176:
May tbe collector of internal revenue sustain bis action, on tbe ground that tbe transfer made was not intended to take effect in possession or enjoyment until after tbe husband’s death? There is no question that tbe son at once entered into possession of the brewery’s stock, with whatever enjoyment it was possible to get out of it. Tbe agreement reserved to tbe husband no rights in it, and tbe government has not sought to tax tbe stock, which was worthless, or nearly so. The indebtedness had value, provided the business was promptly wound up. What, if anything, it would be worth, if its collection was postponed, until after the death of the husband, no one could then say. What did the transaction amount to? Was it anything other than the purchase by the husband from the son of an annuity of nearly $4,200 a year, payable in monthly installments; the buyer paying for it by assigning to the seller his claim against the brewery? It has been many times held that the vendor of an annuity enters at once into the possession and enjoyment of the price paid for it, which does not, upon the death of the annuitant, figure as part of his estate for taxation purpose. Matter of Edgerton, 35 App. Div. 125, 54 N. Y. Supp. 700, affirmed 158 N. Y. 671, 52 N. E. 1124; Matter of Thorne, 44 App. Div. 8, 60 N. Y. Supp. 419, affirmed in 162 N. Y. 238, 56 N. E. 625.
It follows that the tax was improperly collected, and the plaintiff is entitled to recover it.
Counsel for the Commissioner cited numerous authorities in support of his contention, but they are, we think, distinguishable from the instant case. We are of the opinion, upon consideration of the evidence, that the transaction outlined in the findings of fact above constituted an absolute transfer in praesenti of $63,000 to H. B. Smithers and that possession and enjoyment thereof vested in him immediately and were not postponed until the death of his father.