*72OPINION.
Black:The estate tax and the additional estate tax imposed by sections SOI (a) of the Revenue Act of 1926 and 401 (a) of the Revenue Act of 1932, respectively, are “upon the transfer of the net estate of every decedent * * The term “net estate” means the “gross estate” as defined in section 302 of the Revenue Act of 1926 as amended, less the deductions specified in section 303 as amended. See also section 300 (b), Revenue Act of 1926. The respondent determined that, under subdivision (a) of section 302 of the Revenue Act of 1926, the value of decedent’s gross estate was $289,175.79, $242,500 of which represented the value of 5,000 shares of common stock of the International Shoe Co. Subdivision (a) provides as follows:
Sec. 302. The value of the 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—
(a) To the extent of the interest therein of the decedent at the time of his death;
*73What was the decedent’s “interest” in the property the value of which the respondent has included in the decedent’s gross estate? The respondent contends that the decedent was the sole owner of all the property which she attempted to dispose of in her will, including the shares of International Shoe Co. stock assigned to her by her children on or about July 30, 1925, and that the two decrees of the Circuit Court of St. Louis County, Missouri, referred to in our findings, are not binding upon the Board as requiring a holding contrary to the respondent’s determination.
Petitioners contend that the determination of the decedent’s “interest” in the property in question is purely one of the determination of property rights, and, as such, is controlled by the two decrees of the local circuit court.
We agree with the petitioners’ contention. If the decedent owned only a life estate in the International Shoe Co. stock assigned to her in 1925 by her children, no part of the value of such property so assigned should be included in her gross estate, only her own share of the stock which she inherited from her husband’s estate, which was one-fifth, should be included. Article 11 of Regulations 70, 1929 ed. and Regulations 80, 1934 ed., and article 13 of Regulations 80, 1937 ed., all provide: “Nor shall anything be included [in the decedent’s gross estate] on account of an interest or an estate limited for the life of the decedent.” The determination of whether the decedent owned only a life estate in the property assigned to her in 1925 by her children or whether she owned an absolute interest therein is clearly a determination of property rights, and, as such, is controlled by local law. Poe v. Seaborn, 282 U. S. 101; Tyler v. United States, 281 U. S. 497; Freuler v. Helvering, 291 U. S. 35; Blair v. Commissioner, 300 U. S. 5; Sharp v. Commissioner, 303 U. S. 624, reversing, per curiam, 91 Fed. (2d) 802; Susan B. Armstrong, 38 B. T. A. 658; Estate of Frederick R. Shepherd, 39 B. T. A. 38.
The Circuit Court for the County of St. Louis, State of Missouri, Division No. 2, after a full hearing in the matter, decreed on March 21, 1935, that the assignment executed by the children on July 30, 1925, “be and the same is hereby reformed as of the date of its execution to read” that the children “hereby jointly and severally grant, transfer and assign to our said mother, Mamie D. Rhodes, an estate, for her life only, in and to our joint and several interests in said estate of Taylor Rhodes, deceased * * The assignment as reformed also provided that upon the death of Mamie D. Rhodes “that certain life estate which we hereby assign to her shall terminate and our said joint and several interests shall thereafter be held and owned by us as if this instrument had not not been executed.”
There is no evidence that this decree was obtained for the purpose of defeating any Federal estate tax; or that it was obtained by *74collusion. Such, evidence as we do have points to the fact that it was a decree rendered after there was a hearing on the merits and was not a mere consent decree. The respondent has placed in evidence before us the testimony of Leona Kemp, who testified at the hearing before the local circuit court held on March 15, 1935. The substance of her testimony was that she was the secretary to W. E. Baird, the attorney who prepared the original assignment; that Baird had since died; that prior to the preparation of the assignment she remembered seeing “Mr. and Mrs. Paul Rhodes and Mr. Hugh Rhodes” at Baird’s desk, which was adjacent to her own; that she “heard Mr. Paul Rhodes tell Mr. Baird he wanted to have him draw up a document whereby they could give their share of the estate to their mother for the time of her life, and Mr. Baird made a notation on his calendar pad”; that about four or five days later, Baird placed a paper written in long hand on her desk and asked her to copy it; and that the paper thus handed to her was the original assignment. All of the evidence before us, including the recitals in the decree itself, indicates that the decree was rendered after a hearing on the merits and was in every respect regular. It was a decree adjudicating property rights. There is no evidence that it was ever modified or reversed, and, upon the authority of the above cited cases, it must be taken as establishing conclusively that the children assigned to their mother only a life estate in their interest in their father’s estate.
Shortly after the reformation decree J. Jackson Rhodes and Hugh D. Rhodes, individually, and as executors and trustees under the will of Mamie D. Rhodes, deceased, filed a suit in the Circuit Court of the County of St. Louis, State of Missouri, May term, 1935, against Paul T. Rhodes, individually and as one of the trustees under the will of Mamie D. Rhodes, deceased, and Mary B. Rhodes, praying “for a decree of this court determining the ownership of all of the property held in the name of Mamie D. Rhodes at the time of her death on January 22, 1934, as between the estate of said Mamie D. Rhodes on the one hand and the plaintiffs and defendants herein on the other, and for such other and further orders and decrees as to the court may seem just and proper.” The circumstances surrounding this suit are fully set out in our findings and need not be repeated here. Suffice it to say that on June 5, 1935, the court handed down its decree, in which it gave full faith and credit to the decree of the Circuit Court of the County of St. Louis, Division No. 2, heretofore mentioned and discussed.
It is our opinion that the two decrees in evidence before us establish conclusively that the decedent did not own outright any more *75than one-fifth of the 5,000 shares of common stock of the International Shoe Co. which the respondent has included in her gross estate and we have so found in our findings of fact. Her “interest” in the remaining four-fifths of the 5,000 shares was a life interest, which ceased with her death, and under the above cited provisions of the respondent’s regulations it was error for the respondent to include as a part of the decedent’s gross estate the value of 4,000 shares, amounting- to $194,000. Excluding $194,000 from the net estate as determined by the respondent leaves a net estate (exclusive of the exemptions) of $48,217.74, which is less than the exemption of $100,000 allowed by section 303 (a) (4) of the Revenue Act of 1926 and also less than the exemption of $50,000 allowed by section 401 (c) of the Revenue Act of 1932. It follows that there is no Federal estate tax due. Even if it should be held that the second court decree rendered by Division No. 3, June 5, 1935, was a consent decree because it followed substantially the lines of a written agreement which had been previously entered into by the parties, nevertheless, the first court decree of Circuit Court No. 2, reforming the original instrument of transfer, was not a consent decree and settled the question as to' ownership of the International Shoe Co. common stock and we are bound by it.
The respondent stresses the importance of the fact that the decedent, after the original assignment from her children in 1925, thereafter treated the property as her own. It is true that she so testified in the affidavit referred to in our findings; that she actually sold 3,000 shares of the stock; that she pledged the remaining stock on ¡loans; and that she attempted to dispose of all the stock in her will. As we look at this case, those were the facts for the local circuit court to consider in arriving at its decision in the matter. We may not assume that it did not do so. The decree having been rendered by a court of competent jurisdiction in a suit between adverse parties after a hearing upon the merits, we feel that we are bound by it. Whether the decree ever should have been rendered under the evidence is not a matter for us to decide. The question of property rights there decided is no longer an open question for the Board or the Federal Courts to consider. Freuler v. Helvering; Blair v. Commissioner; Sharp v. Commissioner, all supra.
The conclusion which we here reach is not contrary to our recent decision in Estate of Arthur D. Forst, 40 B. T. A. 876. In that case we held that a decree of the Orphans’ Court of Mercer County, New Jersey, approving a certain claim against the estate was not binding upon the Board as to whether the claim was deductible under section 303 of the Revenue Act of 1926, in arriving at the net estate. *76That question was altogether different from the one we have here to decide. Congress has established its own criterion as to what claims are deductible. Cf. Lyeth v. Hoey, 305 U. S. 188.
In view of our holding on the first issue, we need not decide the second issue.
Reviewed by the Board.
Decision will be entered for the -petitioners.