*14 Decision will be entered under Rule 50.
1. Value of remainder interest in inter vivos trust after discretionary life estates to two minor unmarried grandchildren, which by the terms of the trust was to revert to decedent grantor, or, if he were dead, to his estate, upon the death of the grandchildren without wives or issue prior to receipt of the principal and in default of the exercise of limited powers of appointment, held includible in decedent's gross estate; held, further, no reduction for the value of the hypothetical exercise of the powers is permissible.
2. Notes executed to decedent by two of his children, which were partly secured by collateral but subject to defenses of statute of limitation, and coverture, held, to have no value in excess of that of the collateral.
*390 Petitioners in this proceeding challenge a portion of a deficiency of $ 214,823.29 determined in the estate tax of William Walker, deceased. Certain issues raised by the petition have been conceded and others have been settled, *15 leaving open for decision three issues: (1) The valuation of a note of William C. and Elizabeth Stevenson; (2) the valuation of a note of Hepburn Walker; and (3) whether an interest in a trust created by decedent in 1929 is includible in his gross estate under section 811 (c) of the Internal Revenue Code, and, if so, the value thereof.
*391 FINDINGS OF FACT.
The facts have been stipulated and are hereby found accordingly. Petitioners are the executors and trustees of the estate of William Walker, deceased (hereinafter referred to as decedent).
Decedent, who had resided in the Borough of Edgeworth, Allegheny County, Pennsylvania, died November 28, 1939, leaving a last will and testament which was duly probated in the office of the register of wills, Allegheny County, Pennsylvania. The estate tax return here involved was filed with the collector of internal revenue for the twenty-third district of Pennsylvania. In the return the executors elected to value the assets at the optional valuation date, November 28, 1940.
Elizabeth Walker, daughter of decedent, married William C. Stevenson on June 20, 1916. At that time and until 1939 they resided in Leetsdale, Allegheny County, *16 Pennsylvania. They have never voted except in Allegheny County. They filed their income tax returns in the twenty-third district of Pennsylvania, at Pittsburgh, and their personal property tax returns, if any, were filed in Allegheny County, Pennsylvania.
In September 1927 William C. Stevenson bought a farm at or near Middleburg, Virginia. The purchase price was paid by him out of his own funds and the property was conveyed to him in his own name by deed dated September 15, 1927, and recorded in Fauquier County, Virginia.
In the fall of 1929, when stock market prices fell, Stevenson, in order to save his equity in the stocks which he had purchased, borrowed $ 50,000 from decedent. The loan was evidenced by a note in the sum of $ 50,000, dated Pittsburgh, Pennsylvania, November 15, 1929, signed by Stevenson and his wife, and payable January 2, 1931, at Pittsburgh.
The proceeds of the loan were paid by two checks, payable to W. C. Stevenson, one dated November 15, 1929, in the sum of $ 35,000 and the other in the face amount of $ 15,000 dated December 7, 1929. The first check was endorsed by Stevenson to C. D. Halsey & Co., stock brokers at Pittsburgh, in payment on account of his*17 margin indebtedness. The other check was endorsed by Stevenson for deposit only and deposited in his own personal checking account, and the proceeds were used for his own purposes. The margin account with C. D. Halsey & Co. was in Stevenson's own name and his wife had no interest therein. The two checks were signed "William Walker, by J. E. MacCloskey, Jr., Attorney in Fact." The full amount of $ 50,000 was not transferred by decedent to Stevenson on November 15 because he had to wait until after the first of December to receive dividends which would supply him with sufficient cash to make the full loan.
*392 The loan described above was secured by a deed of trust dated November 15, 1929, signed by Stevenson and Elizabeth W. Stevenson, his wife, to William Walker. The deed was acknowledged in Fauquier County, Virginia, on January 8, 1930, and was recorded January 15, 1930. The only interest payments made by Stevenson to decedent on account of the above indebtedness were made on May 6, 1930, and November 21, 1930. Mrs. Stevenson never paid anything on either the principal or interest of the note.
At the date of decedent's death and ever since then Stevenson has been financially*18 unable to pay his obligation. The value of the property subject to the deed of trust was, on the optional valuation date, $ 25,000.
On June 20, 1932, Hepburn Walker, son of decedent, borrowed $ 23,000 from the Farmers Deposit National Bank, Pittsburgh, on a collateral note. The note was renewed every 30 or 90 days over a period of 6 years. The maker failed from time to time to pay the interest due on the note and interest thereon was paid to the bank by decedent. On March 31, 1934, decedent borrowed $ 23,600 from the Farmers Deposit National Bank and executed his note therefor dated the same day. With the proceeds of this note he purchased his son's note from the bank. As collateral security for his own loan he pledged $ 20,000 par value First Liberty Loan 3 1/2 percent bonds which he owned and also the previously described note of his son Hepburn. Subsequently decedent paid off his own note and retained his son's note, together with the collateral belonging to his son which was pledged on that note. The value of the collateral belonging to decedent's son as of the optional valuation date was $ 13,295.31. Hepburn Walker, the maker of the note, never paid any interest to his*19 father after the latter purchased the note and never paid any part of the principal. At the date of decedent's death and ever since then Hepburn Walker has been financially unable to pay his obligation.
The will of decedent dated November 12, 1935, after bequeathing his personal effects and household goods, etc., to his wife, if she survived him, or to specified children if she did not, provided in part:
ARTICLE II.
Section 1. All the rest, residue and remainder of my property, * * * I give * * * to my Executors and Trustees, * * * in trust * * * for the following uses * * *
To have and to hold the same during the natural lives of all my children and grandchildren who shall be living at the date of my death, and of the survivors or survivor of all of said children and grandchildren; * * *
* * * *
Section 3. * * * to pay the entire net income from the whole of the trust estate to my beloved wife, Jane D. Walker, for and during her lifetime.
*393 ARTICLE III.
Section 1. And upon the further trust, upon the death of my wife, to divide the said trust estate in the same number of equal parts as the number of my children who survive my wife and me, or who are dead, leaving a child*20 or children, or more remote issue, surviving my wife and me, and to set apart or allocate to each such child one equal part or share (except, however, as to the part set aside or allocated for my son, Hepburn, which is to be charged with an advancement as hereinafter set forth.)
By Deed of Trust, dated the 20th day of December, 1929, I transferred to Trustees about Two Hundred Thousand ($ 200,000.00) Dollars of securities for the benefit of my son, Hepburn, his then wife and his two children. I direct that in the division of my estate for the benefit of my children the share set apart for my son, Hepburn, be charged with Two Hundred Thousand ($ 200,000.00) Dollars as an advancement to him, but without interest. I direct that no other sums of money or securities which I have given to Hepburn or to my other children be regarded as advancements; but I direct that any loans to any of my children evidenced by their bonds, notes or mortgages shall be paid by them, with interest.
Section 2. And upon the further trust, to pay the net income from the part or share allocated to each of my children who survive my wife and me, to my child for whom the said share or part has been so allocated, *21 for and during the lifetime of my said child; and from and after his or her death, to his or her lawful issue then living, if any, for and during their respective lives * * * [with remainders over].
* * * *
ARTICLE V.
Section 1. The income which I have directed to be paid to the beneficiaries shall be paid to each of them, respectively, and their own personal receipts taken therefor, and, so long as it remains in the hands of my Trustees, it shall not be capable of being anticipated or assigned under any circumstances by them, or any of them, and shall not be liable in any way for any debts they, or any of them, may contract, and in no manner, shape or form shall they, or any of them, have power to mortgage or pledge it or any part of it. * * *
A codicil was added to the above will on August 25, 1937. It provided that decedent's wife should receive in lieu of the income from the trust for life, an annuity of $ 50,000 from the trust annually. Income not needed to pay the annuity was to be paid to decedent's children in the same proportion in which they were to share after the death of decedent's wife. Decedent's wife, Jane D. Walker, died on February 21, 1943.
No distributions were*22 made by the executors or trustees under the will of decedent to either Elizabeth W. Stevenson or Hepburn Walker from the date of decedent's death until March 24, 1943. During the period from March 24, 1943, to April 1, 1944, $ 12,000 was distributed by the executors to Elizabeth W. Stevenson and $ 7,200 to Hepburn Walker. No other amounts had been distributed to those two children up to April 24, 1944. The values of the respective life estates *394 of Mrs. Stevenson and of Hepburn Walker under the will of decedent were each greater than the face amount of the respective notes of William C. Stevenson and Hepburn Walker, with accrued interest. The executors of decedent's estate filed an account in the Orphans' Court of Allegheny County, Pennsylvania in 1939, which was to come up for audit before a judge of that court during the week of June 12, 1944. The Orphans' Court was to be asked to determine, unless the issues were earlier settled between the parties, whether the executors can set off or reclaim the difference between the value of the collateral and the face amount of the notes with interest against the interest of Mrs. Stevenson and Hepburn Walker under the will. The*23 notes in question were appraised for Pennsylvania inheritance tax purposes at the value of the collateral as of the date of decedent's death, and no appeal was taken from that appraisement. In the Federal estate tax return, petitioners included the two notes in the gross estate at the value of the collateral only. Respondent in his notice of deficiency increased the value of the notes to their respective face amounts and also included accrued interest of $ 30,108.33 and $ 10,533.46, respectively.
On December 20, 1929, decedent created an irrevocable trust, naming himself and J. E. MacCloskey trustees. Securities then stated to be worth approximately $ 200,000 were transferred to the trustees, who were to hold and manage the corpus. All income received on January 1, 1930, and/or accrued as of that date was to be paid to the donor. Income received after that date was to be paid in various amounts to various persons as follows:
ARTICLE II.
* * * *
Section 2. And upon the further trust, to pay out of the net income therefrom (subject to the provisions hereinafter set forth) (a) the sum of Ninety-six Hundred ($ 9600.00) Dollars per year, payable in equal monthly installments of Eight*24 Hundred ($ 800.00) Dollars each, to Eleanor Scott Walker, wife of Hepburn Walker, the son of the Donor, until Hepburn Walker, Jr., son of the said Eleanor Scott Walker and Hepburn Walker, shall reach the age of twenty-one years, which will be on the 8th day of March, 1939, unless the said Hepburn Walker, Jr. should die before said date, in which event the said sum shall be paid only until his death; (b) and thereafter, the sum of Seventy-two Hundred ($ 7200.00) Dollars per year, payable in equal monthly installments, to the said Eleanor Scott Walker until William Walker, II, the second son of Eleanor S. Walker and Hepburn Walker, shall reach the age of twenty-one years, which shall be on the 2nd day of September, 1943, unless the said William Walker, II should die before said date, in which event the said sum shall be paid only until his death; (c) and thereafter, the sum of Forty-eight Hundred ($ 4800.00) Dollars per year, payable in equal monthly installments, to the said Eleanor S. Walker for her lifetime (except always as hereinafter set forth); (d) the sum of Twenty-four Hundred ($ 2400.00) Dollars per year to the said Hepburn Walker, Jr. from and after he reaches the age of *25 twenty-one years; (e) the sum of Twenty-four Hundred *395 ($ 2400.00) Dollars per year to the said William Walker, II, from and after he reaches the age of twenty-one years.
Section 3. The above income is intended (a) for the support of the said Eleanor S. Walker as long as she may remain the wife of the said Hepburn Walker, or, if she should become widowed or divorced from him, then as long as she shall thereafter remain unmarried; and (b) for the support, maintenance and education of the two sons of the said Eleanor S. Walker and Hepburn Walker, namely, Hepburn Walker, Jr. and William Walker, II, during their minorities. If the said Eleanor S. Walker (a) should ever, by any court proceeding, secure from Hepburn Walker any alimony or other sum for the support or maintenance of herself and/or her two children, or (b) if, in the event of the death of the said Hepburn Walker, she should receive from his estate any income or principal, then, in either of these events the income payable hereunder to the said Eleanor S. Walker shall be reduced by an amount equal to (a) the alimony or support so received, or (b) the income received from the estate of Hepburn Walker or the yearly value*26 of any principal received from the said estate, computed on a Five (5%) per cent. basis; and that amount, (namely, the reduction), shall be paid to the Donor, if living, and, in the event of his death, shall be allowed to accumulate and be paid over to Hepburn Walker, Jr. and William Walker, II when they respectively reach the age of twenty-one years, and in the event of the death of either one before reaching twenty-one years of age, without leaving a wife or children surviving, the accumulated income shall be paid to the survivor when he shall reach the age of twenty-one years; and in the event of the death of both the said Hepburn Walker, Jr. and William Walker II before reaching the age of twenty-one years and without leaving a wife or child surviving, then the said accumulated income shall be paid to Hepburn Walker, son of the donor.
Section 4. The above income shall cease and no longer be payable to the said Eleanor S. Walker if she should become widowed or divorced from the said Hepburn Walker and thereafter remarry.
Eleanor Scott Walker was the wife of Hepburn Walker, son of decedent, at the time the trust was created. Hepburn Walker, Jr., and William Walker, II, were sons*27 of Eleanor and Hepburn Walker and were grandchildren of decedent. Hepburn, Jr., was born March 8, 1918, and William II was born September 2, 1922. The former was eleven years old when the trust was created and the latter seven.
The trust further provided:
Section 5. In the event (a) of the death of the said Eleanor S. Walker, or (b) in the event she becomes widowed or divorced from the said Hepburn Walker and thereafter remarries, and consequently be no longer entitled to any of the income from the trust herein created, then in either of these events the Trustees hereunder shall divide the trust property into two equal parts and allocate one part for the said Hepburn Walker, Jr. and the other part for the said William Walker, II; until there has been an actual distribution of the principal of the trust property, as hereinafter set forth, the said Trustees may set aside for each such child an undivided portion of the trust estate rather than actually dividing the whole estate and setting apart a divided part for each child, and in any such events the Trustees hereunder, during the minority of the said Hepburn Walker, Jr. and William Walker, II, shall pay out of the net income from*28 the part allocated to each one of them so much thereof as in the opinion of the Trustees is necessary for their reasonable support, maintenance and education, and the *396 balance of the income shall be allowed to accumulate and be paid over to the said Hepburn Walker, Jr. and William Walker, II when they respectively reach the age of twenty-one years, when each of them shall be entitled to receive the whole income until there has been a total distribution of the trust property, as hereinafter set forth.
Section 6. And upon the further trust, in the event of the death of both Hepburn Walker, Jr. and William Walker, II during their minorities, without either one having a wife or child surviving, then and in that event, to pay the income that would otherwise be payable for the support, maintenance and education of the said Hepburn Walker, Jr. and William Walker, II, to the Donor, if living, and in the event of his death to Hepburn Walker.
Section 7. Any net income in excess of the specific sums hereinbefore provided for, shall be paid yearly to the Donor, if living; in the event of his death, the same shall be allowed to accumulate and be paid over to Hepburn Walker, Jr. and William*29 Walker, II when they respectively reach the age of twenty-one years, and in the event of the death of either one before reaching twenty-one years of age, without leaving a wife or children surviving, the accumulated income shall be paid to the survivor when he shall reach the age of twenty-one years; and in the event of the death of both the said Hepburn Walker, Jr. and William Walker, II before reaching the age of twenty-one years and without leaving a wife or child surviving, then the said accumulated income shall be paid to Hepburn Walker, son of the Donor.
ARTICLE III.
Section 1. And upon the further trust, as to the principal of the said trust property, at the termination of the interest of the said Eleanor S. Walker, either by (a) death, or (b) by her becoming widowed or divorced from the said Hepburn Walker and remarrying, the Trustees may, in their uncontrolled discretion, pay one-fourth of the share or part allocated to the said Hepburn Walker, Jr. and William Walker, II, as each of them reaches the age of twenty-five years; another one-fourth to them as each one reaches the age of thirty years; another one-fourth to them as each one reaches the age of thirty-five years; *30 and the remaining one-fourth to them as each one reaches the age of forty years. The said grandsons of the Donor shall not have a legal right to demand the distribution of one-fourth to them, but the distribution thereof shall be discretionary with the Trustees hereunder. * * *
Section 2. In the event of the death of the said Hepburn Walker, Jr. or William Walker, II before he shall have received his entire share allocated to him, the unpaid or undistributed balance of the said share (subject always to the income hereinbefore given to the said Eleanor S. Walker) remaining in the hands of the said Trustees of the grandson so dying, shall be paid over to the widow of such grandson so dying and/or the lineal descendants of the Donor in such amounts, on such conditions and with such limitations as the said grandson so dying may by his last will and testament lawfully appoint, limit and direct; if either grandson of the Donor should die without exercising the power of appointment herein set forth, and leaving a wife or child surviving him, then and in that event the share of the trust property of the grandson so dying shall be paid over and distributed to and among the widow and/or child*31 or children of the grandson so dying, and/or the lineal descendants of the Donor, in the same manner as if the grandson had died seized and possessed of the same as his absolute property and as if his mother were dead; subject always to the interest in the income herein given to the said Eleanor S. Walker. If either grandson of the Donor should die at any time without having exercised the power of appointment *397 herein given him, and without leaving a wife or child surviving him, then the entire interest of the said grandson so dying, both in the income and principal, shall be added to the share of the other grandson and distributed in like manner as if it had been originally a part thereof. If both of the grandsons of the Donor should die without having exercised the power of appointment herein given them and without leaving a wife or child surviving them, then the entire interest of the said grandsons so dying, both in the income and principal, shall (subject to the interest of the said Eleanor S. Walker) be paid over to the Donor hereunder, if living, or, in the event of his death at that time, it shall be paid over and distributed to the Executors and Trustees under the*32 Donor's last will and testament, to be held by them with the powers given under the said last will and testament and the income therefrom paid as therein indicated, and in the distribution of the principal of the estate of the Donor, shall be added to the share or part set apart or allocated to Hepburn Walker, son of the Donor, in the said last will and testament.
At the date of decedent's death Eleanor Scott Walker and Hepburn Walker had been divorced and Eleanor had married William McCarthy. Both grandsons of decedent were living at the time of his death, were not then married, have not since been married, and are still living. Hepburn Walker was born July 24, 1894.
Respondent included the sum of $ 30,624.95 in the gross estate of decedent, stating that to be the adjusted value of a remainder interest in the corpus after the expiration of the two life estates.
The fair market value of the Stevenson and Hepburn Walker notes held by the estate, including the collateral securing them, was in each case the value of the collateral.
The fair market value of 28,752 shares of common stock of Harbison-Walker Refractories Co. to be included in the gross estate is $ 648,717. The allowable*33 deduction for executors' commissions is $ 65,849.33 and for attorney fees is $ 6,000.
OPINION.
The questions presented relate to the propriety or permissible extent of certain inclusions in decedent's estate. One involves the subject matter of a transfer by decedent to a trust for the benefit of two grandchildren. The controversy is whether this falls within the provisions of section 811 (c), Internal Revenue Code, as intended to take effect at or after decedent's death, under the principle of Helvering v. Hallock, 309 U.S. 106, and subsequent cases.
This subject has been variously treated in a number of recent cases and several tests have been applied, or, at least, if there is but one test, it has been divergently expressed. The question has been said to be whether decedent disposed of his property during his lifetime "as well as any man could," Commissioner v. Kellogg (C. C. A., 3d Cir.), 119 Fed. (2d) 54; whether he retained a "string or tie" upon the disposition of the property in spite of its transfer to the trust, *398 Lloyd v. Commissioner (C. C. A., 3d Cir.), 141 Fed. (2d) 758;*34 the degree of remoteness of the probability of reversion, Estate of Benjamin L. Allen, 3 T. C. 844; Estate of Ellen Portia Conger Goodyear, 2 T. C. 885; and the intention of the decedent as manifested by the terms of his gift. See Frances Biddle Trust, 3 T. C. 832, concurring opinion.
By any one of those tests it seems to us the property composing the trust before us must be included in the gross estate. Decedent did not dispose of his property as well as any man could. He eliminated his son, the father of the income beneficiaries, a clearly available taker, as well as his other children and their possible issue, from the line of succession. This omission makes it much more reasonable to think of the trust as a gift limited to the grandchildren and their own household group, with a reversion to the grantor upon failure to realize those limited objectives, than as an effort to dispose of the property completely and to provide for reversion only as a last resort.
By the same token, if his two grandchildren, who were then minors and unmarried, both died without wives or children and without*35 exercising their limited power of appointment, the decedent, by further action if he were alive, and otherwise by his will, himself undertook to prescribe the subsequent devolution of the property and thereby retained a string or tie to bring it back to him and subject it to his further control upon the happening of the designated contingencies.
As we have said, the grandchildren had neither wives nor children and their limited power to appoint by will could not have been exercised at the time the trust was created, since minors are incapable of testamentary action. 20 Purdon's Pa. Stat., sec. 181. Even at the time of decedent's death both were unmarried, one was still a minor and the other had barely reached majority. Thus, only those two lives stood between decedent and a reversion -- a far cry from the "remoteness" found to exist in such cases as Frances Biddle Trust, supra; cf. Becker v. St. Louis Union Trust Co., 296 U.S. 48.
Finally, if we attempt to judge this situation by analyzing the decedent's evident intention, we have not only a reference in the instrument to the explicit and clearly contemplated possibility*36 that decedent might survive his grandchildren and thereby succeed to the property, but to the further obviously anticipated contingency that the grandchildren might not themselves survive to receive it, even though they outlived the grantor. In that event, a further indication of decedent's purpose that the transfer should not definitively ensue as a consequence of the establishment of the trust is manifested by the provision that even in this event, a possibility extending far into the future, the dead hand of the grantor should still maintain its hold over the ultimate disposition of the property by means of the requirement *399 that in such circumstances it was to pass in accordance with the provisions of his will.
While we might regard it as only remotely possible that a grantor should outlive his grandchildren, cf. Estate of Ellen Portia Conger Goodyear, supra, and Estate of Lester Hofheimer, 2 T. C. 773, there is no such improbability in the failure of the grandchildren themselves to survive the designated period of retention of the corpus. Considering all the circumstances, including this provision and the*37 evident limitation of the takers to a particular segment of the decedent's family, we think the terms of the trust indenture demonstrate an intention that the transfer should take effect, if not at death, then thereafter. Martha E. Gaston Estate, 2 T. C. 672.
Perhaps the case most nearly resembling the present facts is Fidelity-Philadelphia Trust Co. v. Rothensies (Stinson estate), 142 Fed. (2d) 838 (C. C. A., 3d Cir.). There decedent left two unmarried daughters for whose benefit she had created a trust during her lifetime. Income was to be paid to the daughters for their lives, and the principal was given to their issue, if any, otherwise to revert. The court held the trust property includible in decedent's estate. Considering that the grandchildren here are entitled only to the income unless they reach certain ages and then are to succeed to the principal in the sole discretion of the trustees, of whom decedent was one, it is difficult to say here any more than in the Fidelity-Philadelphia case that the ultimate takers were in being at the time the trust was created. While certiorari has been granted in*38 that case, 323 U.S. 693, it is limited to the quantum of inclusion, an issue which, as will presently appear, has been eliminated from this proceeding. For all of the foregoing reasons, we take the view that the present transfer in trust must be treated, to the extent that respondent has done so, as one intended to take effect in possession or enjoyment at or after death.
Petitioner's only quarrel with the process of valuation is that respondent, having determined the correct figure for the remainder interest after the two life estates in the grandchildren, should in addition have allowed for the possibility that their limited power of appointment over the remainder might have been exercised by the respective life tenants. Passing the question whether this would be an allowable diminution of decedent's reversion, it seems unquestionable that in any event the contingencies involved are in their nature incapable of actuarial computation and hence that they have no place in the calculation of value. Robinette v. Helvering, 318 U.S. 184. We think respondent's action in this respect was proper and that the corresponding portion*39 of the deficiency should be sustained.
The remaining questions relate to the inclusion at full face amount and accrued interest of two promissory notes executed by two of decedent's children and held by him at the time of his death. Petitioner *400 concedes inclusion, but only at a value, about half of the face amount, represented by collateral held by the estate.
Both notes were due at such a time that, without more, the statute of limitations would have operated as a bar to collection by the executor on the optional valuation date. In the case of the daughter's note there is the additional factor that her status as a married woman rendered accommodation liability voidable under Pennsylvania law. 48 Purdon's Pa. Stat., sec 32. And as to both children, the facts suggest that their personal assets were insufficient to establish their ability to discharge the debt.
On the latter point, respondent relies on Estate of Edwin Hodge, 2 T. C. 643, reasoning that the debtors became solvent when decedent's death put them in funds through their participation in the estate. But the obstacles to enforcement would not thereby have been eliminated. The question*40 to be settled is the fair market value of the estate's assets. This involves a setting of the price at which a willing buyer and a willing seller would deal. With their apparent infirmities we regard it as too great a stretch of the credulity to conclude that a prospective buyer would be prepared to acquire these notes at any price appreciably in excess of the value of the collateral. At best he would be buying a lawsuit, and the only fair inference from the present record is that it would be an unsuccessful one.
We think petitioner has furnished sufficient proof to make a prima facie case for the absence of any value in the notes in excess of the collateral. If there were other factors, the burden of going forward to prove them was thereby shifted to respondent. On this issue, we regard respondent's action as erroneous.
Decision will be entered under Rule 50.
Arundell, J., dissenting: It seems to me that the majority opinion on the first issue disregards the fact that the estate tax falls upon the shifting of an economic interest from the dead to the living. Shukert v. Allen, 273 U.S. 545; Reinecke v. Northern Trust Co., 278 U.S. 339;*41 May v. Heiner, 281 U.S. 238.
Section 811 (c) deals with property technically transferred by means of inter vivos gift, the actual enjoyment or possession of which is made to depend upon the death of the grantor. The grantor's death, completing the gift previously made, is the event which calls the statute into play. The crux of the problem is pointed out by the Supreme Court in Helvering v. Hallock, 309 U.S. 106, where, in commenting upon Klein v. United States, 283 U.S. 231, the Court said: "By bringing into the gross estate at his death that which the settlor gave contingently upon it, this Court fastened on the vital factor." The *401 question presented in the Hallock case and its companion cases is made manifest in the following statement: "All involve dispositions of property by way of trust in which the settlement provides for return or reversion of the corpus to the donor upon a contingency terminable at his death."
In the present case the transfer sought to be subjected to tax bore no reference to the death of the decedent. His death could have no effect*42 whatsoever upon the possession or enjoyment of the trust property, neither creating, completing, enlarging, or diminishing the estate or interest of any taker under the trust instrument. His death was the "generating source" of no property rights or interests. No interest, right, or benefit passed from him to others upon his death, or was terminable at his death. All had been established by the inter vivos transfer and remained completely unaffected upon his death. It is difficult, therefore, to understand the basis for including in decedent's gross estate the value of property the transfer of which was completed during his lifetime, not in contemplation of death and in no way related to his death.
It is true that on a remote contingency, namely, that both grandsons die prior to distribution to them of the corpus, without leaving widows, or children, and without exercising the testamentary power of appointment, the property might revert to the donor, if living, and otherwise to his estate. However, as stated in Lloyd v. Commissioner, 141 Fed. (2d) 758: "If the contingent reversionary interest should ever vest in the settlor in his lifetime*43 (or after his death for that matter) it would vest only because of the death of the life beneficiaries under the prescribed conditions and not because of or with relation to the death of the settlor." This case is indistinguishable in principle from Lloyd v. Commissioner, supra;Estate of Benjamin L. Allen, 3 T. C. 844; and Frances Biddle Trust, 3 T. C. 832. Upon such authority and upon analysis of the plain terms of the trust instrument, I am of the opinion that decedent gave nothing contingently upon his death; that nothing passed from him to others at his death; and that, therefore, the transfers were not intended to take effect in possession or enjoyment at or after his death.