1935 BTA LEXIS 927">*927 Transfers held not to have been made in contemplation of death.
32 B.T.A. 596">*596 The Commissioner determined a deficiency in estate tax in the amount of $260,716.69. He made several adjustments which are not contested and added to the value of the gross estate as shown on the return $3,185,089.50, which he held should be "included in the gross estate in accordance with section 302(c) of the Revenue Act of 1926 which provides that such transfers shall be deemed and held to have been made in contemplation of death in excess of $5,000 to each transferee." The petitioner assigned this action of the Commissioner as error and contends that (1) the transfers were not made in contemplation of death; (2) the transfers were not made within two years of the death of the decedent; and (3) the Commissioner incorrectly valued the preferred, class A, and class B stock of the General Cable Corporation included in the transfers.
32 B.T.A. 596">*597 FINDINGS OF FACT.
The petitioner is the executor of the estate of William E. Mossman. William E. Mossman1935 BTA LEXIS 927">*928 died on April 12, 1929, aged 85 years, 6 months, and 25 days. He died from shock and injuries received in a fall which occurred in his bedroom on the night of April 1, 1929. He was attempting to get back into his bed but miscalculated the distance, due to the darkness and his faulty eyesight, and fell to the floor. His hip and wrist were broken and he was otherwise bruised. He had been a widower since 1915. He was survived by his only son, B. Paul Mossman, his two daughters, Stella M. Philbrock and Ethel M. Jacobs, and two grandchildren, William S. Mossman and Dorothy Mossman.
The three children of the decedent went to their father's house on Christmas, 1926, to exchange gifts and to extend their greetings to their father. He called the three aside at that time and told them that he was giving them as a Christmas present all of his 43,000 shares of stock in the Dudlo Manufacturing Corporation (hereafter referred to as Dudlo). He stated that the certificates were in his safety-deposit box to which his son had access; he wanted them to divide the stock equally among themselves except that Paul was to have an extra portion worth $100,000 and William S. Mossman was to have a1935 BTA LEXIS 927">*929 portion worth $150,000; and he would retain dividends distributed in 1927 from earnings of prior years, but in all other respects the stock was theirs. Shortly thereafter Paul took the certificates from the safety-deposit box and had his father endorse them in blank so that the appropriate transfers could be made. Dudlo had been founded and managed by the decedent's son-in-law, George Jacobs. The decedent had financed the corporation. He and Jacobs owned a large part of its stock. The decedent had consulted Paul a great deal in regard to the affairs of this corporation. William had been employed by it for a number of years. A plan to combine this corporation and about four others under the name of General Cable Corporation had been under consideration for some time and was then about to be carried out. Paul and his sisters decided to delay having the Dudlo stock transferred to their names. They anticipated that in the combination they would receive General Cable Corporation stock in exchange for their Dudlo stock and thus no new certificates for Dudlo stock would be necessary. The combination was effected in November 1927. Paul turned in the certificates which his father1935 BTA LEXIS 927">*930 had endorsed in blank. These certificates entitled the owners to receive under the plan of combination 2,993 shares of preferred stock, 21,960 shares of class A common stock, 4,392 shares of class B common stock, and $38,700 of bonds of the General Cable Corporation and $465,552 in cash. The decedent and his three children conferred 32 B.T.A. 596">*598 as to how this property should be divided. They decided to have a few odd shares of each kind of stock (23 preferred, 360 class A, and 192 class B) issued to the decedent to permit him to have an interest in the business and to permit the remaining shares to be divided equally among the three children. The decedent then wrote to a firm of brokers which was assisting in the combination, stating that he had given the stock to his children and directing the brokers to credit to the separate account of each of the three children 900 shares of preferred, 7,200 shares of class A, and 1,400 shares of class B stock. Two hundred forty-two thousand five hundred dollars of the cash was used to purchase 2,500 shares of General Cable Corporation preferred stock, and the decedent instructed the brokers to credit 1,000 of these to Paul and 1,500 to William1935 BTA LEXIS 927">*931 S. Mossman. The broker credited the stock to the various accounts. The three children and the grandson exercised complete control over these accounts. Fifty-four thousand dollars of the cash was used to purchase a note of the First National Securities Co., $51,752 was invested in Fort Wayne Improvement bonds, $25,000 was invested in Otis & Co. bonds, and some of the cash was used to purchase $45,000 par value of Joint Stock Land Bank bonds and $36,000 par value Ancilli Dominic Sisters St. Joseph Hospital bonds. These securities were distributed among and held by the three children of the decedent. The balance of the cash was used to pay the decedent's income tax for 1927 (he reported a profit from the exchange of the Dudlo stock for stock and cash) and to pay some pledges and other obligations of the decedent. The portion used to pay the income tax amounted to $69,000.
After making the transfers described in the above paragraph the decedent owned property worth about $175,000 and had an average annual income of about $7,500. His average annual expenditures were about $4,500.
The purposes which the decedent intended to accomplish by making the transfers in question were, 1935 BTA LEXIS 927">*932 to be relieved of the care and management of the property transferred, to be able to see his children and his grandson enjoy the property during his lifetime, and to have them profit by experience in taking care of property while he was still alive.
The Commissioner added to the value of the decedent's gross estate, as shown on the return, $3,185,089.50 representing 17 items, consisting of 5,400 shares of preferred stock, 21,600 shares of class A stock, 4,200 shares of class B stock, and $38,700 par value of bonds of the General Cable Corporation, the $54,000 note of the First National Securities Corporation, the Fort Wayne Improvement bonds, the Otis & Co. bonds, the Joint Stock Land Bank bonds, and the Ancilli Dominic Sisters St. Joseph Hospital bonds, all of which 32 B.T.A. 596">*599 belonged to the children and the grandson of the decedent. his explanation for this action was that the value of this property should be "included in the gross estate in accordance with section 302(c) of the Revenue Act of 1926, which provides that such transfers shall be deemed and held to have been made in contemplation of death in excess of $5,000 to each transferee." He allowed an exemption of $20,000.
1935 BTA LEXIS 927">*933 The transfers which the decedent made of property involved in this proceeding were not made in contemplation of his death.
OPINION.
MURDOCK: The decision does not depend upon whether the transfers were made within two years of the decedent's death or whether they were made prior to that period. The petitioner starts in either case with a presumption against him. But that presumption can be overcome by proof. . It has been overcome by proof which shows that decedent's purposes in making the transfers were associated with life rather than with death and were to attain objects "desirable to him during his life, as distinguished from the distribution of his estate at death." Cf. . The case must be decided upon the evidence and not by a too close comparison with some other case. The ultimate finding of fact above is decisive of all issues, so that the values need not be determined. In the following paragraphs some of the evidence is briefly reviewed.
The decedent seems to have been an unusually vigorous and healthy man up to the time of the accident which caused his1935 BTA LEXIS 927">*934 death. He had never been sick or confined to his bed for even a day within the memory of witnesses who had known him intimately for many years. He took regular exercises and could kick higher than his head, bend forward to touch the floor without bending his knees, and put his foot back of his head. He was always active, lively, cheerful, and optimistic. He enjoyed life and had plans for the future. His father had lived to be 95 and other members of his family had also lived to be very old. He expected to reach 100 years and thus live longer than any of them. His mental faculties were in no may impaired. He personally attended to his business affairs each day. On the day preceding the accident he had gone to his office as usual and had attended two bank directors' meetings. He had just completed the sale of a carload of lumber.
He lived very simply in his own home. He had a capable housekeeper, a good automobile, and a chauffeur. He was very fond of his children and saw each of them almost every day. He preferred to give his accumulated property to them rather than to keep it himself. Prior to 1926 he had distributed among them, from time to 32 B.T.A. 596">*600 time, gifts1935 BTA LEXIS 927">*935 having a total value in excess of a million dollars. He derived great pleasure from making substantial gifts to them. He never gave any indication that any of his gifts were impelled by any thought of death. He had been considering making a gift of his Dudlo stock for several years. Many of the large gifts to his children were made at Christmas. After his grandson was married in September 1927, the decedent wrote to him stating that the $150,000 par value of General Cable Corporation preferred stock which he would shortly receive would be a wedding present from his grandfather. He wanted his son to have a large interest in Dudlo. He wanted his children to enjoy and manage the property, for which he had no use in his simple mode of enjoying life.
The decedent was disposing of all but a relatively small part of his property when well advanced in years. He had defective eyesight. His prostate gland was enlarged. Shortly before the accident a doctor became convinced that the decedent had pernicious anemia but did not so inform the decedent. There is uncertainty in the record in regard to 270 shares of preferred, $38,700 of bonds, and two items purchased with cash. The profit1935 BTA LEXIS 927">*936 from the exchange of the Dudlo stock was reported by the decedent and the tax paid from the proceeds of the exchange, although the petitioner contends that the decedent gave away the Dudlo stock before the exchange. The decedent also used or retained other property received in the exchange. These and all other facts in the record which may be unfavorable to the petitioner have been carefully considered. Yet it is clear that the decedent made transfers either of the Dudlo stock or of the proceeds of the exchange, so that the property which the Commissioner has added to the gross estate did not belong to the decedent and had not been transferred in contemplation of death.
Decision will be entered under Rule 50.