*124 Decision will be entered for the respondent.
Gift Tax -- Exclusions -- Net Value. -- Petitioner contributed money to a trust created by him for the benefit of his wife, children, and grandchildren. Held, that because of lack of proof of need of the contributions to meet trust obligations and the present value of the contributions, the gifts are not subject to exclusions for each of the children and grandchildren. Held, further, that because of lack of proof of what portion of one of the contributions was made to third parties, one-half of the contribution may not be treated as a gift made by petitioner's wife under section 1000 (f) of the Internal Revenue Code of 1939.
*808 Respondent determined*125 a deficiency in petitioner's 1948 gift tax of $ 15,065.12. The issues before us are:
(1) Did petitioner make gifts to 11 grandchildren or 4 children in 1948 so that the first $ 3,000 of such gifts may be excluded for gift tax purposes?
(2) Should petitioner's gift tax be based on gifts to a trust in 1948 in the amount of $ 72,000 or $ 96,000?
FINDINGS OF FACT.
Some of the facts are stipulated and are incorporated herein by this reference.
Petitioner, a resident of Worcester, Massachusetts, filed a 1948 gift tax return with the collector of internal revenue for the district of Massachusetts.
On June 10, 1947, petitioner created the Paget Trust, an irrevocable trust. In this trust petitioner was referred to as the Donor and his son, Matthew J. Whittall, II, as the Trustee. The trust instrument named as beneficiaries petitioner's wife, his 4 children, and 11 grandchildren. Petitioner's wife was to receive "so much of the net income in quarter-annual installments in each calendar year as she shall request and said Trustee shall deem wise for her comfort, maintenance and support."
The second paragraph of the trust instrument named one of petitioner's sons, who was in poor health, as*126 a beneficiary. This son was to receive $ 6,000 a year after provision was made for petitioner's wife.
The third paragraph provided that the trustee was to pay out of income $ 200 to each of petitioner's grandchildren "annually for and during the life of his parent who is a beneficiary hereunder." Payments *809 to the grandchildren out of income were to be made after provision for petitioner's wife and his sick son, "but if in any year such income shall be insufficient, payments to the extent of a deficiency of income shall be made out of the principal thereof."
The trust instrument also included a provision for the education of a grandson under certain conditions. The trust was to terminate upon the decease of the last survivor of petitioner's children and grandchildren, and the trust fund as it existed was to be paid over "to the issue of the Donor free and discharged of all trusts" in a manner set forth in the trust instrument.
In general, surviving beneficiaries among the children and grandchildren were to receive additional benefits provided that there was surplus income, and the indebtedness of the trustee did not exceed $ 5,000 at the time of distribution. A financial*127 statement and accountants' report for the Paget Trust for the years 1947 through 1951 indicated that trust liabilities included notes payable in excess of $ 80,000 for each of the years.
On June 10, 1947, petitioner made a contribution of $ 67,291 to the trust. He filed his gift tax return and claimed 16 exclusions; $ 3,000 for each of his 11 grandchildren, 4 children, and his wife.
Respondent disagreed with petitioner's exclusions and determined a deficiency on the 1947 gift tax. After a series of conferences a settlement was reached and petitioner paid a gift tax. The basis of the settlement was that the gifts to the grandchildren were gifts of present interest, but the value was limited to the present discounted value of a $ 200 annuity payable to each of the grandchildren during the lifetime of the grandchildren's parents. On this basis petitioner was allowed aggregate exclusions of $ 31,861.28, representing the present value as of June 10, 1947, of the $ 200 annual gifts to the grandchildren.
Petitioner contributed an aggregate of $ 96,000 to the trust in 1948. Half of this sum was contributed in the earlier part of the year and the other half in December.
Respondent's statement*128 explaining the adjustment to petitioner's 1948 gift tax was as follows:
It is determined that on January 6, 1948, you transferred property by gift in the amount of $ 96,000.00, and that you are not entitled to consider any portion of such gift as having been made by your spouse under the provisions of Section 1000 (f) of the Internal Revenue Code, nor is any deduction allowable to you for a gift to your spouse under the provisions of Section 1004 (a) (3) of the Internal Revenue Code.
It is further determined that you are not entitled to any portion of the exclusions claimed by you under the provisions of Section 1003 (b) (3) of the Internal Revenue Code.
*810 OPINION.
Petitioner created a trust in 1947 and in 1948 he made certain contributions to it. Petitioner contends that he made a gift of $ 48,000 to the trust in the early part of 1948, that another $ 48,000 was contributed to the trust in the latter part of 1948, and that of the second $ 48,000, $ 24,000 should be considered as contributed by his wife, that he is entitled to exclude $ 3,000 for each of his 11 grandchildren as gifts to them, and that he is entitled to exclusions for the gifts to his children.
In opposition, *129 respondent disallowed the exclusions and maintains that the contributions to the trust in 1948 did not inure to the benefit of the grandchildren since the 1947 contribution to the trust was sufficient to fund the annual annuity to them. With respect to petitioner's children, respondent contends that the gifts, if any, were not capable of evaluation and that the gifts were gifts of a future interest. Respondent contends that petitioner's wife made no gift from her property to the trust.
Section 1003 (b) (3) of the 1939 Code provides:
SEC. 1003. NET GIFTS.
(b) Exclusions from Gifts. --
(3) Gifts after 1942. -- In the case of gifts (other than gifts of future interests in property) made to any person by the donor during the calendar year 1943 and subsequent calendar years, the first $ 3,000 of such gifts to such person shall not, for the purposes of subsection (a), be included in the total amount of gifts made during such year.
The beneficiaries under the provisions of the Paget Trust were petitioner's wife, his children, his grandchildren, "and the issue of the Donor" after decease of his children and grandchildren. Petitioner now only claims the benefit of the annual $ *130 3,000 exclusion for the grandchildren and children.
We shall consider the possibility of gifts to petitioner's grandchildren. While petitioner did not admit it, the evidence supports the fact that the $ 200 annual gift to each of his grandchildren for the life of their parents was fully funded in 1947. Therefore, any additional contribution to the trust after 1947 would not directly increase the grandchildren's benefits. Petitioner has not shown that the trust needed additional funds to insure the payments to the grandchildren. Further, we cannot evaluate the present benefits to the grandchildren from the increased corpus resulting from the 1948 contributions to the trust, for they will only benefit if there is a surplus of income, if certain of petitioner's children are deceased, and if the indebtedness of the trustee does not exceed $ 5,000. In view of these conditions, payments to petitioner's grandchildren in excess of $ 200 a year might never arise.
*811 Next, one of petitioner's grandchildren was to receive "Fifteen Hundred ($ 1500) Dollars annually in such installments as the Trustee shall determine." This money was to be paid during the period the grandson was a student*131 in a preparatory school and for the period not exceeding 4 years that he would be a student in a college. The trust instrument stated that a definite amount would be paid, but it did not state a definite time of payment. Therefore, there is no way of determining the value of the gift in 1948. In fact, the grandson might not attend school and never benefit from the provisions of the trust. Again, this provision for the grandson's education is a future interest and as such is not excludible as a present gift to the trust. Fondren v. Commissioner, 324 U.S. 18">324 U.S. 18. Respondent's disallowance of the exclusions for the grandchildren must be sustained.
We shall next consider the possibility of annual $ 3,000 exclusions based on the benefits given to petitioner's children. The second clause of the trust instrument provides for a sum not exceeding the payment of $ 6,000 a year to one of petitioner's sons "provided in each calendar year an excess shall be available out of the net income after making provision" for petitioner's wife. This gift is a present interest. However, we have not been shown the present or discounted value of the gift, nor do we know*132 if any part of petitioner's 1948 contribution to the trust added anything to this gift. Therefore, an exclusion for this gift cannot be sustained.
Petitioner's other three children did not receive any stipulated sum of money. In fact any payment to them was based on a number of contingencies. One was that there must have been surplus income; another, that petitioner's wife, his grandchildren, and sick son would have received their benefits; and finally, the indebtedness of the trust would not exceed $ 5,000 at the time of the distribution to the children. In view of these contingencies we cannot determine the present value of the gifts to his children. Therefore, an exclusion for them for the 1948 contribution to the trust cannot be sustained.
The second issue involves the question of whether petitioner's gift tax in 1948 should be based on contributions to the trust of $ 72,000 or $ 96,000. Petitioner contends that the $ 48,000 gift to the trust in December 1948 should be treated as gifts of property, made one-half by him and one-half by his wife. In contrast, respondent contends that petitioner's wife made no gift to the trust from her own property in 1948.
In general, section*133 1000 (f) of the 1939 Code provides that gifts by one spouse to any person other than his spouse may be considered as made one-half by him and one-half by the spouse. To benefit under this section each spouse must be a citizen or a resident of the United States at the time of the gift and a consent must be signified *812 in a manner as provided by the regulations. It should be pointed out that section 1000 (f) is only applicable to gifts a husband and a wife make to a third party.
According to Regulations 108, section 86.3a (4), if one spouse transfers property in part to his spouse and in part to third parties, the consent is effective with respect to the interest transferred to third parties only insofar as such interest is ascertainable at the time of the gift and hence severable from the interests transferred to his spouse.
Unfortunately, from the record before us we cannot ascertain what part of the December 1948 addition to the trust was an interest transferred to petitioner's spouse. Therefore, we cannot determine what part of the 1948 contribution was made to third parties and was available for gift-splitting privileges under section 1000 (f). On this issue respondent*134 must be sustained.
Decision will be entered for the respondent.