*784 The decedent having created two trusts in property during his lifetime - one in 1926 and the other in 1928 - for the sole purpose of relieving himself of the care and management thereof, merely retaining to himself the income therefrom during his lifetime, such trusts were made neither in contemplation of death nor intended to take effect in possession or enjoyment at or after his death.
*5 The respondent having determined a deficiency in estate tax against the first named petitioner (Docket No. 78778), of $8,304,353.75, and having proposed that amount for assessment against the other two petitioners, as trustees and transferees of the property of the decedent, Henry S. Ayer, under two certain trust instruments, the petitioners bring these proceedings for the redetermination of such deficiency and for determination whether the petitioners in 79152 and 79153 are liable for the payment of that deficiency, as such trustees and transferees. The*785 petitioner in 78778, by amendment, places in controversy an amount, $69,267.59 in excess of the asserted deficiency, which, it is averred, was paid within two years before the filing of the petition and on which he claims the right of refund.
While numerous issues were raised by the pleadings the parties have reduced their controversy to one main question, i.e., whether the value of the corpora of the two trusts of May 17, 1926, and September 25, 1928, should be included in the decedent's gross estate under section 302 of the Revenue Act of 1926, as amended by joint resolution of the Congress of March 3, 1931, and by section 803 of *6 the Revenue Act of 1932, as transfers by the decedent in contemplation of or intended to take effect in possession or enjoyment at or after his death.
FINDINGS OF FACT.
Petitioner Pearson, an individual, is the duly appointed and acting executor of the last will and testament of Henry S. Ayer, deceased (hereinafter referred to as decedent), who suddenly died in Avignon, France, September 3, 1932, at the age of 79 years, while a resident of the City and State of New York. He is also the trustee under a deed of trust of the decedent dated*786 September 25, 1928, and cotrustee with the petitioner, City Bank Farmers Trust Co. (Docket No. 79153), a corporation, organized and incorporated under the laws of the State of New York and doing business in that state, under a deed of trust of the decedent dated May 17, 1926.
J. C. Ayer, the father of this decedent, died in 1879. He directed in his will that the residue of his estate be appraised and divided into two equal parts, one for the sole benefit of his wife, Josephine M. Ayer, and the other for the benefit of his children, Frederick Ayer, Henry S. Ayer, this decedent, and Leslie Josephine Ayer, in three equal trusts, the corpus to be distributed to them at the age of 28.
By a memorandum agreement dated January 3, 1880, between the trustees under that will, the said Josephine M. Ayer, mother, and the three children, after reciting the provision made for them in the will of James C. Ayer, agreed that it would be for the best interests of all concerned to maintain the residue of the estate without division, as provided, one-half of the income to be paid to said Josephine during her life and the other half to her children, the said Frederick, Henry, and Leslie, as long*787 as their mother should live. There were two unimportant modifications of that agreement between the parties on February 19, 1880.
On July 30, 1883, the children of James C. Ayer, parties to the foregoing agreements, that is, this decedent and his brother and sister, entered into another agreement, which, after reciting that they had all arrived at 28 years of age, the age designated in the will of their father at which they should arrive in order to acquire control over and disposition of the property devised to them in his will, and after reciting the wisdom and convenience of the said agreements of January 3 and February 19, 1880, and the fact that it was considered for the best interests of the estate and to those beneficially interested that the estate be kept together and undivided in trust for a still longer time, it was agreed, supplementary to the foregoing agreements between the mother, children, and trustees, that the estate *11 be kept as a unit, undivided, during the life and until the death of Leslie J. Ayer, if she should survive her mother.
Josephine M. Ayer died in 1898. Frederick F. Ayer died, intestate, June 9, 1924. Leslie J. Ayer died May 16, 1928.
*788 Desiring to free himself "from the care and management" of his property and preferring to have a fixed income therefrom adequate for his wants, the decedent, by indenture of July 30, 1883, trusteed all of his property with all accumulations acquired under his father's will to Frederick F. Ayer and other, vesting in them the usual trust authority, the trust to continue until the death of both his mother, Josephine M. Ayer, and his sister, Leslie Josephine Ayer, when it should terminate and the corpus revert to him, the trustees to pay him the sum of $1,000 a month, but no greater amount, except in their sole discretion.
The decedent, by trust of May 17, 1926, "wishing to be relieved from the care and anxiety of holding, managing and investing his property and collecting and disbursing the income therefrom, and paying the bills and accounts for his maintenance and support, and for the maintenance and support of his household" transferred to trustees, without money consideration, all of the properties he would be entitled to receive upon the death of his sister, Leslie Josephine Pearson (nee Ayer), pursuant to trust of July 30, 1883, to collect the income therefrom, and pay him so*789 much thereof as requested by him from time to time and as the trustees thought necessary for his maintenance during his lifetime, the balance to be placed to his credit in bank and upon his death the corpus to be distributed to or in trust for the benefit of the children of the said Leslie Josephine Pearson. This trust was established at the instigation of the decedent's sister, who realized that upon her death the vast estate held in trust for her lifetime would go to him absolutely, a man who was then 73 years of age and had had no business training or experience. Since the trust contemplated the death of Leslie Josephine Pearson, who died May 16, 1928, it received no property prior to that event, although the trustees had accepted under the instrument of trust shortly after its creation. On the date of the decedent's death the property held in this trust had a fair market value of $17,912,983.14. including $171,504.41 interest, which had accrued but had not been collected.
The decedent, by agreement of September 25, 1928, continuing the policy begun in 1883 of trusteeing his properties, created another trust, still "wishing to be relieved from the care and anxiety of holding, *790 managing and investing his property, and collecting the income therefrom, and paying the bills and accounts for his maintenance and *8 support and for the maintenance and support of his household", to which he immediately transferred the sum of $10,000 with the right to make further additions thereto from time to time, the said trustee to receive and collect the income therefrom, pay all necessary expenses and to apply so much of the net income as requested by the decedent and as the trustee may deem necessary toward his support and maintenance during his lifetime, placing the balance at his disposal and upon his death to divide the property among the children of the aforesaid Leslie J. Pearson or their issue.
At the time the foregoing trust was created the average annual income from the 1926 trust approximated $1,000,000. The decedent was using, for his maintenance, support, and taxes, only about $90,000. Petitioner Pearson, who transacted all except minor financial matters for the decedent, was empowered to deposit the excess of such income in the 1928 trust. The following additions having been made to that trust, without money consideration, the fair market value thereof, *791 at the date of the decedent's death, was $3,020,562.44:
| Date | Amount |
| October 15, 1928 | $10,000 |
| October 15, 1928 | 150,000 |
| November 12, 1928 | 115,000 |
| December 12, 1928 | 182,000 |
| January 11, 1929 | 150,000 |
| February 5, 1929 | 20,000 |
| April 16, 1929 | 95,000 |
| May 10, 1929 | 40,000 |
| July 9, 1929 | 165,000 |
| September 11, 1929 | 135,000 |
| October 9, 1929 | 66,000 |
| November 13, 1929 | 100,000 |
| January 13, 1930 | 186,000 |
| February 10, 1930 | 8,000 |
| February 19, 1930 | 25,000 |
| March 25, 1930 | 15,000 |
| April 14, 1930 | 95,000 |
| May 12, 1930 | 50,000 |
| June 30, 1930 | 18,000 |
| July 14, 1930 | $148,000 |
| August 9, 1930 | 123,000 |
| September 12, 1930 | 80,000 |
| October 15, 1930 | 80,000 |
| November 14, 1930 | 82,000 |
| December 14, 1930 | 38,000 |
| January 12, 1931 | 145,000 |
| March 11, 1931 | 25,000 |
| April 13, 1931 | 80,000 |
| May 18, 1931 | 35,000 |
| June 10, 1931 | 30,000 |
| July 9, 1931 | 170,000 |
| August 7, 1931 | 30,000 |
| October 10, 1931 | 125,000 |
| November 11, 1931 | 45,000 |
| December 22, 1931 | 35,000 |
| January 12, 1932 | 170,000 |
| July 8, 1932 | 83,000 |
The approximate annual income from the 1928 trust in 1932 was $120,000, still in excess of decedent's personal needs. Therefore, under date of March 31, 1932, the decedent*792 executed an intrument by which, after referring to the indenture of trust of May 17, 1926, for a nominally stated consideration he released all right or power to request the income from said 1926 trust for his support and maintenance, conveying the same, in equal shares, to the four children of his sister, Leslie Josephine Pearson.
The decedent, a man of complete leisure, had no profession. He was untrained and was not interested in business, and engaged in *9 none after 1880. He had always followed the financial advice of other members of his family who were trustees under the various trusts considered. He had undertaken the management of none of the properties to which he became entitled under his father's will. He was a man of placid nature, happy disposition, and an optimistic frame of mind, with a penchant for travel and diversion - theatres, operas, and concerts particularly. During the years from 1924 until his death in 1932, he traveled almost ceaselessly in the United States and abroad. He habitually took daily motor rides, walked some, and regularly attended the theatres, operas, or concerts. It was on the occasion of an automobile trip from Cannes to Biarritz, *793 when he was stricken with heart trouble at Avignon, that he died.
Aside from slight colds and an occasional bronchial attack, the decedent was never known to be ill. He did not drink and smoked only moderately. He was examined by a physician at some time in 1926, prior to May 17, and found to be in fairly good physical condition for a man of his age. He was then suffering from no heart trouble or other ailments. He was not known to have expressed any apprehension of death. He was physically examined in the spring of 1932, just prior to a European voyage, from which he did not return alive, and found to be in fit condition to travel. His death came as a surprise to those who knew him and had observed his physical condition prior to his departure.
The gross estate of the decedent was reported in the return of his estate as $77,395.68, to which sum the revenue agent, upon investigation, added $828,000, being that portion of the funds which were added to the September 25, 1928, trust after March 3, 1931, the date of the enactment of the joint resolution of the Congress amending section 302(c) of the Revenue Act of 1926. The respondent in his deficiency notice has found the*794 gross estate to be $21,764,716.89, and has computed a deficiency thereon of $8,304,353.75. This determination includes:
| Value of May 17, 1926 trust | $18,632,071.44 |
| Value of September 25, 1928 trust | 3,055,249.77 |
| Total | 21,687,321.21 |
| Value of estate returned | 77,395.68 |
| Gross estate determined | 21,764,716.89 |
In addition to the foregoing the parties have stipulated the following:
That if the property included in the trust created by Henry S. Ayer under date of May 17, 1926, and held by the trustees at the time of his death, is finally determined by the Board of Tax Appeals or any appellate court to be taxable as a part of the estate of Henry S. Ayer for purposes of the Federal *10 estate tax, then it is stipulated and agreed that the value of said trust as indicated in the deficiency notice of December 29, 1934, in the sum of $18,632,071.44 shall be reduced in the sum of $719,088.30, and that the value thereof, if the whole of the said trust is finally determined to be subject to the tax as aforesaid, shall be deemed and found to be $17,912,983.14. The said sum of $719,088.30 is made up of $458,600.50, being the reduction in the value of 5542 shares of*795 Keweenaw Land Association, Ltd. from $1,511,580.50 to $1,052,980.00 (or a value for the Keweenaw Land Association, Ltd. shares of $190.00 per share); the sum of $256,781.02, the said last named sum being the amount of trustees' commissions for receiving the said property, and which said sum was a lien and charge against the said property and the said trust of May 17, 1926, prior to the death of said Henry S. Ayer, and $3,706.78 of expenses in connection with accounting in said trust, the total of the three said sums being $719,088.30.
If any part of the property included in the said trust at the time of the death of the said Henry S. Ayer, but not the whole thereof, shall be finally determined to be subject to the Federal estate tax as aforesaid, then and in that event the value so attributed to the part, provided the part shall contain the said 5542 shares of Keweenaw Land Association, Ltd., stock, shall be reduced by the sum of $458,600.50; and in case a part, but not the whole of the said trust is finally determined to be a part of the estate for purposes of the Federal estate tax, then and in that event trustees' commissions to the extent of one per centum to the City Bank Farmers*796 Trust Company for receiving the said property, and of one per centum for paying out such portion thereof as it may have paid out, shall constitute a reduction in the value of the part so determined to be subject to the tax.
That the said sum of $18,632,071.44, as set out in the said deficiency notice of December 29, 1934, issued by the Commissioner of Internal Revenue, as well as the said sum of $17,912,983.14, as set out in paragraph 1 hereof as being the fair market value of the property of the said trust, includes as a part thereof $171,504.41 of accrued income, that is to say, interest accrued on the securities in the said trust from the last interest payment date to september 2, 1932, the date of the death of the said Henry S. Ayer.
That there will be deducted from the gross estate, for the purpose of computing the net estate as finally determined by the Board of Tax Appeals or any appellate court, the sum of $151,500.00 as attorneys' fees. (If a larger sum is paid for attorneys' fees than $151,500.00 it will be the subject of a further deduction to be agreed upon between counsel at the time of settlement under Rule 50 of the Rules of the Board of Tax Appeals.) The amount*797 to be deducted as executor's commissions and miscellaneous administration expenses will be agreed upon between counsel at the time of the settlement under Rule 50 of the Rules of the Board of Tax Appeals.
That after entry of the decision of the Board of Tax Appeals which becomes final, the petitioner will be entitled to such credit for New York State estate taxes as is allowable under the provisions of Section 301(b) of the Revenue Act of 1926, as amended.
That no part of the alleged Federal estate tax as claimed in the notice of deficiency of December 29, 1934, in case bearing Docket No. 78778; and the notices of liability dated January 31, 1935, in the cases bearing Docket Nos. 79152 and 79153, has been paid other than the sum of $69,252.93 and interest thereon $2,770.12, making a total of $72,023.05.
By virtue of the provisions of the trust instrument under date of May 17, 1926, and of the provisions of the trust instrument under date of September *11 25, 1928, E. Pennington Pearson became entitled to one-fourth of the property included in each of said trusts, and on and as of September 2, 1932, became seized as owner of one-fourth of said property included in each*798 of the said trusts.
E. Pennington Pearson and the City Bank Farmers Trust Company, as trustees under the trust of May 17, 1926 and E. Pennington Pearson, as trustee under the trust dated September 25, 1928, are still seized of the corpus of the said trust funds as of the date of the death of the said Henry S. Ayer on September 2, 1932, or the replacements or proceeds of sale or exchange of any of the said property, less the amount, pursuant to the terms of each of the deeds of trust, to which E. Pennington Pearson, individually, was entitled, and less such expenses that may have been paid out incidental to the administration of the trusts; and that the value, as of the date of execution of this stipulation, April 22, 1936, of the corpus of the said two trust funds, together with the value of the property in the hands of E. Pennington Pearson turned over to him pursuant to the provisions of each of the said trust instruments, is in excess of the total amount of tax claimed in the notice of deficiency of December 29, 1934, and the notice of liability by the Commissioner of Internal Revenue set out in his letters of January 31, 1935, respectively, which are the basis of the petitions*799 in the cases bearing docket numbers 78778, 79152, and 79153, respectively.
As of May 16, 1928, the property that went into the trust of May 17, 1926, came from two sources: (1) From the interest of Henry S. Ayer in the estate of his father, J. C. Ayer, and (2) from his interest in the trust created by himself on July 30, 1883, and mentioned in the said trust bearing date May 17, 1926; and that the total value of the property that came into the trust of May 17, 1926, from the two sources as of said May 16, 1928, was approximately $18,500,000; that the value of the property that came from the J. C. Ayer estate was approximately $4,500,000, and the value of the property that came from the Henry S. Ayer trust of July 30, 1883, was approximately $14,000,000, of which $10,250,000 represented accumulations of income from the date of the creation of that trust ot May 16, 1928.
OPINION.
MORRIS: In order to correctly include the corpora of these trusts in the decedent's gross estate under section 302 of the Revenue Act of 1926 - it having been held that section 803(a) of the Revenue Act of 1932 is not retroactive, *800 Flora M. Bonney et al., Executrices,29 B.T.A. 45">29 B.T.A. 45; affd., 75 Fed.(2d) 1008 - it must be found (1) that the transfers were made in contemplation of death or (2) that they were intended to take effect in possession or enjoyment at or after death. The pertinent provisions of the 1926 Act are 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, tangible or intangible, wherever situated -
* * *
(c) To the extent of any interest therein of which the decedent has at any time made a transfer, by trust or otherwise, in contemplation of or intended to take effect in possession or enjoyment at or after death, except in case of a bona fide sale for an adequate and full consideration in money or money's worth. * * *
*12 Section 302(c) was amended, as follows, by a joint resolution of Congress of March 3, 1931:
(c) To the extent of any interest therein of which the decedent has at any time made a transfer, by trust or otherwise, in contemplation of or intended to take effect in possession or enjoyment at or after his death, including a transfer under*801 which the transferor has retained for his life or any period not ending before his death (1) the possession or enjoyment of, or the income from, the property or (2) the right to designate the persons who shall possess or enjoy the property or the income therefrom; except in case of a bona fide sale for an adequate and full consideration in money or money's worth.
Subsequently the Revenue Act of 1932 again amended section 302 by section 803. The provisions thereof are substantially the same as the joint resolution just quoted.
Whether a gift is in contemplation of death, that is whether the inter vivos transfer of property, in trust, is motivated by contemplation of death, is not to be determined solely from the decedent's age or his physical condition, particularly where the actual motive for the transfer is otherwise evidenced. See Real Estate Land & Title & Trust Co. v. McCaughn, 79 Fed.(2d) 602. Where a different motive is clearly shown, i.e., a motive associated with life, these factors become unimportant. That is our case. This decedent cared little or nothing for the exercise of ownership or dominion over great wealth. He demonstrated this*802 by his action, as reflected in the several trust agreements entered into after his father's death, in 1880 and 1883. He was content to receive only sufficient income from the wealth at his disposal to maintain him in a relatively modest fashion, under the circumstances. So little of that income did he use - $12,000 annually, in the beginning, and upward of $90,000 during the years under consideration - that the trust grew by several millions of dollars, solely by reason of accumulations from the excess and unused income. Having no profession and, indeed, not having been engaged in business at all since the death of his father, and in fact being almost without interest in business affairs, he began early to relieve himself of all responsibility and burden incident to the ownership of his wealth by trusteeing his properties and reserving the income to himself for maintenance. For instance, in the trust which he created as early as July 30, 1883, he said: "I * * * am desirous of freeing myself from the care and management of my property and prefer instead thereof and of the income derived therefrom a fixed income adequate to my wants * * *." In his trust of May 17, 1926, he expressed*803 the wish "* * * to be relieved from the care and anxiety of holding, managing and investing his property and collecting and disbursing the income therefrom * * *", and, finally, in his trust of September 25, 1928, he expressed the same wish and desire which had been *13 his from the acquisition of his father's estate. This appears to have been the sole motive for the creation of these two trusts. We find nothing in the history of the decedent's physical condition nor in the other facts of record which would alter this conclusion in the slightest degree. See United States v. Wells,283 U.S. 102">283 U.S. 102. Becker v. St. Louis Union Trust Co.,296 U.S. 48">296 U.S. 48.
The next contention of the respondent in support of including the corpora of these two trusts in the decedent's gross estate is that the trusts were intended to take effect in possession or enjoyment at or after death. Both trusts were created prior to any act or amendment taxing such trusts as those here involved. The tax is one imposed on transfers at death or made in contemplation of death and is measured by the value at death of the interest which is transferred. *804 Reinecke v. Northern Trust Co.,278 U.S. 339">278 U.S. 339; Helvering v. St. Louis Union Trust Co.,296 U.S. 39">296 U.S. 39. But here no interest in the property held under the trust deeds passed from the decedent to the living. The trust property had passed completely from the control or possession of the decedent and, as to the 1926 trust, the enjoyment of the income had passed irrevocably from him. The transfers having been completed during the decedent's lifetime, and prior to the amendment of section 302(c), except those hereinafter discussed, the tax does not attach to the value of the corpora as transfers intended to take effect in possession or enjoyment at or after death. May v. Heiner,281 U.S. 238">281 U.S. 238. Nor does the fact that the income from the 1928 trust was payable to the settlor during his life make the value of the corpus of that trust taxable. May v. Heiner, supra.
One further contention of the petitioner remains to be considered. Eight hundred and twenty-eight thousand dollars was transferred to the 1928 trust after March 3, 1931, the date of the joint resolution of Congress amending section 302(c) of the*805 Revenue Act of 1926. With respect thereto, the petitioner contends that that amount is not subject to the tax in that the taxation of irrevocable transfers not made in contemplation of death is in violation of the due process of law clause of the Fifth Amendment. That the said amount came within the provisions of the joint resolution is not questioned. Nor can it be successfully argued as to the additions, made after the passage of the joint resolution, that the decedent was not upon notice of the law's command, and there can be no claim that the statute is retroactive in its application to those transfers. Helvering v. City Bank Farmers Trust Co.,296 U.S. 85">296 U.S. 85. In that case a similar contention was made under section 302(d) of the Revenue Act of 1926. The Court, in holding the provisions constitutional, used the following language:
Congress may adopt a measure reasonably calculated to prevent avoidance of a tax. The test of validity in respect of due process of law is whether the *14 means adopted is appropriate to the end. A legislative declaration that a status of the taxpayer's creation shall, in the application of the tax, be deemed the equivalent*806 of another status falling normally within the scope of the taxing power, if reasonably requisite to prevent evasion, does not take property without due process.
The reasoning of the Court is equally applicable to the instant question. The respondent is, therefore, sustained in his determination as to this item.
Reviewed by the Board.
Judgment will be entered under Rule 50.