*89 Decisions will be entered under Rule 50.
1. Transfers of securities in trust by the decedent for the benefit of her three children more than two years prior to her death and the transfer to one of such children of a one-half interest in residential property, held, not to have been made in contemplation of death within the meaning of section 811 (c) of the Internal Revenue Code.
2. The value of certain shares of stock of Pittsburgh Press Co. determined as of December 10, 1940, for gift tax purposes and as of May 29, 1942, for estate tax purposes.
*563 These proceedings, consolidated for hearing, involve gift taxes and estate taxes*90 in amounts as follows:
| Year | Tax | Deficiency | |
| Docket No. 7354 | 1941 | Gift | $ 8,109.75 |
| Docket No. 9833 | Estate | 58,176.10 |
*564 The only question at issue in the gift tax case is the value of certain shares of stock on the date of the gifts. In the estate tax case the principal question is whether certain transfers were made in contemplation of death. There is also the question of the value at the date of death of shares of the same stock involved in the gift tax case.
FINDINGS OF FACT.
The decedent, Mary E. Cook, died a resident of Columbus, Ohio, on May 29, 1942, at the age of 68. An estate tax return was filed with the collector of internal revenue for the eleventh district of Ohio, showing a gross estate of $ 139,662.96.
Surviving the decedent were a son, Clare E. Cook, and two daughters, Mary E. Cook Morris and Helen Louise Cook. The decedent's husband, Ermond E. Cook, had predeceased her on May 3, 1931.
The decedent's estate consisted for the most part of property which she had acquired either by inter vivos or testamentary gifts from her husband. At the time of his death he was editor-in-chief of a group of Scripps Howard newspapers, known as the "central*91 group," which included the Columbus Citizen, the Pittsburgh Press, and several others. He was the founder and editor of the Columbus Citizen. He had spent most of his life with the Scripps Howard organization and had accumulated a large amount of securities, consisting mostly of stocks in companies of the Scripps Howard group.
In 1928 the decedent's husband transferred to her 525 shares of Youngstown Telegram Co. and 5,000 shares of preferred and 10,500 shares of common stock of Pittsburgh Operators Co. These transfers approximately equalized the annual incomes of the decedent and her husband. The stock was reported in his estate tax return at valuations of $ 21,000 for the Youngstown Telegram stock and $ 250,000 for the Pittsburgh Opertors Co. stock.
Also, in 1928, the decedent's husband transferred to her a one-half interest in the family residence located at 121 South Parkview Avenue, Bexley, Ohio, a suburb of Columbus.
The decedent and her husband executed wills in 1929 in which each left all of his or her property to the other. The decedent's will contained the following provision:
Item II. I give, devise and bequeath all of my property, real, personal or mixed, of every*92 kind and description, wheresoever situated, which I may own or have the right to dispose of at the time of my decease, to my beloved husband, Ermond E. Cook, absolutely and in fee simple. Having every confidence in my beloved husband and believing that he will use any property which I may leave, for the best interest of my children and grandchildren, as well as for himself, I purposely make no provision in this Last Will and Testament for any of my children or grandchildren.
A similar provision was contained in the husband's will.
*565 Upon her husband's death the decedent acquired, under his will, all of his property, valued in his estate tax return at $ 96,430. The Commissioner added to that amount the $ 271,000 of securities transferred to the decedent in 1928, as a gift intended to take effect in possession or enjoyment at or after death. The adjustment resulted in an additional estate tax of $ 752.03, which was paid, with interest of $ 26.08, in 1933.
From time to time the decedent's husband made gifts of cash and securities of considerable amounts to his children.
In 1932 the decedent executed a new will, in which she bequeathed all of her property to her three children*93 and named her son Clare her sole executor. This will was prepared by her attorney, Maynard M. Donaldson. Donaldson was a first cousin of her deceased husband and had served as their attorney since about 1924.
After her husband's death the decedent made substantial gifts of cash, securities, and other property to her children. She assisted Clare and Mary in purchasing and equipping their new homes, and in 1940 she conveyed to Helen Louise a one-half interest in the family residence at Bexley, in which they both lived until the decedent's death.
There was at all times a very close family relationship between all members of decedent's family. Both the decedent and her deceased husband were generous in their gifts to the children.
The decedent's son Clare was employed by the Columbus Chamber of Commerce from 1929 to July 1, 1937, at a salary of $ 7,500 a year. In 1935 he and several of his associates organized a new casualty insurance company, known as the Republic Mutual Insurance Co., to which he made a contribution of $ 10,000. He terminated his employment with the chamber of commerce on July 1, 1937, to devote his full time to the new company. He worked without any compensation*94 until January 1, 1939. In 1939 and 1940 he received a salary of $ 100 a month, which was increased to $ 200 a month in 1941.
The decedent's daughter, Mary Cook, was married in 1933 to Kenneth G. Morris, who was then employed by the Ohio Banking Department at a salary of approximately $ 3,500 per year. He left that employment to go with the Republic Mutual Insurance Co. on July 1, 1937, at a salary of $ 1,200 a year. His salary was increased to $ 1,760 in 1939 and $ 2,400 in 1941.
The decedent's daughter, Helen Louise Cook, has never married. She lived with her mother until the latter's death. Because of ill health she was unable to complete her college education and she has never been physically capacitated for regular employment or self-support.
The decedent transferred to each of her three children in 1936 25 shares of stock of Vindicator Printing Co. of Youngstown, Ohio. *566 The 75 shares were yielding an annual income of about $ 1,500. The gift was reported in a gift tax return filed by the decedent for 1936 at a value of $ 400 per share.
Over the period 1935 to 1941, inclusive, the decedent purchased for her children and grandchildren certain "surplus contribution*95 notes" of the Republic Mutual Insurance Co. in the aggregate amount of $ 42,000. She purchased these notes out of current income and had them issued in the names of her children and grandchildren.
Under a consolidation agreement the decedent, on October 1, 1937, exchanged the 10,500 shares of Pittsburgh Operators Co. stock which her husband had transferred to her in 1928 for 250 shares of common and 2,500 preference shares of Pittsburgh Press Co. In her income tax return for 1937 she placed a value of $ 250,000 on the 2,500 preference shares and a value of $ 177,200 on the 250 common shares. On October 9, 1937, she sold the 250 common shares to E. W. Scripps Co. for $ 221,500, payable $ 21,500 on November 1, 1937, and the balance in 10 annual installments of $ 20,000 each on the first day of July of each of the years 1938 to 1947, inclusive, with interest on the unpaid principal of one-half of 1 per cent a month. The decedent reported capital gains on the sale of $ 5,591.10 in 1937 and $ 8,668.38 in each of the years 1938 to 1941, inclusive. Six of the installments remained unpaid at the time of the decedent's death and her executor elected to report all of the gain thereon in*96 her 1942 return.
On May 15, 1939, the decedent created 3 separate trusts, one for each of her 3 children, transferring to each trust 500 of the preference shares of Pittsburgh Press Co. She filed a gift tax return for 1939, on which she paid a gift tax, with deficiency, based on a valuation of $ 80 per share for the transferred shares. She named her son Clare as the sole trustee of the trusts for Mary and Helen Louise and as cotrustee with her attorney, Donaldson, for his trust.
The trusts referred to above were alike in all respects here material. The income of each was distributable to the beneficiaries at intervals of not more than 3 months and, in addition thereto, capital distributions not to exceed $ 2,000 in any one year might be made to them if deemed necessary by the trustee or trustees. The trusts were to continue for 21 years after the death of the life beneficiaries. Thereafter, the income and, upon termination of the trusts, the remaining assets were to be distributed to the living issue of the life beneficiaries, if any, or, if none, to the surviving lineal descendants of the grantor. The grantor retained no beneficial interests in any of the trusts.
The trust *97 agreements under consideration were prepared by Donaldson. Soon after their execution he prepared a new will for the decedent, which she executed on August 21, 1939. By this will she left the residue of her estate in trust for the benefit of her three children under provisions substantially like those of the three inter vivos*567 trusts described above. The decedent's son Clare and Donaldson were named as trustees of the testamentary trust.
At the time the inter vivos trusts were established the decedent's son Clare was 39 years of age, was married, and had 2 minor children. He had given up his job with the Columbus Chamber of Commerce a short time before to serve as an officer of the Republic Mutual Insurance Co. The decedent's daughter Mary was 28 years of age. Her husband, Kenneth G. Morris, was also then employed by the Republic Mutual Insurance Co. The decedent's daughter Helen Louise was unemployed and was living with her mother. Clare and Mary had their own homes.
By supplemental agreements dated December 10, 1941, the decedent transferred 300 additional preference shares of Pittsburgh Press Co. to each of the 3 trusts created on May 15, 1939. A gift tax*98 return was filed for 1941 in which the shares were valued at $ 40 each. It was stated in the return that the motive for the gifts was "That children might enjoy property during donor's lifetime; also reduction of income taxes." The decedent's income tax returns for the years 1931 to 1942, inclusive, show gross income and income tax liabilities as follows:
| Gross taxable | ||
| Year | income | Income tax |
| (per return) | ||
| 1931 | $ 25,248.75 | $ 424.99 |
| 1932 | 18,456.57 | 190.03 |
| 1933 | 12,557.00 | 15.75 |
| 1934 | 17,081.50 | 452.57 |
| 1935 | 20,529.00 | 686.16 |
| 1936 | 25,992.44 | 2,062.92 |
| 1937 | $ 34,206.82 | $ 3,449.34 |
| 1938 | 37,086.86 | 4,436.74 |
| 1939 | 30,344.09 | 3,055.69 |
| 1940 | 24,860.18 | 2,919.75 |
| 1941 | 15,904.96 | 2,178.07 |
| 1942 | 55,800.28 | 26,205.30 |
The 1942 figures include the capital gain on the remaining installment payments due on the above described sale of the 250 shares of common stock of Pittsburgh Press Co.
The cause of decedent's death was found to be acute nephritis with a resulting uraemia and terminal pneumonia. She became acutely ill at her home on May 26, 1942, and died three days later at Grant Hospital, Columbus, Ohio. She had never suffered any previous illness of a serious nature. *99 She was a woman of small stature and was active and alert until within a few days of her death. She took part in social and charitable activities and traveled extensively. She never discussed the matter of her own death with members of her family or other intimates and never made any plans for that eventuality, except to execute the wills prepared for her by her attorney.
The transfers which the decedent made to the above described trusts and the transfer to her daughter Helen Louise of a one-half interest in her residence were not made in contemplation of death within the meaning of section 811 (c) of the Internal Revenue Code.
*568 The Pittsburgh Press Co. is a member of the Scripps Howard organization. It was organized in 1937 under the laws of the State of Pennsylvania in a consolidation of Pittsburgh Operators Co. and Press Publishing Co. It publishes a daily afternoon and Sunday paper in Pittsburgh. It has an authorized stock issue of 110,000 shares of capital stock without par value, divided into 100,000 preference shares with a stated capital of $ 5 per share, and 7,500 class A common shares with a stated capital of $ 1 per share. The holders of the preference shares*100 are entitled to dividends of $ 6 per share "when, if and as declared out of the surplus earnings of the corporation," and in case of liquidation are entitled to receive $ 100 per share before any payments to the holders of the other shares. The shares are redeemable at any time at $ 100 per share.
The net taxable income of Pittsburgh Press Co. for the part of the year 1937 following its organization and for the years 1938 to 1942, inclusive, was as follows:
| Period | Net taxable |
| income | |
| 9/30-12/31 -- 1937 | $ 398,427.66 |
| 1938 | 638,158.23 |
| 1939 | 1,073,064.88 |
| 9/30-12/31 -- 1940 | $ 1,288,489.23 |
| 1941 | 1,429,407.50 |
| 1942 | 1,621,140.35 |
Dividends of $ 6 per share have been paid on the preference shares each year since the company was organized. The stock was not listed on any stock exchange and was not authorized to be sold by dealers in the State of Ohio.
In the gift tax return which the decedent filed for 1941 the 900 shares of preference stock of Pittsburgh Press Co. which she transferred to the three trusts on December 10, 1941, were valued at $ 40 per share. The 100 shares which the decedent owned at the time of her death were valued in her estate tax return at $ 60 *101 per share.
The fair market value of the Pittsburgh Press Co. preference shares was $ 75 per share on December 10, 1941, and was the same at the date of decedent's death.
OPINION.
The evidence before us is convincing, and we have found as a fact, that the transfers here in controversy were not made in contemplation of death within the meaning of section 811 (c), Internal Revenue Code, as that section of the statute has been construed by the United States Supreme Court. See United States v. Wells, 283 U.S. 102. We think that the gifts in question were actuated by motives associated with life, rather than matters related to death. *569 The decedent had property and income far beyond her own needs and her children, though perhaps not in dire need, were in circumstances at least conducive of her generosity. The increase in income taxes was of much concern to the decedent and her attorney. It was to lessen these income taxes that the attorney suggested the transfers of the Pittsburgh Press Co. preference shares to the children's trusts in 1939. The decedent's anxiety for the comfort and well-being of her children and grandchildren and her willingness*102 to help them get established in business and in their new home supplied the other motives for the transfers.
The transfer to Helen Louise of a one-half interest in the residence in which she and the decedent lived together was for the purpose of partially equalizing the gifts to the three children and of giving the unmarried daughter an interest in her own home.
There is no evidence anywhere in the record that any of the gifts in question were prompted by motives relating to death. All of her life, to within a short time of her death, the decedent had been energetic, alert, and much interested in the world about her.
We think the respondent was in error in treating the transfers in question as transfers made in contemplation of death.
The remaining issue relates to valuation of preference shares of Pittsburgh Press Co. This issue is present in both the gift tax proceeding, Docket No. 7354, with respect to the 900 shares which the decedent transferred to the children's trusts on December 10, 1941, and in the estate tax proceeding, Docket No. 9833, with respect to the 100 shares which the decedent still owned at the time of her death.
The stock in question was reported in the gift*103 tax return filed by decedent for 1941 at $ 40 per share and in the estate tax return filed by her executors at $ 60 per share. The respondent has determined that the value of these shares was $ 90 each on both of the valuation dates. The petitioner contends on brief that the stock had a value of $ 65 a share on December 10, 1941, and $ 58.50 at the date of decedent's death.
The stock was closely held at all times and there are no available records of any sales thereof at or near the valuation dates. The petitioner produced two witnesses, experienced dealers in securities, who undertook to value the shares on the basis of the information available to them. They did not have before them and did not take into consideration the business or financial condition of the issuing company and its earnings.
Based on the evidence as a whole, we find that the shares in question had a value of $ 75 each on December 10, 1941, and on May 29, 1942.
Decisions will be entered under Rule 50.