*3713 1. The evidence rebuts the presumption that a transfer in October, 1921, of certain bonds by the decedent to his wife, the executrix of his estate, was made in contemplation of death.
2. Bequests to charities deductible from the gross estate of the decedent should not be reduced by taxes paid out of such bequests to the State of Pennsylvania. Howard K. Walter et al., Executors,2 B.T.A. 453">2 B.T.A. 453.
*824 This is a proceeding for the redetermination of a deficiency in estate tax in the amount of $104,066.63, only approximately $60,000 of which amount is in controversy. The principal point in issue is whether certain bonds of a par value of $500,000 and of a fair market value of $372,000 transferred by the decedent to his wife, the petitioner herein, in October, 1921, was a transfer in contemplation of death within the meaning of the statute. The petition alleges certain other errors in the computation of the correct net estate, among which is that the determination of the amount representing charitable bequests to*3714 be deducted from the gross estate of the decedent was not in accordance with the decision of the Board in Howard K. Walter et al., Executors,2 B.T.A. 453">2 B.T.A. 453. At the hearing it was agreed that these matters would be settled by a stipulation filed by counsel before the determination of the correct deficiency in tax, such determination to be made under Rule 50 of the Board's rules of practice.
FINDINGS OF FACT.
The petition in this proceeding was filed by Mary Walker Boggs on February 24, 1926, now Mary Walker Criqui, executrix of the estate of R. H. Boggs, deceased.
R. H. Boggs, a resident of Sewickley, a suburb of Pittsburgh, Pa., died July 9, 1922. At the time of his death, R. H. Boggs had *825 an estate, as determined by the Commissioner, in the amount of $6,299,068.24, made up approximately as follows:
| Real estate | $1,700,000 |
| Personal property consisting chiefly of transferable stocks and | |
| bonds | 4,600,000 |
On October 3, 1920, after an engagement of some months, R. H. Boggs, who was then 74 years of age, married the petitioner. Prior to the marriage he had informed the petitioner that he would give and transfer to her interest-bearing*3715 securities from which she could receive an independent income. At several times after the marriage he renewed such promise. Conversations to this effect were heard by his butler and valet.
R. H. Boggs was in good health at the date of his marriage. He was president of Boggs & Buhl, Inc., one of the largest department stores in Pittsburgh, Pa.; president of the Dollar Savings & Trust Co., one of the largest banks of Pittsburgh; director in the Philadelphia Co., which company operates railway lines, electric, heat and power companies in Pittsburgh; a member of various clubs and president of the Union Club of Pittsburgh. He was daily actively performing his duties as chief executive of Boggs & Buhl, Inc., and continued active in such duties until within a short time prior to his death. He was also active in the other companies with which he was connected. He managed his large holdings and properties with the help of only his private secretary, one Martin, who was also private secretary to Buhl, his associate in the department store business. His home at Sewickley was a large estate of about 45 acres. He was actively interested in the maintenance and upkeep of the estate and*3716 personally participated in the harvesting of the various fruits and vegetables grown. His business activities made it impossible for him to take a trip at the time of his marriage but after the holiday season was over he took a trip with his wife to California. In the summer of 1921 he took a trip to Europe. R. H. Boggs had no organic illnesses. He had, however, a bilious attack shortly after his marriage and lost one day from business. He caught a cold on his European trip but apparently quickly recovered from it. In October, 1921, he had an attack of indigestion and a physician was called, but he quickly recovered therefrom.
Late in October, 1921, about one year after his marriage, by prearrangement with his wife, Boggs had her go with him to his safe deposit box in the bank of which he was president and he then and there turned over to her $500,000 Pittsburgh, Mars & Butler Railway Co. coupon bonds which had a fair market value at the time of $372,000. Shortly thereafter he directed his secretary, Martin, to remove such bonds from his books and accounts, which was done by *826 the secretary, who thereupon opened an account for the same on the books kept for the*3717 petitioner by Martin.
Late in 1921, Boggs went with the petitioner on a short trip to Florida. While away he kept in close touch with his attorneys in respect of proposed litigation. After returning from Florida he was actively engaged in business until about March 1, 1922, when he went with the petitioner to California. It was contemplated that the two should go from there to Honolulu but this trip never materialized. After a couple of weeks in California, Boggs slipped and fell in his bath room in a hotel in Los Angeles, breaking his collar bone. Attempts were made to set the bone and after six weeks an X-ray examination showed that the bone had not knitted. Thereupon it became necessary to affix silver claimps, which required the administration of ether. A kidney affection which was entirely unknown to the petitioner at that time, and apparently to the decedent, set in. The shock of the anaesthetic and the kidney condition marked the first evidence of his physical failure. He returned to Pittsburgh in June, 1922, attended by a nurse, was up and around for a day or so and by doctors' orders remained in his room. His physical decline continued and he died July 9, 1922.
*3718 R. H. Boggs had stated on numerous occasions that he expected to live beyond ninety. He repeated predictions of a phrenologist who told him he would live beyond ninety, and frequently stated to his wife he hoped to live as long as she did. He came of long-lived ancestors, his parents being well up in the eighties at the time of their deaths. His brothers and sisters surviving him are well and active. When his uncle, Major Boggs, died at the age of eighty-eight he stated that he expected to live longer than his uncle.
OPINION.
SMITH: The principal issue raised by this proceeding is whether the transfer of $500,000 par value of bonds of Pittsburgh, Mars & Butler Railway Co., which had a market value in October, 1921, of $372,000, was a transfer made in contemplation of death within the meaning of section 402 of the Revenue Act of 1921, the decedent having died testate on July 9, 1922, or within two years from the date of the transfer. The respondent has included in the gross estate the bonds in question at a value of $372,000. On behalf of the petitioner it is contended (1) that the subject matter of the transfer is not a material part of decedent's property, and (2) that*3719 fear of death was not the motivating cause for the transfer and that another direct cause is shown therefor.
Section 402 of the Revenue Act of 1921, so far as is here material, provides as follows:
*827 That 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, real or personal, tangible or intangible, wherever situated -
* * *
(c) To the extent of any interest therein of which the decedent has at any time made a transfer, or with respect to which he has at any time created a trust, in contemplation of or intended to take effect in possession or enjoyment at or after his death (whether such transfer or trust is made or created before or after the passage of this Act), except in case of a bona fide sale for a fair consideration in money or money's worth. Any transfer of a material part of his property in the nature of a final disposition or distribution thereof, made by the decedent within two years prior to his death without such a consideration, shall, unless shown to the contrary, be deemed to have been made in contemplation of death within the meaning of this title.
*3720 No decision of the courts has been called to our attention which lays down any definite and specific rule as to the meaning of the words "material part" of the decedent's property as used in section 402(c) of the Revenue Act of 1921, but a number of decisions have been rendered by the courts passing upon the question of the "materiality" of the property transferred. See In re Ebeling's Estate,172 N.W. 734">172 N.W. 734; In re Stephenson's Estate,177 N.W. 579">177 N.W. 579; In re Dupignac's Estate,125 Atl. 119; Gaither v. Miles,268 Fed. 692; In re Stevens' Will,188 N.W. 484">188 N.W. 484. In the case of Gaither v. Miles, supra, the court held that the gift being less than 4 per cent of the whole estate scarcely formed such a material part of it as to throw upon the plaintiff the burden of proving that the gift was not parted with in contemplation of death. In In re Dupignac's Estate, supra, the court found that:
* * * The gifts obviously were of a material portion of the estate - the first one, $75,000, being approximately 10 per cent. of the net estate, and the second, $127,000, being more*3721 than 20 per cent. of the then net estate; and the appellants so concede.
We think that the phrase "material part" used in the statute does not have reference to a specific percentage of the total estate. The sum of $372,000, constituting between 5 and 6 per cent of the estate of R. H. Boggs, in our judgment constituted a material part of the estate.
As to what is meant by the statute with reference to a transfer "in contemplation of death" it was stated by the Court of Claims in Meyer v. United States,60 Ct.Cls. 474:
If it be said that there need not be a conviction that death is imminent, there must at least be a belief that it is to be expected in the very near future rather than in the usual course of events. And in this state of mind, in this behalf in the near approach of death, must be found the motive for the conveyance if it is properly to be characterized as made in contemplation of death.
In Shwab v. Doyle,269 Fed. 321, the Circuit Court of Appeals said:
* * * On *828 principle, and without present reference to authority, the ultimate question concerns the motive which actuated the grantor; that is to say, *3722 whether or not a specific anticipation or expectation of her own death, immediate or near at hand (as distinguished from the general and universal expectation of death some time), was the immediately moving cause of the transfer. * * *
In Spreckels v. State,30 Cal. App. 363">30 Cal.App. 363; 158 Pac. 549, the court said:
A reasonable and just view of the law in question is that it is only where the transfer of property by gift is immediately and directly prompted by the expectation of death that the property so transferred becomes amenable to the burden; or, as counsel for the respondents with singular aptness states the proposition:
"It is only when contemplation of death is the motive without which the conveyance would not be made, that a transfer may be subjected to the tax."
See also State v. Pabst,139 Wis. 561">139 Wis. 561; 121 N.W. 351">121 N.W. 351; Spencer Borden, Jr., Executor,6 B.T.A. 255">6 B.T.A. 255; Estate of A. J. Schulz,7 B.T.A. 900">7 B.T.A. 900; Estate of Charlotte C. Lozier,7 B.T.A. 1050">7 B.T.A. 1050.
R. H. Boggs had many times promised his wife to transfer property to her which would give her an independent income. *3723 Witnesses testified that the decedent had transferred property to his first wife from which she derived an independent income. The transfer made to the petitioner was simply in fulfilment of the promise which he had made to her before marriage. Although Boggs was well advanced in years at the time the transfer was made, he apparently had no premonition of an early demise. The evidence rebuts any presumption that the transfer was made in contemplation of death. The amount of $372,000, the market value of the bonds, was not a part of the gross estate of the decedent for the purpose of the estate tax.
The other issues raised by the petition will be settled by a stipulation to be filed by counsel for the petitioner and counsel for the respondent without the taking of further testimony.
Judgment will be entered on 15 days' notice, under Rule 50.