*1070 This proceeding arises under the Revenue Act of 1926 and is for the redetermination of a deficiency in estate tax in the amount of $952.72. The allegations of error upon which the parties joined issue are: (1) The inclusion in the decedent's gross estate of 249 shares of the capital stock of Alberni Mills & Timber Company, Ltd., at a value of $49,130.04 and 562 shares of the capital stock of Port Neville Timber Company, Ltd., at a value of $50,097.50; (2) the inclusion in the decedent's gross estate of the amount of $69,578.06, representing the value at the date of decedent's death of certain property which the decedent transferred under a trust deed after the enactment of the Revenue Act of 1926 but within two years prior to her death.
*1071 The respondent has conceded that the sum of $304.45 which was paid by the petitioners to the State of Nebraska for inheritance taxes should be allowed as a credit against any estate tax which may be determined to be due in this proceeding, subject to the limitation provided in section 301(b) of the Revenue*1247 Act of 1926.
FINDINGS OF FACT.
The petitioners are the executors of the estate of Emma R. Morse, who died testate, a resident of Omaha, Nebraska, on April 25, 1928.
On April 13, 1927, decedent executed a trust deed by the terms of which she created a trust and transferred to the United States Trust Company of Omaha, in trust, certain stock, bonds and mortgages for the following uses and purposes:
(1) To manage, sell, invest, reinvest, control and handle said trust fund according to the best judgment of said trustee. The trustee shall be authorized to purchase investments from itself provided no greater price is paid therefor than that at which such investments are sold by the trustee to the general public.
(2) At any time during the continuance of this trust the then beneficiary of the income may request the trustee to sell any investment belonging to said trust, and such request shall be acted upon by the trustee.
(3) The income from said trust property shall be paid quarterly to me, the undersigned, Emma Morse, during the remainder of my natural life. Upon my death the income from said trust property shall be paid to my daughter, Ethel Morse, during the remainder*1248 of her natural life, provided she is unmarried at the time of my death, and provided further that should she marry after my death, then upon her marriage, the payment of said income to her shall cease.
(4) If at the time of my death, my daughter Ethel be not living, or if she be then living and is married, or if she be living and is unmarried, then upon her marriage, if such event occurs, the trust hereby created shall cease and terminate. If, in the event my daughter Ethel survives me and be not married at the time of my death and does not thereafter marry, then upon her death, the trust hereby created shall cease and terminate. Upon the termination of this trust, the principal of said trust fund and all undistributed income thereof shall be distributed among and be paid to my heirs, heirs to be determined according to the laws of the State of Nebraska.
The property covered by the trust deed, together with accrued interest thereon, was included by the respondent in the decedent's gross estate at a value of $69,578.06.
At the time of her death the decedent owned 249 shares of the capital stock of the Alberni Mills & Timber Company, Ltd., and 562 shares of the capital stock*1249 of the Port Neville Timber Company, Ltd., both of these companies being British Columbia corporations. The shares of stock held by the decedent in these two corporations had a total value of $99,227.54 at the time of her death and the respondent included them in this amount in the decedent's gross estate.
*1072 On March 20, 1930, the petitioners, as executors of the estate of the decedent, paid inheritance taxes to the State of Nebraska in the amount of $304.45.
The decedent was nearly seventy-nine years of age at the time of her death in April, 1928. In April, 1927, when she executed the trust instrument referred to above, decedent was in excellent health. She was very active and went out a great deal. She visited her married daughter in Omaha nearly every day and went up to Vancouver every summer to visit her son. Decedent had advanced to her son considerable sums of money and at the time she executed the trust deed she canceled the notes evidencing her loans to him because she knew he was not in a position to repay them. The son was in very bad financial condition at this time and was requesting additional funds. Decedent decided to make some arrangement whereby*1250 she would not be in a position to make further advances to her son and to that end she created the trust involved herein.
In November 1927, decedent suffered a heart attack and became seriously ill. She was continuously under the care of a physician thereafter and was never well after this illness. Early in 1928 she had a stroke. On February 16, 1928, decedent executed a will.
The transfer by the decedent under the trust deed dated April 13, 1927, was not made in contemplation of death.
The respoondent valued the decedent's entire gross estate at $174,385.60 and allowed deductions in the amount of $101,749.78. In determining the deficiency the respondent included the entire value of the property transferred by the decedent in trust under date of April 13, 1927, as a transfer made in contemplation of death or intended to take effect in possession or enjoyment at or after death, within the meaning of section 302(c) of the Revenue Act of 1926.
OPINION.
MATTHEWS: Although it is alleged in the petition that the respondent erred in including in the decedent's gross estate the shares of stock owned by her in two British Columbia corporations, which the respondent valued*1251 at $99,227.54, no evidence was introduced with respect to the value of this stock.
There remains for consideration the question whether the respondent erred in including in the decedent's gross estate the property transferred by her in trust on April 13, 1927. The pertinent section of the statute, section 302(c) of the Revenue Act of 1926, is quoted in the margin. 1 The second provision of section 302(c), which raises a *1073 conclusive presumption that transfers made within two years prior to the decedent's death were made in contemplation of death, has been held by the Supreme Court of the United States to be unconstitutional (). The respondent is relying upon the first provision, under which the value of transfers made at any time in contemplation of death or intended to take effect in possession or enjoyment at or after death, except by a bona fide sale, is required to be included in the decedent's gross estate.
*1252 We have carefully considered the evidence introduced in this proceeding and have reached the conclusion that the transfer in trust was not testamentary in character. The testimony of several witnesses indicates that the decedent's son, who lived at Vancouver, had been borrowing considerable sums of money from the decedent and that he was in very bad shape financially. The son was asking the decedent for additional funds and she did not wish to accommodate him further. The trust which we are considering herein was created at the suggestion of her attorney, whom she had consulted with reference to arranging her affairs so that she could make no additional loans to her son. The decedent was in excellent health on April 13, 1927, and although she died the following April there is nothing to indicate that she was thinking of her approaching decease at the time she executed the trust deed. By this instrument, which is quoted in our findings of fact, decedent transferred to trustees certain securities in trust, it being provided that the income therefrom should be paid to the decedent during her lifetime, and after her death to the unmarried daughter of the decedent so long as the*1253 daughter lived and remained single, the trust to terminate upon the death of the daughter or upon her marriage, with remainder over to the heirs of the decedent. It will be seen that the absolute disposition of the trust property was provided for in the trust instrument and only the income was reserved to the grantor for life and to her single daughter, if the daughter survived the grantor and did not marry. The transfer was beyond recall by the decedent, title to the property being definitely fixed by the trust deed. The interest therein which the decedent possessed immediately prior to her death was obliterated by that event. The transfer was not made in contemplation of death and was not intended to take effect in possession *1074 or enjoyment at or after death, within the legal significance of those words. Under the authority of , we hold that the corpus of the trust should not be included in the value of the gross estate of the decedent for purposes of estate tax under section 302(c) of the Revenue Act of 1926. See also *1254 , reversing , which reversed the decision of this Board reported at .
The petitioners are entitled to credit the estate tax determined by the respondent with the inheritance taxes paid to the State of Nebraska in the sum of $304.45, such credit not to exceed 80 per cent of the amount determined under section 301(a) of the Revenue Act of 1926.
Judgment will be entered under Rule 50.
Footnotes
1. 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, 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, by trust or otherwise, in contemplation of or intended to take effect in possession or enjoyment at or after his death, except in case of a bona fide sale for an adequate and full consideration in money or money's worth. Where within two years prior to his death but after the enactment of this Act and without such a consideration the decedent has made a transfer or transfers, by trust or otherwise, of any of his property, or an interest therein, not admitted or shown to have been made in contemplation of or intended to take effect in possession or enjoyment at or after his death, and the value or aggregate value, at the time of such death, of the property or interest so transferred to any one person is in excess of $5,000, then, to the extent of such excess, such transfer or transfers shall be deemed and held to have been made in contemplation of death within the meaning of this title. * * * ↩