*219 Decision will be entered under Rule 50.
The decedent created an irrevocable trust, naming himself as one of the two initial trustees. The trustees were authorized to distribute the net income to or expend it for the benefit of decedent's daughter or her survivors, or they could distribute it to decedent's wife during her lifetime. The corpus could be paid over in whole or in part to decedent's wife during her lifetime at the sole discretion of the trustees, or it could be held for ultimate distribution to other remaindermen upon the termination of the trust. From 1939 to his death in 1941 the decedent suffered from cerebral arteriosclerosis and, in the opinion of his physician, he was incapable of making normal decisions. He was never removed as a trustee, nor was he ever adjudged an incompetent. Held, the value of the trust estate at the optional valuation date is includible in decedent's gross estate under section 811 (d) (2) of the Internal Revenue Code.
*819 This proceeding involves an estate tax deficiency in the amount of $ 7,843.58.
The only question for our determination is whether the value of the corpus of a trust created by the decedent in 1935 is includible*221 in his gross estate under section 811 (c) or section 811 (d) (2) of the Internal Revenue Code.
The other issues raised by the petition have been settled by the stipulation of facts.
FINDINGS OF FACT.
Part of the facts have been stipulated. In so far as they have been stipulated, they are found accordingly.
Edward L. Hurd, hereinafter referred to as the decedent, died May 26, 1941. At the time of his death he was a resident of Milton, Massachusetts. His wife, Charlotte H. Hurd, the petitioner herein, was duly appointed executrix of his estate by the Probate Court of Norfolk County, Massachusetts. The Federal estate tax return was filed with the collector of internal revenue at Boston.
On November 1, 1935, the decedent created a trust, naming himself and his wife as the first trustees. He transferred in trust 300 shares of the capital stock of the American Telephone & Telegraph Co.
In so far as here material, the trust instrument provided as follows:
II. During the continuance of the Trust, the Trustees shall pay over to Catherine Hurd Graton, daughter of the Donor or to her husband if she dies leaving a husband or to her lawful issue, or shall expend for her or his benefit *820 *222 or their benefit from time to time the whole or such parts of the net income of the Trust Property and in such proportions as the Trustees may in their own discretion deem necessary for the comfortable support and maintenance of the said Catherine Hurd Graton or of her husband if he survives her or of her said issue, provided always that the Trustees may in their own discretion during the life of Charlotte H. Hurd, wife of the Donor, without regard to the circumstances of the said Catherine Hurd Graton or of her said husband or of her issue, pay over to the said Charlotte H. Hurd or expend for her benefit the whole or any part of the net income of the Trust Property.
III. During the life of the said Charlotte H. Hurd the Trustees may, if in their opinion the circumstances so require, pay over to or expend for the benefit of the said Charlotte H. Hurd the whole or any part of the principal of the Trust Property.The trust instrument provided that the trust should continue during the joint lives of Catherine Hurd Graton (his daughter) and Charlotte H. Hurd (his wife) and the life of the survivor and thereafter until the youngest child to be born to Catherine Hurd Graton reached the *223 age of 21 years or possibility of issue of his said daughter became extinct, whichever of the two events should first occur. It was provided, however, that the trust should not terminate during the life of the surviving husband, and there was added a safeguard against violation of the rule against perpetuities. Upon termination of the trust the trustees were directed to distribute the remainder of the trust property to the lawful issue of Catherine Hurd Graton then living in equal shares, per stirpes. In default of such issue, the remaining property was to be distributed as Catherine Hurd Graton should by her last will direct and if she should die intestate, the trustees were directed to distribute the property among the heirs of the donor ascertained in accordance with the laws of Massachusetts.
Additional or succeeding trustees could be appointed from time to time by the donor, or, in case of the death or disability of the donor, by the remaining or succeeding trustees. In case of the absence or disability of any trustee the remaining trustee or trustees could act alone or in behalf of all the trustees as effectually as if all were present and acting. Each trustee was responsible*224 for his own acts only and was not liable for the default or omissions of his cotrustee or cotrustees.
The trust instrument expressly provided that the donor had reserved no right to revoke, modify, or change any of the provisions of the agreement, or to repossess himself of the trust property under any circumstances whatsoever.
In the fall of 1939 the decedent suffered from cerebral arteriosclerosis. It was the opinion of his physician that the decedent was from that time until the date of his death incapable of normal decisions and did not regain that power at any time before his death, and that for a considerable period immediately prior to decedent's death *821 he was physically and mentally incapable of performing any acts involving the use of discretion with respect to property or proprietary rights of himself or any other person. From and after 1939 decedent's cotrustee acted alone or in behalf of all the trustees. The decedent was never adjudged mentally incompetent, nor was he removed as a trustee.
The executor elected to have the gross estate valued as at the optional valuation date, and it is agreed that the value of the shares on that date was $ 34,950.
The decedent*225 filed a gift tax return in 1935, reporting a gift of the shares to his daughter Catherine Hurd Graton.
The trust filed Federal income tax returns for the years 1936 through 1941, indicating that the entire net income of the trust had been distributed or was distributable to Catherine H. Graton, and Catherine H. Graton, in her income tax returns for the same years, reported the entire net income of the trust.
The respondent has determined that the value of the trust property on the optional valuation date is includible in decedent's gross estate under section 811 (c) and (d) ( 2) of the Internal Revenue Code.
OPINION.
The cotrustees, one of whom was the decedent, the settlor of the trust, had authority to pay over to or expend the entire net income for the benefit of the decedent's daughter or her survivors, or they could pay over the whole or any part thereof to the decedent's wife during her lifetime. With respect to the principal of the fund, the cotrustees could, in their sole discretion, pay over the entire corpus or any part of it to decedent's wife. Otherwise the corpus was to be left intact for distribution to remaindermen upon termination of the trust.
The respondent has *226 determined that the trust is includible under section 811 (c), Internal Revenue Code, as one where the decedent had the "right, either alone or in conjunction with any person, to designate the persons who shall possess or enjoy the property or the income therefrom." He further determined that the trust was includible in decedent's gross estate under section 811 (d) (2) of the code as one where the enjoyment was, at the date of decedent's death, subject to change through the exercise of a power to alter, amend, or revoke.
In the circumstances we deem it necessary to treat the matter only with respect to the application of section 811 (d) (2), inasmuch as it seems clear to us that the value of the trust is includible by virtue of that provision.
*822 The petitioner asserts that section 811 (d) (2) does not reach the trust, since the decedent as settlor expressly relinquished all rights to alter, amend, or revoke the trust and his only powers or responsibilities in connection with the trust were those he enjoyed by virtue of the fact that he was one of the trustees. It is further claimed that a power to terminate is not included under section 811 (d) (2) as is the case under section*227 811 (d) (1).
Section 811 (d) (2), dealing with transfers on or prior to June 22, 1936, embraces and includes a power of termination. Commissioner v. Estate of Holmes, 326 U.S. 480">326 U.S. 480. The right of the cotrustees to pay over, at any time, the entire corpus of the trust to the decedent's wife constitutes a power to terminate. The petitioner does not seriously contend otherwise. Nor does the fact that decedent's powers in connection with the trust property were exercisable only in his capacity as trustee take the transfer beyond the reach of the section here in question. It is established that section 811 (d) (2) embraces such powers, irrespective of the capacity in which they are exercisable by the settlor. Welch v. Terhune, 126 Fed. (2d) 695; Union Trust Co. of Pittsburgh v. Driscoll, 138 Fed. (2d) 152; Estate of Albert E. Nettleton, 4 T.C. 987">4 T. C. 987.
However, we need not rest our conclusion solely upon the fact that the decedent could terminate the trust. In addition to that right, the cotrustees were authorized to vary the enjoyment of the trust property. *228 They could pay over or expend all or a part of the income for the benefit of the daughter and her survivors or they could distribute all or any portion thereof to the wife. It appears that they may have had authority to accumulate the income. As to the principal, they could, in their discretion, pay it over to the wife in whole or in part or leave it for eventual distribution to the remaindermen. The right to determine by whom and in what proportions the trust property shall be taken brings the trust within section 811 (d). Estate of Albert E. Nettleton, supra.
Finally, the petitioner contends that the decedent had become mentally and physically incapable of exercising any discretion in 1939 and that he remained so to the date of his death. It is argued that because of his condition he was unable to act, and that as a matter of fact he did not discharge any duties or responsibilities in connection with the trust from 1939 on. The trust indenture provided that in case of the absence or disability of any trustee the remaining trustees or trustee could act alone or in behalf of all of the trustees as effectually as if all the trustees were present*229 and acting. It further provided that a trustee should be responsible for his own acts only and should not be liable for the default or omission of his cotrustee or cotrustees. The petitioner asserts that the remaining trustee, from and after 1939, *823 acted alone and that, since the decedent's connection with the trust was solely by reason of the fact that he was a trustee, his power and control over the trust ceased in 1939. It is argued that in these circumstances, it may not be said that the decedent held or exercised, at his death, such power or control as is requisite to the application of sections 811 (c) or 811 (d).
It is true that in the opinion of his physician the decedent was not capable of making normal decisions respecting property rights at the time of his death or at any time after the fall of 1939. But, decedent was never removed from his trusteeship nor was he ever adjudged mentally incompetent. The design of the revenue act is to include in the estate of a decedent property theretofore disposed of by him but over which he retained a power, such as is here present, at the time of his death. While the matter is one of first impression, we should think that*230 some definitive action might well be necessary to terminate the retained power of the decedent before the purpose of the statute can be defeated. It is not unusual that during a protracted illness one might be incapable, both physically and mentally, of making normal decisions affecting property rights, and yet we would not suppose that the statute does not apply in such cases. Petitioner's argument is a plausible one, but we are not convinced.
In the circumstances, we sustain the respondent. The two minor issues settled by the stipulation will be given effect in a recomputation.
Decision will be entered under Rule 50.