*3299 Where decedent by will creates a life estate in her daughter, with remainder over to the issue of her daughter, and at the same time provides for a power of appointment in the daughter, and thereafter the daughter dies leaving issue surviving her but devising to her issue by her will whatever property she has under the provisions of her mother's will, the issue takes under and by virtue of their grandmother's will and not because of a power of appointment attempted to be exercised by their mother, and the value of such property should not be included in the gross estate of the daughter.
*174 This proceeding is for the redetermination of a deficiency of $2,435.15 in estate taxes. The deficiency results from the inclusion in the gross estate of the decedent of property valued at $37,293 which inclusion petitioner alleges was erroneous.
FINDINGS OF FACT.
The petitioner is a New York corporation and is the duly qualified executor of the last will and testament of Helen M. W. Grant, who died a resident of Kings County, New York, and whose will was*3300 duly admitted to probate by the Surrogate's Court of the said County.
On October 11, 1899, Mary E. Wolcott, the mother of the decedent died, leaving a last will and testament which was duly admitted to probate. The provisions of the will of Mary E. Wolcott, which was dated September 7, 1888, pertinent hereto, are as follows:
THIRD: I give all my personal other property and estate that may remain after the payment of my debts, funeral and testamentary expenses, to the Brooklyn Trust Company in Trust, to pay all the net interest or income to be *175 derived from my said personal property and estate to my said daughter during her life time, and on her death to pay or deliver over all the principal and any unexpended income arising therefrom to the issue of my said daughter, by representation, or to such person or persons or institution, as my said daughter may by her last Will and Testament direct give or appoint to receive or take the same.
SIXTH: If my daughter shall die without issue and without leaving any last Will and Testament disposing of said personal property, I will and direct the same be divided in equal proportions between my own next of kin, and the next*3301 of kin of my deceased husband. I constitute and appoint my daughter Helen M. Wolcott Grant, sole Executrix of this my Will during her life time, but if she shall die leaving any of its provisions unexecuted, I constitute and appoint the said Trust Company Executor to finish such unexecuted provisions.
On July 20, 1924, Helen M. W. Grant died, and left her surviving two daughters, viz, Helen Wolcott Grant and Marion Burton Grant. The provisions of her will pertinent hereto are as follows:
SECOND: All the rest, residue and remainder of my property and estate, real and personal, and all property which, by the will of my mother, Mary E. Wolcott, I am authorized to dispose of by my will, I give, devise, and bequeath to my daughters, HELEN WOLCOTT GRANT and MARION BURTON GRANT, in equal shares, or the whole thereof to that one of my daughters who survives me, except that the child or children, me surviving, of either of my said daughters who may die before me, shall take the share of my said residuary estate and of my said mother's estate to which the parent of such child or children would have been hereunder entitled if living.
The respondent included in the decedent's gross estate*3302 all of the property left in trust under the provisions of the will of Mary E. Wolcott, which had a value of $37,293.
OPINION.
MORRIS: The only question to be determined is whether the corpus of the testamentary trust created by Mary E. Wolcott should be included in the gross estate of her daughter, Helen M. W. Grant. The answer to the question lies in the interpretation of the provisions of the wills left by the mother and daughter. The respondent contends that this property should be included in the gross estate of Mrs. Grant as passing under a power of appointment given to her by the will of her mother. The petitioner claims that it did not and could not so pass as under Mrs. Wolcott's will the power of appointment became operative only if Mrs. Grant left no issue.
The applicable provisions of the Revenue Act of 1924 read 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, real or personal, tangible or intangible, wherever situated -
* * *
(f) *176 To the extent of any property passing under a general power of appointment exercised by the decedent (1) by*3303 will, or (2) by deed executed 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 a fair consideration in money or money's worth; * * *
* * *
Mary E. Wolcott's will provides "I give * * * to the Brooklyn Trust Company in trust, to pay all the net interest or income * * * to my said daughter during her life time * * *." If we pause at this point, Mary E. Wolcott by this provision made her daughter a beneficiary for life in the income and interest to be derived from the testamentary trust. The next clause provides for disposition of the corpus and any accumulated portion of the income arising therefrom by stating "and on her death to pay or deliver over all the principal and any unexpended income arising therefrom to the issue of my said daughter, by representation, or to such person or persons or institution as my said daughter may by her last Will and Testament direct, give or appoint to receive or take the same." Examining this provision of the will it is our opinion that, if the daughter had issue, such issue was to receive the property in question, unless other persons were appointed by her*3304 to receive the same. The power of appointment was operative only to the extent of permitting the daughter to designate some person (or institution) other than her issue to receive the remainder. It is clear that if no such designation or appointment were made, said issue was to receive the property under the will of Mary E. Wolcott. This would be true whether the failure to exercise the power of appointment were due to the daughter's dying intestate or the designating of her issue as the persons to receive the remainder. The attempted exercise of the power did not effect the passing of the property in question under a general power of appointment.
Helen M. W. Grant, possessed no doubt with some of the foresight of her mother and desirous for the welfare of her children, provided that "all property which, by the will of my mother, Mary E. Wolcott, I am authorized to dispose of by my will, I give, devise, and bequeath to my daughters, * * * in equal shares, * * *." This disposition is the same as that contained in the will of Mary Wolcott, and it is this provision which respondent asserts is an exercise of the power of appointment. The New York courts have had occasion to pass*3305 on questions similar to the present in several cases. In ; , the court had to consider whether a granddaughter took under the will of her grandfather or by virtue of the power of appointment attempted to be exercised by her mother. The court in its decision, said:
* * * Her rights were fixed by the will of her grandfather, and, unless changed pursuant to its provisions, her estate in expectancy would become an estate in possession upon the death of her mother. While the situation *177 was subject to change under the power of appointment, no change was made. Although the power was exercised in form, her title was perfect without it, and she derived no benefit from it. The power was to "dispose of the remainder," and the remainder was not disposed of, but continued where it was. The attempt to execute the power was not effective, because it did nothing. The exercise of a power which leaves everything as it was before is a mere form, with no substance.
Accord: ; *3306 ; ; .
It follows in accordance with the foregoing that the trust corpus passed under and by virtue of the will of Mary E. Wolcott and, therefore, should not be included in the gross estate of Helen M. W. Grant.
Reviewed by the Board.
Judgment will be entered for the petitioner under Rule 50.