Decision will be entered under Rule 50.
1. Decedent, who died in 1939, was a partner in a baking business. His wife had contributed the original capital for the business, had taught him to bake, had in large measure handled the finances of the business until about 1920, and had clerked in the bake shops until about the same date. Thereafter until decedent's death she was in a decreasing degree consulted on matters of major importance. The decedent worked in the business until 1936. The great growth and success of the business, which very largely took place after 1920, was due primarily to the ability and effort of the other partners, three sons of decedent and his wife. Held, that the Commissioner did not err in including in the decedent's estate his one-fourth partnership interest, and the entire value of other properties standing in the joint names of decedent and his wife, acquired with moneys distributed by the partnership to decedent.
2. Gifts made by decedent to his wife and children were not made in contemplation of death, within the intendment of section 811 (e) of the Internal Revenue Code.
*222 This case involves estate tax liability. Decedent died on December 9, 1939. The respondent determined a deficiency in the amount of $ 30,796.79. Petitioner claims that there was an overassessment of $ 14,864.38.
The issues remaining for our consideration are as follows:
(1) As of the date of the decedent's death, to what extent, if any, did decedent's wife have an interest in her husband's one-quarter share in the partnership known as Awrey Bakeries?
(2) As of the date of the decedent's death, to what extent, if any, within the meaning of section 811 (e) of the Internal Revenue Code, was decedent's wife the owner of certain properties standing in their joint names?
(3) Were certain gifts made by decedent to his children and his wife made in contemplation of death, within the meaning of section 811 (c) of the code?
FINDINGS OF FACT.
We adopt as part of our findings of fact herein the stipulations of fact filed by the parties. Such parts thereof as are germane to the remaining issues in this case are set forth below. We also include *223 additional findings of fact based upon evidence adduced at the hearing.
Petitioners were appointed *149 executors of the estate of Fletcher E. Awrey (deceased December 9, 1939) by the Probate Court of Wayne County, Michigan.
The estate tax return here involved was filed with the collector of internal revenue for the district of Michigan.
Fletcher E. Awrey (hereinafter sometimes referred to as the decedent) was born in Ontario, Canada, on June 30, 1855. He came to the United States in March 1899, accompanied by his wife, Elizabeth E. (who was 14 years younger than he was), his two sons, Elton R. and Wilbur S., and his two daughters, Mary and Fern. A third son, Thomas L., was born in the United States in December 1899.
The Awreys came to this country with only $ 60. They rented the farm on which they had lived in Canada for two years and then sold it. Decedent did not have any specific plans as to the kind of work he would do to earn a living. The $ 60 was invested in the purchase of a small oven and some equipment and Mrs. Awrey began to make bread, pies, cookies, and fried cakes, which were sold to their neighbors. In the beginning decedent knew nothing about the baking business, but by the fall of 1899 he had learned through her how to make bread.
The family moved in the fall of 1899 *150 and a larger oven was purchased. They also purchased a horse and wagon. Although Mrs. Awrey was pregnant at the time, she assisted decedent by scaling the bread and doing whatever else she could. Decedent and his wife worked together in this business for about a year, when the former became ill with a fever. His illness lasted about two months and it became necessary to sell the oven and other baking equipment and the horse and wagon. The baking business was discontinued for a few years. In the meantime decedent worked first in a table factory for a short time and later as a baker for one Meade. While decedent worked for Meade, decedent's wife supplemented the family income by making cookies and fried cakes at home and selling them to the neighbors. This situation continued until approximately 1910 or 1911.
About 1910 or 1911, one Millen, a cousin of Mrs. Awrey, proposed to lend to Mrs. Awrey and decedent $ 200, and to put up $ 200 as his own capital contribution and go into the baking business with decedent. Decedent had been talking about going into business again, but had no money at the time. The Awreys were somewhat reluctant to accept Millen's proposal, as Mrs. Awrey *151 expected to get some money from her father and to use that money to go into business on their own account. However, Millen put up the $ 400 and the business was started. Millen knew that Mrs. Awrey was going to get some money from her father and he looked to her for repayment of the $ 200 *224 loan. He also relied upon decedent's skill as a baker in entering into this business.
Decedent and Millen were in business together for about two years. Decedent baked all the bread. Millen handled the selling end of the business. In the beginning, Mrs. Awrey did some pastry baking, but after a short time a baker was hired to do this. Also, in the beginning, Mrs. Awrey and Mrs. Millen divided the clerking duties, but later a clerk was hired. Millen and decedent drew a weekly salary of $ 50 each. After about two years the business was operating two stores and it was mutually agreed that Millen would take one store and the Awreys the other. Mrs. Awrey in the meantime had received $ 300 from her father. She used $ 200 thereof to repay Millen and the remaining $ 100 to purchase supplies in the new venture.
After the split-up with Millen, Mrs. Awrey clerked in the store part of the time. A *152 second store was started and she also did some clerking there. In 1912 Wilbur S. Awrey, decedent's son, gave up his job with a manufacturing company, at the request of Mrs. Awrey, and took over the selling end of the bakery business. The driver whom Wilbur replaced was discharged at the insistence of Mrs. Awrey, who was handling the finances of the business during this period, while decedent confined his activities to baking the bread. When Wilbur gave up his job with the manufacturing company it was understood that he would have a 50 percent interest in the bakery business, the other 50 percent to be held by decedent.
That arrangement continued until September 1916, when decedent's eldest son, Elton R., came into the business. Elton entered the business with the understanding that he would probably become a partner at a later date. After about two months he loaned the business $ 200 to buy materials. About two months later he decided to remain in the business. He thereupon canceled the loan and was given a one-third interest in the business. The other two-thirds was held in equal shares by Wilbur and the decedent. During this period Mrs. Awrey took care of all the finances *153 of the bakery business, paid the bills, did some of the book work, and clerked to some extent in the store. The business continued to operate in this manner until May 1918, when Elton and Wilbur were drafted into the United States Army. Thereupon, decedent's third son, Thomas L., then 18 years of age, left his job at a bank and entered the bakery business, at the request of Mrs. Awrey. Thomas did not become a partner at that time and the partnership interests remained unchanged. During this period Mrs. Awrey clerked in one of the stores, handled the finances generally, and was always consulted on any contemplated changes or other important matters.
When Thomas first entered the business only two stores were being operated and about fifteen people were employed. Thomas was paid a *225 salary of about $ 15 a week. During the period of Elton's and Wilbur's absence, Thomas, with the assistance and advice of Mrs. Awrey, opened four additional stores. Decedent concerned himself only with the production end of the business, not caring very much for the business end of it. Elton and Wilbur returned after approximately a year and a half and from that time on Thomas was given a one-quarter *154 interest in the partnership. The other three-fourths was held by Elton, Wilbur, and decedent in equal shares.
From approximately 1920 until decedent's death Mrs. Awrey took no part in the partnership affairs, except that she was consulted from time to time on matters of major importance, more in the beginning and to an increasingly less degree in the late years. Throughout the years, however, she did have an influence on the business. Mrs. Awrey was a stronger character than decedent. She never drew a salary at any time for her services to the partnership. She always considered that she and the decedent had but one pocketbook. The business expanded greatly during this period. Many more stores were added and plant facilities were correspondingly enlarged. This growth was due primarily to the ability and work of Elton, Wilbur, and Thomas. At the time of decedent's death there were about ninety stores being operated.
The first written partnership agreement was executed November 15, 1927. It is incorporated herein and made a part of our findings. It provided in part as follows:
AWREY AND SONS BAKERIES
Partnership Agreement
Agreement made this 15th day of November, 1927, by and between *155 Fletcher E. Awry, Elton R. Awrey, Wilbur S. Awrey, and Thomas L. Awrey, all of Detroit, Michigan.
Whereas the above mentioned parties have heretofore for a long period of time conducted a general baking business as a partnership without any written articles of agreement, and
Whereas said parties wish to put in writing the partnership agreement under which they are now operating;
It Is Hereby Mutually Agreed By and Between the Parties Hereto, as Follows:
1. That the parties hereto shall, as partners, conduct a general baking business; * * *
* * * *
5. That the capital of the partnership shall be whatever the assets of the partnership already operating may be found to be, That each partner shall be considered as having contributed one-quarter of that amount and shall, therefore, retain and have a one-quarter interest in said partnership. * * *
* * * *
11. (b) That the net profits, or net loss, shall be divided equally between the parties hereto, and the account of each shall be credited, or debited, as the case may be, with his proportionate share thereof.
*226 12. In case of the death of any partner or partners, during the time fixed for the continuance of this partnership, this partnership shall *156 not thereby be dissolved but shall be continued by the survivors. The capital or contributions or interest of a deceased partner may be continued in the business and the remaining partners pay to the executor or heirs of said deceased partner the profits, or charge to him the losses, which might have accrued to said deceased partner had he remained alive. Provided, however, that at any time the heirs of said deceased partner shall have the right to withdraw their interest from said partnership, their interests to be paid off by the remaining partners in equal monthly installments prorated over a period of two years. Provided further, however, that said obligation may be discharged by the remaining partners in such other method or manner as may be agreed to between the parties.
13. That, at the termination of this partnership, by the expiration of its term, or by reason of any other cause, a full and accurate inventory shall be prepared, and the assets, liabilities and income, both gross and net, shall be ascertained; that the debts of the partnership shall be discharged; and all moneys and other assets of the partnership, then remaining, shall be divided in specie, between the parties, *157 share and share alike.
No reference is made to decedent's wife in this agreement.
On May 27, 1931, the original written partnership agreement was amended by an agreement which by reference is incorporated in our findings. It was executed by decedent, Elton, Wilbur, and Thomas and by Awrey Bakeries, the partnership. The purpose of this subsequent agreement was generally to provide life insurance protection for Elton, Wilbur, and Thomas and further to provide that upon the death of any of those insured three-fifths of that person's interest in the partnership would be purchased with the proceeds of the insurance policy or policies covering the life of that person, and the interest so purchased would be retired and the benefit thereof accrue to the surviving members of the partnership. Decedent's wife was named as trustee for the sole purpose of carrying out the provisions of this agreement. This agreement was amended in writing on February 2, 1934, April 12, 1935, and October 21, 1937, and on each occasion that writing was signed by decedent, Elton, Wilbur, and Thomas.
After decedent's death a new partnership agreement was executed on July 1, 1940, by Elton, Wilbur, Thomas, and Mrs. Elizabeth *158 E. Awrey. This agreement is incorporated here by reference and made a part hereof. Elton, Wilbur, and Thomas are referred to therein as the party of first, second, and third parts, respectively, and Mrs. Elizabeth E. Awrey is referred to therein as the party of the fourth part. The agreement provides in part as follows:
4. The first party, second party and third party shall have, exercise and maintain sole and exclusive management and operation of the partnership business, it being expressly understood and intended by all parties hereto that the party of the fourth part shall not take any part in the conduct and management of the said partnership business, transactions and affairs; said party of the fourth part, however, shall have the right of access to all partnership offices, properties, *227 books and records and to have upon request full information in relation to the business and affairs of said partnership.
* * * *
7. It is mutually and expressly understood and agreed that the parties of the first part, second part and third part shall each be entitled to have, receive, withdraw and retain a weekly salary or remuneration for personal services in such amount as it be mutually agreed *159 upon by said first party, second party, third party, and fourth party.
* * * *
10. The capital, assets, property, rights, and interests of said partnership shall be and consist of the following:
(a) All right, title and interest of the parties of the first part, second part and third part in that certain partnership heretofore carried on by sayd [sic] parties of the first part, second part and third part as surviving partners of Fletcher E. Awrey, Deceased, and sais [sic] Elton R. Awrey, Wilbur S. Awrey and Thomas L. Awrey, co-partners heretofore doing business under the firm name and style of Awrey Bakeries, as reflected and shown by the books, records and inventory, as of June 29th, 1940, of the mentioned partnership.
(b) A note herewith made, executed and delivered by the party of the fourth part to the partnership hereby formed, in the sum of $ 201,502.00 Two Hundred One Thousand Five Hundred Two oo/100 Dollars.
11. The parties hereto hereby assume responsibility for and obligate themselves to pay and discharge all debts and liabilities imposed by law against parties of the first part, second part and third part as surviving partners of Fletcher E. Awrey, Deceased, said Elton R. Awrey, *160 Wilbur S. Awrey and Thomas L. Awrey, co-partners heretofore doing business under the firm name and style of Awrey Bakeries.
* * * *
13. It is expressly understood and mutually agreed * * * that the amount of the aforesaid contribution to the capital, assets and property of this partnership by party of the fourth part is based upon an appraisal and valuation expressly excluding "good will" and that the intent and purpose of this agreement is that party of the fourth part does not and does not intend hereby to purchase or otherwise acquire presently or in the future any right, title or interest in and to the "good will" of the partnership and that all "good will" which may now exist or hereafter accrue is and shall be solely and exclusively the property of the parties of the first part, second part and third part, * * * and that in the event of the termination or dissolution of this partnership by the death or withdrawal of the party of the fourth part * * * the "good will" and the whole thereof * * * shall continue to be and to remain vested as theretofore vested exclusively in the parties of the first part, second part and third part, * * *
The partnership return of income filed by Awrey *161 Bakeries for the calendar year 1935 shows a gross profit from the business of $ 529,189.52, and a net income of $ 103,188.51. It lists the decedent and his three sons as the sole and equal partners and shows the earned income of each to be $ 5,143.43. Decedent's share of the balance of the net income is reported to be $ 20,573.69. In his individual income tax return for the calendar year 1935, decedent reported as his share of the income from this partnership the sum of $ 25,717.12.
*228 The partnership return of income filed by Awrey Bakeries for the calendar year 1936 shows a gross profit from the business of $ 648,305.65 and a net income of $ 180,532.11. It lists the decedent and his three sons as the only partners and shows the earned income of decedent to be $ 8,374.70 as compared with $ 9,243.90 for each of his sons. Decedent's share of the balance of the net income is reported to be $ 33,498.82, as compared with $ 36,975.63 for each of his sons. In his individual income tax return for the calendar year 1936 decedent reported as his share of the income from this partnership the sum of $ 41,873.52.
The partnership return of income filed by Awrey Bakeries for the calendar year *162 1937 shows a gross profit from the business of $ 748,236.94 and a net income of $ 218,107.32. It lists in schedule A the decedent and his three sons as the only partners and shows the earned income of decedent to be $ 3,000 as compared with $ 11,107.32 for each of his sons. Decedent's share of the balance of the net income is reported to be $ 47,424.92, as compared with $ 44,517.60 for each of his sons. In his individual income tax return for the calendar year 1937 decedent reported as his share of the income from this partnership the sum of $ 50,424.92.
The partnership return of income filed by Awrey Bakeries for the calendar year 1938 shows a gross profit from the business of $ 832,121.77 and a net income of $ 226,430.91. It lists in schedule J the decedent and his three sons as the only partners and shows the earned income of decedent to be $ 3,000 as compared with $ 11,557.55 for each of his sons. Decedent's share of the balance of the net income is reported to be $ 49,587.72, as compared with $ 46,230.18 for each of his sons. In his individual income tax return for the calendar year 1938 decedent reported as his share of the income from the partnership the sum of $ 52,587.72, *163 plus an additional amount of $ 120 representing dividends received from the partnership.
The partnership return of income filed by Awrey Bakeries for the calendar year 1939 shows a gross profit from the business of $ 1,012,541.14 and a net income of $ 323,230.62. It lists in schedule J the decedent and his three sons as the only partners from January 1 to December 9, 1939, and shows the earned income of decedent for that period to be $ 3,000, as compared with $ 14,000 for each of his sons for the entire calendar year. Decedent's share of the balance of the net income up until the time of his death is reported to be $ 66,632.27; that of the estate of Fletcher E. Awrey for the period from December 10 to December 31, 1939, is reported to be $ 7,155.38; and that of each of decedent's three sons for the entire calendar year is reported to be $ 67,987.66. In the individual income tax return filed for decedent for the calendar year 1939 decedent's reported share of the income from the partnership was the sum of $ 69,632.27.
*229 A partnership return of income covering the period January 1 to June 30, 1940, was filed and in schedule J thereof the partners are listed as the decedent's three sons *164 and the decedent's estate.
In none of the partnership returns submitted in evidence is the decedent's wife listed as a partner. Each of the individual income tax returns filed by decedent from 1935 to 1939, inclusive, was the separate return of decedent and not a joint return of decedent and his wife. Decedent's wife never filed an individual income tax return for Federal tax purposes for any year prior to the calendar year 1940. All of the partnership returns and decedent's individual returns for the years 1935 to 1939, inclusive, were prepared by Elorion Plante. All of the partnership returns for the years 1935 to 1939, inclusive, were signed on behalf of the partnership by Elton R. Awrey. The partnership returns for the years 1937, 1938, and 1939 recite the date of the partnership's organization to be April 2, 1927. Decedent personally signed his individual tax returns for the years 1935 to 1937, inclusive. The return for the calendar year 1938 was signed by Elton R. Awrey on behalf of decedent and bears the notation, "Fletcher E. Awrey is unable to sign this return personally because of illness." The 1938 return also contains the following statement, in reply to the question, *165 "State name of husband or wife if a separate return was made * * *": "wife had no income."
The "Partners Dividends" account for the period March 28, 1936, to and including June 19, 1940, lists as partners only the decedent and his three sons.
Distributions from the partnership were paid by checks in four equal amounts. Prior to the decedent's death, one check was made payable to him and the other three checks were made payable to the three sons, respectively. Decedent's check was usually deposited by Elton in a bank account standing in the joint names of decedent and his wife. After decedent's death on December 9, 1939, and through June 1940, the share of the partnership distributions which had theretofore been paid to decedent was then made payable to his estate.
From the date of decedent's death to July 1, 1940, pursuant to probate court order, Mrs. Awrey received $ 800 a month as a widow's allowance. During that period she received no other payment or payments from either the estate or the partnership. The widow's allowance was paid out of a savings account that was opened by the executor of the estate to accept receipts for the estate. After Mrs. Awrey became a member of the *166 Awrey Bakeries partnership on July 1, 1940, partnership distributions were made payable directly to her and they were no longer made payable to decedent's estate.
On February 13, 1926, Frank Hlavaty and Martha Hlavaty (his wife) conveyed to decedent and his wife lot 334 and one-half of lot 335 (hereinafter sometimes referred to as the Greenway property) *230 in Wayne County, Detroit, Michigan. There are affixed to this deed canceled United States internal revenue documentary stamps in the amount of $ 6. The purchase price of these lots was $ 5,100 and the funds with which payment was made came from a joint savings account of decedent and his wife. A building was erected on the Greenway property and the funds therefor were obtained (1) by placing a mortgage of $ 4,000 on the former home of decedent and his wife; (2) by placing another mortgage of $ 9,500 on the new building being constructed on the Greenway property; and (3) by withdrawing the required balance from a savings account standing in the joint names of decedent and his wife. The mortgage note executed in connection with this Greenway property transaction was signed on August 26, 1926, by both decedent and his wife. At the *167 time of decedent's death title to the Greenway property stood in the name of "Fletcher E. Awrey and Elizabeth E. Awrey (his wife)" and the then fair market value of the property was $ 8,070. One-half the value of this property, to wit, $ 4,035, was included in schedule E of petitioner's estate tax return.
On April 4, 1935, Robert E. Sage, a circuit court commissioner in and for the County of Wayne and State of Michigan, conveyed to decedent and his wife, in consideration of the sum of $ 8,000, lot No. 33 in Wayne County, Detroit, Michigan (hereinafter sometimes referred to as the Martindale property). This conveyance was made pursuant to an order of the Circuit Court for the County of Wayne directing the premises to be sold at public auction for the purpose of foreclosing the mortgage on the premises. At the time of this foreclosure sale decedent and his wife owned all the bonds on the Martindale property. Their acquisition of these bonds is traceable directly to an original investment in 1930 of $ 10,173.73, withdrawn from a savings account standing in their joint names. At the time of decedent's death, title to the Martindale property stood in the names of "Fletcher E. Awrey *168 and Elizabeth E. Awrey, his wife" and the then fair market value of the property was $ 9,000. One-half of the value of this property was included in schedule E of petitioner's estate tax return.
On February 28, 1934, Allan Sheldon and his wife conveyed to decedent and his wife lot No. 3219 (hereinafter sometimes referred to as the Rosedale property). A canceled documentary stamp in the sum of 50 cents was affixed to the deed. Consideration for this deed in the agreed sum of $ 500 was paid by assigning to the grantors one-half of a claim of $ 1,100 of decedent and his wife in certain frozen bank deposits, which arose from a joint account of decedent and his wife. At the time of decedent's death, title to the Rosedale property stood in the names of "Fletcher E. Awrey and Elizabeth E. Awrey, his wife" and the then fair market value of the property was $ 700. *231 One-half of the value of this property was included in schedule E of petitioner's estate tax return.
The individual income tax returns filed by the decedent for the years 1935 to 1939, inclusive, show that, with respect to the Greenway, Martindale, and Rosedale properties, he took all deductions for local property taxes, and *169 reported the income from and claimed depreciation on the Martindale property.
Savings account book No. 13694, the Detroit Bank, was recorded in the name of Fletcher E. Awrey or Elizabeth E. Awrey, "payable to either or the survivor of them." The account was opened on August 9, 1933. The balance shown on deposit at the date of death was $ 5,203.90, one-half of which was included in schedule E of petitioner's estate tax return.
Savings account book No. 2724, National Bank of Detroit, was recorded in the name of Fletcher E. Awrey or Elizabeth E. Awrey, "payable to both or either, or the survivor." The account was opened on January 5, 1935. The balance shown on deposit at the date of death was $ 1,343.02, one-half of which was included in schedule E of petitioner's estate tax return.
Claim No. 12-12546, filed by Fletcher E. Awrey and Elizabeth E. Awrey with the receiver of the First National Bank, Detroit, Michigan, after the bank had closed, arose from savings account book No. 16615, First National Bank, recorded in the name of Fletcher E. Awrey and Elizabeth E. Awrey, "payable to either or the survivor of them." The account was opened prior to January 31, 1928; the opening entry on this *170 date shows a balance forwarded from a previous pass book. The amount owing on said claim at the date of death was $ 837.46, one-half of which was included in schedule E of petitioner's estate tax return.
On October 22, 1931, single premium policy on the life of Elton R. Awrey was issued by the Massachusetts Mutual Life Insurance Co. The premium of $ 4,999.88 was paid by funds withdrawn from a savings account standing in the joint names of decedent and his wife. The insurance policy was terminated by surrender, and under a supplemental agreement dated October 22, 1932, between the insurance company and decedent and his wife, $ 4,985.05 was retained by the insurance company, which agreed to pay interest thereon annually. The fair market value of the supplemental agreement at the time of decedent's death was $ 4,985.05, one-half of which was included in schedule E of petitioner's estate tax return.
On February 1, 1932, J. Arthur Matthews and Maude E. Matthews, his wife, signed a promissory note payable to Fletcher E. Awrey and Elizabeth E. Awrey. The funds for that loan were withdrawn from a joint account of decedent and his wife. The balance owing on said *232 note on the date of decedent's *171 death was $ 805.60, one-half of which was included in schedule E of petitioner's estate tax return.
The individual income tax returns of decedent for the years 1935, 1936, 1938, and 1939 reported interest on bank deposits, notes, mortgages, etc., in varying amounts without identifying their source, except that the 1936 return has attached to it the following schedule:
| Int. on Savings Account in Detroit Bank | $ 87.75 |
| Int. on Savings Account Nat'l. Bank of Detroit | 85.79 |
| Int. from Mass. Mutual Life Ins. Co. | 194.19 |
| Int. on Mortgage (W. B. W.) | 202.00 |
| Int. on Loan (W. S. A.) | 40.00 |
| Total | $ 609.73 |
On April 1, 1932, funds in the amount of $ 5,400 were withdrawn from a joint account of decedent and his wife and loaned to decedent's daughter, Mary A. Winchester and her husband, William B. Winchester, and on April 1, 1932, William and Mary Winchester signed a promissory note for that amount payable to "Fletcher E. Awrey & Elizabeth Awrey" three years after date. The note was secured by a mortgage for $ 5,400 on the Winchester home. On the back of the note there appears endorsement of payments of principal, from October 1, 1932, to December 10, 1936, in the total amount of $ 600, and of interest, in the total *172 amount of $ 1,098 from October 1, 1932, to October 3, 1936.
With minor exceptions distributions from the partnership were the source of all funds deposited in the joint names of decedent and his wife.
In July 1936 decedent went to the hospital because he was suffering from gland trouble. He remained in the hospital for about 7 weeks and during that time an operation was performed removing his prostate gland. Decedent knew that a prostatic operation had been performed. That was decedent's only serious illness since approximately 1900. After the operation decedent was quite ill for a while, suffering from neuritis and rheumatism, which caused his hands and feet to swell. The operation disclosed that decedent was suffering from a malignant cancer of the prostate gland. This fact was made known to decedent's family at once, but decedent himself was not told of his true condition until the spring of 1939. Although the decedent did not return completely to normal health after the operation, he was up and around, enjoying life, and seemed to be cheerful during this period. About a year after his operation decedent walked once a week to and from the office, which was a little more than *173 a mile from his home, and had lunch with his sons. He made this trip on that day in the week when his wife engaged a cleaning woman, as he disliked *233 being around the house at that time. After his operation in June 1936 decedent did no more work in the business.
In the summer of 1937 decedent made two trips by auto, visiting Wilbur and Thomas in their summer cottages, which were about 200 miles from decedent's home. He also visited his daughter's college a number of times that summer. In the summer of 1938 he took a 5-day boat trip with his wife and two nieces. Also, decedent made a trip to Kansas City, Missouri, by train in December 1938 to visit his daughter, although he was not feeling very well at the time. He spent Christmas of 1938 in Kansas City and returned in the early part of January 1939. He seemed to enjoy these trips.
In the spring of 1939 decedent became rather insistent on changing doctors, as he was not feeling right and felt that he was not making the recovery he should because the doctor did not understand his case. He was then informed that he had a cancer and that its effect might still be slow. Although decedent stated that the doctor was mistaken and that *174 he would recover, nevertheless, he was somewhat depressed at first.
On December 4, 1937, decedent executed his last will and testament, and under the terms thereof his wife was named residuary legatee after the payment of debts and administration expenses, if she survived him; if she predeceased him, he directed his interest in the partnership to be given to his sons and the remainder of his estate to his daughters. Decedent died December 9, 1939, at the age of 84 years and 5 months. The death certificate shows, and we find, the principal cause of death to be "carcinoma of the prostate" and a contributory cause of importance to be "senility."
Schedule O of petitioner's estate tax return shows a gross estate of $ 213,911.87. This total includes jointly owned property the value of which is reported in schedule E as $ 15,722.52 which sum represents one-half of the total value of the property listed in that schedule. The total shown in schedule O also includes the following interest reported in schedule F:
Undivided one-quarter (1/4) interest in a certain bakery business owned and operated by Fletcher E. Awrey (the decedent), Thomas L. Awrey, Wilbur Awrey and Elton R. Awrey, co-partners, *175 doing business under the firm name of Awrey Bakeries, with offices at 5231 Tireman Avenue, Detroit, Michigan. Value at date of death $ 197,537.49.
The value of this undivided one-fourth interest has been stipulated to be $ 250,000. The entire value of this one-fourth interest was included in schedule F on advice of counsel.
The mortgage on the Winchester home was discharged by decedent and his wife on December 15, 1936, at which time the balance due thereon was $ 4,800. The discharge was made without an adequate *234 and full consideration in money or money's worth. On December 9, 1936, $ 4,800 was withdrawn from savings account book No. 13694, Detroit Savings Bank, and given to Fern A. Meyering, decedent's daughter. At the time the Winchester mortgage was discharged the mortgage on the Awrey home (the Greenway property) had been paid off. Both of decedent's daughters were in moderate circumstances. The gift to Mary A. Winchester was made to relieve her and her husband from the burden of making payments on the mortgage and the gift to Fern A. Meyering on December 9, 1936, was made because decedent and his wife wanted to treat both daughters alike. Mrs. Awrey took the initiative in *176 suggesting that these gifts be made, as the decedent was a very conservative and retiring man.
On December 11, 1937, $ 4,800 was withdrawn from savings account book No. 13694, Detroit Savings Bank, and on the same day $ 4,800 was withdrawn from savings account book No. 2724, National Bank of Detroit. The sum of $ 4,800 was given to Mary A. Winchester and $ 4,800 to Fern A. Meyering. The gift to Fern, who lived in Kansas City, was to enable her to buy a home. She and her husband had been engaged in missionary work in Turkey for five years until the depression caused their return to this country. Winchester then took his doctor's degree at Ann Arbor, and later took a position as a teacher in a college in Kansas City. Mrs. Awrey wanted Fern to pay cash for her home and to own it outright. They gave Mary an equal amount, as they wished to treat both daughters alike.
On December 30, 1937, the Awrey Bakeries partnership distributed to each of the four partners (Fletcher E. Awrey, Elton R. Awrey, Wilbur S. Awrey, and Thomas L. Awrey) United States Government bonds of $ 15,000 par value. The bonds distributed to decedent were immediately given to his three sons. He and Mrs. Awrey had *177 no particular ambition to accumulate wealth and they knew their security was assured. The fair market value on December 9, 1939, of the bonds given to each of the sons was $ 5,334.38. Decedent and his wife discussed the idea of giving the boys these bonds and they decided that they wanted to do as much for the boys as they had done for the girls.
On December 23, 1938, $ 4,800 was again given to each of the two daughters from funds withdrawn from the same two savings bank accounts described above.
On December 31, 1938, the Awrey Bakeries partnership again distributed United States Government bonds of $ 15,000 par value to each of the four partners, and the bonds distributed to decedent were immediately given to his three sons. The fair market value on December 9, 1939, of the bonds given to each of the sons was $ 5,264.06. By this time the policy of making annual gifts to his children of approximately $ 5,000 each had been established.
On April 13, 1939, decedent's wife withdrew $ 5,000 from savings *235 account book No. 13694, Detroit Savings Bank, with which she opened a bank account in her own name, as she wanted to have an account of her own.
On June 2, 1939, Awrey Bakeries partnership *178 again distributed United States Government bonds of $ 15,000 par value to each of the four partners, and the bonds distributed to decedent were immediately given to his three sons. The fair market value on December 9, 1939, of the bonds given to each of the sons was $ 5,018.75.
On June 23, 1939, $ 4,950 was given to each of the two daughters. The sum of $ 4,800 out of each gift of $ 4,950 came from funds withdrawn from the same two joint savings bank accounts which had been the source of similar gifts previously made by decedent.
Subsequent to the filing of the estate tax return, the executors have paid miscellaneous administration expenses and debts in the amount of $ 4,575.72.
As of the date of the decedent's death, decedent's wife was not owner of an interest in her husband's one-quarter share in the partnership business known as Awrey Bakeries.
As of the date of the decedent's death, decedent's wife was not the owner of an interest in the one-quarter interest of the jointly owned property set forth in schedule E of the estate tax return.
None of the gifts here in controversy made by decedent to his children and his wife were made in contemplation of death.
OPINION.
The first issue is *179 as follows: As of the date of decedent's death, to what extent, if any, did decedent's wife have an interest in her husband's one-quarter share in the partnership business known as Awrey Bakeries. The answer to this question is governed by section 811 (a) and (e) of the Internal Revenue Code, the provisions of which are set forth in the margin. 1*180
*236 In schedule F of the estate tax return filed by the estate of Fletcher E. Awrey, there is included as owned by the decedent at the time of his death an undivided one-quarter interest in the partnership business known as Awrey Bakeries. The value assigned therein to that undivided one-quarter interest is $ 197,537.49. It has been stipulated that the correct value of that one-quarter interest is $ 250,000.
Respondent recognizes that the issue is "purely one of fact" and contends that "for estate tax purposes, the undivided one-fourth interest in question at the date of death, and at all times since about 1920, has been the property of the decedent *181 and that the value thereof as of the date of his death is properly includible in the value of his gross estate."
Petitioner concedes that "a partnership did not exist between Fletcher Awrey and his wife," 2 but contends that "the wife did have the right to own her separate property and retain earnings attributable to her personal labor" and that she owned one-half of decedent's share in the partnership "by virtue of the fact that she had furnished the original investment and put a lot of time and effort and energy in the early days of the business." No agreement of partnership between decedent and his wife is relied on.
The fact that Mrs. Awrey was not a member of the partnership known as Awrey Bakeries is not fatal to her contention here. Berkowitz v. Commissioner, 108 Fed. (2d) 319. See also Estate of Lester L. Fletcher, 44 B. T. A. 429. The question is whether under all the facts she was a coowner with her husband of the interest standing in his name. She contributed the original capital about 1910, in the sense that with her own funds she repaid a loan of $ 200 with which the business was started, and used another *182 $ 100 for supplies. Also, she contributed services to the business, for which she was not compensated. These services consisted mainly of clerking in a store at times, and looking after the finances of the business, more than did her husband, up to about 1920. Likewise, she was consulted about business matters until decedent's death. On the other hand, she was never considered a partner in the business itself, either after the formal partnership was set up in 1927 or prior thereto, for that agreement states that the father and three sons had for a long period conducted a baking business as a partnership, without written articles of agreement, and it provides that the partnership capital shall be "the assets of the partnership already operating" and that each partner shall be considered as having contributed one-quarter of that amount and shall therefore retain and have a one-quarter interest. The decedent's returns from 1935 to 1939 were individual returns.
*237 Mrs. Awrey never, prior to 1940, returned any income for Federal tax purposes, and in his return for 1938 the decedent stated that she had no income. Had the petitioner's wife been the owner of a one-half interest, or other *183 interest, in her husband's partnership interest, she would have had income therefrom, and her failure to return such income can reasonably be explained only on the theory that she did not really consider herself the owner of such interest.
The claim here is that the wife was the owner of one-half of a business and property interest, i. e., the petitioner's share in the partnership, of an agreed value of $ 250,000. The claim, it is to be noted, is based not upon contract between husband and wife, but upon her contribution, about 1910, of the original capital, and her contribution of services, uncompensated, to the business. The capital contributed was $ 300. The record shows that after about 1920 the wife contributed no services, except that she was consulted on major matters, though to an increasingly less degree as time passed; the record also shows that up to about the time the wife discontinued her activities except as to such consultation, the business was very small in comparison with its extent when the petitioner died in 1939, as of which date it is claimed the wife owned half of a $ 250,000 interest. About 1920, when the older sons returned from military service, there were *184 about six stores; in 1939, when decedent died, there were about 90, with plant facilities accordingly enlarged. Thus it is apparent that the wife's industry contributed at the most, in substance, only to the development of about six stores, and that the further development of the extensive business existing in 1939 is logically to be ascribed not to the activity of the wife (or of the husband, who appears, in effect, to have occupied no position other than that of a baker), but to the industry and ability of the three sons, who in effect conducted the business after 1920. There is breach of logic, therefore, in a view that the wife, by contribution made, should be regarded as owner of a large interest in the extensive and prosperous business existing in 1939.
This idea, we think, is borne out by the attitude taken as to good will in forming the new partnership in 1940. Good will of the business, obviously an important matter, was specifically excluded from consideration of the contribution by the wife to the new partnership, it being agreed that the sons were the exclusive owners of such good will; yet, had the wife been the owner of a one-half or other interest in her husband's *185 partnership interest, she would have been the owner of an interest in the good will. In this connection, it should be noted that the fact that the sons and their mother entered into a partnership in 1940 (she contributing not an interest in the former business, but a note for $ 201,502, based upon an appraisement of the partnership, expressly *238 excluding good will as above seen), does not indicate recognition that the mother already had an interest. She was her husband's residuary legatee after payment of debts and expenses. She therefore was entitled, under the will, to the one-fourth interest of the decedent in the partnership.
The petitioner has cited, among other cases found to be less parallel in fact, Max German, 2 T. C. 474, and Berkowitz v. Commissioner, 108 Fed. (2d) 319. The latter case offers no assistance in the present matter because in that case there was an agreement between husband and wife, permitted by the law of Pennsylvania, whose statutes do not preclude partnership between husband and wife. No such agreement is present in this case.
The Max German case is based largely upon the law of Missouri. Section 2998, par. 5055, vol. 7, Missouri Statutes Ann., permits *186 a married woman to carry on and transact business and contract and be contracted with as a femme sole. No such broad emancipatory statute is to be found in the Michigan statutes in effect during the taxable years involved in this case. Again, it is pointed out in the Max German case that the law is well settled in Missouri that a wife can contract with her husband with the same freedom as with others. No Michigan cases to the same effect are cited to us, and diligent research has failed to reveal any. Indeed the contrary would appear to be inferable from such cases as Lutz v. Dutmer, 286 Mich. 467">286 Mich. 467; Kuntz v. Kuntz, 244 Mich. 78">244 Mich. 78; Lesher v. Brosteau, 238 Mich. 189">238 Mich. 189, which hold that husband and wife may not (at the time herein involved) enter into a contract of partnership. Moreover, petitioner on brief apparently so concedes, saying that "a husband and wife constituting one person could not contract with each other." That the law of Michigan differs from that of Missouri, as relied on in the German case, in respect to a wife's services is apparent from the following excerpt from the opinion of the Supreme Court of Michigan in the case of Detroit & Security Trust Co. v. Gitre, 254 Mich. 66">254 Mich. 66; *187 235 N. W. 884, 887:
* * * The right of a married woman to the "earnings acquired by any such married woman as the result of her personal efforts," Comp. Laws 1929, § 13061, covers services performed by her for others than the family as well as apart from her household duties. * * * [citations] The statute does not convert the marital relationship into a business partnership nor raise a money debt from husband to wife for her services to him, even though they take her outside the strict ambit of the domestic circle, and consist of aid to him in his business. [Italics supplied.]
See also Kuntz v. Kuntz, supra;Gregory v. Oakland Motor Car Co., 181 Mich. 101">181 Mich. 101; 147 N. W. 614, 617. For the foregoing reasons, we are of the opinion that the present case is distinguishable from the Max German case.
*239 Considering the whole record before us, we are of the opinion that the contribution of the original capital (in the sense that she paid the $ 200 note with money from her father and put $ 100 into supplies) and the contribution of services until about 1920, with some consultative capacity thereafter, is not sufficient basis for considering the wife as owner of an interest in her husband's partnership *188 interest, but is rather to be ascribed to her general interest as a wife in the family welfare. We therefore conclude and hold that the Commissioner did not err in including in decedent's gross estate the entire one-fourth partnership interest.
The second issue is: As of the date of decedent's death, to what extent, if any, was decedent's wife the owner of certain properties standing in their joint names? The answer to this question is also governed by section 811 (a) and (e) of the code, set forth in the margin under footnote No. 1.
In schedule E of the estate tax return there is included one-half the value at the time of decedent's death of nine items of jointly owned property, including three tracts of real estate. The total value assigned therein to all of these items is $ 15,722.52. The respondent determined that the full value thereof, to wit, $ 31,445.04, should have been included in decedent's gross estate. Item No. 8 relates to certain household furniture the value of which is listed in schedule E as $ 250; the Commissioner determined that the full value thereof, to wit, $ 500, should be included in decedent's gross estate. Petitioner, however, has failed to assign this *189 particular determination as error. Therefore, if petitioner's contention that one-half of the jointly owned properties acquired with her separate funds are not includible in decedent's gross estate is upheld, the amount to be excluded would be $ 15,972.52. The decedent, in individual Federal income tax returns placed in evidence, took all deductions as to the jointly held real estate, and only he reported income therefrom.
It is clear that these jointly owned properties were acquired with funds drawn from or consisting of several savings bank deposits which stood in the joint names of decedent and his wife and which had as their source decedent's share of the partnership distributions. Having held under the first issue that decedent's wife had at the time of his death no interest in his share of the net worth of the partnership, we are of the opinion that the value of the contested items as of the time of decedent's death should properly be included in his gross estate. We, therefore, hold that the Commissioner did not err in including the total value of such property in decedent's gross estate.
The third issue is: Were certain gifts made by decedent to his *240 children and his wife *190 made in contemplation of death within the meaning of section 811 (c) of the code? 3
The principles to be followed in determining whether the gifts here involved were made in contemplation of death are set forth in United States v. Wells, 283 U.S. 102">283 U.S. 102. The following *191 excerpts from that opinion furnish us with the guideposts upon which we base our judgment, bearing in mind that the petitioner has the burden of overcoming the presumption in favor of the correctness of the Commissioner's determination and the rebuttable statutory presumption affecting gifts made by decedent within two years prior to his death:
* * * The dominant purpose is to reach substitutes for testamentary dispositions and thus to prevent the evasion of estate tax. (Citations) * * * The question, necessarily, is as to the state of mind of the donor.
* * * The words "in contemplation of death" mean that the thought of death is the impelling cause of the transfer, * * *
If it is the thought of death, as a controlling motive prompting the disposition of property, that affords the test, it follows that the statute does not embrace gifts inter vivos which spring from a different motive. * * *
* * * It is sufficient if contemplation of death be the inducing cause of the transfer whether or not death is believed to be near. [Emphasis supplied.]
We are of the opinion that the respondent erred in determining that the various gifts, a summary of which is set forth in the margin, 4 were made *192 by decedent in contemplation of death within the meaning of section 811 (c). In reaching this conclusion we have not overlooked *241 decedent's advanced age at the time he made these various gifts 5*193 or decedent's operation in July 1936 and the condition of his health from that time until his death in December 1939. 6 Respondent suggests on brief that the amount of the various gifts (about $ 5,000 each) "suggest the possibility of wishing to avoid payment of gift tax"; but that is a purpose associated with life rather than death. 7 Respondent also suggests on brief that "Elton to a large extent seems to have taken care of his father's financial affairs for some time prior to his death"; and the facts also show that Mrs. Awrey took the initiative in suggesting the making of some of these gifts. Such facts as these fail, in our opinion, to support respondent's contention that decedent's motive in making these gifts was induced by the thought of death. If they accomplish anything they tend to disprove the existence of any motive on decedent's part.
However, the record does show that the gift to Mary A. Winchester on December 15, 1936, was motivated primarily by a desire on decedent's part to relieve his daughter and son-in-law from the burden of making payments on the mortgage on their home held by decedent and his wife. The desire to treat both daughters alike adequately explains decedent's motive in making the gift on December 9, 1936, to Fern A. Meyering. The dominant motive on decedent's part in making the gift to his daughter Fern on December 11, 1937, was to enable her and her husband, who were in moderate circumstances due in part to their missionary work in Turkey and his studying for his doctorate, to buy and own their own home outright. Decedent's motive in making the gift to Mary on the same day is also adequately explained by decedent's desire to treat his daughters alike. This, likewise, in our opinion, explains in part the motive for the gifts in 1937 made by decedent to his sons, the source of these gifts being a distribution to decedent by the partnership. *194 But the motive for these gifts and the subsequent gifts made by decedent to his sons, all of which were from the same source, namely, the partnership, is also explained by the fact that, although decedent ceased to work in the business after his operation in July 1936, nevertheless he was still credited with a very sizeable amount of the partnership profits, in fact with an amount substantially equal to that of each of his three sons, who did all the work. These facts prove that these gifts sprang from a different motive than that urged by respondent, namely, contemplation of death. In addition to the fact, already suggested, that decedent desired to treat all his children alike, the gifts in 1938 and 1939 to his children were motivated also by the fact that by 1938 decedent had established a policy of making annual gifts to his children of approximately $ 5,000 each. Finally, the gift to Mrs. Awrey *242 in 1939 was, in our opinion, motivated only by the desire on the part of decedent to satisfy her wishes to have a small account belonging solely to herself and this gift was not made in contemplation of death.
As to the gifts made by the decedent after he learned in the spring of 1939 *195 that he was afflicted with cancer, we do not think that that knowledge indicates that the contemplation of death actuated him. They were entirely in line with the gifts he had been making prior to such knowledge. Had he upon learning of his true condition desired for that reason to make gifts, he would reasonably have greatly increased the amount, and perhaps the number, of the gifts. Considering his financial ability to increase his donations and the fact that there is no change in his acts in that respect, we think that there exists no more reason for ascribing to the later gifts a contemplation of death than to those made earlier.
These are only some of the facts which in our opinion justify the conclusion we have reached on this issue. Other facts, such as the amount of the gifts as compared with decedent's net worth, the trips taken by decedent, his weekly walks to the office, his apparently cheerful spirits, his lack of knowledge of his true condition until the spring of 1939, his belief when informed that he was suffering from a cancer that the doctor was mistaken, all speak for themselves and require no further comment. We conclude that the thought of death was neither the *196 "impelling cause," nor the "controlling motive," nor the "inducing cause," of the transfers made by the decedent in this case, and that, therefore, the value of none of these gifts is properly includible in decedent's estate.
Decision will be entered under Rule 50.
Footnotes
1. SEC. 811. GROSS ESTATE.
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, except real property situated outside of the United States --
(a) Decedent's Interest. -- To the extent of the interest therein of the decedent at the time of his death;
* * * *
(e) Joint and Community Interests. --
(1) Joint interests. -- To the extent of the interest therein held as joint tenants by the decedent and any other person, or as tenants by the entirety by the decedent and spouse, or deposited, with any person carrying on the banking business, in their joint names and payable to either or the survivor, except such part thereof as may be shown to have originally belonged to such other person and never to have been received or acquired by the latter from the decedent for less than an adequate and full consideration in money or money's worth: Provided, That where such property or any part thereof, or part of the consideration with which such property was acquired, is shown to have been at any time acquired by such other person from the decedent for less than an adequate and full consideration in money or money's worth, there shall be excepted only such part of the value of such property as is proportionate to the consideration furnished by such other person * * *.
2. Our several findings of fact are consistent with this concession.↩
3. -
SEC. 811. GROSS ESTATE.
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, except real property situated outside of the United States --
* * * *
(c) Transfers in Contemplation of, or Taking Effect at Death. -- 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 * * * his death * * * except in case of a bona fide sale for an adequate and full 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 consideration, shall, unless shown to the contrary, be deemed to have been made in contemplation of death within the meaning of this subchapter.↩
4. The summary is as follows:
↩
Date Donees Value/d Dec. 9, 1936 Fern A. Meyering (daughter) $ 4,800.00 Dec. 15, 1936 Mary Awrey Winchester (daughter) and William B. Winchester 4,800.00 Dec. 11, 1937 Mary Awrey Winchester (daughter) 4,800.00 Fern A. Meyering (daughter) 4,800.00 Dec. 30, 1937 Elton R. Awrey (son) 5,334.38 Wilbur S. Awrey (son) 5,334.38 Thomas L. Awrey (son) 5,334.38 Dec. 23, 1938 Mary Awrey Winchester (daughter) 4,800.00 Fern A. Meyering (daughter) 4,800.00 Dec. 31, 1938 Elton R. Awrey (son) 5,264.06 Wilbur S. Awrey (son) 5,264.06 Thomas L. Awrey (son) 5,264.06 Apr. 13, 1939 Elizabeth E. Awrey (wife) 5,000.00 June 2, 1939 Elton R. Awrey (son) 5,018.75 Wilbur S. Awrey (son) 5,018.75 Thomas L. Awrey (son) 5,018.75 June 23, 1939 Mary Awrey Winchester (daughter) 4,950.00 Fern A. Meyering (daughter) 4,950.00 5. Cf. United States v. Wells, 283 U.S. 102">283 U.S. 102↩.
6. Emily J. Pratt et al., Executrices, 18 B. T. A. 377↩.
7. Anna Ball Kneeland et al., Executors, 34 B. T. A. 816, 818↩.