*218 Decision will be entered under Rule 50.
By a trust indenture dated December 30, 1935, petitioner transferred to himself, as trustee, certain shares of the capital stock of the Fruehauf Trailer Co., of which he was the president. The trust income was to be paid to his wife for life, with the remainder to his children, upon their arriving at certain ages, and, in the event of their prior death, to their issue. Held, the trust income for the year 1941 is not includible in petitioner's gross income under section 22 (a), 166, or 167 of the Internal Revenue Code.
*681 This proceeding involves a deficiency in income tax for the year 1941, in the amount of $ 50,807.14.
The sole issue involved is whether petitioner, as settlor, is taxable in the year 1941 upon the income of three trusts created on December 30, 1935, for the benefit of his wife and children, under section 22 (a), 166, or 167 of the Internal Revenue Code.
The respondent, on brief, concedes error in taxing the income of three additional trusts created on February 19, 1941, by petitioner for the benefit of his children.
The case was submitted upon a stipulation of facts, with exhibits, documentary proof, and oral testimony. The stipulated*220 facts are so found. Other facts are found from the evidence.
FINDINGS OF FACT.
Petitioner is an individual, residing in Grosse Point Park, Michigan. His income tax return for the calendar year 1941 was filed with the collector of internal revenue for the first district of Michigan.
Petitioner married his present wife, Angela, on January 3, 1920. Their children are Harvey C. Fruehauf, Jr., born October 10, 1929; Ann L. Fruehauf (now Ann Fruehauf Kuhn), born July 9, 1924; and Barbara L. Fruehauf, born March 28, 1934.
On December 30, 1935, petitioner executed and delivered an agreement of trust, as follows:
This Agreement, made this 30 day of December, A. D. 1935, between Harvey C. Fruehauf, of Detroit, Michigan, hereinafter called the "Settlor", Party of the First Part, and Harvey C. Fruehauf, as Trustee, hereinafter called "Trustee", Party of the Second Part,
Witnesseth:
Whereas, the Settlor desires to make provision for the care and management of a certain part of his estate and for the ultimate distribution of the trust funds created; and
*682 Whereas, the Trustee hereunder, in consideration of One Dollar ($ 1.00) and other good and valuable consideration heretofore paid, *221 receipt of which is hereby acknowledged, is willing to accept the trusteeship hereby created;
Now, Therefore, in consideration of the promises and undertakings of the parties hereto, the Settlor hereby sells, assigns, gives, grants, transfers and conveys unto the Trustee, and his successors in trust, the property described in the attached Schedule A, which is by this reference incorporated herein and made a part hereof, to have and to hold the same irrevocably, subject to the following trusts, terms and conditions:
1. The trusts hereby created shall be for the use and benefit of Angela Fruehauf, wife of the Settlor, during her lifetime, and after her death for the benefit of Harvey C. Fruehauf, Jr., Barbara L. Fruehauf, and Ann L. Fruehauf, children of the Settlor.
2. The Trustee hereunder, shall, upon receipt of the securities listed in Schedule A, divide the same into three equal separate and distinct trust funds, the Trustee to act as such over each of the several trust properties, and, upon receipt of any additional securities, as hereinafter provided, the same shall be similarly divided, unless stipulated otherwise at the time of the deposit; provided, however, that should it*222 ever be impractical for any reason to make a physical division of the trust funds then the Trustee is authorized to hold such funds or property intact but each of the three separate trust funds shall constitute and have an undivided interest in such funds or property not so divided.
The names and titles of said respective trusts are, and they are hereby designated, as follows:
Trust A for the benefit of Harvey C. Fruehauf, Jr.;
Trust B for the benefit of Barbara L. Fruehauf;
Trust C for the benefit of Ann L. Fruehauf.
All provisions herein contained shall be construed in such manner as to carry out the Settlor's intent to create three separate distinct trusts as above described.
3. Angela Fruehauf, wife of Settlor, is hereby designated as income beneficiary hereunder. The Trustee hereunder shall pay to Angela Fruehauf, wife of Settlor, the net income from each of the trust estates hereby created, namely, Trust A, Trust B and Trust C, so long as she shall live, in such installments as she shall designate, but not more often than quarterly. In the event said Angela Fruehauf shall elect not to withdraw the income to which she may be entitled she may leave it in the hands of the*223 Trustee, in which case it shall accumulate and be added in equal parts to the corpus of the respective trusts hereby created. Her failure to give notice in writing to the Trustee prior to December 31st of any year of her desire to withdraw the income for that year shall constitute an election not to withdraw the income for that year, and the same shall thereupon accumulate and be added in equal shares to the corpus of the respective trusts hereby created and cannot thereafter be withdrawn as income, and shall amount to a contribution to the respective trusts hereof.
Upon the death of Angela Fruehauf, wife of Settlor, the net income from each of the trusts hereby created, namely Trust A, Trust B and Trust C, shall, during the minority of the named beneficiary thereof, be accumulated and added to the corpus of said trust with power in the Trustee to apply out of such accumulations or the corpus a suitable sum from time to time for the maintenance and education of such minor if such minor by reason of the death or incapacity of the Settlor or of other cause whatsoever shall have no other sufficient means therefor, and with power in the first named Trustee during his lifetime to direct*224 the paying out of any such accruing or accumulated income for the benefit of such minor in any way which the Settlor as parent of said minor is not under obligation *683 in law to provide. From and after the time each of said named beneficiaries shall attain the age of twenty-one (21) years the Trustee shall pay to him or her the entire net income from his or her said trust estate in reasonable installments until the death of the Settlor, and thereafter until such beneficiary shall attain the age of forty-five (45) years. In the event any named beneficiary shall predecease the survivor of Settlor and Settlor's wife, then the income which would have been paid to or used or accumulated for such deceased beneficiary shall, until the death of the survivor of Settlor and Settlor's wife, be paid to the issue of said beneficiary by right of representation, and if there shall be no such issue to take said income, then such income shall be accumulated or used for or paid to the remaining beneficiaries named herein in the manner hereinbefore provided, the issue of either deceased one of them to take their deceased parent's share by right of representation.
4. Upon the death of the survivor*225 of Settlor and Settlor's wife, the body or corpus of each of the trust estates hereby created, namely, Trust A, Trust B and Trust C, shall be distributed as follows:
(a) If the named beneficiary of said trust shall not have attained the age of thirty (30) years, the trust for that beneficiary shall be continued until he or she shall have attained the age of thirty (30) years, at which time he or she shall receive outright, free from the trust, one-third (1/3) of the then value of his or her respective trust; upon attaining the age of forty (40) years he or she shall receive one-half (1/2) of the then value of the remainder of his or her respective trust; and upon attaining the age of forty-five (45) years the balance of his or her respective trust shall be distributed to him or her, free and discharged from the trusts hereof. If said beneficiary shall have attained the age of thirty (30) years but shall not have attained the age of forty-five (45) years prior to the death of the survivor of Settlor and Settlor's wife, then said beneficiary shall be entitled to receive the amounts payable at the ages designated in this paragraph (a).
(b) If any of the three named beneficiaries for*226 whose benefit the three trusts hereof are created shall predecease the survivor of Settlor and Settlor's wife, then upon the death of the survivor of Settlor and Settlor's wife, if such named beneficiary shall have left issue then surviving, or if any of said three named beneficiaries shall be living at the time of the death of the survivor of Settlor and Settlor's wife but shall thereafter die before attaining the age of forty-five (45) years, then upon the death of such named beneficiary leaving issue surviving him or her the residue and remainder of the respective trust estate created hereby for said beneficiary shall be distributed outright to the lawful issue of said beneficiary, said issue to take per stirpes and not per capita.
(c) If any of the three named beneficiaries for whose benefit the three trusts hereof are created shall predecease the survivor of Settlor and Settlor's wife, then upon the death of the survivor of Settlor and Settlor's wife, if such named beneficiary shall have left no issue then surviving, or if any of said three named beneficiaries shall be living at the time of the death of the survivor of Settlor and Settlor's wife but shall thereafter die before*227 attaining the age of forty-five (45) years, then upon the death of such named beneficiary leaving no issue surviving him or her, the residue and remainder of the respective trust estate hereby created for said beneficiary shall be divided equally between and added to the remaining trusts hereby created. The portion thus added to either such existing trust shall constitute principal thereof and the trust conditions applicable shall govern the disposition of the principal and income therefrom; and if either of said trusts shall have expired through the passage of time, then the share which would have been added to such expired trust shall pass to the beneficiary thereof.
*684 5. The Trustee mentioned herein shall continue as sole Trustee herein so long as he shall live or until he shall have resigned or until he shall for any reason become incompetent to act in a trustee capacity. Upon the death of the first trustee named hereunder, or upon his resignation, or upon his becoming incapacitated to act, the trustee's duties herein specified shall be transferred to and be assumed by Detroit Trust Company of Detroit, Michigan, a Michigan trust company, and Settlor's wife, Angela Fruehauf, *228 if she shall be living at that time, or, should she not be living at that time or in the event of her subsequent death, resignation or inability to act, the Trustees of each of the trusts hereby created shall be Detroit Trust Company and the named beneficiary of said respective trust, provided he or she shall be twenty-one (21) years of age; and if he or she shall be under twenty-one (21) years then the trustees of his or her respective trust shall be Detroit Trust Company and one of the following persons in the order named, viz:
Harry Fruehauf, brother of Settlor;
Roy Fruehauf, brother of Settlor;
Earl L. Vosler, of Detroit, Michigan;
W. C. Hanway, of Detroit, Michigan;
which such person shall act until the named beneficiary of said respective trust shall attain the age of twenty-one (21) years, at which time his said trusteeship shall cease and determine and thereafter such named beneficiary shall become a co-trustee with Detroit Trust Company of his or her respective trust estate.In the event of the inability of Detroit Trust Company to act, or its unwillingness to act, then the other Trustee shall be such other bank or trust company as may be designated by the Settlor, *229 if living and competent, or in the event of his death or incapacity to act, by such court as shall have competent jurisdiction to make such appointment. This agreement is to be construed in such manner as to have no more than two trustees for any one trust.
6. No stock dividends, or rights to subscribe for stock, whether availed of or sold by the Trustee, shall be considered as income, but the same shall be considered as an increment in value of principal and added to the principal account of the fund in which the stock upon which such dividend or right accrues is held, after deduction therefrom as a charge against the same of all income taxes payable with respect thereto. All cash dividends, except liquidating dividends, shall be considered as income.
7. No beneficiary named hereunder, either income or remainder beneficiary, shall be entitled in any manner to anticipate his or her interest in the trust or the income therefrom and to that end all legal and equitable title thereto shall remain in the Trustee until due and payable according to the terms hereof. Any attempted assignment of any beneficiary's interest herein, either in whole or in part, shall be null and void and of*230 no effect, and the Trustee hereunder is hereby directed to ignore any such assignment, and if necessary to carry out this purpose to withhold income or principal until the assignment is withdrawn.
8. The trusts hereby created shall consist at all times of personal property only and shall be construed in the light of this intention. The Trustee shall sell any real estate which may at any time become a part of the trusts hereby created. Settlor further directs that any real estate which may become a part of the trusts hereby created shall for legal purposes be deemed to be converted into personalty as of the time such real estate shall become a part of the trusts hereof, and that the rents, profits and income therefrom from the time of the acquisition of such real estate and until the same shall be sold shall be considered as personalty.
*685 9. The Trustee hereunder shall have the following powers and authority with respect to all property embraced within the trusts hereby created:
(a) The first Trustee named hereunder shall hold, manage, care for and protect the trust estates in accordance with his best judgment and discretion, collecting all income therefrom. He may continue*231 to hold securities or other property received by him from the Settlor and shall invest such part of the trust fund or the income therefrom as may from time to time be in or be converted into cash, in bonds, stocks, real estate mortgages or any other income producing or nonincome producing securities or personal property and without regard as to whether or not the same constitute legal investments for trust funds under the laws of the State of Michigan. Said Trustee shall have full power to sell, either for cash or part cash and part deferred payments, convey, exchange, lease for any length of time, and with or without covenants of renewal, mortgage, pledge, partition, distribute or otherwise dispose of all of said trust property and estate, or any part thereof, or any interest therein at such time or times and in such manner as he shall in his sole and uncontrolled discretion deem advisable, and, in general, the first Trustee mentioned shall have full power and discretion in the management of the trust estate and without answering to any court for his acts.
(b) Upon the death, resignation or inability to act of the first Trustee, the successor Trustees shall take possession of the*232 trust property and estate and collect and receive the income therefrom with full power in said Trustees to manage the same and all such trust property and estate as in the judgment and discretion of said Trustees may seem most advantageous to the trust estate and the beneficiaries thereof, and shall have the power to sell, either for cash or part cash and part deferred payments, convey, exchange, lease for any length of time, and with or without covenants of renewal, mortgage, pledge, partition, distribute or otherwise dispose of all of said trust property and estate, or any part thereof, or any interest therein, at such time or times and in such manner either public or private and upon such terms as in the absolute and uncontrolled discretion of said Trustees may seem expedient and proper. The successor Trustees shall be limited in the reinvestments of any trust funds or in the investment of any of the trust funds which are converted into cash to such investments as may at any time be proper for trust funds under any statute of Michigan relating to such investments, or in such investments as at the date borne hereby are proper for trust funds under the common law of the State of*233 Michigan, irrespective of any later change in such law by statute or otherwise, always preferring investments of undoubted security to those yielding higher rates of income; provided, however, that said successor Trustees shall not be under any obligation to sell any securities which are in the trust funds at the time of the death, resignation, or inability to act of the first Trustee, but shall be entitled but not required to retain such securities in the trusts hereby created.
(c) Included in the power of management given to the first named Trustee, and after his death, resignation, or inability to act, to the successor Trustees hereunder, shall be the power to vote in person or by general proxy any and all stocks in any and all corporations, at any and all meetings of stockholders for any and all purposes, without any limitations whatsoever.
(d) The power herein given to the Trustee to sell, convey, partition and distribute shall continue as a power in trust for such time not exceeding six (6) months after the time limited for the termination of the trusts hereof as may be permitted by law.
(e) In the event of any disposition whatever of any property subject to the trusts hereby*234 created the Trustee shall make, execute and deliver any and all *686 such instruments in writing as shall be necessary or proper to carry out the same. Purchasers and other persons who shall pay any trust moneys to the Trustee hereunder shall be exempt from all responsibility with respect to the application of the same, and from the necessity of inquiring into the regularity, validity or propriety of any disposition made or purported to be made under the trusts or powers contained in this trust agreement, provided the same, upon its face, does not appear to be irregular.
(f) The Trustee shall have the power to distribute in kind, at a price to be fixed by the Trustee, any stocks, bonds or other securities belonging to the trusts hereby created, in equal or unequal proportions, to or among the persons entitled to participate at any time in the distribution thereof. The selection of the securities for distribution, the proportions and the prices thereof, shall rest in the sole judgment and discretion of the Trustee, and when selected, the proportions determined and the prices thereof fixed by the Trustee, the same shall be final and conclusive and binding upon all persons concerned*235 therewith.
(g) The Trustee may incur, and pay from the trust estate, all reasonable expenses in connection with the management, preservation and administration of the trusts hereof, and the same may be charged against either income or principal thereof as the Trustee may elect.
(h) The Trustee is authorized to become a party to any concerted action among security holders concerning any voting trust agreement, reorganization, recapitalization or refinancing plan which the Trustee shall deem for the best interests of the trust, and to that end may deposit with and assign to any committee or trustee, any stocks, bonds or other securities embraced within any trust hereof and may receive and collect the securities issued as a result thereof, making any subscription or payments required therewith, and the trustee shall not be responsible for any act of such committee or trustee, nor be liable for having deposited with or having assigned to such committee or trustee any of said stocks, bonds or other securities so long as the Trustee hereof shall have acted in good faith.
10. If in the opinion of the Trustee the income herein provided, together with receipts from other sources shall not *236 be sufficient to suitably support and maintain Settlor's wife, Angela Fruehauf, or in the case of any emergency befalling her such as illness, accident or other extraordinary distress, the Trustee is authorized to use and expend such part of the principal of the trusts hereby created as the Trustee may deem necessary to make up such deficiency or meet such emergency, and any principal so used for Settlor's wife shall be taken equally from the three trusts hereby created. After the death of Settlor's wife, if in the opinion of the Trustee the income herein provided, together with receipts from other sources, shall not be sufficient to suitably support, maintain and educate any income beneficiary hereof, or in the case of any emergency befalling any such beneficiary such as illness, accident or other extraordinary distress, the Trustee is authorized to use and expend such part of the principal of the trust from which such beneficiary shall be receiving income as to the Trustee may seem necessary to make up such deficiency or meet such emergency.
11. It is agreed between the parties that the Settlor hereunder shall have the right at any time to deposit additional securities hereunder, *237 subject to the same terms and conditions as the original provisions of these trusts, and said deposits shall be evidenced by additional schedules, wherein shall be set forth a list of the securities deposited, a certificate signed by the Settlor indicating his intention that said securities are deposited under the terms of the trust indenture, and said schedules shall be signed by the then Trustee or Trustees.
*687 12. The Trustee shall not be liable for any losses that may come to said trust property, either in principal or income, arising from any investment held by the Trustee, whether now made by the Settlor or hereafter made by the Trustee, provided such loss has not occurred through the gross mismanagement or wilful default of the Trustee. Good faith shall be all that is required of the Trustee hereunder.
13. The first Trustee hereunder, Harvey C. Fruehauf, shall act as Trustee without compensation for his services. Compensation shall be paid to any successor Trustee at no more than the then prevailing rates for such services.
14. The Trustee accepts the property and the trusts herein created on the terms and conditions stated, and agrees to care for, manage and control*238 the same in accordance with the directions herein specified; to furnish the Settlor, and after Settlor's death to each beneficiary hereof (annually and oftener if requested so to do in writing), statement showing the condition of said trust property, the character of the investments, and receipts, expenses and disbursements since the last previous statement. The books of account of the Trustee in connection with the investments shall at all times be open to the reasonable inspection of the Settlor, and such person or persons as he may designate for that purpose, and after the death of the Settlor, the said beneficiaries thereof.
15. The trusts hereof shall be irrevocable; provided, however, that Settlor reserves unto himself the right to change at any time any Trustee herein designated.
16. The word "Trustee" wherever used in the singular number in this instrument shall be interpreted in the plural number whenever the context of this instrument shall so require.
In Witness Whereof Harvey C. Fruehauf, as Settlor, has hereunto set his hand and seal, and Harvey C. Fruehauf, as Trustee hereunder, has hereunto set his hand and seal this 30th day of December, A. D. 1935.
In presence of:
*239 (Sgd.) Muriel G. Batt
(Sgd.) H. C. Giessler, Jr.
(Sgd.) A. R. Hancock
(Sgd.) Leslie C. Oehman
(Sgd.) Harvey C. Fruehauf (L. S.)
Settlor(Sgd.) Harvey C. Fruehauf (L. S.)
TrusteeState of MichiganCounty of Wayne
SS.
On this 30th day of December, A. D. 1935, before me, a Notary Public in and for said County, personally came Harvey C. Fruehauf, to me known to be the person described in and who executed the foregoing trust instrument as Settlor and as Trustee, and acknowledged that he executed the same as his free act and deed.
(Sgd.) Roy W. Jacobs,
Notary Public, Wayne County, Michigan.
My Commission expires: Dec. 3, 1938.
| Schedule "A" | |
| Common Stock of Fruehauf Trailer Company, evidenced by | |
| Certificate No. NPO-173 | 7,000 shares |
| Common Stock of Fruehauf Trailer Company, evidenced by | |
| Certificate No. NPO-174 | 7,000 shares |
| Common Stock of Fruehauf Trailer Company, evidenced by | |
| Certificate No. NPO-175 | 7,000 shares |
| Total | 21,000 shares |
*688 On December 30, 1935, petitioner transferred to himself, as trustee, 21,000 shares of the common stock of the Fruehauf Trailer Co., evidenced by 3 certificates for 7,000 shares each. On August 31, 1936, petitioner*240 sold to each of the 3 trusts 120 shares of the common stock of said company at a price slightly under the then market. On May 15, 1937, the Fruehauf Trailer Co. increased the number of shares of its common stock by issuing 2 shares for one, and as a result each of the 3 trusts received an additional 7,120 shares. On December 7, 1937, petitioner made an additional gift of 450 shares of the common stock of the Fruehauf Trailer Co. to each of the trusts. Petitioner duly filed gift tax returns on which he reported the gift of the 21,000 shares made on December 30, 1935, and the gift of 1,350 shares made on December 7, 1937. During the period December 30, 1935, through the calendar year 1941, the corpus of each trust consisted of the capital stock of the Fruehauf Trailer Co. and cash.
During the years 1936 to 1941, inclusive, Angela Fruehauf reported the income of the 3 trusts created on December 30, 1935. Petitioner included no part of that income in his income tax returns for these years.
The following tabulation shows the total number of shares of the common capital stock of the Fruehauf Trailer Co. outstanding and the total number of shares held by petitioner and his wife and *241 children, including the shares held by the trusts created by petitioner, during the years 1935 to 1941, inclusive:
| Shares held | |||||
| Shares | by petitioner's | Shares | Total | ||
| Year | Shares outstanding | held by | wife and | held by | shares of |
| petitioner | children | trusts | family and | ||
| trusts | |||||
| 1935 | 156,833 | 17,020 | 273 | 21,360 | 38,653 |
| 1936 | 160,315 | 18,760 | 273 | 21,360 | 40,393 |
| 1937 | 400,000 | 51,820 | 546 | 44,070 | 96,436 |
| 1938 | 400,000 | 51,820 | 546 | 44,070 | 96,436 |
| 1939 | 399,400 | 53,520 | 5,546 | 44,070 | 103,136 |
| 1940 | 398,214 | 42,720 | 6,200 | 44,070 | 92,990 |
| 1941 | 398,536 | 32,720 | 5,750 | 55,095 | 93,565 |
During the period 1935 to 1941, inclusive, petitioner was the president and one of about 18 directors of the Fruehauf Trailer Co. Petitioner voted the capital stock owned by the trusts at the annual meetings of the stockholders of the company, either in person or by proxy. The Fruehauf Trailer Co. shares are listed on the New York Stock Exchange.
During the period 1935 to 1941, inclusive, petitioner paid all of the household expenses of his family, including the expenses of clothing his wife, maintenance of the children, and their education. Petitioner did not borrow*242 from the trusts or from his wife. He did not *689 receive any gifts from his wife and he maintained no joint bank account with her.
On October 13, 1942, petitioner resigned as trustee of the trusts created by him on December 30, 1935, designated new trustees, and relinquished any further rights to change any trustee.
OPINION.
The only contested issue concerns the taxability of petitioner upon the income of three trusts created by him on December 30, 1935, for the benefit of his wife and three children. The respondent contends that the income is taxable to petitioner under section 22 (a) of the Internal Revenue Code, under the doctrine of Helvering v. Clifford, 309 U.S. 331">309 U.S. 331. The respondent argues that paragraph 9 (a) of the trust agreement, which grants to the trustee a broad sweep of powers, including the power "to invest * * * in * * * nonincome producing securities," and "without answering to any court for his acts," presents the issue whether such reserved powers over the investments are exercisable in a fiduciary capacity. The respondent further contends that the exculpatory clause supports that position in that it leaves additional grave*243 doubts as to whether the beneficiaries' interests are reasonably subject to the protection of a court of equity, despite the provisions of paragraph 12, which limit the trustee's liability for losses, except those incurred through "gross mismanagement or wilful default," and provide that "Good faith shall be all that is required of the Trustee hereunder." We disagree.
The only power which the petitioner reserved to himself as grantor is contained in paragraph 15, which provides that "Settlor reserves unto himself the right to change at any time any Trustee herein designated." The extensive powers of management vest in the settlor only in his capacity as trustee and for so long as he remains trustee. Upon familiar principles, these are to be construed as fiduciary powers, to be exercised in good faith for the benefit of the trust and its beneficiaries. United States v. Morss, 159 Fed. (2d) 142; Hall v. Commissioner, 150 Fed. (2d) 304; Cushman v. Commissioner, 153 Fed. (2d) 510. Since the immunity clause contained in paragraph 9 (a) relates only to the settlor's acts as trustee, *244 it is ineffective. Pray v. Belt, 26 U.S. 670">26 U.S. 670, 679; Cushman v. Commissioner, supra.
To justify taxation of the income of a trust to its settlor under section 22 (a), the "bundle of rights" retained by him must be so substantial that it can be said that he remained in substance the owner of the corpus. The trust instrument in question was irrevocable. The income beneficiaries and the ultimate distributees of the corpus were definitely fixed and could not be changed. The conditions as to payment *690 or accumulation were likewise definitely fixed and were not subject to change. The possibility of a reverter of either corpus or income is so remote as to be of no significance for the purposes of taxation of the income. Cushman v. Commissioner, supra.Absent here are important factors influencing the decisions in Stockstrom v. Commissioner, 148 Fed. (2d) 491; certiorari denied, 326 U.S. 719">326 U.S. 719; Shapero v. Commissioner, 165 Fed. (2d) 811; certiorari denied, 334 U.S. 844">334 U.S. 844;*245 and Commissioner v. Buck, 120 Fed. (2d) 775, relied upon by the respondent. In the Stockstrom case, the settlor had the power to deal with the property as his own, to apportion or withhold income, and to accumulate income in favor of the remainderman. The retained power over the purse strings, coupled with the extraordinary administrative powers, were regarded as sufficient to make the doctrine of the Clifford case applicable. In the Buck case, the settlor, in his individual capacity, had the power to alter or amend the trust indenture in respect to the income and corpus, and thus to "sprinkle" it among any of the beneficiaries he might select. In the Shapero case, the grantor had the power "to modify, alter, change or amend" in certain respects, as well as the power to control the drug company by voting the trusteed shares. These powers, in the court's opinion, enabled the grantor to use the trust corpus to his personal advantage, and were sufficient attributes of ownership to justify taxing the income to him under section 22 (a) of the code.
Among the reserved powers in the instant case is the right to vote the trusteed shares, *246 which consisted solely of the capital stock of the Fruehauf Trailer Co., of which petitioner was the president and one of about 18 directors. In the taxable year there were outstanding 398,536 shares of Fruehauf Trailer Co. stock, which shares were listed on the New York Stock Exchange. Petitioner owned individually 32,720, or approximately 8.21 per cent; his wife and children owned individually 5,750, or approximately 1.44 per cent; and the trusts created by petitioner held 55,095 shares, or approximately 13.82 per cent, or an aggregate of 23.47 per cent. The extent to which a given percentage of voting strength constitutes control varies greatly with the company. Kohnstamm v. Pedrick, 153 Fed. (2d) 506. Where the shares are listed on the Exchange and apparently widely scattered, a single block as large as 23.47 per cent might constitute control. Frederick B. Rentschler, 1 T. C. 814. In the instant case, of the 23.47 per cent held by the petitioner and his family, including the trusts, the latter held 13.82 per cent. Petitioner's voting power over the shares held by the trust, however, was as trustee, and such*247 power must be exercised for the best interest of the beneficiaries. In Cushman v. Commissioner, supra, it is said:
* * * The power to vote the stock held in trust may not be exercised by the trustee for his own purposes; and where such conduct is threatened a court of *691 equity will direct the voting of the stock. See 2 Scott, Trusts (1939) § 193.1 * * *.
In any event, possible voting control is only one factor to be considered in connection with the other powers lodged in the trustee in determining whether there is sufficient dominion and control as to warrant taxing the income of a trust to the settlor. On the facts disclosed by this record, we do not regard petitioner's voting strength in the Fruehauf Trailer Co. as of controlling importance. Cf. Donald S. Black, 5 T. C. 759, 767.
The respondent argues that, since the powers conferred upon the successor trustee are more limited than those reserved to the settlor trustee, the inference is clear that the broad powers were reserved for settlor's individual advantage. We do not agree. A more reasonable inference is that petitioner had greater confidence*248 in his own ability to manage the trust estate to the greater advantage of the beneficiaries.
We think the facts in the case at bar bring it within the rationale of such cases as United States v. Morss, supra;Cushman v. Commissioner, supra; and Anthony J. Drexel Biddle, Jr., 11 T.C. 868">11 T. C. 868. We, therefore, conclude that the income of the three trusts here involved is not taxable to petitioner under section 22 (a) in the year in question.
In his deficiency notice, the respondent also based the taxability of the trust income to petitioner on sections 166 and 167 of the code. While, on brief, he has made no argument respecting these sections, we nevertheless examine their applicability.
Paragraph 10 of the trust instrument gives the settlor-trustee power to invade the corpus for the maintenance and support of settlor's wife, and, after her death, for the support, maintenance, and education of settlor's children, who were then minors.
Paragraph 3 also gives power to the settlor-trustee, after the death of the life beneficiary, to use the income or corpus for the support, maintenance, and education*249 of settlor's children, who were then minors.
This power to use either the corpus or income is so circumscribed that it is clear the settlor did not intend that the power could or would be used to discharge the settlor's marital obligations or his duty to support, maintain, and educate his children. The exercise of the power vested in the settlor respecting the children was contingent upon the death of the life beneficiary. A power not presently exercisable and which may never be capable of exercise has been held not to exist as a power. Corning v. Commissioner, 104 Fed. (2d) 329.
Under the trust instrument all of the income was payable to the settlor's wife, and it has been so paid. There was no requirement that the income was to be used to discharge any of the settlor's obligations.
*692 The courts have held that provisions of similar purport to those here involved do not render the income of an irrevocable trust taxable to the settlor, under either section 166 or section 167 of the Internal Revenue Code. Morss v. United States, 64 Fed. Supp. 996; affd., 159 Fed. (2d) 142 (see*250 supra); Commissioner v. Katz, 139 Fed. (2d) 107; Suhr v. Commissioner, 126 Fed. (2d) 283, reversing 41 B. T. A. 1270 on another point. We, therefore, conclude that sections 166 and 167 of the code are not applicable here.
Decision will be entered under Rule 50.
Murdock, J., dissenting: The facts stated are insufficient to show error in the determination of the Commissioner.