*678 Decedent at the age of 78, on October 29, 1924, created a trust, reserving all the income to himself for life, and also the right to withdraw from the corpus up to $10,000 annually, which right was cumulative. Ten separate additions were made to the trust prior to March 3, 1931, and three separate additions were made after March 3, 1931. Decedent died April 18, 1933. Held:
(1) The several transfers prior to March 3, 1931, were not made in contemplation of death.
(2) None of the transfers made prior to March 3, 1931, are includable in gross estate under section 302(c) of the Revenue Act of 1926.
(3) The value of the transfers made after March 3, 1931, is includable in gross estate under section 302(c), Revenue Act of 1926 as amended by Joint Resolution approved March 3, 1931, and section 803(a) of the Revenue Act of 1932.
(4) The value includable in gross estate under section 302(d) of the Revenue Act of 1926 is limited to the undrawn portion of the corpus which decedent had a right to withdraw up to the date of death.
*634 Petitioner*679 seeks the redetermination of a deficiency in estate tax in the amount of $30,295.59. The principal issue is whether there should be included in decedent's gross estate any part of the value of the corpus of a trust created by the decedent on October 29, 1924, and 13 additions thereto made in the years 1925 to 1932. Collateral issues, which depend on the decision of the main issue, concern credits for Federal gift tax and state estate tax.
FINDINGS OF FACT.
The decedent, William M. Young, died April 18, 1933, aged 86 years, of pneumonia, after an illness of two weeks. Petitioner is the duly appointed executor of his estate.
On October 29, 1924, Young, as trustor, executed a declaration of trust with the Pacific Southwest Trust & Savings Bank, the predecessor of the petitioner herein, as trustee. At the time of the execution of the trust, and for some time prior thereto, Young was and had been in good health and the transfer of property to the trustee was not made in any expectation or apprehension of imminent death. The property Young had at that time he had acquired after he had reached 50 years of age. His purposes in creating the trust were to conserve his property*680 and to be relieved of the responsibility of managing it. The transfers of property to the trustee were not made in contemplation of death.
The property conveyed to the trustee consisted of stocks, bonds, notes, the real estate in Los Angeles then being used by Young as his residence, and the household furniture and other contents of the residence.
The trust agreement, as far as material here, provided that the income from the trust property was to be paid to Young for life. Upon his death part of the income was to be paid to his wife and the remainder to his four children. Upon the death of the wife the corpus was to be distributed to the four children, directly as to two of them, and in trust for the other two. The trustee was given broad powers to manage, sell, invest and reinvest, etc. but with the reservation that it must secure Young's consent to any sale or other disposition of any of the trust property. Young also reserved the *635 right to make additions to the corpus of the trust at any time. The trust agreement contained the following provision:
Twelfth: THIS TRUST, except as hereinafter provided, IS ABSOLUTE AND IRREVOCABLE, either by the Trustor, *681 or by the Trustor in conjunction with all of the beneficiaries.
Except and Provided, however, that the right and power of revocation of and withdrawal from said trust, up to the sum, amount or property value of Ten Thousand Dollars ($10,000.00) per year, is hereby expressly reserved unto the Trustor, and hereby acknowledged by the Trustee, the same to be cumulative in such manner and to such extent that any part of said sum or amount, not withdrawn by the Trustor from and out of the trust estate in any one year, shall be cumulated and added to the amount thus withdrawable under said reservation in any succeeding year, and the right to thus withdraw such sum or amount in any later or succeeding year, and all such unexercised rights of revocation and withdrawal accruing in any previous year, of the sum or amount as to which such right isd herein expressly reserved, shall not be lost, but shall continue to be and remain in the said Trustor, until exercised.
Under the provisions of paragraph twelfth Young withdrew from the corpus of the trust the following amounts:
| February 17, 1925 | $3,000.00 |
| August 12, 1925 | 1,000.00 |
| October 5, 1925 | 500.00 |
| October 6, 1925 | 762.50 |
| April 1, 1926 | 1,500.00 |
| March 5, 1928 | 850.00 |
| August 15, 1928 | 10,375.00 |
| October 15, 1928 | 5,000.00 |
| January 9, 1929 | 397.50 |
| March 28, 1929 | 2,630.23 |
| March 28, 1929 | 1,009.72 |
| February 8, 1930 | $15,000.00 |
| February 14, 1930 | 11,693.43 |
| April 15, 1930 | 5,000.00 |
| November 8, 1930 | 10,000.00 |
| November 3, 1931 | 7,400.00 |
| April 29, 1932 | 1,000.00 |
| January 17, 1933 | 2,144.38 |
| February 2, 1933 | 2,000.00 |
| Total | 81,262.76 |
*682 Under the right reserved in paragraph tenth of the trust to make additions to the corpus, Young made the following additions:
| September 23, 1925 | $10,000.00 |
| February 9, 1927 | 14,450.78 |
| April 30, 1927 | 13,300.00 |
| November 17, 1927 | 511.24 |
| January 30, 1928 | 6,220.72 |
| April 30, 1928 | 4,863.36 |
| August 22, 1928 | 19,650.00 |
| February 24, 1930 | 15,000.00 |
| March 10, 1930 | $40,058.65 |
| March 10, 1930 | 5,762.50 |
| March 31, 1932 | 4,703.25 |
| November 7, 1932 | 22,535.00 |
| December 7, 1932 | 2,412.75 |
| Total | 159,468.25 |
The value of the property held under the trust agreement by the trustee at the time of Young's death was $476,554.14.
The respondent included the trust property in the gross estate of the decedent at a value of $476,554.14.
The respondent in determining the deficiency herein allowed as a credit against the estate tax the sum of $4,986.60 on account of gift taxes paid with respect to the property transferred in trust. There has been paid to the State of California the sum of $11,605.94 as a *636 State estate, inheritance, legacy or succession tax with respect to property included in the decedent's estate for Federal estate tax purposes. The respondent, *683 in determining the deficiency, has allowed a credit of $5,616.57 on account of the tax paid to the State of California.
On October 29, 1924, when the trust was created, decedent was 78 years of age, and at that time the present value of the right reserved by the decedent to withdraw from the trust $10,000 each year during the remainder of his life was $51,428.60.
OPINION.
ARUNDELL: The respondent included in Young's gross estate the full value of the trust corpus at the date of death on the theory that the transfer in trust was one intended to take effect at or after death. By amended answer counsel for the respondent alleges as further reasons for the inclusion that (a) the transfer of October 29, 1924, was also made in contemplation of death and (b) that the enjoyment of the trust property was subject at the date of death to a change through the exercise of a power by the decedent to alter, amend, or revoke.
It should be noted at the outset that, while the parties speak of this case as involving "a transfer", there were in fact fourteen transfers. The one to which the parties address themselves is that of October 29, 1924. Thereafter thirteen additional transfers were*684 made, all subject to the trust agreement of October 29, 1924, the dates of which are set forth in the findings of fact. For reasons hereinafter given some of the subsequent transfers become of importance in the case.
The contemplation of death issue raised by amended answer is not difficult. Speaking now of the original transfer in 1924, the parties have stipulated that the transfer "was not made in any expectation or apprehension of imminent death." They have also stipulated that at that time Young was, and for some time had been, in good health. The testimony of the trust company official who aided in preparing the agreement is to the effect that the primary consideration that prompted Young to create the trust was his desire to conserve his property and be relieved from the work and responsibility of managing it. This official further testified that he suggested that a trust would effect savings in administration costs on the death of Young. This is pointed to as establishing contemplation of death in the creation of the trust. But out of this circumstance we can spell out at the very most only "the general expectation of death which all entertain." *685 United States v. Wells,283 U.S. 102">283 U.S. 102. We are unable to find in this casual reference to administration costs *637 tht the thought of such costs, occasioned by death, was a controlling motive in the creation of the trust. The subsequent transfers are not shown to have been impelled by any other motive than that which prompted the original one. As to all of the transfers that were made prior to 1931, the burden is on the respondent to establish a contemplation of death motive as this fact issue was initiated by his answer. He has not met that burden. We have accordingly found as a fact that the transfers were not made in contemplation of death and hold that the value of the trust property is not includable in gross estate on that ground.
Section 302(c) of the Revenue Act of 1926, which the respondent originally said was authority for inclusion of the trust property in the taxable estate, provides for the inclusion of transfers intended to take effect in possession or enjoyment at or after death. The cited section was amended by Joint Resolution of Congress, approved March 3, 1931, so as to include transfers under which the transferor reserved the income*686 from the property or the right to designate who should possess or enjoy the property or the income therefrom. A further amendment was made by section 803(a) of the Revenue Act of 1932, which for the purposes of this case may be considered a reenactment of the Joint Resolution.
Under Section 302(c) of the Revenue Act of 1926, as it read before amendment, the transfers would not be included in decedent's gross estate. Counsel for the respondent concedes that the decisions are against him on this point. The transfers of corpus were complete at the time thereof and the retention of income was not enough under the 1926 Act to bring the transfers within the provisions of transfers intended to take effect at or after death. May v. Heiner,281 U.S. 238">281 U.S. 238; Commissioner v. Northern Trust Co., 41 Fed.(2d) 732; affd., 283 U.S. 782">283 U.S. 782; Charles W. Foster et al., Executors,26 B.T.A. 708">26 B.T.A. 708; affd., C.C.A., 1st Cir., without opinion.
The provisions of the Joint Resolution of March 3, 1931, were designed to include, and do in so many words include, transfers such as we have here. However, those provisions are not*687 to be applied retroactively, and do not reach transfers made prior to the date of the Resolution. Mildred Kienbusch et al., Executors,34 B.T.A. 1248">34 B.T.A. 1248; Pearl W. Dahl, Executrix,35 B.T.A. 282">35 B.T.A. 282; Welch v. Hassett, 90 Fed.(2d) 833; Treasury Decision 4314. Under these holdings, the original transfer in trust, and the subsequent transfers subject to the same trust made prior to March 3, 1931, are not subject to inclusion in decedent's estate for tax purposes. Three transfers were made after March 3, 1931, to wit, $4,703.25 on March 31, 1932, $22,535 on November 7, 1932, and $2,412.75 on December 7, 1932. These transfers, being subject to the provisions of the original instrument which gave *638 the decedent the right to the income for life, come within the provisions of the Joint Resolution. See Pearl W. Dahl, Executrix, supra;E. Pennington Pearson, Executor,36 B.T.A. 5">36 B.T.A. 5. We are aware that the Circuit Court of Appeals for the Seventh Circuit, in *688 Bullard v. Commissioner, 90 Fed.(2d) 144, intimates that the cited Joint Resolution and the amendment effected by section 803(a) of the Revenue Act of 1932 are invalid as applied to a transfer in trust where the transferor retains only the income. This proceeding arises in another circuit, and, with all respect to the court in the seventh circuit, we feel that our position in the Bullard, Dahl, and Pearson cases is right and we should adhere to it until there is more authority to the contrary.
The final question under the main issue is whether the trust property is includable in gross estate under section 302(d) of the Revenue Act of 1926. This section of the statute includes property transferred by the decedent, the enjoyment of which "was subject at the date of his death to any change through the exercise of a power by the decedent alone * * * to alter, amend, or revoke * * *." The power reserved which gives rise to the question here was that contained in the twelfth article of the trust agreement which reserved to the decedent the right to withdraw from the said trust up to the sum of $10,000 per annum. This right was cumulative, that is, if only*689 $5,000 were withdrawn the first year, he could withdraw $15,000 the second year. According to the American Experience Table of Mortality, Inheritance Taxation, Federal Estate and Gift Taxes, 4th Ed., Gleason & Otis, p. 536, decedent's life expectancy at the time he created the trust was 5.11 years. He actually lived 8.46 years after October 29, 1924, or 3.35 years beyond his expectancy on that date. During this time he exercised his power to withdraw from the corpus $81,262.76 of the $84,600 that he had a right to withdraw. On the date of decedent's death, and that is the date mentioned in section 302(d), supra, the trust estate was only subject to change through the exercise of a power by the decedent to revoke to the extent of $3,337.24. Beyond that, the enjoyment of the beneficiaries was, on the date of decedent's death, subject to no change whatever. Like the right to receive the income of the trust, the right to withdraw the amount of $3,337.24 ceased at death. We hold, therefore, that only $3,337.24 of the trust estate is includable in decedent's gross estate under section 302(d) of the Revenue Act of 1926. Cf. *690 Daisy Christine Patterson, Esecutrix,36 B.T.A. 407">36 B.T.A. 407.
Regarding one of the collateral issues, namely, the credit for gift taxes, the petitioner concedes that if the trust property is execluded from the gross estate, the credit for gift taxes should be disallowed. *639 In our opinion above we have excluded from the decedent's gross estate all of the trust property, except the value of the three transfers in 1932 and the $3,337.24 item to be included under section 302(d) of the Revenue Act of 1926. The credit for gift taxes should be adjusted accordingly.
As to the other collateral issue, namely, the credit for state estate or inheritance taxes, counsel for respondent stated at the hearing that this would be adjusted in the computation to be submitted under Rule 50.
The deficiency should be recomputed in accordance with this opinion.
Reviewed by the Board.
Decision will be entered under Rule 50.
HARRON dissents on the holding that none of the transfers made prior to March 3, 1931, are includable in gross estate under section 302(c) of the Revenue Act of 1926.