*554 The decedent created a trust in which he reserved the right to control and manage the corpus and from which he was to receive the income for life. Held, that the powers reserved were sufficient to bring the value of the corpus within his gross estate as a transfer intended to take effect in possession or enjoyment at or after death.
*183 The respondent has determined a deficiency in estate tax of $32,628.24. These petitioners contest that determination, alleging the commission of certain errors, some of which they have expressly waived. The issue of law raised is with respect to certain property transfers made by the decedent during his lifetime, as hereinafter shown, i.e., whether such transfers constituted gifts in contemplation of or intended to take effect in possession or enjoyment at or after death under the provisions of section 302 of the Revenue Act of 1926 as amended by section 803 of the Act of 1932.
FINDINGS OF FACT.
The petitioners are the*555 duly appointed and acting executors of the estate of Adolph Hollander, born 1852, who died September 29, 1932, while a resident of the State of New Jersey.
Decedent's first wife, Blume Hollander, died in July 1922. He, then 69 years of age, married Frances Hollander, 30 years his junior, in October 1922. This early remarriage and the great disparity in the age of the decedent with that of his wife, precipitated a rift between him and certain of his children, resulting in separation very shortly thereafter in 1922. She, Frances, having instituted proceedings in the Court of Chancery of New Jersey, for separate maintenance, entered into an agreement on January 24, 1923, with decedent and one Smith, as trustee, settling their respective property rights, he agreeing to deposit three bonds of the aggregate face value of $30,000, bearing interest at 8 percent per annum, with the Newark Trust Co. under a contemporaneously executed indenture by which that institution was directed to hold such securities in trust; to reinvest the proceeds in the event of redemption thereof, to collect the proceeds *184 therefrom, and to pay such proceeds to her as long as she should remain his*556 wife and upon termination, for any cause, of the said marriage between the decedent and his wife, the corpus and all accrued income therefrom to be paid to her, if living, or to her representatives, if deceased, the same to be paid in lieu of alimony, or other demands which she might otherwise be entitled to make, including her dower rights in his estate. She also agreed to execute and deliver four deeds to realty belonging to him covering premises situated (1) on Malverne Street, (2) on 16th Avenue and Bergen Street, (3) on High Street, and (4) a certain parcel in Boston, Massachusetts, the expressed intention being the release of her claim to dower rights in said realty. That agreement was ratified by the Court of Chancery of New Jersey.
Meanwhile - during the interim of separation - the decedent's family was very much concerned about decedent's future welfare, lest he return to his wife - which was under serious consideration - dissipate his personal fortune and thereby become a charge. His reconciliation, as had been his marriage in the beginning, was actively opposed, but at the same time measures to protect him to the extent of an estate of $250,000 were being discussed*557 and considered by his sons and by his personal attorney, at their request. During these deliberations the point was made by his attorney that certain pieces of property which decedent owned should, in some manner, be disposed of in order to prevent future dower rights from attaching thereto. It was finally decided to create trusts and to retain life interests to the decedent therein.
Accordingly, by indenture of February 3, 1923, the decedent declared an irrevocable trust, in certain Malverne Street property, the material portions of which are as follows:
FIRST: The said Settlor, Adolph Hollander, reserves the right during his lifetime to manage and control the real estate himself without interference by the said trustee and particularly to lease the same with as full right and power as if he had not executed the aforesaid Deed, it being understood that all the net rents, issues and profits of said real estate shall be the sole property of the Settlor.
SECOND: At the death of the Settlor, the said trustee shall hold title to the said real estate for the following uses and purposes: he shall within a reasonable time sell said premises to Philip A. Singer and Leo Singer * * *558 *. The price of said real estate * * * shall be Fifty Thousand Dollars. The terms of the payment shall be made as liberal as possible * * *. The said trustee shall then hold the net income of said sale for the following uses and purposes: he shall invest the same in investments * * * and shall during the lifetime of the Settlor's daughter Sarah Singer pay over three-fourths of the net income thereof to the said daughter * * * and one-fourth of the net income thereof to Rose Goldstein, the daughter of the said Sarah Singer. At the decease of the said Sarah Singer, the principal of said fund shall be distributed in manner following: three-fifths thereof to said Rose Goldstein; one-fifth thereof to Miriam Goldstein * * * and the remaining one-fifth *185 part thereof to the children of the grandson of the Settlor, namely the children of Philip A. Singer share and share alike. * * *
On February 3, 1923, the decedent and his wife, Frances - pursuant to prior arrangement with her counsel by which she would join him - deeded to Gladys A. Savage, a "dummy", the so-called High Street property "so that the said Gladys A. Savage may by Deed create a life estate in said premises in*559 the said Adolph Hollander with remainder over to Rosa Goldstein, Harriet Halperin and Rosalind Halperin as tenants in common" and for the "additional purpose of releasing any claim or right of dower or dower rights which the said Frances W. Hollander may have or claim to have in the above described premises." On the same date the said Savage reconveyed the same property, granting a life estate to the decedent with remainder over to Rosa Goldstein, Harriet Halperin, and Rosalind Halperin, as tenants in common. A similar transfer had already been made by indenture of October 3, 1922, by the decedent, as a widower, before he remarried (the foregoing differing only in that it included his wife, Frances), and this was only as a precautionary measure. The original conveyance on October 3, 1922, was made by the decedent in order to carry out the erroneous devise of this same property in his first wife's last will and testament to her three granddaughters, Rosa Goldstein, and Harriet and Rosalind Halperin, it having later developed upon the probate of her will that such property was not in her name but in the name of her husband, the decedent.
Thereafter, on April 3, 1923, the decedent*560 established a further irrevocable trust to properly provide for and protect his two grandchildren "in accordance with the wishes of his deceased wife * * * Blume Hollander, and in accordance with his own wishes" in certain bonds, mortgages, and other securities set forth in the indenture, vesting the usual powers in the trustees thereunder, the income therefrom to be paid to him during his lifetime and upon his death to hold the corpus for the said grandchildren, share and share alike, the income thereafter to be paid to them during their minority, after which the principal of such fund to be turned over to them in a manner therein directed, i.e., a certain amount upon their respective marriages, etc. This trust was established as a part of the plan devised to protect the decedent's estate from dissipation, it having been determined that the Malverne Street property and the High Street property, hereinbefore referred to, would aggregate $40,000 and $30,000, respectively, and that the amount of this trust would aggregate approximately $180,000, or a grand aggregate of $250,000, which was thought to be sufficient protection under the circumstances.
The foregoing trusts represented, *561 in the aggregate, about one-third of the decedent's total estate.
*186 The decedent was reconciled with his wife, Frances, in April 1923 and on the twelfth of that month he entered into a reconciliation agreement with her and with Bankers Trust Co., as trustee. That agreement recited the separation, referred to the agreement of January 24, 1923, hereinabove, creating the $30,000 trust, and provided for the creation of a further irrevocable trust, with the usual powers in the trustees, from which the income was payable to her, during her lifetime, and upon the death of the decedent the corpus also was distributable to her, together with all accrued and undistributed income, it being distinctly understood therein that such trust was in addition to the said trust of January 24, 1923. That agreement also expressly made the agreement of January 24, 1923, irrevocable. This last trust was created at the insistence of Frances' attorneys to protect her in the event of a further marital breach. As in the case of the $30,000 trust, it was first insisted that $50,000 - the amount of the Canadian bonds in this trust - be paid to her outright, but because of their fear that these amounts*562 would be squandered by her and that she would make further demands in the event of such a breach, the decedent's attorneys refused, resulting in said trust.
A short time prior to his death in 1932, the decedent purchased and paid $5,000 for a home in Atlantic City, New Jersey, in the name of his wife, Frances. Being fond of Atlantic City, this home was intended as a substitute for hotel accommodations during the summer months. About $2,000 was spent on the house to make it more comfortable. Until 1930, when the decedent suffered a slight stroke of paralysis, he had never been known to have an illness, colds, et cetera, excepted. He was at all times physically vigorous, mentally alert, and after his retirement and remarriage was an almost incessant traveler in this country and abroad. Some of his travels in foreign lands were on donkey or camel. He traveled considerably after his illness in 1930. He was a tireless walker - cared little for automobiles - and was an ardent race fan and horseman, preferring high-spirited animals for personal use. When chided about his age on the occasion of his remarriage he remarked that his grandfather lived to be 103 years old and that he*563 intended to do likewise.
The respondent has included the following amounts in the decedent's gross estate because of the various transfers and because of the gift to his wife of a home in Atlantic City:
| Trust of January 24, 1923 | $30,000.00 |
| Transfer of February 3, 1923 | 27,008.82 |
| (616 High Street, Newark, New Jersey) | |
| Trust of February 3, 1923 | 32,200.00 |
| (Malverne Street property, Newark, New Jersey) | |
| Trust of April 3, 1923 | 172,576.59 |
| Trust of April 12, 1923 | 46,375.00 |
| Cash paid in 1932 on account of the purchase of | |
| a house at Atlantic City, New Jersey | 5,000.00 |
*187 It is stipulated between the parties that credits for state taxes paid be adjusted under Rule 50.
OPINION.
MORRIS: The respondent "recognizes that the decedent, at the time the transfers were made, was in excellent physical condition, active, and robust, and that the transfers were not made causa mortis, that is, that the transfers were not motivated or prompted by any apprehension arising from a physical condition that led the decedent to believe death was imminent, impending, or near at hand"; and he does "not contend that the transfers are taxable by reason of such an apprehension, *564 or because such transfers were made causa mortis."
Whether a gift is made in contemplation of death or not depends upon the primary or dominating motive which prompted the making of the gift and this motive is to be ascertained from all of the surrounding circumstances when the gift was made. If death - be it impending or distant - prompted the gift, it falls within the ambit of the statute. The respondent admits the good health of the decedent during all of the period when the transfers under consideration were made.
There is an abundance of testimony substantiating the fact that these various transfers - excepting the Atlantic City property purchased by the decedent in his wife's name - were not only not made in contemplation of death but that other motives associated entirely with life were the generating source. They were prompted by the state of affairs which grew out of the decedent's early remarriage. Two trusts were established to provide an income for the decedent's wife, one at the time of separation, and because of separation, and the other in order to effect reconciliation. Those were the irrevocable trusts of January 24, 1923, and April 12, 1923, from which*565 she received the income and finally the corpus.
The February 3, 1923, transfer of the High Street property added little to what had been accomplished by the transfer of that property on October 3, 1922, except that, out of precaution, the decedent's wife had been joined in the conveyance in order that there be no question about the property being free from dower claims. This transfer, at the outset, was to carry out the expressed wish of the decendent's first wife by a devise found to be erroneously conceived when her will was admitted to probate. The other transfers were a part of the plan devised by the decedent's children in combination with his personal attorney to protect the decedent's estate from dissipation and to provide him with a life income. There is not a scintilla of evidence in the record - except what amounts to pure inference drawn from the advanced age of the decedent in 1923 when *188 these various transfers took place - from which any logical conclusion could be drawn that the decedent contemplated or even gave thought to the question of death.
We believe, from all of the testimony and documentary evidence, that there is no justification whatsoever*566 for the determination that he made these various transfers in contemplation of death within the meaning of that term as defined in .
The purchase of the Atlantic City property by the decedent in his wife's name occurred after he was stricken with paralysis. Practically all we know is that the property was purchased and that it was placed in the name of Mrs. Hollander. The record is silent of any motive for the gift. In this particular the respondent's determination must be approved, for lack of evidence.
It is the contention of the respondent that certain of these transfers are nevertheless taxable to the estate of the decedent under section 302 of the Revenue Act of 1926, as amended by section 803 of the Act of 1932, as transfers intended to take effect in possession or enjoyment at or after death. We are of the opinion that, except as to the trust involving the Malverne Street property, they can not be so classified. In order for the estate tax to apply to these transactions, they must have been testamentary in effect, and in order for them to have been testamentary in effect, the thing to which the tax applies must*567 have passed at the death of the decedent from his "possession, enjoyment, or control." . Where the decedent has unqualifiedly vested a property right in another, in a transaction begun and completed during his lifetime, the tax does not attach, notwithstanding, the decedent reserved to himself a life interest. . Nothing whatsoever passed to the living upon the death of this decedent which was not passed in 1923. This case is a much stronger one for the petitioner's cause than where it is provided that upon failure of the property to vest in possession due to death of the grantee, it shall revert to the grantor, but the Supreme Court, in , and , has held that even under those circumstances and notwithstanding there is a possibility of a reversion to the grantor, nevertheless, such a grant is not one to take effect in possession or enjoyment at or after death. In respect to this contention, except as to the trust involving the Malverne*568 Street property, the respondent is in error.
With respect to the Malverne Street property trust, the settlor reserved the right during his lifetime to manage and control the corpus without interference by the trustee and the power to lease the property *189 the same as if no trust had been executed, at the same time reserving to himself all the income therefrom. By the retention of such powers, the "possession, enjoyment, or control" of the corpus passed at his death, and the transfer was testamentary in effect. The value of the corpus of this trust, which the respondent placed at $32,200, should be included, therefore, in the decedent's gross estate.
Section 803(a) of the Revenue Act of 1932 is not retroactive and has no bearing on the question here. ; affd., ; certiorari denied, .
Reviewed by the Board.
Judgment will be entered under Rule 50.