*748 1. TRANSFERS IN CONTEMPLATION OF DEATH. - A transfer of property to permit the decedent's son to expand a profitable business was not made in contemplation of death. Other transfers held to have been in contemplation of death.
2. TRANSFERS WITHIN SECTION 302 OF THE REVENUE ACT OF 1926. - The decedent had received certain money from two of his sons under an agreement which permitted him to invest the money and retain the income, but required him to return the principal to the sons. Since the decedent held the funds not in his own right but only as trustee, his transfer of those funds to another trustee was not a transfer within the meaning of section 302 of the Revenue Act of 1926.
3. TRANSFEREE LIABILITY. - A transferee is liable for the entire amount of the deficiency up to the value of the property transferred to him and properly included in the gross estate.
4. Persons who received no property of the decedent properly included in his gross estate are not liable as transferees for any part of the deficiency.
*239 The notice to each of these petitioners states:
Pursuant to Sections 315(b)(1) and 316 of the Revenue Act of 1926, there is proposed for assessment against you the sum of $13,144.49 (plus interest thereon) constituting your liability as transferee of property of Nelson Story, Sr., who died on March 10, 1926, a resident of Bozeman, Montana.
The petitioners assign as error the action of the Commissioner in including in the decedent's gross estate certain property transferred by the decedent in 1917, in 1923, and in 1924 as transfers made in contemplation of death, or intended to take effect in possession or *240 enjoyment at or after death, within the meaning of section 302(c) of the Revenue Act of 1926. Each petitioner also assigns as error, in case there is any deficiency, the action of the Commissioner in holding him liable for the tax other than the tax upon the particular property transferred to him.
FINDINGS OF FACT.
Nelson Story, Sr., the decedent, died on March 10, 1926, within a month of his eighty-eighth birthday. His wife died on February 9, 1924, at the age of 80. He was survived by four children, Rose Story, Hogan, *750 Nelson Story, Jr., Thomas Byron Story, and Walter P. Story. The ages of the children at the time of the death of the father ranged from about forty-three to about fifty-five. The decedent was a resident of Bozeman, Montana, at the time of his death.
No property of the decedent was reported for estate tax purposes. The Commissioner, in determining the deficiency, determined a gross estate of $512,889,84 by including therein the following:
| Cash | 1 $41.66 |
| Transfers: | |
| (a) To T. B. Story, 6/1/17, bonds, total value | 192,500.00 |
| (b) To T. B. Story, 12/14/23, bonds, stock note of Vandenhook, certificate of deposit, total value | 60,000.88 |
| (c) To Commercial National Bank, trustee for Katherine F. Story, 12/14/23 bonds and certificate of deposit total value | 82,097.30 |
| (d) To Commercial National Bank, trustee for Nelson Story, Jr., 12/14/23, stock, total value | 40,000.00 |
| (e) To Walter P. Story, 2/23/24, two pieces of real estate in Bozeman, Mont., total value | 37,250.00 |
| (f) To daughter, 2/23/24, four pieces of real estate in Bozeman, Mont., total value | 1 101,000.00 |
| $512,889.84 |
*751 (a)
Thomas B. Story had been in the sheep business for a number of years prior to 1917. This business became extremely profitable during the war period, and in 1917 the decedent, in order to permit this son to extend his activities in the sheep business, gave to the son bonds of the par value of $192,500. The Commissioner included $192,500 in the gross estate of the decedent representing the value of these same bonds. The transfer of these bonds by the decedent to his son in 1917 was not made in contemplation of death nor was it made to take effect in possession or enjoyment at or after death.
*241 (b)
Thomas B. Story was left in straitened financial circumstances when the price of sheep and wool collapsed in 1920. He lost the $192,500 par value of bonds which his father had given him in 1917. He used all of his own funds and a large amount of money which he borrowed from his wife, to pay notes of about $100,000 for which he was morally obligated as a result of his sheep business. The decedent thereafter desired to help this son financially so that the son would again have some property of his own with which to engage in business and support his family. Between*752 1920 and December 1923 the two had discussed several times the possibility of the decedent making additional gifts to this son. The father had offered him some real estate, which the son refused on the ground that his acceptance of it might cause family friction. The decedent, on December 14, 1923, gave to his son Thomas certain bonds, stock, a certificate of deposit, and a Vandenhook note of the total value of $60,000.88. This gift was absolute and complete. It was not made in contemplation of death.
(c) and (d)
The decedent, on December 14, 1923, transferred to the Commercial National Bank of Bozeman, in trust, bonds and a certificate of deposit which had a value at that time of about $72,625. This same property has been included by the Commissioner in the gross estate at a value of $82,097.30. The decedent on the same day transferred to the same bank, in trust, shares of stock having a value at that time of about $63,000. This same property has been included by the Commissioner in the gross estate at a value of $40,000. The deeds of trust provided that the income from each of these trusts was to be paid to the decedent during his lifetime, and thereafter to his wife*753 for her lifetime, if she survived him. The instrument relating to the first trust provided that after the death of the decedent and his wife the entire trust property was to be paid over to Katherine F. Story, wife of Thomas. Thomas had directed his father to name Katherine F. Story as the recipient of those funds so that she might thus be reimbursed in part for the loss of her funds which Thomas had borrowed in connection with his failure in the sheep business. The instrument relating to the second trust provided that after the death of the decedent and his wife, the entire trust property was to be paid over to Nelson Story, Jr. The decedent, in 1913, had given to his two sons Thomas and Nelson a large amount of valuable property. This property had been transferred to the sons pursuant to agreements whereby the sons were required to pay the decedent $500 a month *242 until such time as the decedent might choose to release them from further payments. The decedent was to be permitted to invest these payments as he saw fit, and the income from the investments was to belong to him absolutely. But he was to hold in trust for each of the sons the equivalent of the total of*754 the $500 monthly payments which they had made to him. Thomas made his payments regularly until October 1, 1920, at which time he was in financial difficulties as a result of his losses in the sheep business. The father stopped the payments at that time and no further payments were ever made. When the decedent gave his son Thomas the $192,500 par value of bonds in 1917, they entered into an agreement which required the son to pay to the father semiannually $4,437.50, an amount equal to the interest on the bonds. These amounts were to be used and held by the father just as he was holding and using the monthly payments of $500. These payments were stopped by the father with the payment in January 1920. The total payments made by Thomas to his father under these two agreements amounted to $72,625. Nelson Story, Jr., made the payments of $500 a month to his father until they were stopped on September 1, 1923. The total payments made by him amounted to $63,000. The transfers to the trusts made by the father on December 23, 1924, above described, were made pursuant to the earlier agreements and in discharge of his obligation to return to the sons the aggregate payments made by them.
*755 (e)
The decedent on February 23, 1924, transferred to his son Walter, two pieces of real estate situated in Bozeman. The decedent retained a life interest in both pieces of property. The one property was the home which the decedent and his family had occupied for a great many years. The other property was used as a lumber yard. The Commissioner, in determining the deficiency, included in the gross estate $27,250, representing the value of these two pieces of property. The transfer of these properties by the decedent was made in contemplation of death.
OPINION.
MURDOCK: The first transfer in point of time which the Commissioner has determined was in contemplation of death, was the transfer by the decedent to his son Thomas of certain bonds of the par value of $192,500. That transfer was made in 1917 about nine years before the decedent died, at a time when he was about seventy-nine years of age. The decedent, up to that time, had always been a man of unusual strength and vigor. His health, aside from some minor chronic ailments, had been excellent. He was an active man. His The taxpayer returned his income for the years in controversy on the accrual basis. It thus*756 included in that income the amounts receivable under the life contracts executed during that year, whether such amounts were actually received during the year or not. *243 advanced age is the only circumstance which might indicate that this transfer was made in contemplation of death. The Commissioner points also to two letters written about eleven years previously, and argues that they indicate that the decedent was then contemplating death. However, these letters were written so long before the transfer in question and are so ambiguous as to meaning, that they are of little evidentiary value. On the other hand, the real purpose of this gift is quite apparent. The decedent in the past had given substantial amounts to aid his sons in business. His son Thomas was making money in the sheep business. It appeared that through expansion more money could be made. The decedent gave his son the bonds in question so that this expansion might take place. The gift was complete. It was made for a purpose connected with life rather than with death, and the Commissioner erred in including the value of the bonds in the decedent's gross estate.
Next in point of time were a series*757 of transfers which the petitioner made on December 14, 1923. One of these transfers was to this same son Thomas. Prior to 1923 Thomas had lost not only the bonds which his father had given him in 1917, but all of his own property and some of his wife's property. His financial condition distressed his father. The father wanted very much to give his son some immediate help so that the son could support his family and again get started in business. For this purpose he made on December 14, 1923, an absolute and complete gift to his son of certain properties. The value of the properties at that time does not appear, but at the time of the decedent's death these properties had a value of $60,000.88. The Commissioner is able to marshal stronger evidence in support of his conclusion that this transfer was made in contemplation of death than he was able to marshal in the case of the transfer made in 1917. But the evidence which the petitioner relies upon to show that the transfer was made for a purpose connected with life, rather than with death, is just as strong as the similar evidence relating to the transfer made in 1917. The decedent at the time of this transfer was past eighty-five*758 years of age. Although he was still unusually vigorous and active for a man of his years, nevertheless he had slowed up considerably. He had been confined to his home in the care of a nurse for a number of weeks during the fall of 1923 as a result of the removal of a carbuncle. He took some steps about this time to dispose of his home, and there is other evidence which has some tendency to support the Commissioner's determination. The weight of the evidence, however, is that this transfer was not made in contemplation of death.
The other transfers made on December 14, 1923, were made by the decedent to a bank in trust to pay the income from the trust *244 property to the decedent and his wife for life, and then to pay all of the trust funds of the one trust to Katherine, the wife of Thomas, and all of the funds of the other trust to Nelson Story, Jr. The facts leading up to these transfers have been set out in detail in the findings of fact and need not be repeated. Suffice of say that the decedent, in transferring these funds, was merely carrying out his earlier agreement to hold amounts received from his sons under those earlier agreements in trust, and eventually*759 to return those funds to the sons. Thomas preferred that his share should be paid to his wife. After the decedent's death, suits were instituted in the courts of Montana by the administrator of the estate of the decedent and also by Rose Story Hogan. The plaintiffs challenged all of the transfers made by the decedent on December 14, 1923, and sought to recover from the defendants the properties transferred. Some of these proceedings were taken to the court of last resort of the state. The court, in each instance, upheld the transfers and held that the properties transferred in trust subject to a life estate, had at all times been the property of the sons and had not been the property of the decedent. ; ; ; . It may be that we are bound by those decisions on the question of the ownership of the property which was placed in the trusts on December 14, 1923. Cf. *760 ; ; ; , affirming . If, however, we are at liberty to draw our own conclusion from the evidence in this case, it is that the decedent was merely a trustee of the property, who transferred bare legal title to another trustee. Cf. . Since the property belonged to the sons and not to the decedent, it could not be the subject of a transfer within the meaning of section 302 of the Revenue Act of 1926.
The decedent on February 23, 1924, transferred to his son Walter and to his daughter all the rest of his property. The Commissioner included in the gross estate the value at the time of death of all of the property transferred on February 23, 1924. The petitioners have raised no issue in their pleadings challenging his action in regard to the properties transferred to the daughter. Nevertheless, they argue in their briefs that the transfers to the*761 daughter were improperly included in the gross estate. Since that issue is not raised by the pleadings, it need not be decided. However, the transfers to the daughter were just like the transfers to the son on that date. The transfers to the son were in contemplation of death, and, if *245 the transfers to the daughter were properly in issue, the holding would have to be that they likewise were in contemplation of death. The record fails to show any purpose which the decedent might have had in making those transfers which would be inconsistent with the making of a transfer in contemplation of death. That is, no purpose for the transfers appears which would have to do with continuing life rather than impending death. On the contrary, there is affirmative evidence in the record indicating that these particular transfers were made in contemplation of death. The transfers were made shortly after the death of the decedent's wife. He was depressed and nervous following her death and was confined to his home for two months constantly attended by nurses. He revoked his will on the same day that he made these transfers by an instrument in the following terms:
Having previously*762 disposed of my personal property, I am this day disposing of my real estate, therefore leaving no will. Any will, or wills heretofore made by me are hereby revoked, nullified and made void.
The evidence as a whole certainly fails to show that the Commissioner erred in including the transfers of February 23, 1924, in the decedent's gross estate.
It is apparent from the foregoing discussion that there is a deficiency in estate tax and, consequently, it is necessary to consider the alternative issues raised by each petitioner. The alternative issues are the same in principle. Each petitioner contends that his liability as a transferee is limited to the tax upon the particular property received by him. There are numerous decisions, however, to the effect that the liability of transferees is joint and several, and that the liability of each transferee is limited only to the value of the transferred property received by that transferee. ; ; *763 .
There is no question about the values. This really disposes of all of the issues raised. However, there is another matter that demands discussion despite the fact that no issue is raised by the petitioners. The point is that the Commercial National Bank, Katherine F. Story, Thomas B. Story, and Nelson Story, Jr., are not liable as transferees because none of them received any property properly included in the decedent's gross estate. The property which came to three of those petitioners was property placed in trust by the decedent on December 14, 1923. It has already been held
1. Petitioner was president of the Saint Amour Co. throughout its life, and performed the duties of the office, but received no salary. not in contemplation of death. Thus he received no part of the *246 decedent's gross estate. Walter P. Story received property, properly included in the gross estate, exceeding in value, at the time of the decedent's death, the amount of the deficiency with interest.
Reviewed by the Board.
Decision of no transferee liability will be entered in the cases of the four petitioners, and decision*764 will be entered under Rule 50 in the case of Walter P. Story.
Footnotes
1. There is no error assigned that either the cash or the property transferred to the decedent's daughter was improperly included in the gross estate in determining the deficiency. ↩