*1336 Held that respondent erroneously included the value of the corpus of two trusts in decedent's taxable estate.
*286 The respondent determined a deficiency in estate tax of the above named decedent amounting to $35,147.52 and, after deducting from the deficiency certain allowable credits, he proposed for assessment against the petitioners the balance of such deficiency, namely, the sum of $7,029.50. The petitioners have paid the sum of $5,823.13 on account of this balance and the amount of deficiency remaining for redetermination in this proceeding is $1,206.38.
The question presented in this proceeding is whether or not in determining the deficiency the respondent erred by including in the value of the decedent's gross estate the value of the corpus of two certain trusts created by her during her lifetime.
The parties to the proceeding entered into a stipulation of facts, from which we find the material facts as follows.
FINDINGS OF FACT.
Mary Virginia Dunham, hereinafter called the decedent, died a resident of the city of Chicago*1337 and a citizen of the United States on the 15th day of February, 1928.
The said decedent left a last will and testament, which was duly admitted to probate by the Probate Court of Cook County, Illinois, wherein petitioners were appointed executors and letters were duly issued to them, and they been ever since and are now acting as such executors, except that one of said executors, Timothy F. Mullen, died on the 22d day of January, 1931, and that the said Lucy Belle Dunham is now the sole surviving executrix under the last will and testament of said decedent and is acting as such.
*287 The said petitioners in manner and form as required by law and the rules and regulations of the bureau of internal revenue, made return of the gross estate of said decedent, which the Commissioner, on the 18th day of October, 1929, finally determined the tax liability thereupon as follows:
| Gross estate | $1,932,323.80 |
| Deductions | 678,938.49 |
| Net estate | 1,253,385.31 |
| Tax | 68,770.82 |
| Credit for State inheritance tax paid | 55,016.66 |
| Tax less credit | 13,754.16 |
| Return tax less allowable credit | 6,724.66 |
| Amount proposed for assessment | 7,029.50 |
Since said determination the*1338 petitioners have paid upon said amount proposed for assessment, with the interest due at the time of said payment, $5,823.12, leaving the amount proposed for assessment $1,206.38.
The Commissioner, in determining said gross estate, incorporated therein the value of certain assets which were transferred to trustees by the trust agreements, copies of which are hereafter inserted, the agreed value of which at the time of the death of decedent aggregated $75,399.07. These assets were set forth in the return made by the petitioners, but were omitted by them from the gross estate as not taxable.
The tax determined, with the value of the assets transferred by said trusts omitted from the gross estate, after making the deductions allowable and the credit for the state inheritance tax paid, would be as follows:
| Tax determined | $62,738.90 |
| Credit for State inheritance tax paid | 50,191.12 |
| Tax less credit | 12,547.78 |
| Return tax less allowable credit | 6,724.66 |
| 5,823.12 |
which sum has been paid by petitioners, with all interest charges due at the time of payment.
The petitioners have, in strict conformity with the rules and regulations of the bureau of internal revenue, *1339 protested the incorporation by the Commissioner in the gross estate of said decedent of the amount of said trust assets and each of them, and the sole question in dispute in this appeal is whether the transfers created by said trusts of the aggregate value of $75,399.07 justifying the net amount of $1,206.38 tax bearing interest at the rate of 6 per cent per annum *288 from February 16, 1929, should be included in the gross estate of said decedent.
The facts, circumstances and amount of said trust transfers are as follows, viz:
(a) The said decedent on the 23rd day of July, 1917, delivered over and transferred to Allison W. Green, as trustee, certain assets the fair market value of which at the date of decedent's death, with the income accrued thereon to the date of the death, was $22,282.92, by and under the terms of a certain deed of trust in the following words and figures, viz:
DEED IN TRUST
THIS INDENTURE WITNESSETH, that the Grantor, MARY V. DUNHAM, a spinster, of the City of Chicago, County of Cook and State of Illinois, in and for the consideration of One Dollar to her in hand paid, the receipt whereof is hereby acknowledged, does hereby grant, remise and convey*1340 unto ALLISON W. GREEN, as Trustee, of the said City of Chicago, the following described real estate, to-wit, Lots Eighty-eight (88), Eighty-nine (89) and Ninety (90) in J. H. Dunham's Subdivision of the South Six Hundred Sixty-one (661) feet of the Southwest quarter (S.W. 1/4) of the Northeast quarter (N.E. 1/4) of Section Eleven (11), Township Thirty-eight (38) North, Range Fourteen (14) East of the Third Principal Meridian, together with all buildings and improvements thereon, situated in the City of Chicago, in the County of Cook and State of Illinos, hereby waiving and releasing all rights under and by virtue of the homestead exemption laws of the State of Illinois:
To have and to hold the said premises unto the said ALLISON W. GREEN, as Trustee, upon the following trusts, namely:
FIRST: To manage and lease the said premises (leases to be for terms not exceeding five years) and to collect the rentals thereof and after paying therefrom all taxes, insurance and cost of repairs and upkeep of said premises, to pay to me the net rentals thereof quarterly in each and every year during my life beginning November 1st, 1917.
SECOND: Upon my written request, to sell said premises*1341 and to invest the proceeds thereof and keep the same invested in first class interest bearing securities conformably to the laws of Illinois respecting trust funds and to pay to me the net income therefrom quarterly in each year during my life. Purchasers from said Trustee shall not be required to look to the application of purchase money. Said Trustee shall deduct from said net rentals or net income, the sum of Fifty Dollars per year for his services.
THIRD: To convey said premises upon my death, to my cousin, Lucy Belle Dunham in fee simple if she be then living. In the event of her death before my death, said Trustee shall convey said premises in fee simple to my cousins, Byron W. Dunham and Electa A. Dunham, in joint tenancy and not in tenancy in common or to the survivor of them. In the event said premises shall have been sold prior to my death, said Trustee shall upon my death, turn over and deliver the net proceeds thereof including any accrued income thereon, to said Lucy Belle Dunham, if she be then living, or in the event of her death before my death, to said Byron W. Dunham and Electa A. Dunham or to the survivor of them.
In the event of the death or resignation*1342 of said Trustee before my death, I hereby appoint the CHICAGO TITLE AND TRUST COMPANY, as his successor hereunder, with like title, rights, powers and authority as is hereby vested *289 in said Trustee, hereby conferring upon said successor in such event all the title, rights, powers and duties of my Trustee hereunder.
The foregoing instrument was duly executed and acknowledged.
(b) The said decedent on the 7th day of April, 1925, delivered over and transferred to Timothy F. Mullen, as trustee, certain assets the fair market value of which, at the date of decedent's death, with the income accrued thereon to the date of death, was $53,116.15, by and under the terms of a certain deed of trust in the following words and figures, viz:
KNOW ALL MEN BY THESE PRESENTS, That I, MARY VIRGINIA DUNHAM, of Chicago, Illinois, for the consideration of One Dollar ($1.00) and for other good and valuable considerations to me in hand paid, the receipt whereof is hereby acknowledged, do hereby assign, transfer, set over and deliver unto TIMOTHY F. MULLEN, of Chicago, Illinois, AS TRUSTEE, Ten Thousand Dollars ($10,000.00) in par value of United States Government First Liberty Loan 3 1/2%*1343 bonds of 1932-1947, now held by me and numbered as follows, to-wit: Nos. 9543, 9544, 9545, 9546, 24149, 74814, 74815, 74816, 74817 and 74818, each for One Thousand Dollars ($1,000.00); also Forty-two Thousand Dollars ($42,000.00) in par value of United States Government Third Liberty Loan 4 1/4% bonds of 1928, now held by me and numbered as follows, to-wit: Nos. 140361, 152137, 152191 and 152192, each for Ten Thousand Dollars ($10,000.00), and Nos. 994993 and 994994, each for One Thousand Dollars ($1,000.00), together with the unpaid coupons attached to all said bonds, all of said bonds and coupons and the income and avails thereof to be held by the said Trustee upon the following trusts, namely:
1. During the continuance of said trust to collect the interest upon said securities, as the same matures, and to collect the principal thereof whenever payable by their terms.
2. During my life to pay to me all the income from the trust estate, in semi-annual payments, as the same matures.
3. Upon my death, to transfer, turn over and deliver all the said trust estate, principal and interest, then remaining in the hands of said Trustee, to my cousin, Lucy Belle Dunham, as her sole*1344 and absolute property, whereupon said trust shall cease.
4. In case of the death of said Lucy Belle Dunham prior to my decease, then to transfer, turn over and deliver all the said trust estate, principal and interest, then remaining in the hands of said Trustee, back to me, free and clear of said trust, which shall thereupon wholly cease.
5. At any time during the continuance of said trust, the Trustee may collect, sell or exchange all or any of the bonds or securities belonging to said trust and reinvest the principal derived therefrom; but no such sale, exchange or reinvestment shall be made by said Trustee without first obtaining the written approval thereof by said Mary Virginia Dunham.
6. The said Trustee shall receive as compensation for his services the sum of One Hundred Dollars ($100.00) in each calendar year, but shall also be entitled to be reimbursed out of said fund for any and all taxes, expenses, costs, charges or attorney's fees to which the estate in his hands may be subjected, or for which he may become liable by reason of the existence of said trust.
7. In case of the death of said Timothy F. Mullen or of his resignation, refusal or inability to*1345 act as such Trustee, then Allison W. Green of Chicago, *290 Illinois, is hereby made his Successor in Trust, with the same title, rights, powers, duties and obligations as are hereby conferred upon and vested in said Trustee. During the lifetime of said Mary Virginia Dunham she may by a written appointment signed by her appoint a successor in trust hereunder, whenever a vacancy occurs in said Trusteeship. In case a Trust Company is made Trustee hereunder, it shall be entitled to its reasonable compensation for the performance of its duties as Trustee.
The foregoing instrument was duly executed and acknowledged in duplicate.
Lucy Belle Dunham, one of the parties named in the trust indentures herein previously referred to, survived the decedent, and the trust assets in each of the trusts were immediately after the death of the trustor turned over by each of the trustees to the said Lucy Belle Dunham in accordance with the directions in the respective trust indentures.
Notice of deficiency was mailed to said petitioners under date of October 18, 1929, and the petition was filed herein on December 14, 1929.
OPINION.
VAN FOSSAN: The respondent contends that, pursuant*1346 to section 302(c) of the Revenue Act of 1926, the corpus of the trusts created by the two instruments set forth in the findings of fact should be included in the decedent's gross estate for Federal estate-tax purposes, for the reason that the transfers of property were intended to take effect in possession or enjoyment at or after the decedent's death.
Section 302(c) of the Revenue Act of 1926 provides in part as follows:
SEC. 302. 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 -
* * *
(c) 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 or intended to take effect in possession or enjoyment at or after his death * * *.
There is no contention or suggestion in this proceeding that either of the trust instruments was executed and delivered in contemplation of death.
The tax imposed by section 302(c) of the Revenue Act of 1926 is an excise tax on the transfer of property by death. *1347 ; ; . The cited decisions discussed provisions of prior revenue acts substantially similar to the provisions of section 302(c), above quoted. Therefore, in accordance with the principles *291 enunciated in these decisions, if the decedent, by the execution and delivery of the trust instruments, divested herself fully, completely and irrevocably of all interest in the corpus of the trust which might inure to her benefit, no interest remained in her which was transferable because of her death. , and decisions therein cited.
In neither of the trust instruments is there any reservation to the settlor of the power to revoke or alter the trusts. It is true that in each of them the settlor reserved a certain power of management. In the one case the trustee was required, upon the written request of the trustor, to change the capital of the trust from real property to personal property. In the case of the other trust, the trustee could not sell or exchange the securities*1348 constituting the corpus of the trust or reinvest the proceeds of a sale thereof without the written approval of the settlor. These reserved powers of management did not, however, "save to the decedent any control over the economic benefits or the enjoyment of the property" the shifting of which is the subject of the tax. ;
Each trust instrument provided for the payment of the net income of the trust to the decedent during her life. A similar provision was included in the trust discussed in , in which the court held that the trust was not testamentary in character and that at the time of the trustor's death no interest under the trust passed from the settlor to the living and that title to the property in trust had been definitely fixed by the trust deed. It is equally true that no interest under the trusts involved in this proceeding passed to the living from the decedent at the time of her death.
We are not impressed by the contention that the transfers effected by the execution and delivery of the trust instruments*1349 were contingent. It is unimportant that under one of the instruments the corpus of the estate transfered would revert to the settlor in the event that the named beneficiary predeceased her. It is also unimportant that the other of the two trusts provided for alternate beneficiaries in the event that the first named beneficiary predeceased the trustor. Prior to her death she had disposed of the corpus of the trusts completely and during her life no power which she could lawfully exercise under the trust instruments could have caused the properties thereby conveyed and transferred to revert to her.
In accordance with the foregoing, we are of the opinion that the corpus of the two trusts should not be included in the decedent's gross estate for Federal estate-tax purposes.
Decision will be entered under Rule 50.