*165 Decision will be entered under Rule 50.
In 1943 decedent, who then owned and held title to three tracts of real property, transferred one tract to each of three of his children by quitclaim deed, his wife joining in the deeds and releasing her inchoate dower. Simultaneously, each of the three transferees executed an annuity obligation undertaking to pay the decedent, then 82 years old, an annuity of $ 1,000 for his life and a further annuity of $ 1,000 to his wife, should she survive him. Each also simultaneously executed, in accordance with the decedent's requirements a $ 5,000 note secured by mortgage on the transferred property, and these notes were delivered to another son of the decedent. Held:
(1) These were transfers for an inadequate consideration in money or money's worth and to the extent the value of the property exceeded the value of the consideration received by the decedent they were taxable as completed gifts under section 1002, I. R. C.
(2) No reduction in value of the decedent's gifts is to be made by reason of the decedent's wife's joining in the deeds to release her inchoate dower.
(3) No reduction in the value of the property transferred is to be made*166 on account of the contingent annuities payable to the decedent's wife, and the respondent's valuation of the annuities payable to the decedent in accordance with Table A, section 86.19, Regulations 108, is not shown to be erroneous.
(4) The transfer by the decedent of the three $ 5,000 notes to his fourth son constituted a separate, completed gift by the decedent, taxable as such.
*1074 This proceeding involves a gift tax deficiency for 1943 in the amount of $ 16,196. One adjustment to the valuation of property which the Commissioner made in determining the deficiency has been conceded by the petitioner. Several issues remain for decision, all in connection with the transfers of three tracts of real estate by Koert Bartman to his children. The first is whether any of these gifts was complete so as to be subject to tax. Another is whether his wife made a gift of her inchoate dower by joining with him in the deeds and, if so, the value thereof. A third question is as to the valuation of annuities payable by the donees. A fourth is whether the total value*168 of the gifts should be reduced by the amount of notes and mortgages executed by the donees in favor of one of their brothers at the time they received the deeds to the realty.
FINDINGS OF FACT.
Koert Bartman (hereinafter called decedent), to whom the notice of deficiency was mailed and who filed the petition herein, died testate January 19, 1948, a resident of New Holland, Illinois. Koert Bartman, Jr., son of the decedent, was appointed executor of his estate on March 25, 1948. The decedent's gift tax return for 1943 was filed with the collector of internal revenue for the eighth district of Illinois.
On November 27, 1943, decedent resided with his wife, Sunkea Bartman. He was then 82 years of age, having been born April 8, 1861, and she was 77 years of age, having been born August 28, 1866. She died July 14, 1946. In 1943 decedent and his wife had the following sons and daughters, all residents of New Holland, Illinois: Sunkea Deiss, Jennie Kopp, Margaret Post, Redmer Bartman, Fannie Bartman, Amke Bartman, and Ralph Bartman.
On November 27, 1943, decedent transferred by gift separate tracts of farm land to his children, Sunkea Deiss, Jennie Kopp, Margaret Post, and Redmer Bartman. *169 The aggregate value of these gifts was in the amount of $ 79,975. On the same date decedent transferred separate tracts of farm land to 3 of his other children, Fannie, Amke, and Ralph Bartman, each tract containing 160 acres, with a value of $ 200 per acre, or $ 32,000 for each tract, and a total of $ 96,000 for the 3 tracts.
All seven of the foregoing transfers were made by decedent by quitclaim deeds, which were also signed by his wife, Sunkea Bartman. Each of the deeds released and waived all rights of the decedent and his wife under or by virtue of the homestead exemption laws of Illinois. Decedent's wife had an inchoate right of dower in each of these properties prior to the execution of the deeds. Before the transfers, decedent owned and had legal title to the properties, and his wife's sole interest, if any, therein was her inchoate right of dower. By joining *1075 in the deeds she released her inchoate right of dower in and to each of the premises described therein.
On November 27, 1943, Fannie, Amke, and Ralph Bartman each executed an instrument designated as an "Annuity Obligation." In the case of Fannie Bartman, after describing the real estate conveyed to her*170 by quitclaim deed, the material portion of the annuity obligation provided as follows:
Now, Therefore, in consideration thereof, the undersigned, Fannie Bartman, hereby covenants and agrees to pay to Koert Bartman during his lifetime an annuity of One Thousand Dollars ($ 1000) payable on or before March 1st of each year commencing March 1, 1945, and in case Sunkea Bartman shall survive her husband, Koert Bartman, then such payment shall continue to be made to her during her lifetime with an apportionate part payable to her estate up to the date of her death.
It Is Further Agreed that all such payments hereunder are expressly made a lien on the above-described premises and growing crops thereon, and in case default shall be made in the payment of any annuity as same becomes due, then such lien may be enforcible by proceeding either in law or equity.
The obligations under this agreement shall extend to and be binding on the heirs, executors, administrators or assigns of the undersigned.
The material provisions of the annuity obligation were identical in the instruments executed by Amke and Ralph Bartman.
At the same time on November 27, 1943, Fannie, Amke, and Ralph Bartman each signed*171 a note and mortgage in the amount of $ 5,000 each, encumbering with the lien of mortgage the land conveyed to them. The notes were made payable to the makers and endorsed by the makers. They were dated November 27, 1943, bore interest at 4 percent, and were payable on or before one year after the death of the survivor of Koert and Sunkea Bartman. These notes were delivered to Koert Bartman, Jr., on the date they were executed.
The plan requiring the mortgage notes to be executed by the transferees of the three tracts and delivered to Koert, Jr., was originated by the decedent, who felt that Koert, Jr., already had enough land in his own right and who wanted to make provision for him in a different manner. Koert, Jr., has received no interest or principal payments on the note executed by Ralph. Amke has made payments on her note to him to date. Fannie made one interest payment and one principal payment of $ 2,000 on her note on November 27, 1944. The fair market value of each of the notes delivered to Koert, Jr., on the date of gift, November 27, 1943, was $ 5,000.
In his gift tax return for 1943 decedent reported as taxable gifts for that year each of the transfers to Sunkea*172 Deiss, Jennie Kopp, Margaret Post, and Redmer Bartman, and included therein the full amount of each of said properties. However, the farm land transferred to Margaret Post was erroneously reported at a value of $ 75 per acre, a total of $ 12,000, whereas the correct fair market value of the land was $ 100 *1076 an acre, a total of $ 16,000 as determined by the Commissioner in his deficiency notice.
The transfers to Fannie, Amke, and Ralph were not included by decedent in his return as taxable gifts, although these transfers and the values thereof were set out in a schedule attached to the return.
No gift tax return for 1943 was ever filed by or on behalf of decedent's wife, Sunkea Bartman.
Respondent determined that the transfers to Fannie, Amke, and Ralph had been made by decedent for less than an adequate and full consideration in money or money's worth, and that such transfers were taxable gifts to the extent the value exceeded the consideration received by the decedent. The Commissioner determined that the value of each of said gifts was in the amount of $ 28,797.42, or an aggregate amount of $ 86,392.26.
The determined value of $ 28,797.42 for each of the gifts to Fannie*173 Bartman, Amke Bartman, and Ralph Bartman was computed by the Commissioner as follows:
| Value of land transferred | $ 32,000.00 |
| Less: Value of annuity payable to petitioner (aged 82) for | |
| life, $ 1,000 x $ 3.20258 | 3,202.58 |
| Value of each gift | $ 28,797.42 |
The value as of November 27, 1943, of the annuity of $ 1,000 payable annually to petitioner (aged 82) for life was determined by the Commissioner in accordance with section 86.19 (f) of Gift Tax Regulations 108 and under Table A thereof, by application of the factor of 3.20258, which is the factor set forth in Table A for computing the value of an annuity payable for the life of a person aged 82.
In determining the deficiency, the Commissioner allowed only seven exclusions of $ 3,000 each, or a total of $ 21,000.
OPINION.
Petitioner's first argument is that none of the gifts in issue was complete so as to occasion the incidence of gift tax. Reliance is placed upon Mabel G. Adams, 44 B. T. A. 1091, and Elizabeth S. Hettler, 5 T.C. 1079">5 T. C. 1079, and in an attempt to bring this case within the scope of those, evidence was presented by petitioner with respect to the gross*174 and net income, in comparatively small amounts, derived from the farming operations on the three gift tracts during the first two or three years after the gifts. The petitioner's point is that, by means of the annuity obligations executed by the three donees of the tracts, the decedent retained a right of invasion of the gift to the full extent, or to revest the freehold in himself through forfeiture.
The Adams and Hettler cases are readily distinguishable on their facts. In Adams the various powers and rights retained by the trustor *1077 were so extensive that they might easily consume the entire corpus of the trust. In Hettler the transferee was unable to pay the agreed annuity from his separate estate. The transferred property did not produce sufficient income for that purpose, and neither the transferor nor the transferee intended that the trust corpus should be used to pay the annuity. The parties did intend that there should be an immediate default in the annuity payments, which is exactly what happened, so that the transferor would at once have power, as reserved in the trust instrument, to revest the entire trust property in herself. No such showing*175 appears in this case. The annuity obligations were the personal obligations of the transferees. They were not limited to payment either from the transferred properties or from the income to be derived from the operation of such properties. The obligations to pay the annuities existed regardless of whether the properties produced any income or whether the transferees sold or otherwise disposed of such properties. It does not appear that any of the transferees was unable to pay the annuities.
The mere fact that for security purposes the annuity obligation was made a lien on the property does not negative the completeness of the gift; nor does it, under the facts here present, amount to a power in the decedent to revest title to the property in himself or to change the beneficial enjoyment thereof. At most, the lien would protect the annuity only to the extent of the unpaid balance, and the deduction of the value of the annuity gives adequate recognition to that fact. It is only to the extent of the excess of the value of the transferred property over the value of the consideration received by the decedent that the transfer is taxed as a gift under section 1002 of the Internal *176 Revenue Code. We hold that to that extent the properties transferred were put beyond the dominion and control of the decedent and were completed gifts. Smith v. Shaughnessy, 318 U.S. 176">318 U.S. 176; Robinette v. Helvering, 318 U.S. 184">318 U.S. 184; Estate of Sarah A. Bergan, 1 T. C. 543; Daisy B. Plummer, 263">2 T. C. 263; Regulations 108, sec. 86.3.
We shall not dwell upon the petitioner's second point, that the decedent's wife, by joining in the deeds, made a gift of her inchoate dower rights, and that the value thereof should be deducted in determining the amount of the decedent's gifts. It is recognized in the petitioner's brief that Correlia Mason Thompson, 37 B. T. A. 793, is a direct ruling to the contrary; and, while we have carefully considered petitioner's elaborate arguments in this connection, we adhere to the ruling in that case. See also Hopkins v. Magruder, 34 Fed. Supp. 381; cf. Frank J. Digan, 35 B. T. A. 256. This makes unnecessary a consideration of the further *177 problem as to whether such inchoate right of dower is susceptible of actuarial valuation, though because of the many contingencies other than survivorship (see Illinois Revised Statutes, ch. 3, secs. 18-25) through which the right may be barred or defeated, there would *1078 seem to be equally as much difficulty in the way of an actuarial valuation as there was in valuing the "contingent reversionary remainder" involved in Robinette v. Helvering, supra.
We next come to the question as to how much the value of the gift properties should be reduced on account of the annuities payable by the donees; in other words, by how much did the value of the property exceed the consideration received by the decedent. Petitioner is of the view that the value of the annuities to both the decedent and his wife, Sunkea Bartman, in case she survived him, should be deducted. The respondent took into account only the value of the annuities to the decedent and did not deduct the value of the contingent annuities payable to his wife. Practically the only argument the petitioner makes on brief is that the respondent's method is "wholly indefensible as a matter of*178 fact and law." We do not agree. The gift tax is an excise imposed, not upon the receipt of property by various donees, but upon the donor's act of making a transfer; and it is measured by the value of the property passing from the donor. Regulations 108, sec. 86.3. The contingent annuities to Sunkea Bartman were not consideration flowing to the decedent. Their value, whatever it might be, was a value which passed irrevocably from the dominion and control of the decedent. It would go to decedent's wife only if she survived him; otherwise it would be retained by the children. In no event would it revert to the decedent. The annuities for his own life were all that he would get. We accordingly hold that no deduction should be made on account of the contingent annuities for the decedent's wife.
The respondent's valuation of the annuities payable to the decedent for his life ($ 3,202.58 for each of the three annuities) was based upon Table A following section 86.19 of Gift Tax Regulations 108, which in turn is predicated upon the Actuaries' or Combined Experience Mortality Table, as extended, with interest at 4 per cent. Petitioner contends for a valuation of $ 3,788 based on *179 the Combined Annuity Mortality Table at 3 per cent interest. Petitioner also produced evidence of computations under the U. S. Life Tables of 1939-1941 -- Forecast (1943) at 2 1/2 per cent and 3 per cent interest, showing respective valuations of $ 3,647 and $ 3,573, and under the U. S. Life Tables 1939-1941 (Total Whites-Makehamized) with interest at 2 1/2 per cent and 3 per cent, showing respective valuations of $ 3,503 and $ 3,432. An actuarial expert called by the petitioner testified that the Combined Annuity Mortality Table would be his first choice for valuing the annuities in question, and that the U. S. Life Tables would be his second choice, because these tables were more recent than the Actuaries' or Combined Experience Mortality Table. He also testified that the Combined Annuity Mortality Table was designed especially to fit the particular needs of insurance companies, though *1079 it had a wider utility, and that insurance companies are now using 2 1/2 or 3 per cent interest in their calculations.
Respondent also called an actuarial expert as his witness, who testified that the tables used by the petitioner's experts were used principally by commercial life insurance*180 companies for writing annuities and were not suitable for use in valuing such annuities as those here involved; that insurance companies take into consideration the element of self selection in writing annuities; and that they use whatever tables are best suited for their particular needs. He further stated that 16 states use the Actuaries' or Combined Experience Mortality Table for inheritance tax calculations; that no state uses the Combined Annuity Mortality Table for such purposes; that Table A in the Commissioner's Regulations is the most suitable for the purpose of valuing annuities like those here involved; that the value determined by the Commissioner was liberal in petitioner's favor, because if proper adjustment were made for the decedent's exact age and for the fact that the first payment under the annuity is deferred approximately 15 months, the value of each annuity would not exceed $ 2,853.12.
Petitioner cites Anna L. Raymond, 40 B. T. A. 244, in support of the valuation contended for by petitioner. In Estate of Charles H. Hart, 1 T. C. 989, however, we approved the use of the Commissioner's table to compute*181 the value of a private annuity, pointing out that, though there was evidence that it would cost more to purchase the annuity from an insurance company, the estate tax regulations differentiate between annuities issued by insurance companies and all other annuities. The same is true of the gift tax regulations. Regulations 108, sec. 86.19 (f) and (i). See also Estelle May Affelder, 7 T. C. 1190; Estate of Sarah A. Bergan, supra; cf. Henry F. Dupont, 246">2 T. C. 246; Daisy B. Plummer, supra.We think the petitioner here has not proved the respondent's valuation to be erroneous, and we accordingly hold that the value of each annuity to the decedent was $ 3,202.58, as the respondent has determined.
The final question is whether there should be a reduction in the value of the decedent's gifts because of the $ 5,000 note and mortgage executed by each donee of the land. Respondent made no allowance for these items in his determination, and on brief he contends that it is unnecessary to do more in valuing the decedent's gifts than to take the value of the real*182 property passing from him, less the consideration flowing back to him in the form of the annuity for his life. Petitioner contends that these three notes and mortgages, totaling $ 15,000, were carved out of the decedent's transfers as a separate gift in future to Koert Bartman, Jr., but that not until the notes are paid is the gift complete, relying upon G. C. M. 16460, XV-1 C. B. 369. We agree *1080 with the petitioner's view that the notes and mortgages were a separate gift to Koert, Jr. That is clearly the substance of the transaction. The evidence shows that decedent's intention was to make a separate gift to Koert, Jr., and that, since Koert, Jr., already had sufficient land in his own right, decedent wanted to provide for him in a different way. We do not agree, however, with the contention that the gift was not complete when made. G. C. M. 16460 deals with a gift of a donor's own note or check and holds that the gift is not complete until the note or check is paid, negotiated, or transferred for value. It obviously has no application here, where the decedent transferred to Koert, Jr., not the decedent's own notes*183 and mortgages, but those of the grantees of the land. We think there can be no question but that the gift to Koert, Jr., was complete when made and subject to the gift tax. Indeed, the parties have stipulated that the value of each of the notes was $ 5,000 on November 27, 1943.
We hold, therefore, that the respondent did not err in failing to reduce the amount of the decedent's gifts by the value of these three notes and mortgages. He should, however, have allowed one additional exclusion of $ 3,000 for the gift to Koert, Jr. With this modification we approve his determination.
Decision will be entered under Rule 50.