*70 Decision will be entered for the respondent.
By separate fee simple deeds, executed and recorded in 1938, decedent purported to convey certain improved properties to each of three grandchildren, as gifts. The deeds were not delivered to the donees, nor were they informed of the alleged transfers in 1938. Thereafter, decedent collected the rents and profits from the properties, paid the taxes thereon, made repairs thereto, and took the income and expenses into account in his income tax returns for each year until his death in 1946. Respondent included the value of these properties in decedent's gross estate. Held, the alleged transfers in 1938 did not divest decedent of his ownership of the properties, and respondent properly included the value thereof in decedent's gross estate under section 811 (a), I. R. C.
*579 This case involves a deficiency in estate tax in the amount of $ 17,112. The issue is whether the value of certain properties transferred by decedent to three grandchildren in 1938 are includible in the gross estate.
Some of the facts are stipulated.
FINDINGS OF*72 FACT.
The stipulated facts are so found and are incorporated herein.
The petitioner is the surviving executrix of the estate of John W. Mortimer, deceased. The estate tax return was filed with the collector of internal revenue for the first district of Pennsylvania, at Philadelphia, Pennsylvania.
The decedent, John W. Mortimer, died April 14, 1946, a resident of Philadelphia, Pennsylvania.
During his lifetime, the decedent, by indenture dated April 12, 1938, and recorded in the Office of the Recorder of Deeds in and for the County of Philadelphia, on April 14, 1938, in Deed Book D. W. H. No. 332, page 253, &c., granted and conveyed premises 2129, 2131, 2133 Stenton Avenue, to John W. Mortimer, his grandson, in fee simple.
*580 The decedent, by indenture dated April 12, 1938, and recorded in the Office of the Recorder of Deeds in and for the County of Philadelphia, on April 14, 1938, in Deed Book D. W. H. No. 332, page 237 &c., granted and conveyed premises 2146, 2150, and 2152 Stenton Avenue, to Robert Mortimer, his grandson, in fee simple.
The decedent, by indenture dated April 12, 1938, and recorded in the Office of Recorder of Deeds in and for the County of Philadelphia, *73 an April 14, 1938, in Deed Book D. W. H. No. 332, page 245 &c., granted and conveyed premises 2132 and 2144 Stenton Avenue and 5413 Rutland Street, to Edith Quimby, his granddaughter, in fee simple.
The aforesaid grandchildren were children of a deceased son, Michael Mortimer.
At the time of the aforesaid conveyances, the decedent was active in the control and management of his various business interests.
The decedent filed a gift tax return for the calendar year 1938 with the collector of internal revenue for the first district of Pennsylvania, on March 15, 1939.
In this return the decedent reported two gifts of real estate, the first being a gift of real estate to his son, John Mortimer, said realty being being valued in the return at $ 12,410. The second gift was to his daughter, Margaret Lillian Seifert and George Louis Seifert, her husband. This gift was valued in the return at $ 28,600.
The gift tax return for the calendar year 1938 reported the amount of gifts for said year as being in the amount of $ 31,010. The specific exemption claimed in the return was $ 31,010. The amount of net gifts reported in the return was none. There was no gift tax reported on the return as*74 being due.
The conveyances to the decedent's grandchildren were not reported in said gift tax return for the calendar year 1938.
On January 16, 1940, the decedent filed a gift tax return for the calendar year 1938, in which return he reported the aforesaid conveyances to his grandchildren, as gifts.
The gift tax return of the decedent was investigated by a revenue agent, who made his report on his investigation on February 17, 1941. The revenue agent included in net gifts the conveyances by the decedent to his grandchildren and made other adjustments summarized as follows:
In view of the foregoing facts disclosed during investigation, it is concluded there was no gift tax due as per summary of transfers made, outlined below: *581
| Donee | Subject of gift |
| 3247-9 Kensington Ave | |
| John Mortimer (son) | Braddock St. property |
| 2129 Stenton Ave | |
| John W. Mortimer (grandson) | 2131 Stenton Ave |
| 2133 Stenton Ave | |
| 2146 Stenton Ave | |
| Robert Mortimer (grandson) | 2150 Stenton Ave |
| 2152 Stenton Ave | |
| 2132 Stenton Ave | |
| Edith Quimby (nee Edith Mortimer) | 2144 Stenton Ave |
| (granddaughter) | 5413 Rutland Ave |
| Margaret M. Seifert (granddaughter) | |
| and Dr. Geo. L. Seifert | 4126-8 Parkside Ave |
| Edith Hazel Holst (granddaughter) | |
| and Thomas C. Holst | 3024 "E" St |
| Total | |
| (Donor in gift tax return filed claimed | |
| $ 31,010 as applicable against the | |
| specific exemption) | |
| Amount of net gifts for year 1938 | |
| subject to tax |
| Included | |||
| Donee | Value | Exclusion | amount of |
| gift | |||
| $ 12,410 | $ 7,410 | ||
| John Mortimer (son) | $ 5,000 | ||
| 1,800 | 1,800 | ||
| 3,000 | |||
| John W. Mortimer (grandson) | 3,000 | 5,000 | 4,000 |
| 3,000 | |||
| 3,000 | |||
| Robert Mortimer (grandson) | 3,000 | 5,000 | 4,000 |
| 3,000 | |||
| 3,000 | |||
| Edith Quimby (nee Edith Mortimer) | 3,000 | 5,000 | 4,000 |
| (granddaughter) | 3,000 | ||
| Margaret M. Seifert (granddaughter) | |||
| and Dr. Geo. L. Seifert | (1) | (1) | (1) |
| Edith Hazel Holst (granddaughter) | |||
| and Thomas C. Holst | (2) | (2) | (2) |
| Total | $ 41,210 | $ 20,000 | $ 21,210 |
| (Donor in gift tax return filed claimed | |||
| $ 31,010 as applicable against the | |||
| specific exemption) | 21,210 | ||
| Amount of net gifts for year 1938 | |||
| subject to tax | None |
On February 3, 1941, the decedent executed an affidavit in connection with the revenue agent's examination of his gift tax return for 1938, which, after reciting the conveyances to his three grandchildren in 1938, stated in part as follows:
That he did not file a Gift Tax Return *76 on the above three gifts [to the three grandchildren] for the reason that the information that the gifts had been made was not communicated to the said donees, nor are they aware up to the time of making this affidavit that they hold the record title to these properties and that the donor as beneficial owner of the said properties continued to collect the rents of same.
The decedent continued, up until the time of his death, to collect the rents and profits from the afore-mentioned properties and reported as income the said rents and profits in his individual income tax returns for each taxable year, up until the time of his death. No accounting was ever made to the grandchildren, by either the decedent or the executors of his estate, for the said rents.
On April 16, 1945, the decedent executed a new will, which was eventually probated, paragraph 4 of which reads as follows:
4. I give and bequeath unto each of my three grandchildren, ROBERT, JOHN WILLIAM and EDITH, who are the children of my deceased son, MICHAEL H. MORTIMER, the sum of FIVE ($ 5.00) DOLLARS.
I make no further provisions for these grandchildren for the reason that I have conveyed to them by way of gift during my lifetime*77 each three clear properties in the City of Philadelphia, subject, though not expressed in said deeds, to my right to collect and enjoy the rents of these properties during the whole term of my natural life.
*582 Paragraph 4 was inserted in decedent's will in an effort to protect his estate from any claims by his grandchildren for the rents that decedent had collected from the properties from 1938 to the date of decedent's death.
The decedent paid the local taxes on and made repairs to the nine pieces of property after 1938. He claimed the tax payments and the cost of repairs as deductions on his annual income tax returns.
At the time the decedent conveyed the properties to his three grandchildren, he owned approximately sixty separate parcels of real estate in the city of Philadelphia, Pennsylvania.
At the time the decedent died the value of the nine properties conveyed to his grandchildren was $ 62,000.
Decedent made no valid gifts of the nine parcels of real estate to his three grandchildren in 1938. The value of the nine properties should be included in decedent's gross estate.
OPINION.
Petitioner seeks to turn the issue upon that portion of section 811 (c), I. R. C., *78 which deals with transfers of property, by trust or otherwise, where the decedent has retained (1) the possession or enjoyment of, or the right to the income from, the property, or (2) the right to designate the persons who shall possess or enjoy the property or the income therefrom. Petitioner contends that the deeds in fee simple contained no such reservations in decedent's favor but operated absolutely to divest him of all of the incidents of ownership.
The basic question goes much deeper than petitioner's arguments, which are bottomed upon an assumed transfer of the properties in fee in 1938. We think the facts establish that decedent never completed the inter vivos gifts. If the gifts were not completed, decedent remained the owner of the properties until his death, and the value thereof is includible in his gross estate under section 811 (a), I. R. C.
In Edson v. Lucas (C. A. 8, 1930), 40 F. 2d 398, the requirements necessary to constitute a valid gift inter vivos were listed as follows: (1) a donor competent to make the gift; (2) a clear and unmistakable intention on his part to make it; (3) a donee capable of taking the gift; (4) a *79 conveyance, assignment, or transfer sufficient to vest the legal title in the donee, without power of revocation at the will of the donor; and (5) a relinquishment of dominion and control of the subject matter of the gift by delivery to the donee. See also, Visintainer v. Commissioner (C. A. 10, 1951), 187 F. 2d 519, 522-523; Linwood A. Gagne, 16 T. C. 498 (1951).
In Henry F. Jaeger, Executor, 33 B. T. A. 989, affd. 88 F. 2d 1011 (1936), we considered whether decedent had made a completed gift inter vivos. After holding that decedent had no present intention *583 of making completed gifts effective at the time of delivery of the stock certificates to his son, we pointed out that it was not shown that there was any acceptance of the gifts by the donees, actual or constructive, at least until after decedent's death, that the daughters were not informed of the transfers, and that there was no showing of complete relinquishment by decedent of dominion and control of the property. On the contrary the decedent received and appropriated to his own use all dividends*80 from the stock until his death, and exercised control over the voting of the stock by proxies given to his son. We held that the property was properly included in the decedent's gross estate.
The decedent in this case had no clear and unmistakable intention to make completed gifts to his grandchildren in 1938. He did not relinquish dominion and control over the subject matter of the gifts to the donees at any time prior to his death. All that he did was to execute fee simple deeds in their favor and have the deeds recorded in their names. But there was no conveyance, assignment, or transfer of the real properties sufficient to vest legal title in the donees, for it is a fundamental principle of law that a deed to be operative must be delivered; it is delivery that gives the deed force and effect. 16 American Jurisprudence 499, section 111, and cases there cited. Furthermore, before there can be a completed delivery of a deed, which will become operative as a conveyance of title, the donee or grantee must accept. Id. p. 523, sec. 153. Here, the donees could not accept the gifts for they had no knowledge of the execution of the deeds, the recordation of the deeds, or that*81 decedent had any intention of giving them the properties.
Finally, petitioner has no basis in law for contending that decedent's deposit for recording of the deeds constituted delivery, for there can be no effectual delivery to the donees where the grantor expressly instructs the recorder to redeliver the deeds to him; and it is a fair assumption here that decedent in effect gave such instructions, for otherwise the donees would have acquired knowledge of the alleged gifts. Id. p. 513, sec. 135.
In addition to the foregoing principles of law, it is undisputed that decedent exercised rights with respect to the nine parcels of realty which normally are associated with full and complete ownership. His attorney testified that he continued to collect the income from the properties, used the income for his own purposes, and reported it on his income tax returns as his income. He made repairs to the properties and took deductions therefor on his tax returns. He claimed depreciation on his other real estate properties, and presumably took depreciation on the properties in question. His treatment of the properties is completely inconsistent with the claimed and usual divestiture of all*82 right, title and interest that accompanies a fee simple *584 conveyance. On the facts and on the law there can be but one conclusion -- decedent did not, nor did he intend to, transfer the properties to his grandchildren by way of gifts. The fee simple deeds retained by decedent effected no divestiture of decedent's rights of ownership in the properties and the value thereof was properly included in the decedent's gross estate.
In this view of the question presented, it is unnecessary to discuss petitioner's interpretation of section 811 (c) of the Internal Revenue Code, as amended.
Decision will be entered for the respondent.