*1018 Petitioner entered into an antenuptial agreement with his intended wife in which she released all rights which she might acquire by marriage in certain stock which he owned, and other statutory rights. In return for her relinquishment of those rights, petitioner transferred to her two annuities and an interest as tenant by the entirety in two parcels of real estate. Held, that such release was "adequate and full consideration in money or money's worth" under section 503 of the Revenue Act of 1932 and the transfers are not subject to gift tax.
*263 In this proceeding petitioner asks redetermination of a deficiency in gift taxes asserted against him for the year 1937 in the sum of $2,056.92. An alleged overpayment of gift tax for the year 1937 in the amount of $4,641.60 is also involved.
The sole issue before the Board is whether or not certain properties transferred by petitioner to his wife upon marriage were gifts subject to gift tax.
FINDINGS OF FACT.
Petitioner is an individual residing in Foxboro, *1019 Massachusetts. He was born May 3, 868.
Since the organization of the Foxboro Co., hereinafter referred to as the company, in 1914, petitioner has been treasurer of the company. The company is engaged in the manufacture of indicating, recording, and controlling instruments for industrial purposes. Most of its capital stock has been owned by petitioner's family since its inception. It was organized as the successor of a corporation engaged in a similar business and having the same ownership.
*264 At one time substantially all the capital stock of the company was owned by petitioner's father, petitioner, and his brother. Three-fifths of the shares owned by the family were owned by the father. Petitioner and his brother each owned a fifth portion of the stock.
Before the father died, he transferred title to one of his fifths of the capital stock to petitioner, another to petitioner's brother, and one to petitioner's two sisters. The voting rights to the fifth part given to the sisters were granted to petitioner and his brother, or the survivor of them. The father received the dividends on the shares formerly owned by him as long as he lived. After his death, the*1020 dividends on the fifth portion transferred to the sisters were paid to them.
In 1937, petitioner and his brother controlled more than 85 percent of the company's stock. The remainder of the shares was owned in small amounts by employees of the company. In August 1937 petitioner was the owner of 130,230 shares of the company's stock, which he valued at $6 a share. He owned a winter residence in Foxboro, Massachusetts, worth $15,000, and a summer residence in Falmouth, Massachusetts, valued at $19,000. He also owned certain other real estate and securities of much less value than his stock in the company.
Petitioner's first wife died in 1930. Six children were born of petitioner's first marriage, all of whom were married, had families, and were living at the date of the hearing.
Petitioner's only son is now assistant treasurer of the company. Petitioner's brother also has a son, who is now vice president and general manager of the company.
Petitioner became engaged to marry Agnes S. Thompson. Miss Thompson was born December 18, 1884. In 1937, during the period of their engagement but before their marriage, petitioner consulted his personal attorney, who was acquainted*1021 with petitioner's various properties and knew the value of his real estate holdings. It has always been the intention of petitioner and his brother to keep the control of the company within their family. With this in mind, petitioner obtained his attorney's advice concerning the effect of his intended marriage upon the family plan to retain control of the company. The attorney informed petitioner that in the event of his death, under the laws of Massachusetts, his widow would acquire a one-third interest in all his property.
Petitioner's personal attorney informed him that it would be possible to transfer other property to his wife in lieu of her statutory interests. The attorney advised him that the desired result could be accomplished by a will executed by him and assented to by Agnes S. Thompson, plus a transfer of certain other property to her. Petitioner and his attorney discussed the matter with Agnes S. Thompson. *265 She agreed to accept two annuities and an interest in two pieces of real estate as tenant by the entirety in lieu of any interest which she might have otherwise acquired in the company's stock.
Petitioner's attorney, accordingly, prepared a will*1022 for petitioner which contained the following provisions:
* * * in contemplation of marriage to the below named AGNES S. THOMPSON do make, publish and declare this my LAST WILL, * * *
* * *
* * * I hereby give, bequeath, devise and appoint all of my estate * * * as follows:
FIRST: All my own stock in THE FOXBORO COMPANY, a corporation organized under the laws of Massachusetts, and also any other stock of said corporation over which I may at my decease have any power of appointment or disposal enabling me so to do, I hereby give, bequeath and appoint to my son REXFORD A. BRISTOL and to THE FOXBORO NATIONAL BANK OF FOXBOROUGH, of said Foxborough, jointly; but in trust, nevertheless, upon those terms and conditions of trust which are hereinafter set forth in the "FIFTH" clause of this will.
SECOND: One third part of all such of the rest, residue and remainder of my estate as may remain after and exclusive of the stock of THE FOXBORO COMPANY mentioned in and to pass under the "FIRST" clause of this will I give, bequeath, devise and appoint to my intended wife, the said AGNESS THOMPSON, now of Norfolk in said County of Norfolk, absolutely and free of all trusts, as, and to be*1023 taken by her as, her full share (including what might otherwise be decreed to her by way of any so-called "widow's allowance") in or to my estate.
The "Fifth" clause of the will established a trust to continue during the life of the petitioner's son. Upon his death the corpus was to be distributed to the petitioner's children or their heirs.
The will was executed by petitioner on August 24, 1937. Agnes S. Thompson's signature appears on each page of the will for purposes of identification. She executed an acknowledgment of the will dated August 24, 1937, which was attached to the will and reads as follows:
Acknowledging that the foregoing will of BENNET B. BRISTOL has been made by him in contemplation of our intended marriage, each to the other, and that the provisions for my benefit contained in such will have been made in such contemplation, I, AGNES S. THOMPSON of Norfolk, Massachusetts, do hereby (1) consent to such will, and (2) except in the case of subdivisions (b)(c)and (d) hereof, subject to and conditioned upon the final allowance of such will, also agree with the said BENNET B. BRISTOL, and also with MARY LOUISE VINCENT, HELEN R. FULLER, REXFORD A. BRISTOL, PAULINE*1024 R. WALSH, MARGARET R. CARLETON and EVELYN R. BRABSON (they being the six children of the said Bennet B. Bristol), and with each of them and with their respective heirs, executors and administrators, that I will not (a) file in any probate court any waiver of the provisions for my benefit contained in such foregoing will, (b) file in any probate court any waiver of the provisions for my benefit contained in any future will made by the said BENNET B. BRISTOL in accordance with my written consent to such future will, (c) file in any probate court any waiver of the provisions for my benefit contained in any future codicil or codicils made *266 by him in accordance with my written consent to such future codicil or codicils, (d) if the said BENEFIT B. BRISTOL die testate, except as expressly given to me or for my benefit either by such foregoing will or by any finally allowed future will or codicil made by him in accordance with my written consent, make in or to the estate of the said BENNET B. BRISTOL, upon his decease testate, either any claim other than to or for such part of said estate as may be expressly given to me for my benefit by such present foregoing will or by any such*1025 future will or codicil as may be made by him in accordance with my written consent, or (e) if the said BENNET B. BRISTOL die testate, except as expressly given to me or for my benefit by any finally allowed future will or codicil, make any claim to or respecting any of the capital stock, now or then owned by the said BENNET B. BRISTOL, of THE FOXBORO COMPANY, a corporation organized under the laws of Massachusetts.
The will and acknowledgment are the only written evidences of any agreement entered into between petitioner and his fiancee in contemplation of their marriage.
On August 26, 1937, petitioner and Agnes S. Thompson were married. On the same day, petitioner purchased two annuities, each costing $51,983, payable to his wife for her life and terminating at her death without remainder over.
On August 27, 1937, in accordance with his agreement with his wife, petitioner caused his Foxboro winter home and his Falmouth summer residence to be transferred to her and himself as tenants by the entirety.
Petitioner filed a timely gift tax return on Form 709 for the year 1937, in which he reported as taxable gifts the two annuities purchased for his wife on August 26, 1937. *1026 A gift tax in the sum of $4,641.60 was assessed against and paid by petitioner on the basis of this return.
In the same gift tax return, petitioner reported the transfer of the Foxboro and Falmouth real estate to himself and wife as tenants by the entirety. An addendum attached to the return, entitled "Details of Schedule A", states in part:
The two foregoing conveyances of real estate, items 3 and 4, by Bennet B. Bristol as donor to himself and his wife as tenants by the entirety, are reported for the information of the Treasury Department, but the said Bennet B. Bristol Claims that such conveyances do not constitute taxable gifts, and in support of this claim refers to the decision of the Board of Tax Appeals, rendered December 28, 1937, in the case of Hart, Petitioner, v. Commissioner of Internal Revenue, 36 B.T.A. No. 176.
The gift tax return further states that the "value at date of gift" of the two pieces of real estate transferred to petitioner and wife as tenants by the entirety, "namely, $8,625.00 and $10,925.00, was reached by multiplying the actual values ($15,000.00 in the case of such item 3 and $19,000.00 in the case of such item 4), of the real estate*1027 to which such items refer, by the factor 0.575, thus -
| 3. $15,000.00 by 0.575 is | $8,625.00 |
| 4. $19,000.00 by 0.575 is | 10,925.00" |
*267 Petitioner's wife filed an information return of gifts as donee on Form 710 for the year 1937, setting forth substantially the same information contained in the gift tax return filed by petitioner.
On November 29, 1938, petitioner filed a claim for refund on Form 843 of gift taxes assessed and paid in the year 1937, in the sum of $4,641.60. It was alleged in the claim that:
The purchase and transfer of the two annuities aggregating in cost $103,966 by claimant to Agnes S. Thompson (Bristol), now the wife of claimant on or about August 26, 1937, upon which the $4,641.60 alleged gift tax in question was predicated, assessed and collected, was in no sense a gift by claimant to the said Agnes S. Thompson (Bristol), but was a transfer of property for adequate and full consideration pursuant to a premarital contract and agreement entered into by and between claimant and the said Agnes S. Thompson shortly prior to their marriage on August 27, 1937, to wit, the agreement by the said Agnes S. Thompson to waive, relinquish and*1028 surrender any and all claim, right, title and interest she might have or acquire as the wife of claimaint [sic] in and to certain other property owned by the claimant. Claimant was married to the said Agnes S. Thompson on August 27, 1937 and the said premarital contract has been in all respects carried out and fully executed. Claimant filed a gift tax return and paid an alleged gift tax in the sum of $4,641.60 aforesaid through mistake, by reason of claimant's being erroneously misinformed as to his liability for gift tax thereon.
Claimant alleges that the aforesaid transaction did not constitute a gift property, was not subject to the imposition of gift taxes, that no gift tax return was required by reason thereof, that the assessment and collection of a gift tax based thereon was erroneous and improper, and claimant accordingly claims that the amount of $4,641.60 aforesaid constituted an overpayment by him which should be refunded, and for which amount claim is hereby made, together with interest thereon from the date of payment to the date of refund.
Respondent addressed a notice of deficiency to petitioner dated September 6, 1938, in which petitioner was notified*1029 that the transfer of real estate to himself and wife as tenants by the entirety was a taxable gift.
OPINION.
VAN FOSSAN: The issue for our determination is whether or not certain properties and annuities transferred by petitioner to his wife upon marriage were gifts subject to tax. Petitioner contends that no taxable gifts were made during the taxable year, asserting that he exchanged the properties and annuities in question for his wife's in certain stock and other property and that the transaction amounted in certain stock and other property and that thetransaction amounted to a sale or exchange rather than a gift.
Respondent argues that the exchange was not for "adequate and full consideration in money or money's worth" and that the properties were given to the wife. He urges that although the relinquishment of the wife's statutory interest might be sufficient consideration to support her antenuptial agreement, it was not enough to cause the *268 transfers to be excluded from the gift tax provisions of the Revenue Act of 1932 as amended (secs. 501 and 503 1).
*1030 That the release of a widow's statutory rights is sufficient consideration to support an antenuptial contract in Massachusetts is clear. . The agreement between the petitioner and Agnes S. Thompson was a contract embodying such a release. However, in order to comply with the statutory requirement to exempt from gift tax, the contractual consideration must be adequate and full in money or money's worth. ; affd., ; ; affd., ; ; affd., .
The difference between the parties in this case arises partly from the parallelism between certain language used in the gift tax law and that found in the estate tax law. The provision "adequate and full consideration in money or money's worth" appears in both statutes. By section 804 of the Revenue Act of 1932 the estate tax law of 1926 was amended to provide that the release of dower, or similar interests, "shall not be considered to any extent a*1031 consideration in money or money's worth." The amendment so made has been held to be "declaratory of the law as it existed in the act of 1926 * * *." , affirming . See also , affirming ; , reversing . There is no comparable provision in the gift tax law.
Counsel for respondent urges that, despite this omission of the quoted provision from the gift tax sections, we should construe the words "adequate and full consideration in money or money's worth" in the instant case involving gift tax the same as though we were applying the estate tax sections. We are unable to agree. The gift tax under consideration was imposed by the Revenue Act of 1932, *269 the same act that amended the 1926 Act respecting estate tax as above noted. Both the gift tax provisions and the estate tax amendment were considered in the same Congressional Committee reports. Nevertheless, the amendment was made specifically applicable*1032 to the estate tax and was omitted from the gift tax provisions. The only logical conclusion in the light of such facts is that, with both taxes before it, the Congress did not intend the interpretative restriction placed around the estate tax to apply to the gift tax and that the omission thereof from the gift tax provisions was deliberate. We are of the opinion, accordingly, that the relinquishment of dower or other marital rights may, under the gift tax statute, be adequate and full consideration in money or money's worth. The adequacy of the consideration in a given case is a question of fact.
The petitioner was a man 69 years of age. He became engaged to Agnes S. Thompson. He owned stock, valued at over $781,000, in a family company whose control he desired to keep in the Bristol family. To accomplish that end, he executed a will, assented to by Agnes S. Thompson, by which he bequeathed all of his own stock in the company (and also any under his control) possessed by him at the time of his death, to his son and a bank, as trustees, for the benefit of his children. He also bequeathed one-third of the residue of his estate to Agnes S. Thompson. Under the same date she*1033 executed an acknowledgment, the effect of which was a waiver of her statutory rights. Upon the execution of the will and Agnes S. Thompson's assent thereto and the acknowledgment thereof, the petitioner purchased for her two annuities costing about $104,000 and caused two residence properties to be conveyed to her and himself as tenants by the entirety. The value of her right in the real estate at the time of the transfer was $19,550.
Thus, Agnes S. Thompson upon marriage received property whose cost or value aggregated over $123,000 and also the right to receive one-third of the petitioner's residual estate upon his death. In exchange she relinquished her statutory rights in all of the petitioner's estate.
Under the laws of Massachusetts (ch. 190, sec. 1 (2), General Laws of Massachusetts, 1932) the surviving wife of a husband dying intestate and leaving issue, takes one-third of the personal and one-third of the real property. Section 9 of chapter 191 provides that "the marriage of a person shall act as a revocation of a will made by him previous to such marriage, unless it appears from the will that it was made in contemplation thereof."
By paralleling Agnes S. Thompson's*1034 rights before and after the execution of the agreement in the form of a will, we find that, in the absence of the will and agreement, she would have been entitled to *270 one-third of the petitioner's Foxboro Co. stock and one-third of his remaining property (since he would have become intestate by the operation of section 9, chapter 191), while after such execution she preserved the same rights as to the remaining property but received assets worth $104,000 in lieu of her prospective rights to one-third of the stock.
By applying the same method of calculation as that used by the respondent in determining the value of her rights in the real estate, we find that her prospective rights in the stock which she relinquished were worth $149,764.50. By this simple arithmetical comparison it appears that the consideration for the transfer by petitioner of the real estate to his wife as a tenant by the entirety and for the procuring of the two annuity contracts in her behalf, was full and adequate in money or money's worth.
Accordingly, the respondent erred in his determination that the petitioner made a gift of an interest in real estate to his wife in the year 1937 by causing*1035 the title to the two residence properties to be conveyed to her as a tenant by the entirety. Since the value of the annuity contracts did not constitute a gift, the petitioner made an overpayment of his gift tax for the year 1937.
Reviewed by the Board.
Decision will be entered under Rule 50.
Footnotes
1. SEC. 501. IMPOSITION OF TAX.
(a) for the calendar year 1932 and each calendar year thereafter a tax, computed as provided in section 502, shall be imposed upon the transfer during such calendar year by any individual, resident or nonresident, of property by gift.
(b) The tax shall apply whether the transfer is in trust or otherwise, whether the gift is direct or indirect, and whether the property is real or personal, tangible or intangible; but, in the case of a nonresident not a citizen of the United States, shall apply to a transfer only if the property is situated within the United States. The tax shall not apply to a transfer made on or before the date of the enactment of this Act.
SEC. 503. TRANSFER FOR LESS THAN ADEQUATE AND FULL CONSIDERATION.
Where property is transferred for less than an adequate and full consideration in money or money's worth, then the amount by which the value of the property exceeded the value of the consideration shall, for the purpose of the tax imposed by this title, be deemed a gift, and shall be included in computing the amount of gifts made during the calendar year. ↩