*62 Decision will be entered under Rule 50.
Issue 1. -- Upon reconsideration of the question of whether a trust for the son of the decedent was created in contemplation of death within section 811 (c), I. R. C., it is held that the trust was created in contemplation of death. See Estate of James E. Frizzell, 9 T.C. 979">9 T. C. 979.
*576 The respondent determined a deficiency in estate tax in the amount of $ 24,834.80. The main question is whether a transfer of property to a trust for the benefit of an incompetent son of the decedent was made in contemplation*63 of death, within the meaning of section 811 (c) of the Internal Revenue Code, so as to render the property includible in the decedent's estate, as the respondent has determined.
This proceeding has been considered by the Court heretofore. The respondent's determination under the first issue was sustained. See Estate of James E. Frizzell, 9 T.C. 979">9 T. C. 979. In that report, a second question was considered, upon our rejection of the contention of the petitioners under the first issue, but if the first question had been decided in favor of the petitioners, there would not have been occasion for considering the second question.
This proceeding is before the Court again pursuant to motion of the petitioners for reconsideration of our holding under the first issue, the motion having been granted. By that motion, petitioners requested *577 the Court to make additional findings of fact. The record supports the findings which have been requested. The facts which are covered by the motion of petitioners for further findings of fact were given full consideration in the first instance. However, in the interest of removing any doubt on that score, additional*64 findings of fact are now made which cover, in general, the following matters: (1) The amount of net losses sustained by the decedent in six transactions in 1937 (see p. 982, vol. 9 T. C.); (2) the explanation which the decedent gave on the gift tax return for the gift of 1,132 shares of Coca-Cola stock to the trust for the benefit of William Pitts Frizzell; and (3) further findings relating to considerations of the decedent just prior to creating the trust.
Petitioners do not object to the findings of fact which have been made, except that they object to the ultimate findings of fact that the trust was created and the transfer of property to the trust was in contemplation of death.
The facts which were found in our former report are restated (see pp. 980 to 983, vol. 9 T. C.), and additional findings of fact are made as follows, with notation in parentheses of the additional findings.
FINDINGS OF FACT.
Petitioners are the executors of the estate of James E. Frizzell, who died testate on August 23, 1940, a resident of Waverly Hall, Georgia.
Decedent was born January 24, 1856. He died at the age of 84 after an illness of 4 weeks following a heart attack.
On October 14, 1937, the decedent*65 executed a trust agreement under which he created an irrevocable trust for the benefit of his son, William Pitts Frizzell. On that date he transferred 1,132 shares of common stock of the Coca-Cola Co. to Trust Co. of Georgia, trustee under the trust agreement.
The decedent was 81 years old when he created the trust. At that time his family consisted of his wife, who was 66 years old; a daughter, Mary George Frizzell, who was 38; and a son, William Pitts Frizzell, who was 40. There was also a married daughter, Annie Frizzell Jackson, age 36, the wife of E. A. Jackson, who had a son 13 years old.
The decedent's son, William Pitts Frizzell, is an incompetent person. His mental development had been retarded and his mind was that of a child of 12 years. However, his physical condition, as distinguished from his mental condition, was good. William was unable to care for himself or to earn a livelihood. His parents bought his clothes and took care of him in every way. He was unable to take care of money or property. He was never given any large sum of money. William lived with his parents.
*578 Roy Burns is a certified public accountant in Columbus, Georgia, which is located*66 about 20 miles from Waverly Hall. He prepares income tax returns for clients, in addition to his auditing and accounting work for the Columbus Bank & Trust Co. and other corporations, but he did not prepare the tax returns of the decedent until 1938, when he prepared the decedent's return for the year 1937. (Additional paragraph.)
In September of 1937, prior to creating the trust, the decedent consulted Roy Burns about his desire to make some provision for his son William so that he would be cared for during his (the son's) life, and so that property which would be set aside for the son's benefit would not be wasted by the son or anyone else, and so that the son would never be financially dependent upon anyone. Burns recommended that the decedent consult some lawyer about creating a trust. Burns advised the decedent that he would have to pay a gift tax in connection with transferring property to a trust, and that the gift tax would be about two-thirds of the estate tax. Burns brought up the point about taxes; the decedent did not express concern about taxes. (Additional paragraph.)
The decedent selected the Trust Co. of Georgia to be the trustee, because he knew the head of *67 that company and believed that it was capable and competent to handle such trust fund. (Additional paragraph.)
The decedent was financially able to create the trust for his son in October 1937. (Additional sentence.)
The decedent filed a Federal gift tax return in March 1938, in which he reported a gift on October 14, 1937, of 1,132 shares of Coca-Cola Co. stock to Trust Co. of Georgia, trustee for William Pitts Frizzell. The decedent stated in the return that the "motive" of the gift was "Love and affection and to protect William Pitts Frizzell against his own improvidence and inability to care for his own property." (Additional paragraph.)
The decedent directed the trustee not to distribute any income or corpus to William, but to make the distributions to his mother, sisters, or some person selected by the trustee. The decedent directed the trustee to distribute whatever amounts of trust income it should determine, in its discretion, to be necessary to provide for the reasonable needs of William, during his life; and to accumulate in the trust all of the undistributed income. He gave the trustee authorization to encroach upon the corpus for the benefit of William in the event*68 of illness or emergencies which the trust income was insufficient to meet. He authorized the trustee to make and change investments, and to receive and add to the trust corpus any additional property from the settlor.
*579 The trust could be terminated at any time after the death of William, and upon such termination the trust was to be distributed to the surviving sisters of William, or their lineal descendants. Or, if the trust was not terminated after the death of William, it was to be divided in equal parts and held in trust for the surviving sisters of William, or their lineal descendants. Other provisions for the eventual termination of the trust and the distribution thereof are not material to the issues presented.
The trust indenture is incorporated herein by this reference.
The trustee did not distribute all of the annual trust income, but paid William's mother $ 50 per month, as follows:
| Year | Trust income | Distributions |
| 1937 | $ 3,113 | $ 150 |
| 1938 | 5,094 | 600 |
| 1939 | 5,660 | 600 |
| 1/1/40 to 8/23/40 | (Not shown) | 400 |
The trustee invested about $ 9,193 of the undistributed, accumulated trust income during the period up to the decedent's death, about three years, *69 in stocks and bonds; and when decedent died, the trustee held uninvested, accumulated cash in the corpus amounting to $ 4,792. At the death of the decedent, the securities held in the trust consisted of the 1,132 shares of Coca-Cola stock, having a value of $ 108,592.28; 174 shares of stock of Lee Tire & Rubber Co., having a value of $ 4,219.50; and Federal Land Bank bonds having a value of $ 2,216.17, including accrued interest. The value of the trust corpus at the date of death was $ 119,820.80.
At one time the decedent was in the private banking business in Waverly Hall with W. I. H. Pitts, Sr. In June 1937 he acquired a one-third interest in a potato-selling business which was conducted as a partnership. He was active in that business until the time of his fatal illness. During the period from 1937 until his death the decedent devoted time and attention to his investments; he followed the securities market and bought and sold securities. He also dealt in commodities futures and negotiated about six transactions in 1937 in lard and cottonseed oil. On five of these transactions which were closed before July 1, 1937, he sustained losses in the net amount of $ 5,777.50. (Additional*70 sentence.)
During the year 1937, the decedent was not suffering from any illness. On and prior to October 14, 1937, the date of the trust, the decedent was in good health. His health record in prior years, including 1935 and 1936, was good. He did not suffer any serious illnesses during his lifetime, nor have any accidents or operations. In 1938 he had some gall bladder disturbance caused by gall stones, *580 for which he received treatment in an Atlanta hospital, but there was no operation; the gall stone passed, and there was no recurrence of gall bladder trouble. In the latter part of 1938 the decedent had some disturbance from arthritis in leg joints, which was relieved by treatment. In July 1940 the decedent suffered a heart attack, which was the cause of death. He was ill about four weeks. There had not been prior heart attacks.
After 1930 Dr. Steward Roberts of Atlanta was the physician of the decedent and of his family. Decedent and his family went to Atlanta once a year for annual physical check-ups. On September 17, 1937, the decedent was given a complete physical examination. Dr. Roberts wrote to decedent on October 1, 1937, reporting the results of the *71 examination. The letter indicated that the decedent's physical condition was good and stated that the condition of the blood, urine, heart, and lungs was normal for a man 82, that "for your age of 82 on January 24, 1938, you are extraordinarily well preserved," and that the decedent did not need any medicines.
During the period 1937 until his death, the decedent was active in his business affairs and in his church. He was active physically in 1937 and went down to his place of business every morning, where he stayed all day. He walked to and from his office every day. In 1937 the decedent was chairman of the board of stewards of his church, superintendent of the Sunday school, and leader of a Sunday school class. He often led a prayer meeting. He took trips to Florida. The decedent had a bright and happy disposition.
The decedent executed his last will and testament on April 22, 1940, four months before his death. He executed a codicil to his will on July 24, 1940. By the will and the codicil the decedent devised and bequeathed to a trustee of three trusts for the benefit of his wife and two daughters equal thirds of his residuary estate. He did not make any bequests direct*72 to his son. He stated in clause 5 of his will that the reason he had not made further provision in his will for his son was that he had heretofore made a gift in trust in which he had made full provision for his benefit and protection.
The transfer in trust of 1,132 shares of Coca-Cola common stock on October 14, 1937, was made in contemplation of death. The trust was established in contemplation of death.
SUPPLEMENTAL OPINION.
Issue 1. -- Consideration has been given to the contentions of the petitioners which are set forth in their motion for reconsideration under the first issue in this proceeding. Reconsideration of the record and of the pertinent authorities does not move us to set aside our previous finding of fact that the trust for William Pitts *581 Frizzell and the transfers of stock to that trust were made in contemplation of death, and our conclusion as to the question of law to the same effect.
Petitioners stress a short part of the testimony of Roy Burns to the effect that the decedent had sustained losses in six commodities transactions in 1937, shortly before he created the trust; and upon this evidence they argue that this proceeding comes within the *73 rationale of Colorado National Bank of Denver v. Commissioner, 305 U.S. 23">305 U.S. 23. We do not agree with this contention.
In the case of Colorado National Bank of Denver, the evidence clearly established that the decedent, Hendrie, intended to and did speculate on the market to a considerable degree, particularly during the last five or six years of his life, and that his dominant purpose in creating a trust for the benefit of his daughter and grandchildren was to remove his sound assets from the hazards of losses from his own speculations on the market, which he desired to and did continue up to the time of his death. See Commissioner v. Colorado National Bank of Denver, 95 Fed. 160, 162; reversed, 305 U.S. 23">305 U.S. 23.
In this proceeding there is practically no evidence that the decedent, Frizzell, speculated on the market before or after the trust was created; or that the decedent believed that his business activities were attended by risks which might or could reduce his assets so that he deemed it prudent to isolate part of his assets from the hazards of losses, and thereby assure for his *74 incompetent son means for his support at the time and for the rest of the son's life. At the time of death the decedent owned stocks and bonds of the value of about $ 425,000, exclusive of the stock given to the trust in 1937. There is no evidence that the decedent was a trader or speculator on the market in stocks in 1937 or thereafter, or that his business activities at that time were speculative or hazardous. The only evidence on this point is testimony of the witness Burns that in 1937 the decedent made six purchases on the commodities market which resulted in a net loss of about $ 5,700, which Burns learned about in 1938 from his preparation of the income tax return of the decedent for the year 1937. Burns had no knowledge otherwise of any market transactions of the decedent and he did not testify that the decedent speculated on the market. We can not make a finding from this fragment of evidence that the dominant purpose of the decedent in creating the trust in 1937 was to isolate part of his property from risk of losses from speculation, as was the basis for the holding in the Colorado National Bank case, supra, of the Board of Tax Appeals in its memorandum opinion*75 that the Hendrie trust was not created in contemplation of death. (The memorandum opinion of the Board of Tax Appeals was entered on September 19, 1936, and is reported by Prentice-Hall in 1936 B. T. A. Memorandum *582 Decisions, vol. 5, par. 36,314, p. 442.) Since this Court does not have before it substantial evidence to make such finding and conclusion in this proceeding, and does not so hold, this proceeding does not come within the rationale of the Supreme Court in Colorado National Bank of Denver v. Commissioner, supra.
We have reviewed again the testimony dealing with the motive of the decedent in creating the trust for the benefit of William Pitts Frizzell. The testimony shows that the son was unable to look after himself in every respect; that is, he had to be under the care of guardians who would buy his clothes and look after him; he was unable to care for himself even though he were provided with an income. Mary George Frizzell, a daughter of the decedent, testified about her deceased father's reasons for creating the trust as follows:
Well, he said that he wanted to fix this trust so that my brother would have something to*76 live on under any circumstances that might happen. * * *
Well, I guess maybe he thought that there might come a day when he might be left alone in the world; that we might all be taken. * * *
Yes, I mean if something should happen to all of us because that is something you never know. * * *
The beneficiary of the trust was 40 years old when the trust was created; the grantor was 81 years old. The evidence does not show that the decedent intended by his creation of the trust in 1937 to relieve himself of the care of the son during the remainder of his (the decedent's) life, so as to make the son independent in that sense.
It is our judgment that the evidence shows that the dominant purpose of the decedent in creating the trust was to arrange for such time as the incompetent son might be alone. Such provision could be made either by will or by an inter vivos trust. In this proceeding the evidence shows, in our opinion, that the trust was created in 1937 in lieu of making the same provision under a will. Therefore, the trust comes within the scope of section 811 (c) as a transfer in contemplation of death.
Decision will be entered under Rule 50.
Black, J., dissenting: *77 I realize, of course, that whether a transfer in trust such as we have in the instant case was made in contemplation of death is largely a question of fact. The majority opinion, after finding certain facts, makes an ultimate finding of fact as follows:
The transfer in trust of 1,132 shares of Coca-Cola common stock on October 14, 1937, was made in contemplation of death. The trust was established in contemplation of death.
I do not agree with this ultimate finding. Upon the same facts upon which it is based, I would find as an ultimate fact:
*583 The transfer in trust of 1,132 shares of Coca-Cola common stock on October 14, 1937, was not made in contemplation of death. The trust was not established in contemplation of death.
In these contemplation-of-death cases the important thing is to search for the dominating motive which prompted the transfer. If that dominating motive was associated with life rather than death, then the decision should be for the taxpayer; if associated with death, then the decision should be for the Government. In this case I think the evidence shows that the dominant motive which prompted the decedent to make the transfer was associated with *78 life rather than death. I realize, of course, that each of these contemplation-of-death cases depends upon its own facts and that the study of other cases which have been decided by this Court and other courts, including the Supreme Court of the United States, is only relatively helpful. However, they do lay down certain principles which serve as guides in evaluating evidence. One of the cases which I think is helpful in evaluating the weight of the evidence in the case at bar is Griffith v. United States, 32 Fed. Supp. 884. In that case the Court of Claims said in the concluding part of its opinion:
The record in the case at bar discloses that paramount to all other considerations in the decedent's mind was the particular concern which he felt for his invalid daughter so far as the 1928 transfers are concerned; and the assurance of an adequate income for himself in later years so far as the 1929 transfers are concerned. These were the dominant motives which impelled the decedent to act, and any other considerations that might have occurred to him were purely incidental. Only by an inference altogether unwarranted under all the evidence of record*79 could it be said that the decedent intended to effect a testamentary disposition, and to us it is clear from a consideration of all the evidence submitted that it cannot be said that the decedent in making transfers did so in contemplation of death. * * *
It seems to me that in the instant case the facts show that the dominant motive which impelled the decedent to make the transfer was concern for his mentally incompetent son and to provide safely for his support and maintenance, regardless of what might happen to decedent's own financial resources in the future, and that, as said by the court in the Griffith case, "any other considerations that might have occurred to him were purely incidental."
Our own recent case of Estate of Ernest Hinds, Deceased, 11 T.C. 314">11 T. C. 314, seems to me to be in point in petitioner's favor. In that case General Hinds, a good many years before his death, had created a trust for the benefit of his wife, Minnie Hinds. Upon the request of his wife, he had made that trust revocable. In 1940 Mrs. Hinds suffered a serious accident, followed by a nervous breakdown, and General Hinds feared that she might remain an invalid the*80 remainder of her life. In order to provide for her support and maintenance *584 regardless of what might happen in the future to his own financial resources, he and Mrs. Hinds executed a new trust and made it irrevocable. The Commissioner determined that this latter trust was executed by General Hinds in contemplation of death. We held to the contrary, basing our holding upon the fact that the evidence showed that the dominant motive of General Hinds in making this transfer was associated with life, namely, the providing for the certain support of his wife, whom he feared might become a permanent invalid, with the assurance that this support would be available regardless of what might happen in the future to his own financial resources. In arriving at our decision in that case we quoted from the Supreme Court's decision in Allen v. Trust Co. of Georgia, 326 U.S. 630">326 U.S. 630, in which the Court, among other things, said:
* * * Many gifts, even to those who are the natural and appropriate objects of the donor's bounty, are motivated by "purposes associated with life, rather than with the distribution of property in anticipation of death." United*81 States v. Wells, supra * * *. Those motives cover a wide range. See 1 Paul, Federal Estate & Gift Taxation (1942) §§ 6.09 et seq. "There may be the desire to recognize special needs or exigencies or to discharge moral obligations. The gratification of such desires may be a more compelling motive than any thought of death." United States v. Wells, supra * * *. Whether such a desire was the dominant, controlling or impelling motive is a question of fact in each case. * * *
Because I believe that the evidence in this case shows that the dominating motive which impelled the decedent to make the transfer here involved was in recognition of the special needs of his mentally incompetent son, William Pitts Frizzell, and to discharge the moral obligation which decedent felt to insure his adequate support and maintenance in the future, regardless of what might happen to his own financial resources, I respectfully dissent from the majority opinion.