*179 Decision will be entered for the petitioner.
The taxpayer's daughter transferred to the taxpayer without consideration valuable real estate and other property prior to her marriage to a man to whom the taxpayer objected. Complete estrangement between the daughter and the taxpayer resulted from the marriage, and in 1942 the daughter made demand for the property, alleging duress and threatening suit. She then offered to settle for $ 600,000. After protracted negotiations the settlement figure was reduced and, on advice of her attorneys, the taxpayer agreed to transfer $ 120,000 to a trust for the daughter's benefit. She did so in 1943, procuring a discharge of all claims. The transfer of the $ 120,000 in trust, held, under the circumstances, not a gift, but made for a full and adequate consideration in money or money's worth.
*915 The Commissioner determined a deficiency of $ 30,712.50 in petitioner's gift tax for 1943 by treating as a gift her transfer of $ 120,000 to a trust created for the benefit of her estranged daughter. The transfer was*180 made pursuant to an agreement whereby the daughter released petitioner from claims for property which the daughter had transferred to petitioner in 1934 without consideration and allegedly under duress. Petitioner contends that she made the transfer for an adequate and full consideration in money or money's worth.
FINDINGS OF FACT.
Petitioner, a resident of Indianapolis, Indiana, filed with the collector of internal revenue for the district of Maryland a 1943 gift tax return, on which she reported no gifts. Attached to the return was a copy of an agreement creating a trust to which in 1943 she transferred $ 120,000.
Petitioner is the widow of the late Senator Albert J. Beveridge and the mother of two children, Abby Beveridge Baum and Albert J. Beveridge, Jr. In 1932 she transferred as a gift to her daughter, then unmarried, certain jewelry and parcels of valuable, income-producing real estate, located in Chicago, Illinois, at 3022 Michigan Avenue, 1112-14 North Clark Street, 1600-2 Indiana Avenue, and 1601-3 South Michigan Avenue.
In 1934 the daughter, then 27 years of age, determined, contrary to petitioner's wishes, to marry Franz Baum, a German national who resided in Germany. *181 Before departing for Germany, and on October 18, 1934, the daughter reconveyed the real estate to petitioner by a quitclaim deed, and filed with the collector of internal revenue at *916 Chicago, Illinois, a gift tax return on which the real estate was valued at $ 24,368.75.
Petitioner made vigorous efforts to dissuade her daughter from the intended marriage, enlisting the aid of friends and family advisors, but to no avail. The daughter was married to Franz Baum in 1935; the couple resided in Germany until 1939 and then moved to Seattle, Washington. The marriage resulted in a total estrangement between petitioner and her daughter, which has continued to the present; they have not seen each other since the marriage.
After the conveyance in 1934 petitioner treated the property as her own, receiving and retaining the income from the real estate. In 1938 she sold one parcel for $ 1,500 and in 1941 conveyed the others to Albert J. Beveridge, Jr., and the Continental Illinois National Bank & Trust Co. of Chicago, as trustees under an instrument of trust for the benefit of Albert J. Beveridge, Jr., and his issue. On a gift tax return she reported these conveyances as gifts of *182 a value of $ 76,125, and this value was accepted without change by the Commissioner. In 1942 the trustees sold the parcel known as 1112-14 North Clark Street for $ 14,000, and in 1946 they sold the parcels known as 1600-2 Indiana Avenue and 1601-3 South Michigan Avenue for $ 213,000, after rejecting two lower offers. This property produced rents of about $ 23,000 annually.
In August 1942 an attorney representing Abby Beveridge Baum approached Bruce Baird, a bank officer and friend of petitioner, who had been her advisor for many years. The attorney charged that the daughter's conveyance of the real estate to petitioner in 1934 had been made without consideration and under duress; he demanded restitution to his client, threatening suit. Baird referred him to petitioner's attorney in Washington, D. C., to whom he repeated his demand for the real estate and an accounting for the income, but offered to settle his client's claim for $ 600,000. Petitioner rejected this demand, and retained associate counsel in Chicago and Indianapolis to resist it. The daughter's attorney then prepared a complaint, which he exhibited to petitioner's counsel but never filed. Conferences and negotiations*183 between the attorneys ensued, disagreeable in character and protracted over a period of six months. In the course of dickering the daughter reduced her settlement offer to $ 200,000; petitioner's counsel advised against acceptance. Thereafter the daughter offered to accept $ 120,000, and petitioner's counsel advised payment of this amount rather than risk the uncertainties of litigation and additional expense. Petitioner took this advice, but insisted that payment be made to a trust for the daughter's benefit, and final settlement was made in that way.
On March 15, 1943, petitioner and her daughter signed an agreement which recited their desire to settle certain controversies which *917 had arisen between them and provided that, in consideration of petitioner's establishment of a trust fund of $ 120,000, the payment of Federal gift tax, if any, and the release of a power of appointment conferred upon petitioner in her mother's will, the daughter, her heirs, legal representatives, assigns and next of kin would release, quitclaim and discharge petitioner from all claims and demands against her and would convey, relinquish, and assign to her all expectancy in property then owned*184 or thereafter acquired by her, and would never contest or dispute her disposition of such property.
Pursuant to this agreement, in which the daughter's husband acquiesced, the daughter and her husband by formal instrument conveyed and quitclaimed to petitioner all their right, title, and interest in and to the Chicago real estate, and by separate instruments the daughter released and forever discharged petitioner and her brother, Albert J. Beveridge, Jr., and the Continental Illinois National Bank & Trust Co. from any causes of action, claims, and demands which she ever had or which her heirs, executors, administrators or assigns "can, shall or may have."
On April 9, 1943, petitioner transferred $ 120,000 to three individual trustees under a trust instrument which directed them to hold, manage, and invest the amount for a period expiring 20 years after the daughter's death; to pay to the daughter the trust income and in their discretion parts of the principal, subject to a maximum; and after the daughter's death to make like payments to the daughter's surviving children, to whom the trust assets were to be distributed upon expiration of the trust. For their services in arranging *185 the settlement reached, petitioner paid to her attorneys fees aggregating $ 25,000.
Petitioner's transfer of $ 120,000 to the trust was for an adequate and full consideration in money or money's worth.
OPINION.
The Commissioner determined that petitioner was subject to gift tax on the $ 120,000 transferred in trust in 1943. Admitting on brief that the estrangement between mother and daughter precluded any donative intent, he defends the determination by the argument that no such intent is necessary under Commissioner v. Wemyss, 324 U.S. 303">324 U.S. 303, it being enough that the property was transferred for less than an adequate and full consideration, as contemplated by section 1002, Internal Revenue Code, 1 and, since petitioner made the transfer "to secure the release of unproven claims which had *918 no ascertainable value in money or money's worth," she received nothing in return, and hence the entire amount transferred should be deemed a gift.
*186 The testimony of petitioner's advisors and attorneys convinces us that in making the transfer petitioner was not actuated by love and affection or other motives which normally prompt the making of a gift, and, further, that the settlement to which she agreed on her attorneys' advice was that which they and she regarded as advantageous economically under the circumstances. Perhaps she could have successfully resisted the daughter's threatened suit, but her attorneys were not certain of the outcome of the litigation and so advised her; the value of the property defended was substantial, and by accepting that settlement, she avoided additional legal expenses. She acted, in our opinion, as one would act in the settlement of differences with a stranger.
The transfer made is analogous for tax purposes to those of spouses who agree upon a property settlement prior to divorce in order to satisfy existing claims of one against the other. Transfers pursuant to such agreements are not gifts and are not subject to gift tax, Commissioner v. Converse (C. C. A., 2d Cir.), 163 Fed. (2d) 131; Lasker v. Commissioner (C. C. A., 7th Cir.), 138 Fed. (2d) 989;*187 Matthew Lahti, 6 T. C. 7; Herbert Jones, 1207">1 T. C. 1207; dismissed, C. C. A., 7th Cir. The release from unliquidated claims, moreover, has a recognizable value in money or money's worth, for, as said in Commissioner v. Mesta (C. C. A., 3d Cir.), 123 Fed. (2d) 986:
* * * a man who spends money or gives property of a fixed value for an unliquidated claim is getting his money's worth.
Obviously the transfer was not a gift or a marriage settlement as contended by the respondent. Nor can it be treated as a division of property.
And this view was recently repeated in Estate of Josephine S. Barnard, 9 T. C. 61:
* * * Here Mrs. Barnard was seeking to free her property from all claims of her husband and gave in payment therefor what she considered to be the reasonable value thereof. Since these claims were unliquidated, it may be assumed, as the court said in the Mesta case, that she received her money's worth and accordingly did not make a taxable gift of this $ 50,000 to Barnard. * * *
See also Albert V. Moore, 10 T. C. 393;*188 Edmund C. Converse, 5 T. C. 1014; affd., 163 Fed. (2d) 131; Herbert Jones, supra.
Respondent cites Commissioner v. Wemyss, supra, and Merrill v. Fahs, 324 U.S. 308">324 U.S. 308, as supporting his determination, but both cases involved transfers made in pursuance of antenuptial agreements, and they are distinguishable for the reasons set forth in Edmund C. Converse, supra. See also Clarence B. Mitchell, 6 T. C. 159; dismissed, C. C. A., 7th Cir.
Decision will be entered for the petitioner.
Footnotes
1. SEC. 1002. 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 chapter, be deemed a gift, and shall be included in computing the amount of gifts made during the calendar year.↩