*1088 1. Decedent, a native of this country living abroad, described himself as "of St. Louis, Missouri." Thereafter he took an oath of allegiance to Great Britain. He never returned to the United States to live, nor was he engaged in business here. After his death his administrators described him as being domiciled in this country at the time of death. Held, decedent was a nonresident alien when he died.
2. Decedent left property physically located in the United States. It consisted of domestic corporation stocks and securities, United States bonds and certificates, corporate and municipal bonds, cash on deposit, real estate in Missouri, and outstanding claims. Held, only the corporate stocks are subject to Federal estate tax.
3. Held, decedent's personal property located abroad is not subject to estate tax by this Government.
4. During his life decedent made voluntary payments to his mother's estate so that certain of her wishes might be carried out. Held, the amount so paid should not be included in decedent's gross estate.
5. Held, deductions for funeral and administration expenses, et cetera, may not exceed 10 per cent of the value of*1089 the property subject to tax.
*319 This proceeding is for the redetermination of a deficiency in Federal estate tax, asserted by the respondent in the amount of $172,857.82, less a credit of $22,511.19 for inheritance taxes paid to the States of Missouri and New Jersey. The following are alleged as errors;
1. Determining that decedent at the time of his death was a citizen of the United States;
2. Including in decedent's gross estate the following: (a) the amount of principal received by his executor from the estate of William McMillan; (b) bonds, notes and certificates of indebtedness of the United States, and accrued income thereon, received from the William McMillan estate; (c) certain securities, intangible personal property, and money on deposit, received from the William McMillan estate; (d) the amount of $152,285.27 received as income from the William McMillan estate; (e) the amount of $72,302.63 received from the William McMillan estate, and consisting of interest on bonds, notes and certificates of indebtedness of the United States; *1090 (f) certain securities, accounts receivable and other intangible personal property kept by decedent in St. Louis, Missouri; (g) moneys deposited by decedent in banks in the United States.
3. In not deducting from decedent's gross estate funeral expenses, debts of decedent, administration expenses, income taxes, allowance for support of dependents, and a payment of $50,000 made out of the assets of the estate.
The respondent, in his answer, asserts that there should be added to decedent's gross estate, as previously determind by respondent, (a) $278,779.97 representing the value of decedent's personal property *320 situated in England and in East Africa; (b) $289,544.86 representing an escrow fund; and (c) $399,635.53 representing the value of decedent's claim against the estate of Eliza McMillan.
FINDINGS OF FACT.
From the stipulation of the parties to this proceeding, we find the following facts.
William Northrup McMillan, hereinafter called the decedent, was born in St. Louis, Missouri, in 1872. His father, a British subject, became a naturalized American citizen in 1874. Decedent married in 1894 and, with his wife, lived in St. Louis until September, 1899. *1091 He then removed to London, England, where for four years he represented an American business concern. In 1903 he went to British East Africa, later called Kenya Colony, where he maintained his home until his death in 1925. In Africa decedent acquired large tracts of land which he used for farming and cattle raising. He built a house on the land, and many smaller houses for his farm employees, stables, etc. In 1906 he erected a stone bungalow in Nairobi, in Kenya Colony. In 1914 he acquired another large tract of land, on which he erected a large residence. He also acquired an important residential estate in Nairobi.
Decedent enlisted in the British Army in 1915 and served through out the World War, retiring with the rank of major. In 1918 he was knighted by the British Crown. In 1920 decedent was elected a member of the Legislative Council which governed Kenya Colony, and remained a member of that body until his death. To qualify for such membership he took the oath of allegiance to the British Crown. At no time after entering the British army did decedent take the oath of allegiance to the United States. After leaving this country decedent returned every second year*1092 to visit his mother, until her death in 1915. From that time, until his own death in 1925, he was in the United States but once, for a short visit with relatives. Decedent was not engaged in any business in the United States after 1899, nor did he or his wife own or lease any place of residence in the United States at the time of his death nor for many years prior thereto. When decedent's mother died she devised the family home in St. Louis to decedent and her summer home to his wife. Neither of these homes was thereafter occupied by decedent or his wife and both pieces of property were sold soon after the mother's death. Thereafter neither decedent nor his wife owned any real estate interest in this country except in some of the property held by his father's estate in trust. Decedent was one of the trustees of that estate and as such trustee he signed papers sent to him for the purpose, but he took no active part in managing the trust property.
*321 In 1913, in an executed power of attorney to a London solicitor, decedent described himself as "of Juja Farm, Nairobi, British East Africa." In his will, executed in February, 1915, decedent described himself as "of St. *1093 Louis, in the State of Missouri." After decedent's death that will was probated in St. Louis as the will of a resident decedent. A London solicitor, applying for administration as to the decedent's property in Great Britain, described decedent as "of the City of St. Louis and State of Missouri in the United States of America," and further stated that decedent died "domiciled" in the State of Missouri. In the Federal estate tax return filed by petitioner the decedent's permanent residence at the time of death was set forth as St. Louis, Missouri, and his "business address" as Nairobi, Kenya Colony.
William McMillan, a resident of St. Louis, died in 1901, survived by his widow and his son, William N. McMillan, the petitioner's decedent. Under the will of the elder McMillan all of his property was left in trust for his widow and son in equal shares during their lives, and upon the death of either all the income from the property was to go to the survivor. If the son died leaving issue, such child or children became entitled to his share of the income. The will provided that after the death of William McMillan's widow, as each child of the present decedent reached the age of twenty-one, *1094 it was to receive its pro rata share of the corpus of the estate. It was further provided that if the present decedent died leaving no surviving issue or lineal descendants thereof, and after the death of the testator's widow, the trust estate was to pass to the heirs of William McMillan's two brothers. At various times prior to 1914 certain of such contingent heirs sold and assigned their respective interests in the trust estate to the present decedent and his mother. The total so transferred amounted to 58/120 of the entire trust estate, 29/120 to the present decedent and the same proportion to his mother. The mother died in 1915. Decedent died March 22, 1925, survived by a widow but no children or lineal descendants thereof, and no posthumous child was born. On the date of his death the principal of his father's trust estate had a value of $6,927,627.18. That estate included real property in St. Louis worth $82,527.15; 100 shares of stock in a Missouri corporation worth $334,649.79, and United States Liberty Bonds and Treasury notes worth $4,098,562.54.
After decedent's death some of the contingent heirs to the trust estate brought suit to set aside their assignments of*1095 interest in the trust property which they had made to decedent and his mother. The court, on February 19, 1927, held that the assignments were valid and directed the surviving trustee to pay over to decedent's executor 29/120 of the principal of the William McMillan trust *322 estate, and that was done. The property so paid over consisted of the following items, valued as of the date of decedent's death:
| Item | Amount |
| United States Liberty Bonds | $751,499.94 |
| Interest accrued thereon | 12,745.18 |
| United States bonds and certificates of indebtedness | 372,789.09 |
| Income accrued thereon | 407.76 |
| County road improvement bonds | 19,040.75 |
| Income accrued thereon | 64.17 |
| Railway Exchange Bldg. bonds | 22,937.50 |
| Income accrued thereon | 587.50 |
| 40 shares Annuity Realty Co | $36,936.60 |
| Note, Bedford Holding Co | 520,000.00 |
| Income accrued thereon | 12,234.46 |
| Cash | 47,959.23 |
| Due from decedent | 2,613.78 |
| Total | 1,799,815.96 |
The above items were included in decedent's gross estate by the respondent in his determination of deficiency.
Under the will of William McMillan, the net income from the trust estate was to be paid to the present decedent and his mother in equal*1096 parts, free from interference or control of creditors. The will contained a declared intention that neither beneficiary should have the right to alienate, encumber, or otherwise dispose of his or her interest in the trust estate, nor in any way to anticipate or charge the income therefrom. In 1913 decedent and his mother made a written agreement by which, upon the death of either, the survivor was to pay, during his or her life, to the representative of the other, one-quarter of the total income received annually from the trust estate. A cancellation of that agreement was signed by both during the mother's last illness, but in order to carry out her wishes decedent voluntarily paid to her representatives, from the time of his mother's death in 1915, until April, 1921, a total of $399,635.53, pursuant to the original agreement. He then declined to make further payments. In 1924 a suit was brought in the St. Louis courts to determine the validity of the agreement. Trial occurred after decedent's death. The lower court held the agreement valid and ordered decedent's executor to pay over the amount of the unpaid balance, with interest, a total of $94,351.72. Also, what was called*1097 the escrow fund, consisting of the accruals of one-fourth the trust estate income and which had been placed with a depositary pending the outcome of the litigation, was ordered by the court to be paid over under the agreement. The decision of the lower court was appealed to the Supreme Court of Missouri and while the appeal was pending the respondent issued his deficiency notice. In 1929 the Supreme Court reversed the decision below and thereafter the depositary paid the amount of the escrow fund to decedent's executor. The inventory and valuation of that fund, as of the date of decedent's death, was:
| U.S. 4th Liberty Bonds | $149,756.25 |
| Interest accrued on same | 307.26 |
| U.S. Treasury notes | 134,163.75 |
| Interest accrued on same | 277.99 |
| Cash | 3,722.32 |
| Total | 288,227.57 |
*323 The Federal return filed with respect to decedent's estate contained the following:
| Schedule B, stocks and bonds - | |
| Fair market value at day of death - | |
| Stocks of domestic corporations | $920.00 |
| Bonds | 71,935.00 |
| 72,855.00 | |
| Accrued interest or dividends | 1,032.41 |
| 73,887.41 | |
| These values are correctly stated, except that $8.75 should be added to accrued interest and dividends, making the correct total of this item | 73,896.16 |
| Schedule C, Mortgages, Notes, Cash and Insurance - | |
| Fair market value at day of death | 47,186.73 |
| Accrued interest or income | 1,390.83 |
| 48,577.56 | |
| These values are correctly stated. | |
| Schedule D, Other Miscellaneous Property - | |
| There may be additional personal property being administered upon Kenya Colony, Tanganyika Territory and London, England; the value of which this Executor cannot at this time ascertain. | |
| Prior to the death of the decedent, he had acquired 24 1/6 per cent of the interests of all the remainders created by the will of the late William McMillan * * * Said remainders have not as yet determined and no property from that source has come into the hands of the Executors. | |
| Decedent's estate also has a claim to funds held in escrow * * * which claim on the date of death amounted to approximately $285,000.00. Said claim is now in the process of litigation. | |
| Open accounts against Alice Warfield | $6,552.32 |
*1098 Decedent's executor also received $152,285.27 accrued and undistributed income of the William McMillan Trust Estate. Of that amount $72,302.63 consisted of interest on bonds, notes and other obligations of the United States. No other property belonging to decedent at the time of his death, or coming into the hands of his executor, was physically situated within the United States, except the so-called escrow fund. Decedent's gross estate outside of this *324 country constituted slightly more than 8 per cent of his entire gross estate, and was as follows:
| In Great Britain | In Kenya | In Tanganyika | |
| Intangible personal property | $23,121.52 | $94,654.72 | $25,595.75 |
| Tangible personal property | 1,750.00 | 110,836.18 | 9,840.00 |
| Real estate | 331,023.31 | 24,383.50 | |
| Total | 24,871.52 | 536,514.21 | 59,818.75 |
None of the intangibles in the above three jurisdictions consisted of stocks, bonds, or other obligations of corporations organized under the laws of the United States, or any state therein, or of obligations of residents of the United States.
The following items were claimed as deductions from the gross estate:
| Item | Amount |
| Funeral expenses | $524.26 |
| Debts | 380,960.47 |
| Expenses of administration, including litigation expense over the escrow fund | 253,799.22 |
| Additional Federal income taxes of decedent, 1919 to 1924 | 126,981.97 |
| Net interest accrued thereon | $105.77 |
| Allowance for support of dependents | 24,000.00 |
| Compromise payment to settle claim of remaindermen | 50,000.00 |
| Total | 836,371.69 |
*1099 The respondent disallowed those deductions, but now concedes error in so doing.
OPINION.
MARQUETTE: The first question is whether William Northrup McMillan was a resident and a citizen of the United States at the time of his death in 1925. In our opinion he was not. Title 8, section 17, United States Code of laws, provides that "Any American citizen shall be deemed to have expatriated himself when * * * he has taken an oath of allegiance to any foreign State." It is undisputed that the decedent took an oath of allegiance to the British Crown in 1920, perhaps even earlier than that, and he never thereafter repatriated himself as a citizen of this country. A statement in his will, made prior to his oath of allegiance to Great Britain, that he was "of St. Louis, Missouri," and like statements concerning him made by others after his death, do not constitute repatriation. It is clear from the facts before us that he was not a citizen of the United States at the time of his death.
We think it equally clear from the facts that he was not a resident of this country at the time of his death, nor for many years prior thereto. A resident is one who resides in a place and to reside*1100 *325 is to live; to make an abode for a considerable time; to dwell as in a home. (Standard Dictionary.) Under no aspect of that definition can it be said that decedent ever resided in the United States after 1899. He made his home elsewhere, acquired extensive property and business interests outside this country, and looked after those interests in person. During the last ten years of his life he was in this country but once, for a brief visit. Respondent cites, as authorities to the contrary, Adolph Rosenberg, Executor,2 B.T.A. 720">2 B.T.A. 720; Union Trust Co. of Cleveland, Executor,5 B.T.A. 1272">5 B.T.A. 1272; Noah C. Rogers, Executor,17 B.T.A. 571">17 B.T.A. 571; Bank of New York & Trust Co., Executor,21 B.T.A. 197">21 B.T.A. 197; Guaranty Trust Co., Executor,25 B.T.A. 507">25 B.T.A. 507. But in each of those cases there was no expatriation, as here, and there were definite evidences of intention to retain domicile in the United States. In the instant proceeding the evidence not only fails to support the theory that decedent retained or intended to retain his domicile in this country, but it shows that he had no such idea or intention.
The second*1101 question relates to the inclusion in decedent's estate of various items of property received from his father's estate, of certain intangibles kept in this country, and of money deposited in banks in the United States. The property received from the estate of decedent's father consisted of United States bonds and Treasury notes, county road improvement bonds, corporate stocks and securities, a debt owing from decedent to his fathers' estate, cash in bank, accrued interest on bonds, and real estate valued at $82,527.15.
The pertinent provisions of the Revenue Act of 1924, here applicable, are:
SEC. 302. The value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated -
(a) To the extent of the interest therein of the decedent at the time of his death which after his death is subject to the payment of the charges against his estate and the expenses of its administration and is subject to distribution as part of his estate * * *.
SEC. 303. For the purpose of the tax the value of the net estate shall be determined -
* * *
(d) For the purpose of Part*1102 I of this title, stock in a domestic corporation owned and held by a nonresident decedent shall be deemed property within the United States, * * *
(e) * * * and any moneys deposited with any person carrying on the banking business, by or for a nonresident decedent who was not engaged in business in the United States at the time of his death, shall not, for the purpose of Part I of this title, be deemed property within the United States.
*326 In Ernest Brooks, et al., Executors,22 B.T.A. 71">22 B.T.A. 71, we considered the statute above cited respecting its application to intangible property of a nonresident alien. The property consisted of stock in a foreign corporation, bank deposits, bonds of foreign corporations, foreign governments, domestic corporations, and a domestic municipality. All that property was kept in New York, where the income was collected and deposited to the credit of the alien decedent. We there held that the situs of such securities was at the domicile of the owner, and hence they should not be included in his taxable estate in this country. That decision was affirmed by the *1103 Circuit Court of Appeals for the Second Circuit on July 29, 1932, 60 Fed.(2d) 890. In both decisions a distinction, due to statutory provision, was drawn between the securities mentioned and stock in a domestic corporation.
In the above case court decisions are reviewed, and it is apparently settled in the Federal jurisdiction that stocks, bonds and similar securities, mortgages and other evidences of indebtedness, money on deposit, and other intangibles, if not part of a localized business elsewhere have an exclusive situs for tax purposes at the domicile of the owner. Cf. Baldwin v. Missouri,281 U.S. 586">281 U.S. 586. That principle is modified by section 303(d) of the Revenue Act of 1924, which provides that, for Federal estate tax purposes, "stock in a domestic corporation owned and held by a nonresident decedent shall be deemed property within the United States."
None of the personal property in this country which was owned and held by petitioner's decedent at his death was employed by him in business here. In our opinion none of that property was subject to Federal estate tax except the 40 shares of stock in the Annuity Realty Company, a domestic*1104 corporation, received in the distribution of the William McMillan estate, and the stock in domestic corporations included in the return filed with respect to decedent's estate.
Under the laws of Missouri, in 1925 real property was not subject to the expenses of administration of a decedent's estate. Hence it could form no part of such estate for Federal estate tax purposes, under section 302(a) of the Revenue Act of 1924. Crooks v. Harrelson,282 U.S. 55">282 U.S. 55; Oreon E. Scott et al., Executors,25 B.T.A. 131">25 B.T.A. 131. Therefore, whatever interest in real property in Missouri was held by petitioner's decedent at his death can not be subjected to estate tax by the respondent.
Respecting personal property of the decedent in Great Britain and Africa, respondent concedes that such property is not taxable here if we decide, as we have, that decedent was not a resident or citizen of the United States. The value of that property, $265,798.17, therefore should not be included in the gross estate upon a recomputation of the tax.
*327 The decedent and his mother made an agreement respecting a portion of the income from the William McMillian trust estate. *1105 During the mother's last illness the agreement was canceled, but in order to carry out certain provisions of her will the decedent voluntarily paid to her executors amounts aggregating $399,635.53. The payments began in 1915 and continued until some time in 1921. The respondent contends that the amount so paid constituted a valid claim by decedent's estate against the estate of his mother, and hence should be included in his gross estate. The evidence indicates that decedent made the payments with full knowledge of all pertinent facts. If he was under any misapprehension at all, and it is by no means certain that he was, it was only concerning the legal effect of the agreement with his mother. We think the respondent's contention is not well founded. It is a general principle of law that payments voluntarily made with full knowledge of all the facts, although under mistake or ignorance of the law, are not recoverable in the absence of fraud or improper conduct of the payee. Little v. Bowen,134 U.S. 547">134 U.S. 547. Here, no fraud, or improper conduct by his mother's executors, induced the payments in question.
Respondent has admitted error in disallowing deductions*1106 on account of funeral and administration expenses and the like under the Revenue Act of 1924, and of a payment of $50,000 in compromise of a claim against decedent's estate. In the case of a nonresident decedent such deductions are allowable in the proportion which the value of his gross estate located in this country bears to his entire estate, but in no case to exceed 10 per cent of the value of his gross estate situated in the United States. Section 303 of the statute deals only with such property of a decedent as may become subject to Federal estate tax. It is not concerned with any property not subject to such tax. Obviously, the language used and the deductions allowed can only refer and apply to such taxable property. Oreon E. Scott et al., Executors, supra.The only property of the decedent subject to Federal estate tax was his stock in domestic corporations, having an aggregate value of $37,856.50. Not more than 10 per cent of that amount should be allowed as a deduction in recomputing the tax.
Reviewed by the Board.
Decision will be entered under Rule 50.