*222 Decision will be entered under Rule 50.
In 1931 the decedent created a trust, reserving to herself all income therefrom in excess of $ 7,500 per annum which was to be distributed $ 2,500 each to her three children. Under the terms of the trust, if decedent survived her children and their descendants, the corpus would have reverted to her or her estate. Held, the value of the trust corpus at her death is to be included in her gross estate under section 811 (c), Internal Revenue Code, as interpreted by Commissioner v. Church, 335 U.S. 632">335 U.S. 632, and Spiegel v. Commissioner, 335 U.S. 701">335 U.S. 701, decided January 17, 1949.
*629 Petitioner challenges respondent's determination that there is a deficiency of $ 46,770.80 in estate tax. By an amended answer respondent asks that the deficiency be increased from $ 46,770.80 to $ 75,113.48. The issue is what part, if any, of the corpus of a trust created by the decedent is to be included in her gross estate.
*630 The other question raised by the pleadings was stipulated by the parties. Effect will be given to their stipulation in the computation under Rule 50.
FINDINGS OF FACT.
The petitioner is the estate of Anna Scott Farnum, deceased. The duly qualified executors are Fidelity-Philadelphia Trust Co., a corporation which has its principal office in Philadelphia, Pennsylvania; Henry W. Farnum, an individual residing at Righters Mill Road, Ardmore, Pennsylvania; and Charles I. Thompson, an individual residing in Chestnut Hill, Philadelphia, Pennsylvania.
The decedent, Anna Scott Farnum, was born July 28, 1878, and died testate May 25, 1940.
On January 19, 1931, the decedent executed an irrevocable deed of trust, which, upon execution by her, was delivered to W. G. Littleton, then vice president and*224 senior trust officer of the Fidelity-Philadelphia Trust Co.
On August 22, 1941, petitioner filed the Federal estate tax return for decedent's estate without including any amount in the gross estate in respect of decedent's trust.
On May 12, 1944, respondent mailed to petitioner a notice of deficiency in Federal estate tax in the amount of $ 46,770.80 in respect of decedent's estate. It was therein determined (a) that the net value of the corpus of decedent's trust was $ 385,393.80 ($ 392,300.10 less trustees' commissions of $ 6,906.30) as of the date of her death, and (b) that $ 261,816.31 of this amount was includible in decedent's gross estate.
By an amended answer filed October 8, 1945, respondent alleged (a) that the net value of the corpus of decedent's trust, $ 385,393.80, should be included in her gross estate for estate tax purposes; (b) that the correct deficiency was $ 75,113.48, and (c) that claim for the additional deficiency was asserted.
Anna Scott Farnum was a granddaughter of Thomas A. Scott, who died May 21, 1881. Decedent's mother was Thomas A. Scott's daughter; she was Mariam D. Bickley by her first marriage and Mariam D. Thropp by her second marriage. Thomas*225 A. Scott created two inter vivos trusts, and a testamentary trust. Decedent's mother was entitled to the income during her lifetime from each of the three trusts. In each of the three trusts there was a remainder over after the life estate equally to the four children of the life tenant, who were Helen Douglas Page, Anna Scott Farnum, Douglas S. Thropp, and Thomas A. Scott Thropp. The Fidelity-Philadelphia Trust Co., or its predecessor, the Fidelity Insurance Trust & Safe Deposit Co., was trustee in each of the three trusts, which were designated on its books as follows: *631
| Trust under deed of Thomas A. Scott dated | |
| November 26, 1879 | Mariam D. Thropp Trust No. 1. |
| Trust under will of Thomas A Scott | Mariam D. Thropp Trust No. 2. |
| Trust under deed of Thomas A. Scott dated | |
| March 15, 1880 | Mariam D. Thropp Trust No. 3. |
Mariam D. Thropp died testate October 4, 1930. The Fidelity-Philadelphia Trust Co., Douglas A. Thropp, and Thomas A. Scott Thropp were executors under her will. Upon her death the three trusts created by her father, Thomas A. Scott, terminated.
On January 19, 1931, Anna Scott Farnum owned an undivided interest in the assets that formed the corpora*226 of the three trusts that terminated with the death of her mother, Mariam D. Thropp. Those assets consisted of real estate, stocks, bonds, mortgages, and other personalty.
On January 19, 1931, decedent was a widow, with three living children, the date of birth of each being as follows:
Henry W. Farnum, July 29, 1903.
Anna M. F. Thompson, March 2, 1905.
Elizabeth Farnum Gates, February 25, 1907.
On January 19, 1931, all of these children of decedent were married and living with their respective spouses, except Henry W. Farnum, who was married on February 3, 1933.For many years prior to her death, Mariam D. Thropp had given an allowance to her daughter, Anna Scott Farnum, who in turn had given allowances to her children, the daughters' allowance being $ 200 each per month. When decedent executed her trust deed on January 19, 1931, she wanted to give $ 200 per month, net, to each of her three children out of the trust income. Accordingly, the trust deed provided for annual payments out of trust income of $ 2,500 a year for each child. The decedent expected the additional $ 100 to be consumed by income taxes.
Decedent's trust deed of January 19, 1931, appointed the Fidelity-Philadelphia*227 Trust Co. and James D. Winsor, Jr., trustees. The trust deed provided, in part, that:
* * * the said Anna Scott Farnum for and in consideration of * * * Hath granted, bargained, sold, * * * and by these presents Does grant, bargain, * * * [unto the trustees] the money, securities, mortgages and all other property (excepting only the sum of One hundred thousand Dollars ($ 100,000) which has been paid over to Anna Scott Farnum prior to the execution and delivery hereof) held by Fidelity-Philadelphia Trust Company, Philadelphia, Pennsylvania, as successor trustee constituting all the distributive share of principal (excepting only said sum of One hundred thousand Dollars ($ 100,000)) of the said Anna Scott Farnum, * * * [in the three trusts created by Thomas A. Scott hereinbefore mentioned] * * *, the principal of all of said trusts being now distributable in accordance with the terms thereof. To Have, Hold, Receive and Take the said money, securities, mortgages and other property *632 hereby granted and assigned, * * * In Trust, nevertheless, for the following uses and purposes, that it [sic] to say:
In Trust to invest and keep invested the moneys and personal property in*228 such manner as the Trustees shall deem proper, and the same from time to time to call in, sell, assign, dispose of, and again invest as aforesaid; and to collect, receive and recover the income and interest thereof, and after deducting all proper expenses for the execution of this trust, to pay over when and as received and not by way of anticipation the net income thereof as hereinafter set forth:
(a) Payment of Income during Lifetime of Anna Scott Farnum.
For and during the term of the natural life of Anna Scott Farnum to pay:
(1) To Henry W. Farnum (son of Anna Scott Farnum) the annual sum of Two thousand five hundred Dollars ($ 2,500) payable in quarterly installments beginning April 1, 1931.
(2) To Anna M. F. Thompson (daughter of Anna Scott Farnum) the annual sum of Two thousand five hundred Dollars ($ 2,500) payable in quarterly installments beginning April 1, 1931.
(3) To Elizabeth Farnum Gates (daughter of Anna Scott Farnum) the annual sum of Two thousand five hundred Dollars ($ 2,500) payable in quarterly installments beginning April 1, 1931.
(4) The entire balance of net income to Anna Scott Farnum.
And in the event any of said children shall die during the lifetime*229 of Anna Scott Farnum, leaving issue surviving, to continue to pay the parent's share of income to such issue, equally per stirpes, until the death of Anna Scott Farnum.
(b) Division of Principal into Shares and Sub-Shares at death of Anna Scott Farnum.
(1) In Trust upon the death of Anna Scott Farnum to divide the principal into as many parts or shares as there shall be children of Anna Scott Farnum living at the time of her death, and children of Anna Scott Farnum then dead represented by children then living, and to sub-divide the share applicable to each such deceased child represented by children then living, per stirpes upon the principle of representation.
(2) In Trust to pay over to Henry W. Farnum (if he survive Anna Scott Farnum) as soon as may be convenient, one-half of the amount that may be ascertained to be his share of principal, and the remaining one-half of said amount to continue to be held in trust hereunder and to be considered the share of Henry W. Farnum for all purposes hereinafter mentioned.
(c) Payment of Income on Shares and Sub-Shares.
In Trust to pay over to the beneficiaries for whom shares or sub-shares may be held, the full income from their respective*230 shares or sub-shares until the principal thereof shall be distributed as hereafter provided.
(d) Final Distribution of Principal.
(1) In Trust upon the death of each child of Anna Scott Farnum for whom a share shall be held under paragraph (b) (1) above, and who shall die leaving issue surviving, to make distribution of the principal of said share to said deceased child's issue per stirpes upon the principle of representation.
(2) In Trust upon the death of each child of Anna Scott Farnum for whom a share shall be held under paragraph (b) (1) who shall die without leaving issue surviving, to make distribution of the principal of said share to the person or persons and for such estate or estates as may be provided in the last will and testament of said deceased child; but should any child of Anna Scott Farnum *633 for whom a share shall be held as aforesaid, die without issue and intestate, then and in that event to divide and distribute said share of principal among the then living descendants of Anna Scott Farnum per stirpes upon the principle of representation.
(3) In Trust to distribute the principal of any share or sub-shares which may be held for issue of deceased children*231 of Anna Scott Farnum under paragraph (b) (1) above, when each attains the age of twenty-one years; provided that if any of said issue of a deceased child of Anna Scott Farnum should die before attaining the age of twenty-one years, his or her share shall be added equally to the shares of other issue of said deceased child of Anna Scott Farnum (including any of said issue to whom distribution shall then have been made); and further provided that in default of such other issue said share shall be divided among the then living descendants of Anna Scott Farnum per stirpes upon the principle of representation.
Anna Scott Farnum's will, executed February 17, 1931, bequeathed her residuary estate to Fidelity-Philadelphia Trust Co. and James D. Winsor, Jr., as trustees, and provided for the same division of the estate, the same beneficiaries, and the same shares of income and principal as she provided for in her trust deed of January 19, 1931.
On May 25, 1940, all of decedent's children were married and living with their respective spouses. Each child of the decedent had three children, whose names and dates of birth were as follows:
Charles I. Thompson, Jr., January 16, 1927.
Joseph *232 W. Thompson, 2nd, April 21, 1929.
Henry Farnum Thompson, November 30, 1930.
Caleb Frank Gates, 3rd May 9, 1932.
Betsy Anne Gates, August 18, 1935.
Mary Ellen Gates, June 23, 1938.
Edith Bringhurst Farnum, February 3, 1935.
Anna Scott Farnum, December 16, 1937.
Henry Whipple Farnum, July 5, 1939.
On January 19, 1931, and thereafter until approximately April 1940, decedent enjoyed excellent health, and during this period she continued a life of normal and unimpaired physical activity.
Anna Scott Farnum's shares of the assets in the three Mariam D. Thropp trusts were awarded to her by the several courts on January 6, February 11, and February 13, 1931, and the schedules of distribution in compliance with such awards were filed in the courts on June 2 and July 2, 1931.
The trustee of the Mariam D. Thropp Trust No. 2 advanced the sum of $ 4,600 to the decedent from October 4, 1930, to January 1, 1931, and $ 104,200 to her between January 1 and April 1, 1931, $ 100,000 of which decedent had specifically reserved to herself under the trust deed of January 19, 1931. No part of these sums was ever delivered to the trustees under decedent's trust indenture. Except for the $ 4,600 and $ 104,200*233 aforementioned, no delivery of former trust assets was made to Anna Scott Farnum or to her trustees under the *634 January 19, 1931, indenture prior to April 1, 1931. The assets transferred in trust by Anna Scott Farnum's trust deed were received by her trustees after March 31, 1931.
It is stipulated that the value of the entire corpus of decedent's trust on May 25, 1940, was $ 392,300.10.
The omitted portions of the stipulated facts are incorporated herein by reference.
OPINION.
Respondent contends that the entire corpus of the trust created by decedent must be included in her gross estate under section 811 (c) of the Internal Revenue Code, (a) as a transfer in contemplation of death, or (b) as a transfer intended to take effect in possession or enjoyment at or after decedent's death. As an alternative, respondent contends that section 811 (c) requires a portion of the trust corpus to be included in decedent's gross estate because the transfer was made after the Joint Resolution of March 3, 1931, and decedent retained for her life a portion of the income from the property transferred. The value of that portion of the trust corpus which would be included in decedent's gross*234 estate under respondent's alternative contention is $ 222,082.20.
Petitioner contends that no part of the corpus of decedent's trust is includible in her gross estate (a) as a transfer in contemplation of death; (b) by reason of her retention of an interest in income for her lifetime; (c) by reason of the existence of a possibility of reverter by operation of law; or (d) as property in which decedent had an interest at the time of her death.
Two recent decisions of the Supreme Court, Commissioner v. Church, 335 U.S. 632">335 U.S. 632, and Spiegel v. Commissioner, 335 U.S. 701">335 U.S. 701, decided January 17, 1949, support respondent's contention that the instant transfer in trust was one intended to take effect in possession or enjoyment at or after decedent's death. We shall pass the other contentions advanced by the parties. The Church case held that a trust agreement that reserved a life income to the settlor was intended to take effect in possession and enjoyment at the settlor's death, and the value of the trust property should be included in the settlor's gross estate. The Spiegel case held that where a settlor has conveyed*235 away less than all of his property ownership and attributes, present or prospective, section 811 (c) requires the value of the property transferred in trust to be included in the settlor's gross estate.
In the Spiegel case the Supreme Court pointed out that its discussion of the "possession or enjoyment" provision of section 811 (c) in the Church case:
* * * demonstrates that the taxability of a trust corpus under this provision of section 811 (c) does not hinge on a settlor's motives, but depends on the nature and operative effect of the trust transfer. In the Church case we *635 stated that a trust transaction cannot be held to alienate all of a settlor's "possession or enjoyment" under section 811 (c) unless it effects "a bona fide transfer in which the settlor, absolutely, unequivocally, irrevocably, and without possible reservations, parts with all of his title and all of his possession and all of his enjoyment of the transferred property. After such a transfer has been made, the settlor must be left with no present legal title in the property, no possible reversionary interest in that title, and no right to possess or to enjoy the property then or thereafter. *236 In other words such a transfer must be immediate and out and out, and must be unaffected by whether the grantor lives or dies." We add to that statement, if it can be conceived of as an addition, that it is immaterial whether such a present or future interest, absolute or contingent, remains in the grantor because he deliberately reserves it or because, without considering the consequences, he conveys away less than all of his property ownership and attributes, present or prospective. In either event the settlor has not parted with all of his presently existing or future contingent interests in the property transferred. * * *
In this case the decedent reserved a life interest in the trust income, which means that section 811 (c), as interpreted by the Church case, requires the inclusion of the trust corpus in her gross estate. Admittedly there is a remote possibility of a reverter in this case. Such a possibility of reverter brings into play the principle announced in the Spiegel case. Upon the authority of these two cases, we hold that section 811 (c) requires the inclusion of the value of the trust corpus in the decedent's gross estate.
After the Church and Spiegel*237 decisions were promulgated, petitioner filed a motion for further hearing. This motion was set down for argument on March 16, 1949, at which time counsel for and against the motion were heard. After carefully weighing and considering their arguments, it is our opinion that no useful purpose will be served by further delaying our decision on the issue presented. Accordingly, petitioner's motion for further hearing is denied.
In redetermining decedent's estate tax liability, consideration will be given to the increased deficiency requested by the respondent.
Decision will be entered under Rule 50.