*183 Decision will be entered under Rule 50.
Decedent prior to 1918 took out certain policies of life insurance upon his own life. In 1932 he irrevocably assigned these policies to trustees who were to collect the proceeds at his death and hold them for the benefit of his wife, children, and grandchildren. Before transferring these policies to the trustees decedent borrowed upon them their maximum loan value. After the transfer the premiums were paid by the decedent or by loans made upon the policies by the trustees or by the application of dividends to premiums. The trustees held no other assets. The transfer by decedent of the policies to the trustees was motivated solely by his desire to avoid estate taxes. Held, that the transfer of the policies in 1932 was made in contemplation of death and the proceeds of the policies are properly includable in decedent's gross estate.
*358 Respondent determined a deficiency in the estate tax liability of petitioner estate in the sum of $ 327,544.95. By stipulation and concession all issues have been removed from*184 the case except the following: Whether respondent erred in including in the gross estate of decedent Frank A. Vanderlip the proceeds of certain policies of insurance issued upon the life of decedent prior to 1918 and transferred by him in 1932 to a certain trust for the purpose of avoiding estate taxes.
The parties have filed a voluminous stipulation of facts. In addition oral evidence was adduced at the hearing. The oral evidence and a large part of the stipulation have to do with issues no longer before us.
FINDINGS OF FACT.
We find the facts to be as stipulated. That part of the stipulated facts which is pertinent to the issue before us may be summarized as follows:
Decedent was born on November 17, 1864, and died on June 29, 1937. He was survived by his wife, six children, and several grandchildren. His wife, his two sons, a daughter, and the City Bank Farmers Trust Co. are the executors of his estate. They filed an estate tax return with the collector of internal revenue for the fourteenth district of New York, showing a gross estate of approximately $ 1,000,000. There was no material change in the total amount of decedent's estate from June 1, 1932, to the date of his*185 death.
*359 By agreement dated June 1, 1932, the decedent irrevocably assigned, transferred, and delivered to City Bank Farmers Trust Co. et al., as trustees, policies of insurance upon his life aggregating $ 923,868.60, the proceeds of which were to be held in trust for the benefit of the decedent's widow and descendants. The terms of the trust instrument are incorporated herein by reference. These policies were all issued prior to the effective date of the Revenue Act of 1918. No additional policies of insurance on the decedent's life were subsequently assigned and transferred to said trustees. The policies of insurance so assigned and transferred to the trustees comprised, until the death of the decedent, the sole assets of the trust.
Before the assignment and transfer of the policies of insurance to the trustees under the trust agreement, decedent borrowed upon the security of the policies the total sum of $ 398,898.51, which on June 1, 1932, represented the then maximum loan value of every policy of insurance assigned and transferred to the trustees.
After the assignment and transfer of the policies of insurance to the trustees, the latter invariably applied to the payment*186 of each annual policy premium and the annual interest on each policy loan, any and all dividends together with the maximum additional loan value created as the result of payment of each new policy premium. The decedent paid policy premiums and interest on policy loans to the extent that the total of such two items exceeded the dividends and additional loan value so credited at the instance of said trustees. The payments thus made by decedent were in the total amount of $ 183,026.45. The total amount of the policy loans procured by the trustees subsequent to the transfer of the policies of insurance to them and applied by them in partial payment of premiums and of interest on policy loans was $ 114,539.69.
Article V of the trust instrument provided in part as follows:
From and after the assignment to them of each policy of insurance at any time assigned to them as Trustees hereunder, said Trustees shall have, with respect to such policy, or any paid-up additional insurance purchased with annual dividends thereon, or any paid-up insurance, whether extended term or otherwise, received in the event of a surrender or lapse thereof, the sole right to exercise any and all of the benefits, *187 rights, options and privileges of whatsoever kind appertaining to such policy, and may exercise the same, or refrain from exercising the same, at such times and in such manner as they may in their absolute discretion from time to time deem advisable, including but not by way of limitation, the right (1) to borrow thereon; (2) in the event of the surrender or lapse of such policy, either (a) to receive the cash surrender value thereof, (b) to direct the purchase of non-participating paid-up life insurance, or (c) to continue the insurance for its face amount as paid-up extended term insurance; (3) to direct the disposition of the annual dividends on such policy. The Trustees shall direct that the dividends on such policies as are not fully paid up, be applied in reduction of the premiums on such policies. The Trustees are hereby expressly authorized and empowered to do and perform any and all acts and to make, execute and deliver any and all written instruments which they in their sole judgment may *360 deem advisable in order that all the benefits, rights, options and privileges under the policies of insurance held by them hereunder from time to time shall be vested in the *188 Trustees.
Wherever possible, the Trustees shall cause provision for automatic premium loans to be endorsed on the policies by the issuing companies. If at any time the Trustees believe that any policy assigned to them hereunder is likely to lapse by reason of the non-payment of any premium thereon, they are hereby expressly authorized and empowered, in their absolute discretion, to make payment of such premium out of any funds then in their hands, and they are further authorized and empowered to borrow upon any policy, or surrender the same for cash, or take any other steps which they may deem advisable in order to raise funds for the payment of any premium on any policy, but they shall be under no duty or obligation whatsoever to pay any such premium or to take any steps to raise funds for the payment thereof.
The only value of the insurance policies comprising the corpus of the trust was the difference between the loan value and the terminal reserve value.
At the decedent's death said trustees received $ 421,815.66 as the proceeds of the decedent's life insurance
The decedent's transfer of said policies of insurance upon his life to said trustees pursuant to said trust agreement*189 dated June 1, 1932, was motivated solely by the decedent's desire to avoid estate taxes thereon and was not otherwise made in contemplation of death within the meaning of the Revenue Acts of 1926 and 1932, as amended, or of the regulations thereunder.
OPINION.
In 1932 decedent was the owner of certain policies insuring his life and calling for the payment at his death of $ 923,868.60. These policies were taken out by decedent prior to 1918. The record does not disclose whether the proceeds of the policies were payable upon his death to named beneficiaries or to his estate. In 1932, and "motivated solely by [his] desire to avoid estate taxes" which might be payable upon these life insurance policies, he transferred them by irrevocable assignment to trustees, the beneficiaries being his wife, his children, and his grandchildren. Before making this assignment decedent borrowed upon these policies the sum of $ 398,898.51, which represented their then maximum loan value. After the assignment a part of the premiums due were paid by the trustees, who borrowed for this purpose whatever loan value was periodically created by the payment of premiums and applied to the same purpose any *190 dividends paid upon the policies. The remaining part of the premiums was paid by decedent during his lifetime, and amounted to $ 183,026.45. At his death the full amount of the policies less loans was collected by the trustees. The question presented is whether this amount should be included for estate tax purposes in decedent's gross estate.
*361 The primary problem is whether the assignment of the policies by decedent to the trustees was a transfer, by trust or otherwise, made by decedent in contemplation of death. It is stipulated that the transfer "was motivated solely by the decedent's desire to avoid estate taxes thereon and was not otherwise made in contemplation of death within the meaning of the Revenue Acts of 1926 and 1932, as amended, or of the Regulations thereunder." We are of the opinion that decedent's sole motive in making the transfer was one connected with death and not with life and the transfer was therefore one made in contemplation of death. This conclusion is in accord with the opinions of the Circuit Court of Appeals for the Second Circuit in the cases of , and *191 . It is true that, because of the facts present in those cases and dicta to be found in those opinions, distinctions may be pointed out between those cases and the instant case. However, a case which is squarely in point is (C. C. A., 3d Cir., July 9, 1943), which affirmed per curiam a decision of the District Court "for the reasons sufficiently and satisfactorily given in the opinion of" the district judge. This latter opinion is set out in 43-1 U. S. T. C., § 10,011. In that case the district judge said: "* * * We can draw no other conclusion than that the transfer was made with intention that these properties should not be liable for Federal estate tax. If that is so, naturally the transfer must have been made in contemplation of death." Certiorari was denied by the Supreme Court in this case on January 31, 1944. The Supreme Court had already denied certiorari in , on October 11, 1943. See also*192 Regulations 105, sec. 81.16.
Having decided that the transfer of the insurance policies by decedent to the trustees in 1932 was made in contemplation of death, we come to the question of whether, even so, the proceeds of the insurance policies in question are subject to the Federal estate tax.
Although the policies are not in evidence, the facts stipulated indicate that decedent prior to 1932 had the right to borrow on the policies and to transfer them, and thus had certain incidents of ownership with regard to them, both before and after 1918. The fact that these incidents of ownership were surrendered by decedent by the transfer to the trustees in 1932 is immaterial. This transfer was made, as we have held, in contemplation of death, and can not affect the incidence of the Federal estate tax. .
Petitioners' contention on this issue goes beyond the contention that decedent at the time of his death had no incidents of ownership in the *362 life insurance policies, and resolves itself into the broad contention that the Federal estate tax does not apply retroactively to any life insurance issued*193 prior to the effective date of the Revenue Act of 1918, regardless of whether the insured possessed incidents of ownership with regard to such insurance at that date. In this contention they rely principally upon ; ; ; and .
We are of the opinion that the authorities relied upon by petitioners are no longer controlling on this issue since the Supreme Court handed down its opinions in , and . This is the position we took in , which was affirmed sub nom (C. C. A., 1st Cir., Nov. 3, 1943). See also ; certiorari denied*194 October 12, 1942; Paul, Federal Estate and Gift Taxation § 10.06.
Decedent had legal incidents of ownership with regard to these policies in 1918 and in 1932, and would have had them at the time of his death had it not been for transfers made in contemplation of death. We see no statutory or constitutional reason why these policies and their proceeds should not be subject to the Federal estate tax.
Upon this question we decide against petitioners.
The contention of petitioners that section 302 (c) is not applicable to life insurance policies is without merit. . Equally without merit is petitioners' contention that the insurance policies in question had no value at the time they were transferred by decedent on account of the exhaustion of their loan value by decedent and, therefore, having no value in the commercial sense at that time, their transfer can not be considered a transfer in contemplation of death. We are concerned with values as of the time of death, and not as of the time of transfer.
Petitioners' final contention*195 is that, regardless of our disposition of the questions discussed above, there is includable in the gross estate only that portion of the insurance proceeds allocable to the premiums and interest on property loans paid by the decedent subsequent to the transfer of the policies. In support of this contention petitioners point to Regulations 105, section 81.27 (b), which provides that "where a portion of the premiums or other consideration was actually paid by another and the remaining portion by the decedent, either directly or indirectly, such insurance is considered to have been taken out by the latter in the proportion that the payments therefor made by him bear to the total amount paid for the insurance." See . However, section 81.27 (a) of the same regulations provides: "The purchase of insurance upon *363 the life of the decedent is attributed to the decedent even though the premiums, or other consideration, are paid only indirectly by the decedent. As thus used, the phrase 'paid indirectly by the decedent' is intended to be broad in scope." In our opinion it is broad enough to cover the instant*196 case. The only payments of premiums on the policies covered by the 1932 transfer were made from the funds of the decedent or from the loan values of the policies periodically created by the payment of premiums, or dividends distributed on such policies which depended upon the payment of premiums. The funds going to the payment of the premiums either came directly from the decedent or indirectly through the realization of accretions to the value of property transferred by decedent in contemplation of death which resulted from his payment of part of such premiums. No other person contributed to the payment of premiums. Under the facts shown we are unable to agree with petitioners in this contention.
We conclude that the proceeds of the policies in question realized by the trustees were properly included for estate tax purposes in decedent's gross estate.
Decision will be entered under Rule 50.