*825 Where decedent, who was a diabetic, suffered an illness for the first time in several years, and made gifts of a substantial amount within a few months thereafter to her two sons, who were not in need, and made the gifts when her estate was not as large as she had said it would have to be before she would make any gifts, and when she had attained the age of 81 years, and within three months of the date of death, held, that the gifts were made in contemplation of death within the statutory presumption in section 803(c) of the Revenue Act of 1932, upon failure of petitioners to prove by a fair preponderance of evidence that the gifts were not made in contemplation of death.
*582 The Commissioner determined a deficiency of $2,485.29 in estate tax. The Commissioner included in the gross estate the value at *583 the date of death of stock given by decedent to two sons less than three months prior to her death. The sole question for determination is whether decedent made two certain transfers*826 of property in contemplation of death.
FINDINGS OF FACT.
Mathilde Ader, the decedent, died on November 21, 1935. She was born on August 18, 1854, and was 81 years of age at her death.
Decedent was survived by two sons, Frederick P. and Leon H. Ader. They are the duly appointed, qualified, and acting executors of the last will of decedent, dated June 1, 1932.
Decedent, in her last will executed June 1, 1932, made small bequests to the wife of each son and bequeathed the residue of her estate in equal shares to her two sons, Leon and Frederick.
In 1926 or 1927 it was first discovered by decedent's physician that decedent had diabetes. Thereafter, until February 1935, decedent visited her physician regularly each month for checkup and the making of tests. Decedent kept her diabetic condition under control by means of diet. Decedent, by preference, did not take insulin. During the period between 1927 and February 1935 decedent never had fainting or sinking spells. Aside from the diabetic condition, which was not considered serious, decedent's general condition was good, for a woman of her age.
Decedent lived alone in her own apartment, in a four-family residence. *827 Her son, Leon, lived in the apartment directly above her in the same building. She kept no regular servant. She did her own general housekeeping with the exception of the heavy work. She enjoyed walking. On an average of twice a week, she walked a distance of a half mile to the public library, often carrying home with her as many as six books. She also walked when shopping, frequently carrying her purchases home with her. Decedent read the newspapers daily, especially the financial page, which she discussed with her son, Leon. She took her vacations with either of her two sons. Two years before her death decedent went to Cuba with her son, Frederick. That was her last vacation. The decedent was of a cheerful and optimistic disposition. She showed no concern over her diabetic condition. Her physician told her that diabetes was not serious in the first stages and that where the disease is contracted late in life it does not always hasten death.
In February 1935 the decedent fell and broke her arm close to the shoulder joint. The general effect of the fracture brought on an acid condition and a temporary semicomatose condition, which lasted less than a week and kept the*828 decedent confined to her bed for about a week, under treatment for acid elimination. The semicomatose condition consisted of a brain fog and was a condition *584 that supervened with the diabetes on account of irritation and lowered alkalinity. The decedent was not fully conscious during the period of the semicomatose condition. It lasted only a few days. This was the first serious disorder which decedent suffered after it was found that she was a diabetic. After the first week decedent recovered from the semicomatose condition and the diabetic condition was the same as it had been in the earlier years. Decedent wore her arm in a sling until May 1, 1935, when she fully regained the use of her arm. Thereafter, the decedent resumed the customary monthly visits to her physician for the regular checkup and tests.
On September 3, 1935, the decedent suffered an attack of shingles. The pain and irritation from this ailment interfered with her sleep and caused another acid condition, which was followed by another short-lived semicomatose condition. Decedent was taken to a hospital on September 19, 1935, for treatments for acid elimination. She recovered from the comatose*829 condition in a short time and was discharged from the hospital at the end of two weeks, on or about October 3, 1935. The attack of shingles lasted for a period of from five to six weeks. Shingles is not considered a serious ailment. The decedent's condition was fairly good when she returned from the hospital, except that her vitality was low as a result of the treatments for the acid condition.
Between October 3 and November 2, 1935, the date of death, decedent suffered an upset condition and she ate very little. This brought on a serious diabetic complication. Insulin injections were given to decedent. She went into a coma and eventually passed away. The cause of death was diabetes mellitus.
In 1925, shortly after her husband's death, the decedent discussed with her attorney, L. R. Weinmann, and with her physician, her intention of transferring to her two sons a portion of the property she had inherited from her husband's estate. Decedent then felt that she had more than she needed for herself during the balance of her life, and that her sons' needs were greater than her needs. During one of these conversations, decedent said to her attorney that all the property would*830 go to her sons when she died and that she only wanted to keep sufficient property so that she would know that she would be well provided for.
In 1928 decedent had not yet made any gift to her sons, but she still intended making the gifts. Several years later, in 1931 or 1932, when the stock market was depressed, the decedent again spoke to her attorney concerning her financial affairs. When asked by her attorney whether her stock market losses had left her with sufficient means to live on, she replied that conditions had not changed her mode of living, but that conditions had changed her general assets. Decedent's attorney always advised her to retain sufficient property *585 to provide for herself when considering the matter of gifts to her sons.
It was the custom of decedent's son, Leon, to call at his mother's apartment on the first of each month and inventory her assets, which consisted almost entirely of securities. That is, he estimated current values of securities according to current market prices. Upon such visits he informed his mother of any fluctuation in market prices. Sometime in 1931, when an inventory of decedent's property showed a decrease in total*831 value to about $125,000 from a value of approximately $180,000 in 1929, decedent stated to Leon that she had intended giving some of her property to him and to Frederick, but that because of the declines in values of securities she was going to postpone making the gifts. A similar conversation took place on the first of April or May 1935, when the total market value of decedent's securities amounted to approximately $100,000. At that time, decedent said that when her assets were well over $100,000 she was going to make a division of the excess between Leon and Frederick.
In July 1935 the decedent had a conversation with Leon about gift taxes. She showed him a pamphlet she had received from the trust department of a bank which stated that a higher gift tax would go into effect on January 1, 1936, and advised that gifts should be made before that date. Leon read the pamphlet and explained it to decedent. The pamphlet contained some statement to the effect that the total amount exempt from gift tax was to be reduced from $50,000 to $40,000.
Sometime in August 1935, the decedent went to the Alameda Branch of the Bank of America to discuss with an employee of the bank a contemplated*832 transfer of certain stock to her two sons. On August 20, 1935, decedent took to the bank 400 shares of stock of Pacific Lighting Corporation and requested that 200 shares, each, be transferred to the names of Leon and Frederick. On August 28, 1935, new certificates, made out in the names of Leon Ader and Frederick Ader, were delivered to decedent.
On August 30, 1935, the decedent gave to Leon certificates for 200 shares of stock of Pacific Lighting Corporation. At the time the gift was made decedent said that she had been intending to make the gift for some time and that she had just gotten around to it. At that time Frederick was on his vacation. Upon his return decedent gave him, on September 11, 1935, certificates for 200 shares of stock in the same corporation. Upon making this gift decedent stated that she wanted to make it before the new gift tax went into effect.
Decedent owned various securities which had a value at the date of death of about $84,272.75. At the date of death decedent had several bank deposits and other assets having a value of about $6,472,87. *586 The total value of decedent's estate, excluding the stock in question, was $90,745.
The*833 value of the 400 shares of stock of the Pacific Lighting Corporation at the date of decedent's death was $21,200.
Decedent was considered a very keen business woman.
The gifts made on August 30 and September 11, 1935, were made in contemplation of death.
OPINION.
HARRON: The gifts in question were made after decedent suffered a fracture of her arm and a lapse into a semicomatose condition, which required that decedent be confined to her bed and undergo treatments for complications of her diabetic condition. The illness brought on by the fracture was the first one of any seriousness which decedent suffered after it had been discovered that she had diabetes.
Decedent was 81 years old at the dates of the making of the gifts in question. The gifts were made less than three months prior to the date of death.
Section 803 of the Revenue Act of 1932 is applicable. Subsection (c) provides, in part:
* * * Any transfer of a material part of his property in the nature of a final disposition or distribution thereof, made by the decedent within two years prior to his death without such consideration, shall, unless shown to the contrary, be deemed to have been made in contemplation*834 of death within the meaning of this title.
The significance of the statutory provision quoted above has been stated to be as follows:
This provision was intended to and does place upon the taxpayer the burden of proving by a fair preponderance of evidence that the transfer within two years of death is not made in contemplation of death. [.]
The statutory presumption is rebuttable, as is the determination of the Commissioner that a gift has been made in contemplation of death. It is necessary, therefore, to determine from the evidence whether the petitioners have proved "by a fair preponderance of evidence" that the gifts were not made in contemplation of death.
Whether or not the gifts were made in contemplation of death depends upon decedent's motive in making the gift. It is a difficult matter to determine the motive of a deceased person. In searching for the predominant motive, all the evidence must be considered, including the circumstantial evidence. The tests to be applied have been set forth in *835 and we apply here the tests and the rule set forth in the Wells case
One of petitioners' theories is that the gifts in question were made at the particular dates in 1935 because decedent thought that she would avoid paying a higher gift tax if she made gifts prior to *587 January 1, 1936, the effective date of amendments to the gift tax law. The evidence shows that decedent stated to her son, Leon, that she wanted to make a gift to him, that she had been intending to make the gift, and that she had finally gotten around to making the gift; that decedent stated only to her son, Frederick, that she wished to make a gift to him before the new gift tax went into effect. But the part of the evidence relating to what decedent said at the time she made the gifts must be considered with other evidence. Taken with the testimony of Leon Ader to the effect that decedent read financial pages of the papers daily, that Leon explained, in July 1935, a bank circular about gift taxes to decedent, that statements in the circular indicated that gifts of a value of $40,000 would be exempt from gift tax, it must be assumed that decedent*836 knew the value of each gift at the date of gift and that decedent knew that the total value of the two gifts was less than $40,000 and that the gifts were, therefore, exempt from gift tax.
It is a fact that section 505 of the Revenue Act of 1932, which was applicable to the year 1935, exempted gifts of a value of $50,000 from the computation of net gifts for tax.
Decedent surely must have learned, prior to making each gift, that she did not have to pay any gift tax. She had her bank make a transfer of the stock certificates into the names of the donees, and she apparently told the bank clerk that she was going to make a gift of the stock. It is reasonable to believe that, since decedent was interested in and knew about gift taxes, and knew the current values of her stocks, and was considered to be a keen business woman (according to testimony of a bank employee), she would have inquired at the bank whether the gifts would be subject to gift tax.
Assuming then that decedent said to one son that she wanted to make the gift to him prior to the effective date of new gift taxes, it does not follow that the statement should be given much weight. In view of the general knowledge*837 of decedent on the matter of gift taxes, which the record shows she had, the statement means very little here, in so far as it is relied upon to reveal a predominant motive in the making of one or both of the gifts. It is noted that decedent did not refer to the effect of new gift taxes when she made the gift to Leon.
We, therefore, attach little weight to the reference to gift tax made by decedent at the time she made the gift to Frederick.
Another of petitioners' theories about the motive of decedent in making the gift is that decedent in 1935 was putting into execution an intent she had entertained for about nine years to give to each son a part of the estate that she had inherited from her deceased husband. The evidence shows that decedent's expressions of an intent to make gifts to her sons, in 1925 and in subsequent years, *588 were vague. The intent of actually making the gifts was vague. Decedent stated, as far back as 1925, that all the property would go to the two sons when she died and that decedent wanted to keep enough to be sure that she would be well provided for. In May 1935 decedent indicated that she wanted her net assets to amount to at least $100,000, *838 and that she was not going to give any of her property to her sons until there should be a "substantial amount over $100,000", and that at such time decedent was going to give the excess above $100,000 to her sons.
Decedent did not carry out any intent to make gifts to her sons during the period between 1925 and 1935, when the value of her assets was as high as $175,000 and $125,000. As far as the record shows, decedent did not make any gifts to her sons during the above stated period. She was not in the habit of making gifts to her sons. She was a frugal person and apparently was much interested in the values of her assets.
Therefore, little weight can be given to the indefinite expressions made by decedent on a few occasions to the effect that she intended making gifts to her sons. In 1932 decedent executed her last will. In the will she gave all of her estate, above bequests totaling $10,000, to her two sons. There is no evidence to show that in 1932 decedent had any definite intention of making any inter vivos gifts to her sons.
We turn, then, to consideration of the circumstances under which decedent made the gifts in 1935. (a) The decedent's physical condition*839 had been bad within five months prior to making the gifts. In February decedent was ill, confined to bed, and, for a short time, was in a semicomatose condition. That was the first instance of any complications from diabetes. It is reasonable to believe that decedent knew that she had been in a semicomatose condition, and that this was a complication of the diabetic condition. (b) Decedent, for reasons unknown, in August 1935 departed from her express policy to not make any gifts while her assets were worth not in excess of $100,000, i.e., in August 1935 her assets were not worth a "substantial amount over $100,000." She decided, for reasons not known, to make gifts to her sons, regardless of lack of increase in values of her assets. (c) The evidence does not show that either Leon or Frederick was financially in need of any assistance at the dates the gifts were made. (d) The gifts were made a short time after decedent attained the age of 81 years. She became 81 years of age on August 18, 1935. It is not outside the realm of the possible that decedent believed that she was approaching the late hours of the evening of her life.
The evidence here is neutral. It does not reveal*840 any positive state of mind of the decedent, as of the date of the gifts in 1935, that decedent believed that she had long to live, or that she believed that she was soon to die. The two theories presented by petitioners as to *589 the motives behind the making of the gifts do not stand up well under analysis. In fact, the evidence which is presented weakens, rather than strengthens, the theories. Stripped to clear facts, the situation is simply that an aged woman, a short time after she had suffered a broken arm and a complication of a disease which is seldom curable, made gifts which in value represented about one-fourth of her holdings in securities. There has not been presented a "fair preponderance of evidence" to prove that the gifts were not made in contemplation of death. It must be concluded that the gifts, substantial in amount and made within three months of the date of death, were made in contemplation of death, under the statutory presumption contained in section 803(c), which has not been refuted. It is so held, and respondent's determination is sustained. Cf. *841 ; ; ; .
Decision will be entered for the respondent.