*3846 Gifts of shares of stock made by decedent to his brothers within two years prior to his death held not to have been made in contemplation of death.
*214 This is a proceeding for the redetermination of a deficiency in estate tax of $230,930.03. The deficiency results in part from the respondent having included in the gross estate of the decedent an amount of $1,466,000, representing the value at the time of the decedent's death of certain shares of stock transferred by him to his brothers 19 days prior to his death. This adjustment, resulting in a tax of $229,147.89, is the basis of this proceeding, the other adjustments involving the remainder of the deficiency, $1,782.14, being acquiesced in by the petitioners.
FINDINGS OF FACT.
Jacob Gimbel, the decedent, was born September 26, 1850, and died November 7, 1922, at the age of 72 years, one month and 12 *215 days. The petitioners are the duly qualified executors of his estate, under letters testamentary granted to them*3847 December 11, 1922, by the register of wills of Philadelphia County, Pennsylvania.
Jacob Gimbel was an inhabitant of the State of Pennsylvania on the date of his death. The petitioners, with the exception of Isaac Gimbel, were inhabitants of the State of Pennsylvania, during the year 1922, on the date the petition was filed, and at the time of the hearing. Isaac Gimbel was in 1922, and is now, a resident of the city of New York, State of New York. As executors, the petitioners made the return involved in this appeal to a collector of internal revenue whose office is located in Pennsylvania.
Jacob Gimbel was the eldest of seven brothers and was about 7 years older than the next eldest brother, about 9 years older than the next brother, and about 18 years older than the youngest brother.
At about the age of fifteen Jacob Gimbel engaged in the merchandising business with his father, under the firm name of A. Gimbel & Son, at Vincennes, Ind. Several branch country stores were established under the same name and as the younger brothers became old enough to work, they were apprenticed to the country stores until all seven brothers were working for the firm.
About 1887, A. *3848 Gimbel, the father, retired from the business. Jacob Gimbel then organized a partnership under the firm name of Gimbel Bros., with his six brothers as partners. It was decided to open a store at Milwaukee.
Although Jacob Gimbel had more money to invest in the partnership than the others, his family pride, paternal attitude toward his brothers, and his ideas of justice led him to insist that his brothers enter the partnership with interests equal to his own. This was done even though the others were unable to invest an amount equal to the amount contributed by Jacob Gimbel, who furnished their share of the capital of the partnership which they lacked.
The discrepancies in unpaid capital were cared for through an account known as "the pool." Jacob Gimbel, who had paid for his own interest in the partnership and who had advanced the money to carry the deficiency of his brothers, was called a "plus member" of "the pool." His brother Daniel, who soon paid for his share, also became a "plus member." The other brothers because of their smaller investments, their indebtedness to Jacob for his advances, by reason of their being married and having families and being unable to live as*3849 economically, were never able to pay the amounts charged against them in "the pool" until 1922. These brothers were known as "minus members."
"The pool" was an accounting arrangement between the brothers and was independent of the accounts of the partnership or of the *216 corporations. Partnership profits and corporation dividends to which each of the brothers were entitled were credited to each brother and the "minus members" paid interest at 6 per cent per annum to the "plus members."
The business grew and prospered and it was decided to open a store at Philadelphia, which was done in 1894. The small country stores were then discontinued and the firm had only the two stores, the one in Milwaukee and the one in Philadelphia. The business continued to grow and as more capital was needed to meet this growth the partners organized a corporation under the laws of Pennsylvania in 1902 under the name of Gimbel Brothers, Incorporated. The corporation took over the business of the Milwaukee and Philadelphia stores. Messrs. Guggenheim of New York became the holders of 20 per cent of the stock of the corporation and the remaining 80 per cent was held in equal amounts by Jacob*3850 Gimbel and his brothers. While Jacob's capital would have enabled him to have more stock in the corporation than he took, yet he and Daniel loaned to the other brothers such amounts of money as would enable them to purchase an equal number of shares.
The Milwaukee and Philadelphia stores continued to be profitable and Jacob Gimbel and his brothers, being ambitious, decided to open a store in New York. In 1910 a corporation known as Gimbel Brothers, Incorporated, New York, was formed, and in that year a large store was opened in New York City. The Guggenheims being unwilling to participate in the New York enterprise, the Gimbel brothers interested Julius Rosenwald of Chicago, who acquired 20 per cent of the stock of this corporation. The remaining 80 per cent of the stock of the corporation was owned equally by Jacob Gimbel and his brothers. As in the Pennsylvania corporation, Jacob and Daniel loaned the other brothers such amounts of money as would enable them to purchase an equal number of shares. For the first few years of its existence the New York store was not profitable and it was not until 1921 that it earned profits equal to those of the Pennsylvania corporation.
*3851 From the time the opening of the New York store was considered, the Gimbel brothers desired to have it under the same corporation as the Philadelphia and Milwaukee stores, but the Messrs. Guggenheim were unwilling to invest additional capital in the business. This made it necessary to obtain capital outside of the Gimbel family, which was done by forming a separate New York corporation and selling an interest to Rosenwald. From time to time after organization of the New York corporation, overtures were made by the Gimbel brothers to the Guggenheims and Rosenwald for the consolidation of the two companies or the three stores into one corporation. *217 These overtures continued to be declined until about the early part of 1922, at which time the New York corporation was earning on its capital the same proportion as the Pennsylvania corporation. Upon obtaining the consent of the Guggenheims and Rosenwald to the consolidation of the two corporations, the Gimbels took steps to put such consolidation into effect.
In January, 1922, the final negotiations for the merger of the Pennsylvania and New York corporations were begun. At a dinner given to the Gimbel brothers in New*3852 York, the bankers, Goldman, Sachs & Co. and Lehman Brothers, gave indications that they were willing to float the stock of the consolidated corporation. Plans for the consolidation were prepared. The Gimbel brothers executed a "Stockholders Deposit Agreement" and on July 26, 1922, what was known as the "Bankers Agreement" was executed by each of them and by representatives of Goldman, Sachs & Co. and Lehman Brothers, the bankers who had agreed to float the stock to be sold.
The agreements provided, among other things, that the Gimbel brothers were to organize a new corporation which was to own all the assets of the Pennsylvania and New York corporations and be subject to the liabilities thereof as of January 31, 1922; that the new company should have an authorized issued and outstanding capital stock of $15,000,000 par value 7 per cent cumulative preferred stock of a par value of $100 per share and 500,000 shares of no par value common stock; that the bankers would purchase from the stockholders of the two original corporations $12,000,000 par value of the preferred stock and one-seventh of the shares of common stock and pay therefor $13,500,000 cash and any accrued dividends*3853 on the preferred stock, and that upon completion of the organization of the new company the stock was to be issued in such name or names and in such denominations as the bankers should request. The corporation of Gimbel Bros., Inc., was incorporated under the laws of New York on September 8, 1922, to effect a consolidation of the two original corporations and the three stores with a capital stock of $15,000,000 par value preferred stock and 500,000 shares of no par value common stock.
The bankers purchased and paid for the shares of stock that they had agreed to take. That part of the money paid by the bankers that belonged to the Gimbel brothers went to "the pool," which paid off all its debts and the balance of the cash was distributed to the members in accordance with their respective accounts. This liquidated "the pool" and placed the brothers on terms of equality with each other, since there were no longer any "minus members."
Because of his seniority, and having been associated with his father in business, Jacob Gimbel's leadership and advice was accepted by all his brothers, whose attitude toward him was always more like that of *218 sons than brothers. While*3854 anxious for the business to continue to develop, Jacob Gimbel, being a bachelor, looked to his brothers and their children for the successful continuance of the business.
Jacob Gimbel was the organizer, financier and directing member of the partnership of Gimbel Bros. He was an officer in the Pennsylvania and New York corporations, and in the consolidated corporation he became vice president and chairman of the board of directors, the duties of which office he exercised until his death. To Jacob Gimbel the business was ahead of anything personal and to his brother Daniel, who lived with him, it appeared that he remained a bachelor for the reason that he was so interested in the business. Beginning about 10 years prior to his death, Jacob Gimbel began to relax in his physical activities in the business, doing a little less work all the time. During the last two years of his life he reduced the amount of time spent at the stores and such time as he did spend there was devoted to questions of business policy, legal questions and other important matters. When he was in Philadelphia, which was about one-half of the time, his hours at the store were from 11 a.m. to 3 p.m.
During*3855 the last two years of his life, the decedent spent a great deal of his time at various resorts away from Philadelphia. He spent the winter of 1920-1921 at Pasadena, Calif. He returned to Philadelphia, where he stayed a short while and went to Poland, Me., for the summer of 1921. On October or November, 1921, following his return from Poland, Me., he went to Hot Springs, Va. After his return from Hot Springs and on March 27, 1922, he went to Miami, Fal., from which place he returned on April 28, 1922. On May 12, 1922, he went to Atlantic City, where he remained until his death.
Jacob Gimbel kept in contact with the business while he was away from Philadelphia. While in Pasadena, Poland, Hot Springs, and Miami his contacts were by correspondence. While in Atlantic City he used the telephone to communicate with the Philadelphia and New York stores and also held conferences at his Atlantic City residence with his brothers and business associates.
While away, many of Jacob Gimbel's duties in the business were performed by Richard Gimbel, his nephew and assistant, in accordance with instructions given by Jacob. Before going to Poland in 1921 a power of attorney was given Richard*3856 in order that all the policies which Jacob had carefully explained should be carried out and that in cases of contracts, law suits, and disputes, he could express Jacob's opinion. Before going to Miami in 1922, Jacob authorized and empowered Richard to draw checks for him. On August 10, 1922, Jacob gave a power of attorney to Richard by which he *219 authorized him to draw checks and endorse negotiable instruments which required endorsement for deposit or collection.
While in Philadelphia in the winter of 1922 and before going to Florida, and while in Atlantic City, Jacob Gimbel was actively engaged in the details relating to the reorganization and consolidation of the two corporations. He did much work in preparing the papers. While the bankers had sought to more completely tie up the transfer of the stock, it was at his insistence that the following paragraphs were inserted in the "Bankers Agreement":
Each of the Vendors severally agrees with the Bankers that, until four months after the termination of any Syndicate formed by the Bankers to sell the said Stock, but not exceeding five months from the date of the delivery of the Stock to the Bankers as hereinabove provided, *3857 he will retain the ownership and possession of each and every share of the Preferred and Common stock of the New Company received by him, excepting any transfers which he may make either to his relatives for members of his family or to employes or associates in the business; and during said period neither he nor any of said transferees will sell, hypothecate, or offer for sale, or contract to sell, or otherwise dispose of any part of said shares, except for the sale to the Bankers hereinbefore provided; and that within two weeks hereafter or within such extended period as counsel for the parties hereto may agree upon in writing, the Vendors will furnish to the Bankers satisfactory proof of the execution and delivery by all holders of record of the Stock of the New York and the Pennsylvania Companies, other than the Vendors, of similar agreements against sale, hypothecation, etc.
Within two weeks hereafter or within such extended period as the counsel for the parties here to may agree upon in writing, the Vendors will secure the execution and delivery to them by all holders of record of the Stock of the New York and the Pennsylvania Companies, other than the Vendors, of such deposit*3858 agreements, contracts or other instruments as the counsel for the parties hereto may deem necessary in order to carry out all of the terms of this contract.
Gimbel always took good care of himself and his habits of life were always very simple. He never drank spirituous liquors nor did he smoke. Occasionally he would take a glass of diluted Rhine wine with his dinner. His appetite was good and he ate carefully of plain food. He was fond of music and during the season attended the opera and concerts. Sometimes he would play bridge, but much of his time was spent in reading. He was regular in his hours of sleep and during the last two years of his life generally retired about 9 p.m. and arose about 7 a.m. He rode horseback until 1920 and played golf until about Labor Day in 1921; otherwise he exercised by taking walks.
Gimbel had an excellent mind which was perfectly normal and very active. His temperament was essentially cheerful. He was happy, contented, and enjoyed life.
*220 For about 25 years prior to his death, Gimbel had been acquainted with Dr. Joseph S. Simsohn of Philadelphia. In the beginning their acquaintance was social, but during the last 20 years*3859 of Gimbel's life Dr. Simsohn was his personal or family physician, seeing him once weekly and sometimes daily. During the 20-year period Gimbel occasionally had a cold, rheumatic pain, or a cough, at which times Dr. Simsohn would attend him daily until he was well. Gimbel was never confined to his bed except for three or four days during an illness in Florida in April, 1922, and for about a week during his final illness at Atlantic City, nor did he have any organic disease other than heart trouble.
About five or six years before his death, Gimbel complained to Dr. Simsohn about shortness of breath, especially when he was playing golf or taking more or less violent exercise, or was very active in business. Upon examination Dr. Simsohn discovered that he had valvular cardiac trouble or "leaking heart." The condition was not serious and was noticeable only when the decedent had exercised or was excited. Neither at the time he discovered this heart trouble nor at any subsequent time did Dr. Simsohn inform Gimbel or any of his family that he had heart trouble, but instead advised him that he was merely suffering from asthmatic condition.
Dr. Simsohn advised the decedent to take*3860 life easy, rest as much as possible, be careful about his diet, not to play golf or ride horseback, and prescribed digitalis, but did not inform his as to the medicine prescribed. The prescription was given to his valet who gave the medicine at the times designated by the physician. A diet was prescribed and the cook was instructed as to the food Dr. Simsohn desired the decedent to have on different days. There was a mild progress of the disease and it was not until January, 1922, that the prescription of digitalis and instructions as to diet were given. At no time between the discovery of the disease and January 4, 1922, was there any alarming or distrubing condition. On January 4, 1922, the decedent was examined at his residence by Dr. Alfred Stengel, one of the foremost physicians of Philadelphia. He and Dr. Simsohn were in agreement as to the symptoms, diagnosis and treatment. Without informing the decedent as to the nature of his disease the two physicians advised him to lead a moderate life, give up business entirely and take life easy.
Gimbel showed no alarm about his health or any fear or expectancy of sudden death, but on the contrary he frequently spoke of the longevity*3861 of his parents and grandparents and stated that he also expected a long life. The decedent's father and mother had reached the ages of 82 and 68, respectively, at the time of their deaths. On his father's side, the decedent's grandfather lived to be *221 92 years of age and his grandmother lived to be about 85 years of age. On his mother's side, decedent's grandfather lived to be about 82 years of age and his grandmother lived to be about 75 years of age. The decedent did not by any word or act give any indication that he contemplated an early death.
While in Miami, Fla., and during the latter part of April, 1922, Gimbel had a severe heart attack which confined him to his bed for three or four days. At the time of this attack he was attended by Dr. Packard Laird, of Miami. However, Dr. Simsohn, at the request of decedent's brother Daniel, proceeded to Miami, examined Gimbel and conferred with Dr. Laird about the attack. When Dr. Simsohn arrived in Miami he found the decedent in bed, quiet and comfortable. His heart had recovered and was in the same condition as before he had left for Miami. The attack resulted in no rapid progression of the disease. Neither Dr. *3862 Laird nor Dr. Simsohn informed the decedent of the condition of his heart.
Gimbel returned to Philadelphia from Miami on April 28, 1922, and on May 12 went to Atlantic City for the summer. Before the decedent went to Atlantic City, Dr. Simsohn made another examination. He did not discover any other organic trouble than that of the heart and found nothing in his condition to cause any apprehension of an early death. The decedent's death was unexpected by Dr. Simsohn.
At the suggestion of Dr. Simsohn, Gimbel was attended while at Atlantic City by Dr. Philip Marvel, Sr. In the absence of Dr. Marvel, Sr., his son, Dr. Philip Marvel, Jr., attended the decedent. Dr. Simsohn called several times to see him, and Dr. Stengel saw him the day before his death. Dr. Marvel, Sr., did not see the decedent very frequently, once a week for a time then it might be two or three weeks between times. Dr. Marvel, Jr., saw the decedent every day at times and other times it was every other day or every two or three days.
Dr. Marvel, Sr., examined Gimbel during the early part of June, 1922, and found that he had a valvular disease of the heart which was an old trouble of long standing. He*3863 did not discover any other organic trouble or any signs of any disease other than a disturbed nutrition or a little indigestion which was incidental to the heart condition. None of the conditions discovered were alarming. At this time the decedent was going around the house at Atlantic City free and easy; he was going out on the boardwalk, at times in a wheel chair, and he would walk at times around the square. Between the first examination in June and October 19, the date of the transfers in issue, the decedent progressed favorably. His digestion improved, he gained strength, his general condition improved and *222 nature had accommodated herself to the situation. In the early part of his treatment of the decedent, Dr. Marvel, Sr., prescribed a "regime" for him. The "regime" was that the decedent take his breakfast in bed, after getting up he could go out and then lie down in the afternoon. This was followed for a time and when the decedent had improved it was withdrawn, after which time the decedent directed himself with reference to his own activities. While Dr. Marvel, Sr., prescribed digitalis at times for the decedent, he did not inform him of the nature of the*3864 prescription and only discussed his condition with him from the standpoint of improvement.
Dr. Marvel, Sr., had Gimbel go to a dentist in Philadelphia on October 20, 1922, for the extraction of a tooth. Nitrous oxide was used as the anaesthetic and the decedent promptly recovered from the anaesthetic and the extraction without any resulting bad effects. While at Altlantic City and prior to his final illness, the decedent had no symptoms of any disease other than the heart trouble and a slight cold, which did not alter the heart condition.
Dr. Marvel, Jr., of Atlantic City, examined the decedent in June, 1922, and found him suffering from a chronic cardio-valvular condition. There was a mild decomposition of the heart, but no acute condition. There were no dangerous aspects apparent, nor was there anything to cause alarm. The decedent did not appear to Dr. Marvel, Jr., to be aware of his heart condition and he did not inform him of his actual condition, but told him that his heart needed a little rest. Between the time Dr. Marvel, Jr., first examined Gimbel in June, 1922, and October 19, 1922, there was no progress of the heart disease, but on the contrary, he gradually*3865 got better during the summer, and his heart regained "compensation." The condition of his general health gradually improved and he had no further condition that was bothering him. The decedent's mind was perfectly normal, his temperament was essentially cheerful, he did not seem to be disturbed as to his physical condition and up to the day before the decedent's death, there were no symptoms indicating an early death. During September and October, 1922, the decedent was making plans for the future. He intended to go to Florida for the following winter and for that purpose bought a new overcoat, a number of shirts, some underwear, and had several pairs of golf trousers shortened. As part of his plans in preparing for the trip, he had a tooth extracted. He was planning to move from his Philadelphia residence to the suburbs. He was also planning to go to Poland, Me., for the summer of 1923. He was contemplating the distribution of stock he still held in Gimbel Bros., Inc., the consolidated corporation, among his nephews as soon as they could agree upon what he considered an equitable plan for such a distribution.
*223 After an illness of about a week and following a bad*3866 heart attack, Gimbel died on November 7, 1922, as the result of a massive hemorrhage from the stomach which was due to his heart condition. His death was sudden and not anticipated by his physicians.
Considering the life, habits, and physical condition of Jacob Gimbel, his expectancy of life on October 19, 1922, was fully five years.
On October 19, 1922, the decedent made absolute gifts to each of his five brothers, Isaac, Charles, Daniel, Ellis A. and Louis S. Gimbel, of 1,010 shares of the preferred stock and 6,200 shares of the common stock of Gimbel Bros., Inc., an aggregate of 5,050 shares of the preferred stock and 31,000 shares of the common stock, the value of which at the decedent's death was $1,466,000.
About 1912, two years after the New York store was opened, about four or five years prior to the discovery of any signs of heart trouble and about 10 years prior to his death, Jacob Gimbel began to discuss with his brothers the increasing of their holdings in the two corporations, by his transferring to them some of his shares of stock in these corporations. The reasons he gave for contemplating such action were that he intended to devote less time to the business*3867 and take things easy; he did not want to work so hard; that because he did not intend to be as active as his brothers, who were working harder than he, they should be rewarded with larger interests in the business; that he was accumulating more capital than his married brothers who were working harder, and that they should be rewarded for their services and that he wished to reward his brothers for the hard work and long hours that they devoted to the business and which he did not do. These discussions between the decedent and his brothers continued from about 1912 until the transfers were made.
In the following letter written by Jacob Gimbel to his brothers, a copy of which was sent to each of them, he also set forth his motives in transferring the stock to them:
ATLANTIC CITY, N.J.
October 19th, 1922.
ISAAC GIMBEL,
CHARLES GIMBEL,
DANIEL GIMBEL,
ELLIS A. GIMBEL
LOUIS GIMBEL.
MY DEAR BROTHERS:
As we are now about to distribute the proceeds of the reorganization, I think it opportune for me to take certain steps which I have long contemplated and which during the past five years I have several times promised you I would do. I have often told you that in*3868 view of the fact that I am a bachelor and you are, with one exception, all married and have families and that you have all for many years devoted yourselves faithfully and single-mindedly to the welfare *224 of our family's business, you are justly entitled to a much larger share of the stock of Gimbel Brothers than you now hold. This is only fair because of the many years during which I have not been active in the business, while you have all done not only your own work but mine also. We have never allowed selfish considerations to creep into our affairs and you have always been guided by my judgment and my sense of justice, all looking to me as the head of the family because I was the eldest. I therefore deem it only my duty to try to adjust the inequalities existing between you and me and at least in some measure to compensate you all for your fidelity, unselfishness and devotion to the business. While in my opinion I owe you very much more than I am now turning over to you, I consider that the personal obligation and the debt of gratitude are matters which can not be pecuniarily compensated for. But, so far as I am able and in accordance with my views of justice, I*3869 wish now to remedy the discrepancy and to remove the inequality of benefit which exists between you and myself. I have therefore arranged, by letters that I have delivered to the depositaries under the reorganization plan, to distribute among you a substantial part of my holdings in the new Company. As I cannot attempt to measure each man's service to the business and to me, and as I know that each man has done his best, I feel that an equal division among you is perhaps the most nearly exact recognition that I can make.
I do not wish any of you to bear any sense of obligation to me because of this distribution nor to feel beholden to me for what I am now doing; for I am only doing my duty as I see it. Each of you has fully earned by hard work and loyal service the shares which he is now receiving from me, and if there be anything due me for this recognition let it be that union and harmony among all members of the Gimbel family shall continue in the future without interruption just as in the past.
In my future years it will be gratifying to me to feel I am even more free from business cares than I have been in the past and that I can rely upon each of you even more than in*3870 the past to handle the problems of your great business without my personal participation. You understand, of course, that in the years to come I will be very happy to give you the benefit of my advice whenever and as often as you care to call on me for it on broad questions of policy and the like, but that I have now come to the time when I feel that I have earned the right to be free from the cares of daily routine so that I may devote myself to many things which I was obliged in the past to forego.
About the date of this letter, Gimbel was in better physical condition than at any other time during the summer.
The above letter was preceded by three other letters which were as follows:
ATLANTIC CITY, N.J., Oct. 18, 1922.
MESSRS. ELLIS A. GIMBEL AND ISAAC GIMBEL, DEPOSITORIES UNDER STOCKHOLDERS'
DEPOSIT AGREEMENT OF GIMBEL BROTHERS.
DEAR SIRS:
I understand that you are now ready to cause the issuance and delivery of 3084 shares of preferred stock and 44,630 shares of common stock of Gimbel Brothers, Inc., being the proceeds in stock of that corporation resulting from the reorganization of Gimbel Brothers and attributable to the shares of stock of the old corporations, *3871 Gimbel Brothers New York and/or Gimbel Brothers, Incorporated (Pennsylvania), deposited by the undersigned after deducting one per cent of common stock for expenses.
*225 I hereby authorize and direct you to cause such stock of Gimbel Brothers, Inc., to be issued as follows, to wit: 410 shares of preferred stock, and 6,000 shares of common stock to each of the following:
| Charles Gimbel, | 9th & Market Sts., |
| Philadelphia, Pa. | |
| Daniel Gimbel, | 9th & Market Sts., |
| Philadelphia, Pa. | |
| Ellis A. Gimbel, | 9th & Market Sts., |
| Philadelphia, Pa. | |
| Isaac Gimbel, | Gimbel Bros., B'way & 33rd St., |
| New York, N.Y. | |
| Louis Gimbel, | Gimbel Bros., B'way & 33rd St., |
| New York, N.Y. |
I further authorized and direct you to cause the remainder of such stock of Gimbel Brothers, Inc., to wit, 1034 shares of preferred stock, and 14,630 shares of Common stock, to be issued to me.
ATLANTIC CITY, N.J., Oct. 18, 1922.
Messrs. ELLIS A. GIMBEL AND ISAAC GIMBEL, DEPOSITARIES UNDER STOCKHOLDERS' DEPOSIT AGREEMENT OF GIMBEL BROTHERS.
Dear Sirs:
Acting under my instructions, you purchased for me at the time of the public offering by the Bankers of stock of Gimbel Brothers, *3872 Inc., approximately 4700 shares of preferred stock and approximately 1500 shares of common stock, the exact amount of stock purchased for me being, as I understand, not immediately ascertainable by you. I hereby authorize and instruct you to cause this stock to be issued and delivered as follows, to wit: 600 shares of preferred stock, and 200 shares of common stock to each of the following:
| Charles Gimbel, | 9th & Market Sts., |
| Philadelphia, Pa. | |
| Daniel Gimbel, | 9th & Market Sts., |
| Philadelphia, Pa. | |
| Ellis A. Gimbel, | 9th & Market Sts., |
| Philadelphia, Pa. | |
| Isaac Gimbel, | Gimbel Bros., B'way & 33rd St., |
| New York, N.Y. | |
| Louis Gimbel, | Gimbel Bros., B'way & 33rd St., |
| New York, N.Y. |
I hereby confirm the oral arrangement heretofore made by me that my share of the cash proceeds of the reorganization of Gimbel Brothers is to be charged with the cost of the total number of shares of preferred and common stock heretofore purchased by you for my account from the Bankers, including the stock mentioned above. All of such stock, except as hereinabove directed, shall be issued in my name.
ATLANTIC CITY, N.J., Oct. 18, 1922.
Messrs. ELLIS A. GIMBEL AND ISAAC*3873 GIMBEL, DEPOSITARIES UNDER STOCKHOLDERS' DEPOSIT AGREEMENT OF GIMBEL BROTHERS.
DEAR SIRS:
Referring to my two letters to you under even date herewith, in which I gave you instructions as to the issuance to each of my five brothers, Charles, Daniel, *226 Ellis, Isaac and Louis, respectively, of 6,000 shares of common stock and 410 shares of preferred stock of Gimbel Brothers, Inc., out of the stock coming to me under the Gimbel reorganization, and also gave you instructions as to the issuance to each of said five brothers respectively of 200 shares of common stock and 600 shares of preferred stock of Gimbel Brothers, Inc., out of stock purchased for me by you out of my share of the cash proceeds of the reorganization, I hereby irrevocably authorize and direct you to deliver to each of my said five brothers the certificates for the shares of stock to be issued in his name in accordance with said letters, and each of my said brothers shall thereupon become the individual owner in his own right of the shares of stock so issued in his name and delivered to him.
The instructions contained in the letters dated October 18, 1922, were carried out by the depositaries.
Pursuant*3874 to the directions contained in the three letters of October 18, 1922, and in accordance with the letter of October 19, 1922, the shares of stock were issued directly from the stock book of Gimbel Brothers, Inc., to the five brothers without being issued in the name of Jacob Gimbel and were delivered on October 20, 1922, which was the first day that it was possible to make delivery.
During the period from about 1912, when the decedent first spoke to his brothers about his intention of increasing their stock holdings by transferring some of the shares to them until October, 1922, certain factors or conditions existed which prevented him from taking such action. Some of such factors or conditions follow.
Four of the brothers who were "minus members" of "the pool" had not yet paid for their interests in the corporations. Inasmuch as they owed different amounts to "the pool" and incidently to Gimbel, they were on a different basis. There was only one "plus member" of "the pool" besides the decedent. The decedent's idea of justice was that all should be equal things to entitle them to equal rewards and felt that the "minus members" of "the pool" should fully pay for their interests*3875 in the corporations before receiving equal amounts of stock from him. To have forgiven the indebtedness of the "minus members" would have resulted in unequal benefits, since each owed a different amount and it would have been unjust to the other brother who was a "plus member."
No salaries were paid the brothers until 1902, the year in which the Pennsylvania corporation was incorporated. From then until about 1918 each of the brothers received a salary of $5,000 per year and after 1918 until the consolidation each received a salary of $10,000 per year. The family responsibilities and living requirements coupled with the low salaries paid and the fact that dividends were not declared in sufficiently large amounts on account of extensions being made in the business prevented the "minus members" from becoming able to pay the indebtedness to "the pool" and clear their ownership to the stock.
*227 From the opening of the New York store in 1910 until the consolidation in 1922, all of Gimbel's stock in the Pennsylvania corporation was pledged to various banks as collateral for money borrowed for use in the business of the Philadelphia store and to establish the New York store. *3876 During this time he did not have shares of stock in hand to distribute and he did not wish to distribute any stock as long as he owed money.
It was not until the early part of 1922 that the Guggenheims and Rosewald became reconciled to a consolidation of the two corporations. The negotiations with the bankers to underwrite the stock were not completed and the agreements between the stockholders and between the stockholders and the bankers executed until July 26, 1922, and it was not until September 8, 1922, that the new and consolidated corporation was incorporated.
In January, 1922, when there seemed to be no obstacles to the merger and when negotiations were under way, Richard Gimbel, the decedent's assistant, who had made for him several plans for a merger of the two corporations and a distribution of the decedent's interest in the company, advised his uncle to delay any transfer until the new corporation was formed. This advice was followed by the decedent.
Until the consolidation all of Gimbel's money was tied up in the business and he did not have the money to make cash gifts.
Decedent left a will made on July 11, 1908, in which he named his brothers the residuary*3877 legatees.
On or about December 30, 1923, the executors of the estate filed an estate-tax return in which they reported a gross estate in the amount of $2,784,836.51 and total deductions of $165,868.92, or a net taxable estate of $2,618,967.59. While the executors reported in the return the transfer to each of the brothers of the above-mentioned shares of stock as having been made on October 19, 1922, they did not include the stock as a part of the estate. On the net estate of $2,618,967.59 there was reported as due a tax of $248,155.46, which was subsequently paid by the executors of the estate.
The respondent included in the decedent's gross estate the value of the gifts at the decedent's death, $1,466,000, holding that they were transfers made in contemplation of death, and determined the deficiency herein involved.
OPINION.
TRAMMELL: The only error assigned by the petition in this proceeding is that in determining the taxable net estate the respondent erroneously included as property transferred in contemplation of death the amount of $1,466,000, representing the value of the 5,050 shares of the preferred stock and the 31,000 shares of common stock *228 of Gimbel*3878 Bros., Inc., which had been the subject of absolute gifts by the decedent to his brothers prior to his death.
Section 402 of the Revenue Act of 1921 provides in part as follows:
That 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 -
* * *
(c) To the extent of any interest therein of which the decedent has at any time made a transfer, or with respect to which he has at any time created a trust, in contemplation of or intended to take effect in possession or enjoyment at or after his death (whether such transfer or trust is made or created before or after the passage of this Act), except in case of a bona fide sale for a fair consideration in money or money's worth. 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 a consideration, shall, unless shown to the contrary, be deemed to have been made in contemplation of death within the meaning of this title.
Inasmuch as Gimbel made the gifts of the shares of*3879 stock to his brothers on October 19, 1922, and died on November 7, following, there is a presumption under the Act that the gifts were made in contemplation of death. The sole question that we are called upon to decide is whether the gifts made by the decedent were under the facts and circumstances made in contemplation of death within the meaning of that term as used in the Act.
The phrase "in contemplation of death" has often been considered and construed by the courts.
In , the court said:
A review of the authorities is scarcely necessary to sustain the proposition that the contemplation of death referred to in the statute is not that contemplation of death which must be present with all of us, mindful of its certainty at some time, we know not when, but it is that state of mind which by reason of advanced age, serious illness, or other producing cause induces the conviction that death in the near future is to be anticipated. If it be said that there need not be a conviction that death in imminent, there must at least be a belief that it is to be expected in the very near future rather than in the usual course*3880 of events; and in this state of mind, in this belief in the near approach of death, must be found the motive for the conveyance if it is properly to be characterized as made in contemplation of death.
In , it is stated:
There is a common agreement that the words "contemplation of death" mean not the general knowledge of all men that they must die; that it must be a present apprehension, from some existing bodily or mental condition or impending peril, creating a reasonable fear that death is near at hand; and that, so arising, it must be the direct and animating cause, and the only cause, of the transfer. If this apprehension, so arising, is absent, there is not that contemplation of death intended by the statute, especially when another adequate motive actuating the gift is shown.
*229 In ; , the court said:
A reasonable and just view of the law in question is that it is only where the transfer of property by gift is immediately and directly prompted by the expectation of death that the property so transferred becomes amenable to the*3881 burden; or, as counsel for the respondents with singular aptness states the proposition: "It is only when contemplation of death is the motive without which the conveyance would not be made that a transfer may be subjected to the tax." That is, the expectation of death must be the direct, specific, and immediate animating cause of the transfer.
In , we said:
An act may well be performed in contemplation of death at some time in the future and yet not be in contemplation of death within the meaning of that phrase as used in the statute. The intention of Congress in the enactment of section 402 of the Revenue Act of 1918 was to provide for the inclusion in the gross estate of the value of any property concerning which the decedent made a transfer, except for a fair consideration in money or money's worth, in contemplation of death within a reasonable time in the near future, as distinguished from the general expectation of death entertained by everyone.
In , we said:
It may be well that when the conveyances in question were made Joseph N. Phillips contemplated*3882 death at some time in the future, but men perform acts daily with the knowledge that death may overtake them any moment. Men all wish to accomplish certain things before that fateful day and in that sense things may be done in contemplation of death, but this general and certain knowledge that to all death cometh soon or late is not what is meant by the phrase "in contemplation of death" as used in the Revenue Act.
Examining the facts in the case in connection with the statute and the decisions above quoted we find that, beginning about 1887, Gimbel and his brothers became associated in business and that this association continued until his death. During all this time, the brothers accepted his advice and direction in the business and their attitude toward him was that of sons toward a father. About 10 years prior to his death and about four or five years prior to the discovery of heart trouble, Gimbel gegan gradually to relax his activities in the business, especially such physical activities as required his presence at the store for long hours. About the same time he began discussing with his brothers the matter of increasing their holdings in the two corporations by transferring*3883 to them some of his shares of stock. These discussions continued until about the year 1922, when the gifts here in controversy were made. During the period of these discussions the Gimbel brothers were attempting to reconcile the Guggen-heims and Rosenwald to the idea of consolidating or merging the activities of the Pennsylvania and New York corporations into one corporation. During this period all of the stock Gimbel owned in *230 the Pennsylvania corporation was pledged as collateral for money borrowed and used in the business of the two corporations. All the money he had was tied up in the business and he was in debt.
From the beginning of their association in the business it was always the idea of Gimbel that each of his brothers should have an equal interest in the business. He was a bachelor, was several years older than the other brothers, and had been associated in business with their father and was better situated financially than they. Through the operation of "the pool" he enabled each to have an equal share in the business. From the formation of the partnership until 1922 all of the brothers with the exception of Daniel were indebted through "the pool" *3884 to the decedent. The indebtedness was in unequal amounts, some owing more than others, due to the varying sizes of their families and their different ideas as to the ways of living. Not only were the interests of each in the business equal, but they were receiving equal salaries. Jacob Gimbel was very solicitous that his brothers remain on an equality.
The decedent, while desiring to make a distribution to his brothers of a portion of his interest in the business, felt that the brothers should first pay off their indebtedness to "the pool." This was not possible, however, until the consolidation in 1922. The consolidation not only brought the activities of the two corporations together under the control of one corporation, but provided the brothers with money enough to pay off their indebtedness to the decedent and also enabled them to get out of debt.
The consolidation having enabled the brothers to pay off their debts, and also having left Gimbel free of debt and his interest in the business free of encumbrances, he on October 19, 1922, directed the depositaries to issue to the brothers certificates for the shares of stock here involved. The transfer of this stock was*3885 in pursuance of Gimbel's plan formulated as far back as 1912. In the prior years he had planned that his brothers should be rewarded with larger interests in the business by the transfer of some of his stock to them. He was accumulating more capital than his married brothers, who were working harder than he was. He desired that they should be rewarded for their services and the long hours that they devoted to the business.
At the time the decedent began discussing the transfers he was apparently in good health as up until then he had had only occasional illnesses of a minor nature. While at the time the discussions began he may have had heart trouble, it was not apparent and it was not until four or five years later that it was discovered. When first discovered, the heart condition was not serious, nor was he *231 advised of the nature of his disease. Following the directions of his physician, he took life easy and during the last two years of his life spent a great deal of his time at resorts away from Philadelphia. With the probable exception of the spring of 1922, Gimbel, when in Philadelphia, would spend from about 11 a.m. to 3 p.m. of each day at the store. When*3886 away from Philadelphia he was in correspondence with his nephew about the business. While at Atlantic City during the summer preceding his death, he communicated with the Philadelphia and New York stores by telephone and was also engaged in working on the agreements relative to the consolidation and holding conferences with his brothers and others in regard thereto.
While Gimbel had a severe heart attack in Florida during April, 1922, he soon recovered from it. After going to Atlantic City, his general condition gradually improved, and one of his physicians testifed that on October 20, 1922, his condition was better than it had been at any other time during the summer. Gimbel had no symptoms of any organic trouble other than that of his heart, and up until the time of his last illness, his physicians found nothing in his condition to cause alarm or lead them to think that death was near.
The decedent's physicians did not tell him of the nature of his condition any more than that his heart needed a little rest. He was never told that his condition was serious.
There is nothing to indicate that Gimbel had any belief or expectation that his death was near at hand or might*3887 occur within the reasonably near future. In fact, there is an abundance of evidence to the contrary. At no time did he do or say anything in the presence of his valet, housekeeper, physicians or brothers, which indicated that he was expecting death within the near future. He was always cheerful, showing no alarm about his health and often discussed the longevity of his parents and grandparents and expressed the expectation that he would live as long as they. At the time of his final illness he was making plans for changing his Philadelphia residence to the suburbs, and for spending the following winter in Florida and the next summer in Maine. The decedent had made no will since 1908, after which date the New York store had been established and the consolidation of the Pennsylvania and the New York corporations had been effected.
From a consideration of all the facts in this case we are of the opinion that in making the gifts, Gimbel had no expectation, belief or apprehension that his death was near at hand or might occur in the reasonably near future. Inasmuch as the decedent did not have such a belief, expectation or apprehension, we think the gifts were *232 not made*3888 in contemplation of death, within the meaning of that phrase as used in the Act.
Reviewed by the Board.
Judgment will be entered on 15 days' notice, under Rule 50.
MILLIKEN did not participate.
STERNHAGEN and VAN FOSSAN concur in the result.