*2596 ESTATE TAX. - The property described in the transfers involved in this proceeding were not made in contemplation of, nor intended to take effect at or after grantor's death, and may not be included in a computation of either gross or net estate of decedent.
*423 This proceeding is for a redetermination of a deficiency in the amount of $1,357.17 in estate tax asserted against the estate of August F. W. Brehmer, deceased, by the respondent in his letter dated May 29, 1925.
The petitioners allege that the respondent erred in his determination (1) that certain transfers of real property made by the decedent prior to his death, were made in contemplation of death; (2) that the transfers did not take effect until or after decedent's death, and (3) that the said property was included in decedent's estate.
FINDINGS OF FACT.
The petitioners, Otto T. Brehmer and Albert A. Brehmer, are the executors of the estate of August F. W. Brehmer, who died testate on September 13, 1923, a resident of Cass County, Iowa.
In 1914, the decedent was a retired farmer, *2597 residing at Atlantic, Iowa, but prior to that time he had been a practical farmer for many years. In 1914, the decedent and his wife executed and delivered to each of their six children warranty deeds conveying to each child a certain parcel of farm land for and in consideration of "one dollar and love and affection and other valuable considerations." Each deed was the usual warranty deed and contained the following reservations:
That the grantors, who are the father and mother of the grantee in each deed, reserve for the life of each grantor, or survivor thereof, the use, occupancy, possession, control, rents and profits, of the land so transferred.
There is no controversy as to the land deeded to Emma, Emil A., and Bertha W. Brehmer, for as to those transfers, no subsequent deeds were given to the said grantees.
The deeds executed in 1914 and conveying the parcels of land here in controversy contained the following descriptions: In the deed to Albert, the southeast quarter of section 23-76-38, 160 acres, Pottawattamie *424 County, Iowa; in the deed to August, the northeast quarter of section 9-76-37, 160 acres, Cass County, Iowa; and in the deed to Otto, the west*2598 one-half of the northeast quarter of section 17-76-37, 80 acres, Cass County, Iowa. In order to equalize the distributions, the decedent required August to give Bertha and Otto notes for $5,500 secured by mortgage on his 160 acres, and he also required Albert to give Bertha and Otto notes for $2,000, secured by mortgage on his 160 acres. Bertha and Otto each received 80 acres of land. The amounts of these notes were paid to Bertha and Otto personally, they exercised complete control over them, and the decedent neither received nor controlled any portion of the said funds. At the time the said deeds were given in 1914 it was understood and agreed that there should be paid annually to the decedent and his wife or the survivor for the rest of their lives and/or life, $350 by August; $350 by Albert and $300 by Otto. The agreed payments commenced in 1915 and the said amounts or the amounts which the children were able to pay have been paid regularly each year and were at the date of the hearing on this proceeding, being paid regularly to decedent's widow.
The decedent collected the rents from the farms and paid the taxes for the year 1914. Possession was delivered to the children*2599 in 1915. From the time the children gained possession of their respective farms, they had complete control over them and either occupied them or rented to tenants; received or collected and controlled the profits or rents from their respective farms; paid the taxes thereon and paid for all expenses, repairs, and improvements. Each of the three sons, August, Albert, and Otto paid their parents the above-described agreed annual amounts, without regard to the amounts of their profits derived from their respective farms. The amounts were fixed and not in any relation to earnings.
August had lived on the 160-acre farm deeded to him in 1914, for five or six years prior to that time and had rented from the decedent. From 1915 on, he occupied the farm and paid no rent, but did pay annually the agreed $350. Albert had lived on the 160-acre farm deeded to him in 1914, from 1902 to 1912, and had bought the farm from decedent under a contract, not in evidence, but that contract was canceled when the transfers were made in 1914. Albert rented his farm until 1917, in which year he moved back on that farm and he was living there at the time of decedent's death. During 1915, Otto was employed*2600 in the Farmers Bank at Atlantic, and he never occupied the 80-acre farm deeded to him in 1914, but he did rent it to a cash tenant and collected and controlled the rents.
In 1919, Albert was indebted to a bank in the amount of about $10,000, an unsecured loan, on which he was paying 8 per cent interest *425 and he desired to mortgage his 160-acre farm at a 6 per cent rate of interest, pay off his debt at the bank, pay off the balance he owed Bertha and Otto on his notes and have a little working capital. Albert went to decedent's home at Atlantic and asked him for a quit claim deed to clear his title so that he could secure a mortgage loan and on or about January 25, 1919, decedent and his wife gave Albert an ordinary quit claim deed. A mortgage loan was secured, Albert had complete control over the funds, and decedent received no portion thereof.
August was greatly indebted and desiring to secure a mortgage loan, asked decedent for a quit claim deed to clear his title on his 160-acre farm. On or about January 15, 1920, decedent and his wife, executed and delivered to August an ordinary quit claim deed. August secured a mortgage loan of $16,000, most of which he used*2601 to pay off his debts, but decedent controlled no portion of it.
In 1920, Otto desired to sell his 80-acre farm and invest the proceeds and he asked the decedent for a quit claim deed to clear his title. On or about April 12, 1920, decedent and his wife executed and delivered to Otto and ordinary quit claim deed. Shortly thereafter Otto sold the said farm to Rollin E. King.
In each instance the decedent gave the quit claim deed without any discussion at all, but each of the sons continued to pay the fixed annual amounts agreed upon in 1914. Aside from the property deeded to his children the decedent was worth about $10,000 in personal property.
The decedent had always been in very good health until after an hernia operation in November, 1920, which left him weak. He owned a half block of ground in Atlantic, on one-half of which his home was situated, surrounded with trees, flowers, and lawn, and the other half was a truck garden. He kept a cow, bought hay and stowed it away in the barn. He did all the work around his own place, and each year would go out and help his sons thresh and do other manual labor, just because he enjoyed the work. He helped to thresh during the*2602 summers of 1919 and 1920. The decedent also owned about 10 acres of timber near Atlantic and each year he cut out the dead wood and hauled it to town for firewood. In September or October of 1920 the decedent, without any assistance, used an axe to cut the dead timber, which was mostly oak, and used a hand saw to saw it up.
In November, 1920, the decedent had his first operation for hernia after which he was not very strong. Prior to that operation decedent was very robust and never mentioned any fear or thought of death. *426 He had a second operation in December, 1920, after which there developed a malignant growth. After these operations, decedent confided in Otto that he did not expect to live long because he was so weak. The decedent died of heart failure on September 13, 1923, at the age of about 72 or 73.
The respondent included in the decedent's gross estate the value of the three tracts conveyed to August, Albert, and Otto on the ground that they were transferred by decedent in contemplation of, and were intended to take effect in possession or enjoyment at, or after, his death.
OPINION.
TRUSSELL: The testimony in the record of this case convincingly*2603 establishes that in the years 1914 and 1919 and 1920, when the transactions herein described took place, the grantor, August F. W. Brehmer, at such times a retired farmer, was still in good health; that he had up to 1920 no thought of approaching death, and that up to the time of these transactions there had occurred no incident which, in the ordinary course of life, should or could have caused him any apprehension of impending death. We are, therefore, satisfied that the transfers here in question were made not in contemplation of death.
In the original grants made in 1914 the instruments of conveyance were in the form of ordinary warranty deeds but contained reservations respecting the income and profits from the farms and required that such income and profits should accrue to the grantor and his wife during their respective lives, or the survivor. In the instruments of conveyance made in the years 1919 and 1920 the reservations respecting rents and profits were specifically relinquished and thereupon the grantees acquired an absolute and indefeasible title to their respective parcels of land and subject to no encumbrance other than such mortgage liens as the grantees had themselves*2604 placed upon their land.
We can not escape the conclusion that the grantor in these transactions intended to and did convey to the grantees the entire interest in the property conveyed and that the grantor after giving the deeds in 1919 and 1920, retained no interest in nor claim upon lands conveyed, and that the grantees then took complete possession and enjoyment of their respective farms. We are thus brought to the conclusion that the transfers were not intended to take effect in possession or enjoyment at or after the grantor's death.
The situation in respect to these transfers is somewhat analogous to the trust described in the case of , *427 and under the decision of the Supreme Court in that case the value of the properties described in the case here at bar can not be included in the gross estate of the decedent.
The deficiency in estate tax should be computed in accordance with the above findings of fact and opinion. Order of redetermination will be made upon 15 days' notice, under Rule 50.
Considered by LITTLETON, SMITH, and LOVE.