*149 Decision will be entered for the respondent.
1. Held, that prior to his death the decedent did not dispose of ownership of certain bonds by valid parol trust, or otherwise, and the value thereof was properly included in his gross estate.
2. Real estate taxes, penalties, etc., had accrued and constituted a lien on certain of decedent's property prior to his death. A suit was instituted by the taxing authorities to enforce the lien and collect the amount of the taxes, penalties, etc. The suit was compromised by the estate for a lesser amount than the amount of the taxes claimed. Held, that only the lesser amount is deductible from the gross estate of decedent.
3. Certain other real estate taxes, penalties, etc., had accrued on other property of decedent prior to his death and the taxing authorities instituted a similar suit as that mentioned above, which suit is still pending. Held, that the amount of such taxes, penalties, etc., is not deductible from decedent's gross estate.
*153 Respondent determined an estate tax deficiency of $ 5,335.52, all of which is in controversy. The issues presented are whether the respondent erred (1) in including as a part of the *151 decedent's gross estate the value of the principal of certain bonds delivered by decedent to his two daughters prior to, and in their custody, at the date of his death; and (2) in allowing as a deduction only the $ 7,678.18 *154 actually paid by the estate in settlement of real estate taxes, interest, costs, and penalties, instead of the entire amount of $ 17,204.54 claimed as a deduction as representing those real estate taxes, interest, and penalties accrued and assessed against and constituting liens upon real estate owned by decedent at date of death.
Petitioners claim an overpayment of additional estate tax in the amount of $ 2,190.06, plus $ 300.34 interest, stipulated to have been paid on June 17, 1944.
The proceeding has been submitted upon a stipulation of facts, testimony, and documentary evidence. The stipulated facts are so found and included herein by reference.
FINDINGS OF FACT.
(1) William P. Metcalf, a practicing attorney and resident of Memphis, Tennessee, died, testate, on July 20, 1940. The decedent was widowed, but left surviving him two adult daughters, who were the sole beneficiaries of his will, except a son-in-law, who was bequeathed two club memberships. *152 The decedent's will was duly probated and his two daughters, Sandol M. Stark and Louise M. Prest, both residents of Memphis, Tennessee, are the qualified and acting executrices of his will. The decedent's estate tax return was filed with the collector of internal revenue for the district of Tennessee at Nashville, Tennessee.
(2) On December 31, 1935, the decedent delivered into the custody of each of his two adult daughters certain bonds, with coupons attached, identical in classes and principal amounts, as follows:
| Principal amount | Value at | |
| date of death | ||
| $ 5,000 | State of Tennessee, 4 3/4% due 6-1-44 | $ 5,662.50 |
| 2,000 | Sullivan County, 5% due 3-1-51 | 2,450.00 |
| 1,000 | Hamilton County, 4 1/2% due 6-1-57 | 1,180.00 |
| 1,000 | Madison County, 5% due 7-1-56 | 1,230.00 |
| 2,000 | State of Arkansas, 3% due 1-1-49 | 1,940.00 |
| 11,000 | Total | 12,462.50 |
(3) The delivery of the above described bonds by the decedent was made at the First National Bank in Memphis, where there had been procured in the name of each daughter a separate lock box to which she alone had access. At that time the decedent stated orally to each of his daughters that the bonds delivered to her were to be placed *153 in her individual lock box and held in trust, that each daughter was to clip the coupons and pay the interest realized therefrom to the other daughter. Those directions were carried out from the date of delivery to date of decedent's death, and during that period the decedent made no further oral or written explanation as to his intention concerning *155 the delivery of the bonds. The decedent never executed any written assignment of the bonds. At no time did the decedent indicate whether the delivery was to constitute direct gifts to the daughters, or to them in trust, of the principal amount of the bonds, or not. He did not indicate how long the arrangement was to last; or what disposition was to be made of the bonds and of any undetached coupons in the event of the death of either or both of the daughters or the death of the decedent.
(4) The decedent's will, which was executed on May 20, 1940, directed, inter alia, that immediately after his death the sum of $ 10,000 should be paid over to each daughter, either in bonds, stock, or money; gave all his real estate to his two daughters, share and share alike, with certain conditions attaching as to the sale thereof; provided*154 for a trust for the benefit of the two daughters, the corpus of which comprised any stocks and bonds not specifically bequeathed and also certain proceeds from the sale of real estate. The term of the trust was to be for ten years from date of decedent's death, with further provisions in the event either of the daughters died within the ten-year period. The will also bequeathed certain designated stocks to the two daughters, with full power to dispose of same; and gave all the rest and residue of his estate to his two daughters, share and share alike.
(5) On December 31, 1940, after the decedent's death, Sandol M. Stark and Louise M. Prest executed a "Mutual Agreement and Release Under a So-called Trust" and delivered to each other the above described bonds delivered to each of them by the decedent on December 31, 1935. That agreement provided in part as follows:
Whereas, on or about December 31, 1935 the late William P. Metcalf, father of Sandol and Louise went with them to The First National Bank where he contracted in their behalf for two safety deposit boxes, one being No. 981 having been rented in the name of Sandol M. Stark, Trustee, and the other being No. 142, having been*155 rented in the name of Louise M. Prest, Trustee, and
Whereas, the late William P. Metcalf placed in the safety deposit box so procured in the name of Sandol bonds of the value of $ 10,000.00, and in the safety deposit box so procured in the name of Louise bonds of the value of $ 10,000.00, stating to them at the time that each of them was to be Trustee for the other, and that each was to clip the coupons of the other when they were due and deliver them to the other, but the said William P. Metcalf did not at said time or thereafter give them any further instructions with reference to said bonds, such as why they were Trustees for each other, how long they were to act as Trustees for each other, what was to become of the bonds or the principal thereof at their death, or when the trusts, if any, should cease, nor any other details or conditions which usually and generally are embodied in the creation of a trust. Nor was any trust agreement ever drawn up in writing or signed by them, the said William P. Metcalf, or anyone else so far as they have been able to ascertain, and
Whereas, although Sandol and Louise have kept said bonds in said safety deposit boxes so procured as above mentioned, *156 and although they have clipped *156 the coupons off of the bonds in the respective boxes and given them to each other, they, as stated, have never known why their father placed the bonds in the safety deposit boxes as he did, and
Whereas, Sandol and Louise because of the vagueness of said so-called trusts, and apparent lack of terms, conditions or limitations thereof, are now desirous of transferring the bonds held by each other to each other outright and free from any so-called trust relationship,
Now, Therefore, it is mutually agreed between the parties, and for the considerations herein mentioned flowing each to the other, that Sandol shall deliver over to Louise all of the bonds which she has in her possession under said so-called trust, and Louise shall deliver to Sandol all of the bonds which she has in her possession under said so-called trust, and each of them mutually release the other from any liability to the other because of said relationship attempted to be created.
(6) Prior to his death the decedent did not dispose of his ownership by a valid parol trust, or otherwise, of the principal amount of the bonds set forth in paragraph numbered (2) above.
(7) At date of*157 death the decedent owned fourteen parcels of real estate located in Shelby County, Tennessee, having a total value of $ 64,900, and he owned one parcel of five acres of land located in Dyer County, Tennessee, having a value of $ 450. The stipulation herein contains a tabulation which shows, as to each parcel, the legal description, the value at date of death, and the name in which title was recorded. Only five of such parcels were recorded in the name of the decedent. State, city, and county taxes on such parcels of real estate were assessed by the proper officials in the name of the owner of record and as to all of such parcels on which taxes were delinquent suits were duly filed in the chancery court for collection thereof. The total of all state, city, and county taxes, interest, penalties, and costs assessed against all of the decedent's fifteen parcels of real property at date of death amounted to $ 17,204.54.
(8) Under the statutes of Tennessee, after suits in chancery court have been instituted to collect unpaid and delinquent taxes, interest, and penalties, the taxpayer and the city attorney and the back tax collector of the state and the county may effect a compromise*158 agreement as in other legal proceedings. Accordingly, on March 1, 1941, the executrices of decedent's estate entered into agreements with the proper authorities whereby the taxes assessed, plus interest, penalties, and costs on the fourteen parcels of Shelby County real property owned by decedent at date of death, totaling $ 14,825, were compromised by the payment of $ 7,678.18.
(9) The decedent's estate can never be called upon to pay any portion of the above mentioned Shelby County real estate taxes, plus interest, penalties, and costs thereon, in excess of the $ 7,678.18 paid on March 1, 1941, and the balance in the sum of $ 7,146.82 is not a valid enforceable claim against the estate.
*157 (10) The total state, city, and county taxes which had been assessed at date of decedent's death against the decedent's five acres of land located in Dyer County, Tennessee, plus interest, penalties, and costs, amounted to $ 2,379.54. The suit brought by the taxing authorities to collect this amount is still pending and the executrices of decedent's estate have not paid any portion of such taxes, interest, penalties, and costs, and have not entered into any compromise agreement with the*159 proper officials with respect thereto.
(11) In 1934, in a receivership proceeding involving James E. Stark & Co. and with the approval of the chancery court, the decedent assumed all of that company's liabilities and acquired all of its assets, including the above mentioned five acres of land located in Dyer County, Tennessee. The receiver's deeds transferring that and several other parcels of property to decedent were never recorded and the receivership was not terminated until July 17, 1941, after the decedent's death. On January 6, 1941, Harry A. Darnell and others, receivers for James E. Stark & Co., the then record owner of the five acres of Dyer County realty, executed a deed naming Sandol M. Stark and Louise M. Prest as grantees, which deed was duly recorded on February 13, 1945. On February 6, 1945, Sandol M. Stark and Louise M. Prest, as devisees and legatees under the will of William P. Metcalf, deceased, and in consideration of $ 350 cash, executed a deed transferring title to such five acres of Dyer County realty to H. G. Knight in fee simple, subject, however, to real estate taxes, special assessments, etc., thereon which by agreement of the parties were assumed by*160 the purchaser.
(12) On June 17, 1944, petitioners paid additional estate tax in the amount of $ 2,190.06, plus $ 300.34 interest. The petition herein was filed on August 16, 1944.
OPINION.
The first issue involves the question of whether the respondent erred in including in the decedent's gross estate, under section 811 (a) of the Internal Revenue Code, 1 the value, totaling $ 24,925 at date of death, of the principal of the bonds in question.
The essential facts and circumstances as set forth in paragraphs numbered (2) to (5), inclusive, of our findings of fact are not in dispute. The petitioners contend (1) that one-half of the *161 principal of the bonds involved was given to each of the two sisters in trust for the other, and, if not so, (2) that an absolute gift of such principal *158 was made to each of the two sisters, each sister being delivered and holding such principal of the bonds as agent for the other. The respondent opposes these contentions.
Were the bonds delivered to each sister given to her in trust for the other?
It is agreed by both parties that under the laws of Tennessee a valid parol trust of personalty may be created. The Tennessee rule and the general rule is that, while no particular form of words need be used to create a valid trust, whether written or oral, the declaration of intention must be clear and unequivocal, not vague, doubtful, and uncertain in its material terms, which should include the subject matter or property embraced within the trust, the beneficiaries thereof, the nature and quantity of the interest which the beneficiaries are to have, the terms of the trust, and the manner in which the trust is to be performed. If the language of the declaration is so vague, loose, or equivocal that the necessary requisites of a trust are left in real uncertainty, it will be*162 impossible to administer and enforce the trust in accordance with the intention of the trustor, since that intention can not be determined. 2
*163 In the instant case we have evidence merely of a delivery of the bonds into the custody of the respective daughters of decedent, coupled with the oral statement of decedent to the effect that each daughter was to hold the bonds in trust, to clip the coupons, and to pay the interest realized therefrom to the other daughter. There is no further indication of what the decedent intended. We think that under the authorities cited this evidence of the intention of the decedent is too vague, loose, and equivocal to justify a conclusion that the principal of the bonds in question was transferred by decedent in trust.
The following language of the court in Dahlgren v. Dahlgren, supra (p. 758), can be applied here as being particularly apposite:
An express or implied trust must possess inherently the legal specifications which will enable a court to decree its administration in accordance with the wishes of the settlor, who alone has power to assent to it and to declare it. What estate is here granted for the benefit of the children, the income for a period of years, or the corpus of the estate? If the income, what is to become of the principal? If the*164 income and a portion of the principal, what is to become of the residue? When does the trust terminate? Does it last for the life of the children * * * ? The record fails to disclose any terms whatsoever. These are matters that cannot be supplied by a court of equity, but must expressly appear in the declaration of trust itself.
*159 The decedent's mere use of the word "trust" can not be relied upon as determinative of whether or not a trust was created, for the whole transaction must be scrutinized. Morsman v. Commissioner, 90 Fed. (2d) 18; certiorari denied, 302 U.S. 701">302 U.S. 701. See also 54 Am. Jur. 51, par. 40, and 65 C. J. 269, par. 48.
Our conclusion as to the evidence of the intention of the decedent being too vague and loose to justify a conclusion that the principal of the bonds was transferred in trust is supported by the "Mutual Agreement and Release Under a So-Called Trust" executed by decedent's two daughters subsequent to his death. In that agreement and release it is stated, inter alia, that the decedent delivered one-half of the bonds in question to each daughter, but "because of the vagueness of *165 said so-called trusts, and apparent lack of terms, conditions or limitations thereof," the two daughters were "desirous of transferring the bonds held by each other outright and free from any so-called trust relationship." It may be here said that although the stipulation shows a figure of $ 11,000 as the principal of bonds delivered each daughter, the parties, on brief, have treated $ 10,000 as the correct figure. In connection with our conclusion it is noteworthy that subsequent to the transactions with his daughters the decedent in his will executed in May 1940 and under which his daughters were, for all practical purposes, the sole beneficiaries, made specific provision for the immediate payment to each daughter of $ 10,000 either in bonds, stocks, or moneys, which amount of $ 10,000 is the same as the amount of the principal of the bonds which the parties treat as having been delivered each daughter on December 31, 1935.
We conclude, and have so found as a fact, that prior to his death the decedent did not dispose of his ownership of the principal amount of the bonds in question by a valid parol trust.
Did the decedent make an absolute gift of one-half of the principal of the*166 bonds to each of the two sisters?
Inasmuch as actual delivery direct to each daughter of the bonds claimed by petitioners to have been given each daughter was made to the other daughter, petitioners argue that such delivery was delivery to one daughter as agent for the other. Without discussing this argument and assuming, but not so deciding, that it is sound, it is unnecessary to say more than that the evidence with regard to the intention of the deceased when he delivered the principal of the bonds to his two daughters is, as was the case in our disposition of the trust issue, too vague, loose, and equivocal to support a conclusion that the principal of the bonds was transferred to the deceased's two daughters as absolute and unconditional gifts. There is nothing in this evidence indicating any donative intent on the part of the deceased to make such gifts to his daughters and mere delivery of the bonds *160 without such intent does not suffice to show a gift. The case of Collins v. McCanless, 179 Tenn. 656">179 Tenn. 656, cited by petitioners, is not contra, because there the donor of bonds stated to his wife and children that he was making a gift*167 of the bonds to his wife, thus clearly manifesting a donative intent.
We hold, as we have found to be a fact, that decedent did not dispose of his ownership of the principal amount of the bonds by way of gifts to his two daughters.
The second issue involves the question of whether state, city, and county taxes assessed, plus interest, penalties, and cost, against real estate owned by decedent at date of death are deductible from the gross estate under section 812 (b) (3) of the Internal Revenue Code, 3 prior to its amendment by section 405 of the Revenue Act of 1942, in the full amount of $ 17,204.54 accrued and constituting a lien against the properties at date of death, as contended by petitioners, or, as determined by respondent, are allowable only to the extent of $ 7,678.18 actually paid by the estate.
*168 On the facts presented, the petitioners' contention that they need only show that taxes, etc., in the amount of $ 17,204.54 had accrued as a claim against the decedent's estate to secure a deduction in such amount and that it is wholly immaterial that all of such sum in excess of $ 7,678.18 will never be paid by the estate, is untenable. Under section 812 (b) (3), supra, the deductions granted are limited to such amounts for claims "as are allowed by the laws of the jurisdiction, * * * under which the estate is being administered." In short, the deduction is for only such claims as may be enforced against the estate. United States v. Mitchell, 74 Fed. (2d) 571; Glascock v. Commissioner, 104 Fed. (2d) 475. Here, the facts show that the estate paid $ 7,678.18 in complete compromise of a claim for $ 14,825 for taxes assessed, plus interest, penalties, and costs, against the Shelby County properties, and thereafter the unpaid balance of $ 7,146.82 no longer represented an enforceable claim against the decedent's estate, since the indebtedness to that extent was extinguished, Buck v. Helvering, 73 Fed. (2d) 760;*169 and Estate of Ethel M. DuVal, 4 T. C. 722; affd., 152 Fed. (2d) 103; certiorari denied, 328 U.S. 838">328 U.S. 838.
*161 In Lucius N. Littauer et al., Executors, 25 B. T. A. 21, a doctor's claim against the estate amounted to $ 500, but was settled by payment of $ 250, and only the latter amount was allowed as a deduction.
In John Jacobs et al., Executors, 34 B. T. A. 594 (95 Fed. (2d) 1006), a similar question was involved under the provisions of section 303 (a) (1) of the Revenue Act of 1926 similar to the provisions of the statute applicable here. There, the taxes assessed and accrued at date of death were subsequently rendered noncollectible from the estate by issuance of the Ohio Tax Commission's certificate of immunity. It was held that valid claims against an estate either actually paid or to be paid is what Congress had in mind when it used the words, "claims against the estate," and the claimed deduction was disallowed.
In Estate of Ethel M. DuVal, supra, a deduction was sought for the amount*170 of certain notes on which the decedent was coguarantor at date of death. Subsequently, the bank holding the notes and owning the claim against the estate released such claim without payment by consenting to the distribution of the estate. That claim which existed at date of death would never be paid by the estate and it was held that, for Federal tax purposes, no bona fide claim was outstanding and there was no basis for a deduction from the gross estate under section 812 (b) (3), supra.
The respondent's determination as to the taxes, penalties, costs, and interest on the Shelby County property is approved.
The same principle applied to the Shelby County taxes, costs, interest, and penalties applies to the Dyer County taxes, costs, interest, and penalties, i. e., that the result of the suit brought for collection of those taxes is decisive of the amount of the deduction, if any, to be here allowed. The only difference in material facts between the situations as to the Shelby County taxes, etc., and the Dyer County taxes, etc., is that, in the former, we know that the suit resulted in a final settlement for a lesser amount than that sued for, while, in the latter, we know*171 only that the suit was pending and that no part of the amount sued for had been paid or compromised at the time of this hearing. We do not know whether that suit will terminate by compromise for a lesser amount than claimed in the suit, as was the case in regard to the Shelby County taxes, etc., or, if not compromised, what will be the result of the suit as to the amount, if any, which would be found to be due and which would be paid by this estate. Cf. Jacobs v. Commissioner, 34 Fed. (2d) 233, and John Jacobs et al., Executors, supra.We are not apprised as to whether the suit pending in the Tennessee court is being defended on the ground that there is no liability for any of the amount sued for or on the ground that there is a liability for only a portion thereof. In either event, however, the position *162 taken by petitioners in the Tennessee court conflicts with their position here, where they claim a deduction for the entire amount sued for in the Tennessee court. In view of such conflicting positions we are left in an unresolvable doubt as to what amount, if any, should be allowed as a*172 deduction; and, in such circumstances, we have no alternative other than to deny the deduction. Accordingly, we approve the determination of the respondent with regard to the Dyer County taxes.
Decision will be entered for the respondent.
Footnotes
1. SEC. 811. GROSS ESTATE.
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, except real property situated outside of the United States --
(a) Decedent's Interest. -- To the extent of the interest therein of the decedent at the time of his death.↩
2. 54 Am. Jur., 43, 48, pars. 30, 37; 65 C. J. 231; Chicago, M. & St. P. R. Co. v. Des Moines Union R. Co., 254 U.S. 196">254 U.S. 196; Colton v. Colton, 127 U.S. 300">127 U.S. 300; Allen v. Withrow, 110 U.S. 119">110 U.S. 119; Dahlgren v. Dahlgren, 1 Fed. (2d) 755; certiorari denied, 266 U.S. 626">266 U.S. 626; Eschen v. Steers, 10 Fed. (2d) 739; Weil v. Commissioner, 82 Fed. (2d) 561; certiorari denied, 299 U.S. 552">299 U.S. 552; John A. Cavanagh, 2 B. T. A. 268; Godfrey R. Rebmann, 18 B. T. A. 1265; Claud McCauley, 17 B. T. A. 886; Derrick v. Lumpkin, 20 Tenn. App. 77">20 Tenn. App. 77; 95 S. W. (2d) 939; and Sheegog v. Perkins↩ (Tenn.), 4 Baxter 273.
3. SEC. 812. NET ESTATE.
For the purpose of the tax the value of the net estate shall be determined, in the case of a citizen or resident of the United States by deducting from the value of the gross estate --
* * * *
(b) Expenses, Losses, Indebtedness, and Taxes. -- Such amounts --
* * * *
(3) for claims against the estate,
* * * *
as are allowed by the laws of the jurisdiction * * * under which the estate is being administered, but not including * * * property taxes not accrued before his death, * * *↩