In this proceeding respondent determined a deficiency in estate tax in the amount of $26,471.49. The parties submitted the case on a written stipulation of facts which we incorporate herein by reference and adopt as the basis for our findings of fact. Certain adjustments are not contested. The only question for our consideration is whether a certain inter vivos cash transfer made by decedent, not in contemplation of death, was intended to take effect in possession or enjoyment at or after death, and, if so, what part of the property so transferred and the accumulation thereon is includible in decedent's gross estate.
FINDINGS OF FACT.
Petitioners are executors of the estate of Mary B. Hunnewell, who died March 29, 1940, at the age of 77. The estate tax return was filed with the collector of internal revenue for the district of Massachusetts.
On May 1, 1928, the decedent deposited with the Massachusetts Hospital Life Insurance Co. the sum of $100,000 under a contract bearing that date and executed by the insurance company. The contract provided that the insurance company would annually apportion its income, less certain stated deductions, from all property in its possession pro rata among the deposits and other funds of the company, including the deposit made by the decedent. The contract further provided as follows:
This Deposit is made for the benefit of those of the grandchildren of said Mary B. Hunnewell now living, and that may hereafter be born, who shall reach his or her twenty-first birthday.
It is agreed that all income due under this deposit and not paid, as hereinafter provided, shall be added to said Principal Sum on January first of each year in order to increase said Principal Sum.
It is also agreed that as each of said grandchildren shall reach his or her twenty-first birthday, one equal share of Income of this deposit shall be paid in the manner above provided to such grandchild, if living, on the following first day of January and annually on said date thereafter during his or her life.
Provided, however, that if any grandchild, after reaching his or her twenty-first birthday, shall decease between the first day of November and the thirty-first day of December (inclusive) in any year, the share of income which he or she would have been entitled to receive on the following first day of January shall be paid to his or her executors or administrators.
The number of grandchildren (irrespective of age) living on the first day of November in any year shall determine the fraction of income to be paid on the following first day of January to those who, as provided above, are entitled to receive payment.
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It is further agreed that sixty days after the death of a grandchild, provided said grandchild shall have reached his or her twenty-first birthday, one equal share of said Principal Sum, accumulations, and additions if any, shall be paid to his or her executors or administrators. The number of grandchildren (irrespective of age) living at time of said death shall determine the fraction of said Principal Sum, accumulations, and additions if any, to be paid in the manner aforesaid to the executors or administrators of said deceased grandchild.
It is also agreed that if at any time there be no grandchildren of said Mary B. Hunnewell living, the last survivor having died before reaching his or her twenty-first birthday, then the whole, or the balance, as the case may be, of said Principal Sum, accumulations, and additions if any, and interest thereon to date of death of said last survivor, shall be paid sixty days thereafter to said Mary B. Hunnewell, if living; otherwise to her husband, Henry S. Hunnewell; and if both said Mary B. Hunnewell and Henry S. Hunnewell be then deceased, then to the executors or administrators of said Mary B. Hunnewell.
The obligation of said Company under this Contract shall cease when the whole of said Principal Sum, accumulations, and additions if any, shall have been paid as hereinbefore provided.
When the deposit was made decedent had surviving a husband, 3 children, and 5 grandchildren. One additional grandchild was thereafter born during her lifetime. The ages of the children at the date of decedent's death were 52, 48, and 46 years, and the ages of the grandchildren on that date were 26, 24, 18, 13, 13, and 6 years. Decedent's husband predeceased her.
The deposit in question was not made in contemplation of death.
On March 29, 1940, the date of decedent's death, the amount of the deposit plus accumulations totaled $142,601.61, all of which the respondent included in the decedent's gross estate. Respondent, on brief, abandoned his claim with respect to that part of the fund allocable to the two grandchildren who had reached age 21 and as to which the possibility of reverter no longer existed. He would now include only the remaining four-sixths of the deposit, or $95,067.74.
The contingent reversionary interest at decedent's death, on the basis of the Combined Experience Mortality Table, had an indeterminate value of approximately 12 cents.
Decedent did not intend that the transfer should take effect in possession or enjoyment at or after her death. She intended to and did make a complete gift when she made the deposit with the insurance company.
OPINION.
ARNOLD, Judge:
Respondent contends that the value of the transferred property which at decedent's death was still subject to the possibility of reverting to decedent's estate is includible in gross estate under section 811 (c) of the Internal Revenue Code, on the theory that the transfer was intended to take effect in possession or enjoyment at or after death. Petitioners claim that there was no such intent accompanying the transfer; that decedent's death could have had no effect whatsoever on the interests of the beneficiaries; and that no part of the transferred property is includible in decedent's estate.
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 —
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(c) TRANSFERS IN CONTEMPLATION OF, OR TAKING EFFECT AT DEATH. — To the extent of any interest therein of which the decedent has at any time made a transfer, by trust or otherwise, in contemplation of or Intended to take effect in possession or enjoyment at or after his death, or of which he has at any time made a transfer by trust or otherwise, under which he has retained for his life or for any period not ascertainable without reference to his death or for any period which does not in fact end before his death (1) the possession or enjoyment of, or the right to the income from, the property, or (2) the right, either alone or in conjunction with any person, to designate the persons who shall possess or enjoy the property or the income therefrom; except in case of a bona fide sale for an adequate and full consideration in money or money's worth. * * *
The terms of the deposit contract are detailed in our findings. In brief, decedent deposited money with an insurance company for the benefit of those of her grandchildren then living or thereafter born who should attain age 21. As each grandchild became 21 his share of the income of the deposit was to be paid over to him annually. In case of the death of a grandchild after reaching age 21, his share of the principal sum was to vest absolutely in his estate. In case of the death of any grandchild before reaching age 21, his share of the principal sum was to remain on deposit for the benefit of the surviving grandchildren, increasing their fractional shares of the total income and principal of the fund. In case all the grandchildren should die before the last survivor reached age 21, the remaining part of the fund would revert to the decedent or her estate. Decedent had five grandchildren when the deposit was made and six grandchildren at the date of her death, two of whom were then over 21 years of age.
Respondent relies primarily upon Fidelity-Philadelphia Trust Co. ( Estate of Stinson) v. Rothensies, 142 F.2d 838, (hereinafter referred to as the Stinson case) which was decided on the authority of Helvering v. Hallock, 309 U.S. 106. The Stinson case has since been affirmed by the Supreme Court, 304 U.S. 108. The terms of the deposit agreement and the accompanying circumstances in the instant case are sufficiently similar to those in Frances Biddle Trust, 3 T.C. 832, (appeal pending, C.C.A., 3d Cir.) to require a similar result. See also Estate of Benj. L. Allen, 3 T.C. 844, (appeal pending, C. C. A., 2d Cir.) and Estate of Harris Fahnestock, 4 T.C. 1096. We are of the opinion that the Stinson case is not determinative here for the reasons stated in the Fahnestock case.
To hold that decedent in the instant case intended that the transfer should take effect in possession or enjoyment at or after death would be to do violence to the meaning of the word "intended," for the decedent quite clearly had no such thing in mind. Two-sixths of the property was freed of the possibility of reverter before decedent's death. All of it might have been had she lived another 15 years. Her death could have had no possible effect upon the possession or enjoyment of the property transferred. Certainly, she had this in mind when the transfer was made. What she apparently did intend was that an irrevocable transfer should take effect immediately, upon deposit of the funds with the insurance company, as a gift to a class consisting of those of her grandchildren who would attain the age of 21. Only the untimely death of all of the grandchildren under almost impossible circumstances could accomplish a divestment and reversion of the gift.
It can not be said, paraphrasing the Hallock case, that decedent's act was too much akin to a testamentary disposition "not to be subject to the same excises." What decedent here accomplished inter vivos could not have been done by will, for as we have pointed out a part of the property vested irrevocably before her death, and all of it might have vested.
Decision will be entered under Rule 50.
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