12 T.C. 163">*164 The respondent has determined a deficiency in estate tax in the amount of $ 37,314.12. There are two questions for decision: (1) Whether the value at the date of the decedent's death of the life estate of Alice F. Mitchell, who was the wife of the decedent at the time of his death, in an inter vivos trust, is includible in the gross estate under section 811 (c) of the Internal Revenue Code as a transfer intended to take effect at or after death. (2) Whether, in determining the value of the trust estate, there should be included in its value the sum of $ 634.35 representing the amount of dividends which were declared on shares of stock 1949 U.S. Tax Ct. LEXIS 283">*285 owned by the trust prior to the death of the decedent and were payable, and were paid, after his death.

Petitioner, in her amended petition, has abandoned claim for a deduction of $ 4,237.37 for commissions payable to the trustees of the trust in question.

The parties have stipulated as follows: That the estate is entitled to a deduction of $ 2,186.98 as administration expenses for attorney's fees and disbursements; and that a credit of $ 139.86 is allowable under section 813 (b) for New York State estate tax which has been paid and for which no credit has been allowed.

Effect will be given to the agreed items in the recomputation of estate tax liability under Rule 50.

The estate tax return was filed with the collector for the district of Florida.

The record in this proceeding consists of a stipulation of certain facts, exhibits, and testimony.

FINDINGS OF FACT.

The facts which have been stipulated are found as facts, and they are incorporated herein by this reference.

Merritt J. Corbett, the decedent, and Alice F. Corbett were married on April 4, 1923. The decedent was born on May 3, 1865, and Alice F. Corbett was born on December 21, 1895. At the time of their marriage, the decedent1949 U.S. Tax Ct. LEXIS 283">*286 was 58 years old and Alice F. Corbett was 28 years old. Alice F. Corbett had been married and divorced prior to her marriage to the decedent. She remained the wife of the decedent until he died. Thereafter, she remarried and is now Alice F. Mitchell.

The decedent died on February 20, 1942, at the age of 77, a resident of Belleair, Pinellas County, Florida, leaving a last will and codicil 12 T.C. 163">*165 thereto, in and by which the then Alice F. Corbett was named the executrix. The then Alice F. Corbett was about 46 years old at the time of the decedent's death.

On December 8, 1927, the decedent entered into a trust agreement with the Equitable Trust Co. of New York, as trustee. The Chase National Bank of New York succeeded the Equitable Trust Co. as trustee.

The decedent was 62 years old when he created the trust. The trust was not created in contemplation of death.

The decedent transferred securities of a value of $ 739,614 to the trustee of the trust on December 8, 1927. Thereafter, through December 9, 1930, he transferred additional securities and cash to the trust of a value in excess of $ 300,000. Prior to June 27, 1930, the decedent withdrew from the trust securities and 1949 U.S. Tax Ct. LEXIS 283">*287 cash of a value of about $ 160,382. After December 9, 1930, no other additions to or withdrawals from the trust were made by the decedent.

The parties have stipulated that the value of the principal of the trust at the date of the decedent's death was $ 208,519.91, inclusive of dividends on stock owned by the trust in the amount of $ 634.35, which dividends were declared payable to stockholders of record on or before February 20, 1942, the date of the decedent's death, but which were payable and were paid after February 20, 1942. The parties have stipulated that the value of the principal of the trust at the date of the decedent's death, exclusive of the $ 634.35 of dividends was $ 207,885.56.

The decedent made several amendments to the trust up to and including June 24, 1941. Most of these amendments are not material to the questions for decision in this proceeding. The trust agreement, as amended, was in existence and in effect at the date of the decedent's death.

In the original trust agreement the decedent reserved the right to revoke and terminate the trust in whole or in part, but, by amendment dated December 15, 1930, he released and relinquished that power. However, by1949 U.S. Tax Ct. LEXIS 283">*288 the same amendment, which was in force until the date of the decedent's death, he reserved the power to change the beneficiaries of the trust, or the amount of the net income payable to each beneficiary, or to modify the terms and conditions of the trust, except and provided:

* * * that so long as Alice F. Corbett shall remain the wife of the Settlor and shall continue to live with him as his wife, the Settlor may not exercise the power hereinbefore reserved to him so as to change or modify the provisions of the paragraph of the said Indenture numbered First that on the first day of 12 T.C. 163">*166 each month during the life of the Settlor the Trustee shall pay out of the net income to Alice F. Corbett the sum of Three thousand dollars ($ 3,000) during her life; and provided further the Settlor may not exercise the power hereinbefore reserved to him so as to change or modify the provisions of the said Indenture to give himself a greater interest in either the principal of the trust estate or the income thereof than that which is reserved to him by the provisions of the paragraph of the said Indenture numbered First, as herein modified.

Under the trust agreement, as amended, the trustee 1949 U.S. Tax Ct. LEXIS 283">*289 was to hold and administer the trust during the life of the settlor's wife, Alice F. Corbett, or until she should cease to be his wife. Upon the death of the settlor's wife, or if she should cease to be his wife, the trust was to continue, and the trust income was to be paid to the grantor, the decedent, for as long as he should live, or until the termination of the trust if it should end during his life. If the trust should continue during the grantor's life, then upon his death the income was to be paid in certain shares to various persons, including the grantor's daughter and son.

Under the trust agreement, as amended, the trustee was to distribute the trust income in the following way:

During the life of the grantor, the decedent, the trustee was to pay his wife, Alice F. Corbett, $ 3,000 per month, and was to pay to the grantor the balance of the net income, if any. Upon the death of the grantor, the trustee was to pay Alice F. Corbett, if she should be his widow, $ 3,000 per month; $ 250 per month to the grantor's daughter and son, and others; and the balance, if any, to Alice F. Corbett.

Alice F. Corbett was to receive $ 3,000 per month from the trust income during the lifetime1949 U.S. Tax Ct. LEXIS 283">*290 of the grantor, the decedent, upon the condition that she continued to be his wife, but if she ceased to be his wife during his lifetime, the payments to her were to end, and all of the trust income was to be paid to the grantor during his life.

Alice F. Corbett was to receive at least $ 3,000 per month from the trust after the death of the grantor, the decedent, during her life, upon the condition that she was his wife at the time of his death, i. e., his widow.

The trust was to continue during the life of Alice F. Corbett (now Mitchell), if she should be the grantor's widow.

The trust is to terminate in accordance with the following provision:

Upon the death of the Settlor's daughter after the death of the Settlor and his wife, or upon the death of the Settlor's daughter after the death of the Settlor and during the lifetime of the Settlor's wife if she was not his wife at the time of his death, or upon the death of the Settlor's wife if she should survive the Settlor and his daughter and was the Settlor's wife at the time of his death, the principal of the trust estate shall be paid as follows: * * *.

12 T.C. 163">*167 The trust agreement, as amended, provided for the distribution of the1949 U.S. Tax Ct. LEXIS 283">*291 principal of the trust, upon termination thereof, to various named persons, or to their then living descendants, if any.

There was no provision in the trust, as amended, for the payment of all or part of the principal of the trust to any institutions in the event that descendants of first named beneficiaries should not be living.

Since the death of the decedent, the net income of the trust has not exceeded $ 2,000 per month, and all of the net income of the trust has been distributable to the petitioner, Alice F. Mitchell. In 1946 the net income of the trust was $ 14,942.06.

In computing the value of the gross estate of the decedent in the estate tax return, petitioner included the value of the remainder interest in the trust which is here in question, but did not include the value of the life estate of the petitioner in the trust. The value of the remainder interest was reported as $ 94,102.03.

Respondent has determined that the value of the trust, without any exclusion of the value of the life estate of the petitioner, is includible in the gross estate.

OPINION.

Petitioner has agreed at all times that there should be included in the gross estate the value of the remainder interest1949 U.S. Tax Ct. LEXIS 283">*292 in the trust which was created on December 8, 1927, because the decedent retained the power to change the beneficiaries and the amount of income to be paid to them, except with respect to the then Alice F. Corbett, and to modify the provisions of the trust.

The first question raised by the pleadings is whether the value of the life estate of Alice F. Corbett Mitchell is includible in the gross estate, as respondent has determined, under section 811 (c) as a transfer intended to take effect at or after death.

Respondent has abandoned an original contention that the entire value of the trust is includible in the gross estate as a transfer made in contemplation of death.

The decedent provided in the trust that trust income should be paid to his then wife, Alice F. Corbett, during his life upon the condition that she remain his wife; and after his death, upon the condition that she was his wife at the time of his death. The dispute between the parties arises because of this condition in the trust agreement. Petitioner contends that the decedent had no power to bring about the ending of the interest of his wife in the trust under an exclusive discretion of his own, and that the condition1949 U.S. Tax Ct. LEXIS 283">*293 upon which her interest depended was not one which the death of the decedent affected. Petitioner cites 12 T.C. 163">*168 Reinecke v. Northern Trust Co., 278 U.S. 339">278 U.S. 339, and Bryant v. Helvering, 309 U.S. 106">309 U.S. 106.

Respondent contends that the life estate of the wife in the trust could not become absolute until the death of the grantor of the trust, the decedent; that until the grantor's death the interest of the wife was contingent and defeasible, and became an indefeasible life estate only upon his death; and that, because of the condition imposed by the grantor, there was not a completed gift in praesenti of a life estate in the trust to the wife at any time before the grantor's death, either when the trust was created in 1927, or when it was amended from time to time thereafter. In brief, respondent contends that the wife did not, until the moment of the decedent's death, have a complete and unqualified life estate because as long as the decedent lived there was the contingency that the two might become separated by divorce.

The question presented in this proceeding closely resembles the question in Klein v. United States, 283 U.S. 231">283 U.S. 231.1949 U.S. Tax Ct. LEXIS 283">*294 There a husband conveyed two parcels of real estate to his wife by a deed which provided that:

Upon the condition and in the event that the said grantee [the wife] shall survive the said grantor, then and in that case only the said grantee shall by virtue of this conveyance take, have, and hold the said lands in fee simple, unto the sole use of herself, her heirs, and assigns forever.

The Supreme Court said, in the Klein case:

Nothing is to be gained by multiplying words in respect of the various niceties of the art of conveyancing or the law of contingent and vested remainders. It is perfectly plain that the death of the grantor was the indispensable and intended event which brought the larger estate into being for the grantee and effected its transmission from the dead to the living, thus satisfying the terms of the taxing act and justifying the tax imposed.

In this proceeding, the decedent imposed a condition to the wife's obtaining the right to receive income from the trust for the duration of her life. The condition was to be maintenance of the martial status, of the then wife of the grantor of the trust as his wife, which status had to be maintained until the death1949 U.S. Tax Ct. LEXIS 283">*295 of the grantor. That is to say, the wife had to survive, so to speak, as the grantor's wife until death did part him from her. Upon the condition and in the event that she was the grantor's wife on the date of his demise, and in that case only, did she become absolutely entitled to receive the prescribed amount of trust income for the period of her life. Her life estate was in suspense until the grantor's death brought an end to the conditional period and, accordingly, his death was the event which brought the wife's life estate into being.

In Helvering v. Hallock, 309 U.S. 106">309 U.S. 106, the Supreme Court rejected 12 T.C. 163">*169 the rationale of Helvering v. St. Louis Trust Co., 296 U.S. 39">296 U.S. 39, where the majority had found a fine distinction in regarding death as ending a "mere possibility" of a reverter. Petitioner in this proceeding argues, in effect, that the death of the grantor simply put an end to what was a mere possibility, i. e., a divorce of the spouses; or, that she had acquired, by virtue of the inter vivos transfer, a life interest subject only to a "condition subsequent," a divorce. But the Hallock1949 U.S. Tax Ct. LEXIS 283">*296 case rejected the view that distinctions in forms of transfers can serve as avenues of escape from the force of the estate tax statute's provisions in section 811 (c) and the corresponding earlier provisions which sweep into the gross estate those interests which are freed from contingencies by the donor's death. This principle of the Hallock case was restated in Fidelity-Philadelphia Trust Co. ( Stinson's Estate) v. Rothensies, 324 U.S. 108">324 U.S. 108, as follows:

The taxable gross estate, in other words, must include those property interests the ultimate possession or enjoyment of which is held in suspense until the moment of the grantor's death or thereafter.

See also Commissioner v. Field's Estate, 324 U.S. 113">324 U.S. 113.

In the instant trust, in the event that the grantor's wife should cease to be his wife prior to his death, all of the trust income was to be paid to the grantor for as long as he lived, provided that his daughter should be living when the petitioner ceased to be his wife; or, if the daughter should die during the life of the grantor, the trust was to terminate, and the principal was to be paid to the 1949 U.S. Tax Ct. LEXIS 283">*297 grantor. ¹ In Commissioner v. Estate of Church, 335 U.S. 632">335 U.S. 632, the Supreme Court reversed May v. Heiner, 281 U.S. 238">281 U.S. 238, and held that an instrument which preserves to the grantor the "beneficial use of one's property during life" and provides for its distribution at death is testamentary in character and comes within the broad scope of the "possession and enjoyment" clause of section 811 (c). The arrangement adopted by the decedent in his inter vivos trust of directing the trustee to pay monthly income to his wife during his life for as long as she remained his wife, with a reservation of all of the income to 12 T.C. 163">*170 himself for life if she ceased to be his wife, was, in reality, a means of preserving the beneficial use of the income to himself for life. The very condition of the payments of trust income to the wife during the life of the grantor involved a retention of beneficial use of such income by the grantor, under the rationale of Commissioner v. Estate of Church. There was a quid pro quo. But, leaving aside the provisions for the use of the trust income during the grantor's life, the petitioner1949 U.S. Tax Ct. LEXIS 283">*298 can not possibly escape the provision which made the contingency a continuing one which only the grantor's death brought to an end. Whatever doubt has existed heretofore about the breadth of the rule of the Hallock case has been removed by the further statement in Commissioner v. Estate of Church, that:

Hallock thereby returned to the interpretation of the "possession and enjoyment" section under which an estate tax cannot be avoided by any transfer except by a bona fide transfer in which the settlor, absolutely, unequivocally, irrevocably, and without possible reservations, parts with all his title and all of his possession and all of his enjoyment of the transferred property. After such a transfer has been made, the settlor must be left with no present legal title in the property, no possible reversionary interest in that title, and no right to possess or to enjoy the property then or thereafter. In other words such a transfer must be immediate and out and out, and must be unaffected by whether the grantor lives or dies.

1949 U.S. Tax Ct. LEXIS 283">*299 And in Estate of Spiegel v. Commissioner, 335 U.S. 701">335 U.S. 701, decided the same day, the Supreme Court added to the above statement as follows:

We add to that statement, if it can be conceived of as an addition, that it is immaterial whether such a present or future interest, absolute or contingent, remains in the grantor because he deliberately reserves it or because, without considering the consequences, he conveys away less than all of his property ownership and attributes, present or prospective. In either event the settlor has not parted with all of his presently existing or future contingent interests in the property transferred. He has therefore not made that "complete" kind of trust transfer that § 811 (c) commands as a prerequisite to a showing that he has certainly and irrevocably parted with his "possession or enjoyment."

We must reject petitioner's contention, and sustain the respondent's determination that the transfer of a life estate in the trust to the wife was a transfer intended to take effect in possession and enjoyment at or after the decedent's death within the meaning of section 811 (c).

The remaining question follows upon the conclusion1949 U.S. Tax Ct. LEXIS 283">*300 that the value of the life estate in the trust is includible in the gross estate, and it is whether the value of the life estate shall be computed upon the basis of including $ 634.35 of dividends which were declared prior to the date of the decedent's death but which were not payable until afterward. The value of the right of the widow, a woman of about 46 years of age at the date of the decedent's death, to receive monthly payments of a certain amount annually for life, is to be computed in accordance with 12 T.C. 163">*171 Table A in section 81.10 (i) of Regulations 105. The dividends in question on stock owned by the trust were dividends which, when received by the trust, would become part of the monthly trust income which would be distributable to the beneficiary.

Until the trustee received the dividends in question, they were not distributable income of the trust, and until they were part of the distributable income of the trust the beneficiary had no claim against the trust for distribution thereof to her, and, therefore, had no command over the income which the dividends in question represented. The dividends did not become payable to the trustee by the corporations which had declared1949 U.S. Tax Ct. LEXIS 283">*301 them until after the date of decedent's death, and, accordingly, until after that date they did not become part of the monthly income of the trust which was distributable to the beneficiary. It is the life estate which the death of the decedent brings into possession and enjoyment which is to be valued. Clearly, that which becomes distributable to the beneficiary from the trust income after the date of death is the interest which is to be valued under the provisions of section 81.10 (i) of the applicable regulation, and it follows that the $ 634.35 of dividends must be taken into account. This is in accord with section 81.13 of Regulations 105 (approved February 18, 1922), which provides, in part, as follows:

Interest and rents accrued at the date of the decedent's death and dividends declared to stockholders of record on or before the date of the decedent's death and not collected at such date constitute part of the gross estate.

See also Commissioner v. American Light & Traction Co., 156 Fed. (2d) 398, and William K. Vanderbilt et al., Executors, 11 B. T. A. 291.

As for the trust itself which owned the stock, 1949 U.S. Tax Ct. LEXIS 283">*302 as distinguished from the trust beneficiary, the declarations by corporations of dividends prior to the date of the decedent's death created a debt owing from the corporations to the trust at the date of decedent's death. See Helvering v. McGlue's Estate, 119 Fed. (2d) 167, 171, in which the court stated the rule in the State of New York as set forth in Ford v. Snook, 205 A.D. 194; 199 N. Y. S. 632, to be that the declaration creates a debt in favor of the stockholder against the corporation. The claim of the trustee for the declared dividends constituted an asset of the trust at the date of the decedent's death, and must be taken into account in valuing the life estate.

For the above reasons, respondent's determination of the value of the life estate, which takes into account the dividends in question, is sustained. The value of the principal of the trust at the date of death was $ 208,519.91, and the value of the life estate was $ 113,347.97.

Decision will be entered under Rule 50.