14 T.C. 534">*535 Respondent determined a deficiency of $ 6,124.50 in the estate tax of petitioner's decedent. Subsequent to the mailing of the notice of deficiency petitioner paid the full amount of the deficiency, plus interest of $ 551.19. Petitioner now asserts it made an overpayment of its tax. At the hearing and in its principal brief petitioner challenged the inclusion in decedent's estate of certain United States bonds, which were jointly owned by petitioner's decedent and his wife at the time of his death, but this issue was abandoned1950 U.S. Tax Ct. LEXIS 240">*242 by petitioner in its reply brief. The sole question remaining for our determination is what, if any, portion of the proceeds of five insurance policies taken out on decedent's life by his wife were includible in his gross estate under section 811 (g) (2) of the Internal Revenue Code, as amended by section 404 (a) (2) of the Revenue Act of 1942.

FINDINGS OF FACT.

Part of the facts were stipulated and are so found.

This proceeding is brought by Helen S. Saunders and Dudley A. Saunders as the duly qualified executors of the estate of Albert Dudley Saunders (hereinafter referred to as the decedent). The decedent died on September 18, 1945, domiciled in Nassau County, New York, leaving as his survivors his widow, Helen S. Saunders, and four children. His estate tax return was filed by the executors of the estate on December 17, 1946, with the collector of internal revenue for the first district of New York.

In 1932 and 1933 Helen Saunders made application for and was issued five policies of insurance on the life of her husband in the aggregate amount of $ 55,000 by New England Mutual Life Insurance Co. of Boston, Massachusetts. She was named as the beneficiary in each of these policies1950 U.S. Tax Ct. LEXIS 240">*243 and decedent possessed no incidents of ownership in any of them.

These five insurance policies remained in full force and effect on September 18, 1945, the date of decedent's death, modified only in certain respects immaterial to the present proceeding. Following his death the proceeds of all these policies in the aggregate amount of $ 55,540.91 were and are being paid to Helen Saunders.

Prior to her marriage Helen Saunders was employed as a private secretary for the Russell-Sage Foundation, but after being wed to 14 T.C. 534">*536 decedent she ceased to hold any outside job. At the time of her marriage decedent's wife had a savings account in her separate name with the Queens County Savings Bank of New York, Flushing Branch, in an amount between $ 3,000 and $ 4,000, and a checking account in her own name with the Corn Exchange Bank Trust Co., Flushing Branch, in an amount somewhere around $ 200. She had no other property at the time of her marriage. At the time of her marriage, each of the above accounts was changed into a joint account with her husband. In the period from January 10, 1941, through July 5, 1945, decedent and his wife continued to maintain their joint checking account1950 U.S. Tax Ct. LEXIS 240">*244 at the Corn Exchange Bank Trust Co.

Decedent was a construction engineer, engaged primarily in subway construction work. He was vice president and general manager of Arthur A. Johnson Corporation of Long Island City, New York, during the last 24 years of his life. For a number of years prior to his death decedent earned an annual salary, apart from bonuses, of $ 16,000. All the salary he received during his married life was deposited in the joint checking account at the Corn Exchange Bank Trust Co.

Decedent and his wife were married for a period of approximately 27 years prior to his death. During the married life of decedent and his wife all deposits in the joint checking account were made by Helen Saunders, even though almost all of them constituted his funds. She likewise drew checks on the joint account for payment of household expenses and education of the children, as well as for payment of premiums on the five insurance policies. From January 10, 1941, until decedent's death she met all the premiums falling due on these policies, and in every instance but one she accomplished this by check. Decedent never specifically furnished her with money to meet these insurance 1950 U.S. Tax Ct. LEXIS 240">*245 premiums.

From January 10, 1941, until decedent's death on September 18, 1945, the total amount of premiums paid on the insurance policies was $ 8,757.85. Of this total, $ 7,587.45 was paid by checks on the joint checking account of decedent and his wife between January 10, 1941, and July 5, 1945, $ 335.30 was paid from untraced sources in January, 1943, and $ 835.10 was paid from a joint checking account in the name of Helen Saunders and her daughter, Audry Saunders, from July 5 until September 18, 1945.

At various times Helen Saunders deposited miscellaneous funds of an indeterminate amount in the joint checking account of herself and her husband from her own investments. In addition she made two identifiable deposits. In January, 1941, she bought a senior interest in a first mortgage on certain realty in Queens County, New York, for $ 3,500. The purchase money consisted of $ 198.97 from her separate 14 T.C. 534">*537 savings and $ 3,301.03 from her husband in the form of gifts. She received $ 3,745.56 on this investment September 10, 1943, when the mortgage indebtedness was paid off. This entire sum was deposited by her in the joint checking account at the Corn Exchange Bank Trust1950 U.S. Tax Ct. LEXIS 240">*246 Co. on the same day she received it. The balance in the account prior to this deposit was $ 1,672.72.

In the period from September 10, 1943, until July 5, 1945, a total of $ 2,874.20 was withdrawn by Helen Saunders from the joint checking account of her husband and herself for the payment of insurance premiums. The last withdrawal for this purpose was made on March 15, 1945. During this period bonus payments of decedent in the aggregate amount of $ 4,454.44 were deposited in the joint account, $ 4,250 of which was withdrawn for the purchase of United States bonds. In this same period unidentified deposits to the joint account were made in the total amount of $ 43,195.26, while unidentified withdrawals amounted to $ 46,030.68.

The source of Helen Saunders' other identifiable deposit, amounting to $ 2,500, was a gift decedent made to his wife in September, 1943. At that time he gave her a signed withdrawal slip on an account "Albert D. Saunders in trust for Helen S. Saunders" carried at the Queens County Savings Bank in the amount of $ 2,500, so she could buy a fur coat. She placed the withdrawal slip in her safe deposit box. On July 2, 1945, she presented it to the Queens County1950 U.S. Tax Ct. LEXIS 240">*247 Savings Bank and received a check for $ 2,500, which she deposited in the joint checking account on the same day. At the time of this deposit the balance in the joint checking account was $ 273.10. Withdrawals on and after July 2 through July 5, 1945, totaled $ 360.

On July 5, 1945, decedent's wife closed out the joint checking account of Albert Dudley Saunders and Helen S. Saunders and placed the balance of $ 2,413.10 in a new checking account at the same bank in the joint names of herself and her daughter, Audrey Saunders. The latter never made any deposits to the new account. Between July 5 and September 18, 1945, three checks drawn by Helen Saunders for the payment of three insurance premiums totaling $ 835.10 were charged against the new checking account.

In his notice of deficiency respondent determined that proceeds of the five policies of insurance on decedent's life, to the extent of $ 20,697.28, comprised a part of decedent's gross estate for Federal estate tax purposes.

Helen Saunders paid $ 562 of her own separate funds to meet premium payments on the five insurance policies between January 10, 1941, and September 18, 1945, when her husband died. Decedent indirectly1950 U.S. Tax Ct. LEXIS 240">*248 paid $ 8,195.85 of the total of $ 8,757.85 expended after January 10, 1941, for the payment of premiums on the five policies of insurance on his life.

14 T.C. 534">*538 OPINION.

The principal question for our determination in this proceeding is what, if any, portion of the proceeds of five insurance policies taken out on decedent's life by his wife were includible in his gross estate under section 811 (g) (2) of the Internal Revenue Code, ¹1950 U.S. Tax Ct. LEXIS 240">*250 as amended by section 404 (a) of the Revenue Act of 1942. Only the proportionate part of the proceeds represented by premiums paid after January 10, 1941, were included in decedent's estate by respondent, this portion being in the sum of $ 20,697.28 by virtue of section 404 (c) of the Revenue Act of 1942. ² The parties agree that Helen Saunders applied for the policies, that she was named the beneficiary of each, and that decedent never had any incidents of ownership in the policies. Hence, the question resolves itself into whether all or any portion of the $ 8,757.85 expended for the payment of premiums on the five insurance policies between January 10, 1941, and September 18, 1945, the date of decedent's death, was paid directly or indirectly by1950 U.S. Tax Ct. LEXIS 240">*249 decedent. It is clear that of this total amount, $ 7,587.45 was paid by checks drawn by Helen Saunders upon the joint checking account of decedent and herself between January 10, 1941, and July 5, 1945, $ 335.30 was paid from untraced sources in January, 1943, and $ 835.10 was paid after July 5, 1945, by checks drawn by Helen Saunders which were charged against the joint checking account of her daughter, Audrey Saunders, and herself.

Petitioner contends that, since Helen Saunders made two specific contributions of $ 3,745.56 and $ 2,500 to the joint checking account of her husband and herself, as well as numerous others of indeterminate amount, by reason of the fact that the funds of decedent and his wife were completely commingled in this account, because decedent never 14 T.C. 534">*539 designated any funds to be expended for insurance premiums, and from the fact that his wife was the owner of the policies and solely responsible for the payment of premiums, therefore, none of the1950 U.S. Tax Ct. LEXIS 240">*251 premium payments from January 10, 1941, to September 18, 1945, were made directly or indirectly by decedent.

Respondent, on the other hand, states that decedent contributed practically all of the funds which went into the joint checking account he had with his wife and which also formed the opening balance in the subsequent joint checking account of Helen Saunders and Audrey Saunders. He further asserts that the identifiable contributions of decedent's wife to the joint checking account of her husband and herself can not be traced to the insurance premium payments. Under these circumstances, respondent claims that all the premium payments totaling $ 8,757.85 made between January 10, 1941, and September 18, 1945, were paid indirectly by decedent within the meaning of section 811 (g) (2) of the code, as amended.

We are convinced that decedent did not directly pay any of the premiums on the five insurance policies from January 10, 1941, until the time of his death, since all but one were met with checks drawn by Helen Saunders and there is no evidence that he made this one cash payment of a premium or furnished the money therefor.

Section 811 (g) (2) does not define what constitutes1950 U.S. Tax Ct. LEXIS 240">*252 an indirect payment by a decedent. Regulations 105, section 81.27 (as amended by T. D. 5239, March 10, 1943), states that "the phrase 'paid indirectly by the decendent' is intended to be broad in scope." Authority for this interpretation of the statute is expressed in the House Report on the Revenue Act of 1942 (H. R. No. 2333, 77th Cong., 1st sess., 1942-2 C. B. 491) which states in part:

Payments of premiums or other consideration by the decedent include payments made by him directly or indirectly. This provision is intended to prevent avoidance of the estate tax and should be construed in accordance with this objective. * * *

Neither the examples given in the regulations nor in the House report cover the specific factual situation in the present proceeding. No case has been cited to us by the parties which deals with payment of insurance premiums by the wife of an insured decedent from their joint checking account in the light of section 811 (g) (2), as amended by the Revenue Act of 1942, and we have found none. However, in Rule v. United States, 63 Fed. Supp. 351, basically the same1950 U.S. Tax Ct. LEXIS 240">*253 fact situation was considered under section 302 (g) of the Revenue Act of 1926. ³14 T.C. 534">*540 The applicable Treasury regulation interpreting this statute (article 25, Regulations 80, as amended by T. D. 5032, 1 C. B. 427) provided, so far as here material, that:

* * * Insurance receivable by beneficiaries other than the estate is considered to have been taken out by the decedent where he paid, either directly or indirectly, all the premiums or other consideration wherewith1950 U.S. Tax Ct. LEXIS 240">*254 the insurance was acquired, whether or not he made the application. * * *

Thus, the same question was posed in that case as in our own, namely, to what extent payments of premium from a joint bank account constitute indirect payments by the decedent. The court there stated:

* * * If the insurance premiums were paid out of jointly-owned property [joint tenancy bank account], as we think they were, then the surviving widow can only be said to have taken them out to the extent to which she can prove that they were paid out of property originally owned by her; * * *

Similarly, in the instant case, we think it must be held that the premiums paid on the insurance policies were indirectly paid by decedent, except where it is shown they were paid out of funds which were his wife's separate property prior to deposit in the joint checking account.

While it is true that Helen Saunders made all deposits to the joint checking account of decedent and herself and drew all the checks thereon which were in payment of the insurance premiums, yet the evidence shows that the account was almost exclusively made up of funds furnished by decedent, either by way of salary or bonuses he received. Petitioner1950 U.S. Tax Ct. LEXIS 240">*255 makes no attempt to trace Helen Saunders' contribution of approximately $ 200 at the commencement of the joint checking account to the payment of insurance premiums. Petitioner does contend that premiums of $ 2,874.20 between September 10, 1943, and July 5, 1945, were paid from $ 3,745.56 which Helen Saunders contributed to the joint account of her husband and herself on September 10, 1943. We agree with petitioner that even though the senior interest in a mortgage which Helen Saunders bought in January, 1941, was purchased largely with funds which originated with decedent, still the $ 3,745.56 which she received when the mortgage was paid off was her separate property, for she was the sole owner of this interest in a mortgage. Yet petitioner has been unable to trace these funds which Helen Saunders deposited in the joint account specifically to any of the premiums paid thereafter. Petitioner does point out that prior to Helen Saunders' deposit on September 10, 1943, there was a balance of $ 1,672.72 in the joint account. Petitioner further notes that unidentified withdrawals exceeded unidentified deposits by $ 2,835.42 in this period, and that bonuses of decedent deposited in1950 U.S. Tax Ct. LEXIS 240">*256 the account over these months were all expended for the purchase of United States bonds, with the exception of $ 204.44. But we can not agree that a reasonable construction of these facts is that $ 2,874.20 of the $ 3,745.56 deposited by decedent's wife was expended for insurance 14 T.C. 534">*541 premiums and that decedent contributed nothing to such payments from September 10, 1943, until July 5, 1945. In addition to the above mentioned deposit of $ 3,745.56 in the joint account by Helen Saunders, it appears that during this same period there were also deposits therein totaling $ 43,195.26, which we must assume, from lack of evidence to the contrary, were made from decedent's funds. We are not satisfied from the evidence presented that these deposits aggregating $ 43,195.26 were not the source of the insurance premium payments, and that Helen Saunders' deposit of September 10, 1943, was not expended for purposes other than insurance premiums. We think that petitioner has failed to prove that any part of the deposit of $ 3,745.56 was withdrawn for the payment of insurance premiums.

Petitioner also asserts that Helen Saunders contributed $ 2,500 of her separate property to the joint checking1950 U.S. Tax Ct. LEXIS 240">*257 account of her husband and herself on July 2, 1945, and that $ 835.10 withdrawn for the payment of premiums thereafter was paid from this deposit. It is clear that decedent gave $ 2,500 to his wife for the purchase of a fur coat in September, 1943, and it was this sum which she deposited on July 2, 1945. Thus we conclude the $ 2,500 did not constitute a gift from him to enable her to pay future insurance premiums. The fact alone that premium payments are made by a wife out of property she received as a gift from her husband at an earlier time does not justify attributing the premium payments to him as an indirect payment. See Estate of John E. Cain, Sr., 43 B. T. A. 1133. Thus the question becomes, to what extent is the $ 2,500 deposit of Helen Saunders traceable to the premium payments totaling $ 835.10 which were made thereafter.

There was a balance of $ 273.10 in the joint account of decedent and his wife on July 2, 1945, when she deposited the $ 2,500. No further deposits were made prior to July 5, 1945, when the account was closed. Withdrawals on and after July 2, 1945, totaled $ 360, leaving a balance of $ 2,413.10 when the joint account 1950 U.S. Tax Ct. LEXIS 240">*258 was terminated, which amount Helen Saunders transferred to the new joint checking account of her daughter and herself opened on the same day. Thus, even if we assume that the withdrawals of $ 360 were all made from the $ 2,500 Helen Saunders contributed, decedent's contribution to the new account available for the payment of premiums did not exceed $ 273.10. Insurance premiums totaling $ 835.10 were charged to the checking account of Helen and Audrey Saunders between July 5 and September 18, 1945. Thus we have found as a fact that a minimum of $ 562 of Helen Saunders' separate property is traceable to the payment of the last three premiums, and to that extent the premiums were not indirectly paid by decedent. In this analysis of the joint account of decedent's wife and daughter we have not considered the possibility of any additional deposits after the $ 2,413.10 on July 5. From the record it is clear that Audrey Saunders made no deposits during 14 T.C. 534">*542 the period under consideration. It is true the evidence does not show whether any additional deposits were made by Helen Saunders prior to payment of any of the last three premiums, and it is possible she may have deposited 1950 U.S. Tax Ct. LEXIS 240">*259 checks of her husband endorsed to her or cash he had given her. Even if we assume this, it would not disturb our finding that $ 562 of the total premium payments is traceable to Helen Saunders, since the proof is clear that decedent never gave her any funds for the purpose of paying premiums, and under the rationale of the Cain case, supra, the fact of such gifts to her and her application of them to the payment of premiums would not result in an indirect payment of a premium by decedent.

Therefore, we have found as a fact and now hold that decedent indirectly paid $ 8,195.85 of the $ 8,757.85 expended for premiums after January 10, 1941. We further hold that only that proportion of the proceeds of $ 55,540.91 from the five insurance policies which $ 8,195.85 bears to the total premiums paid since the commencement dates of the policies is includible in decedent's gross estate under section 811 (g) (2) of the code, as amended.

The amount of the deficiency in petitioner's estate tax, and, therefore, the amount by which petitioner overpaid the tax, must be determined by a Rule 50 computation. In this computation petitioner is entitled to credit for any New York State inheritance1950 U.S. Tax Ct. LEXIS 240">*260 tax it has paid and to such further deduction for estimated attorney's fees in this proceeding as are shown to be necessary in addition to the $ 2,500 previously allowed by respondent.

Decision will be entered under Rule 50.