17 T.C. 304">*305 The Commissioner determined a deficiency of $ 54,246.11 in estate tax. The only issue for decision is whether the Commissioner may include the value of Meander Farm in the gross estate.

FINDINGS OF FACT.

The decedent, George L. Shearer, was born on June 20, 1870, and died testate on March 19, 1946. He resided and practiced law in New York, New York, up to the time of his death. His wife lived with him. The estate tax return was filed by his executor with the collector of internal revenue for the third district of New York.

The two adult daughters of the decedent, Judith and Julia, resided at all times material hereto on the property known as Meander Farm.

The decedent became the owner in 1928 of about 743 acres in Madison County, Virginia, and about 448 acres in Culpeper County, Virginia. He organized Meander Farms, Incorporated, under the laws of Virginia in November 1932 and on December 24, 1932, transferred the two properties to it in exchange for 250 shares, the only outstanding stock of the corporation. The corporation, 1951 U.S. Tax Ct. LEXIS 99">*101 on January 5, 1933, leased the two properties to the decedent during his life at an annual rental of $ 1, the decedent to pay taxes and keep the buildings insured and repaired.

The decedent paid $ 4,300 for about 158 additional acres in December 1938 and took title in the name of the corporation. The property was acquired at the suggestion of Julia. The corporation leased this property to the petitioner on December 24, 1938, under terms identical to those in the 1933 lease.

The decedent made gifts of shares in the corporation to each of his two daughters as follows:

17 T.C. 304">*306 The decedent reported the 1936 gifts at a value of $ 9,000 each but paid no gift tax because of the specific exemption. He filed no gift tax return for other years.

The officers and directors of the corporation at all times were:

The directors met at least once a year. The corporation filed returns showing no income, no deductions, and1951 U.S. Tax Ct. LEXIS 99">*102 no tax due.

The purpose of the decedent in forming the corporation was to permit him to give interests in the farm to his two daughters over a period of years.

The corporation was dissolved on November 19, 1942, at which time the decedent owned 60 shares having a value of $ 23,280. The farm was then worth $ 97,000. The farm was conveyed on November 23, 1942, to the decedent and his two daughters, the decedent receiving a life estate and the daughters the remainder in fee simple as tenants in common. The value of the life estate received by the decedent was $ 22,271.32. There was no further change in the ownership of the farm until the decedent died.

The decedent, at all times material hereto, paid all taxes on the farm, paid all insurance thereon, and made all necessary repairs. A tenant farmer operated the farm under the supervision of Julia for one-third of the crops through 1935. Thereafter, Julia operated it, using help hired by her. The operation resulted in losses ranging from about $ 2,200 to about $ 7,400 for all years from 1933 to the decedent's death, except for profits of $ 900.71 in 1942 and $ 681.89 in 1943. The decedent reported the losses or gains from the operation1951 U.S. Tax Ct. LEXIS 99">*103 of the farm for all years up to his death.

The corporation was dissolved at the suggestion of the decedent who said it would help him taxwise.

The three pieces of property were operated as one farm. The principal activity on the farm has been raising Aberdeen Angus cattle. There was a small herd of broad Swiss and a small herd of Hampshire hogs on the farm. A few thoroughbred horses and some pedigreed dogs were raised.

The decedent and his daughters did not expect the farm to show an operating profit and the decedent was to pay the bills and suffer the losses. He visited the farm about every two weeks except in summer when he visited it about once a month.

The Commissioner, in determining the deficiency, added $ 97,000 to the gross estate as "Transfers During Decedent's Life" and explained:

17 T.C. 304">*307 It is determined that the value of the 250 shares of Meander Farms, Inc. transferred by decedent in his lifetime is includible in the gross estate as transfers in contemplation of death and to take effect in possession or enjoyment at or after the decedent's death within the provisions of Section 811 (c) of the Internal Revenue Code. It is further determined that said transfers are1951 U.S. Tax Ct. LEXIS 99">*104 also includible within the provisions of Section 811 (d) of the Internal Revenue Code.

The facts stipulated by the parties and all joint exhibits are incorporated herein by this reference.

OPINION.

The Commissioner, partly because of changes in section 811 after the issuance of the deficiency notice, now attempts to justify his determination on grounds different from those given in the notice. He now claims that the value of the farm, rather than the value of the stock of the dissolved corporation, should be included in the gross estate because it was transferred by the decedent to his daughters in contemplation of death within the meaning of section 811 (c) (1) (A) through the use of a dummy corporation and, furthermore, that under the transfers the decedent retained for his life the possession and enjoyment of and the right to the income from the properties within the meaning of section 811 (c) (1) (B).

The evidence shows that the only purpose in creating the corporation was to enable the decedent to transfer interests in the farm to his daughters in small enough parts to avoid gift taxes. The purpose in dissolving it is not so clear unless it was to assist the decedent in his1951 U.S. Tax Ct. LEXIS 99">*105 efforts to avoid estate tax on the stock and the farm. The evidence shows that the decedent and his daughters intended at all times material hereto that the decedent would have during his life the possession of the property for the purpose of the farming operations and the income therefrom. The properties were to be operated under his egis, he was to pay the bills, he was to sustain the anticipated losses and to realize whatever income arose from the operations. His retained interest was always at least equal in value to a life estate in him. That was true from the time in November when he transferred the property to the corporation and immediately leased it for $ 1 a year until his death. He was responsible for every step taken. Thus, in a real sense he retained during his life the possession of, enjoyment of, and the right to the income from the property although, during the life of the corporation, he retained those rights by a lease which was terminable by the corporation. These circumstances bring the transfers within section 811 (c) (1) (B) regardless of the method used by the decedent to accomplish this result. The situation is not substantially different for estate1951 U.S. Tax Ct. LEXIS 99">*106 tax purposes from one in which a decedent transfers a remainder directly and retains a life estate, a 17 T.C. 304">*308 situation clearly within section 811 (c) (1) (B). Furthermore, since he intended all along that the daughters should have the property at his death, but meanwhile he would have the use of it, the transfers were testamentary in character and, in that important sense, in contemplation of death.

Decision will be entered under Rule 50.