2 T.C. 1114">*1114 Respondent determined a deficiency in estate tax in the amount of $ 572,530.08, based upon a number of adjustments, some of which are not in controversy here. The first question for determination is whether a trust created by decedent in her lifetime constituted a transfer in contemplation of death or a transfer intended to take effect in possession or enjoyment at or after her death, within the meaning of section 811 (c) of the Internal Revenue Code. The second question is whether two trusts created by decedent in her lifetime were transfers under which decedent retained for her life the enjoyment of the income of the corpus within the meaning of section 811 (c) of the Internal Revenue Code. A further question requires the determination of the value of an undivided one-half interest in a bond and mortgage owned by decedent at the time of her death.

The estate tax return was filed with the collector for the third district of New York. Some of the facts have been stipulated.

2 T.C. 1114">*1115 FINDINGS OF FACT.

Issue 1. -- The decedent, Bertha Low, 1943 U.S. Tax Ct. LEXIS 15">*17 was born on or about November 13, 1876, was a resident of Morristown, New Jersey, from prior to 1923 until about 1937, and thereafter and until her death was a resident of the Borough of Manhattan, New York City. She died on July 13, 1940, at the age of 63 years, leaving a will dated April 15, 1933, which was admitted to probate by the Surrogate's Court of the County of New York, State of New York. The petitioners, Henry M. Orne and the Morristown Trust Co., are the duly qualified and acting executors of this will.

Decedent had never married, and left surviving no descendants, no brothers or sisters, no descendants of deceased brothers or sisters, and no parents. Her nearest relatives were an aunt, Adele T. Low, who was a sister of her father, and thirteen first cousins who were children of deceased brothers and sisters of her father and mother.

Decedent's father died on September 18, 1923, at which time decedent was about 47 years of age. At his death, decedent was possessed of a separate estate, consisting of cash, securities, and other property having a total value of approximately $ 1,450,000, of which a substantial portion had been previously transferred to her by her father. 1943 U.S. Tax Ct. LEXIS 15">*18 Her father had always managed this estate for her. Under the terms of her father's will decedent was entitled to his residuary estate, which amounted to approximately $ 943,000.

On September 25, 1923, decedent, then about 47 years of age, executed and delivered to John Gilgar and the United States Trust Co. of New York a trust indenture wherein she stated that she desired to create a trust for her own use, support, and benefit, and the trustees therein named were directed to hold the property in trust, to pay the net income therefrom to decedent during her natural life, and upon her death to pay the principal of the trust fund to such of her "heirs at law and next of kin as may be living at the time of her death to be divided among them in the same manner as though she had died intestate, a citizen of the United States and a resident of the State of New York, and thereby terminate said trust." John Gilgar and the United States Trust Co. of New York executed the indenture and accepted the trust on September 25, 1923, and October 2, 1923, respectively.

Under the terms of the trust indenture dated September 25, 1923, decedent did not reserve to herself any power to revoke or modify1943 U.S. Tax Ct. LEXIS 15">*19 the trust, to designate or change either alone or in conjunction with any person the persons entitled to possess or enjoy the principal or income thereof, to exercise any control over the investments thereof, or to have any control over or interest in said trust or the property constituting the corpus thereof, except that she retained the right to receive the income therefrom during her lifetime.

2 T.C. 1114">*1116 The trust indenture was prepared about a week after the death of decedent's father, and in her instructions to her attorney decedent stated that her reasons for creating the trust were that she wanted to be relieved from the management of her business, that she had no business training and she desired to be free to travel extensively.

On February 20, 1924, decedent executed a will providing for a bequest of $ 25,000 to her aunt, Adele T. Low, together with numerous other bequests to individuals and charities. The residue of the estate was bequeathed to "such persons as may be living at the time of my death as would be my next of kin under the laws of the State of New York and I died intestate, a resident of said State."

On April 29, 1927, decedent executed and delivered to the1943 U.S. Tax Ct. LEXIS 15">*20 trustees an indenture which purported to amend the indenture dated September 25, 1923. This indenture referred to the prior trust indenture and stated that since the making of the trust agreement decedent had made a will whereby she had amply provided for her aunt, Adele T. Low, who would be the sole heir at law and next of kin under the intestacy laws in the State of New York and that she therefore wished to exclude her aunt as a remainderman under the trust. It then provided that "the remainder of said trust fund, after the death of the party of the first part, be paid to such persons then living as would be the heirs at law and next of kin of the said party of the first part, and in the same manner, as though she died intestate, a citizen of the United States and a resident of the State of New York, and her aunt, the said Adele T. Low had predeceased her."

The indenture dated April 29, 1927, was executed and delivered for the reason that decedent did not intend, under the original indenture dated September 25, 1923, that her aunt, Adele T. Low, should inherit the full trust fund if she survived decedent. It is stipulated that neither the original indenture dated September 25, 1943 U.S. Tax Ct. LEXIS 15">*21 1923, nor the indenture dated April 29, 1927, was made by decedent in contemplation of death in so far as the condition of her health was concerned.

John Gilgar executed this indenture on April 29, 1927. The United States Trust Co. of New York accepted the indenture on May 23, 1927, "without prejudice however to any claim or claims which any heir at law or next of kin of said Bertha Low might make under the original deed of trust of September 25, 1923." John Gilgar died on January 5, 1938, and Henry M. Orne was substituted in his place as trustee.

At the death of decedent, the value of the property held by the trustees was $ 1,266,723.40, consisting of cash and various securities. After her death, the trustees brought an action in the Supreme Court of the State of New York, for the County of New York, for the settlement of their accounts as trustees and for instructions as to the distribution of the trust funds. As a result of an agreement entered into by the various parties with respect to the distribution, the court incorporated 2 T.C. 1114">*1117 the terms of said agreement into its final judgment, without ruling on the effect of the purported amendment dated April 29, 1927.

Decedent1943 U.S. Tax Ct. LEXIS 15">*22 was a pleasant woman, with a happy disposition, and lived a rather sheltered life. Her chief interests were in the theatre, motion pictures, music, radio, opera, her church, charities, and travel. Although she was somewhat handicapped physically due to a hip injury received in her youth, she always enjoyed good health. At the age of 63, and two weeks prior to her death, decedent fell upon a brick walk, sustaining therefrom a compound fracture of the ulna and radius bones of her right arm. Three operations were necessary to reduce the fracture, the last of which resulted in her death while under an anaesthetic.

The trust indenture of September 25, 1923, and the indenture of April 29, 1927, were not made by decedent in contemplation of death.

Issue 2. -- From the time of the death of decedent's father until the year 1928 John Gilgar managed decedent's property. During the year 1928 Henry M. Orne, a second cousin of decedent, who had known her for over 30 years, was employed by decedent to manage her property at a salary of $ 6,000 per year. Desiring to provide for Orne so that he might have enough to live on comfortably for the rest of his life, particularly when he severed1943 U.S. Tax Ct. LEXIS 15">*23 his business connections with her, decedent, on February 19, 1930, created a second trust, hereinafter referred to as the Orne trust. At the time of the creation of this trust Orne was 71 years of age.

At the time of the creation of the Orne trust decedent was 53 years of age. After reciting her desire "to create an irrevocable trust for the use, support and benefit of her cousin, Henry M. Orne, and Gertrude Bayard Orne, his wife," decedent transferred certain property to the Fifth Avenue Bank of New York, in trust, "to pay the net income therefrom to the said Henry M. Orne in monthly installments during his natural life, and upon his death to pay the net income to the said Gertrude Bayard Orne, should she survive him, in monthly installments during her natural life, and upon the death of the said Gertrude Bayard Orne, or, should she not survive her husband, upon the death of the said Henry M. Orne, upon the further trust, to pay the principal of said trust fund to Evelyn Orne Young and any other children of said Henry M. Orne that may survive him, in equal shares," and if no children so survive to pay said principal in equal shares to certain designated charities, "and thereby 1943 U.S. Tax Ct. LEXIS 15">*24 terminate the trust." Decedent did not retain any power to alter, amend, or revoke the trust and she had no control or management over the trust fund.

When decedent advised Henry M. Orne of her intention to create a trust for his benefit, he voluntarily informed her that he would not expect any salary after the creation of the trust for services rendered to 2 T.C. 1114">*1118 her in managing her estate. Accordingly he received no further salary, although he continued to manage her estate until her death.

In 1939 the income of the trust fund created by the indenture dated February 19, 1930, was less than the income therefrom at the time of the creation of the trust. On February 20, 1940, decedent transferred to the Orne trust fund additional cash of $ 36,250 and $ 10,000 par value County of Westchester, New York, 4 1/2 percent bonds due in 1970. At that time, decedent told Orne that she wanted to increase the trust fund so that he would get as much income as he had when the trust was established.

The value of the Orne trust fund at the date of decedent's death was $ 169,120.39, which sum was not included by petitioners in the gross estate. It is stipulated that neither the indenture dated1943 U.S. Tax Ct. LEXIS 15">*25 February 19, 1930, nor the additions thereto on February 20, 1940, was made in contemplation of death in so far as the condition of decedent's health was concerned.

In May 1936 decedent informed Orne that she wished to provide for her dear friend, Catherine C. Lyons, in the same way that she had provided for him. Catherine C. Lyons, a professional nurse, was originally employed for the year 1916-1917 to care for decedent's mother. She returned to the household in 1921 and remained employed therein until decedent's father died in 1923. Thereafter she remained with decedent as her companion and household supervisor until decedent's death.

Decedent, wishing to provide for Catherine C. Lyons as she had for Orne, by trust indenture dated May 27, 1936, transferred property to the Fifth Avenue Bank of New York as trustee, "to pay the net income therefrom to the said Catherine C. Lyons in monthly installments during her natural life, and upon her death to pay the principal of said trust fund to whomsoever she [Lyons] may instruct in her Last Will and Testament." The indenture did not specify who should take the corpus of the trust fund upon the death of Catherine C. Lyons, in the event1943 U.S. Tax Ct. LEXIS 15">*26 that Catherine C. Lyons failed to exercise in her will her power of appointment over the corpus. Decedent did not reserve any power to alter, amend, or revoke the provisions of the trust agreement and retained no control over the management of the trust funds. The indenture recited that decedent "desires to create an irrevocable trust for the use, support, and benefit of her friend, Catherine C. Lyons." Prior to the establishment of this trust, decedent paid Catherine C. Lyons a salary of $ 6,000 per year for her services. Afterwards, decedent did not continue to pay her any salary, although Catherine C. Lyons continued to render the same services to decedent until her death.

On March 12, 1937, the decedent transferred to the Lyons trust additional securities consisting of bonds having a total par value of $ 12,000 2 T.C. 1114">*1119 and $ 237.03 of accrued interest thereon, in order to insure Catherine C. Lyons of an income as large as originally intended.

The value of the Lyons trust fund at the date of decedent's death was $ 142,199.40, which amount was not included in decedent's gross estate by petitioners. It is stipulated that neither the transfer dated May 27, 1936, nor the addition1943 U.S. Tax Ct. LEXIS 15">*27 thereto on March 12, 1937, was made in contemplation of death in so far as decedent's health is concerned.

Decedent's last will and testament, dated April 15, 1933, admitted to probate by the Surrogate's Court of the County of New York, State of New York, in addition to numerous bequests to charities and various individuals, bequeathed $ 75,000 to Henry M. Orne, $ 100,000 to Catherine C. Lyons, $ 40,000 to her personal maid, Katie M. Scally, and made other bequests to former employees. Specific bequests were made to her aunt, Adele T. Low, and also to her various cousins. Her aunt, Adele T. Low, was residuary legatee, should she survive decedent.

Issue 3. -- At the date of decedent's death, she owned an undivided one-half interest in a bond of the Suerken Realty Corporation secured by a first mortgage on a loft building located at 27 Park Place and 24-26 Murray Street, in the Borough of Manhattan, City and State of New York. The bond and mortgage, dated January 30, 1923, was made by the Suerken Realty Corporation to Martha W. Low and James L. Laidlow, executors of the last will and testament of Charles Adolphe Low, deceased, and George A. Low to secure the payment of part 1943 U.S. Tax Ct. LEXIS 15">*28 of the purchase moneys from the sale of the mortgaged property to the realty corporation. At the time of decedent's death, three-eighths of the same was owned by Edith W. L. Bush and one-eighth by Hendon Chubb. The bond and mortgage carried interest at the rate of 5 percent per annum. The principal was to be paid in semiannual installments of $ 3,750 each until August 1, 1933, on which date the balance of said principal sum was to be paid.

At the time of decedent's death the unpaid principal balance due on the bond and mortgage was $ 142,968.80, the face value of decedent's half interest therein was $ 71,484.40, and the bond and mortgage was payable on August 1, 1942. All taxes upon the mortgaged premises and all interest due had been paid and no default existed under the terms of the bond and mortgage. The parties have stipulated that at decedent's death the mortgaged premises had a "fair market value equal to or more than the unpaid principal of said bond and mortgage."

Petitioners returned the value of the one-half interest in the bond and mortgage as being 75 percent of one-half of the face value ($ 53,613.30).

The fair market value of the undivided one-half interest of decedent1943 U.S. Tax Ct. LEXIS 15">*29 in the bond and mortgage was $ 71,484.40 at the time of her death.

On April 16, 1943, petitioners paid $ 387,000 on account of the deficiency set forth in respondent's notice of deficiency and $ 35,020.38 as interest thereon, a total of $ 422,020.38.

2 T.C. 1114">*1120 OPINION.

Issue 1. -- The first question is whether the value of the corpus of the trust created by decedent on September 25, 1923, is includible in her gross estate. The respondent has included it in the gross estate in his determination of the deficiency under his construction of section 811 (c) of the Internal Revenue Code. ¹

1943 U.S. Tax Ct. LEXIS 15">*30 Respondent contends that the total value of the assets in the hands of the trustees at the date of decedent's death ($ 1,266,723.40) is includible in decedent's gross estate (1) as a transfer under which decedent retained for her life the possession and enjoyment of the income from the transferred property; (2) as a transfer made in contemplation of death; or (3) as a transfer intended to take effect in possession or enjoyment at or after death.

Respondent's first contention must be rejected. Inasmuch as the trust was created prior to the joint resolution of March 3, 1931, the corpus is not taxable even though decedent retained the enjoyment of the trust income during her life. Hassett v. Welch, 303 U.S. 303">303 U.S. 303; May v. Heiner, 281 U.S. 238">281 U.S. 238; Estate of Edward E. Bradley, 1 T.C. 518, 523.

Respondent's next contention, that the transfer was made in contemplation of death, must be determined by "carefully scrutinizing the circumstances * * * to detect the dominant motive of the donor in the light of his bodily and mental condition." United States v. Wells, 283 U.S. 102">283 U.S. 102.1943 U.S. Tax Ct. LEXIS 15">*31 The test is one of motive. If the thought of death was the impelling cause of the transfer, it was in contemplation of death and, therefore, includible in decedent's gross estate. Respondent argues that the trust indenture of September 25, 1923, was in contemplation of death for the reasons that it was executed about a week after the death of decedent's father at a time when decedent had 'thoughts of death" in her mind, and that within six months thereafter, decedent executed a will, disposing of the balance of her property in a residuary clause couched in the same language as the trust indenture.

2 T.C. 1114">*1121 From a consideration of the entire record, however, we are convinced that the creation of this trust was not motivated by contemplation of death. At the time of the transfer in 1923, decedent was 47 years of age and in good health. The evidence shows that decendent enjoyed a normal, healthy, and happy life until just prior to her death, which occurred suddenly in 1940. Prior to his death decedent's father had always managed her estate. Decedent had neither training nor experience in business affairs. The testimony is convincing that the sole purpose of the transfer was 1943 U.S. Tax Ct. LEXIS 15">*32 to relieve decedent of the cares and responsibilities inheront in the management of her large estate. Since she was prompted by concerns and matters of life in executing the trust indenture, it follows that respondent's finding that the transfer was made in contemplation of death was erroneous. 283 U.S. 102">United States v. Wells, supra;Colorado National Bank of Denver v. Commissioner, 305 U.S. 23">305 U.S. 23.

Respondent's third contention that the trust constituted a transfer intended to take effect in possession or enjoyment at or after death presents a more difficult problem.

Under the provisions of 811 (c), a transfer intended to take effect in possession or enjoyment at or after death is includible in the transferor's gross estate. The purpose of this language was to prevent the avoidance of estate taxes by inter vivos gifts which were testamentary in character. Respondent, relying upon Helvering v. Hallock, 309 U.S. 106">309 U.S. 106, submits that the distribution of trust corpus to decedent's heirs at law and next of kin at her death was in the nature of a testimentary disposition. He argues that this must1943 U.S. Tax Ct. LEXIS 15">*33 be so because until her death her heirs at law and next of kin received nothing more than a right to a future expectancy, since at the time of the transfer, it was impossible to determine who would be her heirs at law and next of kin. In effect, respondent's argument is that a trust with income therefrom payable to the grantor, and the principal upon his death to those who would take in intestacy, effects merely a reversion in the grantor, and the next of kin take by descent and not by purchase. Doctor v. Hughes, 225 N.Y. 305; Berlenbach v. Chemical Bank & Trust Co., 235 A.D. 170; 256 N. Y. S. 563; affd., 260 N.Y. 539; City Bank Farmers Trust Co. v. Miller, 278 N.Y. 134.

Petitioners contend that under New York law, a deed of trust requiring payment of income to the grantor for life, with payment of principal to the grantor's distributees under the laws of intestacy, creates remainders in those who would be his distributees rather than a reversion in the grantor. Engel v. Guaranty Trust Co. of New York, 280 N.Y. 43;1943 U.S. Tax Ct. LEXIS 15">*34 Schoelekoff v. Marine Trust Co., 267 N.Y. 358; Whittemore v. Equitable Trust Co. of New York, 250 N.Y. 298; Hopkins v. Bank of New York, 261 App. Div. 465; 25 N. Y. S. (2d) 888; 2 T.C. 1114">*1122 Minc v. Chase National Bank of City of New York, 263 A.D. 141; 31 N. Y. S. (2d) 592.

Although the decisions in New York on this question are not uniform, they all agree that the question must be decided by ascertaining the intent of the grantor. The rule as pointed out in Doctor v. Hughes, supra, "that a reservation to the heirs of the grantor is equivalent to the reservation of a reversion to the grantor himself," is at least a prima facie precept of construction. To transform into a remainder what would ordinarily be a reversion, there must be a clear expression of the intention to work the transformation.

We can not say, under the facts of this case, that decedent intended to create remainders in her heirs at law and next of kin.

Neither the indenture1943 U.S. Tax Ct. LEXIS 15">*35 of September 25, 1923, nor its purported amendment expressly specified that the trust was irrevocable. In this respect, it differs from the Orne and Lyons trusts, discussed under the next issue, wherein decedent expressly provided that they should be irrevocable. Had decedent intended this trust to be irrevocable, she could have easily so provided. Here, decedent evidently did not intend to create rights in her presumptive heirs in the nature of remainders since in 1927 she believed the trust was revocable and that she had the right to amend it. She did amend the trust on April 29, 1927. If she had intended to create remainders in her heirs she would not, under New York law, have the power to amend the trust and change the beneficiaries.

The very wording of the original trust indenture and its amendment indicates that the distribution of trust corpus was testamentary in character and intended to take effect in possession or enjoyment after death. One of the elementary rules of law is that "a living person has no heirs." Duffield v. Duffield, 268 Ill. 29">268 Ill. 29; 108 N.E. 673, 675; Moffitt v. Williams, 116 Neb. 785">116 Neb. 785;1943 U.S. Tax Ct. LEXIS 15">*36 219 N.W. 138; Avon State Bank v. Commercial & Savings Bank, 49 S. D. 575; 207 N.W. 654, 656. For that reason, a son predeceasing his father never becomes his father's heir. Root v. Arnold, 133 Or. 417">133 Or. 417; 290 P. 1095. Only on death do heirs come into existence, for, as quoted in Doctor v. Hughes, supra, "the ancestor during his life beareth in his body (in judgment of law) all his heires, and therefore, it is truly said that haeres est pars antecessoris." See Morsman v. Commissioner, 90 Fed. (2d) 18. Since the estate in decedent's "heirs at law and next of kin" could not come into existence until decedent's death there can be little doubt 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." 309 U.S. 106">Helvering v. Hallock, supra;1943 U.S. Tax Ct. LEXIS 15">*37 Klein v. United States, 283 U.S. 231">283 U.S. 231. 2 T.C. 1114">*1123 Thus, under the language of these indentures, we can not say that the transfer was irrevocable, complete, and unaffected in any manner by decedent's death, so as to bring it within the rule enunciated in Reinecke v. Northern Trust Co. 278 U.S. 339">278 U.S. 339.

It should also be noted that within a few months after the creation of the trust dated September 25, 1923, decedent executed a last will and testament disposing of her residuary estate to "such persons as may be living at the time of my death as would be my next of kin under the laws of the State of New York, had I died intestate a resident of said state." This language is substantially the same as that contained in the trust indenture and would seem to indicate that the only intention decedent had in both instruments was to have the New York law determine her heirs at law and next of kin upon her death.

Accordingly, it is held that the corpus of this trust is includible in decedent's gross estate under the provisions of section 811 (c) of the Internal Revenue Code, as a transfer intended to take effect in possession or enjoyment1943 U.S. Tax Ct. LEXIS 15">*38 at or after decedent's death.

Issue 2. -- The next question is whether the value of the corpora of the Orne and Lyons trusts is includible in decedent's gross estate. Respondent has included the values of the two trusts in the gross estate in his determination of the deficiency under the provisions of section 811 (c) of the Internal Revenue Code.

Both trusts were created under similar circumstances, and the beneficiaries were two employees of decedent. The Orne trust provided for the payment of the income to Orne for life, then to Orne's wife for life, with remainder over to Orne's surviving children in equal shares. If no children survived, then the trustees were to pay the principal in equal shares to five designated charities. In the Lyons' trust, the income was payable to Catherine C. Lyons for life, with remainder to whomsoever she might appoint by will. Both trusts were irrevocable and decedent retained no control over the management of the trust funds.

Respondent does not contend that the respective transfers were made in contemplation of death. He does contend, however, that the transfers were intended to take effect in possession or enjoyment at death in that decedent1943 U.S. Tax Ct. LEXIS 15">*39 retained for her life "the possession or enjoyment of, or the right to the income from, the property." This argument is based upon his assertion that the income from the trusts was used for decedent's "pecuniary benefit" and to discharge decedent's legal obligation of paying salaries to these beneficiaries To support this argument he relies on Douglas v. Willcuts, 296 U.S. 1">296 U.S. 1. Since the language relied upon by respondent was not added to the statute until the joint resolution of March 3, 1931, it is apparent that the statute 2 T.C. 1114">*1124 is inapplicable to the Orne trust as created on February 19, 1930. 303 U.S. 303">Hassett v. Welch, supra.

The rationale of 296 U.S. 1">Douglas v. Willcuts, supra, has been applied in estate tax proceedings in determining whether a settlor has retained such an interest in trust income as to make the corpus includible in the gross estate under section 811 (c) of the Code. Helvering v. Mercantile-Commerce Bank & Trust Co., 111 Fed. (2d) 224; Mathilde B. Hooper, Administratrix, 41 B. T. A. 114. We do not believe, 1943 U.S. Tax Ct. LEXIS 15">*40 however, that the principle of 296 U.S. 1">Douglas v. Willcuts, supra, is applicable under the particular facts of this case.

Here, decedent created the trusts to provide for two employees who had rendered faithful service to her. The trusts were irrevocable and the income therefrom was in no way dependent on whether the employees continued to render service to the decedent. They, on their part, voluntarily and gratuitously volunteered to continue such service without further compensation. The record is clear, however, that this voluntary act of the employees was not in consideration of the creation of the trusts. Decedent had no close relatives and, in addition to the trusts, she bequeathed substantial amounts to these employees. We do not believe that the income from these trusts was applied to discharge decedent's legal obligations, as none existed, and it does not appear that she received such pecuniary benefits as to render the corpora of the trusts includible in decedent's gross estate within the meaning and intent of section 811 (c) of the Code.

Respondent advances the further argument that the corpora of the trusts is includible in decedent's gross1943 U.S. Tax Ct. LEXIS 15">*41 estate under 309 U.S. 106">Helvering v. Hallock, supra, on the ground that a possibility of reverter by operation of law existed with respect to each trust. He concedes, however, that under the Orne trust this possibility is remote. The only possibility of reverter in that trust was upon the failure of designated charities. Under the circumstances, the possibility that the trust property would revert to decedent or her estate by operation of law is too remote to bring the corpus within section 811 (c). Here, as in Commissioner v. Kellogg, 119 Fed. (2d) 54, "the grantor during his lifetime disposed of his interest in the corpus of the trust as well as any man could"; and "no inter vivos trust can ever be made that would not be includible in the grantor's estate for the purpose of taxation if the petitioner's [Commissioner's] view prevails."

Although the Lyons' trust presents a closer question, it is our opinion that the possibility of reverter there is also too remote to allow the corpus to be includible in decedent's gross estate. The only possibility of reverter was in the event that the life beneficiary should die 1943 U.S. Tax Ct. LEXIS 15">*42 without exercising her general power of appointment. Decedent, however, had given nothing contingently upon her death, which is "the 2 T.C. 1114">*1125 vital factor" toward which our inquiry is directed. 309 U.S. 106">Helvering v. Hallock, supra;Estate of Mabel H. Houghton, 2 T.C. 871. In the present case, nothing was transmitted from the dead to the living upon decedent's demise. Immediately prior to her death decedent was entitled to receive the corpus of the fund upon Catherine Lyons' death, provided Catherine Lyons failed to exercise her power of appointment. Immediately after decedent's death her estate was entitled to receive the corpus of the fund upon Catherine Lyons' death, provided Catherine Lyons failed to exercise her power of appointment. Nothing was changed by the fact of decedent's death; the trust fund and its ownership remained the same.

Accordingly, it is held that the corpora of the Orne and the Lyons trusts are not includible in decedent's gross estate under any principle derived from the Hallock case or under section 811 (c) of the Internal Revenue Code.

Issue 3. -- The final question concerns the value of1943 U.S. Tax Ct. LEXIS 15">*43 decedent's one-half interest in a bond and mortgage of the Suerken Realty Corporation.

Petitioners returned decedent's interest in this bond and mortgage at 75 percent of one-half of the unpaid balance of principal, or $ 53,613.30, whereas, respondent determined the value to be 100 percent, or $ 71,484.80. Petitioners, in support of their valuation, contend that the fair market value of decedent's one-half interest is only 75 percent of its normal value because of the New York mortgage moratorium law placing certain limitations upon foreclosure proceedings, and also because of the participation of two other parties in the management and control of the investment.

Petitioners concede that the mortgaged premises had a "fair market value equal to or more than the unpaid principal of said bond and mortgage." The bond and mortgage were not in default.

A prima facie presumption exists that the respondent's ruling is correct and the burden of proof lies upon the petitioners. Welch v. Helvering, 290 U.S. 111">290 U.S. 111; Old Mission Portland Cement Co. v. Helvering, 293 U.S. 289">293 U.S. 289. We do not believe that petitioners have overcome this1943 U.S. Tax Ct. LEXIS 15">*44 presumption.

Petitioners' only witness on this issue, Simmons, testified that the value returned by the estate was based upon his appraisal. He was unable, however, to give any reason for the appraisal, basing his opinion solely upon his general ideas of values of mortgages. He did not cite specific sales of similar interests in mortgages which would throw some light upon the accuracy of his opinion. It is conceivable that a participating interest in a bond and mortgage of this nature might be more readily marketable than the whole mortgage.

2 T.C. 1114">*1126 Considering the record as a whole, it must be held that petitioners have not overcome the presumption of the correctness of respondent's determination, and it is, therefore, held that respondent did not err in determining the value of decedent's aliquot portion.

Decision will be entered under Rule 50.