49 T.C. 580">*580 Respondent has determined a $ 11,538.32 deficiency in decedent's estate tax. The question for decision is whether two gifts totaling $ 84,803.60 were made by decedent in contemplation of death, within the meaning of section 2035, I.R.C. 1954. The parties have1968 U.S. Tax Ct. LEXIS 166">*168 not conceded or settled any portion of the determined deficiency.

FINDINGS OF FACT

Some of the facts have been stipulated, are found accordingly, and are incorporated herein by this reference.

Robert W. Hite, Sr., hereinafter referred to as the decedent, was born September 20, 1868, and died testate at the age of 92 on January 12, 1961. Decedent was a resident of Jefferson County, Ky., and his Federal estate tax return was filed by his executors with the district director of internal revenue in Louisville on April 12, 1962. At the time of their petition to this Court, the petitioners were legal residents of the State of Kentucky. ¹

49 T.C. 580">*581 Decedent was survived by three children. These were Helen Hite Sallee, age 62; Anne Hite Corn, age 61; and Robert W. Hite, Jr., age 41. Helen and Anne were decedent's natural-born children. Robert, 1968 U.S. Tax Ct. LEXIS 166">*169 Jr., was an adopted child. Helen had one son, Maurice Hite Henchey, of a prior marriage. Anne's husband is C. T. Corn.

Prior to and until the end of World War II, decedent was actively engaged in agricultural pursuits both as a farmer and as founder and owner of the St. Matthews Produce Exchange. He had been known affectionately as the potato king. Toward or at the end of the war decedent retired from the produce business and planned to occupy himself with his farm, certain speculative oil ventures which amused him, and his hobbies which included local history and genealogy. Decedent was born in 1868 and in 1945, at the end of the war, was approximately 77 years of age. He lived on the family farm with his daughter, Anne, and her husband, C. T. Corn. The bulk of decedent's agricultural holdings consisted of the "Old Herr Homestead," which had been in his family for approximately 150 years and contained approximately 135 acres. In addition to the old homestead proper, decedent had acquired over the years several adjacent or closely neighboring tracts of land which together comprised an additional 84 or 85 odd acres.

In 1946, shortly after his retirement from active business, 1968 U.S. Tax Ct. LEXIS 166">*170 decedent suffered a stroke which incapacitated him physically to a considerable extent. After this stroke he was unable to manage or run his farm. His speech was very seriously affected so that he could be understood only by intimates, and then with great difficulty. On occasions he was unable to speak at all. As the years passed his general condition became slowly and progressively worse as he became a very old man indeed.

During his lifetime decedent was loathe to part with any of his real estate, particularly the Herr Homestead proper, which he planned to devise to his natural children, Helen Hite Henchey Sallee and Anne Hite Corn. In his will made in 1951, he left the Herr Homestead to his two daughters in equal shares, 40 acres of his acquired land to Robert, Jr., and the rest of his estate to the three children in equal shares. Prior to 1953, when his testamentary scheme was altered somewhat, decedent had not planned to give or leave any of the actual Herr Homestead to Robert, Jr., his adopted child. However, in 1952 decedent sold a portion of the acquired adjacent property, thus diminishing the assets which would be available under his testamentary plan for the son. 1968 U.S. Tax Ct. LEXIS 166">*171 As will be later outlined, the proceeds from this sale were divided equally among the three children. Accordingly, decedent revised his testamentary scheme by a codicil executed in 1953 providing that 12 acres of the Herr Homestead proper was devised in trust to 49 T.C. 580">*582 his son. ² Decedent executed and signed personally four subsequent codicils (the latest in 1956), but made no changes in the distributive scheme for the three primary beneficiaries. In later codicils substitute beneficiaries were named to take in the event one of the children predeceased decedent, but his general plan remained substantially unchanged.

Though he was an aged semi-invalid with impaired speech, Robert W. Hite, Sr., retained many of his mental1968 U.S. Tax Ct. LEXIS 166">*172 faculties and remained bright, cheerful, and interested in what was taking place around him. Until the last few years of his life, 1958-61, he did not spend the greater part of his time in bed, and liked to be taken for rides, walks, and short trips. Prior to 1951, decedent had been able to visit his daughter, Helen, in Chicago on two occasions, and at some undisclosed time was taken on one or more trips to Florida by his family or friends. These accompanied vacations to Florida were taken in the years which followed relatively closely in point of time the 1946 stroke. By 1955, decedent was receiving almost daily nursing companionship at his home in Jefferson County, and in the last years of his life, 1958-61, was provided with the constant attention of nursing companions. Decedent was chronically and, at times, critically ill during the entire period 1946 to 1961. During his last years, decedent was a very infirm and almost totally bedridden old man who slowly but steadily declined until his death.

On many occasions the decedent expressed his expectation and wish of living to be 100 years old. However, despite his bright outlook toward life, we must conclude that at all times1968 U.S. Tax Ct. LEXIS 166">*173 after his initial stroke in 1946, Robert W. Hite, Sr., was an invalid with chronic heart or circulatory disease and other accompanying infirmities of old age. His declining and precarious state of health must have been known to him.

Not only was decedent an invalid with regular nursing care furnished him at home, but in addition he was hospitalized on nine separate occasions after the initial stroke in 1946 and before his fatal heart attack in 1961, at which time he was 92 years old. Pertinent extracts from his hospital admission and discharge records follow. All admissions were to the Kentucky Baptist Hospital in Louisville, with the exception of the first two hospitalizations in 1956. These two 1956 admissions were to the St. Anthony Hospital in Louisville. 49 T.C. 580">*583

1968 U.S. Tax Ct. LEXIS 166">*174 Consultation records relative to these respective admissions include the following written comments made by attending physicians:

8/23/47 admission:

Patient's answers extremely incoherent. Can apparently answer only to direct yes or no questions. Doesn't complete sentences.

12/1/48 admission:

Patient is a well developed well nourished elderly man who appears to be in some discomfort. Has difficulty in making himself understood because of several strokes he has had.

5/8/53 admission:

Pt. is [an] 84 yr. old [white male] who had a "stroke" 6-7 years ago which has left him with a speech impairment in that he can not verbalize his thoughts. His thinking is apparently clear [Patient's] daughter states that he has been complaining of pain in his stomach and that he has pus in his urine.

1/30/56 admission:

History of two strokes, 7 and 2 years ago. Has a chronic hypertrophic prostatitis and chronic cystitis, chronic arteriosclerotic heart disease. Recently developed respiratory infection and fever.

8/23/56 admission:

88 year man previously hypertensive CVA and aphasia 3 yrs. ago. Admitted by Dr. Winter because of generalized convulsive episode which lasted over one hour. * * * Previous1968 U.S. Tax Ct. LEXIS 166">*175 convulsive episode 7-10 days ago of short duration.

The record of the March 12, 1956, admission discloses that the decedent had been at home with constant nursing care and the record of the 1957 admission indicates that in the opinion of the hospital's attending physician, the decedent was critically and chronically ill. C. E. Quaife, the decedent's personal physician for this particular admission, agreed with the opinion of the hospital's attending physician.

Decedent's medical deductions during the latter years of his life were considerable and nursing care accounted for a substantial percentage of his annual medical expenses. The following schedules of decedent's medical expenses have been extracted from his income tax returns for the years 1953-59, inclusive. Decedent's deductions were not itemized during 1954 because he elected to use the "standard" deduction. No return for the year 1960, the final full year of decedent's life, has been received into evidence, but it is not basically disputed that the decedent was bedridden the majority of the time during 1960. 49 T.C. 580">*584

49 T.C. 580">*586 In light of the foregoing, and considering the evidence as a whole, it is clear that the decedent's state of health was poor following the initial stroke in 1946. His mind was relatively alert, and he could not have failed to realize by the year 1953 (from which point his medical expenses are detailed of record, supra) that his continued existence was a mere fortuity not to be relied upon. Certainly by 1958 and 1959 he knew, whether or not he liked to admit it, that his days were short and numbered.

Prior to 1953, decedent made few gifts of any consequence to his children or other1968 U.S. Tax Ct. LEXIS 166">*178 near relatives. Irregular gifts in insignificant amounts were made to one daughter, the present Helen Hite Henchey Sallee, and to that daughter's son, Maurice Hite Henchey. The gifts made by decedent to his daughter, Helen, prior to 1953 consisted of several separate donations of a few hundred dollars, to enable her to come from her Chicago home to visit him. The gifts made by the decedent prior to 1953 to his grandson, Maurice Hite Henchey, consisted of payments made shortly after the war for Maurice's tuition, room, and board for 3 years at a college preparatory school. These payments were beyond the means of Helen and her then husband to afford. In 1951 Helen's husband died and his unexpected death left her in straitened financial circumstances. This gave decedent cause for worry and concern. However, he did nothing about this immediately and Helen's financial insecurity was short-lived; she remarried on January 2, 1954, and thereafter had no more financial problems.

Having made no major gifts prior to 1953, decedent in that year initiated a program of giving which was substantial. Set out below are the gifts which were reported on gift tax returns filed in the name of 1968 U.S. Tax Ct. LEXIS 166">*179 the decedent for the years 1953, 1954, 1955, 1958, and 1959. The returns for the earlier years were signed by decedent, but for the years 1955, 1958, and 1959 they were executed by decedent's two daughters as his attorneys in fact. Gift tax returns were not filed for years other than the five listed below. 49 T.C. 580">*587

1968 U.S. Tax Ct. LEXIS 166">*180 As indicated above, decedent's first gifts in 1953 amounted totally to $ 28,500. The liquidity for these first substantial cash gifts was provided by the already mentioned sale in 1952 of approximately 21 acres of decedent's acquired farmland to A. J. Eline, Sr., at a price of $ 28,500. However, as indicated, decedent did not donate all the proceeds to his financially ailing daughter, Helen, nor did the proceeds go to his son, Robert, Jr., to whom this 21-acre tract was devised by will. The proceeds were split into three equal shares, and Helen Hite Henchey Sallee. Anne Hite Corn, and Robert W. Hite, Jr., each received $ 9,500. These three gifts were all reported for gift tax purposes as having been made as follows: $ 7,500 on July 9, 1953, and $ 2,000 on August 10, 1953.

On July 9, 1953, the same date as the first and most substantial gift made that year, decedent executed the first codicil to his will, which began by stating that the testator had disposed of 21 acres of land and expected to dispose of 19 acres, both of which tracts had been devised by his will to Robert, Jr. He accordingly revoked the specific devises of these tracts to Robert, Jr., and reduced the devise 1968 U.S. Tax Ct. LEXIS 166">*181 to Helen 49 T.C. 580">*588 and Anne of the Herr Homestead by 12 specifically described acres which he devised in trust to Robert by further provision of the codicil.

On May 26, 1953, decedent had executed a general power of attorney in favor of his daughters, Helen and Anne. This instrument empowered the two daughters to transact any and all business which the decedent could otherwise transact for himself and included specifically (without limiting the generality of the agency) the power to draw checks and to execute instruments of conveyance. The decedent was afraid that due to the infirmities of his age and condition, he might be unable to sign checks and other documents at the appropriate time. No other motive appears of record relating to the execution of this 1953 power of attorney.

In either 1952 or 1953, chronologically at approximately the same time as the initial sale of farmland, the Hite family learned that a highway was contemplated by the State which would have substantial impact on decedent's agricultural realty. The Department of Highways of the Commonwealth of Kentucky planned to build an expressway which would pass through the old Herr property itself, the core of decedent's1968 U.S. Tax Ct. LEXIS 166">*182 farm. It was decedent's intention, as mentioned, that his two natural-born daughters should inherit the Herr Homestead after his death; in accord with this plan, decedent determined that any proceeds from the sale or condemnation of a portion of the Herr property should go to the two daughters. Proceeds from the sale on condemnation of any realty which decedent had added by purchase to the original homestead were to be given to all three children, the adoptive son receiving an equal share. The proceeds from the initial sale in 1952 of 21 acres of "acquired" realty had been divided in this manner by the gifts made in 1953, and testamentary adjustment had been made by the first codicil, as already mentioned, to compensate Robert, Jr., because land previously devised to him had been sold.

Decedent objected strenuously to the proposed takeover of his property by the State. However, he soon came to accept as inevitable the fact that the State would prevail, and a lawyer was employed in early 1953 to handle the negotiations and/or proceedings with the State. During the years 1953 to 1955 negotiations in the pending condemnation matter dragged on, hindered by a wide disagreement over1968 U.S. Tax Ct. LEXIS 166">*183 value and the lack of a legal description of the exact acreage to be taken. Finally in 1955, the State instituted a condemnation suit which culminated in an award by the trial court to decedent in the amount of $ 91,022.50. This judgment by the county court was entered on April 11, 1956. Retained counsel and the Hite family felt the award was insufficient compensation and decided to appeal the case. Although an 49 T.C. 580">*589 appeal was taken by decedent to the Circuit Court, the State, in order to be able to enter onto the land, paid the award into the trial court. Under Kentucky Revised Statutes, sec. 177.087(4), the award could have been "drawndown" without prejudicing the appeal. However, the moneys paid into court were not drawn down, and the case remained pending on appeal with $ 91,022.50 on deposit with the trial court. This decision was made by Helen and Anne acting as attorneys in fact for their father, after consultation with their advisors.

When negotiations with the State had opened in 1953, the decedent realized that a substantial sum of money would be received from the State, regardless of whether the land were sold outright or taken in a condemnation proceeding. 1968 U.S. Tax Ct. LEXIS 166">*184 Because he planned to give the payments received from sales or the State to his daughters to the extent the Herr Homestead proper was taken over, he realized that the daughters at some time in the future might have to draw large checks on his account and on his behalf payable to themselves. It occurred to him that the propriety of the daughters' future issuance of his checks, disbursing the proceeds to themselves, might be open to criticism or question. Accordingly, even though he had in 1953 executed a general power of attorney in favor of the daughters, he executed an entirely new instrument in 1954 which expressly affirmed their power to issue checks disbursing the proceeds received from the sale of real estate to themselves and to Robert, Jr., "in an equitable way according to the provisions" of his will.

In this document the decedent set forth his express wishes and motives for executing a second instrument. The verbatim contents of the second instrument are as follows:

4417 Westport Road

I, Robert W. Hite of the city of Louisville, county of Jefferson, state of Kentucky, wish to go on record under oath, to make the following provisions:

In the event1968 U.S. Tax Ct. LEXIS 166">*185 of my inability to sign checks, which may occur at any time, on account of my physical condition, it is my wish that the proceeds of the sale of any real estate belonging to me, be divided among my three children, immediately upon receipt of same, in an equitable way according to the provisions of my will. This disboursement [sic] to be made by checks signed by my two daughters, Mrs. Anne Hite Corn and Mrs. Helen Hite Henchey Sallee, to whom I had legally issued POWER OF ATTORNEY some time ago.

My two daughters named above have the legal right through power of attorney to transact any and all business in my stead. However, in the future some question may arrise, [sic] as to their legal right to issue checks to themselves, which are to be charged against my account.

Plans have been made by the State of Kentucky to bring the new Inner Belt Highway through my property and when the necessary ground for the right-of-way has been acquired and paid for, I wish for the proceeds to be given immediately 49 T.C. 580">*590 to my three children proportionately, as outlined above, by checks either signed by me or my attorneys in fact.

Witness my hand and signature, this 29th., day of May, 1954

(S) Robert1968 U.S. Tax Ct. LEXIS 166">*186 W. Hite

Robert W. Hite

Subscribed and sworn to before me by Robert W. Hite this 2nd day of June 1954. (S) Nazarene McDougall

Between 1953 and April of 1956, when the county court rendered the $ 91,022.50 judgment in his favor, decedent sold 2 more adjoining tracts of land, not part of the Herr Homestead. In 1953 he sold 10 acres for a gross sales price of $ 30,000 to the Calvary Presbyterian Church, and in 1955 he sold 14 more acres at a gross sales price of $ 56,000.

In 1954 the decedent made gifts of $ 43,433.06, divided equally among the three children. In 1955 he gave away $ 39,000, divided in equal $ 13,000 shares to the three children and their families. Details about these transfers are set forth in the tabulation already included above. All of these transfers and the tax liabilities due as a result thereof were reported in the name of the decedent for the respective years and paid by him. In selling the 2 tracts disposed of during 1953 and 1955, respectively, decedent was motivated in part by a desire to establish the market value of the adjacent land to be taken by the State in the threatened condemnation action. However, he apparently also wished to make additional1968 U.S. Tax Ct. LEXIS 166">*187 gifts to the children during his lifetime. As soon as he received cash for his land he transferred it to his children and their families.

In April of 1956 when the trial court rendered its $ 91,022.50 judgment in decedent's favor, the decedent had already disposed of three separate tracts of land totaling 45 acres. While the respective cash gifts made to the three children and/or their near relatives in the years 1953, 1954, and 1955 were funded primarily from the sales of the 3 respective tracts in 1952, 1953, and 1955, the proceeds from the three sales did not in each instance equal exactly the amount of the corresponding gift. The 21-acre sale in late 1952 yielded $ 28,500 and the corresponding 1953 gift was of this exact amount. Apparently, there was no withholding of any of the proceeds from the 1952 sale to meet the capital gains and gift taxes which would be due. The next sale of land took place in 1953 when 10 acres were sold to the Calvary Presbyterian Church for $ 30,000. However, as previously noted, the corresponding gift in 1954 came to $ 43,433.06, a greater amount. Apparently, decedent had additional cash on hand which he gave away or he liquified some other 1968 U.S. Tax Ct. LEXIS 166">*188 asset in order to make the larger 49 T.C. 580">*591 gift. By the 1954 gift, decedent gave to his children value representing a greater proportion of his total assets than the 10 acres had represented.

There appears to be no discrepancy between the 1955 sale and the "corresponding" 1955 gift. Fourteen acres were sold to "Buck" Marshall for $ 56,000, but approximately $ 17,000 was withheld to cover taxes due, and $ 39,000 was distributed to the three children and their near relatives, $ 13,000 going to son, Robert, Jr., $ 13,000 to Anne and her husband, and $ 13,000 to Helen and her son. Decedent and his advisors determined to retain sufficient funds to enable him to pay the taxes due on the gains and on the gifts themselves.

After the appeal had been taken in the condemnation case, but before a formal decision was rendered on appeal, the case was finally settled once and for all by an agreement between the parties reached in 1958. The final settlement was for $ 126,000; 39.6 acres of decedent's property were ultimately acquired by the State, part from the Herr Homestead and part from decedent's adjacent property. Shortly before August 18, 1958, a settlement offer in the above amount was1968 U.S. Tax Ct. LEXIS 166">*189 made by the State. It was accepted on that date, and the same day the 1958 cash gifts totaling $ 75,803.60 were distributed to the three Hite children and their close relatives. The sum of $ 91,022.50 which had been paid into the county court at its judgment in 1956 was "drawn down" at this time and funded the 1958 gifts. The remaining $ 35,000 of the $ 126,000 settlement was not received from the State until 1959, and after this occurred, further equal gifts to the children were made. The 1959 gifts, however, totaled only $ 9,000.

The three Hite children did not share equally in the 1958 distribution. Pursuant to the decedent's original wishes and his testamentary scheme, only the two natural-born daughters benefited from that part of the condemnation involving the original Herr Homestead. Robert Hite, Jr., shared equally with his sisters in the proceeds attributable to the adjacent land which his adoptive father had himself acquired. Under the arrangement the two sisters each received $ 28,896.37 in 1958. Additionally, Maurice Hite Henchey, Helen's son, received a $ 3,000 gift, and C. T. Corn, Anne's husband, received a $ 3,000 gift. Robert Hite, Jr., received $ 12,010.86. 1968 U.S. Tax Ct. LEXIS 166">*190 In 1959 Helen, Anne, and Robert, Jr., each received $ 3,000. The decedent apparently retained a sufficient amount of the $ 91,022.50 "drawn down" in 1958 to meet his estimated capital gains and gift taxes. Not all of the total $ 126,000 settlement was treated as the "sales price" for the land which the State had appropriated. 49 T.C. 580">*592 A substantial portion was paid as compensation for damage to the remaining realty.

As mentioned, the division of the condemnation proceeds was in general accord with the decedent's testamentary scheme. However, the division of the proceeds so that Maurice Hite Henchey shared with his mother, Helen, and C. T. Corn with his wife, Anne, was not in strict accord with decedent's wishes expressed in the 1954 instrument reaffirming the powers of attorney in the two daughters and looking to the probability that they would be distributing large sums realized from the condemnation to themselves. The instrument set forth in full, supra, provided in pertinent part as follows:

In the event of my inability to sign checks, which may occur at any time, on account of my physical condition, it is my wish that the proceeds of the sale of any real estate belonging1968 U.S. Tax Ct. LEXIS 166">*191 to me, be divided among my three children, immediately upon receipt of same, in an equitable way according to the provisions of my will * * *

* * * *

Plans have been made by the State of Kentucky to bring the new Inner Belt Highway through my property and when the necessary ground for the right-of-way has been acquired and paid for, I wish for the proceeds to be given immediately to my three children proportionately, as outlined above, by checks either signed by me or my attorneys in fact.

[Emphasis added.]

The 1954 instrument indicates that the decedent did not intend originally for Maurice Hite Henchey and C. T. Corn to share in the distribution of the condemnation proceeds. The decedent mentioned only his "three children" in the instrument. He did not mention his grandson or son-in-law. Further, the instrument specifically provided that the proceeds should be distributed according to the provisions of the decedent's will. Maurice Hite Henchey and C. T. Corn are not mentioned in the will except as substitute beneficiaries in the event decedent was predeceased by Helen or Anne. However, they were included (to the extent of $ 3,000 each) in the gifts made in 1955 and 1968 U.S. Tax Ct. LEXIS 166">*192 in the distribution of the condemnation proceeds in 1958, to effect an apparent gift tax advantage to the decedent. Whether or not decedent actually had knowledge of this action or acquiesced therein does not appear of record.

Throughout the whole period from 1953 or 1954 until the final settlement on August 18, 1958, decedent took no active part in the negotiations and proceedings with the State, nor in decisions relative thereto. These were actively conducted and made by his two daughters and C. T. Corn. However, he was generally kept informed by his daughters and C. T. Corn of the progress which was being made in the negotiations. As was the case in the sale of the other 3 tracts of decedent's 49 T.C. 580">*593 land, the long-term capital gains resulting from the condemnation settlement was reported by the decedent, and not by any other person, and it was taxed to him accordingly. Likewise, gift tax returns were filed in the decedent's name and the taxes paid by him. It was in his name and not that of his daughters that the 1958 gift tax return was filed. For gift tax purposes, the distributions to Maurice Hite Henchey and C. T. Corn were treated as gifts from the decedent himself, 1968 U.S. Tax Ct. LEXIS 166">*193 and not from Helen Hite Henchey Sallee and Anne Hite Corn, respectively.

On July 13, 1960, decedent had so stripped himself of liquid or cash assets that he was forced to borrow funds on a promissory note for $ 2,000 to meet his current living expenses. This note to his son-in-law, C. T. Corn, remained unpaid on the date of death, together with interest due thereon according to its terms.

Robert W. Hite, Sr., the decedent, died suddenly and peacefully of a heart attack at his home on January 12, 1961, at the age of 92. The gifts which were reported as having been made in 1958 and 1959 following the condemnation settlement thus fell apparently within 3 years of the date of death. Decedent's executors, petitioners herein, filed the estate tax return in April 1962. On March 19, 1965, respondent determined the deficiencies mentioned above, holding that the 1958 and 1959 gifts were includable in the gross estate under the provisions of section 2035, I.R.C. 1954. ³ The taxable estate of the decedent as reported was $ 393,110.75 and the gross estate $ 478,323.22. From July 9, 1953, to January 2, 1959, the decedent had distributed gifts to his family totaling $ 195,736.66 in amount. 1968 U.S. Tax Ct. LEXIS 166">*194 This constituted almost all of his liquid or cash assets. Over 98 percent of the value of decedent's gross estate at date of death consisted of the remaining portion of the Herr Homestead proper along with the adjacent tracts acquired by decedent during his lifetime. Less than $ 100 of stocks and bonds and only $ 330.61 of mortgages, notes, and cash were the only liquid assets reported and remaining at date of death. The only other assets reported were working interests in three oil leases valued at a total of $ 3,150. Debts at date of death were $ 2,938.66. The estate tax return executed and filed by petitioners reported the transfers in question as gifts made by decedent in 1958 and 1959; it also stated that decedent's last illness was of 4 years' duration.

OPINION

Petitioners argue first that the gifts reported as having been made in 1958 and 1959 were in fact completed gifts in 1954 (or 1956 at the latest), and, 1968 U.S. Tax Ct. LEXIS 166">*195 therefore, these transfers do not fall within the 3-year 49 T.C. 580">*594 period specified by section 2035. Secondly, they urge that even if decedent did not make the gifts in issue until 1958 and 1959, within a period of 3 years ending with the date of his death, that the gifts were prompted by "life motives" and were not made in contemplation of death. Respondent opposes both contentions. He is aided by the statutory presumption of section 2035 itself if the transfers were made within 3 years before death, as well as by the usual presumption of correctness attaching to his determination.

I

We must reject petitioners' first argument. Under no view of the facts developed at trial can we find a completed gift of the condemnation proceeds prior to the reported cash transfers in 1958 and 1959. Petitioners rely on the 1954 instrument reaffirming the daughters' power of attorney to show that a completed gift was made in that year. That instrument, however, only reaffirmed and explained an agency relationship with the daughters. While the explicit reason for the execution of the 1954 instrument was the prospect that the daughters would be disbursing the proceeds (or a part thereof) 1968 U.S. Tax Ct. LEXIS 166">*196 to themselves, if decedent was unable to write checks when the time came, the instrument does not purport to pass any interest in praesenti as to the proceeds. Clearly, the chose in action or claim against the State per se was not assigned. Neither was the threatened realty. It is clear also that the instrument does not even necessarily envision that the daughters would be the disbursing agents. It specifically states that in the event of decedent's inability to sign checks, the proceeds were to be distributed to his three children in an equitable way as provided by his will, by checks "either signed by me or my attorneys in fact." (Emphasis added.) Gifts in futuro were clearly contemplated.

The essential elements of a bona fide gift inter vivos are (1) a donor competent to make a gift; (2) a donee capable of taking the gift; (3) a clear and unmistakable intention on the part of the donor to absolutely and irrevocably divest himself of the title, dominion, and control of the subject matter of the gift in praesenti; (4) the irrevocable transfer of the present legal title and of the dominion and control of the entire gift to the donee, so that the donor can exercise no1968 U.S. Tax Ct. LEXIS 166">*197 further act of dominion or control over it; (5) a delivery to the donee of the subject of the gift or of the most effective means of commanding the dominion of it; and (6) acceptance of the gift by the donee. See Estate of Carl C. Lynch, 35 T.C. 142">35 T.C. 142, 35 T.C. 142">150 (1960); Adolph Weil, 31 B.T.A. 899">31 B.T.A. 899, 31 B.T.A. 899">906 (1934), affd. 82 F.2d 561 (C.A. 5, 1936), certiorari denied 299 U.S. 552">299 U.S. 552 (1936).

It is apparent to us without an extended discussion of all the above requisites for a completed inter vivos gift that there was no donative 49 T.C. 580">*595 intent to make a present gift by means of the 1954 document. The instrument was nothing more than a statement of wishes or intentions, and at very most an explanatory document to be read together with the power of attorney granted the previous year. Additionally, we find that there was no irrevocable transfer of dominion and control. The decedent-donor reserved sufficient power over the entire transaction so that it is not even certain that the contemplated gift in futuro was an irrevocable undertaking. As mentioned, the decedent clearly envisioned1968 U.S. Tax Ct. LEXIS 166">*198 that he might himself draw the checks disbursing the proceeds if he were physically able. Certainly he could revoke the power of attorney previously given to his daughters and along with this the exculpatory 1954 document.

The 1954 instrument upon which petitioners belatedly rely specifically sets forth the decedent's wish that the proceeds be distributed according to the provisions of his will. It is not disputed that wills are ambulatory in Kentucky, and taking the 1954 instrument at face value, both the amount of the gift and the individual donees were subject to change in the event of a shift in decedent's testamentary plan. In fact here decedent executed several codicils to his will after the 1954 explanatory document was signed, and there is no reason why he could not have changed his plans completely during the years between 1954 and 1961.

Petitioners urge that even if the gift was in fact revocable or for other reasons incomplete in 1954, that by 1956 it had become fixed, irrevocable and complete as to the condemnation award. It is true that in 1956 the daughters and C. T. Corn, acting in decedent's name, won the trial court judgment in the amount of $ 91,022.50 and that1968 U.S. Tax Ct. LEXIS 166">*199 they, in decedent's name, could have "drawn down" the trial court's award at that time, and then Helen and Anne, acting as attorneys in fact for their father could have transferred the funds to the ultimate recipients. Usually, acceptance of a substantial gift is presumed unless the contrary be shown. Here, however, not only was there no acceptance, but acceptance of the gift in 1956 was patently rejected when the putative donees did not draw down the award and distribute same, but instead elected to leave it in court and appeal the decision. It is not disputed that on appeal the award could have been either decreased or increased. As it happened, decedent's appeal was successfully settled and the total amount received from the State several years later amounted to $ 126,000.

At least as important to our decision as the donees' rejection of the putative gift in 1956 is the continuing revocable nature of the whole arrangement, particularly with respect to the quantity of the gift and the number and identity of the recipients. Decedent's original intention as expressed in the 1954 instrument was that his three children 49 T.C. 580">*596 would share in the proportion dictated by his will. 1968 U.S. Tax Ct. LEXIS 166">*200 Petitioners have urged throughout the trial and on brief that it is this 1954 instrument which sets the tenor of the entire transaction. Yet, in 1958, when the first moneys from the State were finally received, the distribution was not strictly in accord with the 1954 instrument. Donees not mentioned anywhere in decedent's will as primary beneficiaries or at all in the 1954 instrument were included in addition to the three children. The added donees were Maurice Hite Henchey and C. T. Corn, decedent's grandson and son-in-law, respectively. The flexibility of the plan of distribution at all times until the payment had been received and its apportionment had become a fait accompli dictates and reinforces our conclusion that even in 1956 there was no completed gift.

Petitioners' own evidence and urgings have convinced us that decedent was a pleasant, cheerful, and relatively alert old gentleman, even though his speech was affected and he was chronically ill with heart and circulatory ailments and other infirmities of old age. It has not been proven to our satisfaction that he could not at any time have changed the whole scheme of the condemnation distribution, either by altering1968 U.S. Tax Ct. LEXIS 166">*201 his will, by revoking the previously granted powers of attorney or by simply directing that the proceeds be distributed by some other formula, or to other recipients or not at all. Apparently the decedent did direct or give his assent to a distribution by some other formula, as his attorneys in fact made gifts as indicated not in strict accord with his testamentary plan. We would also note in passing that in August of 1956 decedent was sufficiently in possession of his faculties to have executed and signed personally a fifth codicil to his will in which he named substitute beneficiaries who would take in the event he was predeceased by his daughters. We conclude and hold that the gifts or transfers in question did not occur until a portion of the condemnation proceeds were actually transferred in 1958 and 1959 as was reported for gift tax purposes, and as was also reported in the estate tax return filed by these petitioners.

In closing our discussion of petitioners' first argument, we would point out finally that it was decedent who reported the transaction and paid the capital gains and gift taxes upon receipt of the proceeds from the State and the concomitant distribution to 1968 U.S. Tax Ct. LEXIS 166">*202 his loved ones. The returns involving the condemnation proceeds were filed for the years 1958 and 1959, and not for any earlier years. If the three children received any present interest prior to that time, why did one of them not file a gift tax return reporting the gifts made in 1958 to Maurice Hite Henchey, the decedent's grandson, and C. T. Corn, his son-in-law? The gifts to Maurice and C. T. Corn were reported on decedent's 1958 gift tax return. This fact undercuts all of petitioners' contentions that the variation from the distribution envisioned in the 1954 instrument 49 T.C. 580">*597 merely demonstrates the extent to which the children had been exercising dominion and control over the right to the proceeds. We conclude and hold that no gifts occurred with respect to the condemnation proceeds until 1958 and 1959, when transfers of various portions of available cash therefrom were made.

The cash gifts in 1958 and 1959 occurred within 3 years of the date of death, and respondent has invoked section 2035, I.R.C. 1954, in order to include the amount of these gifts in decedent's gross estate. ⁴ We must make the essentially factual determination of whether life or death motives1968 U.S. Tax Ct. LEXIS 166">*203 were controlling, impelling, or dominant. Allen v. Trust Co. of Georgia, 326 U.S. 630">326 U.S. 630, 326 U.S. 630">636 (1946).

1968 U.S. Tax Ct. LEXIS 166">*204 The Supreme Court in United States v. Wells, 283 U.S. 102">283 U.S. 102 (1931), has set forth the classic definitional statement on the meaning of the statutory phrase, "in contemplation of death." It is incumbent upon us to ascertain the dominant motive prompting the gift. The purpose of the statute and its predecessors is to reach substitutes for testamentary dispositions in order to prevent evasion of the estate tax. Here the documentary and other objective evidence demonstrates conclusively to us that the inter vivos gifts, quite literally, were testamentary substitutes.

We conclude that the objective evidence establishes that the 1958 and 1959 gifts were a part of decedent's overall testamentary scheme and that the transfers were not made for any life motive. In our judgment, the usual surrounding circumstances so frequently resorted to in an effort to ascertain indirectly a decedent's subjective motives are entitled to less weight when the questioned gifts can be shown by objective evidence to have been testamentary substitutes. The question of testamentary substitute vel non is what the statutory phrase, "in contemplation of death," is "all 1968 U.S. Tax Ct. LEXIS 166">*205 about." 283 U.S. 102">United States v. Wells, supra, and 326 U.S. 630">Allen v. Trust Co. of Georgia, supra.

49 T.C. 580">*598 As it happens, here, in addition to the objective evidence, the accepted indicia also generally support our conclusion that the 1958 and 1959 gifts were in contemplation of death. A handy compilation of the more frequently relied upon of these guides is found in Estate of Oliver Johnson, 10 T.C. 680">10 T.C. 680, 10 T.C. 680">688 (1948). We need not repeat them all here.

However, in passing, we observe that decedent was a very old man when he made the questioned gifts and was in chronic ill health. He was well aware of his recurring and continuing illnesses even though he was cheerful and hoped to see the age of 100. The amount of his property transferred in proportion to the amount of property retained was quite large and it was transferred in accordance with his testamentary plan. There was no long-established gift-making policy on the part of decedent. He made no substantial gifts prior to 1953 when he suddenly at age 84, after a serious stroke and several subsequent hospitalizations, commenced making substantial1968 U.S. Tax Ct. LEXIS 166">*206 gifts as he liquidated various of his real estate holdings.

Petitioners urge that the initial 1952 sale and corresponding 1953 distributions were entered into primarily to aid his financially embarrassed and recently widowed daughter, Helen. However, the total amount given was split equally among all three children, and under the facts, we are not moved to conclude that there was an "equalizing motive," so as to remove any taint from the initial 1953 gifts. See Estate of Carl C. Lynch, 35 T.C. 142">35 T.C. 142, 35 T.C. 142">151 (1960). No gifts were made prior to the simultaneous distribution in 1953 to suggest an "equalizing situation." As for Helen, she had been a widow for 2 years before the alleged rescue from her plight and only 5 months after receipt of her share she was remarried and out of financial need.

The 1954 and 1955 gifts were said to have been the more or less natural consequence of the 1953 and 1955 sales of land which were purportedly entered into to establish value in the area because of the threatened condemnation. The negotiations and proceedings with the State were known to be in the offing. As we noted in our Findings of Fact, however, the 1954 gifts1968 U.S. Tax Ct. LEXIS 166">*207 were of a much greater amount than the "corresponding" proceeds of the 1953 sale. Of course, these 1953, 1954, and 1955 gifts are not directly in issue, but on brief the parties have submitted arguments which relate to them as part of the general scheme of distribution. Finally we must reject petitioners' argument that all the transfers were made by decedent so that he could enjoy seeing his children enjoy the proceeds during his lifetime. This somewhat usual and hackneyed argument is not convincing, nor does the rather general, vague, and scanty evidence of record support the 49 T.C. 580">*599 assertions. We doubt that at his age and in his condition, as disclosed by the record, decedent was aware at all of whether or not the transfers acted to brighten the donees' lives.

Finally we note again that the donees of all the gifts were the natural objects of decedent's bounty and except with very minor differences the designated beneficiaries under his will. This last indicator, as well as the others mentioned, is, of course, closely related to the central fact, i.e., integration of the gifts into the testamentary scheme.

Taken as a whole, the entire record clearly establishes that the 19581968 U.S. Tax Ct. LEXIS 166">*208 and 1959 gifts were made in contemplation of death. Not only does the evidence fail to establish a life motive for the transfers so as to overcome the statutory presumption and the presumption of correctness attaching to the respondent's determination, but on the contrary it establishes a dominant motive and plan to strip down decedent's estate as fast as and whenever possible by transferring all assets after liquidation thereof when a ready division became feasible, in accordance with the decedent's general testamentary plan and scheme. The burden of proving that the thought of death was not the dominant motive in making the transfers has proved too heavy for petitioners to bear. They have failed utterly to meet it, and, accordingly, we sustain respondent's determination.

Decision will be entered for the respondent.