6 T.C. 587">*587 Respondent determined a deficiency in estate tax in the amount of $ 123,053.33. The question is whether there should be included in the gross estate of the decedent, Clothilde K. Lueders, under section 811 (a), (c), or (d) of the Internal Revenue Code, the value on the date of decedent's death of the corpus of a trust which was created by her husband during his lifetime. The value of that trust at the date of decedent's death was $ 363,988.55. At the hearing respondent stated that this value is the value to be included in decedent's estate under his contentions.

The parties have submitted a stipulation of facts, together with exhibits.

FINDINGS OF FACT.

1946 U.S. Tax Ct. LEXIS 251">*253 The facts are found as stipulated.

The decedent, Clothilde K. Lueders, died testate on March 29, 1942, a resident of Summit, Union County, New Jersey. Her last will was duly admitted to probate by the surrogate of Union County on 6 T.C. 587">*588 April 13, 1942. Petitioners are the duly appointed and acting executors of the decedent's estate.

In determining the amount of the deficiency, respondent has not allowed the executors any credit for payment of state inheritance and estate taxes. He stated in the notice of deficiency that the deficiency in estate tax would be reduced to $ 106,920.61 upon proof of payment of state taxes.

Frederick G. Lueders, the husband of the decedent, died on May 4, 1933, at the age of 76 years. He was born on February 4, 1857. The decedent was born on September 3, 1866. She died at the age of 75 years.

From February 1930 until his death, Frederick G. Lueders was chairman of the board of directors of George Lueders & Co., a New York corporation, engaged in the business of distilling, manufacturing, and dealing in essential oils and aromatic chemicals. Frederick G. Lueders owned 1,200 shares out of a total of 2,000 shares of the common stock of the company, 1946 U.S. Tax Ct. LEXIS 251">*254 and he was in control. Prior to being chairman of the board of directors, he had been president of the company for many years. Decedent owned 450 shares of the preferred stock of the company, which had no voting rights. She did not own any of the common stock.

On July 2, 1930, when he was 73 years of age, Frederick G. Lueders executed a trust indenture under which he created a trust, naming himself and the City Bank Farmers Trust Co. as trustees. Under the terms of the trust the trustees were to pay the income to Clothilde K. Lueders during her lifetime. Upon her death the trustees were to divide the principal and to hold it in three separate trusts, one for each of the children of Frederick G. Lueders. All of the provisions of the trust relating to the disposition of the income and principal of the trust fund, covered by article 1, were made subject to articles 2 and 3 of the trust indenture. Article 2 gave Clothilde K. Lueders the right to amend the trust and to terminate the trust. Article 2 provides as follows:

At any time and from time to time so long as my said wife, Clothilde K. Lueders, shall be living, she shall have the right, by an instrument in writing, signed 1946 U.S. Tax Ct. LEXIS 251">*255 and acknowledged by her like a conveyance of real property entitled to record in New York, and delivered to my said Trustees during her life, to amend this trust in any respect whatsoever and to terminate the same as to the whole or any part thereof, and in the event of any such termination my said Trustees shall transfer, pay over and deliver to my said wife such part, or the whole, as the case may be, of the principal of the trust fund, as to which the trust is so terminated.

Article 3 provides in part as follows:

* * * my said wife shall have the power by an instrument in writing, signed and acknowledged by her like a conveyance of real property, entitled to 6 T.C. 587">*589 record in New York, and delivered to my said Trustees during her life, to direct my said Trustees to continue to hold the principal of the trust fund undivided after her death for such period, but in no event exceeding twenty-one years after the death of the last survivor of my said wife and all our issue now living, as my said wife may specify in such written instrument, and during such period as she may so specify, to pay the net income from said trust fund to such of her husband and/or her issue her surviving, and1946 U.S. Tax Ct. LEXIS 251">*256 in such proportions, as she may direct in such written instrument. In the event that my said wife shall exercise the power in this Article "3" of this Agreement above conferred upon her, then during the period specified by her in such written instrument, the principal of the trust fund shall be held undivided and the income thereof shall be disposed of as directed in such instrument instead of as in Article "1" hereinabove provided; and upon the termination of the period so specified by her the principal of the trust fund then in the hands of my said Trustees shall be disposed of as in Article "1" of this Agreement above provided, in like manner as if my said wife had died immediately after the termination of such period.

The trust indenture provided, further, that if at any time during the life of Clothilde K. Lueders there should be no individual cotrustee acting with the trust company, then she should have the power to appoint, by a written instrument, an individual to act as cotrustee with the trust company.

The trust indenture executed by Frederick G. Lueders on July 2, 1930, is incorporated herein by reference.

On July 2, 1930, Frederick G. Lueders irrevocably transferred to1946 U.S. Tax Ct. LEXIS 251">*257 the trustees under the trust created on the same day stocks of various corporations and bonds which had a fair market value on that date of approximately $ 640,000.

Although Clothilde K. Lueders had the power to terminate the above trust and take over the property in her own right, she did not exercise the power, and the trust was in existence at the date of her death. The corpus had a value of $ 363,988.55 on that date.

From the time of the creation of the above trust until his death, Frederick G. Lueders continued to reside with his wife, the decedent, in their home at Summit, New Jersey. During this period their mode of living continued on the same standards as existed prior to the creation of the trust.

As a result of his creation of the trust, Frederick G. Lueders was left without any assets except his salary, which was $ 9,250 in 1930 and $ 8,025 in 1931.

On October 21, 1931, about 15 months after July 2, 1930, Clothilde K. Lueders created a trust for the benefit of her husband, naming him and the City Bank Farmers Trust Co. as trustees. She transferred to the trustees irrevocably under her trust stocks of various corporations which belonged to her in her own right. They1946 U.S. Tax Ct. LEXIS 251">*258 had a fair market value of approximately $ 349,200 on October 21, 1931.

Under this trust, the decedent's husband was to receive the income 6 T.C. 587">*590 of the trust during his life, and upon his death the principal was to be held in trust for the children in the same manner as was specified in the trust of July 2, 1930. Also, Frederick G. Lueders was given the right to amend and to terminate the trust in whole or in part, and in the event of such termination the trustees were to pay the principal of the trust fund to him. Also, he was given the right to direct the trustees, by a written instrument, to retain the principal of the trust for a limited number of years after his death. The trust indenture dated October 21, 1931, is incorporated herein by reference.

The terms of the trust indenture, dated October 21, 1931, are identical with the terms of the trust executed on July 2, 1930, with a few immaterial exceptions. Clothilde K. Lueders did not name herself as a cotrustee of the trust which she created. Both of the trust indentures dated July 2, 1930, and October 21, 1931, were drafted by the same firm of attorneys.

On October 21, 1931, the value of the corpus of the trust of July1946 U.S. Tax Ct. LEXIS 251">*259 2, 1930, created by Frederick G. Lueders, was approximately $ 373,000, and on March 29, 1942, the date of the death of the decedent, the value of the corpus of that trust was $ 363,988.55.

The transfers in trust by the decedent October 21, 1931, were not made in contemplation of death.

The creation of the trust of October 21, 1931, by the decedent, did not result in her impoverishment.

None of the securities which were transferred by the decedent, Clothilde K. Lueders, to the trustees under the trust instrument of October 21, 1931, were at any time a part of the securities comprising the corpus of the trust of July 2, 1930, created by Frederick G. Lueders.

On November 17, 1931, Frederick G. Lueders executed and delivered to the trustees of the trust created by the decedent on October 21, 1931, an instrument in writing dated November 17, 1931, terminating the trust of October 21, 1931, and the principal of that trust was paid over to Frederick G. Lueders forthwith. The instrument dated November 17, 1931, is incorporated herein by reference.

On July 2, 1930, and October 21, 1931, the three children of Frederick and Clothilde Lueders, mentioned in their respective trust indentures, 1946 U.S. Tax Ct. LEXIS 251">*260 were living; and on both of the above dates two grandchildren were living.

The property which Frederick G. Lueders acquired from the trustees of the trust of October 21, 1931, upon his exercise of the power to terminate that trust, was part of his general estate at the time of his death.

For many years prior to October 21, 1931, George Lueders & Co.6 T.C. 587">*591 had been borrowing substantial sums of money from banks in New York, and in the months of August, September, and October of 1931 the company continued such practice. The reason which Frederick G. Lueders gave to his counsel for terminating the trust of October 21, 1931, created by the decedent, was that it had become necessary for George Lueders & Co. to make arrangements for additional lines of credit in connection with its business and in order that the company might secure credit he had to guarantee, personally, the bank loans of the company and give the lending banks a satisfactory statement of his own financial condition, which he was unable to do without terminating the trust.

OPINION.

Respondent contends that the value of the corpus of the Frederick Lueders trust is includible in the estate of the decedent under section1946 U.S. Tax Ct. LEXIS 251">*261 811 (d) of the Internal Revenue Code under the doctrine of Lehman v. Commissioner, 109 Fed. (2d) 99; certiorari denied, 310 U.S. 637">310 U.S. 637.

Section 811 (d) provides that the value of the gross estate of a decedent shall be determined by including the value at the date of his death of all property of which he has made a transfer "where the enjoyment thereof was subject at the date of his death to any change through the exercise of a power, either by the decedent alone or in conjunction with any person, to alter, amend, or revoke, * * *" There can be no doubt that the enjoyment of the property in the trust in question was subject to the exercise of a power to alter, amend, or revoke the trust by the decedent at the time of her death. The only question to be decided is whether the decedent can be deemed to have been the grantor of the trust. "A person who furnishes the consideration for the creation of a trust is the settlor even though in form the trust is created by another." Scott on Trusts, sec. 156.3; Lehman v. Commissioner, supra;Blackman v. United States, 48 Fed. Supp. 362, 368.1946 U.S. Tax Ct. LEXIS 251">*262

The Frederick Lueders trust was in existence at the time of decedent's death and under the trust the decedent had the right to revoke the trust, and upon such revocation the decedent had the right to receive the entire corpus. The Frederick Lueders trust was created on July 2, 1930, for the benefit of the decedent. Frederick depleted his assets entirely by transferring all of his assets to the trust. The decedent did not create a cross-trust at or about the same time that the above trust was created, but she created a trust having identical terms for the benefit of Frederick in October of 1931, to which she transferred property having a value almost equal to the then value 6 T.C. 587">*592 of the property in the Frederick Lueders trust. Decedent transferred in trust property having a value of $ 349,200. At that time the property in Frederick's trust had a value of $ 373,000.

These facts compel the conclusion that the decedent furnished consideration for the trust which was in existence at the date of her death. She must be deemed to have been the settlor of that trust, even though in form, the settlor was her husband. This conclusion is impelled by the effects of the transactions 1946 U.S. Tax Ct. LEXIS 251">*263 of the decedent and her husband relating to their respective assets. The two trusts which were created were reciprocal upon the creation in 1931 of the second trust. This is because, under a practical view of the facts, the creation of a trust by the decedent in 1931 made it feasible for the 1930 trust to be continued in existence. Furthermore, the circumstances strongly indicate that Frederick Lueders had some assurance in 1930, when he transferred all of his assets to a trust, that the decedent would not fail to provide him with some assets, in return, if necessary. She did this a little over one year thereafter. It became a matter of form on October 21, 1931, that the trust which respondent has included in the decedent's estate was dated July 2, 1930, in view of the situation which developed in October and November of 1931. The evidence clearly shows that Frederick became in need of assets, and the decedent was the source for obtaining them. The situation was such that there was surely a practical need for the decedent's terminating the 1930 trust and returning the property to her husband. That she elected not to do so is a fact which can not be minimized. That the 19301946 U.S. Tax Ct. LEXIS 251">*264 trust continued in existence after October 21, 1931, and at the same time, Frederick Lueders received needed property, is important in the determination of the question.

In October of 1931 the decedent could not have been acting independently, and we do not believe that her creation of a trust for the benefit of her husband was entirely unrelated to his termination of that trust within 30 days thereafter. Also, we do not believe that the amount of property which the decedent took out of her separate estate and transferred to a trust for her husband had no relation to the then value of the corpus of the trust created by her husband. Furthermore, a realistic view indicates that the decedent was under a moral obligation to provide her husband with assets when he became in need. It is not impossible that the decedent and her husband had some understanding, at the time he created a trust in 1930, that she would so act, if necessary. The sole source of Frederick's income was the corporation of which he was chairman of the board of directors. It became necessary for him to guarantee loans to that corporation, and for that purpose he had to have assets. Assets formerly belonging 6 T.C. 587">*593 1946 U.S. Tax Ct. LEXIS 251">*265 to him were held in a trust which the decedent could terminate. When, therefore, petitioner transferred her own property to a trust for her husband, which he could terminate, instead of terminating the existing trust and returning his property to him, there was a mutual exchange of property. The property which the decedent transferred to a trust for her husband constituted a quid pro quo for the property which was allowed to remain in the existing trust. The property which the decedent transferred out of her separate estate had its equivalent on October 21, 1931, in the corpus of the 1930 trust, which the decedent had only to terminate in order to restore to herself the equivalent of that which she conveyed on the above date.

Under these circumstances it is concluded that the decedent furnished consideration for the trust which was in existence at the date of her death, and that she must be regarded as the settlor of that trust. It follows that section 811 (d) is applicable and that respondent's determination must be sustained.

Petitioners rely upon Estate of Gertrude Leon Royce, 46 B. T. A. 1090. In that case a single trust was involved, a trust1946 U.S. Tax Ct. LEXIS 251">*266 created by a husband for the benefit of his wife. It is the contention of petitioners, in effect, that the subsequent steps taken by the decedent in creating a trust for the benefit of her husband are immaterial, and that the issue presented should be decided without giving consideration to all that transpired. We can not so limit our consideration of the evidence. Estate of Gertrude Leon Royce, supra, is not a case in point, under the facts before us.

Decision will be entered under Jule 50

Murdock, J., dissenting: I do not think that this case is distinguishable in principle from Estate of Gertrude Leon Royce, 46 B. T. A. 1090.