8 T.C. 492">*492 This proceeding seeks a redetermination of an estate tax deficiency of $ 366,630.70. Paul Garrett, the decedent, died March 18, 1940.

The issues are whether respondent erred in including the value of the assets of the several trusts in the gross estate under section 811 of the Internal Revenue Code.

Respondent has conceded that a trust referred to as Trust Fund No. 2 created in an instrument of November 30, 1923, is not includible in the gross estate.

The case was presented by a stipulation of facts and evidence adduced at the hearing. Those facts hereinafter appearing which are not from the stipulation are otherwise found from the record.

FINDINGS OF FACT.

The stipulated facts are hereby found accordingly.

Decedent, Paul Garrett, died March 18, 1940, at the age of 76 years, in a New York hospital. The immediate cause of his death was pneumonia following an abdominal operation. He had been working at the office before going to the hospital. 1947 U.S. Tax Ct. LEXIS 267">*269 His appetite did not indicate that he had stomach trouble.

Decedent had been a man of good health and great energy, frequently working with but a few hours sleep. He was about six feet in height and in later years weighed about 240 pounds. Aside from his last illness and minor illnesses such as colds, his close lifelong friends and business associates could recall no illness except an attack of coronary thrombosis in 1930 or 1931, subsequent to the death of his son, Charles. He made a good recovery from this attack.

8 T.C. 492">*493 Decedent was continuously active in the wine business as president of Garrett & Co. from prior to 1890 until his last illness. He signed his 1939 income tax returns in his home on March 12, 1940.

Decedent in the year indicated passed the physical examinations for the following life insurance policies:

The four policies of 1922 and 1923 were with three different life insurance companies, the latest date being October 10, 1923.

The1947 U.S. Tax Ct. LEXIS 267">*270 wine business was begun by decedent in a small way at Weldon, North Carolina, and within a few years it doubled in size. In 1903 the business was moved to Norfolk, Virginia, and in 1917 to New York. It had increased its capacity and finances four or five times while in Virginia. From 1917 until national prohibition in 1920 Garrett & Co. had fifteen plants throughout the United States. With the advent of prohibition their plants were reduced to four, which continued operation as producers of medicinal and sacramental wines. At the time prohibition went into effect Garrett & Co. had a large inventory of wines on hand which took four or five years to liquidate, and yielded considerable money. Decedent, as principal stockholder, became entitled to about $ 2,500,000 thereby.

On November 30, 1923, decedent executed a trust agreement reciting the transfer of certain properties as "Trust Fund No. 1" and "Trust Fund No. 2," respectively, to a corporate trustee and Carl R. Ganter and W. Frank Hope, "Individual Trustees."

The transfers into Trust Fund No. 1 comprised $ 750,000 face value of bonds and 30 policies of life insurance. The life insurance consisted of fully paid policies amounting1947 U.S. Tax Ct. LEXIS 267">*271 to $ 30,000 and continuing ordinary life policies amounting to $ 220,000 face value. The cash surrender value of the policies on November 30, 1923, aggregated approximately $ 90,000. The trust property was assigned and transferred to the trustees. After the transfers decedent had an estate in excess of $ 1,000,000.

The instrument provided that the assets of Trust Fund No. 1 should be divided by the trustees into four equal shares, "one share for each child of the grantor who is now living, viz: His son Charles W. Garrett; his daughter, Evelyn C. Garrett; his daughter, Dorothy V. Garrett; and his daughter Mary E. Garrett," but:

8 T.C. 492">*494 To pay to, or apply to the use of, the wife of the grantor, Evelyn E. Garrett, the net income of each of the whole number of said shares during her life, and, upon her death to pay to, or apply to the use of, each of said children then living the net income of his or her share during his or her life, and upon his or her death, to pay and transfer the principal of the same and any undistributed income thereof to his or her lawful issue, per stirpes and not per capita; or in the event that any of such children predecease said Evelyn E. Garrett, to1947 U.S. Tax Ct. LEXIS 267">*272 convey, transfer and pay over to the lawful issue of each such child then deceased, per stirpes and not per capita, the principal of his or her share and any undistributed income thereof then held by the Trustee. * * *

It was further provided that upon the son attaining the age of 25 years, on June 10, 1928, there should be paid to him $ 25,000 of the principal of his share, with additional payments of $ 25,000 on attaining the age of 30 years, and $ 50,000 on attaining the age of 35 years. Provision was also made for cash payments out of the principal of the respective shares for the children -- $ 10,000 on marriage, $ 10,000 on the third marriage anniversary, and $ 5,000 on the fifth marriage anniversary. On the death of any child without issue his share was to be transferred equally to the remaining shares.

The transfers into Trust Fund No. 2 comprised bonds of $ 250,000 face value, with division into four equal shares, one for each child. The trustees were to pay the income "of his or her share" of this fund "during his or her life" to the respective child, and make distribution of the principal to issue of each child upon the death of each child. There were like provisions1947 U.S. Tax Ct. LEXIS 267">*273 to those respecting Trust No. 1 relating to a child dying without issue.

Paragraph "Fourth" of the instrument stated:

The Trustees shall have full power and authority, from time to time, to sell and convey any part of the trust funds at public or private sale at such times and upon such terms as in their unrestricted discretion they may deem proper, and to realize the cash surrender value of any of the insurance policies included in said trust funds, and to invest, and to sell and reinvest, from time to time, in like discretion, any part of the trust funds or the proceeds thereof for any purpose hereunder, and the Trustee shall be free to retain or sell, invest or reinvest, according to their discretion and without restriction or limitation by or under any law or ruling of any state or country and specifically of the State of New York.

And paragraph "Twelfth" provided:

The Trustees shall hold the insurance policies hereinbefore described as constituting part of Trust Fund No. 1 and any additional policies assigned, transferred, and set over to them hereunder to be added to said Trust Fund, without any obligation of any nature in respect thereto other than the safekeeping thereof by1947 U.S. Tax Ct. LEXIS 267">*274 the Corporate Trustee and the payment, so far as may be necessary to keep said policies in full force, of the premiums thereon by the Corporate Trustee, as the same become due, out of the net income received by the Trustees upon said Trust Fund No. 1, during the life of the Grantor (which payment shall be regarded as an application of the income so used to the use of the respective 8 T.C. 492">*495 beneficiaries of said Trust Fund), and upon receiving proof of his death, or that any of said policies shall have matured, to use their best efforts to collect and receive any and all sums of money payable thereunder, and when so collected and received to add the same to the principal of said Trust Fund No. 1, subject to the provisions hereof. If, during the existence of these trusts, it shall be decided by a court of competent jurisdiction that the provisions herein made with respect to the payment of said life insurance premiums out of the net income of Trust Fund No. 1, are for any reason invalid, or a rule of law to that effect be authoritatively enunciated, then and in that event, but not otherwise, the Grantor authorizes, empowers and directs the Trustees to sell from time to time, at public1947 U.S. Tax Ct. LEXIS 267">*275 or private sale and upon such terms as in their unrestricted discretion they may deem proper, so much of the securities composing the principal of Trust Fund No. 1, and/or to realize the cash surrender value of so much of said insurance policies, as may be required (A) for the purpose of paying future premiums with said proceeds, and (B) for the purpose of refunding to the life beneficiaries, out of said proceeds, so much of the income theretofore used by the Trustees in making payment of such premiums, with interest on such income, as may be required by virtue of any such decision or rule to reimburse said life beneficiaries for the income so used; and the Grantor directs the Trustees, upon the happening of said conditions, to pay out of such proceeds such insurance premiums as may be necessary to keep such policies in full force during the life of the Grantor, and to make such reimbursement of the life beneficiaries out of said proceeds.

The individual trustees of this trust were business associates of decedent. Ganter was a member of the law firm which drafted the trust and which had served as attorneys to Garrett & Co. from 1917 to 1929, when the firm dissolved and Ganter retired1947 U.S. Tax Ct. LEXIS 267">*276 from active practice. Hope was treasurer of the company until his resignation in 1939, after a stroke. At that time he also resigned as trustee. Ganter resigned as trustee on January 25, 1940, and was succeeded by Hugh Fulton. Hope was succeeded by Howard Paulsen, son-in-law of decedent and now president of the company.

The trustees independently conducted the affairs of the trust without interference by decedent.

The securities included in the trust had been purchased for decedent by Hope. After consultation with investment houses Hope and Ganter selected the ones most appropriate.

The availability of the large sums of money on the liquidation of the wine inventory by reason of national prohibition was the occasion for the creation of the 1923 trust. Decedent's friends and business associates advised favorably as to the arrangement because decedent's business experience was primarily in the wine business, the future of which was limited and problematical.

From the creation of the 1923 trust to the date of decedent's death, the gross income under Trust Fund No. 1 was $ 525,170.22. Distributions therefrom were in accordance with the provisions of the trust, and were as follows: 1947 U.S. Tax Ct. LEXIS 267">*277 8 T.C. 492">*496

During the same period gross income under Trust Fund No. 2 was $ 172,823.57. Distributions therefrom were in accordance with the provisions of the trust, and were as follows:

At no time during the same period did the trustees surrender any of the insurance policies for their cash surrender values, nor did they borrow on any of them.

Disbursements from principal of Trust Fund No. 1, in accordance with the provisions of the trust, were made as follows:

To help meet these payments a sale of bonds on the marriage of Charles on June 29, 1927, yielded $ 10,000. Additional1947 U.S. Tax Ct. LEXIS 267">*278 bonds were sold in July 1928 for $ 25,000.

Charles died without issue January 18, 1930. His widow subsequently remarried.

The value of the assets in Trust Fund No. 1 at the date of decedent's death was $ 874,671.83, of which $ 261,244.76 was derived from the insurance. The value of the life estate therein of the widow "in possession and enjoyment prior to the decedent's death" was $ 104,579.87, which respondent deducted in his notice of deficiency.

The only security continuously within the principal of this trust was $ 50,000 of City of Memphis, Tennessee, bonds.

In addition to the policies enumerated in this trust agreement of 1923 decedent carried other insurance policies upon his life amounting to $ 43,147.92. The exemption of $ 40,000 allowed by law was taken by the executors of his estate in the Federal estate tax returns.

Under date of April 4, 1929, the Garrett Holding Corporation was incorporated under the laws of the State of New York. Original subscribers for stock were noted in a certificate of incorporation for one share each, as the decedent, his son Charles, and J. Campbell Moore. Acknowledgment of the instrument was before John J. Hyland, who was attorney for the1947 U.S. Tax Ct. LEXIS 267">*279 corporate organization of the Garrett Holding Corporation, including the matters relating to the 8 T.C. 492">*497 real estate of that company and the drafting of its minutes, and the trust instrument dated September 7, 1929. Hyland's office was located at Penn Yan, New York. Hyland died subsequent to the death of decedent.

The amount of capital stock authorized by the certificate of incorporation was $ 1,000,000, being 10,000 shares of common stock at a par value of $ 100 per share.

The first meeting of subscribers to stock was held on July 22, 1929, in Hyland's office, with Moore and decedent present in person, and Charles represented by proxy. Charles went to the hospital in May of 1929, shortly after the company was incorporated, and died January 18, 1930. Decedent was elected chairman of the meeting and Moore, secretary. In addition to recording the filing of the certificate of incorporation, the minutes of the meeting state:

The Chairman explained to the meeting that it was proposed to convey to the corporation all the real property situate in the Towns of Jerusalem, Barrington and Milo, in the County of Yates, and property designated as "Trimyer Property" near Norfolk, Virginia. 1947 U.S. Tax Ct. LEXIS 267">*280 The record title to which properties are held by Paul Garrett, Evelyn E. Garrett, Charles W. Garrett, and Charles W. Garrett, trustee in various parcels and acreage. And it is then proposed to issue the common stock of said corporation to trustees for various members of the Garrett family and some of said stock directly to Evelyn E. Garrett and Paul Garrett. The amounts of such stock and the manner of its issuance to be hereafter determined by the Board of Directors. It being the thought to create a Trust for the management and distribution of the dividends upon such stock. The Chairman, however, explained that this matter was merely in a formative stage, the details of which would be worked out at a later date and would be carried into effect by the Board of Directors.

It was also explained by the Chairman that it was intended that all tools, machinery, implements and other articles of personal property used on or pertaining to the several parcels of realty, be also transferred to the Corporation.

The following resolution was then offered and adopted by the affirmative vote of the subscribers representing all the subscribed shares of stock in said corporation:

"Resolved, that1947 U.S. Tax Ct. LEXIS 267">*281 it is the sense of this meeting that the general proposition, outlined by the Chairman, be carried into effect and that the Board of Directors are hereby authorized to do any and all things which are necessary to consummate the proposal and to issue the stock of said corporation in accordance with law, as in their discretion is for the benefit of the Garrett family and in such a manner as will have the approval of Paul Garrett. The acceptance of conveyances of the real and personal property is hereby approved."

On July 16, 1929, Charles conveyed to Garrett Holding Corporation, by deed executed by himself and wife, 5 separate parcels of real estate located in the general vicinity of Penn Yan comprising about 407 acres and having value in excess of mortgages of $ 36,600. On the same date Charles, as trustee for his sister Evelyn, conveyed to Garrett Holding Corporation approximately 37 acres of similarly located property having a value of approximately $ 7,000 free and clear of encumbrances. 8 T.C. 492">*498 On July 22, 1929, decedent's wife conveyed to Garrett Holding Corporation 7 or 8 separate parcels of similarly located real estate comprising about 200 acres of a value of $ 48,700, 1947 U.S. Tax Ct. LEXIS 267">*282 free and clear of encumbrances. On the same date decedent conveyed to Garrett Holding Corporation by deed executed by himself and wife about 6 separate parcels of similarly located real estate comprising about 300 acres with a value of $ 13,900 over and above mortgages. The foregoing deeds were recorded February 5, 1930.

At the time the Garrett Holding Corporation was organized decedent held title as trustee for his daughter Dorothy to a similarly located tract of land. Beneficial ownership of this tract was transferred to the Garrett Holding Corporation in September 1929, but inadvertently legal title was not conveyed until 1941, when the executors delivered a deed for the property. The value of the property when it became the property of Garrett Holding Corporation was $ 13,000, as the net value over and above mortgages.

All of the mortgages on the properties were assumed by Garrett Holding Corporation.

Records kept for the Garrett Holding Corporation by Moore indicate transfers by decedent to the Garrett Holding Corporation on the date set forth of securities and equipment of a value as follows:

1947 U.S. Tax Ct. LEXIS 267">*283 Decedent paid off and discharged mortgages against the realty in the amount of $ 9,201.46.

At a meeting of directors of Garrett Holding Corporation in the office of Hyland on September 7, 1929, a quorum consisting of decedent, Moore and Hyland were present. Officers were elected to hold offices 8 T.C. 492">*499 until election of successors, as follows: president, decedent; vice president, Evelyn E. Garrett; vice president, Hyland; secretary and treasurer, Moore. A resolution was unanimously adopted calling for the issuance of the common stock as follows:

A resolution was also carried authorizing decedent as president of the corporation to execute in the name of the corporation a trust agreement by the corporation as party of the first part and Evelyn E. Garrett, Charles W. Garrett, and Howard C. Paulsen as trustees. Authorization was also given to Moore to purchase, in the name of the corporation, securities for the purpose of investment and resale, he being given authority to handle such transactions 1947 U.S. Tax Ct. LEXIS 267">*284 as he deemed prudent and for the best interest of the corporation.

The stock of Garrett Holding Corporation was not issued until January 25, 1933. The delay was occasioned by tax difficulties with the State of New York over capital stock valuation and by resolution the board of directors amended the charter to reduce the capital stock to 1,000 shares without par value. When the stock was actually issued 666 shares were issued to the trustees, 167 shares were issued to Evelyn E. Garrett, and 167 to decedent.

The trust agreement heretofore mentioned was executed September 7, 1929, Evelyn E. Garrett, Charles W. Garrett, and Paulsen being named as trustees. The property was to be divided into four equal shares. The trust directed the payment of the net income of one share to each of the beneficiaries, and upon their death to pay the principal to their lawful issue or descendants. On death without issue but leaving surviving spouse, the income was to be paid to the surviving spouse until remarriage and thereafter if the trustees, in their discretion, saw fit. It was also provided that if any of the children desired to use a portion of the principal of their respective shares of the1947 U.S. Tax Ct. LEXIS 267">*285 trust fund for a purpose promising to be a sound business investment in the opinion of the trustees, they could receive up to 25 per cent in any five-year period, not to exceed in the aggregate 75 per cent of the total share. Should a beneficiary die without issue or surviving spouse his share was to pass to the other beneficiaries and:

Fifth: If all of the beneficiaries of this Trust shall predecease Paul Garrett, without leaving issue them surviving, this Trust shall terminate and the principal and undistributed accumulations thereon, shall be paid to Paul Garrett.

Sixth: In the event all of the beneficiaries should survive Paul Garrett and predecease Evelyn E. Garrett, wife of Paul Garrett, without leaving issue, this Trust shall terminate and principal and undistributed accumulations thereon, shall be paid to Evelyn E. Garrett, wife of Paul Garrett.

8 T.C. 492">*500 It was also provided that during the minority of any of the children their share of income could be used, in the judgment of the trustees, for their maintenance and education, the balance to be accumulated and distributed on the child's reaching 21. Any vacancy in the office of trustee was to be filled, with preference 1947 U.S. Tax Ct. LEXIS 267">*286 being given to any son-in-law of decedent. The instrument recited that it was the intention that the stock of the Garrett Holding Corporation would constitute the corpus of the trust, the trust income being derived from dividends thereon. However, in case of an emergency the trustees were given authority to sell such stock.

The trust agreement was executed "Garrett Holding Corporation by Paul Garrett, President" and attested by Moore as secretary, and an acknowledgment by Paul Garrett. There were also affixed the signatures and acknowledgments of the three trustees.

The value of the corpus of this trust at the time of decedent's death was $ 513,282. The value of the share of Garrett Holding Corporation stock issued in the name of Evelyn E. Garrett at the date of decedent's death was $ 128,282.

One of the motives in organizing the Garrett Holding Corporation grew out of losses from the operation of the farming properties at Penn Yan which had been borne by the several family holders of title. It was planned to get the properties into one unit and let decedent meet the losses. Decedent was to contribute securities to pay the expenses of the operation of the properties. Decedent1947 U.S. Tax Ct. LEXIS 267">*287 contemplated that his Garrett & Co. stock would be one of the securities going into the Garrett Holding Corporation. It was expected that Charles would be active in the operations and maintain the books of account, but he went to the hospital shortly after the Holding Corporation was incorporated. Moore did nothing about starting any books until after Charles died, because it was anticipated that Charles would come back. After Charles' death Moore took it on himself to set up the books of account because there was no one else to do it. He had no experience as a bookkeeper beyond his personal records. He had entered the employ of Garrett as an office boy in 1901, and is now an officer. The books he endeavored to set up for the Garrett Holding Corporation were a combined journal, cash book, and ledger. Moore also maintained separate books of account for decedent, on which he made entries which he saw fit, without consulting decedent. His services in this regard were gratuitous. At the date of decedent's death, as a result of the various entries of debits and credits, there was owing by the Holding Corporation to decedent $ 31,130.96.

When the properties and securities were 1947 U.S. Tax Ct. LEXIS 267">*288 contributed the entire amount was credited to the personal account of decedent irrespective of the source. The Garrett Holding Corporation books were set up by Moore in 1930, as of January 1. There was set up on the books 8 T.C. 492">*501 a personal account of decedent. All of his contributions to the Corporation were entered as credits, and disbursements made by the corporation for his personal benefit were charged as debits.

From the period January 1, 1930, to December 31, 1932, the personal account of decedent on the books of Garrett Holding Corporation totaled credits of $ 819,718.01 and debits of $ 333,626.80, leaving a credit balance of $ 486,091.21. When Moore set up a capital and surplus account for the Garrett Holding Corporation in 1933, it was entered as $ 487,091.21, approximately decedent's credit balance on the books on December 31, 1932.

Some of the Garrett Holding Corporation funds were used for and on behalf of decedent's personal affairs. Repayments were made at intervals and corporation expenses were paid out of personal advances.

The minutes of Garrett Holding Corporation, until the time of decedent's death, disclosed no dividends declared nor any activity except 1947 U.S. Tax Ct. LEXIS 267">*289 of a formal nature, although it apparently operated the farms properties. Decedent had unfettered control of the corporation at all times.

After decedent's contributions to the Garrett Holding Corporation, he still possessed an estate having a value of $ 800,000.

By decedent's last will and testament executed July 6, 1935, he appointed as executors and trustees of his estate the same persons acting under the 1929 trust agreement. They were to distribute the income as follows:

To my wife, Evelyn E. Garrett, for and during the term of her natural life and at her death, I direct that the principal of said Trust shall be paid to the Trustees acting under the above mentioned Trust Agreement with Garrett Holding Corporation, dated September 7, 1929, to be administered according to the terms of such Trust Agreement.

When Charles died on January 8, 1930, Moore was appointed successor trustee.

The creation of the trust by Garrett Holding Corporation was conducted as it was at the suggestion of Hyland. Instead of issuing stock to each person and each person creating a separate trust Hyland thought it would simplify the matter to create only one trust and have the corporation do it.

Decedent's1947 U.S. Tax Ct. LEXIS 267">*290 167 shares of Garrett Holding Corporation stock were transferred by him to a charitable trust for the support of the Garrett Memorial Chapel -- a memorial to his son Charles. In 1941 decedent's wife transferred her 167 shares of Garrett Holding Corporation stock to her 3 daughters. Both the transfer by decedent and his wife were reported through gift tax returns.

The condition of decedent's health in 1923 and 1929 when the trusts were created was good.

8 T.C. 492">*502 Decedent suffered a loss in the early thirties of more than $ 500,000 on an investment in a North Carolina bank. The estate tax return discloses other investments held by decedent which were regarded as worthless at his death.

On November 30, 1923, the immediate family of decedent was composed as follows:

Evelyn E. Garrett, widow of decedent, born February 18, 1876.

Charles W. Garrett, son, born June 10, 1903, and died January 18, 1930.

Evelyn Garrett Paulsen, daughter, born April 12, 1907, later becoming wife of said Howard C. Paulsen, born January 17, 1905.

Dorothy Garrett Weed, daughter, born December 5, 1910, later becoming wife of Douglas B. Weed, born August 6, 1910.

Emily Garrett Barden, daughter, born September1947 U.S. Tax Ct. LEXIS 267">*291 8, 1912, later becoming wife of Lewellyn J. Barden, born September 29, 1912.

At the date of decedent's death all the foregoing were living except Charles; and in addition there were the following grandchildren:

Children of Evelyn G. and Howard C. Paulsen:

Evelyn C. Paulsen, born November 4, 1930.

Anne Shirly Paulsen, born January 18, 1935.

Charles Garrett Paulsen, born February 6, 1937.

Black and Johnson, JJ., dissenting: It is plain that Trust No. 1, executed by decedent November 30, 1923, was not executed "in contemplation of death" in the sense that the decedent when he executed the trust had a present apprehension from some existing bodily or mental condition that death was near at hand. It is equally clear that no such fear or apprehension was the dominant cause for the transfers. See United States v. Wells, 283 U.S. 102">283 U.S. 102. If any such "contemplation of death" existed as a dominant motive then, of course, the entire amount of the corpus transferred to the trust would be includible in the decedent's estate under section 811 (c) of the Internal Revenue Code. However, the majority opinion holds that seven-tenths of the value of the securities are not to be included because the dominant motive impelling the transfer of these securities was associated with life1947 U.S. Tax Ct. LEXIS 267">*306 and not with death. That, of course, could not be if the transfer by decedent was "in contemplation of death" in the sense we have above described. But it is, of course, true that transfers to be included under section 811 (c) as "in contemplation of death" do not have to be made in apprehension of death near at hand. It is sufficient if the dominating motive for the transfer is testamentary in character. 283 U.S. 102">United States v. Wells, supra.

The majority opinion holds that, although the transfer of seven-tenths of the securities was not "made in contemplation of death" in either of the senses we have just mentioned, nevertheless the transfers of the insurance policies and three-tenths of the securities were testamentary in character and, therefore, were made "in contemplation of death" within the meaning of the applicable statute. We can not agree to this conclusion. We do not think it is supported by the facts embodied in the findings of fact. The majority opinion almost says, though not quite, that the transfer to a trust of an insurance policy on the transferor's life is necessarily testamentary in character and therefore made in contemplation1947 U.S. Tax Ct. LEXIS 267">*307 of death. The majority opinion concedes that a transfer of an insurance policy may resemble a gift, but deduces the "decedent's purpose to have the policies retained until they 8 T.C. 492">*509 and his life terminate together"; stresses that trust income was to be used in part for premiums; and then concludes that the purpose of the transfer was testamentary. It is evident that decedent contemplated a continuation of the trust and a distribution of trust income long after his death at all events, and hence the only effect of his death would be to increase the corpus from which income could be derived and to increase net income by elimination of the premium payments. It seems to us that the policies were an asset of the trust, like other assets; they had been taken out one by one since 1890, and, so far as we can see, should be treated in the same way as all the rest of the property which was transferred to the trust.

Apart from the normal incidents of insurance, the majority opinion finds nothing to indicate contemplation of death as a motive for creating the trust. Inferentially, we think the majority would have found no such motive if mortgaged real estate had been transferred in trust1947 U.S. Tax Ct. LEXIS 267">*308 and if trust provisions had required that trust income be used to pay off the mortgage debt. Such use would have built up the corpus of the estate; so here, the use of income for premiums built up corpus. In the absence of a general contemplation of death when the trust was formed, we fail to see any good reason why the transfer of insurance policies, taken out years before, is to be differently considered merely because their payment is conditioned on decedent's death. And this view gains strength from the fact that section 811 (g) of the Internal Revenue Code specifically provides for the inclusion in gross estate of the proceeds of insurance policies receivable by others than the insured's estate if the premiums were paid by the insured or if the insured possessed at death any incidents of ownership. Implicitly such proceeds are not to be included in the absence of these conditions, and it is obvious that these conditions were missing here. Decedent had relinquished all powers over the policies and the trust, not he, paid the premiums.

The majority opinion, in reaching the conclusion that the value of the insurance policies and three-tenths of the value of the securities should1947 U.S. Tax Ct. LEXIS 267">*309 be included in decedent's estate because the transfer of them to Trust No. 1 was made in contemplation of death, relies heavily upon Vanderlip v. Commissioner, 155 Fed. (2d) 152; First Trust & Deposit Co. v. Shaughnessy, 134 Fed. (2d) 940; and Thomas v. Graham, 158 Fed. (2d) 561. In our judgment these cases are distinguishable on their facts. In the Vanderlip case the facts briefly were these: Before 1918 the testator had taken out policies of life insurance aggregating nearly a million dollars, upon which he had borrowed before June 1, 1932, all that the insurers would lend. On that day he delivered and assigned all the policies to four trustees 8 T.C. 492">*510 upon trust to hold them until they became payable and then to collect them and hold the proceeds as the principal of a trust fund. The deed gave power to the trustees to use all dividends declared to pay premiums and interest on the loans and to borrow upon the policies for the same purpose. Furthermore and most important of all, it was stipulated that the gift of policies "was motivated solely by the decedent's desire1947 U.S. Tax Ct. LEXIS 267">*310 to avoid estate taxes and was not otherwise made in contemplation of death within the meaning of the Revenue Acts of 1926 and 1932 as amended or of the regulations thereunder."

We have no stipulation of facts in the instant case or finding of fact that the decedent made the transfers solely to avoid estate taxes. If we did have such a stipulation of fact or finding, then of course we would hold that the value of the entire property transferred to Trust No. 1 and not just the insurance policies and three-tenths of the securities should be included in decedent's estate. See Estate of Frank A. Vanderlip, 3 T.C. 358; affd., Vanderlip v. Commissioner, supra.

First Trust & Deposit Co. v. Shaughnessy, supra, is distinguishable on the same ground as the Vanderlip case. In fact, in the Vanderlip case we relied on the First Trust & Deposit Co. case as one of the controlling authorities.

In Thomas v. Graham, supra, the Fifth Circuit reversed the United States District Court for the Northern District of Texas and held that decedent's community1947 U.S. Tax Ct. LEXIS 267">*311 interest in certain securities and policies of insurance transferred to a trust by decedent and his wife on October 12, 1936, were includible as a part of decedent's estate under section 811 (c) on two grounds, (1) because of a possibility of reverter by operation of law and (2) because the transfer was made in contemplation of death. The holding of the court on the second ground was briefly stated and was based on the finding that the deed of trust was nothing more than a substitute for a testamentary disposition of the property within the meaning of the statute and section 81.16 of Treasury Regulations 105. If the language of the court in this Thomas v. Graham case, supra, is to be construed as holding that the mere fact that insurance policies are transferred to a trust to be collected on decedent's death and become a part of the corpus of the trust means that such a transfer is made in contemplation of death and the proceeds of the policies must be included as a part of decedent's estate, then, with all due respect to the court, we think the court is wrong and its decision is contrary to the weight of authority, particularly the reasoning of the Supreme Court in 1947 U.S. Tax Ct. LEXIS 267">*312 283 U.S. 102">United States v. Wells, supra.

For the foregoing reasons, we respectfully dissent from the majority opinion.