2 T.C. 967">*967 Respondent determined a deficiency in estate tax of $ 45,727.12, which deficiency resulted from the inclusion of the value of the corpora of two trusts in the gross estate, one of which trusts was created by the decedent and the other by his wife.

The two principal issues presented are: (1) Did respondent err in valuing the property of the estate involved as of the date of decedent's death and (2) did respondent err in including in the gross1943 U.S. Tax Ct. LEXIS 31">*32 estate of decedent the value of the corpora of the two trusts, or either of them?

Petitioner also claims an overpayment of $ 167.95 in tax due to her inclusion in the estate tax return of $ 1,679.50 dividends declared and paid in the year subsequent to decedent's death.

The proceeding was submitted upon the pleadings, testimony, and a stipulation of facts. The stipulated facts which are not set forth in our findings of fact are included therein by reference.

FINDINGS OF FACT.

Petitioner is the duly qualified executrix of the estate of Henry S. Downe, deceased.

Henry S. Downe was born June 1, 1861, was a citizen of the United States, domiciled in Syracuse, New York, and died December 8, 1938, in Paris, France.

Surviving him were his widow, Ethel Lestrade Downe (born January 27, 1881), and two children, Hamilton B. Downe (born June 12, 1892) and Edward R. Downe (born August 16, 1889). Both children are living and Edward has two children, Edward Allison Downe (born May 20, 1935) and Page Downe (born August 28, 1940). Hamilton B. Downe has no children. Ethel Lestrade Downe has two children, Marguerite Brown Taylor (born July 17, 1904) and Francis 2 T.C. 967">*968 Lestrade Brown (born January1943 U.S. Tax Ct. LEXIS 31">*33 14, 1906). Both are living and Marguerite has one child, Henry Stuart Taylor (born October 24, 1931). Francis Lestrade Brown has no children.

The estate tax return was mailed to the collector for the twenty-first district, Syracuse, New York, on Friday, March 8, 1940 (not a legal holiday), and was stamped received by that collector on March 9, 1940.

The petition herein was filed on March 31, 1942.

Petitioner included in the optional valuation in schedule B of the return $ 1,679.50 dividends declared and made payable to holders of record during the period December 8, 1938, to December 8, 1939.

The decedent, on January 14, 1930, executed and delivered a deed of trust pursuant to which he transferred certain property to United States Trust Co. of New York in trust upon the following terms:

First. To apply the net income therefrom to the use of Ethel Lestrade Downe, wife of the Grantor, during her life, and on her death to the use of the Grantor if living during his life; and on the death of the survivor of the Grantor and his said wife, to divide the trust estate into as many equal parts as there then may be survivors of Edward R. Downe and Hamilton B. Downe (the two children of the1943 U.S. Tax Ct. LEXIS 31">*34 Grantor) and of Marguerite Brown Taylor and Francis Lestrade Brown (the two children of his said wife) and such of those children then deceased who have issue then living; and to transfer, convey and pay over one of such parts, -- one-third to the widow, and the balance thereof, or the whole if there be no widow, to the then living issue per stirpes of each such child then deceased, and to continue to hold one of such parts and apply the net income therefrom to the use of each of such children then living during the life of that child; and upon the death of that child to transfer, convey and pay over the principal of such part to such persons and in such proportions as that child may appoint by will, except that not more than one-third thereof shall be appointed to the widow of that child, and in default of such appointment, in whole or in part, so much of such part as is not so appointed, to the issue of that child per stirpes, and in default of such issue to the then survivors of such children and the then living issue of such children as are then deceased in equal shares, the issue of any deceased child to take per stirpes one share.

Second. The Grantor reserves the1943 U.S. Tax Ct. LEXIS 31">*35 option to direct in writing the Trustee to issue voting proxies on and to retain, sell, exchange, invest and reinvest any of the trust property held hereunder in such manner as he may direct and without liability to the Trustee for resulting loss; and after the death of the Grantor such option shall be reserved to Ethel Lestrade Downe, wife of the Grantor, during her life. Subject to such option the Trustee shall have full authority, in its discretion, to retain property coming into its hands in the same form as received by it and to hold, invest and reinvest the trust fund from time to time held hereunder in such manner and in such property as it may deem advisable, all without the legal restrictions otherwise applicable to Trustees; to sell or exchange any property held hereunder for such price and upon such terms and conditions as may to it seem advisable, and without liability for loss.

Third. Should any investment held hereunder be involved in a reorganization or in the event of default in payment of principal of or interest on any of the securities held hereunder, the Trustee is authorized to join in any reorganization or protective plan approved by it and to deposit said investments1943 U.S. Tax Ct. LEXIS 31">*36 and securities subject to the terms of any protective or reorganization agreement approved 2 T.C. 967">*969 by it and to pay from the capital of the trust any monies required to be paid according to such plan, and without applying to any Court for permission so to do.

* * * *

There was a further provision in the deed of trust that it should be governed by the laws of the State of New Jersey "which is the domicile of the Grantor." There were other provisions not material herein.

It is stipulated that the trust was not made in contemplation of death.

The value of the corpus of this trust at date of decedent's death is stipulated as $ 120,993.27.

Decedent's wife, on January 14, 1930, executed and delivered a deed of trust, identical in all respects with the decedent's deed of trust, except that therein decedent was the life beneficiary, and the grantor, wife, was the life beneficiary after the death of her husband if she survived him, and pursuant to which she transferred certain property to United States Trust Co. of New York.

The value of the corpus of this trust at date of decedent's death was $ 120,980.76.

The corpus of each trust consisted of the same number of shares of common stock in1943 U.S. Tax Ct. LEXIS 31">*37 the same seven corporations.

Decedent's wife purchased a home for decedent and herself in Paris, France, in 1924 with her own funds and she and her husband lived in Paris prior to her husband's death. The husband was the chairman of the European board of the American Radiator Co. and lived in Paris for that reason. The wife used her money in making the purchase of the house because decedent did not wish to sell stock he owned for that purpose. Decedent reimbursed his wife for the cost of the house by payments made her at different times prior to the creation of the trusts. There was no agreement or understanding between them as to the disposition of such reimbursement.

Decedent and his wife returned to the United States annually and, during one such trip, in 1930, established the two trusts. Decedent felt the trusts should be established for their protection in their old age, and in order that they could continue to live in their home regardless of events. He wanted the money put aside so they could not spend it. His wife made no suggestions in connection therewith, but told him to do whatever he wished.

Decedent's salary as chairman of the European board of the American Radiator1943 U.S. Tax Ct. LEXIS 31">*38 Co. for the year 1938 was $ 60,000. Apart from his income from his wife's trust and this salary, he had additional income of $ 4,000 to $ 5,000 a year.

The respondent in his determination included in the gross estate of decedent the values of the corpora of the two trust estates created 2 T.C. 967">*970 by decedent and his wife, stating that they were so included "under the provisions of Section 302 (c) and/or (d) of the Revenue Act of 1926 as amended."

OPINION.

The respondent valued the property of decedent's gross estate as of the date of decedent's death "since the return was not filed within fifteen months after the date of death" and contends that he was right in doing so. The date of death was December 8, 1938, and the only evidence submitted as to the time of filing of the estate tax return was the stipulation that it "was mailed to the Collector of Internal Revenue, 21st District, Syracuse, New York on Friday, March 8, 1940 (not a legal holiday) and was stamped received by said Collector on March 9, 1940."

Under section 302 (j) of the Revenue Act of 1926, as added by section 202 (a) of the Revenue Act of 1935, the executor of a decedent's estate, instead of valuing the property1943 U.S. Tax Ct. LEXIS 31">*39 of the estate as of the date of the decedent's death, may value it as of one year thereafter if he "so elects upon his return (if filed within the time prescribed by law or prescribed by the Commissioner in pursuance of law) * * *."

Article 11 of Regulations 80 (p. 42), applicable to section 302 (j), supra, provides, in part, that:

The election is available to the executor only at the time the return is filed, and only if the return is filed within 15 months from the decedent's death, or within the period of an extension of time for filing granted under the provisions of article 68 or 69 of these regulations.

Article 63 of Regulations 80 (p. 97), also applicable to 302 (j), supra, provides, in part, that:

If the return is due 15 months after the decedent's death, the due date is the day of the fifteenth calendar month after his death numerically corresponding to the day of the calendar month in which death occurred * * *. If placed in the mails the return should be posted in ample time to reach the collector's office, under ordinary handling of the mails, on or before the date on which the return is required to be filed.

There being no evidence that an extension of time was1943 U.S. Tax Ct. LEXIS 31">*40 requested or granted, the return was due by March 8, 1940. While we know it was "mailed" on that date, we are not informed as to the time of mailing or the place from which it was mailed; nor are we informed of any reasonable cause why the return was not timely filed. We accordingly can not determine that the return was "posted in ample time to reach the collector's office, under ordinary handling of the mails, on or before the date on which the return is required to be filed," as required by the regulations; and we hold that petitioner's estate tax return here involved was delinquently filed and that consequently 2 T.C. 967">*971 the estate must be valued as of the date of decedent's death, as determined by respondent.

The respondent included in decedent's gross estate the corpus of the trust created by him, wherein his wife was a life beneficiary of the income and after her death the grantor, if he survived her, was the beneficiary for his life, with remainder to their children and the issue thereof. He supports the propriety of such inclusion on three grounds, the first of which is an alleged retention by the grantor, decedent, of a possibility of reverter of the corpus by operation1943 U.S. Tax Ct. LEXIS 31">*41 of law due to decedent's failure to name a beneficiary who would take in the event decedent's children and his wife's children and their issue should predecease him without exercising the testamentary powers of appointment provided for.

How tangible was this possibility of reverter may be imagined from the fact that decedent, who was 78 at his death, would have had to survive his wife, 57; his two children, 46 and 49, respectively; his two grandchildren, one aged three and the other not then born; his wife's two children, 32 and 34, respectively; his wife's grandchild, seven; and the possible unborn issue thereof.

Under the circumstances we do not consider that such a possibility of reverter operates to establish a transfer intended to take effect in possession or enjoyment at or after decedent's death within the meaning of section 302 (c), supra, because such possibility could actually be realized only by operation of law upon "failure of the trust" and not through any express provision of the trust instrument by which "he could pull the res back to him or invade the corpus." ; 1943 U.S. Tax Ct. LEXIS 31">*42 (on appeal, C. C. A., 2d Cir.); ; ; ; and .

The second ground for respondent's contention that the trust corpus should be included in the gross estate of decedent is that decedent retained the power to alter, amend, or revoke the trust within the meaning of section 302 (d) (1) of the Revenue Act of 1926 as amended by section 805 (a) of the Revenue Act of 1936. ¹ The retained power 2 T.C. 967">*972 in question is that provided in paragraph "Second" of the trust instrument, reserving to the grantor "the option to direct in writing the Trustee to issue voting proxies on and to retain, sell, exchange, invest and reinvest any of the trust property held hereunder in such manner as he may direct and without liability to the Trustee for resulting loss." Subject to this option, the trustee had the right to make investments in its own discretion.

1943 U.S. Tax Ct. LEXIS 31">*43 In , the grantor of an irrevocable trust transferred certain securities to a corporate trustee. The trust instrument provided that the trustee when so requested in writing by the grantor should "sell any part or parts of said trust estate in the manner and for the consideration or considerations which I may in such request express," and that it should "whenever requested by me in writing so to do, invest any funds in their hands forming a part of the principal of said trust estate in the manner and by the purchase of such property as I may in such written request indicate." The issues presented and decided were whether the grantor was empowered to revoke the trust and revest in herself the corpus by requiring the trustee to convey such corpus to her for a nominal consideration and thus render her taxable with the income of the trust under section 166 of the Revenue Act of 1936, or, alternately, whether she retained such control over the administration of the corpus of the trust as to render her taxable on the income therefrom under section 22 (a) of the same act. We held that she was not so taxable under either section, 1943 U.S. Tax Ct. LEXIS 31">*44 and we said with reference to section 166:

Respondent argues that the provision of the trust instrument hereinbefore set out (referring to the provisions we have just above summarized) is so broad as to reserve to petitioner the right to revest in herself the corpus of each trust by requiring the trustee to convey such corpus to her for a nominal consideration and that petitioner is accordingly liable for tax on all income, * * * under section 166, supra. We do not agree. * * * No such power is expressly reserved * * *. We think no construction of this provision as including such right, when it was not explicitly reserved, could have been made without a disregard of the cardinal duty of the trustee to safeguard and conserve the corpora of these trusts in the interest * * * (of the beneficiaries). [Parentheses and italics supplied.]

See also ; reversed on another point, ; ; reversed on another point, ; Cf. ;1943 U.S. Tax Ct. LEXIS 31">*45 affd., ; ; affd., by C. C. A., 2d Cir., on authority of ; and .

While the cited cases, including the Maloy and Ward cases (which latter two are more in point than are the others) all involved income 2 T.C. 967">*973 tax rather than estate tax, as is here involved, the issue of trust revocability or nonrevocability was the same in those cases as it is here, even though that decisive issue arose in those cases out of the applicability or nonapplicability of section 166, supra, while here it arises out of the applicability or nonapplicability of section 302 (d) (1), supra. The tax incidence in each of the cited cases, as it does here, depended upon whether or not there was a retained power in the grantor to alter, amend, or revoke a trust he or she had created. The two sections have a cognate purpose. Cf. ;1943 U.S. Tax Ct. LEXIS 31">*46 ; and (appeal dismissed by C. C. A., 2d Cir., Oct. 1935).

We think the decisions in the Maloy and Ward cases to the effect that the powers there reserved by the grantor were not sufficient to enable him to amend, alter, revoke, or terminate the trust under section 166, supra, must lead us to a like conclusion, under section 302 (d) (1), supra, as to the effect of the powers reserved by decedent here.

The sole authority cited by respondent in support of his second contention is Commonwealth Trust Co. of Pittsburgh v. Driscoll (Dist. Ct., W. Dist. Pa., Jan. 28, 1943); affd., (C. C. A. 3d Cir., July 9, 1943). In that case the decedent created a trust, transferring to the trust certain securities, the income to be disposed of according to the provisions of the trust, and the decedent as grantor under the terms of the trust having the right to make any substitutions of securities from time to time as he deemed advisable. The District1943 U.S. Tax Ct. LEXIS 31">*47 Court and the Circuit Court on appeal held that such power to substitute any securities constituted the retention by the grantor of a power to alter, amend, or revoke the trust under the provisions of section 302 (d) (1) of the Revenue Act of 1926, as amended, and that, therefore, the corpus of the trust was includable in the estate of decedent, grantor, under that section. The Circuit Court said:

* * * He reserved "the right to make any substitutions of securities from time to time as he deems advisable." No restriction was made, however, as to the kind of value of the securities which could be substituted. It is held that the transfer was taxable as one with a right retained to alter, amend, or revoke.

Apparently the court concluded that the power of substitution was equivalent to a power of withdrawal of the trust property with the revocation of the trust as a necessary consequence. The decedent here retained no such power. He merely retained the power to direct the investment policy of the trustee and not the right, as in the Driscoll case, "to make any substitutions of securities from time to time as he deems advisable."

2 T.C. 967">*974 We think the second ground of respondent's1943 U.S. Tax Ct. LEXIS 31">*48 contention is untenable.

The third ground for respondent's contention that the trust corpus should be included in the estate of decedent is that decedent retained such economic control over the corpus that he must be regarded as the owner thereof within the rule announced in ; and that therefore the value of the corpus is includable in decedent's estate under section 302 (a) and (c) of the Revenue Act of 1926, as amended.

We think that this ground is also untenable under the reasoning and holdings in ; ; and . In the Maloy case we said, in holding that the trust there involved did not come within the rule of the Clifford case: "This one power to direct investments which petitioner retained constituted no such 'bundle of rights' as the Court in the Clifford case held to be a substantial retention of the benefits of ownership."

While the Branch and Maloy cases just above cited involved income and not estate tax, 1943 U.S. Tax Ct. LEXIS 31">*49 the fundamental and essential question for decision in each was whether the grantor of a trust should be regarded as the owner of the corpus within the rule of the Clifford case. In each case the solution of this question depended alone upon the effect of a provision of a trust instrument involved whereby the grantor (individually in the Maloy case, and as cotrustee in the Branch case) retained control of sales, investments, and reinvestments of the trust property as did the decedent, grantor, here. The effect of this provision was the only ground assigned by the Government in those cases for the application of the rule in the Clifford case, and assuming, although not so deciding, that the rule in the Clifford case is applicable here under section 302 (a) and (c) of the Revenue Act of 1926, as amended, we, for similar reasons as stated in the Maloy case, reach the same conclusion as to the trust corpus here involved as was there reached as to the trust there involved, i. e., that the trust corpus here does not come within the operation of the rule announced in the Clifford case and that consequently its value is not includable in decedent's estate by 1943 U.S. Tax Ct. LEXIS 31">*50 reason of that rule.

Respondent contends that, even though we decide that it would be improper to include in the gross estate of decedent the value of the trust created by him, nevertheless the value of the trust "nominally created by the decedent's wife" is includable in decedent's gross estate, for the reason that the two trusts were so reciprocal as that decedent must be treated as the real grantor in the "nominally created" trust of the wife and that, as such real grantor, decedent would have received the income therefrom during his life.

2 T.C. 967">*975 Assuming, without deciding, that the two trusts were reciprocal and that decedent must be treated as the real grantor in the "nominally created" trust of his wife, we nevertheless are of the opinion that the value of the trust estate "nominally created" by decedent's wife is not includable in decedent's estate and for the reasons we shall now give, together with those we have given in reaching the conclusion that the value of the trust estate created by decedent is not so includable. The only essential difference in the status of the decedent in the trust created by himself and what would be his status as the assumed grantor in the 1943 U.S. Tax Ct. LEXIS 31">*51 "nominally created" trust of his wife would be that in the latter he would receive the income for life as the initial beneficiary of the trust, while in the former he would not. Under authority of , we are of the opinion that such a difference between the status of decedent under the two trusts does not justify a conclusion that the value of the estate of the trust "nominally created" by his wife should be included in decedent's estate.

We hold that the value of the estate of the trust "nominally created" by his wife, and of which trust we have assumed the decedent must be treated as the real grantor, is not includable in the value of his estate.

Since the estate of decedent is to be valued as of the date of his death, the $ 1,679.50 dividends paid in the year subsequent to his death are not includable in the valuation of his estate.

Decision will be entered under Rule 50.