5 T.C. 488">*488 The Commissioner has determined an estate tax deficiency in the amount of $ 12,360.29. The deficiency resulted mainly from the inclusion in decedent's gross estate of one-third of the value of the corpus of a trust created by decedent and others in 1923, and from certain increases in the value of real estate of which the decedent owned an undivided one-third interest at her death. Several other minor adjustments 5 T.C. 488">*489 are not contested by the petitioner. It is agreed that petitioner will be entitled to a credit for state estate and inheritance taxes upon submission of proof of payment in the manner required by law and regulations.

FINDINGS OF FACT.

Petitioner is the estate of Nina M. Campanari, who died1945 U.S. Tax Ct. LEXIS 116">*118 July 3, 1941, a resident of the State of New York. Christopher C. Campanari and Estella Maresi, both of whom are residents of New York, are the duly qualified and acting executors of the estate. The estate tax return involved was filed with the collector of internal revenue for the fourteenth district of New York, on October 3, 1942.

On or about February 1, 1923, the decedent and Estella Maresi, decedent's sister, and Pompeo M. Maresi, decedent's brother, executed an indenture of trust conveying to themselves, as trustees, their respective undivided interests in certain properties, real and personal. Under the terms of the trust the trustees were to invest and reinvest the property of the trust and to collect and receive the income therefrom. After paying taxes and expenses of administration, they were to pay over the net income, as frequently as they should deem advisable, for and during the lives of decedent and Pompeo, and the survivor of them, in these proportions: seven-fifteenths to Pompeo, four-fifteenths to Estella, and four-fifteenths to decedent. Upon the death of any of the parties thereto the share of the deceased was to be paid over, in equal parts, to his or her1945 U.S. Tax Ct. LEXIS 116">*119 descendants then surviving, per stirpes. If no descendants survived the deceased, the share was to be paid over in equal shares to the surviving parties or the descendants of any deceased party, per stirpes. At the death of the survivor of decedent or Pompeo the property was to be distributed one-third to Estella, if alive, and the remaining two-thirds in equal parts to the then surviving children of decedent and Pompeo and to the descendants of any deceased children, per stirpes. If Estella was deceased at the termination of the trust, then the whole of the trust property was to be distributed, in equal shares, among the surviving children and descendants of any deceased children, per stirpes. Upon the death of any two of the trustees the surviving trustee was to appoint a trust company, organized under the laws of New York, to take the place of the deceased trustees.

At the time the above trust indenture was executed decedent was 31 years of age, Estella was 47 years of age, and Pompeo was 32. Subsequent to the establishment of the trust decedent married, although she died without issue. Estella was unmarried and has never married. Pompeo was married and had two children, 1945 U.S. Tax Ct. LEXIS 116">*120 one age 11 and one age 8. A third child was born in 1923, after the date of the trust agreement. The trust was not created in contemplation of death.

5 T.C. 488">*490 The trust terminated at the death of decedent. On July 3, 1941, the date of the death of decedent, at the age of 49, she left surviving her Estella Maresi, her sister, Sylvia F. Maresi, age 29, Pompeo H. Maresi, age 26, and Helen C. Maresi, age 18, and two children of Pompeo H. Maresi who were then 6 and 3 years of age, respectively. Except for Estella, the above were the children and grandchildren of Pompeo, brother of decedent, who predeceased her by approximately one year.

In his deficiency determination the respondent included the sum of $ 26,701.05, which is the agreed upon value of a one-third interest in the trust property as of the date of valuation.

At the date of her death the decedent was possessed of an undivided one-third interest in certain real estate. The other two-thirds interest was owned by the estate of Pompeo M. Maresi and by Estella Maresi. The executors elected to have the gross estate valued in accordance with the values as1945 U.S. Tax Ct. LEXIS 116">*121 of a date subsequent to decedent's death, as authorized by section 811 (j) of the Internal Revenue Code.

The parcels of real estate in question are briefly described as: "146 Columbia Heights, Brooklyn, New York, four-story and basement brick and brownstone dwelling on lot 25 ft. x 112.4 ft.," the fair market value of the entire parcel being $ 20,000; "151 Furman Street, Brooklyn, New York, six-story brick building with store on ground floor on lot 25 ft. x 37 ft.," the fair market value of the parcel being $ 3,000; "1045 Sixth Avenue, Borough of Manhattan, New York, old four-story and cellar brick building on lot 24.8 ft. x 100 ft.," the fair market value of the entire parcel being $ 75,000; "1141-3 Sixth Avenue and 101-105 West 44th Street, Borough of Manhattan, New York, four-story brick building with stores on the ground floor, lofts on the second floor of 103-5 West 44th Street, and a hotel on the entire upper portion of all the buildings on the northwest corner of Sixth Avenue and 44th Street, on lot 50.5 ft. x 100 ft.," the fair market value of the entire parcel being $ 275,000; and "260-2 West 41st Street, Borough of Manhattan, New York, eight-story and basement store loft building on lot 50 ft. x 98.9 ft.," the fair market value of the entire1945 U.S. Tax Ct. LEXIS 116">*122 tract being $ 175,000.

In its return the estate reported the entire value of each of the above properties at $ 20,000, $ 3,000, $ 75,000, $ 275,000, and $ 175,000, respectively, and reported the value of the decedent's undivided one-third interest as being one-third of the whole value of each parcel, minus 12 1/2 percent. In his deficiency notice the Commissioner determined that the values of the last three of the entire parcels above should be increased in the amounts of $ 2,226.93, $ 4,337.51, and $ 15,000.02, respectively, and he disallowed the 12 1/2 percent decrease in value of decedent's one-third interest in all five parcels.

5 T.C. 488">*491 OPINION.

The first problem before us concerns the includibility in the decedent's gross estate, under the provisions of section 811 (c) of the Internal Revenue Code, of the value of a one-third interest in the trust created by the decedent and others in 1923. By the terms of the trust instrument at least four-fifteenths of the income was to be paid over to decedent during her lifetime. If either of the other primary beneficiaries had predeceased the decedent and had left no living issue or descendants, the decedent would have been entitled1945 U.S. Tax Ct. LEXIS 116">*123 to a greater percentage of the trust income during the remainder of her life.

The respondent makes no contention that the value is to be included in the estate by reason of the retention of the income during the decedent's life. We think it is clear that nothing is includible on that ground. The trust was created prior to the Joint Resolution of March 3, 1931, and is not, by reason of such retention, a transfer intended to take effect in possession or enjoyment at or after death. May v. Heiner, 281 U.S. 238">281 U.S. 238; Hassett v. Welch, 303 U.S. 303">303 U.S. 303; Estate of Edward E. Bradley, 1 T.C. 518; affd., 140 Fed. (2d) 87. The respondent's inclusion of the one-third interest in the corpus of the trust is predicated on the argument that the transfer was intended to take effect in possession and enjoyment at or after death because of the existence of a possibility of reverter. Although the respondent admits that the possibility of reverter was remote, he argues that the question of remoteness is no longer a consideration since the decisions of the Supreme Court in Fidelity-Philadelphia Trust Co. (Stinson) v. Rothensies, 324 U.S. 108">324 U.S. 108,1945 U.S. Tax Ct. LEXIS 116">*124 and Commissioner v. Estate of Lester Field, 324 U.S. 113">324 U.S. 113.

Under the terms of the trust indenture the corpus was to be distributed at the death of the survivor of the decedent and her brother, Pompeo. The gift of the remainder was absolute and unconditional. The decedent reserved no power of appointment, either contingently or otherwise, nor did she hold any strings by which the corpus could be drawn back to her or her estate. At all times during the existence of the trust remaindermen were in being, were known, and were able to take should the trust terminate. At the death of decedent Estella was able to take her proportionate part of the trust corpus and the three living children of Pompeo, one of whom had two living children, were able to take the balance. The instant case is clearly distinguishable from the Fidelity-Philadelphia Trust Co. case, supra, because in that case the grantor reserved a power of appointment. See Commissioner v. Irving Trust Co., 147 Fed. (2d) 946, and Estate of Harris Fahnestock, 4 T.C. 1096. Here the gift was not intended to take effect in1945 U.S. Tax Ct. LEXIS 116">*125 possession at death, since the grantor intended to dispose 5 T.C. 488">*492 completely of her interest in the corpus in her lifetime, and the fact that the death of decedent may have put an end to a remote possibility of reverter does not warrant the inclusion of one-third of the value of the trust property in the decedent's gross estate. Frances Biddle Trust, 3 T.C. 832; Estate of Harris Fahnestock, supra.

We have found that the fair market values of the parcels of real estate were $ 20,000, $ 3,000, $ 75,000, $ 275,000, and $ 175,000. Petitioner's witness, a New York real estate dealer of many years' experience, testified that in his opinion the above sums represented the fair market values of those properties. The respondent offered no evidence. We are satisfied that the witness's testimony warrants our conclusion that the respondent erred in increasing the values of the parcels in question. See Bryant v. Commissioner, 76 Fed. (2d) 103; Bonwit Teller & Co. v. Commissioner, 53 Fed. (2d) 381.

The main valuation problem has to do with the fair market value1945 U.S. Tax Ct. LEXIS 116">*126 of the decedent's undivided one-third interest. The respondent has determined that the value of such interest is one-third of the value of each parcel. Petitioner, on the other hand, contends that the decedent's interest is less than the proportionate value of the whole and asks for a reduction of 12 1/2 percent.

Petitioner's witness testified that it was a common practice in the New York real estate market, in appraising real estate, to deduct a percentage on an individual fractional interest. The reason for such discount was that a purchaser of such minority interest subjected himself to the wishes of the other owners and he had no control in the management, operation, or leasing of the properties. He testified that in his experience it was hard to find a buyer for an undivided fractional interest in New York and that purchasers were interested in buying minority interests only when they could obtain all of the fractional interests making up the whole parcel. The witness stated that he had tried on five or six occasions to sell fractional interests in real estate, but had not been able to obtain offers to buy except at high discounts which the owners had refused to accept. 1945 U.S. Tax Ct. LEXIS 116">*127 He testified that in his opinion the fair market value of decedent's interest was 12 1/2 percent less than the proportionate value of the entire parcel.

The New York authorities recognize that it is proper to make a deduction in valuing an undivided fractional interest in real estate for inheritance tax purposes. In re Gibert's Estate, 163 N. Y. S. 974; In re Loeb's Estate, 164 N. Y. S. 592; and In re Turner's Estate, 222 N. Y. S. 645.

We think the material evidence supports a conclusion that the fair market value of decedent's interest was less than the proportionate value of the whole parcel and that a reduction of 12 1/2 percent is reasonable. The instant case is not unlike William Rhinelander 5 T.C. 488">*493 , 31 B. T. A. 201, where we approved a 15 percent discount, and we think a similar ruling should be applied here.

Decision will be entered under Rule 50.

Murdock, J., dissenting: I dissent from the holding that the fair market value of decedent's undivided one-third interest in the five pieces of real estate is 12 1/2 percent less than1945 U.S. Tax Ct. LEXIS 116">*128 one-third of the fair market value of the entire five pieces. Perhaps an owner of an undivided one-third interest, forced to sell, might not get more than 87 1/2 percent of one-third of the value of the whole. However, in determining fair market value the existence of a willing seller, not forced to sell, and also a willing buyer, is assumed. I can not believe that the holder of a one-third interest who was not forced to sell would accept an offer of a willing buyer at 87 1/2 percent of one-third of the value of the whole.