9 T.C. 503">*503 The Commissioner determined a deficiency of $ 97,961.28 in estate tax. The issues for decision are whether the Commissioner erred in including in the gross estate (1) 150 shares of Feedwaters, Inc., stock transferred by the decedent to his daughter as a transfer within section 811 (c); (2) 100 shares of Feedwaters, Inc., stock transferred to Franklin Lang as a gift in contemplation of death; (3) mortgage certificates transferred by the decedent to Franklin Lang as a gift to his children in contemplation of death; (4) shares of Feedwaters, Inc., stock at $ 316.52 a share instead of at $ 130 a share; and (5) English assets at $ 86,819.71 instead of $ 19,888.97; and (6) in refusing to allow1947 U.S. Tax Ct. LEXIS 82">*84 a deduction of $ 1,000 paid to Aimee P. Hare in settlement of a claim.

FINDINGS OF FACT.

Ambrose Fry, the decedent, died testate on October 22, 1941, while a resident of Vero Beach, Florida. The cause of his death was cancer of the prostate. He died in Paterson General Hospital, Paterson, New Jersey. The length of his last illness was one month.

The decedent was born on August 11, 1868, in Montreal, Canada, and was a citizen of the Dominion of Canada at the time of his death.

He was survived by his widow, two sons, and two daughters, all of whom resided in England.

The decedent originally owned 1,000 shares, being all of the outstanding common stock, of Feedwaters, Inc., a New York corporation which he had organized. That corporation was engaged since about 9 T.C. 503">*504 1927 in the manufacture and sale of a few chemical products, principally compounds used in cleaning and preserving boilers. The decedent was president of the corporation up to the time of his death, but he did not devote all of his time to its affairs. He gave some of his shares to officers and employees prior to 1938.

Franklin Lang was vice president of the corporation at the time of the decedent's death and for1947 U.S. Tax Ct. LEXIS 82">*85 a number of years prior thereto. He managed its affairs and was the only executive officer aside from the decedent. Lang, in the latter part of 1938, was not entirely satisfied with his arrangement with the corporation. The decedent regarded the services of Lang as extremely valuable to the corporation and wanted him to remain with it.

The decedent, in the latter part of 1938, made a gift of 100 shares of Feedwaters, Inc., stock to Lang in order to satisfy him, to give him an interest in the business, and to keep him with the corporation. That gift was not made in contemplation of death. The Commissioner included the value of the shares in the gross estate under section 811 (c).

Muriel Fry Gee was one of the decedent's daughters. The decedent, in the latter part of 1938, was hoping that Muriel would make her home with him in the United States. The decedent and Muriel executed a written memorandum, as follows, on November 30, 1938:

Dearest Muriel:

I am glad you have decided upon making the U. S. your home.

This memo serves to confirm I will now give you in consideration of this -- 150 Feedwaters shares, subject to your giving me the first dividends on these up to $ 15,000.

1947 U.S. Tax Ct. LEXIS 82">*86 [Signed] Ambrose Fry

Accepted:

[Signed] Muriel Fry

The decedent transferred 150 shares of Feedwaters, Inc., stock to Muriel on December 13, 1938. The Commissioner included the value of the shares in the gross estate under section 811 (c).

The transfer of 150 shares of Feedwaters, Inc., stock to Muriel was not made in contemplation of death.

$ 2,632.25 of the $ 15,000 mentioned in the above memorandum remained unpaid at the date of the death of the decedent. Muriel paid that amount to the decedent's estate out of dividends on the stock, after his death.

The value of the stock of Feedwaters, Inc., at the date of the decedent's death was $ 245 per share. The Commissioner valued the shares at $ 316.52 each in determining the deficiency.

The decedent, in August 1941, purchased about $ 7,000 worth of mortgage certificates, which he placed in the name of Franklin Lang, as 9 T.C. 503">*505 a gift to Lang's two young children. That transfer was made in contemplation of death. The Commissioner included the value of the certificates in the gross estate under section 811 (c).

The decedent at the time of his death owned the following property situated in England:

(1) A credit of # 6,691 on the1947 U.S. Tax Ct. LEXIS 82">*87 books of Cavendish Investment Trust Co., representing the balance of the purchase price of some English shares sold by the decedent to Cavendish Investment Trust Co., pursuant to an agreement under which the purchase price was to be paid "as and when funds become available."

(2) Shares of Liverpool Borax Co. Ltd., an English company, having a market value in England of # 12,582.

(3) A credit of # 2,243.13.2 at Barclays Bank Ltd., London, representing dividends on the shares of Liverpool Borax Co., Ltd.

The official rate of exchange at the time of decedent's death was $ 4.035 for a pound and $ .20175 for a shilling. Dividends on British securities could be transmitted to the United States at the time of the death of the decedent at the official rate of exchange.

The British Foreign Exchange Control, at the time of the decedent's death, would not have permitted the transmittal to the United States of the money owed the decedent by Cavendish or the Liverpool Borax Co. Ltd. shares. The value of such a credit and of such shares in the United States at the time of the decedent's death was at the rate of about $ 1.615 per pound sterling.

The shares of Cavendish Investment Trust Co. were1947 U.S. Tax Ct. LEXIS 82">*88 owned by members of the decedent's family. The company contended, after the decedent's death, that the transaction which it had had with the decedent giving rise to the credit on its books in his name was in the nature of a gift rather than a sale, and it did not actually owe the amount of the credit. That question was decided adversely to the company in the British courts and the company was required to pay the credit to the ancillary administrators of the decedent in England.

Cavendish and one of the decedent's sons contended, after the decedent's death, that the Liverpool Borax Co. Ltd. shares belonged to them rather than to the decedent. The decedent had been trying to make gifts of those shares to Cavendish and the son, but the British authorities had withheld approval, pending investigations by them, and the proposed gifts were incomplete when the decedent died. The British courts decided that there had been no complete gifts and the shares belonged to the estate of the decedent.

The proceedings in the British courts were instituted by the British fiduciary of the estate of the decedent to guide it in administering the estate.

The total value of the decedent's interest in1947 U.S. Tax Ct. LEXIS 82">*89 the British assets for Federal estate tax purposes at the date of his death was $ 39,500. The Commissioner included these assets in the gross estate at a value of 9 T.C. 503">*506 $ 86,819.71, making no allowance for British restrictions affecting their transmittal out of England.

The decedent organized a corporation in 1939, known as the Grovite Co. He held all of the capital stock of that corporation until his death. He and his wife executed a warranty deed dated August 4, 1939, conveying, among other property, his residence at Vero Beach, Florida, to the Grovite Co. The consideration for that transfer was a purchase money bond and mortgage of the Grovite Co. dated September 26, 1941. The deed was not delivered to the Grovite Co. until September 26, 1941, at which time the purchase money bond and mortgage were given by the Grovite Co.

The decedent executed a lease on September 11, 1941, whereby he leased the residence at Vero Beach for a long period of time to Aimee P. Hare, an old friend, at an annual rental of $ 240, a purely nominal rental. The lease provided that the decedent would pay all charges for water, light, and fuel.

The Grovite Co., after the decedent died, filed proof1947 U.S. Tax Ct. LEXIS 82">*90 of claim with his estate calling upon the estate to defend the title of Grovite Co. to the Vero Beach residence, and specifically to free it of the claim of Aimee P. Hare under her lease. The matter was compromised, with the approval of the court, by the fiduciary of the estate purchasing the lease from Aimee P. Hare for $ 1,000 and obtaining appropriate releases from her.

The petitioner claimed a deduction of $ 1,000 on the return on account of the payment to Aimee P. Hare. The Commissioner disallowed the deduction in determining the deficiency, on the ground that it was not a proper claim against the estate. It was not contracted bona fide and for an adequate and full consideration in money or money's worth.

The stipulated facts are incorporated herein by this reference.

OPINION.

The decedent was well and active at the time he made the gift of 100 shares of Feedwaters, Inc., to Lang. It was more than a year later that the prostatic condition caused him to consult a urologist and undergo an operation. The evidence shows that he had had difficulty in the past with those with whom he had been associated in the operation of Feedwaters, Inc., he had made similar gifts in prior years, 1947 U.S. Tax Ct. LEXIS 82">*91 he was well pleased with Lang and wanted him to continue as the manager of the business, and he gave the shares, not in contemplation of death, but to satisfy Lang and to retain his services, a motive connected with continued life.

The Commissioner does not contend that the 150 Feedwaters shares transferred to Muriel are to be included in the gross estate as a 9 T.C. 503">*507 transfer in contemplation of death. They were transferred as a reward to Muriel for her decision to stay with her father in this country and not in contemplation of death. The Commissioner argues that the decedent retained the income from those shares for a "period which does not in fact end before his death" within the meaning of section 811 (c).

The petitioner cites two cases in which bona fide sales were made of securities, with the provision that income from the securities would be applied on the unpaid balance of the purchase price. ; . It was held in those cases that the income from the securities was the income of the purchasers and was received by the sellers1947 U.S. Tax Ct. LEXIS 82">*92 as part of the purchase price rather than as ordinary income. A different question is involved in the present case, based on different facts, and the two cases are not in point. Here, Muriel Fry, who received the shares, described the transaction as a gift with a string attached, such as her father was accustomed to giving so that the recipient would appreciate more the value of the gift. The petitioner does not contend that $ 15,000 was an adequate price for the 150 shares. Obviously a gift was involved in this transaction.

The decedent stated in the memorandum that he gave the shares to Muriel "subject to your giving me the first dividends on these up to $ 15,000." The substance of that transaction, regardless of its form, was that the decedent did not give the shares absolutely and completely, but made a transfer of the shares under which he retained, for a period which did not in fact end before his death, the right to all of the income from the property. It can not be fairly said that he did not retain the right to the dividends until they amounted to $ 15,000. Section 811 (c) requires that the value of the property under such circumstances be included in the gross estate. 1947 U.S. Tax Ct. LEXIS 82">*93 Cf. , modified, .

The Commissioner determined that the gift of the mortgage certificates for the Lang children was made in contemplation of death. It was made in August and the decedent died in October. It is presumed under the statute to have been made in contemplation of death and the evidence does not overcome this presumption. The decedent died of cancer of the prostate. Some symptoms of his condition had been apparent to him at least since the fall of 1940. The evidence as to whether or not he ever realized that he had cancer and when he might have realized that for the first time is uncertain. This uncertainty might have been cleared up by the calling of a witness who accompanied the decedent on two occasions when he was examined by his urologist. Uncertainties in the evidence do not help the petitioner's case. There is some evidence from which it might fairly be 9 T.C. 503">*508 inferred that the petitioner knew his true condition and knew that he might not have long to live. It is difficult to believe that he did not know after his second visit to the urologist1947 U.S. Tax Ct. LEXIS 82">*94 what his trouble was. He made several transfers of cash at or about that time, he was engaged in making a number of transfers of property at or about that time, and he wrote his last will on September 24 of that same year. It might fairly be inferred from these circumstances that he knew in August 1941 that he was stricken and might not have long to live. The Lang children were beneficiaries under his will. It is not apparent that the principal motive for the gift of the mortgage certificates to them in August 1941 was one connected with life rather than in contemplation of death. The evidence, as a whole, leaves a real doubt as to just what his motive was, but, suffice to say, that the evidence does not fairly preponderate in the petitioner's favor. This situation requires a finding upholding the determination of the Commissioner and such a finding has been made.

It is conceded that the value at the date of the decedent's death of 600 shares of Feedwaters, Inc., stock must be included in the gross estate. One hundred and fifty additional shares will be included in accordance with this opinion, or a total of 750 shares. The parties are in great disagreement as to the value1947 U.S. Tax Ct. LEXIS 82">*95 of those shares. The petitioner reported 600 of the shares at a value of $ 129 per share. The Commissioner determined that the value per share was $ 316.52, which was about 10 times average earnings for a 6-year period. The petitioner now contends that the value was not in excess of $ 130 per share and the Commissioner contends that it was at least $ 300 per share. A finding must be made of the value of these closely held shares without the aid of evidence of actual sales. Two witnesses, with qualifications equally impressive, gave opinions supported by reasons. The expert called by the petitioner gave a value of $ 130 per share, while the one called by the respondent gave a value of $ 300 per share for a majority interest and a value of $ 255 a share for a minority interest. There is some evidence of the history, size, method of operation, management, earnings, dividends, finances, trials, tribulations, and prospects of the corporation. There is testimony that the war brought a number of difficulties into the business of Feedwaters and there is also evidence that it brought some benefits. The owners of the stock had placed a restriction upon its sale, providing that it could1947 U.S. Tax Ct. LEXIS 82">*96 not be sold to outsiders until it had been offered at book value to other stockholders in a stated order. The restriction upon the sale of the stock must be considered as well as the possibility of the removal of that restriction. The book value applicable under this restriction was just under $ 130 per share. The witness for the petitioner testified that the actual value was about that same amount. But there is other evidence to show that the stock 9 T.C. 503">*509 had a value substantially greater than its book value. A secret formula seems to have been a valuable asset of the business. There is evidence that the decedent and Lang were of great importance to the corporation, but the evidence as a whole does not show that they were indispensable or that someone else, properly qualified, could not have operated the business successfully. The departure of Lang would not have deprived the corporation of the secret formula. There is other evidence of value. All of the evidence, whether conflicting or otherwise, has been considered. It does not lead irresistibly to any amount as the obviously correct value but, since a finding of a precise amount must be made, the Court has concluded, 1947 U.S. Tax Ct. LEXIS 82">*97 after considering all of the evidence in the case, that the value of the stock at the date of the decedent's death was $ 245 per share.

The next question is to determine the value of the British assets. The credit with Cavendish and the Liverpool Borax shares were blocked at the time of the decedent's death, i. e., they could not be transmitted to the United States nor could their equivalent at the official rate of the exchange be realized in any way in the United States. There was a lawful way, however, fully described by witnesses, under which a certain amount could be realized in the United States as a result of the decedent's ownership of those assets. The value of those assets to be included in the gross estate can not exceed that amount. . The deposit at Barclays Bank was not blocked, but could be transmitted to the United States at the official rate of exchange.

The petitioner contends that the values of the British assets should be further discounted 50 per cent because of adverse claims by Cavendish and a son of the decedent. The evidence shows that Cavendish contended after the decedent died that the transaction1947 U.S. Tax Ct. LEXIS 82">*98 resulting in the credit to him on its books was improper and was not owed because the property involved in the transaction had been a gift to Cavendish from the decedent. Cavendish and the son of the decedent also contended after his death that the Liverpool Borax shares had been given to them by the decedent before his death. The record does not show how serious these claims were or the extent to which they may have reduced the value of the decedent's property in those assets. The claims were promptly set at rest by actions instituted by the British fiduciary of the estate. There is no reason under the evidence of this case for concluding that those claims deprive the assets of half of their value at the time of the decedent's death. Whether they ever had any real merit, or whether they were merely raised by or on behalf of the decedent's family in England, in an effort to gain greater benefit from his estate, does not clearly appear. Some allowance has been made for those claims. The petitioner has failed to show that the value of the 9 T.C. 503">*510 British assets was less than $ 39,500. A finding that they had that value has been made.

Section 812 (b) allows claims against the1947 U.S. Tax Ct. LEXIS 82">*99 estate as a deduction from the value of the gross estate. But it also provides that the deductions allowed, in the case of claims against the estate when founded upon an agreement, shall be limited to the extent that they were "contracted bona fide and for an adequate and full consideration in money or money's worth." The claim of Aimee P. Hare against the estate is founded upon a lease executed by the decedent. That was an agreement. The record does not show that it was "contracted bona fide and for an adequate and full consideration in money or money's worth," as required by the statute. It was contracted long after the decedent and his wife executed a warranty deed for the property to the petitioner's wholly owned corporation. His inconsistent actions in regard to the property are not explained, but it seems apparent that he was trying to make a gift to his friend, Aimee P. Hare, so that she could live on the property free of all charges for practically nothing. The evidence does not show that the Commissioner erred in disallowing the deduction of $ 1,000.

Decision will be entered under Rule 50.