20 T.C. 171">*172 The Commissioner has determined a deficiency in estate tax in the amount of $ 95,061.06. The deficiency is due principally to the inclusion in the gross estate by the respondent of the value, as of the date of decedent's death, of the corpora of two trusts. Other adjustments made by the Commissioner have been settled by stipulation of the parties and will be given effect under Rule 50. The decedent was a nonresident alien.

The issues presented for decision are:

(1) Whether1953 U.S. Tax Ct. LEXIS 182">*186 the value, as of the date of the decedent's death, of the corpus of a trust created by the decedent on June 9, 1931, and amended on May 4, 1932, is includible in the decedent's gross estate under either section 811 (c) (1) (A), or section 811 (c) (1) (B) of the Internal Revenue Code as amended.

(2) If the first issue is decided for the respondent, a further question is presented, namely, whether the portion of the trust corpus consisting of a Federal Farm Mortgage Corporation bond issued prior to March 1, 1941, should be excluded from the gross estate.

(3) Whether the value, as of the date of the decedent's death, of the noninsurance assets of a trust, established by an agreement executed by the decedent's wife on June 8, 1931, with property acquired by gift from the decedent, is includible in the decedent's gross estate under the provisions of section 811 (c) (1) (A), 811 (c) (1) (C), or 811 (d) of the Internal Revenue Code, as amended.

Respondent concedes that if the corpus of either, or both, of the trusts is includible in the gross estate, the portion of the corpus consisting of U. S. Treasury bonds issued prior to March 1, 1941, should be excluded from the gross estate.

The estate1953 U.S. Tax Ct. LEXIS 182">*187 tax return was filed with the collector for the second district of New York.

FINDINGS OF FACT.

The facts which have been stipulated are found as facts, and the stipulation is incorporated herein by this reference.

The decedent died on February 20, 1942, a resident of the Isle of Jersey in the English Channel. He was survived by his wife, Tottie Resch, and a daughter. He left a last will and testament which was duly admitted for probate in the Surrogate's Court of New York City. The Chase National Bank of the City of New York, hereinafter referred to as The Chase National Bank, was duly appointed the ancillary executor.

The decedent was a nonresident alien and was not engaged in business in the United States. He was a British subject throughout his life. He was born February 13, 1881, in New South Wales, Australia. He was engaged in the brewery business in Sydney, Australia. In 20 T.C. 171">*173 1926, at the age of 45, he married Tottie Resch, who was then 20 years old. In the latter part of 1928 the decedent sold his business and retired. In about 1930, he and his wife went on a world tour which included two visits to New York City. They returned to Sydney, Australia, in December1953 U.S. Tax Ct. LEXIS 182">*188 1933. In 1936 they established their residence on the Isle of Jersey. The Isle of Jersey was occupied by the German Army from July 1940 until May 1945.

In June 1931, in New York City, the decedent and the decedent's wife, each, executed separate trust agreements as set forth hereinafter. For convenience, the trust agreements are referred to hereinafter as the "Arnold Resch trust" and the "Tottie Resch trust."

The Arnold Resch Trust. On June 9, 1931, the decedent executed an agreement creating a trust of which the Guaranty Trust Company of New York, hereinafter referred to as the Guaranty Trust Co., was the trustee. The decedent reserved the right to amend or revoke the trust. The property transferred in trust consisted of securities and a deferred annuity contract of the Prudential Insurance Company of America. On May 4, 1932, the decedent executed an amendment, as hereinafter mentioned, surrendering his right to amend or revoke the trust.

The trust agreement creating the Arnold Resch trust is incorporated herein by reference. The agreement provided, inter alia, as follows:

FIRST: The Trustee shall hold, manage, invest, and reinvest the principal of the trust estate and1953 U.S. Tax Ct. LEXIS 182">*189 shall collect the income therefrom. The Settlor agrees to execute assignments, changes of beneficiaries and any other instruments that may be necessary to make payable to the Trustee hereunder any amounts which by the terms of the policies become payable at the death of the Settlor. The Trustee, after deducting all expenses properly chargeable against income, shall apply the net income of the trust estate to the payment of premiums, assessments, and other charges on any policy or policies insuring the life of the Settlor included in the trust estate until the policies become fully paid. The Trustee, however, shall be responsible for the payment of premiums on any insurance policies at any time held hereunder only to the extent that it has funds in its possession to pay the same and not otherwise, and no provisions contained in this trust shall be construed or interpreted to oblige the Trustee to borrow any sum or sums at any time on any insurance policies held hereunder, or to surrender any insurance policy for its cash surrender value, in order to pay any of the said premiums or to continue in force any of the insurance policies. If the net income of the trust estate shall at1953 U.S. Tax Ct. LEXIS 182">*190 any time be insufficient for the full payment of such premiums, assessments or other charges, the Trustee shall apply thereto such sums from the principal of the trust estate as from time to time may be necessary for the full payment of such premiums, assessments or other charges. * * *

The trust agreement provided, further, that:

If the net income shall be more than sufficient to pay such premiums, assessments, or other charges, the Trustee shall accumulate such balance of income and invest and reinvest the same * * *, providing, nevertheless, that the 20 T.C. 171">*174 Trustee may in its sole and absolute discretion apply to the use of the Settlor from time to time such sum or sums out of said income, either currently collected or accumulated, as the Trustee may think fit, but the Settlor shall have no right or power to demand and/or enforce payment of any part of said income to him by the Trustee.

The agreement directed the trustee, upon the decedent's death, to collect the proceeds of the policies of insurance, if any, and to continue to hold the proceeds as a part of the trust estate. Thereafter, during the lifetime of Tottie Resch, the trustee is to pay one-half of the net income 1953 U.S. Tax Ct. LEXIS 182">*191 to her, and one-half in equal shares to six designated nieces and nephews of decedent, or to the survivor, or to their issue per stirpes. Upon the death of Tottie Resch, or if she should not survive the decedent, then upon his death, the trust is to terminate and the corpus is to be paid over in equal shares to each of six designated nieces and nephews then living, or to their issue per stirpes.

The decedent retained, under paragraph 4 of the original trust agreement, the following rights and powers:

(a) To modify or revoke this Deed of Trust in whole or in part by an instrument in writing duly executed and acknowledged * * *.

(b) To add to this trust policies of insurance on the life of the Settlor, securities or other property to be held by the Trustee on the terms and conditions herein specified.

(c) At any time and from time to time, by notice in writing signed by him and filed with the Trustee, to withdraw any and all of the policies, securities and/or other properties subject to the trust hereby created and to resume possession of the same.

(d) To receive any dividends, earnings or payments of any kind made pursuant to the provisions of any policy or policies of insurance held1953 U.S. Tax Ct. LEXIS 182">*192 under this agreement.

On May 4, 1932, the decedent, as hereinabove mentioned, executed an amendment to the trust in which he relinquished the rights and powers reserved in paragraph 4 (a) and (c) above. The amendment reads, in pertinent part, as follows:

On June 9, 1931, I entered into an Indenture of Trust with your Company under the terms of which I established a trust for the benefit of myself, my wife, Tottie Resch, and certain other beneficiaries named therein. In Paragraph FOURTH of the said Indenture the settlor (myself) reserved the right.

"(a) To modify or revoke this Deed of Trust in whole or in part by an instrument in writing duly executed and acknowledged like a deed of real estate and lodged with the Trustee.

* * * *

"(c) At any time and from time to time, by notice in writing signed by him and filed with the Trustee, to withdraw any and all of the policies, securities and/or other properties subject to the trust hereby created and to resume possession of the same."

Pursuant to the power reserved by me to modify the said Trust Indenture, I hereby advise and give notice to you that I have modified the said Indenture by surrendering my right and power to modify or revoke1953 U.S. Tax Ct. LEXIS 182">*193 the said Indenture and 20 T.C. 171">*175 by surrendering my right and power to withdraw any and all of the securities and/or other properties subject to the trust.

The trust agreement, in other material parts, recited that the settlor was to execute any instruments necessary to make payable to the trustee any amounts which by the terms of the policies become payable at his death; that control over trust investments was reserved to the decedent during his lifetime; and that the agreement was to be governed by the laws of the State of New Jersey.

Prior to executing the amendment, the decedent, on September 15, 1931, withdrew from the trust the deferred annuity contract of the Prudential Insurance Company of America. No other annuity contracts and no policies of insurance have ever constituted a part of the trust estate.

Also, prior to the amendment, the decedent, on May 2, 1932, directed the Guaranty Trust Co. to withdraw from the trust certain securities and to deliver them to The Chase National Bank for the account of Tottie Resch.

The net income of the trust from the date of its creation on June 9, 1931, through February 3, 1932, was accumulated and added to the principal. For the period1953 U.S. Tax Ct. LEXIS 182">*194 February 4, 1932, through May 2, 1940, the income was paid to decedent pursuant to his request and in the exercise of the sole discretion of the trustee. After May 3, 1940, the funds of the decedent were blocked as a resident of enemy controlled territory and the trustee held the income in a special account pending pay instructions. On February 20, 1942 (the date of death), the balance in the special account was transferred to the principal of the trust.

The value of the corpus of the Arnold Resch trust, on the date of the decedent's death, was $ 128,983.72. The trust corpus consisted of a cash balance of $ 17.86, United States Treasury bonds issued prior to March 1, 1941, of a value of $ 18,643.97, Federal Farm Mortgage Corporation bonds issued prior to March 1, 1941, of a value of $ 42,921.88, and bonds of domestic corporations of a value of $ 67,400.01.

The decedent retained the right to the income from the Arnold Resch trust for his life.

The Federal Farm Mortgage Corporation bonds included in the corpus of the Arnold Resch trust, were issued by the Federal Farm Mortgage Corporation prior to March 1, 1941, under the Act of January 31, 1934, chapter 7, section 4, 48 Stat. 345. 1953 U.S. Tax Ct. LEXIS 182">*195 The bonds are guaranteed both as to interest and principal by the United States, in the event of default by the issuing corporation.

The Tottie Resch Trust. On June 8, 1931, the decedent's wife, Tottie Resch, executed a deed of trust naming The Chase National Bank as trustee. Under the terms of the trust agreement, which is incorporated 20 T.C. 171">*176 herein by this reference, she reserved the right, during the decedent's lifetime and with his consent, to amend or revoke the trust. She transferred to the trustee on the date the agreement was executed, bonds issued by domestic corporations of a face value of $ 100,000, and four policies of insurance on the decedent's life, each with a maturity value of $ 100,000.

The trust agreement provided, in pertinent parts, as follows: During the joint lives of Tottie Resch and the decedent, the net income of the trust, and so much of the corpus (excluding policies of insurance) as may be necessary, was to be applied to the payment of premiums and assessments on any policy insuring the life of the decedent which formed a part of the trust estate. If the net income was more than sufficient for the above purpose, the balance was to be paid to1953 U.S. Tax Ct. LEXIS 182">*196 Tottie Resch. If Tottie Resch survived the decedent, which she in fact did, then, at his death the trustee was directed to collect and add to the principal of the trust estate the proceeds of the policies insuring his life. Thereafter, the trustee is to pay the net income to Tottie Resch for life. In addition, Tottie Resch is authorized to withdraw from the principal during life, or appoint by will the sum of $ 100,000. In the event she fails to do either, the trustee is directed to pay over to her estate the sum of $ 100,000. At the death of Tottie Resch, the trust is to terminate and the corpus is to be distributed to any descendants of the decedent then living, or, if none, to six designated nieces and nephews of the decedent, or their issue per stirpes. The six designated nieces and nephews are the same ones named as beneficiaries of the Arnold Resch trust. In the event that Tottie Resch did not survive the decedent, then, at her death the trust was to terminate and the trustee was to pay over the trust estate to the decedent.

The trust agreement recited, inter alia, that the trustee was to accept and hold as a part of the trust estate, any policies insuring the life of1953 U.S. Tax Ct. LEXIS 182">*197 the decedent which were tendered by the settlor or any other person; that all contractual rights and incidents of ownership in the policies were reserved to the trustee; and that all dividends on the policies were to be applied in the reduction of premiums. Further, that the decedent was to have control over the trust investments, and that if Tottie Resch survived the decedent the trustee was to purchase from his estate, at market value, any securities owned by him which Tottie Resch might direct, using for the purpose the proceeds of insurance on the decedent's life.

The decedent and his wife arrived in New York City, on their first visit, in April 1931. During this visit, and prior to the date the trust agreement with The Chase National Bank was executed, Tottie Resch received as a gift from the decedent the $ 100,000 in bonds which she transferred to the trustee. The decedent attached no conditions to 20 T.C. 171">*177 the gift and Tottie Resch entered into no agreement or understanding with him as to what disposition she would make of the bonds. The decedent at the time of the gift had an estate of a value in excess of one million pounds.

The four policies of insurance, which were1953 U.S. Tax Ct. LEXIS 182">*198 placed in the trust by Tottie Resch, were taken out by the decedent on June 4, 5, and 8, 1931. The initial premiums on the policies totaled $ 19,389. A receipt dated June 9, 1931, for the amount of the initial premiums was sent to Tottie Resch by the insurance agents.

Tottie Resch executed the trust agreement of June 8, 1931, which created a funded insurance trust, at the suggestion and with the advice of Mr. Cerero, then a vice president of The Chase National Bank, whose investment counsel she had sought. She discussed the trust and its provisions with the decedent prior to its execution and secured his agreement and cooperation.

The income of the Tottie Resch trust was, from the beginning, insufficient to pay the premiums on the insurance policies forming a part of the trust estate. As a result, Tottie Resch, during their second visit to New York City in the spring of 1932, asked the decedent to give her additional securities to add to the trust. On May 2, 1932, decedent instructed the Guaranty Trust Co. to withdraw certain securities from his (the Arnold Resch) trust and to deliver them to The Chase National Bank for the account of Tottie Resch. The securities were then added1953 U.S. Tax Ct. LEXIS 182">*199 by her to the trust. Between July 1931 and September 1939, Tottie Resch paid over to the trustee, largely from her own funds, sums aggregating $ 88,187 for the purpose of paying premiums on the policies insuring the decedent's life.

At all times material to the issue, Tottie Resch had a separate estate, acquired by inheritance from her father and by gifts from the decedent, yielding an annual income of about four thousand pounds.

The value as of the date of the decedent's death of the assets of the June 8, 1931, trust, exclusive of proceeds of insurance on the decedent's life, was $ 169,820.38. Included in the trust assets were United States Treasury bonds issued prior to March 1, 1941, of a value of $ 15,336.66.

The trust of June 8, 1931, was created by Tottie Resch.

OPINION.

Issue 1. The first question concerns the Arnold Resch trust created by the decedent on June 9, 1931, and amended on May 4, 1932. The respondent contends, in the first instance, that the decedent in substance reserved the use of, or the right to the income from, the transferred property within the scope of section 811 (c) (1) (B) as amended. Respondent does not argue that the decedent actually 20 T.C. 171">*178 1953 U.S. Tax Ct. LEXIS 182">*200 retained, under the terms of the trust agreement, the right to, or the means by which he could enforce the payment of, the income to himself for a period which did not end before his life. He concedes in his argument that income was payable to the decedent within the sole discretion of the corporate trustee. However, respondent urges that the trustee did in fact pay over the income to the decedent pursuant to his request and claims that it is inconceivable that the trustee would act otherwise; further, that if policies of insurance on decedent's life had been placed in the trust the income would have been used to discharge an obligation otherwise payable by the decedent. In either event, the respondent concludes, the income was effectively reserved by the decedent for his own use. The petitioner contends that under the provisions of the trust agreement the decedent retained no interest in the trust which would require its inclusion in his gross estate. Specifically, the decedent had no right to require the trustee to make payments of income or principal to himself. We do not agree with the arguments advanced by either of the parties.

We are of the opinion that the corpus of 1953 U.S. Tax Ct. LEXIS 182">*201 the Arnold Resch trust, created by the decedent on June 9, 1931, is includible in his gross estate under section 811 (c) (1) (B), as amended, because under the terms of the trust agreement, as amended, the decedent retained the right to the trust income for a period which did not end before his death. The applicable provisions of the Code, as amended by section 7 of P. L. 378, 81st Cong. (1949), hereinafter referred to as The Technical Changes Act, are set forth in the margin. ¹

1953 U.S. Tax Ct. LEXIS 182">*202 Section 7 (b) of The Technincal Changes Act, as amended by sections 608, 609, of the Revenue Act of 1951, reads as follows:

(b) The amendment made by subsection (a) shall be applicable with respect to estates of decedents dying after February 10, 1939. The provisions of section 811 (c) of the Internal Revenue Code, as amended by subsection (a), shall (except as otherwise specifically provided in such section or in the following two sentences) apply to transfers made on, before, or after February 26, 1926. 20 T.C. 171">*179 The provisions of section 811 (c) (1) (B) of such code shall not, in the case of a decedent dying prior to January 1, 1951, apply to --

(1) A transfer made prior to March 4, 1931; or

(2) A transfer made after March 3, 1931, and prior to June 7, 1932, unless the property transferred would have been includible in the decedent's gross estate by reason of the amendatory language of the Joint Resolution of March 3, 1931 (46 Stat. 1516).

The transfer in trust by the decedent was made on June 9, 1931, and the decedent died on February 20, 1942. The issue, therefore, becomes a narrow one, namely, whether the transfer is includible in the gross estate "by reason of the amendatory1953 U.S. Tax Ct. LEXIS 182">*203 language of the Joint Resolution of March 3, 1931."

The Joint Resolution of March 3, 1931, reads as follows:

Resolved * * *, That the first sentence of subdivision (c) of section 302 of the Revenue Act of 1926 is amended to read as follows:

"To the extent of any interest therein of which the decedent has at any time made a transfer, by trust or otherwise, in contemplation of or intended to take effect in possession or enjoyment at or after his death, including a transfer under which the transferor has retained for his life or any period not ending before his death (1) the possession or enjoyment of, or the income from, the property or (2) the right to designate the persons who shall possess or enjoy the property or the income therefrom; except in case of a bona fide sale for an adequate and full consideration in money or money's worth."

The purpose of the Joint Resolution of March 3, 1931, was to avoid the decision of the Supreme Court in May v. Heiner² and subsequent cases ³ and to tax transfers under which a decedent reserved the right to the income for his life, or for any period not ending before his death. ⁴ The third sentence of section 7 (b) of The Technical Changes1953 U.S. Tax Ct. LEXIS 182">*204 Act did not create any new guides for the judicial construction of the amendatory language of the Joint Resolution. Estate of Myron Selznick, 15 T.C. 716, 726.

The trust agreement, as amended on May 4, 1932, provided that the net income of the trust and so much of the corpus as may be necessary was to be applied1953 U.S. Tax Ct. LEXIS 182">*205 by the trustee "to the payment of premiums, assessments and other charges on any policy or policies insuring the life of the Settlor included in the trust estate until the policies become fully paid." Under article four of the trust agreement as amended, the decedent reserved the right to "add to this trust policies of insurance on the life of the Settlor * * * to be held by the Trustee on the terms and conditions herein specified" and "to 20 T.C. 171">*180 receive any dividends, earnings or payments of any kind made pursuant to the provisions of any policy or policies of insurance held under this agreement."

It becomes apparent that, under the foregoing provisions of the trust agreement, the decedent at any time could have applied for, inter alia, a single premium, income-yielding policy of insurance on his life, at a cost equivalent to the then value of the trust corpus, caused the policy to be issued to the trustee for the payment of the premium or assessment, at which time the policy would become effective, and thereafter received the "dividends, earnings or payments of any kind" from the policy for his life. Or, the decedent could have applied for participating, i. e., dividend paying, 1953 U.S. Tax Ct. LEXIS 182">*206 policies of insurance on his life, paid the initial premiums himself, and then added the policies to the trust. The trustee would have been obliged under the trust agreement to consume the entire corpus, if necessary, in paying the annual premiums or other assessments on the policies. In that event the decedent could have received, by way of dividends or other payments made pursuant to the policies, the entire income from the trust corpus for his life. Since the trustee was obliged to consume the corpus, if necessary, in paying life insurance premiums on policies held in the trust, and since the decedent reserved the right at any time to add to the trust policies of insurance on his life and to receive the "dividends, earnings or payments of any kind made pursuant to the provisions of any policy," we are of the opinion that the decedent has retained for his life the right to, or the means by which he could legally require the payment of, the entire trust income to himself within the purview of section 811(c) (1) (B) of the Code.

Had the trustee been directed to use only income for the payment of policy premiums, the decedent, by reserving the right to the earnings from the policies1953 U.S. Tax Ct. LEXIS 182">*207 paid for out of the income, would thereby have retained the right to a measure of the income of the trust. But, the trustee was directed to use both income and corpus for the payment of premiums. Therefore, without question, the decedent-settlor could have enjoyed the income from the entire corpus if it had been applied to the payment of premiums.

The fact that no annuity contract or policy of insurance formed a part of the trust estate after petitioner withdrew the Prudential deferred annuity contract on September 15, 1931, and that decedent did not avail himself of the aforementioned methods, inter alia, of requiring the payment of the trust income to himself is not important. Nor is the fact that he actually received the trust income through the exercise of the sole discretion of the trustee as provided for in article one of the trust agreement. The controlling consideration is that the decedent did reserve the right, or the means, to require and receive 20 T.C. 171">*181 payment of the entire trust income to himself for a period which did not end before his death.

Although the point has not been argued by the parties, we observe that the trust agreement, as amended, permits a construction1953 U.S. Tax Ct. LEXIS 182">*208 that the decedent did not surrender his right to withdraw policies of insurance from the trust. Under the fourth article, paragraph (c), of the original trust, before the amendment of May 4, 1932, the decedent reserved the right "to withdraw any and all of the policies, securities and/or other properties subject to the trust." (Emphasis supplied.) Under the amendment of May 4, 1932, the decedent surrendered the "right and power to withdraw any and all of the securities and/or other properties subject to the trust." (Emphasis supplied.) The right to withdraw policies of insurance was specifically reserved in Four (c) of the trust, dealing with reserved rights of the settlor before the amendment, and that right was not specifically given up by the settlor in the amendment. If the decedent had the right at all times up to the time of his death, as it appears he did have, to withdraw policies of insurance, he thereby reserved the right to revest trust corpus and/or income used to pay insurance premiums, in himself, as well as the right to reacquire and exercise all of the incidents of ownership in the policies, among which would be the powers to change beneficiaries 1953 U.S. Tax Ct. LEXIS 182">*209 and to surrender the policies for their cash value. These powers, clearly, make the trust includible in the decedent's estate under the provisions of either section 811(c) (1) (B), or section 811(d) of the Code.

The petitioner relies on Commissioner v. Irving Trust Co., 147 F.2d 946, affirming Estate of Hugh M. Beugler, 2 T.C. 1052. But that case is readily distinguishable. In Irving Trust Co., supra, the deed of trust authorized the corporate trustee, in the exercise of its sole and uncontrolled discretion, to pay over a part of the trust principal to the settlor. But the settlor retained no legally enforceable rights by which he could require the trustee to return any part of the trust corpus. In the instant case, the decedent-settlor had at his command the means by which he could legally enforce the payment of the trust income and principal to himself, which is the determining factor. Irving Trust Co., supra.

It is held that the value, as of the date of death, of the corpus of the Arnold Resch trust is includible in the decedent's gross estate. 1953 U.S. Tax Ct. LEXIS 182">*210 See Estate of Selznick, supra.

In view of the foregoing it is not necessary for us to consider the respondent's alternative contention that the Arnold Resch trust was created in contemplation of death.

Issue 2. It becomes necessary, in view of the above conclusion, for us to determine whether Federal Farm Mortgage Corporation bonds 20 T.C. 171">*182 issued prior to March 1, 1941, and included in the assets of the Arnold Resch trust, should be excluded from the gross estate because of the decedent's status as a nonresident alien not engaged in business in the United States.

The issue arises under section 861(c) ⁵ of the Internal Revenue Code which was added by section 604(a) of the Revenue Act of 1951 and made effective with respect to estates of decedents dying after February 10, 1939. Section 861(c) (1) of the Code excludes from the gross estate of a nonresident alien not engaged in business in the United States "obligations issued by the United States prior to March 1, 1941."

1953 U.S. Tax Ct. LEXIS 182">*211 The petitioner argues that Federal Farm Mortgage Corporation bonds are obligations of the United States and are, therefore, within the exclusionary provisions of section 861(c) of the Code because the bonds are guaranteed as to both interest and principal by the United States. The respondent contends that the bonds are not "obligations issued by the United States," and are not primary obligations of the United States as contemplated by the exempting statute. We agree with the respondent.

In Estate of Lesley Diana Worthington, 18 T.C. 796, we held that Federal Land Bank bonds were not obligations issued by the United States and hence were not exempt under section 861(c) of the Code. In Worthington, supra, as in the instant case, the bonds were issued by an instrumentality or agency of the United States. However, Federal Farm Mortgage Corporation bonds, unlike Federal Land Bank bonds, are guaranteed both as to principal and interest by the United States, in the event the corporation is unable to make payment. See U. S. C. Title 12, sec. 1020 c. The narrow question here presented, then, is whether the statute exempts1953 U.S. Tax Ct. LEXIS 182">*212 bonds of which the United States is the guarantor as distinguished from the primary obligor. We think not. There is nothing in the plain language of the statute, nor in its legislative history, ⁶ to indicate that Congress, in enacting section 861(c) of the Code, intended to exempt bonds issued by an instrumentality of the United States and merely guaranteed by the United States in the event of default by the issuing corporation. It is well settled that "a statute creating an exemption must be strictly construed 20 T.C. 171">*183 and any doubt must be resolved in favor of the taxing power." Associated Industries of Cleveland, 7 T.C. 1449">7 T.C. 1449, 7 T.C. 1449">1464. We are of the opinion that Congress, by section 861(c) of the Code, intended to exempt only primary obligations of the United States.

We hold, therefore, that Federal Farm Mortgage Corporation bonds issued prior to March 1, 1941, are not1953 U.S. Tax Ct. LEXIS 182">*213 exempt from tax in the estate of a nonresident alien not engaged in business in the United States under the provisions of section 861(c) of the Code.

Issue 3. The remaining issue is whether the noninsurance assets of the trust of June 8, 1931, which was established by an agreement executed by Tottie Resch and with property acquired by gift from the decedent, is includible in the decedent's gross estate. The respondent contends that Tottie Resch was merely the nominal settlor and that the trust was in reality created by the decedent with the consequence that the interest and powers retained were the decedent's. From his premise, respondent argues that the noninsurance assets of the trust are taxable under any one of the following provisions of the Code: (l) under section 811 (c) (1) (A) on the theory that a funded insurance trust is testamentary in nature and hence the transfer in trust was made in contemplation of death; or (2) under section 811 (c) (1) (C) as amended by The Technical Changes Act, since the decedent expressly retained a possibility of reverter having a value in excess of 5 per cent of the trust corpus; or (3) under section 811 (d) (2) since the decedent, at1953 U.S. Tax Ct. LEXIS 182">*214 his death, possessed the power, in conjunction with Tottie Resch, to alter or revoke the trust. The petitioner contends that Tottie Resch was in name and in fact the settlor of the trust, and that its creation was her free and untrammeled act; further, that the power granted to the decedent under the trust agreement to control investments and the requirement that his consent be secured in order for Tottie Resch to alter or revoke the trust are fiduciary powers, the possession of which by the decedent does not result in the trust's being taxed in his estate. We agree with the petitioner.

The respondent's arguments are based on the premise that the decedent was in reality the settlor of the Tottie Resch trust. If that premise is invalid, the respondent's case falls. Whether the party executing a trust agreement is the real settlor, or merely a nominal settlor acting in concert with and at the instance of another, is, in each case, a question of fact. It is an inference to be drawn from all the facts and circumstances attendant upon the execution of the agreement. Estate of John H. Eckhardt, 5 T.C. 673, 679, 680; Estate of Grace D. Sinclaire, 13 T.C. 742, 745.1953 U.S. Tax Ct. LEXIS 182">*215 We are satisfied from all the facts and circumstances attending the creation of the trust in question that Tottie Resch was the real settlor, and that its creation was her free and independent act.

20 T.C. 171">*184 The respondent stresses the fact that the gift of bonds by the decedent to his wife was made shortly before the trust was created, and that the decedent on the succeeding day created a trust with similar provisions, and, further, that decedent immediately prior to the execution of the trust agreement by Tottie Resch took out four policies of insurance on his life which were placed in the trust by Tottie Resch.

The evidence establishes, and we have found as a fact, that the gift of bonds by the decedent to his wife was unconditional, and that there was no attendant agreement or understanding between them that the bonds would be used to create the trust. Tottie Resch was free to invest the gift property as she might choose. She sought the investment counsel of an officer of The Chase National Bank and at his suggestion and advice created the trust in question. The suggestion of an insurance trust was, no doubt, prompted by the circumstances of the parties. Tottie Resch was 251953 U.S. Tax Ct. LEXIS 182">*216 years younger than the decedent. She had no immediate need of income as the decedent was a man of substantial wealth. She thus acquired a wise and sound investment for the future. The fact that Tottie Resch consulted with the decedent and secured his cooperation before executing the agreement does not, in view of the facts, warrant the inference that she was acting at the direction of and in concert with the decedent.

It is significant that section 303 (e) of the Revenue Act of 1926, and corresponding provisions of subsequent acts, exempted from the gross estate of a nonresident alien proceeds of insurance on his life. Because Tottie Resch chose to do through the medium of a trust what she could have done directly without incurring tax consequences tends, also, to weaken the respondent's contention that the decedent was the real settlor of the Tottie Resch trust. Estate of Grace D. Sinclaire, supra, relied on by the respondent, is readily distinguishable on the facts from this proceeding. Other authorities cited by the respondent all involve reciprocal trusts. See Lehman v. Commission, 109 F.2d 99, certiorari1953 U.S. Tax Ct. LEXIS 182">*217 denied 310 U.S. 637">310 U.S. 637. As the provisions of the Arnold Resch and the Tottie Resch trusts were not reciprocal, the rule of the Lehman case is not applicable.

The respondent does not contend that the gift of bonds by the decedent to his wife was in contemplation of death. And we have concluded that the trust of June 8, 1931, was created by Tottie Resch. Therefore, the corpus of the Tottie Resch trust is not includible in the decedent's gross estate under the provisions of either section 811 (c) (1) (A), or section 811 (c) (1) (C) of the Code as amended.

Nor is the Tottie Resch trust includible in the decedent's gross estate under the provisions of section 811 (d) (2) of the Code as amended. The fact that the decedent's consent was necessary for an amendment or revocation of the trust by Tottie Resch and that the decedent was given authority to direct, or veto, the purchase or sale 20 T.C. 171">*185 of securities by the trustee, does not amount to a power in the decedent to amend or revoke the trust in conjunction with any other persons within the scope of section 811 (d) (2) of the Code. See Helvering v. Talbott's Estate, 116 F.2d 160;1953 U.S. Tax Ct. LEXIS 182">*218 Estate of Clayton William Sherman, 9 T.C. 594, 597; Estate of Henry S. Downe, 2 T.C. 967, 971.

Decision will be entered under Rule 50.