28 T.C. 384">*385 Respondent determined a deficiency in Federal estate taxes against the Estate of John P. Hoelzel, deceased, in the amount of $ 88,626.68, arising by reason of his determination that a marital deduction claimed under the provisions of section 812 (e) of the Internal Revenue Code of 1939 in the amount of $ 554,243.90 was allowable only to the extent of $ 294,801.33. The sole issue for determination herein is whether respondent erred in this determination. With1957 U.S. Tax Ct. LEXIS 188">*190 regard to other issues raised in the petition, the parties have stipulated that attorneys' fees and expenses, if any, in connection with the administration of the estate, including the conduct of this proceeding, which may constitute proper deductions from the gross income, will be allowed as deductions in the computations submitted in accordance with Rule 50, and further that in accordance with section 813 (b) of the Internal Revenue Code of 1939 petitioner may claim credit for State, estate, inheritance, legacy, and succession taxes, and may present to the respondent proof of such payments within the statutory period.

FINDINGS OF FACT.

The parties have filed herein a stipulation of facts. We find the facts to be as stipulated and incorporate herein by this reference the stipulation, together with the exhibits attached thereto.

The decedent, John P. Hoelzel, died testate on December 26, 1950, a resident of Pittsburgh, Pennsylvania. By his will decedent appointed his wife, Agnes M. Hoelzel, and the Union National Bank of Pittsburgh as executrix and executor, respectively. Agnes M. 28 T.C. 384">*386 Hoelzel died on April 1, 1952. In addition to his wife, decedent, John P. Hoelzel, was 1957 U.S. Tax Ct. LEXIS 188">*191 survived by two daughters. An estate tax return was timely filed on behalf of the Estate of John P. Hoelzel with the then collector of internal revenue for the twenty-third district of Pennsylvania.

Decedent, by article One of his will, bequeathed to his wife certain items of personal apparel and any automobiles registered in his name. Article Four of decedent's will provided as follows:

ARTICLE FOUR. If my wife, Agnes M. Hoelzel, shall survive me, I devise and bequeath to the trustees hereinafter named in Article Seven hereof, upon the trusts and subject to the provisions hereinafter set forth, a sum equal to one-half (1/2) of the excess of the property included in my gross estate for the purpose of the federal estate tax over the deductions allowable for expenses, claims, mortgages and indebtedness in the determination of the net estate for the purpose of such tax. The property devised and bequeathed by this Article shall be reduced by the portions of such gross estate which pass to my wife, but do not constitute a part of my estate at the date of my death, and by the portions which pass to my wife by virtue of the bequests of Article One hereof. The trustees shall hold the 1957 U.S. Tax Ct. LEXIS 188">*192 property devised and bequeathed to them by this Article upon the following uses and trusts:

A. The trustees shall invest and reinvest the trust property and collect the income thereof, and shall pay all of the income of the trust property in quarter-yearly installments to my aforementioned wife during her life.

B. On the death of my said wife, the trustees shall distribute the principal of the trust property free of trust to such persons (including her estate) and in such proportions as my wife by her last will shall appoint. If she does not survive me or if she shall fail to exercise the said power of appointment, then the property devised and bequeathed by this Article shall be disposed of to the same persons and in the same manner as the other part of the residue of my estate devised and bequeathed by Article Five of this will.

Included in the gross estate of John P. Hoelzel were the proceeds of a refund annuity contract issued by Bankers Life Company in the amount of $ 108,399.57. The settlement elected under this contract by the decedent provided that installments of $ 500 a month be paid to Agnes M. Hoelzel, his widow, during her lifetime. Agnes M. Hoelzel had no power to 1957 U.S. Tax Ct. LEXIS 188">*193 dispose of the principal of the proceeds during her lifetime or at her death. No part of the proceeds of the foregoing refund annuity contract is allowable as part of the marital deduction.

Included in the gross estate of John P. Hoelzel were the proceeds of 3 life insurance policies issued by Equitable Life Assurance Society of the United States aggregating in value $ 151,043. The settlement election made by the decedent prior to his death provided that the interest from these policies was to be paid to his widow, Agnes M. Hoelzel, at a rate of 3 per cent per annum in monthly installments during her lifetime. Agnes M. Hoelzel had no power to dispose of the proceeds of the policies during her lifetime or at her 28 T.C. 384">*387 death. No part of the proceeds is allowable as part of the marital deduction.

In computing the amount bequeathed to the trust established by article Four of decedent's will allowable as a marital deduction, and particularly in computing the portion of the estate of decedent which passed to Agnes M. Hoelzel but did not constitute a part of decedent's estate at the time of his death, within the meaning of article Four, the petitioner reduced one-half of the adjusted1957 U.S. Tax Ct. LEXIS 188">*194 gross estate ($ 554,249.33) by the sum of $ 75,711.97, representing "property interest passing to surviving spouse," listed in schedule M of the estate tax return and consisting of joint property, insurance proceeds (proceeds of policies not here in issue), and jewelry passing to decedent's widow pursuant to article One of his will.

Respondent, in a similar computation, determined that the portion of the estate of decedent which passed to his widow but did not constitute a part of decedent's estate at the date of his death, within the meaning of article Four of decedent's will, included an amount of $ 259,442.57, representing a total of the entire proceeds of the refund annuity contract and life insurance policies referred to above, and, therefore, the one-half of the adjusted gross estate ($ 554,249.33) should be reduced by this amount in addition to the amount of $ 75,711.97 subtracted in petitioner's computation.

The executors of decedent's estate filed a first and final account with the Orphans' Court of Allegheny County, Pennsylvania, which made a decree thereon dated April 27, 1953. No objections were made to the account filed. The decree confirmed the account and directed1957 U.S. Tax Ct. LEXIS 188">*195 distribution in the amount of $ 478,537.36 ($ 554,249.33 less $ 75,511.97) to the trustees of the trust created by article Four of decedent's will.

Agnes M. Hoelzel (hereinafter referred to as Agnes) was born on May 16, 1889, and died on April 1, 1952. At the time of her husband's death on December 26, 1950, she was 61 years old but, in accordance with the respondent's regulations for determining the value of any life interest owned by her, her age was 62. It is stipulated that if her interest in the refund annuity contract, "being the right to receive $ 500 a month during her lifetime," is to be determined by the respondent's actuarial tables, the value of that interest was $ 53,641.95. It is further stipulated that if her interest in the insurance contracts here involved, "being the right to receive interest in the amount of $ 377.61 a month during her lifetime," is to be determined by respondent's actuarial tables, the value of such interest was $ 40,511.20.

In January 1941 Agnes was operated on for cancer of the breast. This operation consisted of a radical dissection. In June 1949, after 28 T.C. 384">*388 Agnes had complained of pain in the chest, difficulty in breathing, and other1957 U.S. Tax Ct. LEXIS 188">*196 symptoms, an examination was made of her by her physician and surgeon, in cooperation with the hospital pathologist and radiologist, in connection with which examination about a gallon of bloody fluid was removed from her left chest. This was found to contain the same type of cancer as was found in her breast in 1941. X-ray pictures disclosed that Agnes had a tumor in the lining of her lung and the diagnosis of her physician and surgeon was that she at that time had an incurable and inoperable metastatic carcinoma of the left lung. Both her surgeon and physician were of the opinion that she could live a maximum of about a year and a half.

On December 26, 1950 (the date of decedent's death), the life expectancy of Agnes did not exceed 1 year.

From December 26, 1950, to the date of her death Agnes received an aggregate of $ 6,000 as monthly installments under the annuity contract, and the aggregate amount of $ 4,531.29 under the insurance contracts here involved. The value on December 26, 1950, of the life interest of Agnes in these annuity and life insurance contracts did not exceed $ 10,531.29.

OPINION.

The parties herein disagree in their computations of the amount of the corpus1957 U.S. Tax Ct. LEXIS 188">*197 of the trust provided for by article Four of decedent's will, which is allowable as a marital deduction under section 812 (e) (1) (A) of the Internal Revenue Code of 1939. ¹1957 U.S. Tax Ct. LEXIS 188">*198 The precise question upon which the parties disagree is whether and to what extent the proceeds of the annuity and insurance contracts, referred to in our findings, constitute "portions of [decedent's] gross estate which pass to [his] wife, but do not constitute a part of [his] estate ² at the date of [his] death," and as such are to be subtracted from the sum "equal to one-half (1/2) of the excess of the property included in [his] gross estate for the purpose of the federal estate tax over the deductions allowable * * * in the determination of the net estate for the purpose of such tax" in computing the amount of the corpus of the trust created by that paragraph.

Respondent contends that the entire proceeds of the annuity and insurance contracts must be considered as having passed to decedent's 28 T.C. 384">*389 wife, while petitioner argues that under a proper construction of the will, which gives effect to the testator's real intention, no part of or interest in the proceeds of these contracts can be considered as "portions of [his] gross estate which pass to [his] wife * * *."

In our opinion the arguments of both parties on this question are without merit. It seems obvious to us, under the facts stipulated, that all of the proceeds of these contracts did not pass to decedent's wife; and equally obvious that some part or portion of these proceeds did so pass, namely, a life interest therein.

Both parties, anticipating the possibility, if not the probability, that this would be our conclusion on this issue, present alternative contentions dealing with the valuation to be placed upon this life interest. The respondent's position is that "petitioner has failed to show that that value is1957 U.S. Tax Ct. LEXIS 188">*199 less than $ 94,153.10 as evidenced by respondent's actuarial tables." Petitioner's contention in this regard is that the uncontradicted medical testimony herein shows that on the date of decedent's death the actual life expectancy of Agnes was not in excess of 1 year, that the application of standard mortality tables is improper in this case, and that the value of the life interest of Agnes as based upon her actual life expectancy, rather than the theoretical life expectancy shown by mortality tables, was not in excess of $ 10,531.29.

On this issue we agree with petitioner both on the facts and the law. See Estate of John Halliday Denbigh, 7 T.C. 387; Estate of Nellie H. Jennings, 10 T.C. 323; Estate of Nicholas Murray Butler, 18 T.C. 914.

Therefore, we conclude that the amount bequeathed to the trust established by article Four of decedent's will, which is allowable as a marital deduction, is one-half of the adjusted gross estate ($ 554,249.33) reduced by $ 75,711.97, and further reduced by $ 10,531.29, the value of the life interests in the annuity and insurance contracts of decedent1957 U.S. Tax Ct. LEXIS 188">*200 passing to Agnes at his death.

Respondent also argues that since the amount distributed to the trustees, under article Four of the will was not reduced by all or any part of the proceeds of the annuity and insurance contracts and since the children of decedent "failed to contest the action of the executor in giving the mother more than she was entitled to under Article Four of the will thereby reducing their shares, such action should be considered an implied disclaimer on their part" and, therefore, "the excess that the widow received would not qualify for the marital deduction under section 812 (e) (4) (B)³ of the Code as such property did not 28 T.C. 384">*390 pass directly * * * from her husband * * * but is considered to have come from the children."

1957 U.S. Tax Ct. LEXIS 188">*201 Since we have indicated above a computation of the amount bequeathed by the decedent to the trust established by article Four of his will, which is allowable as a marital deduction and which was not more than the widow was entitled to under this article, there is no longer a question of any "implied disclaimer" on the part of the children.

Respondent also argues that since one of the factors necessarily considered in computing the amount of the corpus of the trust created by article Four (the proceeds of the annuity and insurance contracts with regard to which the wife had a life interest) was a terminable interest, no part of the corpus of this trust is allowable as a marital deduction, even though as to the corpus itself, after the computation has been made and the amount thereof has been properly determined, there is no terminable interest which would preclude its allowance as a marital deduction under section 812 (e) (1) (B). ⁴ In our opinion this argument is without validity.

1957 U.S. Tax Ct. LEXIS 188">*202 Decision will be entered under Rule 50.