2. The petitioners, Luis James Phelps and Thomas B. Scott, Jr., are the duly qualified and acting executors of the last will and testament of the decedent. 3. The decedent left him surviving his widow, Augusta May Scott, his son, Thomas B. Scott, Jr., and his daughter, Anne Scott Murphy. 4. Under date of October 14, 1925, the decedent created a trust naming his son, Thomas B. Scott, Jr., as primary beneficiary; the corpus of the trust possessed a value, as of the date of the decedent's death, of $120,008.20. In so far as material hereto the trust deed is as follows: Whereas the party of the first part [decedent] is now the owner and possessed of the personal property hereinafter described and is desirous of settling the same in the hands of trustees for the benefit of his son, Thomas Blythe Scott, Junior, and remaindermen, as in this instrument provided: Now this Indenture Witnesseth: That the said party of the first part in consideration of the premises and of the sum of One Dollar to him in hand paid by the parties of the second part, the receipt whereof is hereby acknowledged, doth hereby sell, assign, transfer and set over unto the said parties of the second part and unto their successors and assigns the following described personal property, viz.: Second. Upon the death of said Thomas Blythe Scott, Junior, the Trustees shall pay over, assign and transfer the principal of the trust fund as it may then exist to such person or persons and in such share or shares either outright or in further trust as said Thomas Blythe Scott, Junior, may by his last will and testament admitted to probate in any State of the United States direct and appoint; or failing such appointment made as aforesaid the Trustees shall pay over, divide and distribute the principal of said trust estate as it may then exist to and among his descendants then living equally per stirpes and not per capita; or failing such descendants then to the other descendants of the party hereto of the first part then living equally per stirpes and not per capita; or failing such descendants then equally per stirpes and not per capita to such persons as would be under the laws of the State of New York the next of kin of the party hereto of the first part had he died simultaneously with said Thomas Blythe Scott, Junior. 5. Under date of October 14, 1925, the decedent created a trust, naming his daughter, Anne Scott Murphy, as primary beneficiary; under date of October 6, 1927, the decedent transferred and added to the corpus of said trust, additional property which possessed a value as of the date of the decedent's death of $50,424.21; the corpus of the trust possessed a total value as of the date of the decedent's death of $170,447.63. Except for the name, the pertinent parts of this trust deed are identical with those quoted above. 6. Under date of May 3, 1927, the decedent created a trust naming his wife, Augusta May Scott, as primary beneficiary; the corpus of said trust possessed a value as of the date of the decedent's death of $128,470. Decedent and said Augusta May Scott were married in late April 1927; prior to their marriage the decedent agreed to create a trust fund for the benefit of said Augusta May Scott if she would marry him; the trust was created pursuant to the agreement. In so far as material hereto the trust deed is as follows: Second. Upon the death of said Augusta May Scott, the Trustees shall pay over, assign and transfer the principal of the trust fund as it may then exist to such person or persons and in such share or shares either outright or in further trust as the Grantor may by his last will and testament admitted to probate in any state of the United States direct and appoint; or failing such appointment made as aforesaid the Trustees, having first deducted therefrom and retained or paid their lawful commissions, costs, expenses and charges incurred by them in the execution of the trusts hereby created, shall divide the residue of the principal of said trust estate into two equal parts or shares and shall assign, transfer, convey and dispose of the same as follows, viz.: One such equal part or share of the residue of the principal of this trust estate the said Trustees shall continue to hold during the lifetime and until the death of Ann Scott Murphy the daughter of the Grantor, if she be living at the time of the Grantor's death, in further trust to collect the income thereof (whether paid in cash or otherwise), and after deducting their legal commissions and all taxes which may be levied and assessed thereon and all costs, expenses and charges which may be incurred by them in the execution of the trusts hereby created, shall apply the net income of said trust estate to the use of the said Ann Scott Murphy. Upon the death of said Ann Scott Murphy, the principal, if any, of the trust estate then held for her benefit hereunder shall be paid over, assigned and conveyed to her descendants then living equally per stirpes and not per capita, or failing such descendants then to Thomas Blythe Scott, Junior, son of the Grantor, or if he too be dead to his descendants then equally per stirpes and not per capita; or, failing such descendants then equally per stirpes and not per capita to such persons as would be under the laws of the State of New York the next of kin of the party hereto of the first part had he died intestate simultaneously with said Ann Scott Murphy. If said Ann Scott Murphy shall have died before said Augusta May Scott then and in that event the one half part or share in the residue of the trust estate hereby created for the benefit of said Augusta May Scott shall be paid over, assigned and conveyed upon her death to the descendants then living of said Ann Scott Murphy, equally per stirpes and not per capita, or failing such descendants then to Thomas Blythe Scott, Junior, son of the Grantor, or if he too be dead to his descendants then living equally per stirpes and not per capita; or, failing such descendants then equally per stirpes and not capita to such persons as would be under the laws of the State of New York the next kin of the party hereto of the first part had he died intestate simultaneously with said Augusta May Scott. The other one half part or share in the residue of the principal of the trust estate hereby created for the benefit of said Augusta May Scott shall, upon her death, be paid over, assigned and conveyed to said Thomas Blythe Scott, Junior, if living, or if he be dead to his descendants equally per stirpes and not per capita, or failing such descendants then to said Ann Scott Murphy, if living, or if she too be dead then to her descendants equally per stirpes and not per capita; or, failing such descendants then equally per stirpes and not per capita to such persons as would be under the laws of the State of New York the next of kin of the party hereto of the first part had he died intestate simultaneously with said Augusta May Scott. 7. Under date of October 6, 1927, the decedent made an absolute gift of personal property to his son, Thomas B. Scott, Jr., which possessed a value as of the date of the decedent's death of $50,424.21. 8. None of the transfers above enumerated were made in contemplation of death. 9. The ages of the respective primary beneficiaries of the above enumerated trusts, as of the date of the decedent's death, were as follows: Augusta May Scott.. Thomas B. Scott, Jr. 45 years 31 33 10. In determining the deficiency tax the respondent included in the gross estate the excess over $5,000 of the value of the property added to the trust of October 14, 1925, on October 6, 1927, Anne Scott Murphy, primary beneficiary, the excess over $5,000 of the value of the property given to Thomas B. Scott on October 6, 1927, and the excess over $5,000 of the value of the property constituting the corpus of the trust of May 3, 1926, Augusta May Scott, primary beneficiary; that no part of the original corpus of said trusts of October 14, 1925, naming the decedent's son and daughter as primary beneficiaries, was included in the gross estate by the respondent in determining the deficiency. 11. In determining the deficiency the gross estate was valued at $2,099,514.85; deductions were allowed, including the specific exemption, in the sum of $593,104.47; the value of the net estate was determined to be $1,506,410.38, the tax upon the transfer of which was determined to be $89,076.93; the return filed on behalf of the estate disclosed a net estate of $1,297,054.49, and a total tax liability of $72,264.36. 12. The estate has paid to the State of New York transfer and inheritance taxes in the total amount of $61,886.90, and has paid to the States of Maine, Minnesota, Virginia and Wisconsin, on intangible personal property, total inheritance taxes in the sum of $5,288.37, and is entitled to a credit against the Federal estate tax on account thereof, pursuant to the provisions of section 301 (b) of the Revenue Act of 1926, as amended by section 802 of the Revenue Act of 1932. OPINION. SMITH: The stipulated facts show that none of the several transfers was made in contemplation of death. On brief the respondent states that: In view of the decision of the Supreme Court in Donnan v. Heiner, 52 Sup. Ct. 358, respondent concedes that the value of the property transferred by the decedent to his son on October 6, 1927, by absolute gift, as set forth in the stipulation of facts, paragraph numbered (7), is not subject to the estate tax and should, therefore, be excluded from the value of the gross estate. This leaves in issue the taxability of the corpus of the three trusts created by the decedent for the benefit of his son, daughter, and wife. No contention is made, and the trust deeds would not support such contention if made, that the trusts were revocable. Our question then is to determine whether there was a transfer "intended to take effect in possession or enjoyment at or after " decedent's death within the purview of section 302 (c) of the Revenue Act of 1926. The respondent dwells much on the reversionary and remainder interests involved in the several trusts; and we have recently had occasion to consider exhaustively such possibilities under the New York law (applicable in this proceeding), and call attention to our decision in Elizabeth B. Wallace, Executrix, 27 B. T. A. 902. In creating the trusts for the benefit of his son and daughter, the decedent divested himself of all interest in the trust res, reserving to himself neither the reversion nor the right to dispose of the remainders after the termination of the precedent life estates. May v. Heiner, 281 U. S. 238, is authority for holding that the corpus of these trusts is not to be included in the decedent's gross estate. In creating the trust for the benefit of his wife, the decedent reserved to himself the right to dispose of the remainder upon the termination of the wife's life estate, and in the event of his failure to exercise that right of appointment, the remainder went to his descendants as provided in the trust deed. These provisions left the transfer incomplete and subject to tax. Saltonstall v. Saltonstall, 276 U. S. 260; Chase National Bank v. United States, 278 U. S. 327. The petitioners concede as much, but argue that: The retention of this power of appointment undoubtedly makes taxable the value of that remainder interest, that is to say, the value of the full trust fund less the value at decedent's death of the widow's life interest. However, the widow's life interest is not taxable and for two reasons: A. The widow's life interest was not created by a transfer "intended to take effect in possession or enjoyment at or after (decedent's) death" (Act, Section 302c). It was created by the trust deed executed on 3 May, 1927, a year prior to death, and taking effect forthwith in possession and enjoyment. B. The creation of this life interest in the widow's favor was a "bona fide sale for an adequate and full consideration in money or money's worth" (Act, Section 302c). The consideration was the agreement made between Mr. Scott and his widow prior to their marriage that if she would marry him, he would create a trust for her benefit, an agreement faithfully carried out by both parties (Stipulation, Par. 6.) Under cases such as Ferguson vs. Dickson, 300 Fed. Rep. 961, and McCaughn vs. Carver, 19 Fed. Rep. (2nd) 126, agreements such as this are held to satisfy the above quoted portion of the Act. The cited cases lend color to the petitioners' argument, which, however, is amply substantiated by the facts. The decedent retained only the power to dispose of the remainder after the wife's life estate, and failing the exercise of that power, his descendants would receive the remainder upon the termination of the life estate. The wife's interest, that is her life estate, was irrevocably created in accordance with the antenuptial agreement, and vested in her at the time of the creation of the trust. The decedent's death did not in any way alter her interest. In these circumstances we hold that the stipulated value as of the date of the decedent's death of the corpus of the trust for the benefit of the wife, less the present value of her life estate on that date, should be included in the decedent's gross estate. Pursuant to the stipulation and in accordance with the provisions of section 301 (b) of the Revenue Act of 1926, as amended by section 802 of the Revenue Act of 1932, there should be credited against the estate tax redetermined in accordance with this opinion, the amount of the inheritance taxes paid to the several states. Judgment will be entered under Rule 50. E. A. HOLMES, TRUSTEE, HOLMES BAKERY & CONFECTIONERY, PETITIONER, V. COMMISSIONER OF INTERNAL Revenue, ResponDENT. Docket Nos. 44943, 52861. Promulgated April 26, 1933. Frank J. Albus, Esq., for the petitioner. R. M. McMillan, Esq., and W. H. Payne, Esq., for the respondent. These proceedings were on motion consolidated for hearing and involve deficiencies in income tax for the calendar years 1924 of $352.82; 1925 of $1,324.70; and 1926 of $1,510.37 in Docket No. 44943; and for the calendar year 1928 of $677.89 in Docket No. 52861. A single issue is raised in the pleadings for all four years, whether the business conducted by the petitioner as trustee constituted an association taxable as a corporation. FINDINGS OF FACT. E. A. Holmes, trustee of the Holmes Bakery & Confectionery, began as a baker in 1905 and continued in this trade as an individual until 1922. Sometime before 1922 he had invested money in a corporation manufacturing an automatic carbureter, which failed and went into bankruptcy. Fearing this corporation's creditors might reach his baking business, petitioner to protect himself created a trust, the pertinent provisions of which are set out below, by an instrument dated December 1, 1922, and thereafter amended in |