Before EVANS, MAJOR, and KERNER, Circuit Judges.
This appeal involves the Federal estate taxes of the deceased, Charles Nathan. The controversy arises out of a trust created in 1941 by him. He died in April, 1943.
Petitioner argues that the funds in said trust should be included in decedent's gross estate for the purpose of Federal estate tax, subject only to the deduction of the value of a sister's life estate.
Respondent contends, and the Tax Court accepted her contention, that the value of the trust should not be included in the decedent's gross estate in view of the facts disclosed in this case.
As the applicability of Section 811(c) of the Internal Revenue Code, 26 U.S.C.A. Int. Rev. Code, § 811(c), and its construction, depend upon the terms of the trust which the decedent created, we quote from said agreement:
"This Trust Agreement, made this 23rd day of December, A.D., 1941, by and between Charles Nathan * * * hereinafter called the Donor * * * and * * * hereinafter called the Trustees, Witnesseth:
"Whereas the donor has assigned * * * to the trustees the property described in the schedule hereto attached * * *
"Now, Therefore * * * it is hereby agreed that the trustees shall hold and administer the said property * * * in trust for the uses and purposes and upon the terms and conditions hereinafter set forth.
"2. The entire net income from the trust estate, commencing at the date hereof, shall be paid to Rose Straus, the sister of the donor, for and during her natural life for her sole use and benefit, in installments as hereinabove stated. In the event, however, of the said Rose Straus predeceasing the said donor, CharlesNathan, then and in such event the net income shall be paid over by the trustees to the said donor, Charles Nathan, for and during his natural life for his sole use and benefit, in installments as hereinabove stated."
It must be conceded that Section 811(c) of the Internal Revenue Act governs. Sharp is the controversy over the Regulation (105) promulgated by the Commissioner in 1937.
"(c) Transfers in contemplation of, or taking effect at death. 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, or of which he has at any time made a transfer, by trust or otherwise, under which he has retained for his life or for any period not ascertainable without reference to his death or for any period which does not in fact end before his death (1) the ...