The long-term capital gains and losses derived from securities contributed to the trusts by Gladys T. Stockstrom and Jessie S. Russell were as follows (longterm capital losses are shown in parentheses):

Louis Stockstrom was seventy-seven years of age when he signed the ten trusts on January 6, 1936.

Louis Stockstrom resigned as trustee on the 17th day of February, 1944.

Louis Stockstrom died in St. Louis County, Missouri, on July 5, 1945, and thereafter Arthur Stockstrom was appointed executor of his estate and is now the duly appointed, qualified and acting executor of said estate.

Shortly after the resignation of Louis Stockstrom as trustee and by virtue of the provisions of Item Eleven of the grandchildren's trusts the Mississippi Valley Trust Company and Louis McMillan became trustees of the Louis McMillan trust; the Mississippi Valley Trust Company and Edwin Russell became trustees of the Edwin Russell trust; the Mississippi Valley Trust Company and Nancy Russell (now Primm) became trustees of the Nancy Russell trust; the Mississippi Valley Trust Company and Margaret Stockstrom (now Skinner) became trustees of the Margaret Stockstrom trust; the Mississippi Valley Trust Company and Mary E. Stockstrom became trustees of the Mary E. Stockstrom trust.

Louis Stockstrom II and Arthur Stockstrom, Jr., (twins) became of age on January 9, 1946, and under the provisions of Item Eleven of their trusts are now entitled to become co-trustees with the Mississippi Valley Trust Company, which became the sole trustee upon the resignation of Louis Stockstrom. The said Louis Stockstrom II and Arthur Stockstrom, Jr., have not as yet become cotrustees of their trusts for the reason that Louis Stockstrom II is now in the Army and Arthur Stockstrom, Jr., is attending school away from St. Louis. Immediately upon their return to St. Louis the said Louis Stockstrom II and Arthur Stockstrom, Jr., will be entitled to become trustees of their respective trusts.

It was orally stipulated "that in computing the tax under Rule 50 that [sic] the income from the securities contributed by the two children shall be excluded."

Under the circumstances which we have just stated above in extenso, the petitioner now contends that our decision should be that none of the income from the seven trusts for the grandchildren should be taxed to the grantor, a result exactly contrary to that which we have already determined and which was affirmed by the Circuit Court of Appeals. Petitioner's argument may be summarized as follows:

(a) The evidence before us now differs from the evidence before us at the time of our original decision in that it is now shown that Louis Stockstrom, the grantor, was 77 years of age when he created the trusts in 1936 and his life expectancy was, accordingly, only 6 years. Petitioner contends that the grantor's right to accumulate or distribute the income of the trusts was thus limited to a definite term of years (the

grantor's life expectancy), and that, therefore, the grantor is not liable for a tax upon the trust incomes under the doctrine of Alma M. Myer, 6 T. C. 77, and J. M. Leonard, 4 T. C. 1271.

(b) On December 29, 1945, between the date of the decision of this case by the Circuit Court of Appeals and the date of the last hearing herein, the Commissioner promulgated certain amendments to his regulations by Treasury Decision 5488. These new regulations constitute "controlling authority," and require a conclusion on our part that none of the income of the trusts in question was taxable to the grantor in 1938, 1939, 1940, and 1941.

Petitioner's first argument requires no answer. If it would be considered as having validity, then every estate for life would be equivalent to a term for years.

Petitioner's second argument is based upon a misconception of the status of the Commissioner's regulations. Petitioner on brief states that the regulations in question have the force and effect of law. It is obvious that they do not. They "do not represent an administrative construction of the statute which has been uniform or of long standing, nor has there been a reenactment of the statute subsequent to the change in the regulations which might be construed as a legislative approval of such change." See Estate of Charles Nathan, 6 T. C. 605; Helvering v. Hallock, 309 U. S. 106, footnote No. 7. These regulations represent the Commissioner's present construction of the statutory provisions here applicable. As such, they are entitled to weight and consideration. Pursuant to the mandate of the Circuit Court of Appeals as modified by its order of February 18, 1946, we have considered the Commissioner's amended regulations. We still adhere to our views as expressed in our former opinion which were affirmed by the Circuit Court, and continue to be of the opinion that the income of the trusts in question was taxable to the grantor in the taxable years. We adhere to this conclusion not by reason of stubborn and sterile consistency, but because it continues to represent our considered judgment upon an extremely difficult problem. We have cited and followed our opinion herein in several other cases. If the Commissioner, as a matter of administrative policy, sees fit to construe the taxing statutes differently now than he did at the time this case arose, he may do so, but subject to review by this Court, the Circuit Courts of Appeals, and the Supreme Court. However, the mere change in respondent's administrative construction of the revenue acts of Congress will not result, as petitioner seems to assume, in the overruling of a line of decisions of this Court which, to the present time, have the approval of the higher courts.

It is unnecessary for us to consider whether subsections (d) and (e) of the respondent's amended regulations cover the question of the taxability of the income of the trusts here involved, for, as we have

indicated, even if they do, they would not, in our opinion, represent a correct interpretation of the statute and would not, therefore, be valid. If they do not cover the question here presented, petitioner's whole argument would, of course, be without point.

Decision will be entered under Rule 50.

MABEL F. GRASSELLI, PETITIONER, V. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Docket No. 7391. Promulgated June 28, 1946.

Petitioner was donee of a power of appointment under a trust
created in 1932, of which she was not a trustee. Her children were
cobeneficiaries. She was empowered to alter, amend, or terminate
the trust and to cause distribution of corpus to herself or her
appointees. The trustee paid income to the other beneficiaries
from 1936 to 1940, inclusive. On July 30, 1941, petitioner in writing
amended the trust by dividing the corpus into three parts, one of
which was to go to each of the two children, she relinquishing all
power over it and retaining power over the third fund, which power
she further exercised in 1942. Held, the amendments of section
1000, Internal Revenue Code, by section 452 (a) and (b), Revenue
Act of 1942, do not apply prior to January 1, 1943, to cause such
exercise of power of appointment to be deemed transfers of prop-
erty, and the petitioner was not subject to gift tax either upon
income paid to the other beneficiaries by the trustee in 1936-1940
or upon the division of the trust corpus on July 30, 1941.

Mark A. Loofbourrow, Esq., for the petitioner.
W. W. Kerr, Esq., for the respondent.

OPINION.

DISNEY, Judge: The Commissioner determined deficiencies in gift tax for the years and in amounts as follows:

Two questions are presented: (a) Whether, prior to July 30, 1941 (and after January 1, 1936), the petitioner was subject to gift tax upon amounts paid to beneficiaries, other than herself, by the trustee under a trust under which she had power of appointment; and (b) whether she is subject to gift tax because of action taken by her under such power, on July 30, 1941. All facts were stipulated and we adopt the stipulation by reference and find the facts therein set forth. Only such parts thereof as considered pertinent to examination of the issues will be set forth herein. As the petitioner takes no issue with the

amounts of the deficiencies or the values used by the respondent, and no evidence is offered to deny their accuracy, though the respondent specifically relies thereon, we consider that there is no issue as to figures, but only as to the law applicable thereto.

The material facts may be very briefly stated: In 1932 petitioner's husband created a trust, irrevocable by him, and of which the petitioner was not trustee, providing for payment by the trustee of the trust income during the joint lives of himself and petitioner, as follows: 50 per cent to petitioner, 30 per cent to his son, and 20 per cent to his daughter; and, after settlor's death, 50 per cent to petitioner and 25 per cent each to the daughter and son. In addition, the trust instrument provided as follows:

The Settlor's said wife shall have the right, at any time and from time to time, during her life, by an instrument in writing delivered to the Trustee to alter, amend or terminate the Trust Agreement in whole or in part, and in the event of any such termination the Trustee shall transfer, pay over and distribute such part or the whole of said principal, as the case may be, to the Settlor's said wife or to such person or persons, except the Settlor, and in such proportions as the Settlor's said wife shall direct by such instrument in writing, provided that the agreement shall not be amended so as to direct the payment, at any time, of income or principal to the Settlor.

The settlor, and after his death the petitioner, could give directions to the trustee, in writing, duly delivered. In excess of certain specific annuities provided by the trust instrument, the trust income, from January 1, 1936, to July 30, 1941, was paid one-half to petitioner and 25 per cent each to the daughter and son.

The petitioner, from 1932 to 1941, inclusive, pursuant to the power vested in her, modified the trust and withdrew substantial amounts from the trust fund.

By an instrument executed July 30, 1941, the petitioner, pursuant to the power vested in her, provided that the trust fund should be divided into three funds, designated "A," "B," and "C," that the income of funds A and B should be paid to the two children respectively, and that the income from fund C to be paid to petitioner for life, thereafter to be added (except as to certain bequests) to funds A and B; also that such trust principal as necessary for her care, comfort. and support, in accordance with her customary living standards, be paid to her from fund C.

The instrument also provided:

MABEL F. GRASSELLI shall have the right, at any time and from time to time during her life, by an instrument in writing delivered to the Trustee, to change the beneficiaries of Trust Fund C, except that she shall not in any way increase her beneficial interest in said Trust Fund nor confer upon herself any power not herein reserved to her, or otherwise amend the provisions of this agreement as to Trust Fund C. Said MABEL F. GRASSELLI shall have no power in any way to

alter, change or amend the provisions of this agreement with respect to Trust Funds A and B.

On March 3, 1942, petitioner by written instrument made a change in beneficiaries of fund C.

The deficiencies determined represent gift tax, first, upon the trust income paid from January 1, 1936, to July 30, 1941, to persons other than the petitioner; and, second, upon the trust assets placed in funds A and B, and remainder value of those placed in fund C (after subtraction of certain gifts and the value of petitioner's life estate). The deficiency notice based taxation as to the years 1936 to 1940, inclusive, upon petitioner's control over the income and its apportionment, stating that this made the recipients subject to petitioner's bounty, so that the amounts paid constituted gifts taxable to her under section 501 of the Revenue Act of 1932 and section 1000 of the Internal Revenue Code. With reference to the year 1941, the deficiency notice based gift tax upon certain distributions of trust income in 1941 to the son and daughter, and upon the value of trust property placed in funds A and B, and in C (less certain gifts and petitioner's life estate therein) by the instrument of July 30, 1941, upon the ground that therein the petitioner provided that thereafter she should have no power to alter, change, or amend as to A and B, and, since under the trust instrument she had full power to revoke, terminate or amend, therefore was vested with complete enjoyment, control, and disposition of the property and her exercise of such right constituted taxable gifts, within the meaning of section 1000 of the Internal Revenue Code. After claim by the Commissioner against the petitioner for income tax upon all of the trust income from 1936 to 1940, both inclusive, the matter was settled by the payment by petitioner of all of such income tax, except amounts thereof paid by the trustee and two beneficiaries.

Under the facts outlined above, the petitioner's argument is, in brief, that the gift tax was laid on transfer of property, that a power is not property, and that under Sanford's Estate v. Commissioner, 308 U. S. 39, there is no completed gift so long as the power is in existence, as was the case here, before and after the instrument of July 30, 1941, petitioner having therein expressly reserved rights given her by the trust instrument, which rights she exercised on March 3, 1942; also that the income paid to the children prior to July 30, 1941, came to them under the terms of the trust. Reliance is placed also upon Edith Evelyn Clark, 47 B. T. A. 865, to the effect that relinquishment of a power by a donee thereof entailed no gift tax, no "property" being transferred. The petitioner also argues that the amendments to gift tax law by section 452 of the Revenue Act of 1942 can not be retroactively applied to the taxable years here involved, though it is