34. In determining the deficiency in tax respondent increased "Miscellaneous Property" by $3,076,333.31, $3,073,433.11 of which is in issue. The latter amount is comprised of:

(a) Decedent's share of stock rights proceeds, stock dividends (exclusive of Standard Oil Companies) and stock rights exercised by the Estate of Henry H. Houston, designated in the deficiency notice as "Undistributed Income, Estate of Henry H. Houston".

(b) A one-third interest in the residue of the estate of S. Houston___

*$1, 155, 673. 75

*1, 917, 795. 36

[*The items making up these amounts are shown in detail in the stipulation They include carrying charges on real estate, which respondent has stated h does not intend to press. The second amount also includes the undistribute balance of the assets held by the Real Estate Trust Co. under the family agree ment for distribution on June 6, 1938, to Eleanor Houston Smith ($150,705.72) which amount was distributed to her shortly after that date, and the asset distributable to other grandchildren of Sallie S. Houston, "who had each be come entitled to their respective shares of the principal thereof prior to June 1938, upon their respectively reaching 30 years of age", ($227,336.62).]

35. Respondent also included in gross estate, as "Transfers Du ing Decedent's Life," taxable under section 302 (c) and 302 (d) o the Revenue Act of 1926 as amended, the value of certain securitie which the parties have designated as securities of "Standard Oil Con panies," consisting of stock dividends, stock rights, and income thereo The aggregate is stated in the notice of deficiency to be:

Family settlement and trust under deed dated
December 31, 1915_-_.

[The items making up this amount are shown
in detail in the stipulation.]

OPINION.

4

$5,756, 183. 21

MELLOTT, Judge: The first two issues involve essentially the san questions-the effect, for estate tax purposes, of the deed of fami settlement of 1915, the deed of confirmation of 1922, the annual a provals, the Orphans' Court proceedings, the 1935 income tax cas and especially the failure of the last grandchild (Eleanor Houst Smith) to sign the deed of family settlement prior to the effecti date of the Joint Resolution of March 3, 1931.

444

* Disregarding the Family Agreement [of 1915], the 1922 agreement, s the writings (Exhibits 6-F through 26-Z) [the annual approvals-see findings 18, and 20], some part of the items referred to in Paragraphs 28 and 29 [of the stipulation i. e., the stock dividends, stock rights, etc., on both the Standard Oil companies s non-Standard Oil companies] would have constituted distributable income of the Est of Henry H. Houston, but the questions (a) to what extent, and (b) at what time times, the said items would have been so distributable are agreed by the parties to excluded by the joint motion from consideration at the present [Par. stipulation.]

Of these questions the most important is the effect of the deed of family settlement (sometimes hereinafter referred to as the deed of 1915). The deed of confirmation of 1922 (sometimes referred to hereinafter as the deed of 1922) was largely confirmatory of the deed of 1915 and, together with the approvals signed by Samuel, Gertrude, and the decedent (hereinafter referred to as the three life tenants), brought within the terms of the deed of 1915 the Standard Oil stock dividends and stock rights distributed after December 31, 1915. The non-Standard Oil securities were held in principal by Houston's trustees by reason of the approvals of the three life tenants-possibly also by reason of oral agreements made by them.5 We shall discuss first the effect of the deed of 1915, as confirmed by the deed of 1922. Respondent contends that under the provisions of the deed of 1915 (and also the deed of 1922) no property rights of the decedent passed to the trustees when it was signed and executed by the three life tenants and the grandchildren who had then attained their majority; that acceptance by all the grandchildren was a condition precedent to the transfer of such property rights; that the condition was not fulfilled and the property rights were not transferred until the last grandchild, Eleanor Houston Smith, signed the deed shortly after attaining her majority on July 21, 1931; that the decedent (being one of the three life tenants) retained for life the cash income to be derived from the property which she transferred; and, therefore, that the value of the property transferred by her was properly included in her gross estate under sections 302 (a) and (c) of the Revenue Act of 1926, as amended by the Joint Resolution of March 3, 1931, and subsequent revenue acts. For present purposes the value determined by

ments

The Orphans' Court, in its adjudication upon the trustees' first account, filed October 3. 1941 (Ex. 29—A. C.), held that "oral agreements" had been made by the life tenants that the dividends on corporate securities other than those of the Standard Oil Co. should be held by the trustees of Houston's estate as principal. It said: "By the oral agreeand the repeated affirmation of such agreements found in the approval of the various accounts the life tenants released to the principal of tthe trust any claims to stock dividends and other extraordinary corporate distributions to which they might be entitled as the income beneficiaries of the trust. When made, this release was irrevocable and could not be set aside or revoked without the consent of all remainder interests which were benefited by such release."

SEC. 302 (as amended by section 404 of the Revenue Act of 1934]. The value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated, except real property situated outside the United States

(a) To the extent of the interest therein of the decedent at the time of his death;

(c) [as amended by Joint Resolution of March 3, 1931, Public No. 131, Seventy-first Congress, and by section 803 (a) of the Revenue Act of 1932]. 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 possession or enjoyment of, or the right to the income from, the property, or (2) the right, either alone

Co., 43 B. T. A. 973; affd., 129 Fed. (2d) 363; certiorari denied, 317 U. S. 688.

For reasons which will become apparent later the effect of the deeds upon the Standard Oil Co. securities will be considered first. There is no dispute that the decedent transferred all of her property rights in these securities to the trustees, reserving for her lifetime the income therefrom. The question is whether this transfer was completed prior to the Joint Resolution of March 3, 1931, or shortly after July 21, 1931, when the last grandchild became of age and signed the deed of family settlement. If the latter, then the value of decedent's rights in these securities must be included in her gross estate.

It is apparent, and the parties agree, that the assignment by the life tenants, in the deed of 1915, of all their right, title, and interest in the Standard Oil distributions was coupled with a condition in the same instrument. The decision turns, therefore, largely on whether the condition was precedent or subsequent to the vesting of the property.

Estates on condition are well known to the law and an extended discussion here is not required. However, it may be helpful to note, briefly, the nature and operation of conditions precedent and conditions subsequent.

An estate on condition may be defined as an estate which is subject, as regards its commencement or possible termination, to the occurrence of an event or the doing of an act. It is an estate on "condition precedent" if it is not to commence or "vest" until the occurrence of the event or the doing of the act. If it is to terminate on the happening of a specified event or the doing of an act at the option of the creator of the estate or of his successor in interest, before its normal time of termination, it is an estate on "condition subsequent." Tiffany, Real Property, 3d ed., vol. 1, sec. 185. While certain words are said to be appropriate for the creation of a condition, no particular words are required. The polestar for determining whether a condition exists and whether it is precedent or subsequent is the intention of the grantor as gathered from the whole instrument. Stanley v. Colt, 5 Wall. 119, 166; In re Lindy-Friedman Clothing Co., 275 Fed. 453. A reservation of the right of reentry in a particular event will usually render the estate one on condition subsequent, Kew v. Trainor (Ill.), 37 N. E. 223; Dunne v. Minsor (Ill.), 143 N. E. 842, as will a provision that in a particular event the property shall revert to the grantor, Johnston v. City of Los Angeles, 168 Pac. 1047; Village of Peoria Heights v. Keithley (Ill.), 132 N. E. 532; Powell v. Powell (Ill.), 167 N. E. 802; or a provision that the instrument shall become void. Dunne v. Minsor. supra; Randall v. Wentworth (Me.), 60 Atl. 871; Minneapolis Threshing Machine Co. v. Hanson (Minn.), 112 N. W. 217. Such expressions indicate that the grantee has taken possession, or that the property has passed, or that the conveyance was valid.

any one or more" of the grandchildren should not be willing "to become signatories" and acquiesce in the disposition of the Standard Oil securities in the manner specified in the deed, is consistent only with a condition subsequent; that the ultimate signature of the deed by all the minor grandchildren was not necessary to make the deed binding upon the three life tenants; that any such construction is impossible in view of the fact that all the parties to the deed have treated it as valid and binding from the date of its execution and the Orphans' Court has held it to be binding; and that the only reasonable construction of the deed is that "it was an absolute transfer and agreement, binding upon each of the parties who signed it at the moment when they respectively signed it, subject to abrogation in the event that in the future any grandchild, on coming of age, affirmatively refused to sign it."

In May v. Heiner, 281 U. S. 238, it was held that retention by the grantor of the income for life of an irrevocable trust does not justify the inclusion of the corpus of the trust in the estate of the grantor for purposes of the estate tax. Congress undertook to devitalize this decision shortly after its promulgation by the Joint Resolution of March 3, 1931, specifically including in gross estate a transfer under which the transferor has retained for his life, or for any period not ending before his death, the possession or enjoyment of, or the income from the property, or 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. The joint resolution, however, is not to be applied retroactively, Hassett v. Welch, 303 U. S. 303.

It is not clear whether respondent, at the time the deficiency was determined, was relying upon the view expressed by this tribunal in Estate of Mary H. Hughes, 44 B. T. A. 1196, to the effect that May v. Heiner had been overruled by Helvering v. Hallock, 309 U. S. 106. The Hughes case, however, was specifically overruled before the hearing in the instant case, Estate of Edward E. Bradley, 1 T. C. 518; affirmed sub nom. Helvering v. Washington Trust Co., 140 Fed. (2d) $7. Acquiescence by the respondent in the view expressed in the Bradley case is implicit in the postulate adopted by him upon brief— i. e., that decedent's share of the extraordinary distributions is includible in her gross estate because no actual transfer of them had been made by her prior to the signing of the deed of family settlement by Eleanor Houston Smith, which occurred shortly after July 21, 1931. Any inconsistency in the position taken by him is immaterial; for his determination must be upheld, if justified by the facts, notwithstanding the reason for making it may be unsound. Edgar M. Carnrick, 21 B. T. A. 12; Sand Springs Ry. Co., 31 B. T. A. 392; Standard Oil

Co., 43 B. T. A. 973; affd., 129 Fed. (2d) 363; certiorari denied, 317 U.S. 688.

For reasons which will become apparent later the effect of the deeds upon the Standard Oil Co. securities will be considered first. There is no dispute that the decedent transferred all of her property rights in these securities to the trustees, reserving for her lifetime the income therefrom. The question is whether this transfer was completed prior to the Joint Resolution of March 3, 1931, or shortly after July 21, 1931, when the last grandchild became of age and signed the deed of family settlement. If the latter, then the value of decedent's rights in these securities must be included in her gross estate.

It is apparent, and the parties agree, that the assignment by the life tenants, in the deed of 1915, of all their right, title, and interest in the Standard Oil distributions was coupled with a condition in the same instrument. The decision turns, therefore, largely on whether the condition was precedent or subsequent to the vesting of the property.

Estates on condition are well known to the law and an extended discussion here is not required. However, it may be helpful to note, briefly, the nature and operation of conditions precedent and conditions subsequent.

An estate on condition may be defined as an estate which is subject, as regards its commencement or possible termination, to the occurrence of an event or the doing of an act. It is an estate on "condition precedent" if it is not to commence or "vest" until the occurrence of the event or the doing of the act. If it is to terminate on the happening of a specified event or the doing of an act at the option of the creator of the estate or of his successor in interest, before its normal time of termination, it is an estate on "condition subsequent." Tiffany, Real Property, 3d ed., vol. 1, sec. 185. While certain words are said to be appropriate for the creation of a condition, no particular words are required. The polestar for determining whether a condition exists and whether it is precedent or subsequent is the intention of the grantor as gathered from the whole instrument. Stanley v. Colt, 5 Wall. 119, 166: In re Lindy-Friedman Clothing Co., 275 Fed. 453. A reservation of the right of reentry in a particular event will usually render the estate one on condition subsequent, Kew v. Trainor (Ill.), 37 N. E. 223; Dunne v. Minsor (Ill.), 143 N. E. 842, as will a provision that in a particular event the property shall revert to the grantor, Johnston v. City of Los Angeles, 168 Pac. 1047; Village of Peoria Heights v. Keith ley (Ill.), 132 N. E. 532; Powell v. Powell (Ill.), 167 N. E. 802; or a provision that the instrument shall become void. Dunne v. Minsor. supra; Randall v. Wentworth (Me.), 60 Atl. 871; Minneapolis Thresh ing Machine Co. v. Hanson (Minn.), 112 N. W. 217. Such expressions indicate that the grantee has taken possession, or that the property has passed, or that the conveyance was valid.