the 1307's were significantly different. In its sales of 1307's, GmbH took title to the controls and in turn sold them to the engine manufacturers. Accordingly, GmbH assumed the warranties of a seller and incurred the credit risks. In addition, by its contract with the petitioner, it undertook to indemnify the petitioner against any tort liability. It also incurred the responsibility of furnishing services subsequent to the sale of the 1307's. The respondent points out that the petitioner, not GmbH, arranged for the first sale of the 1307's to Fabrique Nationale and questions whether GmbH performed the selling and servicing activities in connection with the sales of 1307's to Mitsui. However, the initial sale to Fabrique Nationale occurred prior to the beginning of the taxable year in issue, and the sales to Mitsui occurred subsequent to such year. Whether the price charged GmbH for those sales was an arm's-length price is not in issue in this case. Moreover, although the respondent has raised some doubts in connection with the sales to Mitsui, there is no evidence that GmbH did not perform the customary selling and servicing activities. In view of the very significant differences between the nature and extent of GmbH's responsibilities in connection with the sales of the industrial engine and turbine controls and the sales of the 1307's, we find and hold that the respondent acted unreasonably and without justification in his determination. On the other hand, the petitioner has convinced us that the comparable-price method is applicable in this case and that its sales of 1307's to GE established an arm's-length price for its sales to GmbH. When the petitioner decided to enter the European market for 1307's, it was not oblivious of the fact that it could thereby earn and retain a greater profit on the sale of such controls. The profit earned by GmbH was, after all, the profit of the petitioner. That inducement to enter the European market does not affect the issue before us. Our only interest is in determining whether the sales to GmbH were at an arm's-length price so that the petitioner realized, and subjected to United States taxation, an appropriate portion of the profits on the ultimate sales to the European manufacturers. Under the comparable-price method, the arm's-length price is determined by reference to comparable sales to uncontrolled persons. GE was clearly an uncontrolled person, but the respondent contends that the sales of 1307's to it were not comparable. The respondent vigorously argues that under the petitioner's pricing policy, the prime discount was allowed only to domestic original equipment manufacturers and to the U.S. Government and that the petitioner favored GmbH by allowing it the prime discount. When it became necessary for the petitioner to establish the price to be charged GmbH for 1307's, the petitioner decided to allow it the prime discount since it would be selling in competition with GE. No doubt, GmbH was not an original equipment manufacturer, but since it would be selling in competition with GE, the price charged it would have to be equal or close to that charged GE, if it was to realize any profit on the resale of 1307's. Although GE was an original equipment manufacturer, it was acting as a distributor in dealing with its European licensees-it was purchasing the 1307's from the petitioner and reselling them to those licensees. The sales to GmbH were clearly comparable to those transactions. Under the Income Tax Regulations, sec. 1.482-2 (e) (2), for a sale to be comparable, both the property and the circumstances of the sale must be identical. One of the circumstances to be considered is the level of the market. When we consider the sales to the ultimate purchasers, the European manufacturers of the J-79 engines, the sales of 1307's to GE and to GmbH were at the same market level. Moreover, both GE and GmbH performed comparable selling and servicing activities in connection with such sales. Both GE and GmbH were soliciting the European manufacturers of the J-79 engines and attempting to sell them the 1307's. Both warranted their products and stood ready to furnish postsales services. The evidence convinces us that GmbH furnished as much postsales services as did GE. For the sales to be comparable, the terms of sale must be the same. In form, the terms of the sales to GE and to GmbH were the same, but the respondent urges us to look back of the form and conclude that in substance they were not comparable. Both GE and GmbH undertook to indemnify the petitioner against any tort liability, but the respondent contends that the promise by GmbH was not comparable in substance. In connection with the purposes for establishing GmbH, we were told that the petitioner was concerned about possible tort liability. There was some fear that a Starfighter might come down in a heavily populated area, causing extensive damage and resulting in substantial tort claims, especially if it were carrying nuclear weapons. However, we have no evidence as to the likelihood of such a tragedy occurring, nor as to the extent of the petitioner's possible liability. There was some indication that the petitioner had some insurance against such liability, and it is not clear as to what would be the petitioner's liability under European law. The respondent asks us to assume that the promise of GE was worth substantially more than that of GmbH; yet, we have no evidence as to GE's financial soundness. So far as we know, it may be as reliable as the Rock of Gibraltar, but recent events have demonstrated that not all business giants are financially sound. It sometimes requires a very sophisticated analysis of a financial report to determine the financial soundness of the busi ness. What the respondent is asking us to do is to speculate as to the occurrence and amount of such tort liability and as to the financial reliability of GE and GmbH. Since the petitioner has proved that the terms of the sales of 1307's to GE and GmbH were the same, it seems to us that if the respondent wishes to establish that those sales differed in substance, he must do more than merely raise questions and ask us to speculate as to their answers. Under these circumstances, we are satisfied that the terms of sale were comparable. In considering whether the sales to GE were comparable and established an appropriate arm's-length price for the sales to GmbH, it should be remembered that the sales of 1307's to GE produced very satisfactory profits for the petitioner. Although its overall profits, expressed as a percentage of sales, were only 13 percent, it realized 17 percent from the sales in the aircraft product line. The petitioner was unable to furnish information as to its profits on the sales of 1307's, but sales of 1307's to GE constituted approximately 75 percent of the business done in the aircraft product line. Since some of the business in that product line was performed at little or no profit, it appears that the sales of 1307's to GE must have yielded 17 percent or more. Thus, this is not a situation in which a price was established by reference to sales in which there was little or no profit. Eli Lilly & Co. v. United States, 372 F. 2d 990 (Ct. Cl. 1967). The sales to GE were producing satisfactory profits, and there was no reason to attempt to earn more on the sales to GmbH. Although the respondent asserts that the petitioner would not have sold the 1307's to an independent company situated similarly to GmbH, there is no evidence to support that assertion. There is no evidence that the petitioner charged more for 1307's in sales to persons situated similarly to GmbH. In fact, aside from the sales to GE, the other most comparable sales were those to AEL. Parts for the 1307's were sold to AEL at the same prime discount--list less 50 percent, even though it, like GmbH, was not an original equipment manufacturer in the United States. It was a Canadian corporation; yet, it received the prime discount. Under all the circumstances, we find and hold that the respondent acted arbitrarily in treating GmbH as a mere sales agency entitled to a commission on its sales of 1307's and that the petitioner has proved that the sales of 1307's to GE and GmbH were comparable. In order to reflect other ajustments, Decision will be entered under Rule 50. ESTATE OF ROBERT R. WARE, DECEASED, ROBERT R. WARE, JR., EXECUTOR, PETITIONER v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT Docket No. 5192-68. Filed October 19, 1970. Held: During his lifetime, decedent failed to effectively resign his John Donovan Bixler and Crane C. Hauser, for the petitioner. OPINION QUEALY, Judge: The respondent determined a deficiency in the Federal estate tax of the Estate of Robert R. Ware, deceased, in the amount of $290,729.03 of which the sum of $289,493.66 is in dispute. The petitioner is the executor of the estate. The amount in dispute is attributable to respondent's inclusion in the decedent's gross estate of the value ($865,242.22) of five trusts created by the decedent. The only issue presented for decision is whether decedent, during his lifetime, effectively released his power under each of the trusts to accumulate or distribute income. If so, the value of the corpus of each of the trusts would not be includable in his gross estate under sections 2036 and 2038.1 The facts have been stipulated. The stipulation of facts and exhibits attached thereto are incorporated herein by this reference. Robert R. Ware (hereinafter referred to as decedent), deceased, was a resident of Illinois at the time of his death on July 25, 1964. Robert R. Ware, Jr. (hereinafter referred to as petitioner), was appointed executor of decedent's last will and testament by the Probate Division of the Circuit Court of Cook County on August 18, 1964, and has served in that capacity at all pertinent times. The Federal estate tax return for decedent's estate was filed with the district director of internal revenue at Chicago, Ill. Decedent was survived by his wife, Elizabeth D. Ware (hereinafter referred to as Mrs. Ware), and four children. The names and dates of birth of decedent's children are as follows: All statutory references are to the Internal Revenue Code of 1954, as amended, unless otherwise indicated. On or about December 26, 1936, decedent created five trusts, sometimes known and referred to as the Robert Rea Ware Trusts, A, B, C, D, and E, the principal of each trust consisting of shares of common stock of the Chicago Roller Skate Co., an Illinois corporation (hereinafter referred to as the company). The primary beneficiary of Trust A was decedent's wife, and the primary beneficiary of each of the other four trusts was, in each instance, one of the aforementioned four children. On the date of decedent's death, the assets of Robert Rea Ware Trusts A, B, C, D, and E each consisted of small amounts of cash and 864 shares of the Chicago Roller Skate Co. registered on the corporate books of said company, all as follows: Name of shareholder on corporate books Elizabeth D. Ware, successor trustee under Robert R. Ware Robert R. Ware, Jr., successor trustee under Robert R. Ware John D. Ware, successor trustee under Robert R. Ware Trust C. Evelyn W. Peters, successor trustee under Robert R. Ware Each trust instrument commenced with the following language: THIS AGREEMENT, made and executed at Chicago, Illinois, this 26th day of December, A.D. 1936, by and between ROBERT REA WARE, party of the first part, and said ROBERT REA WARE, as Trustee, and, subject to the terms hereof, RALPH WARE and WALTER WARE, as Successor Trustees, as hereinafter stated, parties of the second part, all of the City of Chicago, County of Cook and State of Illinois, Ralph Ware and Walter Ware were brothers of decedent. Each trust agreement contained, inter alia, the following provisions: The said ROBERT REA WARE shall be and continue the sole Trustee hereunder as long as he shall live and remain competent to act as such Trustee. Should said ROBERT REA WARE cease to be such Trustee, then and not until then, said RALPH WARE and WALTER WARE shall become interested as Trustees in the trust hereby created as successors to said ROBERT REA WARE, and shall become entitled to receive and shall receive and have delivered and paid to them as such Successor Trustee, the whole of said Trust estate with the authority and power of the Trustee herein and subject to the limitations thereof, except that the right and power hereinafter granted to the Trustees herein to use his sole discretion in the distribution of the income or the accumulation of same shall be exercised by the Successor Trustees only in the event said Trustee becomes incompetent, and during the period of such incompetency, and under no other circumstances or contingencies. * * * * Should any of said Successor Trustees, die, resign, become incapacitated or refuse to act as such, then, and not until then, the right to designate a Suc |