Illinois Merchants Trust Co. v. Commissioner , 14 B.T.A. 890 ( 1928 )

ILLINOIS MERCHANTS TRUST CO., EXECUTOR UNDER THE LAST WILL AND TESTAMENT OF EDWARD E. AYER, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Illinois Merchants Trust Co. v. Commissioner

Docket Nos. 17092, 23123, 37200.

United States Board of Tax Appeals

14 B.T.A. 890; 1928 BTA LEXIS 2890;

December 21, 1928, Promulgated

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">*2890 1. Payments under agreements between charitable corporations and one who had transferred them stocks and bonds, reserving the income therefrom for his life and the lives of others, held taxable to the transferor as income from trusts.

2. Whether such transfer represented deductible contributions need not be decided in absence of evidence permitting the valuation of the remainder interest after life estates, the only interest transferred.

Hugh W. McCulloch, Esq., for the petitioner.

James A. O'Callaghan, Esq., for the respondent.

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SIEFKIN

">*890 These are proceedings duly consolidated for hearing and decision for the redetermination of deficiencies asserted for the following years and taxable periods.

Year	Docket No.	Deficiency
1920	17092	$1,633.70
1922	23123	910.90
1925	37200	2,474.50
1926	37200	2,133.32
Jan. 1, 1927, to May 31, 1927	37200	115.92

">*891 The petitions in Dockets Nos. 17092 and 23123 were filed by Edward E. Ayer before his death on May 3, 1927. The present petitioner was duly substituted in his place. Docket No. 37200 was filed by the petitioner in its capacity as executor.

">*2891 FINDINGS OF FACT.

Edward E. Ayer was a resident of Chicago, Ill. He died May 3, 1927, and the Illinois Merchants Trust Co. is the duly appointed, qualified and acting executor under his last will and testament.

In determining the deficiencies here involved, the respondent included in the income of Edward E. Ayer for the year 1920 the sum of $10,500 received by him from the Field Museum of Natural History, the Art Institute of Chicago, and the Newberry Library of Chicago, under the terms of the agreements with those institutions. All of these institutions are charitable and educational organizations organized under and existing by virtue of the laws of the State of Illinois, not organized for profit, and were incapable under this charter and under the laws of the State of Illinois of acting as trustees.

In determining the deficiencies here involved, the respondent included in the income of Edward E. Ayer for the year 1922 the sum of $10,500 received by him from the Field Museum of Natural History, the Art Institute of Chicago, and the Newberry Library of Chicago.

In determining the deficiencies for the years 1925 and 1926, the respondent included in the income of Edward">*2892 E. Ayer the respective sums of $19,359.40 and $21,165, and for the period January 1, 1927, to May 31, 1927, added $10,582.50 on account of payments to him by the Field Museum of Natural History, the Art Institute of Chicago, and the Newberry Library of Chicago.

On or about June 22, 1920, Edward E. Ayer transferred and delivered to the Field Museum of Natural History, of Chicago, Ill., 500 shares of the 7 per cent cumulative preferred stock of Ayer & Lord Tie Co. of the par value of $100 per share, which were thereupon transferred on the books of the company out of the name of Edward E. Ayer and into the name of said Field Museum of Natural History. In consideration of the transfer and delivery of said stock, said Field Museum of Natural History entered into an agreement. The ">*892 value of the stock at this time was $50,000. The contract referred to is as follows:

AGREEMENT entered into this twenty-second (22nd) day of June, 1920, between EDWARD E. AYER, of Chicago, Illinois, party of the first part, and FIELD MUSEUM OF NATURAL HISTORY, of Chicago, Illinois, party of the second part, WITNESSETH:

Said party of the first part hereby bequeaths, and delivers, to said party">*2893 of the second part, five hundred shares of Ayer & Lord Tie Company 7 per cent accumulative preferred stock, of par value of one hundred dollars ( $100) per share, under the following conditions.

During life of said party of the first part, or his wife, Emma B. Ayer, if she survives him, all revenues derived from said stock shall be carried in the accounts of said party of the second part, and upon receipt of same by said party of the second part, remittance for the same amount shall immediately be sent to said party of the first part, or his wife, Emma B. Ayer, as their interests may appear.

Upon the death of said party of the first part and his wife, Emma B. Ayer, all revenues derived from said stock, or its reinvestment, shall perpetually be used for the purchase of scientific books, pamphlets, or publications, for the different Departments of said Field Museum of Natural History, as the Trustees of said Field Museum of Natural History may direct.

It is further agreed by the parties hereto that if this stock shall be called for redemption, or if in the opinion of the party of the second part equally valid reasons obtain, then the said party of the second part may reinvest">*2894 the proceeds of said five hundred (500) shares of the Ayer & Lord Tie Company in such manner as shall best serve the purposes for which the bequest has been made.

Edward E. Ayer received, under the provisions of this contract, from the Field Museum of Natural History -

In the year 1920, the sum of	$1,750
In the year 1922, the sum of	3,500
In the year 1925, the sum of	3,500
In the year 1926, the sum of	3,500
In the year 1927, the sum of	1,750

On or about June 22, 1920, Edward E. Ayer transferred and delivered to the Art Institute of Chicago 500 shares of the 7 per cent cumulative preferred stock of Ayer & Lord Tie Co., of the par value of $100 per share, which were thereupon transferred on the books of the company out of the name of Edward E. Ayer and into the name of the Art Institute of Chicago. In consideration of the transfer and delivery of said stock, the Art Institute of Chicago entered into an agreement. The value of the stock at this time was $50,000. The contract referred to is as follows:

AGREEMENT entered into this twenty second (22nd) day of June, 1920, between EDWARD E. AYER, of Chicago, Illinois, party of the first part, and the ART">*2895 INSTITUTE OF CHICAGO, of Chicago, Illinois, party of the second party, WITNESSETH:

Said party of the first part hereby bequeaths, and delivers, to said party of the second part, five hundred (500) shares of Ayer and Lord Tie Co., 7 per cent, accumulative preferred stock, of par value of one hundred dollars ">*893 ($100.00) per share, to constitute a fund to be held under the following conditions.

All income from the said fund shall promptly be paid over to said party of the first part during his life, and after his death, to his wife, Emma B. Ayer, if she survive him. Upon the death of said party of the first part, if his wife do not survive him, or upon her death if she do survive him, the income derived from said fund shall be expended in the purchase of objects of art. Said party of the first part desires that only objects having in the opinion of the party of the second part importance and high artistic merit shall be purchased, and to that end, empowers the said party of the second part to allow the income of the said fund to accumulate from time to time until it shall be deemed adequate for the purpose. Objects of art so purchased shall be installed and marked as">*2896 memorials to Charles L. Hutchinson from a fund left for that purpose by his great friend and admirer, Edward E. Ayer, the latter's object being to forever express his love, admiration and respect for one of the dearest, broadest and most unselfish men he has ever known, and one to whom the people of Chicago are today under more obligations, too, than to any man in the State.

Said party of the second part is empowered at any time to sell said stock, or any portion thereof, for such price or prices as it may see fit, and to invest and reinvest the proceeds of such sale or sales in such stocks, bonds or first mortgages on real estate as it may select, the securities from time so held and the income thereof to be subject to the terms of this agreement in the same manner as the said Ayer & Lord Tie Co. stock.

Edward E. Ayer received, under the provisions of this contract, from the Art Institute of Chicago, -

In the year 1920, the sum of	$1,750
In the year 1922, the sum of	3,500
In the year 1925, the sum of	3,500
In the year 1926, the sum of	3,500
In the year 1927, the sum of	1,750

On or about November 12, 1920, Edward E. Ayer transferred and delivered to">*2897 the Newberry Library of Chicago, Ill., 500 shares of the 7 per cent cumulative preferred stock of Ayer & Lord Tie Co., of the par value of $100 per share, which were thereupon transferred on the books of the company out of the name of Edward E. Ayer and into the name of the Newberry Library. In consideration of the transfer and delivery of the stock, the Newberry Library entered into an agreement. The value of the stock at this time was $50,000. The contract referred to is as follows:

AGREEMENT, entered into this twelfth (12th) day of November, 1920, between Edward E. Ayer, of Chicago, Illinois, party of the first part, and The Newberry Library, of Chicago, Illinois, party of the second party, WITNESSETH:

Said party of the first part hereby bequeaths and delivers to said party of the second part, five hundred (500) shares of the Ayer & Lord Tie Company 7 per cent cumulative preferred stock, of par value of One Hundred Dollars ( $100) per share, under the following conditions:

During the life of the said party of the first part, or his wife, Emma B. Ayer, if she survives him, all revenues derived from said stock shall be carried in the account of said party of the second part, ">*2898 and upon receipt of same ">*894 by said party of the second part, remittance for the same amount shall be immediately sent to said party of the first part, or his wife, Emma B. Ayer, as their interests may appear.

Upon the death of said party of the first part and his wife, Emma B. Ayer, all revenues derived from said stock, or its reinvestment, shall be perpetually used for the purchase of books, pamphlets, publications, manuscripts or transcripts, fitting and naturally belonging to the Edward E. Ayer historical library now in and belonging to The Newberry Library. The proportions of each or any of the above shall be determined by the trustees of The Newberry Library.

It is further agreed by the parties hereto that if this stock shall be called for redemption, or, if in the opinion of the party of the second part, equally valid reasons obtain, then the said party of the second part may sell such stock and reinvest the proceeds of said five hundred (500) shares of the Ayer & Lord Tie Company in such manner as shall best serve the purposes for which the bequest has been made.

Edward E. Ayer received, under the provisions of this contract, from the Newberry Library - ">*2899

In the year 1922, the sum of	$3,500
In the year 1925, the sum of	3,500
In the year 1926, the sum of	3,500
In the year 1927, the sum of	1,750

On or about November 14, 1922, Edward E. Ayer transferred and delivered to the Newberry Library, 10 United States Fourth Liberty Loan bonds, of the denomination of $10,000 each, which were thereupon registered upon the books of the Treasury Department of the United States in the name of the Newberry Library. In consideration of the transfer and delivery of the Liberty Loan bonds, the Newberry Library entered into an agreement dated November 14, 1922. The contract referred to is as follows:

THIS AGREEMENT made this 14th day of November, 1922, Witnesseth:

EDWARD E. AYER, of Chicago, Illinois, heretofore by agreements dated January 27, 1911, November 12, 1920, and December 7, 1920, has given to the Newberry Library a collection of books, maps and manuscripts concerned chiefly with the ethnology, linguistics and history of America, and has made provision for the maintenance and administration thereof. This collection is known as the AYER COLLECTION. Mr. Ayer is desirous of making further provision for enlarging the">*2900 collection and bettering the administration thereof. Accordingly, Mr. Ayer has transferred, assigned and set over, and does hereby transfer, assign and set over to the Newberry Library the sum of One hundred Thousand Dollars ($100,000) in the following form:

Ten (10) bonds of the United States, IV Liberty Loan, of the denomination of Ten Thousand Dollars ($10,000) each to be held and administered by the Library as a perpetual fund upon the following trusts and the income thereof to be paid out in the following manner:

1. Governmental taxes or impost, if any, shall be paid out of the income.

2. The net income as it is collected should be paid to Mr. Ayer so long as he lives, and upon his death to his widow, Emma B. Ayer, so long as she lives, and upon the death of Mrs. Ayer, or in case Mrs. Ayer shall die before Mr. Ayer, then to their daughter, Elizabeth A. Johnson, widow of Frank Johnson, so long as she lives. When Mr. Ayer, Mrs. Ayer and Mrs. Johnson are ">*895 no longer living, the net income shall be applied by the Trustees of the Newberry Library as follows:

(A) A sum not exceeding Five Hundred Dollars ( $500) per annum may be appropriated toward the salary of">*2901 the curator of the Ayer Collection.

(B) The sum of Five Hundred Dollars ( $500) per annum may be appropriated to the publication of bibligraphy illustrating the Ayer Collection. However, this annual sum of $500 may be accumulated over a period of years, or in the discretion of the Trustees may be anticipated.

(C) The residue shall be devoted to the purchase of books, manuscripts, prints, charts, maps, copies, transcripts, picture writings, inscriptions, and other similar material within the scope of the AYER COLLECTION as heretofore established.

(D) Under the last paragraph the trustees of the Library may rent or purchase and may operate photostat or other reproducing machinery and pay the fees, cost, salaries, and traveling expenses necessary for the appropriate operation thereof.

(E) In the event that the Library sells duplicates of any matter originated or reproduced by the Ayer Collection the proceeds of such sales shall be turned into Income Account and expended under the provisions of this Paragraph.

3. Upon the maturity of the securities hereby conveyed the proceeds shall be collected and shall be reinvested in income-producing securities in the sole discretion">*2902 of the Trustees; similarly if the Trustees be of the opinion that the securities hereby conveyed could be converted into cash advantageously, they may sell the same and reinvest the proceeds. The Trustees shall not be limited by any statute governing the investment of trust funds.

4. In the event that any question arises, after the death of Mr. Ayer, Mrs. Ayer and Mrs. Johnson, upon the construction of this instrument, it shall be competent for the Board of Trustees of the Newberry Library by a majority vote entered upon its records, to declare a construction thereof which shall be unreviewable.

The agreements of January 27, 1911; November 12, 1920; December 7, 1920, and (are) not modified by this agreement, which is supplemental thereto.

THE NEWBERRY LIBRARY accepts the gift hereof and agrees to perform the conditions above declared.

The item of $500 (paragraph 2-a supra) shall be used only toward the payment of so much of the annual salary of the curator as may be in excess of $1,500.

Edward E. Ayer received, under the provisions of this contract, from the Newberry Library:

In the year 1923, the sum of	$4,250
In the year 1924, the sum of	4,250

">*2903 On or about February 5, 1925, Edward E. Ayer entered into an agreement with the Newberry Library, under the terms of which the agreement dated November 14, 1922, with the Newberry Library, was changed and altered. The agreement of February 5, 1925 was as follows:

THIS AGREEMENT made this 5th day of February, 1925, by and between the undersigned, WITNESSETH:

WHEREAS, the undersigned, comprising the parties to the within agreement and all of the beneficiaries therein named, without altering said agreement, except as hereinafter provided, desire to change the basis of income payments ">*896 to the individual income beneficiaries therein named so as to provide for an annual payment of Five Thousand Dollars ($5,000) per year to such individual income beneficiaries, respectively, in lieu of the payment to them of the income from the trust funds in said agreement mentioned;

Now, THEREFORE, in consideration of the premises and of the mutual covenants and agreements herein contained, it is hereby mutually covenanted and agreed by and between all of the undersigned as follows:

1. Said agreement shall be and the same hereby is amended so that commencing from the date hereof, ">*2904 The Newberry Library shall pay to said Edward E. Ayer so long as he shall live, and from and after his death to his widow, Emma B. Ayer, so long as she shall live, and from and after the death of both said Edward E. Ayer and said Emma B. Ayer, to their said daughter, ELIZABETH A. JOHNSON, so long as she shall live, the sum of Five Thousand Dollars ($5,000) per year, such annual amount to be paid in two equal installments of Twenty-five Hundred Dollars ($2,500) each, one such installment to be paid upon the first day of January and one upon the first day of July of each year, commencing on July 1, 1925. Said payments shall be in lieu of and substitution for the payment to said beneficiaries of the net income accruing after the date hereof from the trust funds as required by the provisions of the first sentence of paragraph (2) of the within agreement.

2. The within agreement as thus amended shall remain in full force and effect and is hereby fully ratified and confirmed.

Edward E. Ayer received, under the provisions of this contract, from the Newberry Library:

In the year 1925, the sum of	$5,000
In the year 1926, the sum of	5,000
In the year 1927, the sum of	2,500

">*2905 On or about November 17, 1922, Edward E. Ayer transferred and delivered to the Field Museum of Natural History, 10 United States Fourth Liberty Loan bonds, of the denomination of $10,000 each, which were thereupon registered upon the books of the Treasury Department of the United States in the name of Field Museum of Natural History. In consideration of the transfer and delivery of said Liberty Loan bonds, the Field Museum of Natural History entered into an agreement dated November 17, 1922. The agreement of November 17, 1922, was as follows:

AGREEMENT entered into this seventeenth (17th) day of November, A.D. 1922, by and between EDWARD E. AYER, of Chicago, Illinois, party of the first part, and FIELD MUSEUM OF NATURAL HISTORY, of Chicago, Illinois, party of the second part, WITNESSETH:

Said party of the first part hereby bequeaths and delivers to said party of the second part, Fourth Liberty Loan four and one-quarter per cent (4 1/4%) Bonds of the total par value of One Hundred Thousand Dollars ($100,000), under the following conditions:

During the life of said party of the first part, or his wife, Emma B. Ayer, if she survives him, or his Daughter Elizabeth Ayer Johnson, ">*2906 if she survives him, all revenues derived from said bonds shall be carried in the account of said party of the second part, and upon receipt of same by said party of the second part remittance for this same amount shabl immediately be ">*897 sent to the said party of the first part, or his wife, Emma B. Ayer, or his daughter, Elizabeth Ayer Johnson, as their interests may appear.

Upon the death of said party of the first part, and his wife, Emma B. Ayer, and his daughter, Elizabeth Ayer Johnson, all revenues derived from said bonds, or their reinvestment shall be used to pay the travelling expenses and other remuneration of men or women whom the party of the second part may wish to engage to lecture at any lecture, or lecture course, given under the auspices of the party of the second part; provided, however, that no part of the income derived from said bonds shall be used in any form whatsoever to remunerate any person who is in the regular employment of the party of the second part.

It is further agreed by the parties hereto that if at any time the requirements of said party of the second part for lecture courses do not call for the expenditure of the entire income from">*2907 said bonds, then at the discretion of the Trustees of said Field Museum of Natural History, said unexpended income may accumulate for purposes in connection with the lecture courses, or an amount up to and not exceeding twenty-five per cent (25%) of the total income derived from said bonds in any one year may be applied to the cost of producing scientific papers or publications or other similar means of disseminating knowledge.

It is further agreed between the parties hereto that if the said bonds shall be called for redemption, or if in the opinion of the party of the second part equally valid reasons obtain, then the party of the second part may sell said bonds and reinvest the proceeds of said bonds in such manner as shall best serve such purposes for which the bequest has been made.

It is further agreed that the fund herewith created shall be kept on the books of the party of the second part as a separate fund, to be known as the Edward E. Ayer Foundation.

Edward E. Ayer received, under the provisions of this contract, from the Field Museum of Natural History -

In the year 1923, the sum of	$4,250
In the year 1924, the sum of	4,250
In the year 1925, the sum of	4,250
In the year 1926, the sum of	4,250
In the year 1927, the sum of	2,125

">*2908 OPINION.

SIEFKIN: The only issue raised is whether the amounts received by petitioner represented income taxable to him. Counsel for petitioner insists the several agreements herein involved were annuity or endowment contracts, and that the amounts received were return of the capital consideration paid by him under such agreement. Respondent treated the receipts as taxable income. We are without benefit of brief from respondent, who, apparently, interpreted the agreements to be trust agreements, and taxed the payments thereunder, accordingly.

Petitioner directs our attention to the Illinois Revised Statutes, ch. 32, par. 345, et seq., and ; , by which it is established that corporations, not incorporated under the laws of Illinois for the ">*898 express purpose of accepting and executing trusts, can not act as trustee in that State. It is urged that none of the corporations named as parties to the agreements in question being qualified to act as trustee under the law, the agreements can not be interpreted as creating trusts. Granting that petitioner is">*2909 correct as to the law of Illinois as applicable to these corporations, we think the contention based thereon without merit. While the case cited points out the restriction on who may act as trustee, it contains no hint that a trust created would be allowed to fail merely by reason of the naming of a trustee who was not qualified to act as such. It seems clear that a court of equity would appoint a qualified trustee to execute the trust, if such were intended. At any rate, if a trust were intended, it could hardly be contended (in event of its failure) that the transfers of property operated as an absolute conveyance out of petitioner's hands so as to make him unaccountable for any income subsequently derived therefrom.

It is our opinion that the several instruments in question were actuated by the same motive, although there is a marked difference in form between the instrument bearing date of November 14, 1922, and the other agreements. That agreement states:

Mr. Ayer has transferred, assigned and set over, and does hereby transfer, assign and set over to the Newberry Library the sum of One Hundred Thousand Dollars ($100,000) * * * to be held and administered by the Library">*2910 as a perpetual fund upon the following trusts and the income thereof to be paid out in the following manner.

Such language is ordinarily used to create a trust. We are unable to find anything in the remainder of the instrument that may reasonably be interpreted as expressing a contrary intent. The income is directed to be paid over to the grantor for life, remainder to others for life if they outlive the preceding life estates, with remainder over to be applied to the use of library by its trustees as directed. Provision is made for the reinvesting of the fund in certain contingencies. Such directions and powers are common in trust agreements. Our attention is called to the use of the word "Trustees" only in referring to the governing board of the library. That is true. We do not consider such use indicative one way or the other in the question under discussion. We conclude that the respondent correctly taxed the income received by decedent under this instrument.

The instrument of November 14, 1922, was altered by an agreement under date of February 5, 1925. Petitioner urges that payments made after this alteration are clearly annuity payments, as they are stated sums">*2911 rather than dependent upon income receipts. But an examination of the later agreement leads to rejection of such contention. It expressly limits the extent of alteration as follows:

* * * The ">*899 undersigned * * * without altering said agreement, except as hereinafter provided, desire to change the basis of income payments to the individual income beneficiaries therein named so as to provide for an annual payment of Five Thousand Dollars ($5,000) per year to such individual income beneficiaries, respectively, in lieu of the payment to them of the income from the trust funds in said agreement mentioned; * * *

After directions for payment of the substituted amounts to the respective beneficiaries and again stating such payments to be in lieu of the income payments, it further states:

The within agreement as thus amended shall remain in full force and effect and is hereby fully ratified and confirmed.

From these provisions it is clear that all parties concerned recognized the existence of a trust under the earlier agreement and desired to alter only the payment provisions. The two contracts must, therefore, be read together. When so read no intention to abolish the">*2912 trust appears. We think it is clear that the obligation of the library to pay depends upon the continued availability of trust funds for the purpose. Petitioner's contention is rejected as to payments received pursuant to the amended agreement.

The proper interpretation of the remaining contracts presents a more difficult problem. Though they must be separately considered, the similarity of their provisions (except for differences pointed out below) justifies grouping them for purposes of discussion. That they were drafted without regard to legal phraseology is evident from their contents. For example, the word "bequeaths" which is common to all of them, when read with the context was undoubtedly used in a now obsolete sense, meaning "to appoint, give, or transfer by formal declaration; to transfer or deliver (property) so as to pass at once." See Webster's New International Dictionary.

The respondent has so interpreted the agreements that payments thereunder were taxable to petitioner. No evidence has been introduced to dispel the ambiguity inhering in the several instruments. If we are unable to hold that all of the several possible grounds which may have caused respondent">*2913 to determine the income to be taxable to the decedent are untenable, we must sustain such determination.

In view of the loose language used in the contracts too much stress can not be placed upon any particular words or phrases. Such restriction tends to lessen the differences in language used in the several contracts. For example, the conditional phrases or clauses closing the several transfer clauses are "under the following conditions" in three of the agreements, and "to constitute a fund to be held under the following conditions." Yet both forms of such closing phrases were used on the same day (June 22, 1920) in different contracts. Such words are words of limitation on the transfer, if ">*900 anything at all, and under the circumstances we are unwilling to differentiate between the two different expressions used. Since the alternative contentions that the agreements are annuity or endowment contracts are grounded on the inference that the transfers were absolute, creating a debtor-creditor relation, such words of limitation are indicative, though by no means conclusive, against petitioner.

Another difference in terminology concerning the income for the life of">*2914 the grantor and the other life beneficiaries must be similarly discounted as indicative of intent. Such provisions read:

Contract of
Premium
June 22, 1920 - Art Institute	All income from the said fund shall promptly be paid over [to the life beneficiaries].
June 22, 1920 - Field Museum	* * * All revenues derived * * * shall be carried in the accounts of said party of the second part, and upon receipt of same by said party of the second part, remittance for the same amount shall immediately be sent [to life beneficiaries].
November 12, 1920	Same as above.
November 17, 1922	Same, except "remittance for this same amount."

That the several corporations were to receive the income in the first instance is clear. Whether this income was to be kept separate and paid over to the life beneficiaries is not so clear. The contract of June 22, 1920, with the Art Institute so indicates. Yet, on the same day in a substantially similar contract with the Field Museum, the words used, standing alone, would, perhaps, ordinarily be interpreted to indicate no such segregation was contemplated by the parties. We say "would ordinarily be so interpreted" advisedly, ">*2915 as the words "the same amount" may have been used in the sense of the identical money. That is especially true respecting the contract of November 17, 1922, where the reference is to "this same amount." Under such circumstances we are unable to see that the different language was used designedly to show different shades of intent.

The remaining provisions of none of the contracts are particularly helpful, as they might have been used in annuity, endowment, or trust agreements. For example, granting the right to reinvest is a common provision in a trust agreement. While in an annuity contract the right to reinvest would ordinarily follow, that would not necessarily be so where the annuity payments were measured by the income from the property transferred, at least without some new measure being supplied. Perhaps the form of such latter grant would not, ordinarily, so closely follow the language usually employed in trust instruments. Such form may be indicative, but is not conclusive against petitioner in the instruments under consideration.

">*901 Petitioner urges that the payments being measured by the income does not evidence a trust, as annuity payments might likewise">*2916 be measured. We grant that annuity payments, or payments under a contract equivalent to an annuity contract for our purposes, might well be measured by reference to such income. In the ordinary case annuity contracts undoubtedly contemplate the recovery of part of the principal of the consideration as well as the income derived from its investment. However, the transfers in this case were obviously prompted largely by charitable motives. We are, therefore, inclined to agree with petitioner's contention that no significance can be attached to the provision that payments be measured by income.

From what has been said it seems clear that little reliance can be placed upon any particular provision of any of the instruments. We must read the respective instruments in their entirety for the apparent intent of the parties. It seems reasonably clear that in each transaction what the parties contemplated was the transfer of the property to the charitable corporations with the understanding that decedent would receive the income therefrom during his life, and such income would be paid to others if they outlived him. This apparent intent would undoubtedly be best served by holding the">*2917 transfers to have been made in trust. We are not satisfied that the respondent erred in treating the payments as trust income.

Petitioner urges as an alternative contention that the property transferred represented charitable contributions, deductible at least in part. We do not understand petitioner to so contend in the event we approve respondent's determination under the trust theory. In any event, the gift or contribution was limited to remainders after life estates and there are no facts of record by which we can determine the value of the remainders in the years in which the alleged contributions or gifts were made.

Reviewed by the Board.

Judgment will be entered for the respondent.

MILLIKEN and LANSDON dissent.

PHILLIPS

PHILLIPS, dissenting: I can not agree with the conclusion reached in the majority opinion that the decedent is not entitled to deduct as contributions the principal amounts given by him to the Field Museum of Natural History, the Art Institute of Chicago and the Newberry Library of Chicago. The gifts of principal appear to have been absolute and the provision for the reservation of a life estate can not, it seems to me, impair">*2918 the effectiveness or validity of that which was done.

It appears to be the conclusion of the Board that, because a life interest in the income was reserved, that which was given was a remainder interest which must be measured by its present value. ">*902 This is a concept which is well recognized in the inheritance tax field and elsewhere where it becomes necessary to value separately life and remainder interests in the same property. The customary procedure in such cases is to value the life interests and use the difference between the value of the property and the value of the life interest as the present value of the future remainder interest. This recognizes that the life interest has a present value, a principle which is not recognized in the revenue acts. ; .

In the instant proceeding the conclusion is reached, correctly, I believe, that the decedent is taxable upon the income of the principal fund set up by the various agreements. He is to be taxed upon the whole amount, without any deduction for the exhaustion of the value of his life interest by reason of its">*2919 approaching expiration. Yet we reach the conclusion that the gift must be reduced by the value of this same life interest. It does not seem to me that both positions can be defended at the same time. If the amount of the gift is to be reduced by the present value of the life interest reserved, then a part of the income must represent a return of such value and the decedent should be allowed a deduction for the exhaustion of his life interest. If the decedent is required to return the full income, without any deduction for the principal value of the life interest reserved, then the amount of the gift should not be reduced by any principal value assigned to the life interest. The sum of the parts should equal the whole. In view of the decisions cited above, I am of the opinion that decedent should be allowed as a deduction the value of the securities given by him to the institutions named.