
    JOHN A. SIZER, THOMAS A. JONES, AND WARREN GILMAN JONES, EXECUTORS OF THE LAST WILL OF WILLIAM A. JONES, DECEASED, v. THE UNITED STATES
    [No. F-331.
    Decided April 16, 1928]
    
      On the Proofs
    
    
      Estate-transfer tax; gift inter vivos; renunciation of bequest, — The essentials of a valid gift inter vivos require more than intent, and where the alleged donor retains in his possession stock which it is his intent at some time to give to a donee, manifesting the intent by a written statement filed with the certificates of stock that the same belong to such donee and by endorsing them over, but without delivering thereto the key of the safety deposit box containing the certificates or informing him of the transfer so attempted, the circumstances do not show a transfer of title, and a renunciation by such donee of the bequest of said shares to him does not remove them from the burden of the Federal estate-transfer tax.
    
      The Reporter’s statement of the case:
    
      Mr. George R. Jackson for the plaintiff. Underwood, Sway ser, You/ng da Basse were on the briefs.
    
      Mr. Dwight E. Rorer, with whom was Mr. Assistant Attorney General Herman J. Galloway, for the defendant.
    The court made special findings of fact, as follows:
    I. William A. Jones was the president of the W. A. Jones Foundry and Machine Company. He owned over 800 shares of a total of 1,000 shares of the capital stock therein. Warren G. Jones is the son of William A. Jones. He entered the employment of the W. A. Jones Foundry and Machine Company in 1910. By 1915 he was an executive.
    II. About 1913 to 1915 William A. Jones, being anxious to see his son make a success of the business, told him that if he did make a success of it he, the father, would see that Warren G. Jones was given a controlling interest in the business. About 1915 the father told Warren G. Jones that he would get a substantial part of the business before his death; that he would not have to wait to inherit it. This promise was made in good faith.
    III. Warren G. Jones did make a success of the business and highly pleased his father. He exceeded his expectations in the way of managerial ability. Warren G. J ones had been in charge from about 1911, but William A. Jones continued as president until his death.
    IY. William A. Jones intended to retain 600 shares of stock until his death and to give the balance of his holdings to Warren G. Jones before his death.
    Y. William A. Jones had made a will in 1916 in which he bequeathed 599 shares of the stock to Warren G. Jones.
    VI. About Thanksgiving time, 1920, William A. Jones came to the office of his attorney, M. E. Leliter, and stated that he was about to leave for Florida and wished to attend to transferring the stock to Warren and that it was down at the bank. Mr. Jones and Mr. Leliter then proceeded to the bank. Mr. Jones’ safety deposit box was opened. A number of certificates of stock was contained therein in various denomination's. Mr. Jones instructed Mr. Leliter to sort out 288 shares and then instructed him to indorse them over to Warren, all of which was done. Mr. Jones then signed them. Mr. Jones then said, “ Now, Warren can take the stock to Chicago with him or leave it here as he pleases.” When the 288 shares were sorted out and indorsed they were put in a separate envelope and Mr. Leliter wrote, “ 288 shares of stock belonging to Warren Jones.” Mr. William A. Jones then signed the slip or envelope on which this was written. Mr. Jones then directed Mr. Leliter to count over the rest of the stock in order to account for all the shares. Mr. Leliter had a key to the deposit box at his office where it was at the disposal of Warren G. Jones.
    VII. William A. Jones died on May 30,1921, at the age of seventy-one. He left a will in which he bequeathed 599 shares of the capital stock of the William A. Jones Foundry and Machine Company to Warren G. Jones. The executors thereof are John A. Sizer, Thomas A. Jones, and Warren G. Jones, the plaintiffs herein.
    VIII. Of the above bequest, Warren G. Jones filed a written waiver and renunciation of the benefits of the legacy mentioned in Finding VII to the extent of 288 shares of said stock, the amount and number involved in this case. He already owned one share, so that finally his total holdings after the renunciation amounted to 600 shares.
    IX. The executors of the will of William A. Jones duly filed a return with the Commissioner of Internal Revenue disclosing the value of the estate for Federal inheritance taxes. An audit and review were made of the liability of the estate and the net taxable value thereof was increased by the sum of $176,472.00 by reason of the inclusion of the 288 shares of capital stock. As a result of this and other adjustments not here in issue an additional tax amounting to $20,221.49 was determined against the said estate, of which $11,223.62 arose from the inclusion of the transfer. On September 21,1926, plaintiffs paid to the collector of internal revenue at Indianapolis, Ind., the sum of $11,223.62 and filed therewith a claim for refund for the sum of $11,223.62. On April 16, 1924, plaintiffs paid to the collector of internal revenue at Indianapolis, Ind., the sum of $11,223.62 and filed therewith a claim for refund for $9,633.17. Plaintiffs also filed an amended claim therefor on November 18, 1924. The claim for refund of $9,633.17 was rejected by the Commissioner of Internal Revenue by letter on November 4, 1924. Reconsideration of the decision was denied on May 24, 1926. The claim for refund of $11,223.62 was rejected by the Commissioner of Internal Revenue on October 26, 1927.
    X. The decedent was 71 years old at his death. He had had diabetes for 20 year,s and some blood pressure and had been on a semidiet for 20 years, but despite this affliction was an energetic and active man up until a short time prior to his death. The primary cause of his death was nephritis. He had had a stroke of paralysis at a time not far remote from the date of the alleged transfer, which does not seem to have caused his death. He wa^ confined to his bed but one week. His mental condition was good.
    XI. At the time of the transfer Mr. Jones was planning on future activities covering several years. He planned on nothing but life. . He had invited a friend to visit him during the summer of 1921. He spent the last twenty years of his life in traveling, fishing, and hunting.
    XII. The amount of tax involved in the transfer of the 288 shares of,stock here in issue is $11,223.62.
    The court decided that plaintiffs were not entitled to recover.
   Booth, Judge,

delivered the opinion of the court:

This is an estate tax case. The plaintiffs seek to recover $11,223.62 levied and collected by the Commissioner of Internal Revenue from the plaintiffs, executors of the estate of William A. Jones, deceased. The facts, about which there is no important dispute, involve the primary question of a gift inter vivos. The decedent, William A. Jones, was president and owner of 800 of the 1,000 outstanding shares of the capital stock of the William A. Jones Foundry and Machine Company, an Illinois corporation. Mr. Jones resided at La Porte, Indiana, and died there on May 30, 1921. The claim is now made that on Thanksgiving Day, 1920, Mr. Jones gave to his son, Warren Jones, 288 shares of stock in the above corporation of the value of $116,412.00. The executors of the estate did not include in their returns for the estate tax the value of said shares. The commissioner, after, audit and review, did include the amount as part of decedent’s estate, and assessed an additional tax thereon of the amount claimed in this case. No jurisdictional questions are involved.

The findings disclose that the decedent continued the active and dominating figure in the corporation up to about 1915. He was anxious to have his son, Warren Jones, succeed him and was doing all he could to arouse the son’s interest in the business, as well as test his capacity to take it over. He assured the son that if he successfully managed affairs it was his intention to give him a substantial interest in the business prior to his death and a controlling interest therein after that event. The son did succeed. The father made his last will in 1916 and bequeathed to the son 599 shares of stock in the corporation. This legacy, with the addition of one share then owned by the son, gave him 600 shares, more than a majority of the stock.

On Thanksgiving Day, 1920, some four years after the date of decedent’s will, the decedent called upon his attorney and requested him to accompany decedent to a bank where he kept his safety deposit box wherein all his stock holdings in the corporation were contained, stating at the time that he was on the point of leaving for Florida and “wished to attend to transferring the stock to Warren.” The decedent’s lawyer segregated from his stock 288 shares thereof, and by the direction of the decedent indorsed the same over to his son Warren. The decedent signed each indorsement. Thereafter the 288 shares were placed in a separate envelope upon which, on a separate piece of paper attached to the envelope by rubbers, the lawyer wrote the following: “ 288 shares of stock belonging to Warren Jones.” This indorsement the decedent also signed. The package was then replaced in the decedent’s safety box and remained therein until his death. The lawyer retained a key to the box and it was available for use to Warren Jones. The lawyer knew no more of the transaction until the time came for the settlement of decedent’s estate. Warren Jones did not take physical possession of the stock and no claim is made that he was present when the alleged gift was made. He did know of his father’s intention to make such a gift and claimed only a total of 599 shares of stock, 311 from the estate and 288 from this alleged gift.

The plaintiffs insist that the gift was complete; that delivery was made either actually or constructively. There is a manifest intent to make at some time a gift of the stock to the. son, but more than intent is essential to complete the .transaction. The difficulty is one of delivery. At once from the record we are faced with the proposition of title, i. e., transfer of title. The stock certificates, though segregated from others, never changed location. There was no time subsequent to the alleged transfer when the son may be said to have had dominion over them. As a matter of fact, the son seems to have been wholly ignorant of what did take place. It is evident that the father under the existing conditions retained the stock in his possession and might have sold .it. If a question of ownership of the stock had developed between the father and son during the continuance of the status quo, the father undoubtedly would have been declared the owner; so that as between the parties we have little doubt that the gift was incomplete. The testimony of the attorney precludes the possibility of sustaining a contention that he accepted delivery of the stock as trustee for the donee. He was acting for the donor, and gave himself no concern whatever over the transaction after its completion at the bank.

The cases cited by the plaintiffs do not depart from the axiomatic rule as to the essentials of a gift inter vivos. They each one disclose clearly a delivery either to the donee, or someone acting for him. As stated in the brief: “Where the donor intended to give the bonds to the donee and placed within the power of the donee to obtain them and where the donee does in fact obtain them there is sufficient delivery.” (Citing Muir v. Gregory, 168 Fed. 641.)

Unfortunately for the plaintiffs the donee in this case did not receive by delivery the key to the donor’s safety deposit box, as illustrated in the case of Hagemann v. Hagemann, 204 Ill. 378.

We do not think it necessary to continue the discussion. It is an easy and far from cumbersome matter to make a valid gift of certificates of stock — one free from doubt and leaving no avenue open for adverse contentions. The donor in this case was a man of large business experience, he knew how to transfer corporate stock, and he and his son were upon amicable relations, and no reason appears of record why a departure from such a course was adopted. If the donor did not intend to retain dominion over the stock, and keep within his power the reserved right to exercise ownership over it if occasion demanded, he should have given it to the son outright and not resort to unusual and obscure means which serve only to becloud the transaction and throw it open to injection of questions of doubt and conjecture.

The tax was assessed under section 402 of the revenue act of 1918, 40 Stat. 1057, 10.97. This section and pertinent subdivisions read as follows:

“ That 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—
(a) To the extent of the interest therein of the decedent at the time of his death which after his death is subject to the payment of the charges against his estate and the expenses of its administration and is subject to distribution as part of his estate;
‡ ‡ $
“(g) To the extent of any interest therein of which the decedent has at any time made a transfer, * * * in contemplation of or intended to take effect in possession or enjoyment at or after his death * * * except in case of a bona fide sale for a fair consideration in money or money’s worth. Any transfer of a material part of his property in the nature of a final disposition or distribution thereof, made by the'decedent within two years prior to his death without such a consideration, shall, unless shown to the contrary, be deemed to have been made in contemplation of death within the meaning of this title; * * * ”

The defendant raises the additional question of a transfer in contemplation of or intended to take effect in possession and enjoyment after death. The donor was at the time of the gift in somewhat the same situation as to his health which had prevailed for many years. He did not contemplate immediate demise; and in view of the terms of his will it would seem that the transaction was an arrangement of stock certificates in such a way that he might, if so inclined, complete it before his death, and thus accelerate a portion of the legacy left to the son in his will. In any event the donee would receive the gift, either through the will or prior to the donor’s death.

The petition will be dismissed. It is so ordered.

Moss, Judge; Graham, Judge; and Campbell, Chief Justice, concur.

GreeN, Judge, took no part in the decision of this case.  