OPINION.
Murdock, Judge:
The Commissioner determined a deficiency of $24,514.59 in estate tax. He added to the net estate, as disclosed by the return, $78,036 as the cost of a survivorship annuity payable to the decedent's widow. The issues for decision are whether some amount should be included in the gross estate representing the value of the survivorship annuity as a transfer within the meaning of section 811 (c) of the Internal Revenue Code and what the correct amount to represent that value is. The facts have been stipulated.
William J. Higgs, referred to herein as the decedent, died on May 18, 1943. The Federal estate tax return for his estate was filed with the collector of internal revenue for the fifth district of New Jersey. The decedent was born on August 1, 1872. He was survived by his wife, Ella Bolton Higgs, who was born on May 10,1879.
The decendent retired as an employee of Socony-Vacuum Oil Co. on January 1,1935. He had been employed by that company or its predecessors for approximately 47 years and 3 months, or since September 29,1887. The employer had had various systems of pensions and retirement benefits in which the decedent had been a participant, but those were terminated and the employer entered into an agreement with the Metropolitan Life Insurance Co. on January 1, 1931, creating Retirement Benefit Group Plan No. 103, referred to herein as the plan. That plan was underwritten and administered by Metropolitan.
The decedent became a participant in the plan and certificate No. A-12 was issued to him. The plan gave an employee an option, exer cisable prior to the commencement of annuity payments, whereby he might "request the Insurance Company that his Retirement Annuity commence on the normal retirement date for a reduced amount, as determined by the Group Contract, and that it shall be continued after his death, to his designated dependent, should such person survive him." Computations were to be made so that the resulting annuities would be equivalent in value to the annuity to which the employee himself would have been entitled if the option had not been exercised. The equivalents were determined on the basis of the mortalitv tables and interest rates used by the insurance company in determining the purchase price which it charged the employer for each annuity when it was purchased.
The decedent, pursuant to the option provision, designated his wife as dependent and elected to receive a reduced amount so that the annuity would be continued in a lesser amount after his death to his wife, should she survive him. He made a request on September 12, 1934, that his annuity on retirement be in an amount reduced to the extent necessary to provide an annuity of $7,000 for his wife for her life after his death in case she should survive him. The insurance company granted his request. It determined that he could receive an annuity of $7,000 during his life, which would be continued after his death and be paid to his wife thereafter for her life and, in addition, he could receive for his life an annuity of $11,985.27. He was entitled to receive, and was paid from January 1, 1935, until his death, $18,-985.27 annually, and after his death the payments of $7,000 annually were made to his widow under that election. If he had not exercised the option providing for a continuation of the retirement annuity to his designated dependent, he would have been entitled to receive an annuity of $21,750 for his life. That amount represented 75 per cent of his salary of $29,000 per year which he was receiving prior to retirement.
The entire cost of the retirement benefits provided for the decedent under the plan was borne by the employer. The net amount of that cost was $218,353.37. The last payment by the employer to the insurance company was made on January 1, 1934, at which time the annuity contract for the decedent became fully paid. Thereafter it was not subject to any change by the employer.
The Commissioner determined "that the gross estate should be increased by the sum of $78,036.00, the comparable cost of a survivor-ship annuity payable to the decedent's widow under Group Contract No. 103, Certificate No. A-12, of Metropolitan Life Insurance Company."
The only contention of the respondent is that the decedent, by reducing his own annuity and providing that an annuity of $7,000 should continue by payments to his widow after his death, made a transfer within the meaning of section 811 (c). Section 811 (c) provides that the value of the gross estate shall include "the value at the time of his death of all property to the extent of any interest therein of which the decedent has at any time made a transfer, by trust or otherwise, intended to take effect in possession or enjoyment at or after his death, or under which he has retained for his life the right to the income from, the property ." The respondent cites and relies upon Commissioner v. Wilder's Estate, 118 Fed. (2d) 281; certiorari denied, 314 U. S. 634; Commissioner v. Clise, 122 Fed. (2d) 998; certiorari denied, 315 U. S. 821, reversing 41 B. T. A. 820; and Mearkle's Estate v. Commissioner, 129 Fed. (2d) 386, affirming 45 B. T. A. 894. Those cases represent decisions by the Fifth, Ninth, and Third Circuit Courts of Appeals. Judge Garrecht discussed the general subject at considerable length in the Clise case. He held that the transfers were incomplete until the death of the first annuitant, which "caused a shifting, or the completion of a shifting of an economic benefit of property, which is the subject of a death tax." He quoted the following, inter alia, from Helvering v. Hallock, 309 U. S. 106: "By bringing into the gross estate at his death that which the settlor gave contingently upon it, this Court fastened on the vital factor," and concluded that "in the light of the Hallock case the transfers were 'too much akin to testamentary dispositions not to be subjected to the same excise.' " The Board of Tax Appeals at first took a different view, but, after being reversed in the first two cases, fell in line with the Circuit Courts in the last one.
The petitioner would distinguish those cases upon the ground that there the survivorship annuity for the second annuitant had been purchased by the first annuitant with his own funds, whereas here the purchase was made by the employer of the first annuitant. Although that difference exists and the purchase by the decedent was mentioned, nevertheless, that difference does not distinguish the cases. The transfer made by this decedent was just as much a transfer within section 811 (c) as those made in the three cases cited. The cost of the annuity here in question was fully paid by January 1, 1934. Thereafter the decedent possessed property in the paid-up annuity. He was then of retirement age under the plan, but he chose not to retire until January 1, 1935. He had a right under the paid-up annuity to receive $21,750 annually during his life. He could have retained all of that right had he so chosen. He exercised an option which he had under the paid-up annuity to surrender the right to receive a part of the annuity of $21,750 in consideration of the agreement on the part of the insurance company that-it would continue to pay $7,000 annually to his wife for her life, beginning at his death, should she survive him. That option was exercised before the date on which he was to receive the first payment under the paid-up annuity. The exercise of that option deprived him of money which he otherwise would have received during his life and effected a transfer to his wife of an interest in the annuity. The point is decided for the respondent, since no distinction in principle between the present case and the cases cited by the respondent appears. Cf. Estate of William L. Nevin, 11 T. C. 59. The question of how the receipt of each annual payment by the widow should be treated for income tax purposes is not involved or decided, but no doubt recognition would be given in such a case to the fact that the transfer was taxed for estate tax purposes to the decedent.
The remaining question for decision is "the value at the time of his death" of the transferred property. The transferred property was not an annuity for the life of the widow, but was a survivorship annuity payable to her for that part of her life after his death, upon condition that she survive him. The petitioner argues that $23,935.56 is the most which can be included in the decedent's gross estate. That amount represents the actual reduction in the decedent's annuity up to the time of his death resulting from his election to take less for h'imself and thus create an annuity for his wife. Obviously, that amount does not measure the value of the transferred property at the date of the death of the decedent. The petitioner suggests $33,867.86 as an alternative. It argues that the $78,036 included by the Commissioner, although described in the notice of deficiency as the comparable cost of a survivorship annuity as of the date of her husband's death, is in fact not that at all, but the cost of a single life annuity, which does not take into consideration the factor of survivorship. It claims that the cost of a survivorship policy on the day of the death of the decedent, using his life expectancy and that of his wife, would have been $33,867.86. This whole contention must fail for lack of proof. The Court has no way of knowing from the record the true value of a survivorship annuity on the day of death. Since no fault appears in the value determined by the Commissioner, his determination must stand. Mearkle's Estate, supra.
Reviewed by the Court.
Decision will be entered u/nder Rule 50.