Laramore, Judge,
delivered the opinion of the court:
This is a suit to recover $208,285.54 in income taxes paid on a long term capital gain realized from the sale of assets held in trust. The precise question to be decided by the court is whether or not gifts made in contemplation of death which are included in a decedent’s gross estate for estate tax purposes under section 811 (c) of the Internal Revenue Code of 1939 are entitled to the use of the stepped-up basis pro[729]*729vided for in section 113 (a) (5) of the Code upon a sale by the donee.
Plaintiffs were trustees under an irrevocable trust created by one Ora J. Mulford, sometimes hereinafter referred to as decedent, for the benefit of his son John W. Mulford. The trust consisted of 11,071% shares of the Gray Marine Motor Company and was executed by the settlor, Ora J. Mulford, on December 29,1941. A gift tax return was filed and a tax was assessed and collected upon a determination that the value of the stock transferred by the gift in trust was $35 per share.
On August 3,1943, Ora J. Mulford died and thereafter on June 14,1944, the trustees under the December 29,1941, trust agreement sold the entire 11,071% shares of the Gray Marine Motor Company stock at $130 a share or for a total sum of $1,439,295. The trustees filed an income tax return for the year 1944 showing a long term capital gain in the amount of $1,423,638.87 from the sale of stock held in trust. The basis for the determination of the long term capital gain was the original cost to the decedent of $0.7672 per share. The income tax on that capital gain amounted to $355,909.72 and was paid by the trustees.
In administering the estate of Ora J. Mulford, his executors filed a Federal estate tax return but did not include in the gross estate the 11,071% shares of stock in the Gray Marine Motor Company which the decedent had prior to his death transferred by gift in trust. On December 13, 1946, the Commissioner of Internal Revenue, hereafter referred to as Commissioner, issued a 30-day letter setting out a proposed deficiency in estate tax against the estate of decedent in the amount of $593,045.39. One class of items on which the proposed deficiency was predicated was certain transfers which the decedent had made during 1941 but which the executors had not included in the estate tax return. One of those items was the 11,071% shares of stock in the Gray Marine Motor Company. It was the opinion of the Commissioner that the shares of stock in the Gray Marine Motor Company should be included in the gross estate of the decedent as a transfer made in contemplation of death within [730]*730the meaning of section 811 (c) of the Code which provides in pertinent part as follows:
811. Gross estate
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 of the United States—
*****
(c) Transfers in contemplation of, or taking effect at death. 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 * * *. 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 consideration, shall, unless shown to the contrary, be deemed to have been made in contemplation of death within the meaning of this subchapter;
*****
This conclusion was reached because of the decedent’s advanced age and the fact that the beneficiary of the trust was the same individual who would have been the natural object of the decedent’s bounty under a will. Also, inasmuch as the decedent died within two years after making the gift the presumption that the gift was made in contemplation of death attached.
The value placed upon the stock of the Gray Marine Motor Company at the time of the decedent’s death was $130 per share as determined by the Commissioner. Protests were made by the executors to the inclusion of the shares held in trust in the gross estate of the decedent and conferences were held between representatives of the Commissioner and decedent’s estate. At these conferences it was urged on behalf of the estate that the stock given in trust was not a transfer in contemplation of death and should therefore be excluded from the gross estate for estate tax purposes. The repre[731]*731sentative of the Commissioner stated that this was not the only reason for including the trust stock in the estate since they also felt that the decedent retained certain controls over the trustees so as to make the trust includible on that basis.
On October 7, 1947, the Commissioner issued a 90-day letter advising the executors of the estate that he had determined a deficiency in estate taxes. This determination was based upon the inclusion in the gross estate of the same items of transferred property as were proposed in the 30-day letter, including the 11,071% shares of the stock of the Gray Marine Company at a value of $130 per share. The 90-day letter stated in part:
It is held that the total fair market value of certain transferred property was $1,480,890.81 on the basic date, August 3,1943, and should be included in the gross estate under the provisions of Section 811 of the Internal Bevenue Code.
Thereafter the executors filed a petition in the Tax Court of the United States for a redetermination of the deficiency in estate taxes alleging, among other things, that the Commissioner was in error in including the 11,071% shares of stock in the Gray Marine Motor Company as part of the gross estate of the decedent. After the filing of this petition negotiations for'settlement were had between the parties which resulted in the settlement of all issues involved in the petition for $225,000 in lieu of the deficiency of $598,045.39 as determined by the Commissioner. As a condition for accepting this settlement, the Commissioner required an agreement to be signed by the executors of the estate and also the trustees under the trust. This agreement read:
AGREEMENT
In re: Estate of Ora J. Mulford, Deceased; John W. Mulford, Executor, Devisee and Legatee; James B. Moran and Mack By an, Executors and Trustees; Charles P. Spicer, Trustee.
In the event of the acceptance by or on behalf of the Commissioner of Internal Bevenue of a proposal of settlement of the estate tax liability of the Estate of Ora J. Mulford, deceased, upon the basis of an estate tax- deficiency of $225,000.00, and as a part of the con-[732]*732sideratiqn for such settlement, the undersigned agree that their basis for interests in property owned by the decedent at date of death will be the values determined by the examiner in Bureau letter dated December 13, 1946, for income tax purposes under the provisions of Section 113 of the Internal Revenue Code, as amended, or similar provisions of subsequent revenue acts.
The undersigned further agree to whatever extent it may be material that on August 3,1943 the fair market value of 11,07114 shares of Gray Marine Motor Company stock was $841,434.00, or $76.00 per share.
This agreement, together with all instruments executed thereunder, constitutes an entire basis of settlement, subject to acceptance by or on behalf of the Commissioner of Internal Revenue, and in the event of his failure to accept any provision thereof, no part of this agreement shall have any force or effect.
A stipulation was executed and filed in the Tax Court which settled the case and a judgment was entered by the court based thereon.
On March 15, 1948, the plaintiffs, trustees under the trust agreement of December 29, 1941, filed a claim for refund of income taxes paid for the year 1944 in the amount of $208,-235.54 with the Commissioner. In claiming the refund, the trustees contended that they were entitled to use as the basis for computing gain upon the sale of the Gray Marine Motor Company stock the value of the shares of stock on the date of Ora J. Mulford’s death, which had been agreed to be $76 per share. As hereinbefore stated, the trustees in paying the income tax on the capital gain realized from the sale of the stock held in trust had used as the basis for determining that gain the cost to decedent Mulford. The claim for refund was denied by the Commissioner and suit has brought in this court.
It is the position of the plaintiffs that the trust is entitled under section 113 (a) (5) of the Code to use as a basis for determining gain upon the sale of the stock the value on the date of decedent’s death rather than the original cost to him. Section 113 (a) (5) provides in pertinent part as follows:
Property transmitted at death. If the property was acquired by bequest, devise or inheritance, or by the decedent’s estate from the decedent, the basis shall be [733]*733the fair market value of suck property at the time of such acquisition. In the case of property transferred in trust, to pay the income for life to or upon the order or direction of the grantor, with the right reserved to the grantor at all times prior to his death to revoke the trust, the basis of such property in the hands of the persons entitled under the terms of the trust instrument to the Property after the grantor’s death shall, after such death, e the same as if the trust instrument had been a will executed on the day of the grantor’s death.
Plaintiffs say that since the value of the stock in trust was included within the estate for estate tax purposes then it must necessarily follow that section 113 (a) (5) provides for the stepped-up basis. The defendant says that such a position is correct in the case of property transmitted at death, but that the transfer involved herein was a completed transfer by gift prior to the death of the decedent and therefore is subject to the basis provisions of section 113 (a) (2) and not section 113 (a) (5). Section 113 (a) (2) states:
If the property was acquired by gift after December 31,1920, the basis shall be the same as it would be in the hands of the donor or the last preceding owner by whom it was not acquired by gift, * * *.
Defendant says that section 113 (a) (2) applies even where the value of the gift was included in the gross estate of the donor under section 811 (c) as a transfer made in contemplation of death. Defendant points to section 29.113 (a) (2)-l, Treasury Regulations 111, which also provides in part:
Section 113 (a) (2) applies to all gifts of whatever description, whenever and however made, perfected, or taking effect; whether in contemplation of or intended to take effect in possession or enjoyment at or after the donor’s death; or whether made by means of the exercise (other than by will) of a power of appointment or revocation, or any other power. Section 113 (a) (2) applies whether the gift was made by a transfer in trust or otherwise.
Plaintiffs, however, claim (1) that the inclusion of the value of the gift in the estate was not based upon a determination that the gift was a transfer made in contemplation of death, and (2) that even if it was so included for that reason, a denial to the donee of the right to use the stepped-up basis [734]*734provided for in section 113 (a) (5) is illegal and unconstitutional.
We have found as a fact (finding 17) that the value of the gift in trust was included in the gross estate of the decedent for the reason that the Commissioner had determined that the transfer was made in contemplation of death. We do not deem it necessary to recite the evidence as set out in the findings of fact in order to support this conclusion. We are also of the opinion that the collateral agreement executed by the trustees and executors in settling the estate tax case did not set the value of the shares of the Gray Marine Motor Company stock for the purposes of determining the income tax to be paid on the gain from their sale by the trustees. The sale and tax collected upon the gain realized therefrom had taken place several years previous to settlement of the estate tax question. The settlement and collateral agreement made pursuant thereto involved only estate tax liability and we do not read the agreement, as plaintiffs urge us to do, as allowing them to claim a refund based upon the values settled upon for the estate, an entirely different taxpayer. It therefore remains only for this court to decide whether the Commissioner was correct in denying to plaintiffs the use of the stepped-up basis as provided in section 113 (a) (5).
Plaintiffs argue that when a transfer has been determined to have been made in contemplation of death and included in the gross estate of the decedent pursuant to section 811 (c) the reasonable construction of section 113 (a) (5) would be to hold that the transfer is a substitute for a testamentary disposition and allow the stepped-up basis. In order to hold the way plaintiffs argue we would necessarily have to find that section 29.113 (a) (2)-l, supra, is invalid for incorrectly interpreting the law.
In considering the Internal Revenue Code of 1954, Congress had occasion to review the basis provisions of section 113 (a) (5). In so doing they enacted section 1014 of the 1954 Code which corresponds to section 113 (a) (5) of the 1939 Code but expressly allows a donee of-a gift made in contemplation of death to use as his basis, the value of the property at the date of the donor’s death or an alternate date one year later. This legislation was not made retro[735]*735active, and in speaking of the proposed section the Senate Committee on Finance stated in its report to the Senate, Senate Report 1622, 83d Congress, 2d session, at page 107:
Under existing law most property transferred as a result of the death of an individual receives a new basis at the date of death equal to its then market value (or value 1 year later if the estate-tax optional valuation date is used). This is presently true in the case of property acquired directly from the probate estate of the decedent as well as to property transferred by certain other specifically described transfers. This change in basis is not available, however, with respect to property included in the decedent's gross estate for estate-tax purposes if the property was transferred in contemplation of death, * * *. [Italics supplied.]
Identical language appears in the House Report on the Internal Revenue Code of 1954. See the discussion of the legislative' history of section 113 (a) in Speer v. Duggan, 5 F. Supp. 722. In Wurlitzer v. Helvering, 81 F. 2d 928, a case involving the question of whether or not section 113 (a) (5) applied to gifts made in contemplation of death, that court said in discussing this issue:
Respondent was correct in applying section 113 (a) (2) and in valuing the stock as of March 1, 1913. Section 113 (a) (2) applies to all gifts irrespective of their nature. The statute makes no distinction between gifts inter vivos and gifts in contemplation of death. Also the legislative history of the statute strongly supports this conclusion. Section 113 (a) (5) (the section here involved) as introduced, contained a provision making it apply to property, acquired by transfer in contemplation of death. Section 113 (a) (3) contained a provision that section 113 (a) (2) should not apply to transfers in contemplation of death. Each of these provisions was stricken out in conference, and the Senate Committee on Finance in its report as to the bill said:
“The effect of striking out the last sentence of section 113 (a) (3) is also to make the basis in the case of gifts in contemplation of death or to take effect in possession or enjoyment at or after death, if made after December 31,1920, the same as the basis which the property would have in the hands of the donor or the last preceding owner by whom it was not acquired by gift.”
[736]*736It therefore necessarily appears that the only conclusion which we can logically reach is that under the law, as it was in effect prior to the passage of the Internal Revenue Code of 1954, a gift made in contemplation of death must have its basis determined under section 113 (a) (2) and not section 113 (a) (5). We agree with the plaintiffs that this seems to be a harsh result but unfortunately for plaintiffs the relief granted by Congress in the 1954 Code came too late since its provisions were made prospective and not retroactive. We must therefore hold that the Commissioner was correct in applying the law and regulations when he denied plaintiffs’ claim for refund.
Plaintiffs further argue that even if the Commissioner was correct in applying the law as written, they are entitled to recover because the law violates the fifth and sixteenth amendments to the Constitution. These same arguments were presented in the Speer and Wurlitzer cases, supra, and disposed of in favor of the Government. We think that it is clear that although the tax may have been somewhat harsh it was not unconstitutional. The tax imposed was not on the same taxpayer and involved different transactions. We can find no legal basis for holding that it resulted in an unconstitutional tax. Plaintiffs’ petition will be dismissed.
It is so ordered.
MaddeN, Judge/ Whitaker, Judge; LittletoN, Judge; and JoNES, Chief Judge, concur.
FINDINGS OF FACT
The court, having considered the evidence, the report of Commissioner Richard H. Akers, and the briefs and argument of counsel, makes findings of fact as follows:
1. Prior to December 29,1941, Ora J. Mulford, of Detroit, Michigan (hereinafter sometimes referred to as the “decedent”), held the controlling interest (55%) in the common stock of Gray Marine Motor Company, a Michigan corporation. He had been instrumental in the organization of that company, was its president and director, and continued in those capacities until his death on August 3, 1943. On December 29,1941, that company was engaged in the manuf ac-[737]*737ture of implements of war for the United States Government.
2. The decedent had one son, John W. Mulford, who had been engaged in the operation of a passenger boat on the Great Lakes, which his father had considered hazardous and which services had been suspended shortly prior to December 29, 1941, by reason of the disposition of that boat. The decedent wanted his son to become actively interested in the management of Gray Marine Motor Company but he was not ready to give him control thereof or to give him outright the stock in the company.
3. On December 29,1941, the decedent transferred 11,071% shares of the common stock of Gray Marine Motor Company to Charles P. Spicer, James B. Moran and Mack By an, as trustees under an agreement dated that day. That stock represented all of the decendent’s remaining common stock in the corporation on that date. James B. Moran had been the decedent’s personal secretary for forty to fifty years and had been secretary of the Gray Marine Motor Company. Mack Byan had been the decedent’s personal attorney since about 1920. Charles P. Spicer was a friend of the decedent and a director of the Detroit Trust Company.
Among the provisions appearing in the trust agreement just referred to were the following:
Whereas, the Donor has long endeavored to induce his son, John W. Mtjhford, the principal beneficiary of this trust, to become actively interested in the business of said corporation, to the end that he might ultimately assume the management thereof and the direction of its affairs; and
^ * * * %
Whereas, the said Gray Marine Motor Company is now actively engaged in the manufacture of implements of war for the United States Government and will probably continue to be actively engaged in such manufacture during the entire period of the war, and the Donor desires during such emergency to have the said corporation managed and conducted to the best interests of the United States Government and its allies and desires to have control of said company centralized; and
Whereas, the Donor desires to relieve himself of many of the burdens of policy-making and management and to plane said centralized control in the hands of certain individuals, the Trustees herein, who are familiar with [738]*738the Donor’s policies and desires with respect to said Company; and
Whereas, the Donor desires to take advantage of the existing gift tax rates and at the same time withhold control and active management of said corporation from the principal beneficiary hereof until such time as his experience and active interest in the corporation and its management shall in the judgment of the Trustees qualify him for the assumption of such responsibility.
‡ # * ❖ *
1. The Trustees shall hold the same and all accumulations of income for the use and benefit of my son, John W. Muleord, and the contingent beneficiaries herein designated, subject to the terms and conditions of this trust instrument.
2. The Trustees shall hold the trust property and collect the same and all income payable thereon, and as collections of principal and surplus income or monies received from the sale or hypothecation of such trust property shall become available, shall in the discretion of the Trustees invest and reinvest the same as hereinafter provided. The Trustees shall have authority to compromise claims represented by such securities or the proceeds thereof and to give acquittances and releases thereof, and may in their own names institute and prosecute suits thereon and participate in plans for their liquidation to the same extent as if said securities were the absolute property of said Trustees. The Trustees shall have authority to sell, trade and hypothecate the trust property, or any part thereof, or the proceeds thereof, upon such terms and conditions as to the said Trustees shall be deemed for the best interests of the trust estate.
# t{t % # #
4. The Trustees shall collect all money, income, dividends and profits and shall pay therefrom or, in case of the insufficiency thereof, from the corpus of the trust, all proper taxes, interest, assessments, charges, fees and expenses incident to the holding, management and operation of the trust, it being agreed, however, that the Trustees shall not be liable for any losses or penalties incurred through failure to pay said taxes, interest, assessments, charges, fees and expenses if funds for those purposes cannot be readily realized from the assets of the trust estate.
5. After provision shall have been made for the payment of the disbursements provided for in Section 4 above, the Trustees may, during a period of ten years [739]*739from and after the date hereof, pay to _ JoHN W. Mulford, the beneficiary hereof, if he be living, and_ if he be not living, to the contingent beneficiaries hereinafter designated, such part of the annual or accumulated income from said trust as they in their sole, unrestricted judgment shall deem appropriate, and the' said beneficiary or beneficiaries shall have no right or claim during such period for any distribution to him or them, except as the said Trustee shall determine. * * *
* * * * *
7. At any time after one year from the date hereof, if in the sole judgment of the Trustees the said beneficiary, JoHN W. Mulford, has shown sufficient interest and ability in the management and affairs of said company to warrant the immediate termination of this trust, they may in the exercise of their sole collective judgment, as hereinafter provided, after the payment of all taxes, fees and other expenses incident to the administration of the trust, transfer the entire corpus and all accumulated income to the said beneficiary, JoHN W. Mulford, and this trust shall immediately terminate.
Í
* * * * *
14. This trust is hereby declared to be irrevocable and the Donor hereby renounces any claim that he might have to any of the trust property by virtue of being an heir at law or a beneficiary under the will of the said JoHN W. Mulford; also any right or claim that he might in anywise have by virtue of a resulting trust or otherwise, the intent of tlie Donor being to clearly divest himself absolutely and for all time of all property rights in the trust property and in the income therefrom, and of any possibility of a reverter to him.
4. In filing a gift tax return for the transfer of the Gray Marine Motor Company stock to the trust on December 29, 1941, the value of the shares was originally reported by the decedent at $20 a share. After an audit of the gift tax return, the value of the shares was finally settled at $35 a share.
5. On June 14, 1944, which was after the death of Ora J. Mulford on August 3, 1943, the trustees sold the entire 11,-071% shares of Gray Marine Motor Company stock at $130> a share, that is, a total sum of $1,439,295. The trustees filed an income tax return on behalf of the trust for the calendar-year 1944 showing a long-term capital gain on the sale of the. [740]*740aforesaid shares of stock in the amount of $1,423,638.87 arrived at as follows:
Sales Price_$1,439,295.00
Less:
Basis (Ora J. Mulford’s cost)_ $8, 491. 84
Expense of sale_ 7,164.29 15,656.13
Long-term capital gain-$1,423,638.87
The income tax paid on that capital gain amounted to $355,909.72 and the cost or basis used in determining that long-term capital gain was the cost to Ora J. Mulford of $0.7672 a share.
6. Following the death of the decedent on August 3,1943, James B. Moran, John W. Mulford and Mack Ryan were appointed executors of the decedent’s estate by the Wayne County, Michigan, Probate Court. James B. Moran and Mack Byan were the same persons as were named as trustees in the trust agreement dated December 29, 1941, and heretofore referred to, and John W. Mulford was the son of the decedent and the same person who was the prime beneficiary in that trust agreement.
7. The executors of the decedent’s estate filed a Federal es- ■ tate tax return for the estate but did not include in the gross estate the 11,071% shares of stock in the Gray Marine Motor Company (referred to above as having been transferred in trust under the trust agreement of December 29, 1941). However, in a schedule attached to that return, the executors set out the transfer of those shares under the trust agreement of December 29,1941.
8.. On December 13, 1946, the Commissioner of Internal Revenue (hereinafter sometimes referred to as the “Commissioner”) , through the Internal Revenue Agent in Charge, issued a 30-day letter setting out a proposed deficiency in estate tax against the estate of the decedent in the amount of $593,045.39, or a net deficiency of $497,367.03 if proof was supplied of a credit claimed for local inheritance taxes in the amount of $95,678.36. One class of items on which the proposed deficiency was predicated was certain transfers which the decedent had made during 1941 but which the executor [741]*741bad not included in the estate tax return and which the revenue agent included at a total stated value of $1,480,890.81 in computing the proposed deficiency. One of those items was the 11,071% shares of Gray Marine Motor Company stock which had been transferred to the trust under the trust agreement of December 29,-1941, as heretofore indicated. That item was included in the gross estate by the revenue agent at a value of $1,439,239. The following explanation was given in the 30-day letter for these transfers which included the transfer of the Gray Marine Motor Company stock on December 29,1941:
The transfer made by the decedent on 5-20-41, 5-16-41,7-10-41 and 12-29-41 to his son, John W. Mul-ford, are included in the gross estate since the facts indicate that the transfer was made in contemplation of death within the meaning of section 811 (c) of the Internal Eevenue Code. This conclusion is justified in view of the decedent’s advanced age, the condition of his health and the absence of any definite motive for the transfer except that which prompts men to dispose of their property to the natural objects of their bounty, thereby accomplishing dispositions testamentary in character. In addition thereto the presumption attaching to the transfer made on 12-29-41 that that transfer was made in contemplation of death has not been overcome. The recommended value of $130.00 per share for the 11,071% shares of the Gray Marine Motor Company stock transferred on 12-29-41 is predicated upon consideration of all relevant factors and elements of value disclosed by the evidence on file, due weight having been accorded to the corporate earnings for the period 1938-1943, its dividend-paying capacity and the underlying value of the assets of the corporation.
9. At the request of the decedent’s executors, Ralph E. Badger of Detroit, Michigan, made an appraisal of the fair market value of the common stock of the Gray Marine Motor Company as of August 3, 1943, in connection with a determination of the decedent’s estate tax liability. In his report of March 1, 1947, on such appraisal, Mr. Badger gave as his opinion that the fair market value of such stock on the date of decedent’s death was $76 a share.
[742]*74210. In due course the executors of the decedent’s estate protested the proposed deficiency referred to in finding 8 and included in the protest specific objection to the inclusion in the gross estate of the 11,071% shares of stock in the Gray Marine Motor Company which had been transferred to the trust on December 29, 1941.
Conferences were held on August 13 and August 28,1947, with the Technical Staff of the Commissioner’s office to discuss the protest just referred to. These conferences were attended by Bussell McNair and Paul Franseth, representing the executors of the decedent’s estate, and T. L. Terbush of the Technical Staff of the Commissioner’s office. At these meetings representatives of the decedent urged that the transfer of the 11,071% shares of stock of Gray Marine Motor Company in trust was not made in contemplation of death, whereas the representative of the Commissioner stated on behalf of the Commissioner that the Commissioner was not relying entirely on the proposition that the transfer was made in contemplation of death but that in addition there was a question of whether by reason of the control which the decedent retained over the property after the transfer the property should be included in the decedent’s gross estate.
11. On October 7,1947, the Commissioner issued a 90-day letter advising the executors of the decedent of his determination of a deficiency in estate tax in the same amount as had been proposed in the 30-day letter referred to in finding 8. The same items of transferred property as in the 30-day letter, including 11,071% shares of Gray Marine Motor Company stock at $130 a share, were included in the decedent’s gross estate and at the same value, and the following explanation given for such inclusion:
It is held that the total fair market value of certain transferred property was $1,480,890.81 on the basic date, August 3, 1943, and should be included in the gross estate under the provisions of Section 811 of the Internal Bevenue Code.
12. On January 2, 1948, the executors of the decedent’s estate filed a petition with the Tax Court of the United States for a redetermination of a deficiency in estate taxes [743]*743of the decedent alleging, among other things, that the Commissioner was in error in including the 11,071% shares of common stock of the Gray Marine Motor Company as a part of the gross estate.
13. After the filing of the petition with the Tax Court, as indicated in finding 12, negotiations for the settlement of the alleged deficiency in estate taxes took place between the executors of the decedent and the representatives of the Commissioner, which negotiations resulted in an offer by the executors for a settlement of all the issues involved in the petition for $225,000, in lieu of the deficiency of $593,045.39 as determined by the Commissioner. As a condition to accepting that offer of settlement, the Commissioner caused to be prepared an agreement which was signed at the request of the Commissioner by the executors of the decedent’s estate (James B. Moran, Mack Byan, and John W. Mulford), and by the trustees under the trust agreement of December 29, 1941 (Charles P. Spicer, James B. Moran, and Mack Byan), and by John W. Mulford, individually, although neither the trustees under the trust agreement nor John W. Mulford was a party to the petition in the Tax Court. That agreement was delivered to the Commissioner on or about February 5,1948, and read as follows:
AGREEMENT
In re: Estate of Ora J. Mulford, Deceased; John W. Mulford, Executor, Devisee and Legatee; James B. Moran and Mack Byan, Executors and Trustees; Charles P. Spicer, Trustee.
In the event of the acceptance by or on behalf of the Commissioner of Internal Bevenue of a proposal of settlement of the estate tax liability of the Estate of Ora J. Mulford, deceased, upon the basis of an estate tax deficiency of $225,000.00, and as a part of the consideration for such settlement, the undersigned agree that their basis for interests in property owned by the decedent at date of death will be the values determined by the examiner in Bureau letter dated December 13, 1946, for income tax purposes under the provisions of Section 113 of the Internal Bevenue Code, as amended, or similar provisions of subsequent revenue acts.
[744]*744The undersigned further agree to whatever extent it may be material that on August 3, 1943 the fair market value of 11,071% shares of Gray Marine Motor Company stock was $841,434.00, or $76.00 per share.
This agreement, together with all instruments executed thereunder, constitutes an entire basis of settlement, subject to acceptance by or on behalf of the Commissioner of Internal Kevenue, and in the event of his failure to accept any provision thereof, no part of this agreement shall have any force or effect.
14. The offer of settlement of $225,000, referred to in the preceding finding, was thereafter accepted by the Commissioner and a stipulation was entered into and filed with the Tax Court on or about February 12, 1948, which read as follows:
It is hereby stipulated and agreed:
(a)That the Federal estate tax liability in this proceeding is as follows:
Estate tax liability_ $375,990.45
Tax paid—
Original _$150,990.45
Additional assessed subsequent to deficiency notice_ 100,000. 00
Total paid_ 250,990.45
Deficiency_ $125, 000. 00
(b) That the Court may enter its decision that there is a deficiency in Federal estate tax of $125,000.00;
(c) That, effective upon the entry of the Court’s decision, petitioners waive the restrictions, if any, contained in the applicable sections of the Internal Kev-enue Code, and amendments thereto, on the assessment and collection of said deficiency, plus interest as provided by law.
That stipulation was signed by the executors of the decedent’s estate and by the chief counsel of the Internal Kevenue Bureau.
15. A decision pursuant to the above stipulation was entered by the Tax Court of the United States on February 18,1948, reading as follows:
Under written stipulation signed by counsel for the parties in the above-entitled proceeding and filed with the Court on February 12,1948, it is
[745]*745Ordered AND Decided : That there is a deficiency in estate tax of $125,000.00.
16.The computation of the Federal estate tax pursuant to the above stipulation and decision as appearing in the Commissioner’s audit statement included the 11,071% shares of common stock of Gray Marine Motor Company at $770,-288.41, instead of $1,439,295 as had been determined in the Commissioner’s deficiency letter. That audit statement read in part as follows:
Schedule 1
NET ESTATE
Basic Additional
Net estate, deficiency letter_$2,103,566.02 $2,143,566.02
As adjusted_ 710,602.40 710,602.40
Difference _$1,392,963.62 $1,432,963.62
Deduction:
1. Transfers _ $41, 595. 81
2. Transfers _ 669,006.59
Total- $710,602.40
Schedule 2
EXPLANATION OF ADJUSTMENT
1. The amounts of $5,600.00, $35,145.81 and $850.00 representing transfers made prior to two years of decedent’s death are excluded from gross estate.
2. The value of Gray Marine Motor Co. common stock is included in gross estate to the extent of $770,288.41 instead of $1,439,295.00.
17. The settlement referred to in the preceding findings was based upon a determination by the Commissioner that the transfer in trust of the stock of the Gray Marine Motor Company on December 29,1941, was a transfer made in contemplation of death.
18. On March 15, 1948, the plaintiffs (trustees under the trust agreement of December 29, 1941) filed a claim for refund of income taxes for 1944 in the amount of $208,235.54 on account of the long-term capital gain arising in 1944 from the sale of 11,071% shares of common stock of the Gray Marine Motor Company, as set out in finding 4, and assigned the following basis therefor:
[746]*746In computing the capital gains tax in connection witli sale of 11,071% shares of Gray Marine Motor Company stock, the taxpayer used as the basis for determining capital gain $.7672 per share. The Tax Court of the United States, in case No. 16,906, on February 18, 1948, assessed a deficiency in Federal Estate Taxes against the Estate of Ora J. Mulford, Deceased, on the basis, in part, that the said shares of stock were a part of the gross estate of Ora J. Mulford, Deceased, for Federal Estate Taxes and, in connection with the entry of said judgment, the undersigned agreed with the Commissioner that, to the extent that it was material, the fair value of said shares of stock on August 3,1943, the date of Ora J. Mulford’s death, was $76.00 per share.
There was attached to the claim a computation showing how the refund was computed and a copy of the agreement referred to in finding 13 as having been signed at the time of the settlement of the estate tax liability.
19. The claim for refund was referred to a revenue agent for examination and, on July 6, 1948, the Internal Eevenue Agent in Charge at Detroit, Michigan, forwarded to the plaintiffs a copy of a report which recommended the allowance of the claim in full and contained the following explanation of the recommendation:
In the examination of the Federal Estate Tax return of the Estate of Ora J. Mulford, deceased, it was held that the 11,071% shares of Gray Marine Motor Company stock sold by this trust on June 14, 1944 were a part of the gross estate of Ora J. Mulford, deceased, for Federal Estate Taxes. As a basis of settlement of said issue it was agreed that the value of said stock for income tax purposes under the provisions of Section 113 of the Internal Eevenue Code as amended is $76.00 per share. Adjustment increases basis of stock sold from $8,491.84 to $841,434.00, or a difference of $832,942.16, and reduces gain under this item as subject to the provisions of Section 117 (b) of the Code by 80% of $832,942.16, or $416,471.08.
20. On August 29, 1949, after a consideration of a report referred to in the preceding finding, the Internal Eevenue Agent in Charge at Detroit advised the plaintiffs of his conclusion that the claim was not allowable, and stated in part the following reasons therefor:
[747]*747Under the Eevenue Act of 1928 and subsequent acts, including the Internal Eevenue Code, as amended, it is provided that the basis to the donee, for purposes of computing gain, of property acquired by gift in contemplation of death is the same as the donor’s basis or the last preceding owner by whom it was not acquired by gift. Section 113 (a) (2), Internal Revenue Code, as amended; Regulations 111, Section 29.113 (a) (2)—1; Wurlitzer v. Helvering (CCA 6, 1939), 81 F. (2d) 928, Speer et al., Trustees v. Duggan (D. C., S. D., N. Y., 1933), 5 F. Supp. 722; Rose M. Everett, Memorandum T. C. Decision, Docket No. 2312 (5/1/45) ; 3 Mertens (1942), Law of Federal Income Taxation 407.
As a result of the inter vivos gift in trust, the donor completely divested himself of all title and interest in the shares of the above-named stock prior to his death so that such stock were [sic] not owned by the decedent at the date of his death. With respect to property transferred by gift in contemplation of death, the fair market value of such property at the date of the donor’s death is immaterial to the determination of the basis of such property to the donee if the gift was a completed transfer prior to the donor’s death.
For the reasons indicated above it would appear that the gain to the trust on sale of the above-named stock was properly computed and that the claim should be rejected.
21. On July 28,1950, the Commissioner gave official notice to the plaintiffs of his rejection of the claim for refund in accordance with the provisions of section 3772 (a) (2) of the Internal Eevenue Code.
CONCLUSION OK LAW
Upon the foregoing findings of fact, which are made a part of the judgment herein, the court concludes as a matter of law that the plaintiffs are not entitled to recover, and the petition is therefore dismissed.