Court Opinion

ID: 4632089
Source: CourtListenerOpinion
Date Created: 2020-11-21 03:11:03.137755+00
Date Added: 2024-06-11T07:57:50.037184
License: Public Domain

Estate of John M. Goetchius, Deceased, James P. Mimnaugh, Executor, Petitioner, v. Commissioner of Internal Revenue, RespondentGoetchius v. CommissionerDocket No. 22512United States Tax Court17 T.C. 495; 1951 U.S. Tax Ct. LEXIS 73; September 28, 1951, Promulgated *73 Decision will be entered for the respondent.  Estate Tax -- No Bona Fide Sale for Adequate and Full Consideration in Money's Worth Under Section 811 (c) (1).  -- The decedent created a life insurance trust giving X a contingent interest for life in the trust income after his death.  Subsequently X consented to relinquish her interest in the trust income to the decedent's brother in exchange for contingent interests in survivorship annuity contracts in which the decedent was an annuitant during his life.  Under Commissioner v. Clise, 122 F. 2d 998, the annuity contracts are includible in decedent's estate under section 811 (c) unless the decedent's transfers to X of contingent, survivor interests therein were made for adequate consideration in money's worth within the exception contained in section 811 (c) (1).  Held: The decedent did not receive adequate and full consideration in money's worth for his transfer to X of interests in survivorship annuity contracts which would provide X with income after his death, from X's relinquishment of a contingent right to income after his death from the life insurance trust.  The value of the survivorship*74  interests in the annuity contracts is includible in the decedent's gross estate under section 811 (c).  Richard W. Wilson, Esq., for the petitioner.Ellyne E. Strickland, Esq., for the respondent.  Harron, Judge.  HARRON *495  Respondent has determined a deficiency in an estate tax in the amount of $ 99,047.60.  Petitioner now concedes that the respondent has properly included in the value of the gross estate annuity and "insurance" policies having a value of $ 161,000.The issue to be decided relates to other annuity policies and to the interest of a survivor*75  annuitant in the policies, the value of which has been determined by the respondent to have been, at the date of death, $ 200,672, which amount the respondent has included in the value of the gross estate. The decedent used $ 209,163.20 of his own funds in 1938 to acquire 24 single premium survivorship annuity contracts under which he was the annuitant during the remainder of his lifetime and a survivor annuitant was appointed by him and named in each of the annuity contracts.  The respondent has determined that the cost at the date of death of the annuity contracts to the survivor annuitant would have been $ 200,672.  The respondent's determination has been made under section 811 (c) of the Code.The only question to be decided is whether the decedent made a transfer of an interest in property which comes within the exception set forth in section 811 (c) (1), it being the contention of the petitioner that the interest which the decedent transferred was made under *496  "a bona fide sale for an adequate and full consideration in money or money's worth."The estate tax return was filed with the collector for the second district of New York.FINDINGS OF FACT.John M. Goetchius, *76  the decedent, was born on May 19, 1873.  He died, testate, on June 4, 1946, a resident at the date of his death of New York City.  James F. Mimnaugh is the executor of the last will of the decedent, serving under letters testamentary granted by the Surrogate's Court of New York County, New York.  The decedent was survived by Morgan Goetchius, his brother; and Mrs. Eleanor Ray, who was a beneficiary of his last will.  She was not related to the decedent by blood or marriage.  Mrs. Eleanor Ray was born on February 2, 1886.  Morgan Goetchius and Mrs. Ray are still living.The issue in this proceeding relates to 24 immediate survivorship, single premium, nonparticipating, annuity contracts, all of which were issued on December 21, 1938, after prior applications which were made around December 8, 1938, and December 16, 1938.  The following facts relate to events which occurred before the issuance of the annuity contracts:The decedent executed a will on December 2, 1932, in which he gave and bequeathed to St. Paul's School in Concord, New Hampshire, $ 250,000 and 4,350 shares of stock of Illinois Zinc Company upon the condition that the St. Paul's School consent and agree, in consideration*77  of the bequest, to pay Mrs. Eleanor Ray an annuity at the rate of $ 1,000 per month for as long as she lived.  This will was revoked by a subsequent will.The decedent executed another will on May 8, 1935, by which he gave and bequeathed real and personal property to his brother, Morgan Goetchius, and by which he bequeathed the residue of his estate in trust to Morgan Goetchius, trustee of the testamentary trust, to invest the residuary estate, receive the income, and to pay Mrs. Eleanor Ray $ 1,000 per month during her lifetime, and to pay any excess of the net income to Morgan Goetchius.  This will was revoked by a subsequent will.The last will and testament of the decedent, which was admitted for probate, was executed on January 29, 1946, and it revoked all prior wills and codicils.  The decedent made various bequests in his last will, which included bequests of real and personal property to St. Paul's School, bequests of personal property to Morgan Goetchius, Julia Goetchius Fahnestock, and Mrs. Eleanor Ray.  The decedent bequeathed the residue of his estate to Mrs. Ray.On November 19, 1935, which was after the date of the execution of the will of May 8, 1935, which provided*78  for the creation of testamentary *497  trust, the decedent executed a trust indenture with his brother Morgan Goetchius as trustee.  The decedent assigned to the trust a policy of the Equitable Life Assurance Society of the United States, number 9,925,936, on his own life, and delivered the policy to the trustee.  The policy constituted the corpus of the trust.  By the trust indenture the grantor, the decedent, directed that during the life of the grantor all dividends declared and paid on the policy should be paid by the trustee to Morgan Goetchius, that upon the death of the grantor the trustee should collect the proceeds of the policy, which was issued in the principal amount of $ 140,000, invest the proceeds, and pay the trust income in equal monthly installments (as nearly equal as possible) to Mrs. Eleanor Ray during her lifetime. The decedent directed that upon the death of Mrs. Ray the principal should be paid to Morgan Goetchius, if he were then living, terminating the trust; but if Morgan Goetchius should have predeceased Mrs. Ray, then the principal of the trust was to be paid over as Morgan Goetchius should have appointed by his last will.  In the event that Morgan*79  Goetchius, having predeceased Mrs. Ray, had failed to exercise his power of appointment, then the principal was to be paid, upon the death of Mrs. Ray, in equal shares, to the grantor's nieces, Mary Goetchius and Sarah Kellogg Goetchius.  This trust was amended by the grantor on December 21, 1938, with the consent of Mrs. Ray, in the following way:Three documents were executed on December 21, 1938.  The decedent and Mrs. Eleanor Ray executed an agreement which referred to the trust which was created on November 19, 1935, and to Mrs. Ray's interest in the income of the trust which was contingent upon her surviving the decedent. The agreement recites that John M. Goetchius, the decedent, had acquired on December 16, 1938, 12 joint survivor annuity policies from the Confederation Life Association of Toronto, Canada, and also 12 joint survivor annuity policies from Dominion Life Assurance Company of Ontario, Canada, and that by reason of the terms of the 24 annuity policies Mrs. Ray would receive upon the death of John M. Goetchius an annuity of $ 12,000 a year payable in the sum of $ 1,000 per month as long as she lived; that John M. Goetchius had made provision for the payment of *80  the annuity to Mrs. Ray under the annuity policies for her benefit "in consideration of her consent to the revocation of the deed of trust * * * dated the 19th day of November 1935"; and that Mrs. Ray had agreed to consent to the revocation of the trust insofar as it provided that she would receive under the trust, income for life, and any and all other benefits which she might have under the deed of trust, in order that under the deed of trust, due to the revocation of her interest, the income of the trust would be paid *498  during her life to the brother of decedent, Morgan Goetchius.  Accordingly, Mrs. Ray relinquished and transferred to Morgan Goetchius all her interest of every nature in the trust which had been created on November 19, 1935, and consented to the partial revocation of the trust by John M. Goetchius and released Morgan Goetchius as trustee from all liability or accountability with respect to the principal or income of the trust; and Mrs. Ray, also, transferred, conveyed, and released to Morgan Goetchius all her interest, if any, in the Equitable policy upon the life of John M. Goetchius, and in any proceeds therefrom which were held by the trust.  In order *81  to carry out the agreements made by the parties in the above-described agreement, Mrs. Eleanor Ray and John M. Goetchius, the decedent, each executed a separate document.  John M. Goetchius as the grantor of the trust created on November 19, 1935, executed a written revocation of the trust insofar as it made provision for the payment of trust income to Mrs. Eleanor Ray after his death; and he directed that upon the collection of the proceeds of the Equitable policy held by the trust, at the time of his death, the entire net income of the trust should be paid to Morgan Goetchius, individually, during the life of Mrs. Eleanor Ray.  John M. Goetchius stated that it was his "intention to revoke the said deed of trust in part only, and only insofar as it relates to the payment of income to the said Eleanor P. Ray, and in all other respects the said deed of trust shall remain in full force and effect." In the document which Mrs. Eleanor Ray executed she directed that all income of the trust of November 19, 1935, which should be received by the trustee from the investment of the proceeds of the Equitable Life policy after the death of the grantor be paid in accordance with the directions *82  of John M. Goetchius contained in his notice of revocation, and with the provisions of an agreement entered into between herself and John M. Goetchius to Morgan Goetchius, individually, for so long as she, Eleanor Ray, should live.  Also, she waived notice of any action of legal proceedings of any kind in connection with the partial revocation of the trust and gave her written consent to any possible judgment directing payment of income to Morgan Goetchius.The policy of "insurance" on the life of the decedent had been purchased by him from Equitable Life on or about November 15, 1935.  At the same time he purchased 4 annuity contracts from the Equitable Life in the face amount of $ 5,000 each.  The respondent has included in the gross estate of the decedent the values at the date of death of the five policies purchased from Equitable in November 1935, and he has determined that the value thereof was $ 161,000.  The petitioner now concedes that the respondent's determination in including the five Equitable policies in the estate of the decedent is correct.  *499  See Helvering v. Le Gierse, 312 U.S. 531">312 U.S. 531. The Equitable "life insurance" policy which*83  has been included in the gross estate of the decedent is the same policy as the decedent transferred to the trustee under the trust which he created on November 19, 1935, and which he partially revoked, with respect to Mrs. Ray's contingent interest, on December 21, 1938.  In connection with the transfer of the Equitable "life insurance" policy in the face amount of $ 140,000 which the decedent transferred to the trustee of the trust created on November 19, 1935, the decedent filed a Federal gift tax return in which the transfer of the policy in the face amount of $ 140,000 was reported as a gift, and a gift tax was paid on that gift.As stated above, 12 joint and survivor annuity contracts were issued by the Confederation Life Association, and 12 joint and survivor contracts were issued by the Dominion Life Assurance Company on December 21, 1938.  The Confederation Life contracts provided for the payment of $ 700 annually, under each contract, to the decedent during his life, and for the payment of $ 700 annually to Mrs. Eleanor Ray during the remainder of her life, if she survived the decedent. Each annuity contract bore a different month as the month in which the annuity would*84  be paid so that the annuitant would receive $ 700 in each month of the year.  Under the annuity contracts issued by Confederation the annuity payments will end upon the death of the survivor annuitant. The decedent paid the Confederation Life Association a single premium for each of the 12 annuity contracts, and the total amount of the premiums paid was $ 145,149.20.  The total cost of 12 annuity contracts paying $ 700 annually, under each contract, would have been only $ 82,540.50 if John M. Goetchius, the decedent, had been the single annuitant without any survivor annuitant.The Dominion Life annuity contracts provided for the payment of $ 300 annually under each contract, and the annual payments were to be made in a different month of the year so that the series of contracts provided for annuity payments of $ 300 a month.  Each contract provided for the payment of an annuity to John M. Goetchius, the decedent, during his life, and to Mrs. Eleanor Ray, if she survived him, during the remainder of her life.  However, the Dominion Life annuity contracts contain a provision which is not contained in the Confederation Life annuity contracts, namely, that 15 income payments certain*85  shall be made and that thereafter the annual income payments shall be continued during the lifetime of the annuitant or of the survivor of the annuitant, and "If the survivor of the annuitant shall die before 15 income payments certain have been made the remaining payments certain as they fall due shall be made to the executors, administrators, or assigns of John M. Goetchius." John M. Goetchius, the decedent, paid a single premium for each of the Dominion Life annuity *500  contracts, and the total amount of the premiums was $ 64,014.  If the annuity contracts had been issued to the decedent alone without a survivor annuitant, the total amount of the premiums would have been $ 47,844.The decedent did not file a gift tax return during his lifetime reporting a gift of any interest in the 24 annuity contracts above described.  After his death the executor of his estate filed a Federal gift tax return in which he reported the issuance of the 24 survivor annuity contracts in which Mrs. Eleanor Ray was named as the survivor annuitant, and Mrs. Ray's relinquishment of the right to receive income from the proceeds of the Equitable policy in the amount of $ 140,000 under the trust of*86  November 19, 1935.  The gift tax return reported that gifts of interests in the Confederation and Dominion Life annuity contracts had been made by the decedent to Mrs. Eleanor Ray and that the gifts at the date of the gifts had a total value of $ 78,778.70, which value was computed on the basis of the difference between the actual cost of the 24 annuity contracts to the decedent and what the cost would have been if the contracts had been issued to him alone without a survivor annuitant. The executor attached to the gift tax return an affidavit in which he stated that he had been advised by counsel that John M. Goetchius, the decedent, had no power, under the annuity contracts, to revoke the interests of Mrs. Eleanor Ray under the annuity contracts and that since he [John M. Goetchius, the decedent,] had paid the total consideration for the two series of contracts, "this constituted a taxable gift within the provisions of the Internal Revenue Act as of the date of the issuance of the policies."The decedent did not receive adequate and full consideration in money or money's worth for the transfers to Mrs. Eleanor Ray of survivor interests in the joint and survivor annuity contracts*87  which were issued on December 21, 1938, within the meaning of section 811 (c) (1) of the Internal Revenue Code.  The transfers of the interests in the joint and survivor annuity contracts by the decedent to Mrs. Eleanor Ray in December 1938 were not made under a transaction which constituted a bona fide sale for an adequate and full consideration in money or money's worth within the meaning of section 811 (c) (1) of the Internal Revenue Code.  Mrs. Ray's relinquishment of a contingent right to receive income during her life under the trust of November 19, 1935, did not constitute a bona fide purchase by her of the interests in the joint and survivor annuity contracts issued on December 21, 1938, for an adequate and full consideration in money or money's worth within the meaning of section 811 (c) (1) of the Internal Revenue Code.  The decedent expressed intention at various times of making a testamentary bequest which would provide Mrs. Eleanor Ray with an income of $ 1,000 a month upon and after his *501  death for the remainder of her life, which was evidenced by provisions in wills executed by the decedent on December 2, 1932, and on May 8, 1935, and by the provisions of the*88  trust indenture which he executed on November 19, 1935.  It was not the desire of the decedent to make a bequest for the benefit of Mrs. Eleanor Ray of an annuity to be paid to her after his death and during the remainder of her life in an amount which would exceed $ 1,000 per month, or $ 12,000 per year.  The transfers of the interests to Mrs. Eleanor Ray in the 24 joint and survivor annuity policies on December 21, 1938, were testamentary transfers which carried out the previously expressed intent of the decedent to bequeath to Mrs. Ray an annuity of $ 12,000 a year.  The elimination of the contingent right of Mrs. Ray to receive income from the proceeds of the Equitable policy on the life of the decedent, which was held in trust, and the transfer of survivor interests in the 24 annuity policies to Mrs. Ray, constituted a substitution by the decedent of one part of his total property for another part of his total property as the property which would provide an annuity to Mrs. Ray after his death, if she survived him.  Her relinquishment of a contingent interest in the proceeds of the Equitable policy did not provide the decedent with money or money's worth with which the annuity*89  contracts in which Mrs. Ray received a contingent interest were or could have been acquired.OPINION.The decedent procured property -- the 24 annuity contracts -- through expenditures of his own funds, and he made transfers of interests in that property to Mrs. Eleanor Ray with the purpose, effected at his death, of having them pass to her.  Chase National Bank v. United States, 278 U.S. 327">278 U.S. 327, 337. He was the first annuitant under the annuity contracts, and in that way he reserved to himself the economic benefit of the contracts during his lifetime. By transferring to Mrs. Ray survivorship interests in the annuity contracts, the decedent postponed "the fruition of the economic benefits" thereof to the second annuitant until his death.  The transfers to Mrs. Ray of the interests in the property acquired by the decedent with his own funds were testamentary dispositions which are subject to the Federal estate tax under the provisions of section 811 (c) (1) (B) and (C) unless they come within the exception set forth in section 811 (c) (1). Helvering v. Hallock, 309 U.S. 106">309 U.S. 106; Goldstone v. United States, 325 U.S. 687">325 U.S. 687;*90 Commissioner v. Clise, 122 F.2d 998">122 F. 2d 998, certiorari denied 315 U.S. 821">315 U.S. 821; Mearkle's Estate v. Commissioner, 129 F.2d 386">129 F. 2d 386; Commissioner v. Wilder's Estate, 116 F. 2d 281, certiorari denied 314 U.S. 634">314 U.S. 634. The decedent made the transfer to Mrs. Ray of the survivorship interests in the annuity contracts after March 4, 1931, so that the provisions of section 7 of the Technical Changes Act of *502  1949, Public Law 378, 81st Congress, 1st Sess., amending section 811 (c), do not apply to this proceeding.  Cf.  Estate of Mary L. Pruyn v. Commissioner, 184 F.2d 971">184 F. 2d 971.The only question to be decided is whether the decedent made the transfer of survivorship interests in the annuity policies to Mrs. Ray under "a bona fide sale for an adequate and full consideration in money or money's worth" within the exception provided in section 811 (c) (1), 1 so that the transfers of the interests are not reached by any of the provisions of section 811 (c).  It is admitted that the value of Mrs. Ray's life interest*91  in the annuity contracts is $ 200,672.The*92  petitioner argues that the decedent received his "money's worth" for the annuity he provided Mrs. Ray by making her the survivor annuitant under the 24 annuity policies from her relinquishment in 1938, to his brother, of her contingent interest in the income of the "life insurance" trust which he contends should be held to have been a purchase and sale for an adequate and full consideration in money's worth within the exception in section 811 (c) (1), and that, therefore, there was no donative "transfer" by the decedent to Mrs. Ray of interests in the annuity contracts which is taxable under section 811.The question is: What consideration in money's worth did the decedent receive in his transaction in 1938 with Mrs. Ray?The meaning of the phrase which is found in section 811 (c) (1), and in other sections of the Code, "an adequate and full consideration in money or money's worth" has been considered frequently.  It is to receive "identical construction" for purposes of both the estate and gift tax, Merrill v. Fahs, 324 U.S. 308">324 U.S. 308. The words "adequate and full consideration" were, in the 1926 Revenue Act, substituted for the words "fair consideration" *93  in the earlier Revenue Acts "in order to narrow the scope of tax exemptions" "after courts had given 'fair consideration' an expansive construction." Merrill v. Fahs, supra.Whatever doubt existed as to whether or not the term "consideration" should be construed to have been intended by the Congress to mean that which in civil and common law provides contractual consideration *503  has been put at rest by the Supreme Court in Commissioner v. Wemyss, 324 U.S. 303">324 U.S. 303, which rejected the view that the term, as used in the estate and gift tax provisions is the same as common law consideration.  This Court and other courts, and the Treasury in its estate and gift tax regulations, had taken the view that the phrase "a bona fide sale for an adequate and full consideration in money or money's worth" means that there must be the kind of consideration which in an arm's length business transaction provides the transferor of property with the full value thereof, in exchange; and that if the consideration is not paid in money, property, or services, but is represented by some benefit, then the benefit must be of the equivalent*94  money value in order to constitute the required "adequate and full consideration." See: Commissioner v. Bristol, 121 F. 2d 129, 133; 2*95 Latty v. Commissioner, 62 F. 2d 952, 954; Phillips v. Gnichtel, 27 F. 2d 662, 665; Safe Deposit & Trust Co. v. Tait, 295 U.S. 429">295 U.S. 429, 431; Estate of Josephine S. Barnard, 9 T. C. 61, 67; 3 Regulations 79, (1936 ed.) Arts. 1 and 8; Regulations 105, section 81.15, p. 45.  4 The Supreme Court approved that view in Commissioner v. Wemyss, supra.Accordingly, the exemption from tax is limited to those transfers of property where the transferor or donor has received benefit in full consideration in a genuine arm's length transaction; and the exemption is not to be allowed in a case where there is only contractual consideration but not "adequate and full consideration in money or money's worth." Phillips v. Gnichtel, supra;Commissioner v. Bristol, supra.The petitioner's claim that the decedent received adequate and full consideration for the transfer to Mrs. Ray of interests in the 24 Canadian annuity contracts does not meet the requirements for exemption for estate tax.*504  The decedent had transferred a contract issued on his life by Equitable Life for $ 140,000 to a trust under which his brother, Morgan, was the remainderman.  The trust was one which could be revoked in whole or in part by its creator with the written consent of the persons beneficially interested because its corpus consisted*96  of personal property only, and only those who had a vested or contingent interest in the trust at the time of the revocation or partial revocation needed to consent.  Section 23, Personal Property Law; 40 McKinney's Consolidated Laws of New York, p. 244; Corbett v. Bank of New York, etc., Co., 242 N. Y. S. 638. Mrs. Ray's relinquishment of her contingent interest in the trust income, which could not become effective until the death of John M. Goetchius, the grantor, did not benefit John M. Goetchius in any way which could be measured in terms of money's worth in a bona fide arm's length transaction with Mrs. Ray.  She relinquished her contingent right to the future income of the trust to Morgan Goetchius, but the benefit which Morgan received was not one which augmented the property of John M. Goetchius.  For example, Morgan did not have any claim against John which was discharged, and John did not have any duty toward or obligation to Morgan which was satisfied.  Cf.: Commissioner v. Bensel, 100 F. 2d 639; Commissioner v. Mesta, 123 F.2d 986">123 F. 2d 986; Clarence B. Mitchell, 6 T. C. 159;*97 Estate of Josephine S. Barnard, supra, issue 1; Estate of Sarah A. Bergan, 1 T. C. 543. We cannot conclude that the decedent received a benefit which was reducible to a value equal to the value of the interests in the 24 Canadian survivorship annuity contracts which he transferred to Mrs. Ray upon her relinquishment to Morgan Goetchius of an interest in the future income of the trust.  Obviously that which Mrs. Ray surrendered could not provide the consideration which John M. Goetchius gave to the Canadian companies for the 24 survivorship annuity contracts.  As a matter of fact, they were acquired by the decedent by his use of over $ 200,000 of his reserved cash or property which he had kept wholly apart from the trust, and to which Mrs. Ray's relinquishment of a contingent interest in the trust had no relation whatsoever at any time.Mrs. Ray's surrender of her contingent interest in the trust caused her no real or bona fide detriment because it was coincidental to the transfer to her of the contingent, survivorship interest in the 24 Canadian annuity contracts.  Her consent to decedent's desire to change the income beneficiary*98  of the trust was no more than an accommodation to her benefactor, the decedent. The decedent substituted entirely free and reserved property of which he had not yet made any disposition as the property to provide annuities after his death to Mrs. Ray for the Equitable Life policy on his life held in the trust which otherwise would have provided Mrs. Ray's annuities. *505  The decedent could as well have let the trust stand unmodified and given his brother Morgan a survivor interest in the Canadian annuity contracts.Under such circumstances the contractual consideration given by Mrs. Ray to the decedent was not the "adequate and full consideration in money or money's worth" under a "bona fide sale" which is required by section 811 (c) (1) in order for a transfer of property or an interest therein to be exempt from tax.  Merrill v. Wemyss, supra; Merrill v. Fahs, supra;Commissioner v. Bristol, supra;Phillips v. Gnichtel, supra; Estate of Josephine S. Barnard, issue 2, supra; Giannini v. Commissioner, 148 F. 2d 285; Mollenberg's Estate v. Commissioner, 173 F. 2d 698.*99 The purpose of section 811 (c) is to reach all testamentary transfers of property.  In order for a transfer of property to be exempt from tax under section 811 (c) (1) there must not be a donative or testamentary transfer of property.  The condition, receipt of "adequate and full consideration" can intervene to avoid the tax only if the facts show that the transfer of property in question does not represent a depletion of the transferor's estate.  In this proceeding, there are several factors which demonstrate that the entire arrangement "savored more of a testamentary disposition than of a bargain and sale" such as the statute contemplates.  Phillips v. Gnichtel, supra.The decedent had demonstrated on three occasions that he desired to provide Mrs. Ray with a life annuity after his death of $ 1,000 per month.  He had directed in his will of December 2, 1932, that she should receive an annuity of $ 1,000 per month for as long as she lived.  In a later will executed on May 8, 1935, the decedent had bequeathed the residue of his estate in trust, naming Mrs. Ray as the life beneficiary of the testamentary trust under which she was to receive, after*100  his death, $ 1,000 per month for life.  And then in November of 1935 the decedent created an inter vivos trust in which he made Mrs. Ray the beneficiary of the income of that trust after his death.  We observe, upon reviewing all of the evidence in this proceeding, that the decedent intended not that Mrs. Ray should receive two annuities of $ 1,000 per month, but that she should receive one annuity of $ 1,000 per month.  That intent was ultimately achieved by making her the survivor annuitant in the 24 joint and survivor annuity contracts.  Furthermore, the real effect of the arrangement of December 21, 1938, was not so much to provide for Mrs. Ray, for whom provision already had been made by the existing provisions of the 1935 trust, as to increase the bequest to Morgan Goetchius under the trust to include the trust income during the term of the trust.The exemption from tax which is provided by section 811 (c) (1) is to be applied carefully, since it is an exemption. The wording *506  thereof was intended to prevent the distribution of a transferor's estate without the payment of the tax on testamentary dispositions of property.  Merrill v. Fahs, supra;*101 Commissioner v. Bristol, supra.It must be observed that the situation in this case presents a clear pattern for avoiding the reach of section 811 (c) through the application of the exemption clause in subsection (1).  The petitioner admits that the Equitable Life policy for $ 140,000 on the life of the decedent was not "insurance" within the meaning of section 811 (g) because it was issued in conjunction with the Equitable Life annuity contracts (not involved here), and that the value of the policy is includible in the gross estate of the decedent under section 811 (c).  Helvering v. Tyler, 111 F. 2d 422; Helvering v. Le Gierse, 312 U.S. 531">312 U.S. 531. The transfer by the decedent to Mrs. Ray of an interest in the proceeds of the Equitable policy came within the reach of the estate tax. The transfer to her in 1938 of substantially the same interest, from the viewpoint of the annuity she would receive, in the Canadian annuity contracts under the guise of "a bona fide sale for an adequate and full consideration in money or money's worth", if approved, would free from the estate tax, a transfer*102  of an interest in property which otherwise would be taxed.  From another standpoint, approval of the petitioner's theory would free from tax about $ 200,000 of the decedent's estate, the inter vivos transfer of which in 1938 reduced the decedent's estate beyond the previous reduction thereof which was brought about by the transfer of the Equitable policy for $ 140,000 to the trust in 1935, regardless of whether Mrs. Ray or Morgan Goetchius was the beneficiary of the additional $ 200,000 of property of the decedent.The "consideration" which was received by the decedent under the arrangements of December 21, 1938, was merely contractual and did not satisfy the condition prescribed in section 811 (c) (1) for the exemption. It is held that the respondent properly included the value at the date of death of the survivorship interests in the 24 Canadian survivorship annuity contracts in the gross estate of the decedent under section 811 (c).Decision will be entered for the respondent.  Footnotes1. SEC. 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.  -- (1) General rule.  -- To the extent of any interest therein of which the decedent has at any time made a transfer (except in case of a bona fide sale for an adequate and full consideration in money or money's worth), by trust or otherwise --(A) in contemplation of his death; or(B) 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 (i) the possession or enjoyment of, or the right to the income from, the property, or * * *(C) intended to take effect in possession or enjoyment at or after his death.↩2. "Consideration" * * * is not the same as common law consideration; it means that when the transferor gives something away and does not at the same time replace it with money of equal value or some goods or services capable of being evaluated in money, he is deemed to have made a gift within the taxing law.  A similar phrase in the Massachusetts succession tax law was so construed to require "that the consideration must be for the full value of the property whether paid in money, or the acceptance by the transferor of property or services; or some benefit of the equivalent pecuniary measurement." State Street Trust Co. v. Stevens, 1911, 209 Mass. 373">209 Mass. 373, 379, 95 N.E. 851">95 N. E. 851, 853↩. * * * To our mind, the purpose of this section in the gift tax statute and similar wording in sections of the Federal estate tax law was to prevent the depletion of the transferor's or decedent's estate, unless a tax was paid on the transfer, by requiring that the transferor or decedent receive in exchange something of the same money value.3. p. 67. In most business transactions made at arm's length, each party is seeking to profit, and the profits so realized are not gifts.↩4. Regulations 105, section 81.15, p. 45: "To constitute a bona fide sale for an adequate and full consideration in money or money's worth the transfer must have been made in good faith, and the price must have been an adequate and full equivalent reducible to a money value."Regulations 79, Art. 8, p. 15: A bona fide transaction is one which is "at arm's length, and free from any donative intent."↩