Court Opinion

ID: 4593583
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:11:07.850628+00
Date Added: 2024-06-11T07:51:05.515735
License: Public Domain

Estate of Elizabeth W. Vease, Deceased, James L. Vease, Executor, Petitioner, v. Commissioner of Internal Revenue, RespondentVease v. CommissionerDocket No. 65408United States Tax Court35 T.C. 1184; 1961 U.S. Tax Ct. LEXIS 189; March 31, 1961, Filed *189 Decision will be entered under Rule 50.  James H. Walker, decedent's father, died testate in 1919 possessed of a large estate in Canada and the United States.  Shortly before his sudden death, a draft of a new will was completed by his attorney under his direction, which Walker was unable to execute.  Promptly after his death, his attorney informed his widow, two daughters, and three sons about, but did not reveal the provisions of, an existing will and an unexecuted draft will.  Before and without knowing what the provisions of both documents were, the widow and children signed a valid agreement agreeing to do all that was necessary to carry out Walker's wishes and directions in the unexecuted draft relating to themselves.  The family agreement was given effect and carried out.  The daughters' shares of the residue of Walker's estate were transferred to trusts under which each daughter received income for life and had a limited, testamentary power of appointment over the remainder.  The decedent received trust income but did not exercise the power.  Held, the decedent did not transfer property to trusts within the meaning of section 811(c) and (d), 1939 Code, and she did not*190  own any interest in the trust property which passed at or by reason of her death.  Alfred E. Lindbloom, Esq., for the petitioner.Robert B. Pierce, Esq., and James T. Wilkes, Jr., Esq., for the respondent.  Harron, Judge.  HARRON *1185  The respondent determined a deficiency in estate tax in the amount of $ 374,243.55.  The chief issue is whether the respondent erred in including in the gross estate of the decedent, Elizabeth W. Vease, the value of properties held*191  in trusts in which the decedent was the income beneficiary for life and with respect to which she had a limited, testamentary power of appointment. The primary question under this issue is whether the decedent's interests in the trusts were acquired by inheritance from her father, or whether she owned properties and made transfers of them to the trusts within the meaning of section 811(c) and (d) of the 1939 Code.  If it is held that the decedent made transfers to the trusts, another issue requires determination of the amount includible in her gross estate.FINDINGS OF FACT.Elizabeth W. Vease, the decedent, died testate on September 10, 1952, a resident of Arizona, at the age of 49.  James L. Vease, her surviving husband, is the executor of her estate.  The estate tax return was filed with the district director of internal revenue for the district of Arizona.  The decedent, sometimes referred to hereinafter as Elizabeth, was survived by her husband and five children by her previous marriage to Hamilton Hector Paterson.Elizabeth executed her last will on December 2, 1950.  She bequeathed all of her property, including some real estate in Arizona, to James L. Vease.  She did not *192  exercise any powers of appointment by means of her will and no provision thereof related to any trusts involved here.Elizabeth's father, James Harrington Walker, hereinafter called Walker, died testate on December 16, 1919, a resident of Detroit, *1186 Michigan.  His survivors were his wife, Margaret T. Walker, who was 57 years old, and five children, as follows: Elizabeth, who was 16 years old; Mary Margaret W. Small, 25; Harrington E. Walker, 35; Hiram H. Walker, 33; and F. Caldwell Walker, 29.Walker executed his last will on June 24, 1918.  It was prepared by Walker's attorney in Toronto, Canada, Z. A. Lash.  The will was not revoked.  Walker died suddenly in New York City.  His estate, located in the United States and Canada, had a value before taxes of $ 4,881,471.31, and a net value after taxes of $ 4,071,727.58.A few days before his death, Walker worked out with his lawyer, Lash, who also was in New York City, some modifications he wished to make in his will, and for that purpose he instructed Lash to prepare a new will, which Lash proceeded to do immediately.  The new will was ready for execution but Walker's sudden death frustrated his intentions and there remained*193  in Lash's possession an unexecuted, new will.Twelve days after Walker's death, on December 28, 1919, Lash went to Detroit to meet with Walker's secretary of many years, G. G. Benfield, and Walker's widow and five children.  Up to the time of this meeting, the widow and children had not seen Walker's will and did not know anything about its contents.  Neither the executed will nor the unexecuted will was presented to the family and it was not Lash's intention to present these documents or to tell the family anything about the provisions of either, or about the modifications which Walker had intended making in his will.  Rather, the purpose of Lash's visit was to tell the family that there were the two documents and to find out what the family wanted to do under the circumstances.  Lash delivered his message to the family and made his inquiry.The members of the family then retired from their meeting with Lash and privately considered their problem while Lash waited for their reply.  The decision which the widow and five children made and then conveyed to Lash, upon resuming their meeting with him on the same day, was that they wanted to do everything possible to carry out and comply*194  with Walker's last wishes, even though they did not know anything about them or what the effect would be upon their interests under Walker's executed will if they agreed to carry out the provisions in the unexecuted will relating to themselves.Lash did not bring to the meeting either the executed will or the unexecuted document.  He did not inform the family about the respective provisions of the documents pertaining to the widow and children upon receiving their decision.Lash immediately wrote in longhand an agreement which the members of the family, at that time, signed in the presence of each other and Benfield.  It is stipulated by the parties here that this agreement *1187  was signed on December 28, 1919, by Elizabeth, petitioner's decedent. and her mother, sister, and three brothers.Lash took the family agreement of December 28, 1919, to Toronto.  Under the date, December 31, 1919, Lash sent to Elizabeth's sister, Mary Walker Small, a copy of the family agreement, a copy of the unexecuted will (sometimes referred to in the record of this case as the 1919 document), and a copy of a memorandum signed by Lash, entitled, "Memorandum Respecting James Harrington Walker's *195  Will."In the family agreement the widow and all of the children agreed, one with the others, as follows:to do everything which may be necessary in order that the wishes of the said J. Harrington Walker as contained in the said [unexecuted] Will prepared by Mr. Lash may, so far as we are or any of us is concerned or affected, be carried out, and all consents and documents required for that purpose and all instructions to the executors and trustees of the existing executed Will which may be required will be signed and given by us, and we request Mr. Lash to see to the carrying out of this agreement.  * * * Whatever application to any Court may be necessary on behalf of Elizabeth (who is a minor) to make this agreement and the carrying out thereof effective will be made.  Probate of the existing Will shall be applied for in order that this agreement may be properly and effectively carried out.  [Emphasis supplied.]The agreement is set forth in its entirety, excepting an immaterial preamble, in the margin.  1*196  On January 16, 1920, the Probate Court for Wayne County, Michigan, appointed Benfield the legal guardian of Elizabeth.On February 21, 1920, Walker's executed will was filed for probate in the Probate Court for Wayne County.  The hearing thereon was set for February 25, 1920.On February 25, 1920, the Probate Court admitted and allowed Walker's will to probate, and letters testamentary were issued by the court appointing Walker's three sons as the executors of the will.On March 18, 1920, Benfield filed in the Probate Court a petition for authorization to execute on behalf of Elizabeth the family agreement *1188  of December 28, 1919, another draft of which, dated February 19, 1920, had been prepared by Lash for this purpose.  Attached to the petition was a copy of the family agreement together with a copy of the unexecuted will.  In paragraph 6 of the petition the following was stated:(6) That it is for the best interests of said minor child that the terms of said agreement be fulfilled as said minor child will, in such event receive a greater share of the estate of said deceased than under the terms of the Will which has heretofore been filed for probate.On March 18, 1920, *197  the court signed an order authorizing Benfield to sign the family agreement on behalf of Elizabeth and to sign, also, all documents requiring her signature in connection with carrying out the agreement.On March 18, 1920, Benfield and all of the other parties, the widow and the four children, signed the family agreement dated February 19, 1920.  It is the same in its terms as the family agreement first executed on December 28, 1919.  It was prepared only for the purpose of obtaining the signature of Elizabeth's guardian.  Both documents are referred to hereinafter as the family agreement, of which there was, in substance, only one.  The material part of the agreement dated February 19, 1920, is set forth in the margin.  2*198  In both the executed will admitted to probate and the unexecuted will referred to in the family agreement, the executors and trustees who were appointed were Walker's three sons and the National Trust Company, Ltd., of Toronto, Ontario.On June 17, 1921, Walker's will was duly proved and registered, for ancillary administration of the estate in Canada, in the Surrogate Court of York County, Ontario.  Letters of ancillary administration were issued to the National Trust Company and Walker's three sons as executors and trustees under the will.  The major part of the estate was located in Canada.  The National Trust Company, a Canadian corporation, did not take probate of the will in the United States.The dates of birth of Walker's children and the years in which they became 30 and 40 years of age, respectively, are as follows:NameBirth dateAge 30Age 40Harrington E. WalkerSept. 10, 188419141924Hiram H. WalkerAug.  4, 188619161926F. Caldwell WalkerJuly 6, 189019201930Mary M. W. SmallSept. 29, 189419241934Elizabeth T. W. VeaseApr.  19, 190319331943*1189  The executed will directed the testamentary trustees to set apart and hold*199  separately an unspecified amount of assets sufficient to pay the widow, Margaret Walker, out of the income, the sum of $ 50,000 per year; the rent for life of the apartments in Garden Court ($ 712.50 per month); the taxes and repairs on certain garage property in Detroit, and the summer home at Magnolia, Massachusetts; and to purchase a $ 50,000 private dwelling house if the widow preferred to reside in a house instead of the apartment.It also provided for the payment of 52 bequests of Pere Marquette bonds and cash, among which were bequests of Pere Marquette bonds of the par value of $ 150,000 to each of the widow and the two daughters. All of the bequests were to be paid or delivered at such times and in such amounts from time to time as the trustees might deem expedient and no legatee had a right to call for payment or delivery until the trustees deemed expedient.Under the provisions of the executed will the residue of the estate was left in trust to be divided into 5 equal parts, 20 percent, for the benefit of Walker's five children, who were to receive the income.  The principal of their respective shares was payable on attaining 30 years of age.  Discretionary right was given*200  to the trustees to pay the beneficiaries sums not exceeding $ 5,000 per annum out of principal.  The will further provided that upon the death of a beneficiary before 30, leaving lawful issue, the share of such beneficiary should be held by the trustees of Walker's will for such issue according to the terms, limitations and provisions, shares and appointments as the beneficiary might by last will provide and appoint, and failing such provision and appointment, then the share was to be held by Walker's trustees for and divided among such issue, share and share alike.  The beneficiary could also make provisions for a spouse and if no provision was made, Walker's trustees could in their discretion pay over income to the surviving spouse not in excess of 50 percent of the net income for any year.  In the event a beneficiary died before 30 without lawful issue surviving, the trustees were to hold such beneficiary's share for the persons and purposes such beneficiary might by last will appoint and failing such appointment, the share was to be added in equal parts to the other shares.Under the terms of the unexecuted will, the trustees were directed to set apart and hold separately an unspecified*201  amount of the assets of the estate as would amply provide for the payment of an annuity of $ 75,000 to the widow. The increased amount of the annuity was in lieu of provisions for the payment by the estate of rent, taxes, and *1190  other outgoings in connection with the apartments in "Garden Court," or with any residence chosen by the widow, or in connection with her residence in the summer home at Magnolia.The widow was also given a bequest of $ 200,000, payable in bonds, mortgages, or high-class interest-bearing securities in such amounts and from time to time as the trustees deemed expedient.The unexecuted will also provided for 45 specific bequests of cash and securities payable from time to time as the trustees deemed expedient, but no specific bequests were made to Walker's daughters.Under the terms of the unexecuted will, the residue of the estate was left in trust for the three sons and two daughters. The residue was deemed to be divided into 12 equal parts, 3 parts for the benefit of each of the daughters (6 parts, or 50 percent) and 2 parts for the benefit of each of the three sons (6 parts, or 50 percent).Assets were to be allocated from time to time as the trustees*202  of the 1919 document deemed prudent and practicable.  As each son attained the age of 40 years, the trustees of the 1919 document could deliver securities and assets to him on account of his 2 parts in such amounts and at such time as the trustees might deem best.  Pending payment and delivery, the net interest or income from a son's part was to be paid to him.The 3 parts of the residue held for Mary Walker Small and the 3 parts for Elizabeth, the decedent herein, when she attained the age of 21 years, were to be turned over to new trustees.  These trustees were to be named or appointed by the testamentary trustees under the unexecuted will (the 1919 document).  One incorporated trust company could act alone but if individuals without a trust company were named or appointed, there had to be not less than two.  One or more of the testamentary trustees named in the 1919 document were to be eligible.The terms, conditions, and trusts upon which the daughter's part of the residue was to be held were to be settled and determined upon by the named trustees in the unexecuted will but the following provisions were required to be included:(a) The net income of the trust estate was to be *203  paid to or applied for the benefit of the daughter during her life without power of alienation or anticipation and free from the control of any husband.(b) Advances out of corpus of the trust estate could be made to the daughter not in excess of $ 5,000 in any one calendar year.(c) Upon the daughter's death the trust estate was to be held for the benefit of the lawful child or children of the daughter in such proportions and upon such terms, trusts, and conditions as the daughter might by her last will direct or appoint (with power to exclude one or more from such division or proportions) and failing such direction or appointment then the trust estate should be held for *1191  the child or children, share and share alike.  The daughter was to be given power to provide by her will for payment to her husband of an annuity not exceeding in any year 50 percent of the net income for such year.In the event either daughter died without leaving lawful issue, the trust estate held by the trustees of her parts of the residue was to be divided into 5 parts, 2 of which were to belong to the surviving sister and the remaining 3 parts to the surviving brothers, share and share alike.  Provisions*204  were made for the payment of an annuity to a surviving husband and for distribution to the surviving brothers in the event there should be no sister surviving.The unexecuted will further provided that should Elizabeth, the decedent herein, die before 21 years of age, leaving no lawful issue, the 3 parts of the residue intended for her should be divided into 5 equal parts, 2 of which should belong to Mary Walker Small and 1 of which should belong to each of the three sons.In Canada, the administration of Walker's estate under his will proceeded in due course.  As of June 30, 1928, the capital account had increased to over $ 5,500,000.  On that date, $ 800,000 of assets were set aside to provide for the widow's annuity, and distribution was made of $ 3,170,430.42, of which $ 1,585,215.21 was distributed to the three sons and $ 1,585,215.21 was set aside to be distributed to the daughters' trust.  As of June 30, 1928, Mary Walker Small was close to 34 years of age, and Elizabeth was 25.The executors and trustees in Canada filed their accounts for the period June 30, 1928, to September 30, 1933.  Objections thereto were taken by the daughters. The balance on hand in the capital account*205  of the Canadian portion of the Walker estate on June 30, 1928, was $ 1,577,161.82.An action in the Supreme Court of Ontario was instituted by Mary and Elizabeth and their infant children, as plaintiffs, against National Trust Company, Ltd., and the three Walker sons, as trustees under Walker's will and in their corporate and individual capacities, and against Yorkshire Securities Limited and the Canadian Bank of Commerce.  The complaint was based on the plaintiffs' objections to the testamentary trustees' accounts for the period June 30, 1928, to September 30, 1933.  Included in the relief asked was a petition for the removal of the trustees and executors of the Walker estate in Canada for mismanagement and misfeasance as trustees; the return of certain assets (4,500 shares of Yorkshire Securities Limited stock) which had been set aside for the benefit of the two daughters, which the daughters had discovered had been pledged to secure liabilities of companies in which the three sons were financially interested; and a petition to the court to compel the Canadian Bank of Commerce to repay $ 50,000 to the daughters' trust which it had received out of *1192  the daughters' share *206  of the estate.  The action was settled on November 3, 1934, under "Minutes of Settlement," which was approved by an order of the Supreme Court of Ontario entered on the same date.It was provided in the settlement agreement as follows:Subject to the approval of the Court, the Trustees of the estate of J. Harrington Walker deceased shall, pursuant to the trusts created by agreements bearing date the 28th day of December, 1919 and the 19th day of February, 1920, for the purpose of giving effect to the trusts created by the unsigned Will of J. Harrington Walker deceased, nominate, constitute and appoint Guaranty Trust Company of Canada, Gustavus G. Benfield, Sidney Ruggles Small and Hamilton Hector Paterson (hereinafter referred to as the New Trustees) who are nominated by the plaintiffs, to be trustees of the trusts referred to in paragraph 10 of the said unsigned Will for the benefit of the plaintiffs and others and shall concur in the settlement of the deed necessary to create the said trusts which deed shall be approved by the Court.  [Italics supplied.]On December 13, 1934, an instrument was executed by and between National Trust Company, Ltd., and the three Walker sons, *207  as executors and trustees of the Walker estate, parties of the first part, and (the "New Trustees" referred to in the above-described settlement agreement) Guaranty Trust Company of Canada, G. G. Benfield, Sidney R. Small, and Hamilton H. Paterson, parties of the second part.  The instrument is in its own text called "This Indenture, Deed, and Declaration of Trust made and entered into on the 13th day of December, A.D. 1934." By this instrument, the parties of the first part appointed the parties of the second part the trustees of the shares of Mary and Elizabeth "referred to in the said unsigned will," "to receive, manage and administer the same." By this instrument an enforcible trust was established having trustees, corpus, beneficiaries, and provisions determining the rights and duties of the trustees and the rights of the beneficiaries. The indenture is incorporated herein in its entirety by this reference.  It represents what is referred to in this proceeding and the statutory deficiency notice as the Canadian Trust.The aforesaid trust agreement provided in part that "Upon the execution and delivery of these presents, the said Parties of the Second Part as the Trustees appointed*208  hereunder, shall be invested with complete title to all the property and assets now comprising, or which may hereafter comprise, the shares of the said daughters in the estate of the said J. Harrington Walker, to which they became entitled by virtue of the said probated will [1918 will] as altered and affected by the said agreements [dated December 28, 1919, and February 19, 1920] to abide by the said unsigned Will, now, or hereafter to be allocated or distributed by the Parties of the First Part as Executors and Trustees of the estate of the said J. Harrington Walker as part *1193  of the shares of the said daughters, and hold the same, in Ontario, upon the following trusts:"The trust agreement does not contain any schedule of the assets and property of which the trust corpus would consist, that matter having been handled and worked out by a separate allocating and accounting procedure to which reference was made in paragraphs 7, 9, and 12 of the settlement agreement which provided that "an immediate allocation and division" should be made as between the two Walker daughters and their infant children and the three Walker sons, of certain assets in the Walker estate, identified*209  in the executors' and trustees' accounts for the period June 30, 1928, to September 30, 1933, subject to variations, which assets were to be transferred and delivered to the New Trustees.In the action in the Supreme Court of Ontario, upon motion of counsel for the parties on December 13, 1934, the court issued an order whereby it approved the trust agreement dated December 13, 1934, the appointment of the trustees of the trust, and the deed (transferring assets to the new trustees) "necessary to create the said trusts."The trust agreement recites in its preamble that under the last will of Walker, each of his daughters was to receive a one-fifth share of the residue of the estate; and that on December 28, 1919, and February 19, 1920, prior to the probating of Walker's will, the daughters, their mother, and brothers had entered into agreements providing that "a certain instrument" prepared as a last will of Walker, although not signed by him, "should be followed and observed as though duly executed and in fact his last will."The trust instrument in question by its terms creates a spendthrift trust, and gives the trustees the ordinary fiduciary powers.  Under this trust, Mary and*210  Elizabeth (referred to as the daughters) are given life estates in the trust consisting of the right to receive the income for life (in equal shares ) and payments out of corpus not to exceed $ 5,000 per year to either one, and upon the death of a life beneficiary (daughter), her share of the trust estate shall be held for the benefit of her lawful child or children.  In respect of this matter, the indenture provides in part as follows:6. That upon the death of a daughter her share of the said trust estate shall be held for the benefit of her lawful child or children, including any legally adopted child, and for the lawful issue of any deceased child, in such proportions, and upon such terms, trusts and conditions as the daughter so dying may by her last Will direct or appoint (with power to exclude one or more from such division or proportions), and failing such direction or appointment, or in so far as no such direction or appointment shall extend, then for the said child, or if more than one then for the children share and share alike, and the lawful issue of any deceased child, such issue to take the deceased parent's share, * * **1194  The foregoing declaration of trust*211  was not executed by Elizabeth and Mary, or by either one.  There was no provision in the trust allowing them to alter, amend, revoke, or terminate the trust.  The trust indenture complied with the provisions of paragraphs 11 and 12 of the unexecuted will which had been prepared under Walker's direction.The trust accounts were always known as the J. Harrington Walker Estate, Daughters' Trust, and the same accounts were carried on with adjustments to give effect to the Minutes of Settlement. The balance in the capital account of the Daughters' Trust on December 27, 1934, after the liquidation of Yorkshire Securities Limited, was $ 3,007,179.55, and on September 10, 1952, the date of Elizabeth's death, it was $ 2,188,572.88.Subsequent to the execution of the Minutes of Settlement of November 3, 1934, B. C. Schram as receiver of First National Bank of Detroit and of the Guardian National Bank of Commerce, claimed that by reason of an agreement entered into by Harrington E. Walker, Hiram H. Walker, and F. Caldwell Walker, and Union Guardian Trust Company on May 31, 1932, the Union Guardian Trust Company became the assignee of the shares of the three sons in the estate of Walker for *212  the benefit of First National Bank of Detroit, Guardian National Bank of Commerce, and the Canadian Bank of Commerce, and that the Detroit banks and Union Guardian Trust Company were not bound by the Minutes of Settlement of November 3, 1934.  Schram, as receiver, filed objections to the accounts of the executors and trustees of the Walker estate for the period June 30, 1928, to September 30, 1933.  There were proceedings before the assistant master of the Supreme Court of Ontario.  From his ruling, an appeal was taken on October 16, 1935, which was heard by the chief justice of the High Court, who issued an order on June 25, 1936.Schram's claims were settled on December 31, 1936, by a written agreement captioned "In the Supreme Court of Ontario, In the Matter of the Trustee Act, and in the Matter of the Estate of the Late James Harrington Walker, Deceased -- Minutes of Settlement." The agreement was executed by the interested parties, namely, the several banks making claims; Mary Walker Small and Elizabeth; the new trustees of the Daughters' Trust; the executors and testamentary trustees of the will and estate of Walker; Yorkshire Securities Limited; the three Walker sons personally; *213  Schram as receiver of the banks; Union Guardian Trust Company; the Guardian Depositors Corporation; the Canadian Bank of Commerce; and Harry A. Clarke.The agreement provided, in general, for the withdrawal of Schram's objections to the accounts of the executors and trustees of the Walker estate for the period June 30, 1928, to September 30, 1933; that the claimant banks and their receiver, Schram, would be bound by the *1195  Minutes of Settlement and judgment of November 3, 1934 (relating to the Daughters' Trust and other matters); that Union Guardian Trust Company would receive $ 218,978.54, as assignee of the three Walker sons; that $ 248,294.26 would be distributed to the new trustees of the Daughters' Trust for Mary, Elizabeth, and their children; testamentary trustees of the Walker estate would assign the estate's share in the estate of Edward Chandler Walker, one-half to the Daughters' Trust trustees and one-half to Canadian Bank of Commerce; and that the testamentary trustees of the Walker estate would be relieved from preparing or presenting any further accounts in connection with the Walker estate.The preamble of the above-described settlement agreement of December*214  31, 1936, recited the following:Administration of the said estate [the Walker estate] is governed by two agreements in writing entered into by the widow and children of the late James Harrington Walker, dated respectively the 28th of December, 1919, and the 19th day of February, 1920 relating to a draft Will prepared by Mr. Z. A. Lash, Q.C., for the said James Harrington Walker shortly before the latter's death.The interest of Walker's estate in the estate of E. C. Walker was carried in its accounts at $ 1 million.  Under the settlement agreement of December 31, 1936, the J. Harrington Walker Estate -- Daughters' Trust received as its share of the interest in the estate of E. C. Walker, the total sum of $ 522,667.16, which was allocated as capital of $ 393,924.74 and income of $ 128,717.42.Upon the consummation of the Minutes of Settlement of December 31, 1936, there were no more assets in the Canadian portion of the Walker estate to be administered.The Canadian portion of the Walker estate was administered in accordance with the provisions of the 1919 document (the unexecuted will) insofar as it related to the interests of the widow and Walker's five children.The net capital*215  and the income receipts of the Canadian part of the Walker estate, after deducting the payments of the widow's annuity in the total amount of $ 1,030,231.57, were respectively, $ 3,736,601.56 (capital) and $ 2,393,352.34 (income).  These amounts were distributed one-half to the daughters' share of the residue of Walker's estate, and one-half to the share of the three sons in the residue of the Walker estate.Walker's widow, Margaret Walker, died on July 18, 1933.  During her life, the executors and testamentary trustees of the Walker estate paid her a $ 75,000 annuity, the total payments amounting to $ 1,030,231.57.The following facts relate to the administration of the American portion of the Walker estate and to two trust indentures establishing *1196  separate trusts respectively for Mary Walker Small and Elizabeth and their children:The three Walker sons acted as executors of the American portion of the estate until March 25, 1930.  On June 2, 1922, they were appointed testamentary trustees under the will, and were discharged on April 24, 1940, upon the closing of the estate.The estate had substantial liabilities amounting to $ 1,712,866.85, which included administration*216  expenses of $ 181,011.91; debts of the decedent, $ 255,487.38; inheritance, estate, and succession taxes, $ 809,743.73; and legacies other than to the widow and children, $ 391,623.83; plus the widow's support.On June 12, 1922, the executors of the American portion of the estate filed a petition in the Wayne County Probate Court for a partial distribution to them individually of stock of the Walker Twist Drill and Tool Company, Ltd., for the sum of $ 237,759.14.  The petition referred to certain provisions of the 1918 will under which the sons were each entitled to one-fifth of the estate at age 30, and there was attached to the petition the consent of Mary Small and Elizabeth.  A consent order authorizing the partial distribution was entered on the same date.  The order also authorized the executors to pay with funds of the estate obligations of the above-named corporation to the Canadian Bank of Commerce amounting to $ 370,000, and to cancel all claims of the estate against the corporation.On December 31, 1929, the executors filed their final account asking for approval of the assignment by the executors of the residue of the estate to Harrington, Hiram, and F. Caldwell Walker, *217  the testamentary trustees named in the will on the same date.  They also filed a receipt as testamentary trustees of the same date for the residue of the estate and a consent signed by the heirs-at-law and the residuary beneficiaries. The petition was granted by the court in an order of March 25, 1930.The testamentary trustees filed accounts for the period January 1, 1930, to January 31, 1935, in which the income was credited to, and the deficits charged one-sixth to each of the three sons, and one-fourth to each of the two daughters. The balance of the principal of the estate on January 31, 1935, was $ 869,391.92, which sum included the $ 237,759.14 previously distributed to the three sons, but it did not include liability for an assessment on 1,118 shares of Detroit Bankers Company stock.The sons had become financially embarrassed and had assigned on May 31, 1932, all their interests in the estate to Union Guardian Trust Company as trustee for the Canadian Bank of Commerce, the Guardian National Bank of Commerce, and the First National Bank -- Detroit.  The Union Guardian Trust Company objected to the trustees' accounts for the period January 1, 1930, to January 31, 1935.  *1197 *218  The daughters wanted to get the estate closed because of the precarious condition of the Garden Court Realty Company, one of the assets of the estate.  Mary Small retained counsel to represent her in connection with the objections of Union Guardian Trust.A meeting was held on October 26, 1935, between Lawrence Levy, counsel for Union Guardian Trust, Dean Lucking, counsel for Elizabeth, L. A. Masselink, counsel for Mary, and Raymond H. Berry, counsel for the executors and trustees of the estate, to discuss Union Guardian Trust's objections to the accounts and the amount of the estate, if any, to which the three sons would be entitled over and above the distribution made to them in June 1922.  Levy claimed that the assets of the estate were then worth approximately $ 416,000 and that after paying the daughters $ 237,000 to equalize the distribution made to the sons in 1922 and the amount of the daughters' advances to the estate, and also a $ 20,000 bank stock assessment, the balance of the estate should be divided equally between the two daughters and the three sons.  After a further adjustment because of the sons' indebtedness to the estate, Levy claimed that there would be a residue*219  of $ 36,000 for the sons' creditors.  The Union Guardian Trust Company was participating in the proceedings involving the Canadian portion of the J. Harrington Walker Estate at the same time that the aforesaid negotiations were being conducted with respect to the American portion.After the above meeting, and several conferences, it was finally agreed to compromise the claim made on behalf of Union Guardian Trust for $ 9,000.  This compromise was reduced as set forth in an agreement dated January 31, 1936.  It was executed by Mary Small and Elizabeth; Hiram H. Walker, F. Caldwell Walker, and Harrington E. Walker as testamentary trustees and heirs of Walker; Union Guardian Trust as assignee under assignments of May 31, 1932, and as trustee; the Canadian Bank of Commerce; Guardian National Bank of Commerce by its receiver, B. C. Schram; Guardian Depositors Corporation; and Schram, receiver of First National Bank.  In the agreement it was provided that, with the exception of $ 9,000, all the other assets of the Walker estate should be distributed to Mary Small and Elizabeth, provided they assumed and agreed to pay a stock assessment levied upon 1,118 shares of Detroit Bankers Company*220  stock held by the estate.  The agreement further fixed the interest of the sons in the estate at $ 9,000 to be paid on final distribution to Union Guardian Trust Company as assignee of the sons' interest, provided no legal proceedings were brought by any person not a party to the agreement.  In such an event, the beneficiaries of the sons' assignee would receive only those assets which the court should finally determine to be due the sons over and above the amounts already partially distributed to them.  It was further agreed that the trustees' *1198  account for the period January 1, 1930, to January 31, 1935, should be allowed as filed and that a partial distribution should be made to the two daughters consisting solely of shares of stock, bonds, and accounts receivable of Garden Court Realty Company.  The agreement applied only to the assets of the estate of Walker under administration in the United States.  The agreement was not filed with the Wayne County Probate Court because it was thought that this would encourage other creditors of the sons to intervene and delay the winding up of the estate.On April 8, 1936, the trustees of the estate filed a petition for authority *221  to make a partial distribution to the two daughters of $ 70,000 par value of bonds, 2,733 shares of common stock, and $ 68,178.25 of notes receivable of Garden Court Realty Company.  Reference was made in the petition to the 1918 will and consent of the residuary legatees was attached.  On the same day, the Probate Court entered a consent order authorizing the distribution, and in the order the $ 70,000 of bonds were allocated at a value of $ 21,000; 2,733 shares of stock at a value of $ 2,733; and $ 68,178.25 of notes receivable at a value of $ 1,000.On January 31, 1939, the parties executed an amendment to the agreement of January 31, 1936, whereby the daughters transferred to Union Guardian Trust certain stock they had inherited from their mother in payment of the $ 9,000 due it under the earlier agreement.  The amended agreement was not filed in court for the same reason that the original agreement was not filed.The testamentary trustees of the estate filed their final account and petition for discharge in the Probate Court on April 24, 1940, to which was attached the consent of the beneficiaries of the trust under the will.  The court's order in accord therewith was entered *222  on the same day.  The petition made no reference to the assignment of May 31, 1932, of the sons' shares in the estate to Union Guardian Trust or to the agreements of January 31, 1936, and January 31, 1939, fixing the amount of the sons' interest in the estate.  It did allege that the three sons had on April 14, 1939, assigned all their right, title, and interest in the trust estate to Mary Walker Small and Elizabeth, and that they had distributed all the properties included in the trust estate to Mary and Elizabeth in equal shares.  The book value of these assets, as shown by the final account, was $ 386,034.65.On March 4, 1940, an indenture deed and declaration of trust was entered into by decedent Elizabeth T. Paterson (later Vease); Harrington and Hiram H. Walker as trustees under the will of Walker, and F. Caldwell Walker; and G. G. Benfield, Sidney Ruggles Small, and Hamilton Hector Paterson as trustees.Under the terms of the indenture, Elizabeth, in obedience to the obligation of the 1919 document (the unexecuted draft will) and the *1199  family agreements of December 28, 1919, and February 19, 1920, conveyed her share of the assets which had been distributed to her by*223  the trustees of the American portion of the Walker estate, which assets consisted of an undivided half-interest in certain real estate in Detroit and Gloucester; 1,366 1/2 shares of Garden Court Realty Company common stock; an undivided half-interest in $ 70,000 of bonds and $ 68,178.25 of notes of the Garden Court Realty Company; $ 2,000 of Essex Country Club bonds; and all personal property distributed to herself and sister by the trustees of the Walker estate on, namely, April 28, 1939, but which was not actually received until October 12, 1939.Under the terms of the indenture, the three sons nominated and appointed G. G. Benfield, Sidney R. Small, and Hamilton Hector Paterson to act as trustees under the trusts set forth in the indenture. The net income was payable to Elizabeth for life and the trust was to terminate upon her death unless any part of the income was payable to a surviving husband.  Upon termination, the trustees were to pay over the trust estate to Elizabeth's children and issue of any deceased child in such proportions as she might by her last will direct or appoint, with power to exclude one or more from such division, and failing such direction or appointment*224  then to children, share and share alike.On March 4, 1940, a substantially similar trust indenture was entered into under which Mary Walker Small was the life tenant, and Benfield, Small, and Paterson were the trustees.  The corpus of this trust consisted of Mary's share of the assets distributed from the American portion of the Walker estate.Two separate trusts of the daughters' shares of the American portion of the Walker estate were deemed necessary by counsel in order to carry out the intent of the 1919 document because of the real estate and the provisions for annuities for the daughters' husbands.  Execution of the trust agreement was delayed to March 4, 1940, because it took that long for counsel to examine the law and draw the trust indentures.On and after March 4, 1940, the daughters' half-share of the residue of the Walker estate was held in trusts in accordance with the provisions of the 1919 document.  The daughters' one-half share of the Canadian portion of the estate was held in a single trust, dated December 13, 1934, and referred to in the deficiency notice as the Canadian Trust.  The daughters' one-half share of the American portion of the estate was held in two*225  separate but similar trusts dated March 4, 1940, one for the benefit of Mary Walker Small and the other, referred to in the deficiency notice as the American trust, for the benefit of the decedent, Elizabeth W. Vease.There were no transfers or additions to the corpus of each trust after the initial transfers on December 13, 1934, and March 4, 1940.*1200  At the time of the death of Elizabeth, the fair market values of the properties held in the trusts and of the respective interests of Elizabeth and Mary were as follows:TrustFair marketElizabeth'sMary's interestvalueinterestCanadian$ 1,953,771.20$ 976,885.60$ 976,885.60American96,729.2196,729.21American96,729.2196,729.212,147,229.621,073,614.811,073,614.81In the estate tax return filed for the decedent's estate, the respective gross and net estate reported was $ 185,943.77 and $ 4,849.91.The respondent included in the decedent's gross estate under section 811(a) and (d) the values of the properties constituting one-half of the Canadian trust and all of the American trust, in the total amount of $ 1,073,614.81.  He stated as the reason for the determination that the decedent*226  had transferred the properties to the trusts during her lifetime and had retained the income for life and power "to alter, amend, revoke, or terminate the trusts."The stipulated facts are incorporated herein by reference and are found as stipulated.OPINION.The principal question is whether the decedent, Elizabeth Vease, made transfers of any property held in the Canadian or American trusts within the meaning of section 811(c) and (d).It is the petitioner's position that the rule of , is controlling; that under this rule the interest of the decedent in the trusts was, for Federal estate tax purposes, acquired directly by inheritance from her father, James Harrington Walker; that she never became the owner of any of the property in the trusts and did not make any transfers to them, but on the contrary, inherited only a life estate in the trusts with a limited power of appointment; and that consequently she did not make any transfers within the pertinent statutory provisions and no interest in the two trusts passed at her death.The respondent contends that the decedent transferred property to the trusts in which she retained*227  such rights and interests as to render the values of the properties includible in her gross estate under section 811(c) and (d).  He contends, further, that the decedent was the settlor of the American trust and a cosettlor with her sister of the Canadian trust.  He argues that all the property rights of the devisees and legatees of Walker under his 1918 will, including Elizabeth's interest, became vested on the date of the death of Walker; *1201  that at some time between the dates of her father's death and her own, she transferred her rights and interests under her father's will in exchange for certain rights and interests in the trusts and, therefore, made transfers which come within the statutory provisions under which the respondent's determination was made.  He contends that petitioner's reliance upon the Lyeth principle is misplaced.The agreement of the widow and children who survived Walker was entered into solely because they desired and intended to give effect to the testamentary intentions and wishes of Walker.  Walker's last testamentary intentions had been given by him to Lash very soon before Walker died, and had been written out by Lash in a draft of a *228  will, which is referred to herein as either the unexecuted will or the 1919 document (since the last will was executed in 1918).The family agreement was entered into in good faith.  Such good faith is evidenced by the fact that the parties to the agreement entered into it before they obtained any knowledge or information whatsoever about the provisions of either the 1918 will or the 1919 draft of a proposed new will; and, also by the fact that each party adhered to and complied with that agreement.We regard the issue presented in this case as sui generis because of the fact that the parties to the family agreement entered into it before they learned in any respect about any of the terms and provisions of Walker's last will and about any of the provisions of the 1919 document, and, therefore, before they had any idea about what modifications of the 1918 will might be contained in the 1919 document, if any.  Our consideration of the issue has taken into account this rather unique circumstance.  Much of what is said hereinafter is necessarily limited to the particular facts and circumstances of this case.The record shows, without any doubt, that in Canada the Walker estate was *229  administered by the executors and trustees in accordance with the probated will only with respect to all bequests to others than the surviving members of Walker's family and the general administrative matters which did not relate to the family.  On the other hand, with respect to the matters of paying the widow an annuity, making general provisions for her, paying over to her a specific bequest of $ 200,000 in securities or cash, and not paying over to the daughters any specific bequest of Pere Marquette bonds (as provided in the 1918 will); and of not distributing to a son any share of the residue until he reached 40 years; and of dividing the residue of the estate into 2 equal halves, 50 percent for the three sons and 50 percent for the two daughters, the Canadian part of the estate was administered by the executors and testamentary trustees in accordance with the family agreement.  Such compliance with the family agreement to carry out the last directions of Walker, as set forth in the 1919 document, *1202  was finally carried to the ultimate one involved here, the transfer by the testamentary trustees of 50 percent of the residue of the Canadian part of the estate to trustees*230  appointed by them of the Daughters' Trust, the terms and provisions of which were the same as set forth in the 1919 document.It is equally true that in the administration of the American part of the estate, the smaller part, the family agreement was carried out; the daughters and sons, as 2 groups, each received 50 percent of the residue of the American portion of the estate; the one-half thereof set aside for the daughters was distributed in equal 25 percent shares to the same individuals who were the trustees of the Daughters' Trust in Canada; and 2 trusts were established to receive and hold each 25 percent share.  The two American trust indentures contained the same provisions and terms as the Daughters' Trust in Canada (except for some mechanical differences in wording), which, again, were the same as directed by Walker in the 1919 document.The foregoing also is evidence of the fact that the family agreement was entered into and carried out in good faith.  There is no suggestion in the record to the contrary.The family agreement was an arm's-length agreement.  None of the parties was under any compulsion to sign it.  Elizabeth, a minor in 1919, was represented by a duly appointed*231  legal guardian, and he stated in his petition to the Probate Court in Detroit that the family agreement had as its purpose the carrying out of the testator's directions, with respect to the surviving widow and children, contained in an unexecuted draft of a will.  After Elizabeth became 21 years old she ratified by her actions her guardian's act in signing the family agreement for her.It is of importance to point out that in this case, there was absolutely no tax-saving or tax-avoidance motive involved in the family agreement.  There is no suggestion in the record in any respect to the contrary.In Michigan, if the rights of creditors and others having claims against the estate will not be impaired, the doctrine of family agreements applies and legatees and devisees and heirs may make agreements with each other and among themselves with respect to their respective interests in an estate, and such agreements, if they are reasonable and entered into understandingly, are valid and are regarded with favor by the courts both at law and in equity.  Many other States follow the same rule.The family agreement here was valid.  In Michigan, such agreements are valid even when minors are parties*232  in interest.  Mich. Stat. Ann. pp. 527, 528, secs. 27.3178(115), (118) (1943 rev.).  With respect to the minor, Elizabeth, court approval was obtained; and under retroactive statutory provisions, the Walker family agreement was *1203  valid.  See ; . See also ; ; .In the case before us, after the agreement of December 28, 1919, had been signed by Walker's widow and children, including the decedent who was then only 16 years old, Benfield was appointed guardian ad litem for Elizabeth by the Probate Court in Detroit.  Benfield then filed with that court the agreement of December 28, 1919, as well as copies of Walker's will and the draft of the proposed new will made at Walker's request.  Along with these documents, *233  Benfield filed a petition in which he sought the approval and consent of the court to enter into the agreement of February 19, 1920.  That agreement was to the same effect as the one of December 28, 1919.  The court entered an order in which it granted Benfield's petition and authorizing him to execute the second agreement.  This procedure was well within the rule laid down in In , the income tax liability of the widow, Margaret Walker, was in dispute.  Having before it many of the same facts as are involved here, the court made the finding (No. 8, page 60) that in accordance with the provisions of the (family) agreement, the executors and trustees of the Walker estate "followed the terms and provisions of the unexecuted will in the administration of his estate, and in accordance with the second paragraph of the unexecuted will paid to Margaret T. Walker $ 75,000 per year * * * until the death of Margaret T. Walker on July 18, 1933." On the record before us here, we arrive at the same conclusion not only with respect to the payments*234  of the annuity to Margaret Walker but in other respects, as well.  The evidence here establishes that the family agreement and the 1919 document were given force and effect in the administration of the Walker estate.  It is pertinent to mention a few illustrations of this general fact.On November 3, 1928, the Supreme Court of Ontario entered an order approving the distribution on June 30, 1928, of certain assets of the Canadian portion of the estate in the manner provided by the executors in an affidavit of an officer of the National Trust Company, Ltd.  The distribution so outlined followed the provisions of the 1919 document.  The order of the court was based upon the agreement and consent of the widow and children (called the family agreement herein) in several respects, one of which was that the court ordered the executors and trustees under Walker's will to continue to hold the assets to be held for Mary Walker Small and Elizabeth (then Paterson), in which the infant beneficiaries (their children) were interested, until further order of the court.*1204  As of November 8, 1928, the executors and trustees under Walker's will had converted assets held in the Daughters' Trust*235  (in accordance with the 1919 document) into stock of Yorkshire Securities, Ltd., having a book value of $ 1,585,215.21.When the Canadian trust indenture was executed on December 13, 1934, under an order of the Supreme Court of Ontario, all of the assets held by the testamentary trustees under Walker's will as the daughters' shares of the residuary estate were transferred directly to the new trustees of the Canadian trust and there was no distribution to the daughters. The same procedure was followed on December 31, 1936, when the balance of the daughters' shares of the residue was transferred directly to the trustees of the trust.  Also, the daughters were not a party to and did not sign the Canadian trust indenture.With respect to the smaller American trust, there was some variation in the procedure followed by the trustees under Walker's will, of necessity however; but it is clear that the daughters were acting merely as conduits for the trustees in the manner in which assets were transferred. Walker's three sons had become financially embarrassed and on May 31, 1932, they had assigned all of their interests in the estate to Union Guardian Trust Company, assignee of three banks. *236  In an arm's-length agreement with that assignee, the interests of the sons and of the daughters in the American portion of the estate and the income were fixed on the basis of 50 percent for the sons and 50 percent for the daughters. A partial distribution was made to the daughters on April 8, 1936, and a final distribution was made on winding up the American portion of the estate.  On March 4, 1940, each daughter conveyed all of her share of the assets so received to the separate American trusts.  That they were acting merely as conduits for the testamentary trustees and that they did not receive the distributions as their own property over which they had dominion and control, is shown by the indentures of each American trust which describe in detail the circumstances preceding their execution and expressly state that the conveyances of both daughters were "in obedience of the obligation of said Unexecuted Will" and the prior family agreements.  Elizabeth had no choice of freedom with respect to the distribution of property she received on distribution from the American portion of her father's estate.  At the time of such distributions the other parties to the family agreement *237  had in good faith performed their obligations; i.e., the three brothers and their assignees had been limited to 50 percent of the residue of the estate instead of the 60 percent they would have taken under the 1918 will.  That 10 percent difference was substantial since the Canadian portion alone of the residuary estate, after the widow's annuity payments, amounted to $ 3,736,601.56 of capital, and $ 2,393,352.34 of income.  Our view is, in which we agree with the petitioner, that there were merely temporary, if not technical, *1205  distributions from the American portion of the estate to Elizabeth, and as a matter of substance, she did not by virtue of such distributions become the owner of the property which in turn she forthwith transferred to the trusts under her obligation under the family agreement.Upon consideration of the whole record and on the basis of the substance of what actually was done, our conclusion is that Elizabeth did not make any transfers to either the Canadian or the American trusts.Under her father's 1918 will, Elizabeth was given a 20 percent share of the residue of the estate, distributable to her in fee at the age of 30 years.  Until she reached 30*238  years, she was entitled, under the will, to receive the income from such share and a limited amount of principal, not more than $ 5,000 a year.  She never received distribution of a share of the residue, but, in accordance with Walker's last directions in the 1919 document, she continued to receive only the income of a share of the residue. Also, in fact, in substance, and in effect, her share of the residue passed from the testamentary trustees under the will to the new trustees of the daughters' trusts (appointed by the testamentary trustees).From the respondent's argument it is clear that the issue turns on whether Elizabeth can be considered as taking interests by inheritance or under a subsequent agreement, i.e., a contract.In , the court said:On this point we think there is no substantial difference between the provisions of the will and those of the unexecuted will put in force by the agreement.The court discussed the rule of , and concluded that there was no substantial difference in the tax effects of the two agreements, the one in Lyeth*239  and the Walker agreement.  It concluded as follows, page 63:The case before us is somewhat different in its facts, but the case last cited settles some of the controversies we are now considering Under the rules of that case, the fact that annual payments were made to Mrs. Walker by virtue of an agreement under which she received more than she would have under the executed will would not prevent the payments made from being exempt if she was an heir, as in fact she was.  In the instant case there was no legal conflict between the heirs. The settlement agreement was voluntary and amicable.  Under these circumstances, we think that whatever additional she received under the agreement was merely a gift and consequently not taxable.  In any event being an heir in fact, we think there is no substantial difference in the effect of the agreement in the instant case from that made in , and that she was consequently entitled to hold all she received free from tax.  [Emphasis supplied.]The basis of the doctrine of Lyeth is that the Supreme Court concluded about Lyeth that --He was an heir in fact.  * * * When by compromise*240  and the decree enforcing it, that disposition [by his ancestor's will] was limited, what he got from the *1206  estate came to him because he was an heir, the compromise serving to remove pro tanto the impediment to his inheritance.The problem here is whether the principle of Lyeth can be applied under the facts and circumstances of this case.  The reasoning of Lyeth has been extended to estate and gift tax problems.  , affirming ; ; . Upon the facts and circumstances here, we think the decided cases require the conclusion that Elizabeth did not become the owner of the properties held in the two trusts, as the respondent contends, but that she acquired only a life estate in that property and, consequently, she did not own any interest therein which passed at or by reason of her death.The respondent stresses the point that there was no dispute among the members of the Walker family which was settled by the agreement. *241  Under the facts here, this point is not determinative of the issue.  The fact that an agreement settles a right as to which there is no dispute does not deprive it of its character as a family settlement agreement under the doctrine of family settlement agreements.  See ; The respondent argues, further, that it cannot be concluded that the estate was administered under the terms of the family agreement because the agreement was not filed with the Probate Court, in Michigan at least, along with the will which received probate. The mere fact that the settlement agreement was not embodied in a court order, or was not filed along with the will, does not militate against the holding that the estate was administered under both the will and the terms of the unexecuted will by virtue of the family agreement.  See , where the court considered it immaterial that no reference was made in a judgment to the amounts paid in settlement*242  under a settlement agreement. In the latter case it was regarded as immaterial that executors were not parties to the compromise agreement which was not incorporated in or made part of the probate proceedings.  We recognize that in some cases emphasis seems to be placed upon the fact that the compromise agreement is made a part of the probate proceeding.  Nevertheless, such fact is not determinative and it would appear that each case is to be decided on its own facts.  , affd.  . Of course, the individual executors of Walker's estate were parties to the Walker family agreement.Some of the assets in the American part of the Walker estate consisted of real property.  Also, during the course of the administration of the estate both in Canada and in the United States, claims arose *1207  against the estate (not material here) and the executors and trustees were desirous of not having the family agreement readily available to claimants.  The parties who signed the family settlement agreement were the only individuals who had any interest in the residuary estate of Walker. *243  They were all sui juris, except Elizabeth, and she was represented by a legal guardian and later by her acts confirmed the agreement after she attained her majority.  It is our understanding from the entire record that by not filing the family agreement any semblance of a cloud upon the title of real property was avoided; unnecessary complications with creditors were reduced; and, further, such filing of the agreement was not necessary.  In any event, accounts of the executors and trustees which reflected compliance with the family agreement and carrying out the terms of the unexecuted will were approved in the respective Probate Courts.It does not seem possible to distinguish the Lyeth case from the present one in principle.  The important point is that what Elizabeth received as a result of the family agreement she took because of her standing as an heir. It was that status which commanded the family agreement and was recognized by it.Basically the respondent's determination and theory is based upon the fact that there were distributions of properties to the Canadian and American trusts according to the family agreement and contrary to the executed will, as well as upon*244  the fact that the family agreement in turn adopted certain provisions of the unexecuted will.  But that is exactly what took place in the case of Lyeth.  In that case property of a decedent was distributed to a taxpayer according to a compromise agreement of the interested parties and contrary to a will.  The Supreme Court looked through the compromise agreement to the actual fact that "what he [the taxpayer] got from the estate came to him because he was heir." In this case the decedent, Elizabeth, received a life estate in the trust with a limited power of appointment, and she received that because that was what her father directed that she should receive out of his residuary estate.  Such direction was in the unexecuted will, but the family agreement adopted those directions and declared that they should be carried out.  Clearly, what this decedent got from the estate of Walker came to her because she was an heir.In , there was a Settlement agreement which was entered into because of a contest which arose because there were two testamentary documents, an old will and a last will which revoked the earlier will. *245  Under the settlement, the mother of Mary Clare Milner acquired nothing more than the right to the income from certain property, a mere life estate, and the remainder, after such life estate, was acquired by others.  This Court held that the reasoning in Lyeth was applicable and that the value *1208  of the property described in a trust instrument was not includible in the gross estate of Mary Clare Milner.  That case closely resembles the instant case.The respondent refers to , as providing support for his position, but the Bailey case is distinguishable in that the court found that the Rose Bailey trust was not a distribution to the decedent's son in compromise of a threat to contest his father's will, and that rather, the trust created by Rose Bailey for the benefit of her son represented a gift from her of her own property.  In that case, the facts did not show that there was any settlement or family agreement pursuant to which there was a division of assets of that estate in contravention of the terms of the will.  The Court of Appeals, in affirming the Bailey case, noted the foregoing as a distinguishing*246  factor.  Here, the Bailey case is distinguishable on its facts and does not provide support to the respondent.It is held that the decedent, Elizabeth Vease, for the purposes of section 811(c) and (d) inherited a life estate with a limited power of appointment, in a portion of the residuary estate of Walker; that she never became the owner of the properties placed in the Canadian and American trusts; that she made no transfers of properties to the trusts, reserving a life estate and a power to alter, amend, or revoke; and that no part of the value of the properties in the Canadian and American trusts is includible in her gross estate. The respondent's determination is reversed.Decision will be entered under Rule 50.  Footnotes1. "Mr. Z. A. Lash having under the said J. Harrington Walker's directions given in New York on the 11th and 12th of December prepared for him a new Will which Mr. Lash would have sent him for completion and signature on the very day of his death, and which would have been signed had he not died suddenly.  We his family have agreed, and do hereby agree, the one with the others and with each other to do everything which may be necessary in order that the wishes of the said J. Harrington Walker as contained in the said [unexecuted] Will prepared by Mr. Lash may, so far as we are or any of us is concerned or affected, be carried out, and all consents and documents required for that purpose and all instructions to the executors and trustees of the existing executed Will which may be required will be signed and given by us, and we request Mr. Lash to see to the carrying out of this agreement.  We have not seen the [unexecuted] Will prepared by Mr. Lash, nor the existing Will and we request Mr. Lash not to disclose to us their contents or the differences between the existing Will and that prepared by him, as we wish to sign this agreement before we know the contents of these papers for we regard as sacred his last wishes and directions.  Whatever application to any Court may be necessary on behalf of Elizabeth (who is a minor) to make this agreement and the carrying out thereof effective will be made.  Probate of the existing Will shall be applied for in order that this agreement may be properly and effectively carried out."↩2. "Now Therefore, the parties hereto do hereby mutually agree that the papers hereto attached marked Exhibit 'A' constitute a true and complete copy of said new [unexecuted] will of J. Harrington Walker heretofore referred to and said papers marked Exhibit 'A' are hereby made a part hereof; and the parties hereto do further mutually agree to do everything which may be necessary in order that the wishes of the said J. Harrington Walker as contained in the said Exhibit 'A' may so far as any of the parties hereto is concerned or affected, be carried out, and do further agree to execute and deliver all consents and documents required for that purpose and also to execute and deliver all necessary and proper instructions to the executors and trustees of the existing executed will of Mr. J. Harrington Walker dated June 24, 1918 and heretofore filed for Probate in the Probate Court for Wayne County, Michigan."↩