The opinion of the court was delivered by: BYERS
The question for decision is whether Section 863(b) of the Internal Revenue Code, 26 U.S.C.A.Int.Rev.Code, § 863(b), applies to the bank account hereinafter described so that it is not to be deemed property within the United States, for estate taxation.
'Sec. 863. Property without the United States
'The following items shall not, for the purpose of this subchapter (Basic Estate Tax), he deemed property within the United States:
'(a) * * * (Not involved).
'(b) Bank deposits. Any moneys deposited with any person carrying on the banking business, by or for a nonresident not a citizen of the United States who was not engaged in business in the United States at the time of his death. 53 Stat. 131.'
All material facts are stipulated, except as to the banking technique and practice employed in this case, and as to that there is no dispute, so that the following statement of facts in brief narrative can be regarded as the findings:
Edwin Prestage, above named, died October 11, 1940, a British subject, residing and domiciled in England, and was not engaged in business in the United States.
His will, dated March 21, 1938, was duly probated on April 17, 1941, in England, and was thereafter recorded in the Surrogate's Court, New York County, and ancillary letters testamentary were duly issued by that court to the plaintiff, which duly qualified thereunder and has ever since continued as ancillary executor.
The bank account here involved had been maintained in his own name by the decedent in National City Bank of New York prior to July 31, 1939. On that day he created an inter-vivos trust, naming and designating the plaintiff as sole trustee.
The trust agreement is annexed to the stipulation, and no extended quotation therefrom is presently requisite.
It recites the assignment to the trustee of certain securities and 'Cash: Seventy-nine thousand Dollars ($ 79,000.00)'
That sum was the amount of the said deposit in the National City Bank, and upon receipt thereof by the trustee, the latter deposited it with itself individually, in an account designated 'City Bank Farmers Trust Company, Trustee Edwin Prestage u/a 7/31/39 with Edwin Prestage -- No. 20050', and the sum of $ 79,000 remained so deposited continuously until and including the date of the death of Edwin Prestage.
Incidentally, between July 31, 1939, and the latter date, items of income from the securities, totaling $ 1,377.02, were likewise so deposited, the said income being subject to distribution to the Settlor during his life, and then to his wife during her life.
The trust was revocable in whole or in part and was subject to amendment, the trustee's consent being had, and upon revocation the trust fund was payable to Prestage; the latter served full investment control in himself, to be exercised 'by an instrument in writing delivered to the Trustee and unless otherwise directed by the Settlor in writing * * * , the Trustee shall retain the property (including, but not by way of limitation, cash) from time to time held by it hereunder'.
Thus the $ 79,000 was required to be held by the trustee, uninvested, until Prestage should direct otherwise in writing.
The agreement by its terms was to be governed, construed and regulated by the laws of the State of New York.
Since as to the $ 79,000, at least, the trustee had no option but to maintain it in the form in which it was received, until the Settlor of the trust should instruct otherwise (and there is no assertion that he ever did), it is difficult, if not impossible, to understand the statement of the Commissioner, in rejecting the claim for refund (the presently contested item having been paid by reason of an adverse determination by the Commissioner based upon his audit of the original return), contained in the rejection of May 12, 1945: ' * * * He (decedent) ...