This cause arises on an appeal, (petition to review), of an executor from an order of the Board of Tax Appeals which declared a deficiency in an estate tax, levied under section 301 (a) of the Revenue Act of 1926 (26 U.S.C.A. §§ 410, 460). The appellant is the ancillary executor of one Hackfeld, who died in Germany on August 27, 1932, a resident of that country, but a citizen of the United States. Many years before, on March 19, 1888, the eve of his marriage, Hackfeld had made in Bremen what we should call a marriage settlement, putting all his own property of every kind, present and future, into a “community” under the German law. According to the findings of the Board, which is all the record contains, this settlement gave to Hackfeld the management not only of the “community” property, but of his wife’s separate property, (which was otherwise expressly excepted from the settlement) ; and she was to succeed him as manager of both estates upon his death. He reserved power to dispose by will of a half of the “community” estate, if there were no issue of the marriage, and the law gave him independently an unconditional testamentary power over his per capita share. Such a “community” gives to each spouse and to each child “a par *330 ticipating undivided share”; it endures until the death of the longer liver of the^ spouses, or the remarriage of the widow, when it is dissolved and the property is “liquidated,” by which we understand that it is distributed among the surviving children and any issue of those who have died. Neither spouse may dispose of his or her share during life, but either may exclude a “descendant” from the “community,” save that in that case the excluded person may claim half of his intestate share from those who remain.
Hackfeld left a will, made a few days before his death, which assumed to affect the “community” property, h'is chief purpose, as he declared, being to relieve his wife — who was an invalid — of the cares of management which would otherwise devolve upon her. He appointed executors whom he charged with administering the property, not only during her life, but during that of his two daughters, both of whom had married; and he provided that if either died, the share of each of her “descendants,” (Abkommlingen), should continue to be administered until he or she became twenty-five years old. Then followed two sentences, the translation of which is as follows: “The -respective heirs shall get the income of the estate as which I consider the existing joint property. Thereby my wife shall be relieved from the necessity of making contributions from her own income.” The word, “heirs,” (Erben), is here contrasted with “descendants,” (Abkommlingen), just used, and must include the daughters as well as their issue. The proper meaning of the two sentences is that the daughters or their issue shall have the whole income of the estate, “by which I mean the ‘community’ property, (Samtgut),” during the- widow’s life. The Board made no finding to the contrary but seems to have assumed in its opinion that the widow was still to enjoy her third of the income. It is impossible so to read the words, for the first sentence would then effect no change in the limitations until a daughter died, living the widow, an improbable event. The decedent could relieve his wife of contributing to the support of “Erben” only by giving them her share of the "community” property; he was certainly not thinking of his daughters’ issue alone. The point is not indeed of capital importance, but it serves to confirm our conclusion, as will appear. The upshot of the whole will was that the executors should manage the whole property during the life of the widow, and of the joint lives of the daughters thereafter; and that they should continue to do the same as to the separate interest of any surviving daughter throughout her life, and the lives of her issue until they reached twenty-five. To these provisions was added a power in the executors’ discretion to convey the principal of his or her share tp any “heir” (Erb). The share of one daughter was reduced because of an advancement, and the will concluded with some bequests, and a clause in terrorem, designed to compel the daughters’ assent.
By the German law the widow had three courses at her election; to take “under statute”, (by which we should understand the statute governing intestacies), under the settlement, or under the will. She “acquiesced” in the will and so did the daughters. The Commissioner ruled that all the property passed under the will, and was therefore subject to the estate tax. That is the chief controversy. A subsidiary. question relates to - a considerable amount of stocks and bonds which Hackfeld had lent to a cousin to pledge upon a loan. The cousin was insolvent when Hackfeld died, and the executors paid the note by discounting a note of their own, which they later paid out of the proceeds of the original collateral. The petitioner asserts that these securities should not be included in the estate, and the Commissioner ruled against him. The Board sustained both rulings.
As the Board well observed, the chief difficulty is in translating into American equivalents the concepts of another legal system — a difficulty not made less troublesome by the obscure translations. The word, “transfer,” in section 301 (a) of the Revenue Act of 1926 (26 U.S.C.A. §§ 410, 460) need not include every legal change in the incidents of ownership; for example, had Hackfeld merely displaced his wife as manager of the “community” property and substituted his executors, we may assume that it would not have been a taxable event, though perhaps it might constitutionally have been made so. We are indeed accustomed to trusts in which management is joined with “title,” under which we conceive of the property as “transferred”; but the same need not be true of a bare power to manage, even though irrevocable and authorizing purchases and sales. Cf. Helvering v. St. Louis Union
*331
Trust Co.,
We agree that the will was a legally operative factor in the “transfer,” even though it required the “acquiescence” of the widow and .the daughters to be effective. That might not have been true, had they had the power to change the limitations of the settlement at their pleasure. In that event it would have been possible to view the will as jurally neutral, as merely furnishing a content for the assents which they could incorporate by reference; its validity as a testamentary instrument would have been immaterial; the agreement would then have been the only operative legal transaction. . The Board has indeed found that “the law of the community property was subject to modification by contract of the participants before or after marriage”; but although this language is not altogether plain to us, we do not read it as meaning that at any time the “participating members of the community,” as they are elsewhere described, might revoke the settlement and fix such new rights and duties as they chose. Certáinly the power as described may fairly be limited to the two spouses before the birth of issue. Since the taxpayer must bear the risk of any ambiguities in the findings, it follows, in the words of the opinion below, that “the will was not without legal sanction.” With the Board we treat it “as a valid exercise by Hackfeld of the power of testamentary disposition.” It can be as much a “generating source” of the transfer, as though it had not required the assents for its validity; perhaps they were also “generating sources” ; we know of no principle which demands but one. In any case it is enough that unless it had been a valid will, the assents would not have created the new limitations.
The second question is whether the securities lent to the decedent’s cousin and pledged by him were part of his gross estate; so the Board held, relying upon our decision in City Bank Farmers’ Trust Co. v. Bowers,
Order affirmed.