Memorandum Opinion
SCOTT, Judge:
Respondent determined a deficiency in the Federal estate tax of the estate of Mary King Patterson, deceased, James J. Patterson, executor, in the amount of $1,490,362.96.
Due to concessions by the parties, the issue remaining for decision is whether the value of 58 1/6 shares of Tribune Company stock should be included in decedent's estate for Federal estate tax purposes.
All of the facts have been stipulated and are found accordingly.
The address of the estate of Mary King Patterson, deceased, James J. Patterson, executor, at the time the petition in this case was filed was Townley & Updike, 405 Lexington Avenue, New York, New York.1 A timely estate tax return (Form 706) was filed on behalf of the estate of Mary King Patterson with the Internal Revenue Service Center, New York, New York.
Mary King Patterson (decedent) died testate on December 27, 1975. At the time of her death, decedent resided in the State of New York. Decedent's son, James J. Patterson, is the executor of her estate. Decedent was the widow of Joseph Medill Patterson (Mr. Patterson), who had died testate on May 26, 1946.
In 1932, Robert R. McCormick, Mr. Patterson and another person formed the McCormick-Patterson Trust (the M-P Trust). The M-P Trust corpus consisted of 1,070 shares of Tribune Company stock, which composed approximately 53 percent of the Tribune Company outstanding stock. Each share of stock was denominated as a "unit" of the trust. The purpose of the M-P Trust was to retain family control over the Tribune Company.2 All trustees and successor trustees were either family members or closely associated with the Tribune Company. The trustees voted all shares or units as a block. At the time of Mr. Patterson's death in 1946, he owned 196 7/8 units of the M-P Trust. The terms of the M-P Trust provided for its continuation until 20 years after the death of the survivor of Robert R. McCormick and Mr. Patterson. Mr. McCormick died on April 1, 1955, and the M-P Trust terminated on April 1, 1975.
Prior to his marriage to decedent, Mr. Patterson had married Alice Higinbotham Patterson. Three daughters were born of this marriage, which terminated in 1938. On June 16, 1938, Alice Higinbotham Patterson and Mr. Patterson entered into an agreement which provided that if Mr. Patterson later gave or bequeathed any portion of his beneficial interest in the M-P Trust to his son, who had been born to Mr. Patterson and decedent on March 23, 1923, he would simultaneously give or bequeath a portion of such beneficial interest to his daughters.
Prior to their July 1938 marriage, decedent and Mr. Patterson entered into an Antenuptial Agreement on June 27, 1938. Articles FIRST, THIRD, and FOURTH of the Antenuptial Agreement provided in part with respect to Mr. Patterson's interest in the M-P Trust:
FIRST: Joseph Medill Patterson agrees that he will not in his lifetime give away in excess of sixty-six and two-thirds per cent (66 2/3 %) of his beneficial interest, or sell, exchange or otherwise dispose of in excess of sixty-six and two-thirds per cent (66 2/3 %) of his beneficial interest for anything less than a full and adequate consideration therefor, provided that in making any such gift, sale, exchange or disposition, he shall not leave himself in such a position that he cannot comply with the provisions of said agreement, * * * and also with the provisions of this agreement.
* * *
THIRD: Joseph Medill Patterson further agrees that he will execute his Last Will and Testament immediately after his marriage to Mary King and that he will in such Last Will and Testament provide as follows:
A. Thirty-three and one-third per cent (33 1/3 %) of his beneficial interest shall be given and bequeathed outright to Mary King if Mary King shall be living at the time of the death of Joseph Medill Patterson, and if, in addition, his said son shall have predeceased him leaving no widow or descendant or descendants living at the time of the death of Joseph Medill Patterson:
B. A life estate in and to sixteen and two-thirds per cent (16 2/3 %) of his beneficial interest shall be given and bequeathed to Mary King if Mary King shall be living at the time of the death of Joseph Medill Patterson, and if, in addition, his said son shall then be living, or, if deceased, his said son shall leave a widow or descendant or descendants then living. Remainders over in and to said sixteen and two-thirds per cent (16 2/3 %) of his beneficial interest shall be given and bequeathed:
1. To his said son if living at the time of the death of Mary King; or
2. If his said son shall predecease Mary King leaving a widow or descendant or descendants living at the time of her death, to such widow or descendant or descendants in such proportions as Mary King shall in her last will and testament direct and, upon her failure so to direct, to such widow and descendant or descendants, share and share alike, such descendants, as among themselves, to take per stirpes and not per capita; or
3. If his said son shall predecease Mary King leaving no widow or descendant or descendants living at the time of her death, to the then living brothers and sisters of his said son and to the then living descendant or descendants of any deceased brothers and sisters, per stirpes and not per capita.
C. Sixteen and two-thirds per cent (16 2/3 %) of his beneficial interest shall be given or bequeathed to such Trustee as Joseph Medill Patterson shall name and appoint in his Last Will and Testament if Mary King shall be living at the time of the death of Joseph Medill Patterson, and if, in addition, his said son shall then be living or, if deceased his said son shall leave a widow or descendant or descendants then living. Such Trustee shall hold such sixteen and two-thirds per cent (16 2/3 %) of his beneficial interest upon such uses, purposes and trusts as Joseph Medill Patterson shall in his sole discretion deem advisable, provided, however, that such uses, purposes and trusts shall include the following:
1. Upon the date that his said son becomes of such age in excess of twentyone (21) years, as Joseph Medill Patterson shall in his sole discretion determine and set forth in his Last Will and Testament, the Trustee shall distribute all of the principal of the Trust to his said son;
* * *
FOURTH: Joseph Medill Patterson may, instead of making any of the provisions in his Last Will and Testament set forth in Article THIRD hereof, give outright in his lifetime sixteen and two-thirds per cent (16 2/3 %) of his beneficial interest to Mary King and sixteen and two-thirds per cent (16 2/3 %) of his beneficial interest to his said son, provided, however, that at the time of such gifts his said son shall have become twenty-one (21) years of age. Upon the making of such gifts all agreements, terms and conditions contained in said Article THIRD shall be deemed fully satisfied and discharged.
In consideration of the promised beneficial interest, decedent in the Antenuptial Agreement agreed that —
the benefits to her set forth in this agreement are intended as a provision in lieu of any statutory share given by the laws of any jurisdiction to her in the estate or property of Joseph Medill Patterson, and Mary King hereby waives any right of election which she may at any time have to take part of the estate or property of Joseph Medill Patterson against any Last Will and Testament of Joseph Medill Patterson, but such waiver shall not affect the rights of Mary King to any of the benefits provided for her hereinabove.
Mr. Patterson and decedent resided in the State of New York from a time prior to their signing the Antenuptial Agreement until their respective deaths.3 Mr. Patterson executed his last will and testament on October 9, 1944. He died on May 26, 1946, and his will was probated in the Surrogate's Court of Westchester County, New York. In his will, Mr. Patterson made specific bequests to his daughters, his son, and decedent. In Article FIFTH he made a bequest of 66 2/3 percent of his residual estate to his daughters, and of the balance, one-half to decedent and one-half to his son.4
In pertinent part, Article SEVENTH of Mr. Patterson's will provided:
SEVENTH: I give and bequeath my beneficial interest in the so-called "McCormick-Patterson Trust", created by agreement dated May 5, 1932, as amended and supplemented, as defined in that certain agreement dated June 16, 1938, by and between me and my former wife ALICE HIGINBOTHAM PATTERSON, to my Trustees, hereinafter named, to be held according to the following terms, trusts and conditions:
I. This trust shall terminate:
A. Twenty (20) years after the death of the survivor of Robert R. McCormick and myself; or
B. Upon the death of the survivor of my wife, MARY KING PATTERSON, and my daughter-in-law, DOROTHY CLARKE PATTERSON, whichever event shall first occur.
II. The Trustees shall divide the trust estate into two (2) funds to be known as Fund A and Fund B.
III. Fund A shall be that part of my beneficial interest which would have passed to my daughters or the survivors of them and their descendants under Article FIFTH above if my said beneficial interest had been included as a part of the rest, residue and remainder of my estate therein disposed of. Fund B shall consist of the balance of my said beneficial interest.
* * *
B. Fund B shall be divided into two (2) equal separate trusts which shall be held and disposed of as follows:
(1) If my said son, JAMES PATTERSON, shall survive me, my Trustees shall pay the entire net income from one of these separate trusts to him until the
...
