#### WILLIAM R. VERNER, SOLE EXECUTOR UNDER THE WILL OF EMILY L. MOORE, DECEASED, v. THE UNITED STATES

[No. D-875.

Decided November 8, 1926]

*On the Proofs*

*Taxes; income from trust estate.*— Payments *of*net income from a trust estate created by will under tlie terms of wbicb they were to be made by tbe trustees to the testator’s widow, are not bequests exempt from taxation within the meaning of the-acts of October 3, 1913, and September 8, 1916, but are subject to the income tax.

*575
      *The Reporter's*statement of the case:

*Mr. J ames Graig Peacock*for the plaintiff. *Mr. J ohn W. Townsend*was on the brief.

*Mr. Alexander H. McCormick,*with whom was *Mr. Assistant Attorney General Herman J.*Galloway, for the defendant.

The court made special findings of fact, as follows:

I. The plaintiff, William E. Verner, is a citizen of the State of Pennsylvania, and sole executor under the will of Emily L. Moore, deceased.

II. Alfred E. Moore died September 18, 1912, leaving a last will which provided *inter alia*as follows:

*“*Eight. All the rest residue and remainder of my Estate real personal and mixed whatsoever and wheresoever I give devise and bequeath unto my Executors and Trustees hereinafter named and such person or persons corporation or corporations as may succeed them in the said office IN TEUST nevertheless and to for and upon the following uses intents and purposes That is to say IN TEUST to invest and keep the same safely and securely invested with power to alter and change such investments from time to time whenever they may deem the same needful or necessary and after deducting all proper costs charges and expenses to pay the entire net income interest rents issues dividends and profits arising therefrom unto my said wife Emily Louisa Moore for and during the full term of her natural life upon her own receipt or order in writing only from time to time and so that the same or any part thereof shall in no way or manner be subject to or liable for her debts contracts or engagements whether by way of assignment anticipation or otherwise howsoever.”

His will and a codicil thereto further provided that on the death of his wife several similar trusts of the income for life should be created in favor of certain named beneficiaries and that after the termination of all the trusts he devised and bequeathed the residue of his estate to seven trustees to be appointed by the judges of the Orphans’ Court of Philadelphia County, Pennsylvania, which trustees were to apply for a charter for a corporation to be known as “ The Moore School of Electrical Engineering,” all of which provisions of his will have already been carried out, and the Moore School of Electrical Engineering has been established and affiliated with the University of Pennsylvania.

*576III. The residue of the estate of Alfred F. Moore which on his death passed to the trustees under his will was by adjudication of the Orphans’ Court of Philadelphia County, Pennsylvania, valued at $1,408,018.22.

IV. Emily L. Moore, widow of Alfred F. Moore and hereinafter referred to as the testatrix, was born May 26, *1855,*and died on January 4, 1923. On September 18, 1912, she had under the American Experience Table of Mortality an expectancy of life of 16.1 years, and the then present value of her right to receive the income under the trust was $653,935.02, and on March 1, 1913, and at the time of the erection of the trust its value was the same.

Y. The entire net income, interest, rents, issues, dividends, and profits arising from the said trust were in accordance with the provisions of the will of Alfred F. Moore, paid to Emily L. Moore, in each year from September 8, 1912, until January 4, 1923, the date of her death. There was paid to her in 1912 nothing; in 1913, $70,280.08; in 1914, $39,-307.96; in 1915, $157,694.89; in 1916, $350,700.88; in 1917, $585,718.52. The Federal income tax on the said Emily L. Moore’s net income, including the above-mentioned amounts, was paid by her or by the plaintiff in her behalf to the United States as hereinafter set out.

YI. The testatrix before her death duly filed with the Commissioner of Internal Revenue claims for refund of $16,-465.09 of the original tax for 1916 paid on or before June 15, 1917, and for $60,234.21 of the original tax for 1917 paid on or before June 3, 1918, in each case on the ground that the alleged income on which that portion of the tax was computed and imposed was itself a bequest to her under the will of Alfred F. Moore, and was accordingly under the law and regulations exempt from tax.

The claim for $16,465.09 for 1916 was filed in February, 1922, and the claim for $60,234.21 for 1917 was filed May 6, 1922. Both claims were disallowed in full by the Commissioner of Internal Revenue and the testatrix so notified by letter dated January 24, 1923.

VII. The plaintiff thereafter duly filed with the Commissioner of Internal Revenue claims for refund on the same grounds of the following additional assessments of income taxes for the years indicated: $215.97 for 1913, $114.78 for *5771914, $6,352.58 for 1916, and $77,580.85 for 1917, all of which taxes were assessed against testatrix and were paid by plaintiff under protest on July 6, 1923. These claims were filed October 10, 1923, and have since been disallowed by the Commissioner of Internal Revenue.

VIII. All of the amounts as described in Findings VI and VII were paid into the Treasury of the United States, and are now held and retained by the United States.

IX. If it is held that no part of the income received by the testatrix as described in Finding V was subject to income tax until there had been so received by her and withdrawn as exempt from tax amounts equal to $653,935.02, then all of the income so received by her in 1913, 1914, 1915, and 1916, together with $35,951.21 of that received in 1917, was exempt, and her income tax for 1913 would have been less by $215.97 than the amount paid for that year as already set forth; that for 1914 would have been less by $114.78 than the amount so paid for that year; that for 1916 would have been less by $22,817.67 than the amount so paid for that year; and that for 1917 would have been less by $17,-975.60 than the amount so paid for that year.

The court decided that plaintiff was not entitled to recover.

•Campbell, *Ghief*Justice,

delivered the opinion of the court:

The facts are undisputed. It appears from them that Alfred F. Moore, who died in September, 1912, left a will by which he devised and bequeathed the residue of his estate to the executors and trustees, in trust, to invest and safely keep it and “ to pay the entire net income, interest, rents, issues, dividends, and profits arising therefrom ” to the wife of the testator “ for and during the full term of her natural life.”

After her death certain other persons were to have the income for life and ultimately the corpus was to go to the Moore School of Electrical Engineering. In accordance with the terms of the will there was paid to Mrs. Moore by the executors “the entire net income, interest, rents, issues, *578dividends, and profits arising from the said trust” during each year from the testator’s death in 1912 until January, 1923, when she died, nothing being paid her in 1912. On the amounts so paid her during the several years 1913, 1914, 1915,1916, and 1917 she paid the Federal income tax, having included these amounts in her tax returns for these years. But she or the plaintiff as her executor applied to the Commissioner of Internal Revenue for a refund of the tax paid m each case “ on the ground that the alleged income on which that portion of the tax was computed and imposed was itself a bequest to her under the will of Alfred F. Moore and was accordingly under the law and regulations exempt from tax.”

The commissioner having denied the application for a refund, the plaintiff brings suit in the Court of Claims and renews here the contention that the payments by the executors of the husband’s will to Mrs. Moore were themselves the payments of bequests and as such were not taxable under the acts of October 3, 1913, 38 Stat. 167, and of September 8, 1916, 39 Stat. 758, which in terms impose a tax on “ gains or profits and income derived from any source whatever, including the income from, but not the value of, property, acquired by gift, bequest, devise or descent.”

It is not questioned that the statute does not exempt the income from property received by devise or bequest. If the bequest had been to her of the residuary estate for life it could not be contended that the income arising from it would not be subject to income tax. Does the circumstance of the intervention of executors or trustees to hold and administer the trust so change the situation that. the same ‘•income” is not taxable? We do not think Congress so intended. The questions raised are settled by the case of *Irwin*v. Gavit, 268 U. S. 161, which is not distinguishable from the present case. A contention similar to that made by plaintiff was urged in the *Drexel case,*61 C. Cls. 216. A writ of certiorari was denied in that case by the Supreme Court in April, 1926.

The petition should be dismissed. And it is so ordered.

Moss, *Judge;*Gkai-iam, *Judge;*Hat, *Judge;*and Booth, Judge, concur.