Court Opinion

ID: 4495025
Source: CourtListenerOpinion
Date Created: 2020-01-23 18:14:06.757737+00
Date Added: 2024-06-11T08:00:10.778352
License: Public Domain

*870OPINION.
Littleton:-
At the time of his determination the Commissioner did not have before him the will of the decedent. He accordingly computed the deficiencies appealed from on the basis of the income of an estate during the period of administration or settlement. Prior to the hearing, however, he obtained the will of the decedent and raised therefrom the issue that the will created a trust, within the meaning of section 219 of the Revenue Act of 1918, and that, therefore, his determination of the deficiencies upon the basis that the income was the income of an estate during the period of administration or settlement was erroneous. The question of the amount of depletion and depreciation sustained during the taxable year has been disposed of by stipulation, leaving for the Board’s determination only the question whether the decedent’s will created a trust, within the meaning of section 219 of the Revenue Act of 1918, which provides:
(a) Tbat tbe tax imposed by sections 210 and 211 shall apply to the income of estates or of any kind of property held in trust, including—
(1) Income received by estates of deceased persons during the period of administration or settlement of the estate;
(2) Income accumulated in trust for the benefit of unborn or unascertained persons or persons with contingent interests;
*871(5) Income held for future distribution under the terms of the will or trust; and
(4) Income which is to be distributed to the beneficiaries periodically, whether or not at regular intervals, and the income collected by a guardian of an infant to be held or distributed as the court may direct.
⅝ ⅜ ⅝ # ⅜ ⅝ ⅜
The provisions of the will relevant to this appeal impose upon the executors the duty of holding, managing, and operating the entire property, after the payments of the decedent’s debts and funeral expenses, and of paying the entire dividends and annual proceeds from the property to the life beneficiary, at least annually during her life for the period during which she may remain unmarried, after setting aside an amount deemed by them to be sufficient for the upkeep of properties, and of distributing the properties, both real and personal, upon the death or remarriage of the life beneficiary, to the decedent’s three sons and two daughters, share and share alike. These provisions of the will in our opinion clearly created a trust within the meaning of section 219 of the Revenue Act of 1918.
Under the statutes of Pennsylvania, executors are required to make an inventory of all properties of a decedent within thirty days from the time administration is granted, and to make a just account and settlement of the estate in one year, or when thereunto legally required. And, further, whenever, by the provisions of any last will and testament admitted to probate, a trust has been or shall be declared of and concerning any real or personal estate to be executed by the executor or executors of said last will- — • whether by virtue of their office or otherwise — and any of the executors shall die, or shall renounce, resign, be dismissed from, or refuse to act in said trust, it shall be lawful, upon application of parties in interest, to appoint trustees in place of executors.
The Commissioner contends that during the years 1919 and 1920 the executors named in the will of the decedent were trustees, and that his determination should have been made upon the basis of a trust under the provisions of section 219 of the Revenue Act of 1918 and not upon the basis of an estate in process of administration. As to whether he is correct in this determination, the Board is unable to form an opinion under the evidence before it. We have only the will and the fact that the Titusville Trust Co. and Mary F. Roth were appointed executors. We have no evidence as to when letters testamentary were issued or when, if at all, the executors rendered an accounting in settlement of the estate. The Board finds no reason for holding that, merely because a will creates a trust, the tax should be computed upon the basis that the income is that of a trust instead of the income of an estate during the period of administration or settlement. Where the executors, who may also be *872trustees, are required to perform acts in the administration and settlement of an estate, any income received between the date of the decedent’s death and the performance by the executors of their duties, as such, and the rendering of their account in settlement thereof, should be treated as the income of an estate in processs of administration or settlement. The estate of this decedent was subject to administration and the duties common to and necessary in the administration of estates were imposed upon the executors, and, until this duty has been performed and the property is taken over by the executors, or such other person as the court might appoint-as trustee, the provisions of section 219 applicable to estates in the process of administration or settlement should be applied.
In the case of Jones v. Atchison, T. & S. F. Ry. Co., 150 Mass. 304; 23 N. E. 43, the will of the decedent provided :
I order andMireet that my wife, Sophronia P. Goss, shall be supported •and maintained in a proper and suitable manner, during her life-time, out of my estate. * * * The residue of my estate, after the payment of the debts, legacies, and expenditures before stated, I devise to remain and accumulate until the decease of my said wife; and, upon her decease, it is my will that whatever estate shall then remain, whether of the original amount or of its aecutííulations, if any, shall be equally divided between my two daughters aforesaid, to hold, to them and their heirs, forever. * * * I appoint Jeremiah P. Jones, of Georgetown, executor of my last will and testament.
The question involved was whether the executor had the right, five years after the proving of the will, to sell certain stock belonging to the estate for the purpose of making a change of investment. The court said:
No trustee has been appointed under the will; but it was necessary that at least the personal property of the estate should be held by some person, who should act as trustee during the life of the widow of the testator, because by. the'terms of the will she is to be supported out of the estate, and on her death the residue of the estate, with its accumulations, after the payment of the debts, legacies, and the expenses of administration, is to be divided between the two daughters of the testator. Regularly, the executor, after the expiration of two years from his appointment, and after paying the debts, legacies, and expenses of administration, should have settled his accounts as executor, and paid over the money in his hands to a trustee appointed by the probate court. Daggett v. White, 128 Mass. 398; White v. Ditson, 140 Mass. 351, 4 N. E. Rep. 606.
After the debts and legacies and expenses of administration were paid, the executor must be considered as in fact holding the estate, as a trustee, for the benefit of whomsoever was entitled to it under the will.
In the case of Rixey's Executors v. Commonwealth, 125 Va. 337; 99 S. E. 573, the court said:
If an executor is directed to invest funds belonging to the estate which come into his hands as executor, no trust is superadded, but that is a part of his duties as executor. If an executor is also appointed as a trustee under a will, he cannot be considered as holding any part of the assets in his capac*873;ity as trustee until lie lias closed his accounts as executor with reference ■ to this particular fund and has been charged with these funds as trustee. Hall v. Cushing, 9 Pick. (Mass.) 395 ; Perkins v. Moore, 16 Ala. 9 ; 18 Cyc. 1258.
The basis of the Commissioner’s determination is approved, and the executors should be allowed a deduction for depletion, and ^exhaustion, wear and tear, as set forth in the findings of fact.