Court Opinion

ID: 4592659
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:08:27.29196+00
Date Added: 2024-06-11T07:50:54.239821
License: Public Domain

SADA G. WILSON BLAKE, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Blake v. CommissionerDocket No. 89109.United States Board of Tax Appeals39 B.T.A. 793; 1939 BTA LEXIS 979; April 19, 1939, Promulgated *979  Residuary income beneficiary of a trust held not entitled to any greater deduction for depreciation of trust corpus than a portion measured by her proportion of the trust income.  Ralph E. Smith, Esq., for the petitioner.  B. M. Coon, Esq., for the respondent.  ARUNDELL*793  The respondent determined deficiencies in income tax for the years 1933 and 1934 in the respective amounts of $375.42 and $83.85.  An allegation of error in including in 1933 income the amount of $117.07, as profit from the sale of bonds by a trust, was waived by the petitioner at the hearing.  The issue for decision for each year is whether the respondent erred in not allowing the petitioner to deduct all of the depreciation allowable in respect of buildings comprising the corpus of a trust of which the petitioner was one of several beneficiaries.  The respondent has allocated the depreciation on the basis of the amount of trust income allocable to each beneficiary.  FINDINGS OF FACT.  Petitioner, residing at Whittier, California, is the residuary beneficiary of a trust created by the will of Robert W. George.  The will of Robert W. George, as amended by codicils, *980  conveyed the residue of his property to trustees for the following purposes: To hold, manage, and control the same and keep the same invested, and to receive the rents, income, and revenue therefrom, and to pay the said rents, income and revenue therefrom, after deducting the expense of the care, protection, maintenance, and upkeep of the trust estate, together with the expense of carrying out the trusts herein provided for, including reasonable compensation of the trustees, as follows: £Here follow amounts aggregating $550 to be paid monthly to four designated beneficiaries.] The monthly payments hereinabove provided to be made shall be made by the California Trustee out of the income collected by it from the trust property held by it, but in the event there shall not be sufficient income from the trust property held by the California Trustee to make such payments the deficiency shall be made up by the Illinois Trustee out of the income from the trust property held by it.  The balance of the net income from the said trusts shall be paid to my daughter, MRS. SADIE WILSON, for and during the period of her natural life; payments to my said daughter to be made monthly.  The*981  petitioner herein is the person named in the will as Sadie Wilson.  *794  to the petitioner deductions for depreciation of the trust corpus in the respective amounts of $2,691.06 and $1,646.68.  These amounts were calculated on the basis of the amount of trust income allocable to each beneficiary.  OPINION.  ARUNDELL: The petitioner contends that all depreciation allowable in respect of the trust corpus should be allowed as deductions from her portion of the trust income, rather than allocated among all the income beneficiaries of the trust.  The applicable statutory provisions are section 23:k) of the Revenue Act of 1932 and section 23:1) of the Revenue Act of 1934.  Both provide: In the case of property held in trust the allowable deduction £ for depreciation] shall be apportioned between the income beneficiaries and the trustee in accordance with the pertinent provisions of the instrument creating the trust, or, in the absence of such provisions, on the basis of the trust income allocable to each.  The instrument creating the trust in this case contains no provision for apportionment of deductions between beneficiaries and trustees, and it appears that none of the*982  income goes to the trustee, as the will provides for distribution of all of the income to beneficiaries.  Petitioner does not claim that any depreciation is allowable to the trustees.  It is conceded by the petitioner that the beneficiaries designated in the will are beneficiaries of income as distinguished from annuitants.  Cf. Irwin v. Gavit, 268, U.S. 161, and . They are, therefore, the quoted statute uses that term.  The statute, as far as pertinent here, allows depreciation deductions to the income beneficiaries and the trustee income allocable to each. as they received no income, the statute then quite plainly provides that depreciation deductions are allowable to the income beneficiaries on the basis of the trust income allocable to each of such beneficiaries.  Where there is only one income beneficiary, and no provision for apportionment of income to the trustee, we have held that such beneficiary is entitled to depreciation deductions even though there is no income from the trust property.  *983 . In the Carol case, after reviewing the legislative history of section 23:k) of the Revenue Act of 1928, which is the same as the provisions here under consideration, we said: From the legislative history above set forth, it is clear that Congress intended to grant to both life tenants and beneficiaries under trust instruments the same privilege of deducting the depreciation allowance as that enjoyed by any other individual.  The allowance to the income beneficiary, however, was subject to any specific provision relating thereto which might be contained in the *795  trust instrument, or, lacking any such provision, to any division of trust income designated therein.  The section has no other limitations whatever to the income beneficiary's right to the depreciation allowance.  There is nothing in the statute, nor in the opinion in the Carol case, upon which to base the exclusion of any income beneficiary from a proportionate share of the allowable deduction for depreciation.  Each beneficiary has a substantial interest in the property.  *984 . Where it is intended to allow a deduction to the owners of any particular interest, the statute has provided therefor.  Thus, it is provided that in the case of a life tenancy with remainder over, depreciation is to be allowed to the life tenant.  No similar provision is made in the provisions relating to income beneficiaries.  Each of the beneficiaries named in the will, including this petitioner, is an income beneficiary and, as we read the statute, each is entitled to a portion of the depreciation deduction allowable based on the income allocable to each.  The Commissioner is sustained.  Decision will be entered for the respondent.