Court Opinion

ID: 4497088
Source: CourtListenerOpinion
Date Created: 2020-01-23 18:15:14.934019+00
Date Added: 2024-06-11T15:04:04.322560
License: Public Domain

Mellott,
concurring and dissenting: I concur in the portion of the opinion of the majority holding that, under Pierre S. du Pont, 18 B. T. A. 1028, petitioner is entitled to use, as the basis for the computation of her gain or loss upon the sale of the securities turned over to and subsequently withdrawn from the trust, the original cost of such securities to her; but I am of the opinion that the conclusion upon the other issue is erroneous.
Petitioner and the trust created by her are separate taxpayers. “* * * The law has seen fit to deal with * * * [the] abstraction * * * [of a trust] for income tax purposes as a separate existence, making its own return under the hand of the fiduciary and claiming and receiving its own appropriate deductions.” Anderson v. Wilson, 289 U. S. 20; sec. 142, Revenue Act of 1934. The trust income was not includable in petitioner’s income, inasmuch as the corpus could be revested in her only with the consent of her husband, who had a substantial adverse interest in it. Cf. Jane B. Shiverick, 37 B. T. A. 454. In the event of her death the corpus probably would not have been includable in her estate. Helvering v. Helmholz, 296 U. S. 93; White v. Poor, 296 U. S. 98. If the trust had sold the property which it had purchased, it would have been taxable upon any gain, Merchants Loan & Trust Co. v. Smietanka, 255 U. S. 509, and could have deducted any loss occasioned thereby. But it made no sale. The sale was made by petitioner.
The Commissioner has gone on the theory that the trust made a gift of the Lambert stock, which had cost it $6,762.50, to petitioner. Accordingly he has allowed her, as a basis for the computation of her gain or loss, the fair market value of the stock when it was turned over to her, or $1,440.50. Inasmuch as she sold it a few days later for substantially the same amount, he has held that she neither gained nor lost by the transaction. He arrives at this conclusion by treating her acquisition of the stock as governed by section 113 (a) *510(2), which provides, in substance, that if property was acquired by gift after December 31,1920, the basis for the purpose of determining loss is either the cost basis of the donor “or the fair market value at the time of the gift, whichever is lower.” If petitioner is upheld in her contention that no gift was made, then cost is her basis; and under the stipulated facts that is zero.
In my opinion the Commissioner should be sustained in his holding that petitioner’s basis for the Lambert stock was its fair market value on the date she acquired it from the trust.