1936 BTA LEXIS 678 | B.T.A. | 1936
Lead Opinion
In determining the deficiency, the Commissioner included in the decedent’s gross income for the period of 1930 ending with the date of death, $46,431.14, called “profit on the installment basis”, citing section 44 (d), Revenue Act of 1928.
The respondent’s determination is, we think, clearly unfounded. By the five instruments in evidence, express and active trusts were established in which was held the legal title to the lands and the obligations resulting from their sale, and to which were charged the duties of administration in accordance with fiduciary standards. In each instance, including those in which decedent was trustee be
These installment obligations were, as shown by this record, continuously owned by the trusts from the time that the land contracts were made, and their ownership was not affected by the death of this beneficiary. When the installments were received, they were income of the trusts and taxable when thus received in accordance with the proper provision of supplement E of the statute. To the extent that they were within the taxable income of the decedent and his successors, it was because they were distributable to them as trust beneficiaries and not as owners of the obligations or direct recipients of the installments. The trust was a “fiduciary to insulate the owners from direct taxation.” Wild v. Commissioner, 62 Fed. (2d) 777; Lucian S. Moore, Jr., Trustee, 21 B. T. A. 1362; William S. Gordon, Trustee, 33 B. T. A. 460; Harold G. Ferguson, 34 B. T. A. 522.
Judgment will be entered under Rule 50.
SEC. 44. INSTALLMENT BASIS.
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(d) Gain or loss upon disposition of installment obligations. — If an installment obligation is satisfied at other than its face value or distributed, transmitted, sold, or otherwise disposed of, gain or loss shall result to the extent of the difference between the basis of the obligation and (1) in the case of satisfaction at other than face value or a sale or exchange — the amount realized, or (2) in case of a distribution, transmission, or disposition otherwise than by sale or exchange — the fair market value of the obligation at the time of such distribution, transmission, or disposition. The basis of the obligation shall be the excess of the face value of the obligation over an amount equal to the income Which would he returnable were the obligation satisfied in full.