1932 BTA LEXIS 1369 | B.T.A. | 1932
Lead Opinion
The only question in these proceedings is to determine the amount of income of the trust which is taxable to the beneficiaries. Its solution depends upon the rights of these beneficiaries under the will of Charles Netcher. They claim the trustee had a right and a duty to retain enough from the annual income from rents to offset depreciation on the building. The Commissioner maintains that he made no mistake in adding this retained amount to the income of the beneficiaries.
Where a trustee makes investments with the corpus of an estate, he is duty bound to see that, so far as reasonably may be, the corpus alwaj^s includes the equivalent of the amount invested. If bonds belong to a testator and are worth more than par at his death, the trustee may not have to retain any of the interest. But courts have frequently held, for example, that a trustee who buys bonds at a premium, should retain the equivalent of the premium from interest and pay only the excess to the life tenants. In re Stevens et al., 187 N. T. 471; 80 N. E. 858; New England Trust Co. v. Eaton, 140 Mass. 532; 4 N. E. 69; In re Allis Estate, 123 Wis. 223; 101 N. W. 365; Curtis v. Osborn, 79 Conn. 555; 65 Atl. 968; In re Garterdaub's Estate (Cal.), 198 Pac. 209; Kate M. Simon, 10 B. T. A. 1186; Ballatine v. Young, 74 N. J. E. 572; 70 Atl. 668; aff'd., 76 N. J. E. 613; 75 Atl. 1100. Might he accomplish a contrary result by simply erecting a building with corpus or borrowed funds and paying all of the rents to life tenants ? He could if he had authority from the grantor expressed in the instrument creating the trust. Here the will gave no such authority.
Reviewed by the Board.
Judgment will be entered, wnder Rule 60.