dissenting: I dissent from the majority opinion in so far as it holds that these life beneficiaries had income within the meaning of section 162 (b). The primary purpose of that section was to define net income of a trust, which in general is the same as that of an individual but with some additional deductions. Paragraph (b) allows as a deduction to the trust the amount of the income of the trust for the taxable year which is to be distributed currently by the fiduciary to the beneficiaries. It further provides that the amount so allowed as a deduction shall be included in computing the net income of the beneficiaries, the thought being that, if the trust is allowed to deduct distributable income, then the beneficiaries should be required to report it. Thus, this particular section requires the beneficiaries to include an amount in their income onty if the amount is first income of the trust for the taxable year and allowable as a deduction in computing the income of the trust. The revenue act has its own test of what is income to the trust. This trust had no net income from the disposition of this property and no net income within the meaning of section 162 (b). It was not entitled to any deduction under that section. Under such circumstances, no amount is to be included in the net income of the beneficiaries under that particular section.
The New York cases establish an equitable rule for the purpose of making a fair division between life tenant and remaindermen, in accordance with the intent of the testator or grantor. The decisions cited recognize that the allocation to income of a part of the amount realized from the sale is a pure fiction. The rule, appropriate enough in its place, is in nowise adopted by the revenue act as determinative of what is or is not income under section 162 (b). The above reasoning, based upon a close and literal application of section 162 (b), was not considered in the Plunkett case, and that case should not be followed here in making an improper application of section 162 (b).