*982OPINION.
Smith:The taxpayer derives practically all of her income from a trust. During the year 1919 the trustee sold certain assets at a profit of $1,086.25 and sold certain other assets, consisting of premises numbered 17 West 37th Street, New York, N. Y., at a loss of $41,406.10. The net loss from the sale of capital assets was $40,319.85. The entire income or revenue of the trust fund for 1919, exclusive of $3,000 payable to the taxpayer’s mother, was paid to the taxpayer during the year 1919. The taxpayer claims a deduction from the gross income received by her of the above-mentioned net loss of $40,319.85 sustained by the corpus of the trust fund. Is this a legal deduction from the gross income of the taxpayer ?
On behalf of the taxpayer it is argUed that by the terms of the deed of trust the taxpayer reserved the right to direct the Trust Company to change the investment of the funds. This, however, ivas a very limited right since the taxpayer only had the right to require the trustee to sell certain obligations and purchase certain other obligations of a given class. It is also argued that the taxpayer retained the right to substitute a new trustee; that she retained the right to withdraw $300,000 of the principal of the fund after 1909; that she retained the right to have the trustee purchase any residence selected by her for her use and occupation, the company to pay all expense of maintenance out of any income in its possession; that if the taxpayer cannot get the benefit of a deduction in the case of a capital loss, neither can the tr'ustee, for the trustee has no undistributable income nor capital gains against which such capital loss could be offset.
What was the nature of the estate or interest which the taxpayer had in the trust fund voluntarily created by her in 1906? Manifestly, she had only a life interest in a part of the trust fund. It is true that she had the right to withdraw a portion of the corpus of the fund but she retained no right whatever to withdraw the entire fund and so far as the year 1919 is concerned, which is the only year before us, no such withdrawal was made. For the entire year the taxpayer merely had a life interest in the trust fund._
The question whether a beneficiary with a life interest may deduct from gross income any part of a capital loss sustained by a trustee, under the provisions of the Revenue Act of 1918, was before the court in the case of Baltzell v. Mitchell, 1 Fed. (2d) 29. The decision of the lower court was affirmed by the United States Court of Appeals for the First Circuit on January 14, 1925, 3 Fed. (2d) 428. It was there held that under section 219 of the Revenue Act of 1918 capital losses of a trust estate are deductible only by the trust, and the beneficiaries with life interests must report for taxation the income received by them from the proceeds without deduction of losses suffered by the corpus of the trust estate.