*809 1. Under the terms of a trust created by the petitioner five sixths of the expenses of maintaining the family home and of supporting his wife were payable from the income of the trust. Held, that the trust income used for the purposes stated is taxable to the petitioner.
2. Capital net losses should be deducted in determining net income which forms the basis for the computation of the allowable deduction for charitable contributions.
*891 This proceeding involves a deficiency in income tax in the amount of $5,857.92 for the year 1930. The issues to be determined are (a) whether or not income from a certain trust created by the petitioner should be included in his taxable income, the income being used, under the terms of the trust instrument, in maintaining the home in which he lived with his wife and three adult children, and (b) whether capital losses are to be deducted in determining net income for the purpose of computing the amount which may be deducted for charitable contributions. With reference to the*810 two remaining issues raised by the petition, stipulations filed at the hearing supply a sufficient basis for computation in respect thereto under Rule 50.
FINDINGS OF FACT.
The petitioner is a resident of the State of Minnesota, and during the taxable year lived with his wife, Maud van Cortlandt Taylor Hill, at the family home located at 260 Summit Avenue, in Saint Paul, Minnesota. They have four children, all of whom at the times here material were of legal age. Three of the children resided with their parents at the family residence. The fourth child, a son, was married and lived elsewhere.
During the taxable year Maud van Cortlandt Taylor Hill, petitioner's wife, owned in her own name income-yielding property of a value in exess of $600,000.
*892 On December 31, 1917, the petitioner executed an instrument creating five separate trusts, one each in favor of his wife and his four children. By this instrument he created and assigned to himself, as trustee, and to his successors, certain income-producing properties composed largely of securities and an undivided interest in a certain contract for the purchase of lands in Oregon. One of these trusts, designated*811 as the Maud van Cortlandt Taylor Hill Trust, granted to Maud van Cortlandt Taylor Hill an income of $12,000 per annum outright. The remainder of the income for the period of petitioner's life was to be distributed in accordance with paragraph 2 of the instrument, reading as follows:
So long as I shall live and my wife and I shall live together, the balance of the income of said trust estate shall be applied by the trustee or trustees to her maintenance and support, to the maintenance, upkeep and operation of the dwelling or dwellings in which she may from time to time reside, to the maintenance, support, traveling expenses of herself and her children, including expenses of servants, clothes, education of children, and other items of family expense; provided, however, that no more than five-sixths of the expense of operation, upkeep and maintenance of any dwelling or establishment occupied or used by the Trustor in common with the members of his family shall be paid out of the income of the trust estate, it being contemplated that of such expense the Trustor shall provide at least one-sixth out of his own income and property, and no part of such income shall be applied to the use*812 or benefit of the Trustor.
The trust further provided that after the death of the grantor the entire income of the trust estate, if the trust estate had not previously been disposed of in accordance with subsequent provisions of the trust instrument, should go to Maud Van Cortlandt Taylor Hill for her own use and benefit so long as she should live. The remaining clauses provided that at her death, or in the event she and the grantor should cease to live together, the trust estate should be divided and paid over in equal shares to the trusts previously set up in favor of the four children; and, further, in the event that his wife survived him and received under his will any part of the estate which he might own at the time of his death, the trust estate should be divided in the same manner among the trusts in favor of the four children.
During the taxable year the trustees paid to Maud van Cortlandt Taylor Hill income in the amount of $12,000, as provided in the trust instrument, and in addition thereto made the following disbursements for the upkeep and maintenance of the family home at 260 Summit Avenue, Saint Paul, Minnesota, and for other items of expense shown as follows: *813
| Pay roll | $10,976.32 |
| Meats, etc | 2,357.69 |
| Groceries | 5,583.05 |
| Milk and cream | 670.00 |
| Fuel | $2,088.98 |
| Merchandise, including Mrs. Hill's clothes, etc | 9,827.52 |
| Automobile expense | 2,058.70 |
| Electricity and gas | 623.70 |
| Telephone | 776.79 |
| Water | 156.15 |
| Ice | 231.00 |
| Flowers | 359.25 |
| Insurance | 1,180.26 |
| Medical services (Mrs. Hill) | 623.50 |
| Miscellaneous expense | 9,706.57 |
| Club dues and charges (Mrs. Hill) | 121.20 |
| Building repairs | 1,841.16 |
| 49,181.84 | |
| Taxes | 161.35 |
| Charitable and other donations (casual gifts of Mrs. Hill) | 156.25 |
| 49,499.44 | |
| Refund of customs duty (credit) | 65.27 |
| 49,434.17 |
*893 The petitioner personally reimbursed the trust to the extent of $24,573.29, leaving a net amount paid by the trust for the purposes itemized above of $24,860.88. This amount has been included in the income of the petitioner for the year 1930 and is the amount in controversy.
OPINION.
TURNER: With reference to the first issue, it is the contention of the petitioner that the income involved is income from an irrevocable trust which during the taxable year was expended for the benefit of his wife and adult children and could under no circumstances*814 be treated as income taxable to him. He points out that his wife had income-producing property of her own having a value in excess of $600,000 and, further, that his children were of legal age and he had no legal responsibility to provide a home for them. On the other hand, the respondent contends that the expenditures in question were in payment of obligations of the petitioner and, as such, constituted income to him.
Except for the payment of $12,000 per annum to Maud van Cordlandt Taylor Hill, which amount is not involved in this proceeding, the petitioner in creating the trust obviously had but one purpose in so far as the income in question is concerned, and that was to provide the funds for the support of the petitioner's wife and the maintenance of the family home so long as she occupied that home with him. Under Minnesota law these are obligations of the petitioner and it matters not that his wife may have independent means of her own. ; . *894 Furthermore, a husband is liable for goods sold and delivered to his wife for family use, even though he has furnished her with money to pay*815 for the same. . He is also required to maintain his wife according to his estate and rank in life. Cf. ; .
The fact that the trust instrument provided that the petitioner should personally pay one sixth of the expenses of maintaining the home does not make the support of his wife and the maintenance of the family home any the less his obligation, and neither is the fact that adult children are permitted to live there of any significance. The trust in question makes no provision for, and obviously does not contemplate, their separate maintenance.
The petitioner is a man of wealth and the maintenance of a more or less elaborate establishment as his home is in keeping with his financial position. An examination of the expenditures listed indicates that with very few exceptions the items involved are those which might reasonably be contemplated in connection with the maintenance of such a home and there is no showing that they are not proper items in the budget of a family maintaining the social position required of the petitioner and his wife.
*816 That income from a trust which, by its terms, provides that the income is to be used in the payment of a legal liability of the grantor is taxable to the grantor, is no longer in doubt. ; and ; ; and , decided per curiam under authority of The income in question was properly included in the income of the petitioner.
The remaining issue involves the computation of the deduction for charitable contributions. The petitioner contends that the deduction is to be based on net income prior to the deduction of capital losses. In , the Supreme Court held that capital net gains should be included in gross income for the purpose of computing deductions for charitable contributions. Subsequently, on the basis of the reasoning contained in that decision, we held in *817 , that such deductions were to be determined on net income reduced by capital net losses. This latter decision is determinative of the issue here and the respondent is sustained.
Decision will be entered under Rule 50.