*133 Decision will be entered for the respondent.
1. Decedent was a nonresident alien not engaged in business in the United States. Prior to his death his stockbroker in New York had credited his account with the proceeds from stock sold for the decedent, and this amount was owing to decedent at the time of his death. Held: The money thus owed to decedent was not excludable from his gross estate as "bank deposits." Sec. 2105(b), I.R.C. 1954. The mere fact that the brokerage firm had bank accounts of its own was not sufficient to justify treating them as reflecting "moneys deposited * * * by or for" the decedent in a bank.
2. Shares of stock and cash were due to decedent at the time of his death from his former employer pursuant to the terms of an employees' retirement plan; no Federal income tax had yet been withheld by the employer with respect to the stock and cash owed to decedent. Held, the value of the stock and cash were includable in decedent's gross estate without diminution on account of the income tax required to be withheld on these items before they could be paid out.
*243 The Commissioner determined a deficiency in estate tax in respect of a nonresident alien in the amount of $ 73,244.57. The questions for decision are: (1) Whether the proceeds of the sale of securities owed to the decedent by his stockbrokers at the time of his death qualify for exclusion from his gross estate as "moneys deposited * *136 * * by or for" decedent under section 2105 of the Internal Revenue Code of 1954; and (2) whether certain stock and money owed to him by an American corporation are includable in full in his gross estate without diminution on account of the 30-percent withholding for income taxes required by section 1441.
FINDINGS OF FACT
A stipulation of facts, as supplemented by exhibits stipulated by the parties, is incorporated herein by reference.
Petitioner is the estate of Rodolfo Ogarrio (Daguerre), who died in Mexico City on January 17, 1957, at about 8 a.m., Mexico City time, equivalent to 9 a.m., eastern standard time.
The decedent had been an employee of the Texas Co. (now known as Texaco, Inc.), a Delaware corporation, for many years prior to his retirement in December 1950. At the time of his death, and for a number of years prior thereto, he was a nonresident alien, not a citizen of the United States and was not, at the time of his death, engaged in business in the United States.
At the time of his death and for many months prior thereto, the decedent was a customer of and had a "cash account" with Bache & Co. (hereinafter referred to as Bache), a large brokerage house with principal*137 offices in New York City. Bache had membership in the New York Stock Exchange and the Stock Clearing Corporation in New York City. A "cash account" with a stock brokerage house is one where the customer agrees that any purchases made by the broker for his account will be paid for in full by the customer in cash upon receipt of the securities by the broker and any sales made by the broker for the customer's account will be paid for in full in cash to the broker for the customer's account, at the time of delivery by the broker of the customer's securities.
Prior to January 10, 1957, Bache had received 3,936 shares of the Texas Co. for the decedent's account. The certificates were in his name and were held by Bache in safekeeping for him pending instructions from him regarding sale or other disposition of the stock. These certificates were kept by Bache together with whatever other certificates of the Texas Co. that Bache held, from time to time, for other customers.
*244 On January 10, 1957, Bache sold for the decedent's account the foregoing 3,936 shares of the Texas Co. on the New York Stock Exchange, pursuant to the rules of the Exchange, for the total net amount of $ 235,599.54*138 (after deductions for broker's commissions and stock transfer taxes). In accordance with the foregoing rules, the sale was to be completed by delivery and payment on January 16, 1957, through a clearing house known as Stock Clearing Corporation, referred to above.
On January 16, 1957, Bache, through Stock Clearing Corporation, delivered for the decedent's account 3,936 shares of the Texas Co. to the purchaser to whom they had been sold on January 10, 1957. On the same day, January 16, 1957, Bache received, through Stock Clearing Corporation, payment in the net amount of $ 235,599.54 after commissions and stock transfer taxes. On January 16, 1957, as a result of offsetting transactions and as a result of securities delivered and securities received, Bache owed on balance to Stock Clearing Corporation the sum of $ 255,969.72 and actually delivered to Stock Clearing Corporation its check in that amount drawn on Guaranty Trust Co. As a result of this transaction the decedent, at the time of his death, no longer owned the 3,936 shares of the Texas Co. At the close of business on January 16, 1957, the regular books of account of Bache showed that $ 235,599.54 had been credited to the*139 decedent's account on that day as a consequence of the foregoing transaction.
On January 17, 1957, and subsequent to 9 a.m., eastern standard time, Bache delivered to the Hanover Bank in New York City a check in the amount of $ 257,350.53 drawn on its checking account in the Hanover Bank and payable to the order of the Hanover Bank for the account of decedent. This check included the sum of $ 235,599.54 received by Bache on January 16, 1957, through the Stock Clearing Corporation.
Apart from the agreement establishing the decedent's "cash account" with Bache, there was no other agreement between them. Bache was under no obligation to, by agreement or otherwise, nor did it in fact, segregate any funds for decedent which it had received through the clearing house procedures, prior to paying such funds over to or on behalf of the decedent.
On January 17, 1957, Bache could have used its Hanover Bank account for any partnership purpose rather than pay its debt to decedent; and it could have made payment to decedent by drawing on its accounts in at least several other banks. Also, Bache could have paid decedent out of any funds owned or controlled by it, regardless of whether such funds*140 were on deposit in any bank.
Bache had no fiduciary relationship to the decedent in respect of the proceeds of sale. Its responsibilities were to credit decedent's account *245 with the proceeds and to pay him that amount upon receiving instructions from him. Absent such instructions, Bache would hold the credit balance in the account and send out a statement monthly pending instructions.
At the close of business on January 16, 1957, Bache had sufficient funds on deposit in various banks to pay all checks issued on January 16, 1957, and prior thereto, including the check drawn to the order of decedent, dated January 17, 1957, in the sum of $ 257,350.53. On the indicated dates Bache had on deposit in various banks in New York City the following amounts of money:
| January 15, 1957 | $ 2,259,671.58 |
| January 16, 1957 | 2,290,153.42 |
| January 17, 1957 | 2,852,140.95 |
However, on January 16, 1957, Bache did not have sufficient funds on deposit to pay all credit balances outstanding in customers' accounts had all of its customers made demand on that date for immediate payment. The lack of sufficient funds in this connection was in keeping with governing regulations which permitted*141 Bache to have debts, including customers' balances, totaling up to 20 times its capital.
On January 1, 1957, pursuant to the terms of an employees' retirement plan of the Texas Co., decedent, as a former employee of that company, became entitled to receive 376 shares of the common stock of the Texas Co. and the sum of $ 4,007.40 in cash. Because decedent was a nonresident alien, the Texas Co., pursuant to section 1441 of the Internal Revenue Code of 1954, was required to deduct and withhold a tax of 30 percent of the value of the aforementioned stock and money before the stock and money could be turned over to decedent. The market value of the stock on the date of decedent's death was $ 21,949. The amount, in United States dollars, required to be deducted and withheld out of the stock was $ 6,662.25, and the amount so required to be deducted and withheld out of the sum of $ 4,007.40 was $ 1,202.22.
At the time of decedent's death, on January 17, 1957, no part of the 376 shares of stock and no part of the sum of $ 4,007.40 had been delivered or paid over by the Texas Co. to or for the account of decedent, and no part of the United States income taxes required to be deducted and *142 withheld had been paid to the Internal Revenue Service by the Texas Co. or by decedent or by any others on his behalf.
Respondent included in decedent's taxable estate the sums of $ 21,949 and $ 4,007.40. Petitioner filed an Amended Nonresident Alien Estate Tax return and stated that the value of the 376 shares at the date of decedent's death was $ 15,286.75, being $ 21,949 minus $ 6,662.25, the sum required to be deducted and withheld by the Texas Co.
*246 OPINION
1. Whether proceeds of sale of securities qualified as "bank deposits" under section 2105. -- Rodolfo Ogarrio had already died when Bache & Co., on January 17, 1957, delivered its check to the Hanover Bank for his account. Had that check been deposited in his account prior to his death, say on January 16, 1957, when the sale of the securities had been completed, there would be no problem here, because the amount on deposit in the decedent's account at the Hanover Bank would not be subject to our estate tax. Although a nonresident alien's gross estate is determined by reference to his property "situated in the United States" ( sec. 2103, I.R.C. 1954), the Code explicitly excludes therefrom "any moneys deposited*143 with any person carrying on the banking business, by or for a nonresident not a citizen of the United States who was not engaged in business in the United States at the time of his death" (sec. 2105). Accordingly, since Ogarrio was a nonresident alien not engaged in business in this country, any funds on deposit in his bank account at the time of his death would have been excluded from his taxable estate.
Petitioner insists, however, that the proceeds of the sale of the Texas Co. stock are nevertheless excludable as "bank deposits" under section 2105. We hold otherwise.
It is true, of course, that Bache was indebted to the decedent at the moment of his death in an amount which included the proceeds of that sale. But Bache is not a bank nor does petitioner contend that it is. Petitioner's position appears to be that Bache itself had large amounts on deposit in various banks, that such deposits comprehended the proceeds of sale of the decedent's stock, and that the amount in controversy was in fact on deposit "for" the decedent at the time of his death. The difficulty with that position is that we cannot find on this record that there was any deposit "for" the decedent in any of*144 Bache's various bank accounts.
To be sure, a deposit need not be in the decedent's name, and the statute may be satisfied where it is shown that one acting as trustee or agent for the decedent (whether or not the decedent is an undisclosed principal) makes a deposit in a bank. Cf. Estate of Lina Joachim, 22 T.C. 875">22 T.C. 875; Estate of Mertyn S. Bradford-Martin, 18 T.C. 544">18 T.C. 544; Estate of Irene de Guebriant, 14 T.C. 611">14 T.C. 611, reversed on another issue 186 F. 2d 307 (C.A. 2); Estate of Anna Floto de Eissengarthen, 10 T.C. 1277">10 T.C. 1277; Estate of F. Herman Gade, 10 T.C. 585">10 T.C. 585; Estate of Elizabeth Hawxhurst Davey, 10 T.C. 515">10 T.C. 515; Estate of Karl Weiss, 6 T.C. 227">6 T.C. 227; Estate of Annina Fabricotti Fara Forni, 47 B.T.A. 76">47 B.T.A. 76; Bank of New York v. United States, 174 F. Supp. 911 (S.D.N.Y.); City Bank Farmers Trust Co. v. United States, 174 F. Supp. 583">174 F. Supp. 583 (S.D.N.Y.). No such showing has been*145 made here. Although Bache may have been acting as agent for the decedent in selling his stock, it was *247 not acting as agent or trustee for him in making deposits in its various bank accounts. Nothing in the arrangements between Bache and the decedent requires the conclusion that it was his agent or fiduciary in respect of the bank accounts in its name. Those accounts were its own, and the decedent had no beneficial interest therein other than perhaps a priority or lien of some sort (along with all other customers similarly situated) that might relate to all of Bache's resources, whether bank accounts or other unencumbered assets, in the event of Bache's insolvency or bankruptcy. But the moneys were not deposited in Bache's accounts "by or for" the decedent. If the proceeds of the sale of the decedent's stock are to be treated as being on deposit "for" him, in what bank were they held? The record furnishes no answer.
Petitioner seems to argue that since the decedent was a "cash customer" of Bache and since Bache had bank accounts of its own in excess of what it owed the decedent, the Commissioner somehow or other must prove that Bache's bank accounts should not be attributed*146 pro tanto to the decedent in order to sustain the deficiency. This is incorrect. The burden is upon petitioner, not upon the Commissioner. It is the petitioner who must show that deposits in one or more of these bank accounts were "for" the decedent to the extent of the amount that Bache owed him.
All of the cases cited above dealt with specific bank deposits or amounts owed by a specific bank, and it was possible to conclude that a specific account was referable, either in its entirety or in part, to the decedent, and that a deposit had been made in such account in behalf of, or "for" the decedent. No such situation exists here. Petitioner has not even attempted to single out any particular account in Bache's name as being "for" the decedent. Nor was Bache under any obligation to pay the decedent out of any of its bank accounts; its obligation was merely to pay the decedent an amount equal to the proceeds of the sale, and it was free to make such payment out of any assets owned or controlled by it whether or not such assets consisted of bank accounts. Moreover, the fact that Bache's obligations to all of its customers at the time of decedent's death exceeded the aggregate*147 of all of its bank balances indicates the unsoundness of attempting to treat those balances as including an amount "for" the decedent equal to the proceeds of sale of his stock. A conclusion that there were funds on deposit "for" the decedent at the time of his death would rest upon a mere fiction. Although it might be tempting to stretch the statute to provide an exemption from tax that seems so tantalizingly close, the fact is that Congress has drawn a clear line and that this case is on the wrong side of that line.
Estate of Lesley Diana Worthington, 18 T.C. 796">18 T.C. 796, pressed upon us by petitioner, is distinguishable. That case relied upon the rule applied *248 in the various other decisions cited above, and the Court seemed to be concerned only with whether the decedent had an unconditional right to the funds in question or whether her sole claim was a mere right to demand an accounting from the executor of her grandfather's will through whom she traced her rights in the assets involved. No consideration appears to have been given in that case to the further question, which we regard pivotal herein, whether the bank accounts themselves may properly*148 be attributed to the decedent, once it is established that the decedent had a direct claim against the owner of the accounts. Moreover, there are factual differences between the cases -- the Worthington case involved accounts in two specific banks, and there was no finding, as here, that the total amount of the depositor's obligations exceeded the amounts on deposit. That case is not controlling.
2. Whether shares of stock and cash due from the Texas Co. to decedent at the time of his death are includable in his gross estate without reduction for income taxes subsequently withheld. -- At the time of Ogarrio's death he was entitled to receive from the Texas Co. 376 shares of its stock and $ 4,007.40 in cash in accordance with an employee's retirement plan. The 376 shares had a fair market value of $ 21,949 at that time. The stock and cash would have constituted income to Ogarrio when received, and, under section 1441 of the Code, 1 the Texas Co. was required to withhold a tax equal to 30 percent of these items. Petitioner contends that, as a result of the withholding requirement, the amount of each of these items includable in the decedent's gross estate must be reduced*149 by 30 percent. We disagree.
Section 2106 of the Code provides that in determining the taxable estate of a nonresident alien deductions as provided in sections 2053 and 2054 shall be allowed. 2*151 But section 2053(c)(1)(B) explicitly states that "Any income taxes on income received after the death of *249 the decedent * * * shall not be deductible*150 under this section." 3 And since the two items in issue were in fact received after the decedent's death, the statute expressly forbids any deduction in respect of income taxes thereon. Nor may the same result be obtained indirectly by shrinking the amounts includable in the gross estate in the first instance. To the extent that the same item is included in both the gross estate and taxable income received after the decedent's death Congress has provided relief in section 691 by granting an income tax deduction based upon the estate tax imposed in respect of the same item. But there is no basis whatever for diminishing the amount includable in the gross estate.
Decision will be entered for the respondent.
Footnotes
1. SEC. 1441. WITHHOLDING OF TAX ON NONRESIDENT ALIENS.
(a) General Rule. -- Except as otherwise provided in subsection (c), all persons, in whatever capacity acting * * * having the control, receipt, custody, disposal, or payment of any of the items of income specified in subsection (b) (to the extent that any of such items constitutes gross income from sources within the United States), of any nonresident alien individual * * * shall (except in the cases provided for in section 1451 and except as otherwise provided in regulations prescribed by the Secretary or his delegate under section 874) deduct and withhold from such items a tax equal to 30 percent thereof * * *↩
2. SEC. 2106. TAXABLE ESTATE.
(a) Definition of Taxable Estate. -- For purposes of the tax imposed by section 2101, the value of the taxable estate of every decedent nonresident not a citizen of the United States shall be determined by deducting from the value of that part of his gross estate which at the time of his death is situated in the United States --
(1) Expenses, losses, indebtedness, and taxes. -- That proportion of the deductions specified in sections 2053 and 2054↩ (other than the deductions described in the following sentence) which the value of such part bears to the value of his entire gross estate, wherever situated. * * *
3. Income taxes are deductible if they are on income properly includable in an income tax return of the decedent for a period before his death. Taxes on income received after the decedent's death are not deductible. Sec. 20.2053-6(f)↩, Estate Tax Regs.