*1087 Where a surviving wife sold during 1927 two parcels of real estate which she and her deceased husband acquired in 1899 and in 1916, as tenants by entireties, held, the basis for determining gain or loss is the fair market value as of March 1, 1913, of that acquired in 1899 (it being greater than cost) and the cost of that acquired in 1916; held, further, the date of the death of the deceased husband is not the basic date in such determination.
*640 In this proceeding the petitioner seeks a redetermination of a deficiency in income tax of his testatrix for the fiscal period January 1, 1927 to December 25, 1927, in the amount of $17,636.68, which is the result of the determination of the Commissioner that petitioner's testatrix realized a gain of $140,951.33 in the sale during that period of two parcels of real estate in Philadelphia, Pennsylvania, theretofore *641 purchased by said testatrix and her late husband as tenants by the entirety, one parcel in 1899 and the other in 1916. Petitioner alleges that the Commissioner erred in*1088 using as the basis for computing gain or loss the fair market value of March 1, 1913, of the parcel purchased in 1899, and cost of the parcel purchased in 1916; and in not using the fair market value of both parcels, $175,000, as of April 12, 1926, the date of the death of her husband, to which date the property had been held by them as tenants by entireties.
Petitioner alleges alternately that the Commissioner erred in using a March 1, 1913, value of $22,000 on the parcel purchased in 1899, whereas the fair market value thereof at that time was not less than $50,000; and, further, error in determining any profit on the sale and in failing to determine that there was a loss in the amount of $5,250.
Counsel stipulated the facts, which we adopt, as follows:
FINDINGS OF FACT.
Dominick Taheny and his wife, Cecelia E. Taheny, were residents of the city of Philadelphia, Pennsylvania. Dominick Taheny died on April 12, 1926, and Cecelia E. Taheny died on December 25, 1927. Edward V. Schiesser was duly appointed and qualified as executor of the will of Cecelia E. Taheny, and has filed a petition concerning the personal income taxes of the decedent for the fiscal period beginning*1089 January 1, 1927, and ending December 25, 1927.
The respondent has determined a deficiency for the above period in the amount of $17,636.68 which is all due to his determination that the decedent realized a profit of $140,951.33 on the sale of two pieces of real estate. The petitioner claims that decedent realized a loss on the sale in the amount of $5,250.
Under date of March 13, 1899, Dominick Taheny and Cecelia E. Taheny, man and wife, acquired certain real estate ordinarily described as No. 3175 Kensington Avenue, Philadelphia, Pennsylvania, taking the title to themselves as tenants by the entireties.
Under date of September 8, 1916, said Dominick Taheny and said Cecelia E. Taheny, man and wife, acquired the property herein described as No. 3173 Kensington Avenue, Philadelphia, Pennsylvania, taking the title thereto as tenants by the entireties.
Said Dominick Taheny died on April 12, 1926, and one John Taheny, who duly qualified as the executor of the estate of Dominick Taheny, duly filed an estate tax return, reporting therein the said properties located at and known as Nos. 3173 and 3175 Kensington Avenue, Philadelphia, Pennsylvania, as having a fair market value*1090 at the date of said death in the amount of $175,000, less mortgages on the property in the total amount of $5,390; the respondent, in determining the estate tax liability of the estate, determined that these *642 properties had a value as of the date of death in the amount of $175,000, less mortgages in the total amount of $5,390, and assessed and collected an estate tax based in part upon such determination, which tax was duly paid by the executor of the estate.
The said Cecelia E. Taheny died on December 25, 1927, and Edward V. Schiesser was duly qualified as the executor of her estate and duly filed an income tax return for the decedent, cecelia E. Taheny, for the period January 1 to December 25, 1927, and did not return therein any profit as income on the sale of said properties, which said decedent, Cecelia E. Taheny, had sold during that taxable period for the sum of $175,000, less the commission on the sale of $5,250, or a net sales price of $169,750.
The respondent herein has increased the income of the decedent in the capital gain bracket in the amount of $140,951.33, computed as follows:
| Sale price 3173 and 3175 | $175,000.00 | ||
| Kensington Avenue, Philadelphia | |||
| Less: Commission on sale | 5,250.00 | ||
| Net sale price | $169,750.00 | ||
| Value at date acquired | |||
| 1. 3175 Kensington Ave., | $22,000.00 | ||
| acquired 1899 3-1-13 value used | |||
| Less: Depreciation at 2% on | 3,043.33 | ||
| building $11,000.00 - 13 5/6% | |||
| 3-1-13 to 12-31-26 | |||
| $18,956.67 | |||
| 2. 1916 Vaue 3173 Kensington | $11,400.00 | ||
| Ave | |||
| Less: Depreciation at 2% on | 1,558.00 | 9,842.00 | 28,798.67 |
| building $7,600.00 - 10-1-16 | |||
| to 12-31-26 | |||
| Corrected Profit | $140,951.33 |
*1091 The Commissioner's determination of values is based upon the report of a revenue agent, who found that the fair market values were double the value assessed for local taxation purposes.
In determining the alleged profit the respondent determined that the March 1, 1913, value of the property known as No. 3175 Kensington Avenue, Philadelphia, Pennsylvania, was $22,000 and he computed depreciation thereon at 2 percent per annum from March 1, 1913, to the date of the sale. The respondent also determined that the cost of the property known as No. 3173 Kensington Avenue, Philadelphia, Pennsylvania, as of September 8, 1916, was $11,400, and in computing the alleged profit on the sale thereof he computed depreciation at the rate of 2 percent per annum from october 1, 1916, to the date of the sale, as shown in computation above.
*643 Said two properties had a fair market value of $175,000 as of April 12, 1926, the date of the decedent's husband's death, as determined by respondent for estate tax purposes.
OPINION.
SEAWELL: With reference to the alternate allegation of error to the effect that the parcel of real estate purchased in 1899 had a fair market value on March 1, 1913, of*1092 more than $22,000 as determined by the Commissioner, to wit, a value of $50,000, counsel apparently waives the issue and admits in his brief that the fair market value is as determined and that said sum is in excess of cost.
The other issues raised persist, but appear to us to be fully decided in the case of Fannie E. Lang,23 B.T.A. 854">23 B.T.A. 854. Petitioner, however, says:
In the present case, we raised a point which was not decided in the Lang case, which is that whatever value passes and is taxed for Federal estate tax purposes becomes capital and what is capital cannot be income within the meaning of the Sixteenth Amendment to the Constitution of the United States.
This contention of petitioner appears to us to be based upon an erroneous understanding as to what the Supreme Court decided in the case of Tyler v. United States,281 U.S. 497">281 U.S. 497. The brief for petitioner says:
* * * Either the United States Supreme Court was in error in its decision in Tyler vs. U.S., supra, or the entire value of property held as tenants by the entirety must have passed at death in order to have been subjected to the Federal estate tax. There must have*1093 been a transfer from the decedent to the surviving tenant, because the tax is upon the transfer, and not upon the property itself.
The decision of the Board in the Fannie E. Lang case, supra, was affirmed by the Circuit Court of Appeals for the Fourth Circuit, 61 Fed.(2d) 280, and this decision of the circuit court of appeals was itself affirmed upon review by the Supreme Court of the United States, 289 U.S. 109">289 U.S. 109. Mr. Justice Sutherland, who delivered the opinion of the Supreme Court, having under review the question (on facts comparable to the facts in the instant case) whether cost of property at the date purchased and acquired by the tenants by entireties or its fair market value at the time of the death of one of the tenants by entireties is the proper basis for determining the gain from the sale made by the surviving spouse, said:
An estate by the entirety is held by the husband and wife in single ownership, by a single title. They do not take by moieties, but both and each take the whole estate, that is to say, the entirety. The tenancy results from the common law principle of marital unity; and is said to be sui generis. Upon the*1094 death of one of the tenants "the survivor does not take as a new acquisition, but under the original limitation, his estate being simply freed from participation *644 by the other; * * *." 1 Washburn, Real Property, 6th Ed., § 912. In the present case, therefore, when the husband died, the wife, in respect of this estate, did not succeed to anything. She simply continued, in virtue of the nature of the tenancy, to possess and own what she already had. Giving the words of the statute their natural and ordinary meaning, as must be done, it is obvious that nothing passed to her by bequest, devise, or inheritance.
The court further said:
If the legislation here under review results in imposing an unfair burden upon the taxpayer, the remedy is with Congress and not with the courts. Unless there is a violation of the Constitution, Congress may select the subject of taxation and tax them differently as it sees fit; and if it does so in plain words, as it has done here, the courts are not at liberty to modify the act by construction in order to avoid special hardship. *1095 Crooks v. Harrelson,282 U.S. 55">282 U.S. 55, 61.
We feel that the various decisions in the Lang case are fully controlling here, and accordingly we affirm the Commissioner.
Judgment will be entered for the respondent.