*2394 Depreciation disallowed for lack of evidence on which a determination might be made with respect thereto.
*442 These proceedings, which were consolidated for hearing and decision, involve deficiencies in income tax as determined by the Commissioner for the years 1923, 1924, 1925, and 1926 in the respective amounts of $212.24, $524.49, $1,395.29, and $706.09. The petition under Docket No. 32649 was filed in the name of Margaret J. Chalfant, but prior to the hearing the said Margaret J. Chalfant died and the executor of her estate was duly substituted as petitioner.
No error was assigned as to 1923, and as to each of the other years the issue is the same, namely, the depreciation allowable, if any, on account of certain assets which were bequeathed by Albert M. Chalfant to Margaret J. Chalfant for life, with the remainder over.
FINDINGS OF FACT.
Prior to his death Albert M. Chalfant, a resident of Pittsburgh, Pa., had been engaged in the sand and gravel business at Sharpsburg, Pa. He died testate on October 13, 1915, and*2395 left his entire estate to Margaret J. Chalfant for life, with the remainder over to certain remaindermen. The second paragraph of Albert M. Chalfant's will reads as follows:
I give and bequeath to Margaret J. Chalfant all my personal and Real Estate for her personal use, during her life, and at her death I hereby direct, all my property, real and personal, to be divided among the following persons. * * *
Then follow various bequests to certain remaindermen, after which is the following paragraph with respect to the property with which we are concerned:
To John C. Morton, I give and bequeath all my Business, Office, Ground and Fixtures, located at Number 106, South Main Street, Sharpsburg, Allegheny County, Penna. Also all Buildings and Fixtures used in my business, consisting *443 of Hoisting Machinery, Derricks, and all other material, including horses, wagons, &c. located in Etna, Allegheny County, Penna., along the Allegheny River, adjoining the Sharpsburg and Lawrenceville Bridge, and my Blacksmith Shop, also the ground it occupies, located in Prager Street, Sharpsburg, Penna.
Under the provisions of the Fiduciary Act of 1917 (Pa. St. 1920, par. 8511), Margaret*2396 J. Chalfant was entitled to demand distribution to her of all personal property upon giving security in an amount sufficient to protect the interests of the remaindermen in such personal property, but if she refused, neglected or was unable to furnish such security to parties interested, a petition could be directed to the court for the appointment of a trustee who would hold and manage such personal property during the life of the life tenant. Margaret J. Chalfant declined to furnish the necessary security and renounced her right to demand possession of the personal property in question. Thereupon, on February 20, 1918, the interested parties, including Margaret J. Chalfant and the several remaindermen, petitioned the court for the appointment of a trustee, a pertinent part of such petition reading as follows:
That at the audit of the said account of said Executor, Charles C. Chalfant, one of your petitioners, be appointed the Trustee to receive all personal property belonging to the estate of said decedent remaining for distribution, and to hold the same in trust respectively for some of your petitioners in such manner and with such powers as may be necessary in order to comply*2397 with the respective bequests thereof, as in the said will of said decedent respectively provided.
On May 2, 1918, Margaret J. Chalfant signed the following stipulation as life tenant:
In consideration of my love and affection for my children, I, MARGARET J. CHALFANT, widow of George A. Chalfant, deceased, and life tenant and life beneficiary of all the estate of Albert M. Chalfant, deceased, under the terms of the Last Will and Testament of the said Albert M. Chalfant, deceased, do hereby certify to the Honorable, the Judges of the Orphans' Court in and for the County of Allegheny and State of Pennsylvania, that for the purpose of preserving intact the corpus or principal of the legacies and devises by the Will of the said Albert M. Chalfant inuring to the benefit after my death of my children, Alice C. Calvert, Rebecca C. Shenk, Margaret C. Burt and Charles C. Chalfant, that I specifically requested and directed Harry S. Calvert, Executor under the Will of said decedent, to continue the business of the said decedent conducted by him in the Borough of Sharpsburg, Allegheny County, Pennsylvania, and did further direct and authorize the said executor to use and employ so much of*2398 the entire net income of said estate, including the income of said business, as in his judgment was necessary for the payment and discharge of the indebtedness of the said estate.
The petition of the parties was granted on May 10, 1918, a material part of the order of the court reading as follows:
That Charles C. Chalfant be and he is hereby appointed Trustee under the Will of Albert M. Chalfant, deceased, (a) to take and hold the securities and business bequeathed in kind to Margaret J. Chalfant for life, with remainder *444 to Alice I. Calvert, Charles C. Chalfant, and John C. Morton; and (b) to take, hold, and invest the legacy of One Thousand Dollars ($1,000.00) bequeathed to Margaret J. Chalfant for life with remainder to John W. Chalfant, in securities authorized by law; and (c) to pay the net income therefrom after deducting all legal charges to Margaret J. Chalfant during her life and upon the termination of the trust by the death of Margaret J. Chalfant t account for and pay to the persons entitled thereto the corpus of the said several trust funds, or transfer and deliver to them the securities in which it is invested as the court may direct, after deducting all*2399 legal charges. Said Trustee shall by reason of the prayer of said Petitioners be released from entering security.
The court thereupon, on May 10, 1918, decreed a distribution of the personal property from the executor to the trustee and the trustee took over such personal property, including the sand and gravel business here in question. The property of the sand and gravel business was listed in the distribution account on May 10, 1918, as follows:
| 8 horses and wagons | $1,000 |
| 5 dump wagons | 125 |
| 4 coal wagons | 100 |
| 1 engine, boiler, and hoisting derrick | 2,000 |
| Total | 3,225 |
Margaret J. Chalfant died March 8, 1928, and in April, 1928, Charles C. Chalfant, as trustee, filed his first and final account with respect to the property held by him. The following was shown therein with respect to the sand and gravel business here in question:
For the purpose of this Account and in order to ascertain who is entitled thereto, the Accountant charges himself with the assets, as of Mar. 8, 1928, of the business conducted under the name of the Estate of A. M. Chalfant, as per inventory and statement furnished by John C. Morton:
| Material on hand | $1,025.17 | |
| Accounts receivable | 17,517.58 | |
| Cash, Farmers & Mechanics Bank, Sharpsburg | 5,511.49 | |
| Equipment: | ||
| One 1924 Atterbury 5-ton Truck | $1,200.00 | |
| One 1925 Atterbury 5-ton Truck | 1,750.00 | |
| One 1926 Ford Truck | 50.00 | |
| 4 Dump Wagons at $50 | 200.00 | |
| 4 Coal Wagons at $25 | 100.00 | |
| 1 Plow | 5.00 | |
| 1 Scoop | 5.00 | |
| Harness | 50.00 | |
| Hay and Feed | 15.00 | |
| Office Fixtures | 35.00 | |
| 1 Hoist | 700.00 | |
| Sand and Gravel Bins | 100.00 | |
| 1 Boiler | 500.00 | |
| 1 Engine | 200.00 |
| Live Stock: | |||
| 7 Horses at $100.00 | $700.00 | ||
| 5,610.00 | |||
| Less value of equipment decreed to | |||
| accountant as above set forth | 3,225.00 | ||
| $2,385.00 | |||
| 26,439.24 | |||
| Less business accounts payable, as per | |||
| statement of John C. Morton | 4,974.84 | ||
| Total | $21,464.40 |
A fiduciary return was filed for each of the years in question, in which depreciation was claimed as follows:
| 1923 | None. |
| 1924 | $2,000.00 |
| 1925 | 2,731.35 |
| 1926 | 4,476.00 |
The trustee paid Margaret J. Chalfant $3,000 each year from the sand and gravel business.
The Commissioner, in auditing the fiduciary returns filed by the trustee on account of the sand and gravel business, disallowed the depreciation shown above as having been claimed as a deduction for 1924, 1925, and 1926, thereby increasing the net income of the business which was distributable and taxable to Margaret J. Chalfant.
OPINION.
SEAWELL: Fiduciary returns were filed by a trustee for a life tenant, Margaret J. Chalfant, on account of a sand and gravel business in which depreciation was claimed with respect to the assets used in such business. The Commissioner disallowed all such depreciation, *2401 thus increasing the income taxable to the life tenant, petitioner's decedent in the case at bar, on the ground that Margaret J. Chalfant was merely entitled to the assets as a life tenant or life beneficiary and therefore no depreciation could be allowed thereon. The petitioner, on the other hand, contends that the fact that Margaret J. Chalfant was a life tenant does not preclude the allowance of depreciation on assets so held.
On the facts, however, as presented, we do not find it necessary to decide whether, as life tenant of the estate of Albert M. Chalfant, Margaret J. Chalfant was entitled to depreciation on account of assets received from such estate, for the reason that it is not shown that such assets were in existence in the years before us, either in the original or converted form, on which depreciation might be taken. The Commissioner dissallowed all depreciation for the reason heretofore stated but, as stated at the hearing, this does not mean that, *446 with the question settled as to right of the life tenant to some depreciation on the assets in question, it would follow that the depreciation claimed by the petitioner is correct. *2402 Obviously, if the Commissioner considered no legal basis existed for the allowance of depreciation, no occasion would exist to determine the accuracy of the deduction claimed. That the determination of a depreciation deduction is a question of fact is so well established that no citation of authority is necessary in support thereof, and the burden of showing the necessary elements for such an allowance is on the petitioner. See . The fact that only $3,000 was paid to Margaret J. Chalfant in each of the years in question is admitted by both parties not to be determinative of the income on which she is taxable, for the reason that the distributable income is taxable to her whether distributed or not.
The evidence which we have as to the assets in question is that certain assets, consisting of horses, wagons, engine, boiler and derrick, were turned over by the executor to the trustee in 1918, which was three years after the death of Albert M. Chalfant in 1915, and that such assets had a value, which was accepted by the court, of $3,225. The testimony of petitioner's witness was that horses and wagons had a life of six years, *2403 which would mean their complete exhaustion prior to the years with which we are concerned. No evidence was furnished as to the rate of depreciation on the other assets referred to in 1918, though apparently they were likewise not in existence in the years before us, since in the schedule set out in petitioner's brief in which a computation is made of the depreciation claimed no reference is made to such assets. It may be that the assets received from the estate of Albert M. Chalfant were sold prior to exhaustion and the proceeds invested in new assets, but we have no evidence as to what, if anything, occurred in this connection. Or it may be that the assets on which depreciation is being claimed represent assets which were purchased out of the profits of the business and therefore would not be subject to the objection raised by the Commissioner, but there is likewise no evidence in this respect.
Little aid is furnished by the distribution account submitted to the orphans' court in 1928 upon the death of Margaret J. Chalfant. What we are concerned with is depreciation allowable in 1924, 1925, and 1926, whereas this account apparently purports to show only the value of the assets*2404 at the termination of his trusteeship without regard to cost or when acquired. This account does tend, however, to substantiate the statements previously made herein to the effect that assets on which depreciation is now being claimed are not assets received from the estate of Albert M. Chalfant, but rather assets purchased during the period of the life tenancy. The further observation *447 might be made that we are unable to tell from this account what was in fact corpus which upon the death of Margaret J. Chalfant passed to the remainderman on account of the sand and gravel business. The specific amounts for distribution to the other remaindermen are shown, but as to the sand and gravel business there is merely shown a statement of its then purported financial condition without anything definitely stated as to what part thereof belonged to the estate of the life tenant and what part to the remainderman as corpus. Apparently upon the basis of the decision of the orphans' court as to that to which the remainderman was entitled, appeal was had by such remainderman to the Supreme Court of Pennsylvania in which it was claimed that the profits of the business earned during the*2405 period of the life tenancy should be awarded to the remainderman, but the court held that such profits should go to the estate of the life tenant (; ). But we are unable to tell from the evidence before us what interpretation was finally adopted as to the division between corpus and income. However, if we should adopt the most favorable position for the petitioner for the purpose of this depreciation allowance, namely, that equipment of a value of $5,610 in 1928 is the equipment on which depreciation is being claimed in 1924, 1925, and 1926, the lack of proof is apparent when we consider that the depreciation claimed for these years is $9,207.35 (1924, $2,000; 1925, $2,731.35; and 1926, $4,476), or almost twice the value of the assets in 1928 and almost three times the value in 1918.
Judgment will be entered for the respondent.