*803 1. Held, that under section 113(a)(5) of the Revenue Act of 1928 the basis for determining gain or loss from the sale of securities acquired by a remainderman after the death of the life beneficiary of a testamentary trust is the fair market value of the property when distributed to the taxpayer at the termination of the trust.
2. Held, under the capital gains provisions of section 101 of the Revenue Act of 1928, that the securities in question were not "held by the taxpayer," petitioner remainderman, from the date of the death of the original grantor.
*981 This proceeding was brought for a redetermination of a deficiency of $11,753.40 in petitioner's income tax for the calendar year 1930.
The questions presented are (1) the date to be used in fixing the basic valuation of securities which petitioner had received as remainderman of a testamentary trust after the death of the life beneficiary for the purpose of determining taxable gain or loss to petitioner on the sale thereof; and (2) the date to be used*804 for the purpose of determining the period for which these securities were held by petitioner prior to their sale within the meaning of the capital net gains and losses provisions of the applicable statute. 1
*982 FINDINGS OF FACT.
The facts were stipulated substantially as follows:
Mary Van Nest died a resident of the County of New York, State of New York, on November 20, 1897, leaving a last will and testament which was duly admitted to probate by the Surrogate of the County of New York, letters testamentary being issued to Franklin W. Gilley, Giraud Foster, and Thomas Thacher as executors.
The ninth article of this will reads in part as follows:
NINTH: All the residue of my estate of every kind I give and devise as follows:
One half thereof in equal shares to my daughters Mary Van Nest Jackson, Anna Van Nest Gambrill and Jennie Van Nest Foster, and my granddaughter, Mary Alice Van Nest absolutely.
The other half thereof in four equal shares to my executors, to hold the same in trust, one share for the benefit of each of the same four persons to wit my said three daughters and my said granddaughter and to receive the*805 income and pay the same to her during her life with full power to invest and reinvest in their discretion without any limitation whatsoever and at her death to transfer and deliver the same as she if leaving issue shall by will direct or in the absence of such direction, to her issue equally, or if she shall leave no issue, then to the survivors of the said four persons to wit my said three daughters and my said granddaughter, and to the issue of any of the said four persons who may have died, the issue to take the share which the parent would have taken if living. * * *
The executors proceeded with the administration of the estate and on or about January 4, 1898, they delivered to themselves, as trustees for Anna Van Nest Gambrill, the following securities at the following prices:
| 375 shares Farmers Loan & Trust Co., par value $25 | $76,406.25 |
| 300 shares Harlem Railroad Co. | 48,000.00 |
| 100 shares Pittsburgh & Fort Wayne Railroad | 16,900.00 |
| 200 shares New York, N.H. & H.R.R.R | 36,600.00 |
| 300 shares Delaware, lackawanna & Western Railroad | 23,250.00 |
| 50 shares Rensselaer & Saratoga Railroad | 9,250.00 |
| 75 shares Chicago & North Western Railroad, preferred | 12,225.00 |
| Total | 222,631.25 |
*806 Separate trusts were likewise set up by the trustees for each of the other three life beneficiaries named in the will of Mary Van Nest and securities of a value equal to the value of those set forth above in favor of Anna Van Nest Gambrill were delivered by the executors to themselves as trustees for Mary Van Nest Jackson, Jennie Van Nest Foster, and Mary Alice Van Nest.
Anna Van Nest Gambrill, mother of petitioner and the life beneficiary of one of the trusts, died on March 23, 1928, without having *983 exercised the power of appointment conferred upon her by the ninth article of the will of Mary Van Nest. Her sole surviving issue was petitioner, Richard Van Nest Gambrill, who was born prior to the death of Mary Van Nest.
Upon the death of Anna Van Nest Gambrill, the trustees of the trust for her benefit under the will of Mary Van Nest proceeded with the settlement of their accounts. One of the matters which had to be settled before the trustees could make distribution of the corpus to the petitioner as remainderman was the question of additional inheritance taxes due to the State of New York from the estate of Mary Van Nest on the remainder interest. In the original*807 appraisal of the estate of Mary, Van Nest, filed for the purpose of determining the New York State inheritance tax, the appraiser reported that the value of this remainder interest was not at that time ascertainable and the collection of the inheritance tax on this remainder interest was therefore held in abeyance under the provisions of section 221, chapter 908, Laws of 1896 of the State of New York. Under this section the tax on the remainder interest would become due and payable when the person or persons beneficially entitled thereto should come into actual possession or enjoyment thereof. The tax was made a lien upon the property transferred, and the law provided that no trustee should be entitled to a final accounting unless he should produce a receipt sealed and countersigned by the Comptroller of the State of New York, or a copy thereof certified by him, unless a bond should have been filed as prescribed by law. On or about the 16th day of April 1928, the trustees by their attorney filed a petition in the Surrogate's Court for the County of New York, asking for an order modifying the original order fixing the New York State inheritance tax on the estate of Mary Van Nest, *808 and on or about May 1, 1928, an order was entered assessing a tax of $2,359.91 upon the value of the remainder interest passing to the petitioner. This tax was paid on or about May 24, 1928.
Other payments made by the trustees prior to the transfer and delivery of the corpus to petitioner included fees for legal services, commissions to the trustees on receiving gain on the corpus of the trust and for paying out the corpus of the trust, payments to the executors of the estate of Anna Van Nest Gambrill for income collected after her death, fees for services in preparing Federal and state income tax returns, and payments to the trustees for commissions on income. Other transactions by the trustees after the death of the life tenant included the sale of $40,000 of New York City 4's of 1936, the sale of which was required in order to raise funds for the payment of the trustees' commissions and for the payment of the New York *984 State inheritance tax on the remainder interests passing to the petitioner.
There was no judicial settlement of the accounts of the trustees, but the trustees accounted by receipt and release, the release being signed on May 22, 1928, by petitioner*809 individually, and by Lewis Cass Ledyard, Jr., and petitioner as executors of the last will and testament of Anna Van Nest Gambrill. The balance of the corpus included in the trust as to which petitioner was remainderman was delivered to petitioner in accordance with the terms of the will of Mary Van Nest, on or about May 5, 1928.
During the calendar year 1930 petitioner sold certain of the securities which had been delivered to him by the trustees. In computing gain or loss from the sale of these securities, petitioner used their fair market value as of May 5, 1928. These securities sold in 1930, together with the proceeds received therefor, the dates of sale and the fair market value as of May 5, 1928, are as follows:
| Securities | Date of sale - 1930 | Proceeds | May 5, 1928, value |
| $2,000 Third Avenue Railroad 4/60 | Feb. 18 | $1,015.00 | $1,440.00 |
| 54 shares United States Steel preferred | Feb. 18 | 7,625.34 | 7,830.00 |
| 122 shares Manhattan Railway | Feb. 20 | 4,544.62 | 7,160.75 |
| 50 shares Rensselaer & Saratoga Railroad | Feb. 19 | 6,898.00 | 7,275.00 |
| 100 shares Pittsburgh, Fort Wayne & Chicago Railway | Feb. 20 | 15,096.00 | 16,400.00 |
| 10 shares Chicago & Eastern Illinois Railway preferred | Feb. 21 | 400.85 | 762.50 |
| 405 shares Glen Alden Coal | May 6 | 40,380.30 | 66,369.38 |
| 405 shares Lackawanna securities | June 4 | 16,616.80 | 20,067.35 |
| 200 shares National City Bank | June 9 | 39,022.44 | 35,700.00 |
| Total | 131,599.35 | 163,004.98 |
*810 The March 1, 1913, fair market value of the securities acquired prior to that date, or the cost, whichever is greater, and the cost to the trustees of the securities acquired after March 1, 1913, are as follows:
| Securities | Acquired by trustees | March 1, 1913 or cost to trustees |
| $2,000 Third Avenue Railroad 4/60 | Mar. 12, 1912 | $1,717.50 |
| 54 shares United States Steel preferred | Sept. 9, 1921 | 5,889.93 |
| 122 shares Manhattan Railway | Prior to Mar. 1, 1913 | 15,982.00 |
| 50 shares Rensselaer & Saratoga Railroad | Prior to Mar. 1, 1913 | 9,025.00 |
| 100 shares Pittsburgh, Fort Wayne & Chicago Railway | Prior to Mar. 1, 1913 | 16,200.00 |
| 10 shares Chicago & Eastern Illinois Railway preferred | Prior to Mar. 1, 1913 | 516.14 |
| 405 shares Glen Alden Coal | Aug. 16, 1921 | 2,025.00 |
| 405 shares Lackawanna securities | Sept. 16, 1927 | 9,846.46 |
| 200 shares National City Bank | Prior to Mar. 1, 1913 | 10,344.00 |
| Total | 71,546.03 |
The fair market values of these securities as of March 23, 1928, the date of death of the life beneficiary, Anna Van Nest Gambrill, are as follows:
| Securities | Adjusted value Mar. 23, 1928 |
| $2,000 Third Avenue Railroad 4/60 | $1,380.00 |
| 54 shares United States Steel, preferred | 7,830.00 |
| 122 shares Manhattan Railway | 5,154.50 |
| 50 shares Rensselaer & Saratoga Railroad | 7,225.00 |
| 100 shares Pittsburgh, Fort Wayne & Chicago Railway | 16,500.00 |
| 10 shares Chicago & Eastern Illinois Railway, preferred | 700.00 |
| 405 shares Glen Alden Coal | 62,471.25 |
| 405 shares Lackawanna securities | 19,398.46 |
| 200 shares National City Bank | 31,400.00 |
| Total | 152,059.21 |
*811 *985 In determining the period for which petitioner had held these securities, under the provisions of section 101 of the Revenue Act of 1928, petitioner used the date May 5, 1928, whereas respondent has determined that the period held should be computed, from November 20, 1897, the date of the death of Mary Van Nest, in the case of securities owned by her at the time of her death, and from the dates of purchase in the case of securities subsequently purchased by the trustees.
OPINION.
VAN FOSSAN: The first of two major questions presented by the case at bar, is the date to be used for the purpose of fixing the basic valuation in determining the gain or loss to petitioner on the sale of securities which he received as remainderman of a testamentary trust after the death of the life beneficiary.
The second question is the date to be used in determining the period for which these same securities were held by petitioner prior to their sale, within the meaning of the capital gains provisions of the applicable revenue act. 2
The securities which petitioner received as remainderman, after the death of the life beneficiary, are*812 capable of being divided into two categories, the first being those securities which had come to the trustees as part of the trust res, and the second being those securities which were purchased by the trustees with trust funds, subsequent to March 1, 1913, and held by them until delivery to petitioner in 1928.
The statutory provisions governing the basis for the determination of gain or loss are found in section 113 of the Revenue Act of 1928 and those here pertinent are as follows:
(a) Property acquired after February 28, 1913. - The basis for determining the gain or loss from the sale or other disposition of property acquired after February 28, 1913, shall be the cost of such property; except that -
* * *
*986 (5) PROPERTY TRANSMITTED AT DEATH. - If personal property was acquired by specific bequest, or if real property was acquired by general or specific devise or by intestacy, the basis shall be the fair market value of the property at the time of the death of the decedent. If the property was acquired by the decedent's estate from the decedent, the basis in the hands of the estate shall be the fair market value of the property at the time of the death*813 of the decedent. In all other cases if the property was acquired either by will or by intestacy, the basis shall be the fair market value of the property at the time of the distribution to the taxpayer. In the case of property transferred in trust to pay the income for life to or upon the order or direction of the grantor, with the right reserved to the grantor at all times prior to his death to revoke the trust, the basis of such property in the hands of the persons entitled under the terms of the trust instrument to the property after the grantor's death shall, after such death, be the same as if the trust instrument had been a will executed on the day of the grantor's death;
* * *
(b) Property acquired before March 1, 1913. - The basis for determining the gain or loss from the sale or other disposition of property acquired before March 1, 1913, shall be:
(1) the cost of such property (or, in the case of such property as is described in subsection (a)(1), (4), (5), or (12) of this section, the basis as therein provided), or
(2) the fair market value of such property as of March 1, 1913,
whichever is greater. In determining the fair market value of stock in a corporation*814 as of March 1, 1913, due regard shall be given to the fair market value of the assets of the corporation as of that date.
As to the first above indicated issue, respondent urges that petitioner's interest under the testamentary trust was a vested interest under the controlling law of New York; (as to the securities which were a part of the original trust res ) that where property is bequeathed in trust, distribution by the executor of the donee's estate to the trustee constitutes the "distribution to the taxpayer" contemplated by the statute; (as to the securities which were acquired by the trustees with trust funds) that where trustees purchase property with trust funds, and later distribute the property so acquired to the taxpayer, such property is not "acquired by will or intestacy" within the meaning of the above quoted statute.
Even though petitioner's interest under New York law may be a vested interest acquired at the date of testator's death, which was prior to March 1, 1913, and as such brings the matter within the purview of section 113(b), that section, by its terms, makes section 113(a)(5) controlling. The date of acquisition therefore is removed from the picture*815 and the date for determining gain or loss is the date prescribed by section 113(a)(5). Counsel are agreed that the applicable provision of the subsection is the provision covering *987 "all other cases" and that the basis therefore is "the fair market value of the property at the time of the distribution to the taxpayer."
Respondent concedes that , 3, 4, are all contrary to the position he takes on the first issue. These cases, togehter with , affd., , hold that the phrase "the time of distribution to the taxpayer" as used in the statute, means the time when this property was Actually delivered to or made available for the use of the taxpayer.
*816 However, respondent cites , as squarely supporting his contentions, and urges that this Board reconsider the entire issue on the basis of the Jenkins case and the arguments presented in the brief in the case at bar.
After a careful consideration of respondent's arguments and with due deference to the District Court for the District of Connecticut, we are constrained to adhere to our original position. Nothing is presented which would justify our recantation. We, therefore, hold that the basis to petitioner for the purpose of determining gain or loss on the sale of the securities in question is the fair market value of such securities on May 5, 1928, the date when the corpus of the trust was delivered to petitioner. This was the time of the "distribution to the taxpayer." Cf. ; .
Respondent urges that the second issue, being concerned with the capital gains provisions of the statute, is not dependent upon the date used under section 113 for determining the basis for gain or loss and*817 that the securities here involved have been held by petitioner, within the meaning of section 101 of the Revenue Act of 1928, since the respective dates on which they were acquired by the trust estate. In other words, that those securities which were a part of the original trust res were "held by the taxpayer" since the death of the testator, and those securities which were acquired by the trustee with trust funds were "held by the taxpayer" since the time of their purchase.
Respondent relies on , which case directly severs any dependence of section 101 on section 113 for the determination of the holding period.
*988 In addressing itself to the question presented in the McFeely case the Supreme Court, through Justice Roberts, declared that "held" and "acquired" were in effect synonymous, and stated:
* * * In common understanding, to hold property is to own it. In order to own or hold one must acquire. The date of acquisition is, then that from which to compute the duration of ownership or length of holding. Whether under local law title to personal property passes from a decedent to the legatee or*818 next of kin at death subject to a withholding of possession for purposes of administration, or passes to the personal representative for the purposes of administration, - the title of the beneficiary, though derived through the executor, relating back to the date of death, - is for the present purposes immaterial. In either case, the date of acquisition, within the intent of the Revenue Act is the date of death. [Citing
To determine the application of the McFeely case to the case at bar, it is necessary to consider the particular questions involved in the two cases. The McFeely case, which is really a consolidation of five cases, is concerned with the administration period between the date of death of the original holder and the date of actual acquisition by the respective taxpayers, and involves, respectively, residuary legatees, the donee of a widow who elected to take against her husband's will, and one taking under intestate laws. The Court states the question "whether property acquired from a decedent through intestacy, or a general bequest, is, within the meaning of the clause [held by the taxpayer for more*819 than two years] held by the taxpayer from the date of decedent's death or from the date of distribution." The case at bar is concerned with the date of acquisition of a remainderman's interest in a trust estate after the death of the life beneficiary. This, we think, presents a distinctly different problem, one not ruled on in the cited case. For this reason we do not deem the McFeely case controlling here.
As above noted, respondent contends that the securities which were originally a part of the trust estate were "held by the taxpayer" from the date of the death of the original grantor (1897), and those purchased with trust funds were held from the date of such purchase. This contention was based on , which, as above indicated, we have rejected as controlling in the case at bar.
Petitioner urges that the controlling date is May 5, 1928, the date of delivery of the trust corpus to petitioner. Whether this date or that of March 23, 1928, the date of death of the life beneficiary, is the determinative date it is not necessary in this case to decide. The result is the same whichever be taken. The findings of fact establish*820 that certain securities were sold prior to March 23, 1930, and that others were sold after May 5, 1930. None were sold in the interval between the two dates.
*989 We hold that those securities sold in February 1930 had not been held by the taxpayer for more than two years and were, therefore, not capital assets, while those sold on May 6 and in June 1930 had been held by taxpayer for more than two years and were, therefore, capital assets.
Decision will be entered under Rule 50.