*1423 Petitioner was a life beneficiary under two different trusts created under the wills of two deceased relatives. She had no interest in the corpus of either trust. held, the entire amounts distributed to her by the trustees were income to her, and she was not entitled to a deduction for depletion of the corpus.
*1131 These proceedings are for the redetermination of deficiencies in income taxes for the calendar years 1923, 1924 and 1925, in the amounts of $1,149.30, $752.60 and $683.56, respectively. Both proceedings were heard separately, but it was stipulated by the parties that all of the evidence introduced in the first proceeding should also be considered as evidence in the second proceeding.
The issues are (1) whether petitioner, who is a life beneficiary under two different trusts created under the wills of two deceased relatives, is entitled to a deduction for depletion on the amounts distributed to her as such beneficiary, and (2) whether an amount of $120.38 was income to petitioner in 1923 or in 1924.
The only evidence introduced*1424 in connection with the first issue was an "Indenture" executed on June 24, 1904, the wills of Rebecca Coxe and Eckley B. Coxe, Jr., and petitioner's income-tax return for the calendar year 1923. No evidence was offered in connection with the second issue.
FINDINGS OF FACT.
Petitioner is Charlotte Coxe Teuber, residing at #6 Wattmannsgasse, Vienna, Austria.
In her income-tax return for the calendar year 1923 petitioner reported "other income" from fiduciaries as follows:
| Estate of Rebecca Coxe, deceased | $1,842.89 |
| Estate of Brinton Coxe, deceased | 6,437.78 |
| Estate of Eckley B. Coxe, Jr., deceased | 7,965.55 |
Attached to the return for the year 1923 was a rider captioned "Protest," which read as follows:
Amounts received from trust funds are included in this return under protest, because such amounts are not taxable income, and all tax assessed thereon is therefore paid under protest.
For the year 1923 the respondent increased the "other income" reported by petitioner from the said fiduciaries in the following amounts:
| Estate of Rebecca Coxe, deceased | $1,649.06 |
| Estate of Brinton Coxe, deceased | 120.38 |
| Estate of Eckley B. Coxe, Jr., deceased | 6,439.06 |
*1425 For the years 1924 and 1925 the respondent increased the income reported by petitioner from the estate of Eckley B. Coxe, Jr., deceased, by the additional amounts of $8,055.92 and $5,929.63, respectively. The reason given by the respondent in his deficiency notice *1132 for such increases in income was that in view of General Counsel's Memorandum No. 1673 (C.B. VI-1, p. 252) "beneficiaries are not entitled to deduct depletion from their proportionate share of income from an estate or trust."
On June 24, 1904, Rebecca Coxe, Eckley B. Coxe, Jr., and certain other persons not here material, "hereinafter called the Lessors, of the first part, and Coxe Brothers and Company, Incorporated, a corporation organized under the laws of the State of Pennsylvania, hereinafter called the Lessee, of the second part" executed an instrument called "THIS INDENTURE," which consisted of 52 printed pages. It covered the mining rights in tracts of land in Luzerne, Carbon and Schuylkill Counties, Pennsylvania, by far the larger amount being in Luzerne County. The lessors "demise and let" in certain parts certain lands, reserving surface rights and excepting certain described premises used for*1426 churches, lodges, etc., and also in other parts certain veins of coal, and again in still other parts certain surface lots and parcels of land. Further on in the indenture the lessors "demise, let and grant" unto the lessee certain other veins of coal, and "further grant" the right to carry coal from any tract to any colliery then erected on the said lands, and the said lessors do "further demise and let" to the said lessee "all the houses, buildings, structures, improvements, machinery, apparatus and fixtures of every kind and description belonging to said Lessors, whether on or under the surface, which shall be on the hereinbefore mentioned tracts of land at the beginning of the term hereby created excepting the surface of the hereinbefore excepted surface tracts."
The habendum clause of the indenture is as follows:
TO HAVE AND TO HOLD the premises, rights and privileges hereby demised or granted, subject to the covenants and conditions herein contained to be kept and performed by the said Lessee from the date hereof until the coal in the hereinbefore described tracts or pieces of land shall have been practically exhausted for mining purposes, as to which matter any difference*1427 of opinion between the Lessors and the Lessee is to be determined by arbitrators as hereinafter provided.
The reddendum clauses of the indenture provide, among other things, for the payment of royalties of certain specified amounts on different sizes of coal on or before the 25th day of each month during the term, for the mining, sending away and paying royalty in each and every year on at least 417,000 tons of coal unless prevented by faults in the veins or other unavoidable causes, such as strikes, floods, accidents in the mines, etc.; and for the payment of all taxes assessed against the fixtures erected by the lessee and certain other taxes. And, in case of default, the indenture provided:
* * * it shall and may be lawful to and for the said Lessors, their heirs, successors and assigns, into and upon the said demised premises to re-enter, *1133 and the same again to have, repossess, and enjoy as in their first and former estate; and the leasehold estate and rights hereby granted to the said Lessee shall cease and determine and become void, anything herein contained to the contrary notwithstanding.
Rebecca Coxe, petitioner's aunt, by will dated February 27, 1906, devised*1428 and bequeathed as follows:
THIRTIETH, All the rest, residue and remainder of my estate, real, personal and mixed, of whatever kind and description and wherever situated, not herein otherwise disposed of and subject to the annuities and bequests hereinbefore directed to be paid, I give, devise and bequeath as follows:
* * *
3rd. I give, devise and bequeath three-ninths thereof unto my executors hereinafter named, and the survivor of them, and the heirs and executors of such survivor in trust nevertheless, to pay to my niece Charlotte Coxe Teuber, Eliza M. Coxe Young and Mary Rebecca Coxe Gerhard, * * * the net income or revenue each a one-ninth thereof, for and during their respective lives, and from and immediately after the death of each of the said tenants for life to pay over the shares so held in trust for each of my said nieces, being the one-ninth thereof, to her children, share and share alike.
Eckley B. Coxe, Jr., petitioner's cousin, by will dated November 7, 1910, devised and bequeathed a residuary estate in trust to the Trust Company of North America. On June 12, 1916, he executed a codicil to his last will and testament which codicil provided in part as follows:
*1429 I give devise and bequeath all of the rest, residue and remainder of my Estate real and personal whatsoever and wheresoever and whether in possession or expectancy to my Executors Charles Sinkler and John Cadwalader, Junior in Trust to hold the same and to invest and reinvest the principal sums whenever and so often as may be necessary in their judgment and to pay the whole of the net interest and income of my said Estate to my mother in monthly payments as nearly equal as possible during the term of her natural life and from and after the death of my said mother to hold to sum of ten thousand Dollars ($10,000.00) in trust to pay the net interest and income thereof for the maintenance of a nurse to attend to the sick and injured in the town of Eckley Luzerne Co. Pa. so long as mining shall be continued at Eckley. And as to all the rest residue and remainder of my said Estate to hold the same in further Trust to pay the net interest and income thereof in equal shares to my cousins Charlotte Teuber; Eliza Middleton Young; Mary Rebecca Gerhard and Edmund J. b. Coxe in monthly installments during their natural lives for the sole and separate use of Charlotte Eliza and Mary Rebecca*1430 and free and clear of all liability for the debts of them and of the said Edmund J. D. Coxe and without any power of anticipation by any of them and upon the deaths of each and all of my said cousins to hold the said respective shares of my said cousins and to pay over to to their respective children taking by representation the share or shares of their respective parents a full and equal share of the principal to each and every such child * * *.
OPINION.
LOVE: Petitioner's principal contention in these proceedings is that she is entitled to a deduction for depletion of the coal mined by *1134 Coxe Brothers and Company under the indenture dated June 24, 1904. She bases this contention upon the ground that she is a life beneficiary under the wills of two of the original lessors of the said indenture. She had no interest in the corpus of either trust created under the wills of Rebecca Coxe and Eckley B. Coxe, Jr. The taxable years in question are all prior to the taxable year 1928. Under such circumstances we have held in a long line of decisions that deductions in the nature here contended for are not allowable. See *1431 Sophia G. Coxe (where the will of Eckley B. Coxe, Jr., was also involved), ; ; Richard Sharpe (a Pennsylvania case), ; ; ; affirmed by the First Circuit at ; and , and cases therein cited. Petitioner cites and relies upon the decision of the Second Circuit in , but this case is to be distinguished from the instant proceedings on the same basis as it was distinguished in
But petitioner further contends that while the indenture of June 24, 1904, is in the form of a lease, yet the courts of Pennsylvania. where the coal lands in question were located, hold that where the term is for the exhaustion of the mineral, the agreement between the parties in such cases cases is a sale of the coal in place and not a lease thereof. From this contention petitioner argues that the amounts she received from the two trusts*1432 in question "are in fact installments of the purchase price of the coal and relate to capital assets"; that "the mere intervention of a trustee through whom the said royalties are paid does not change their nature"; and that "as the royalties represent shares of capital, the taxpayer receives them as an owner in fee and is entitled to the same deductions to which all owners in fee are entitled."
At this point it should be specifically noted that the record made by petitioner is substantially deficient in proof of the amounts of the deductions she is claiming, and that, upon the present record, we would have to sustain the respondent's determination even if we agreed with petitioner on the law. Neither is there any evidence that the indenture of June 24, 1904, was in effect during the taxable years here in question. Assuming, however, that the indenture was in effect during the years 1923, 1924 and 1925; that the two trusts here in question received royalties thereunder; and that petitioner was paid a part of such royalties (all of which petitioner contends is true), we are clearly of the opinion that petitioner is not entitled to reduce the actual amounts which she received*1433 from the two trusts by any deduction for depletion or, in the language of petitioner, "deductions to which all owners in fee are entitled," and we discuss *1135 the law issue simply to show that there is no miscarriage of justice, due to petitioner's failure to offer proof as to the amounts of the deductions she is claiming.
It is our opinion that as far as these proceedings are concerned it is wholly immaterial whether we regard the indenture of June 24, 1904, as a lease or as a sale of coal in place. The fact remains, based upon the above assumption, that petitioner was paid the amounts in question by the trustees appointed in the two wills and under such wills she had no interest in the corpus of the trusts, but was merely a life beneficiary. In her brief petitioner states that "The contention here is not that no income tax should be charged on the coal royalties but as they partake of the nature of capital a reasonable allowance for depletion should be made as provided by the Act of Congress."
We regard the decisions cited above as controlling, and, therefore, find no error in the respondent's determination as to this issue. See also *1434 ; and .
Petitioner offered no evidence on the issue as to whether an amount of $120.38 was income to petitioner in 1923 or in 1924. The respondent determined that the amount was income in 1923. We sustain the respondent.
Judgment will be entered for the respondent.