*2079 Following Edward Mallinckrodt, Sr.,4 B.T.A. 1112">4 B.T.A. 1112; Edward Mallinckrodt, Jr.,14 B.T.A. 194">14 B.T.A. 194; Ida C. Calloway et al., Executors,18 B.T.A. 1059">18 B.T.A. 1059, the petitioner settlor is entitled to deduct losses based upon sales of securities to a trust.
*717 The Commissioner determined a deficiency of $968.94 in the petitioner's income tax for the calendar year 1923. The petitioner alleges that the Commissioner erred in disallowing as a deduction from his gross income the sum of $21,259.70 as a loss sustained upon the sale of certain securities in that year.
*718 FINDINGS OF FACT.
The petitioner is an individual residing in Pittsburgh, Pa.
By an instrument dated May 15, 1918, the petitioner, as party of the first part, entered into an agreement with the Fidelity Title & Trust Company of Pittsburgh, hereinafter referred to as the trustee, as party of the second part, the pertinent provisions of which were as follows:
AND WHEREAS, the party of the first part is desirous of*2080 transferring said stocks and bonds to the Trustee, to be held by it in trust for the purpose of providing an income for the living expenses of the party of the first part, his wife and children, as hereinafter set forth, the said income to be free and clear of all of the debts, contracts, engagements, alienations and anticipations of all of the beneficiaries of, and free and clear of all levies, attachments, executions and sequestrations against any or all of the beneficiaries named herein.
AND WHEREAS, the Trustee is willing to accept said trust and carry out the terms of this agreement;
NOW, THEREFORE, it is mutually understood and agreed as follows:
FIRST: The party of the first part does hereby sell, assign, transfer and set over unto the Trustee all of the securities listed on said "Exhibit A" herein attached. In Trust Nevertheless, to invest and keep the same invested, and to pay over, in quarterly installments, during the life-time of the party of the first part the net income therefrom to Pauline Livingston Foster, the wife of the party of the first part, * * * provided, that said Pauline Livingston Foster continue during said period to live with the party of the first*2081 part as his wife.
SECOND: In the event that said Pauline Livingston Foster shall cease for any cause whatsoever to live with the party of the first part as his wife, or shall fail to survive the party of the first part, then and in either of said events, the Trustee shall during his lifetime pay over, in quarterly installments, the net income of said trust estate to the party of the first part as Guardian for, and to be used in such manner as he shall deem right and proper for the maintenance and support of, such lawful child or children of the first party as may then be living; * * *
THIRD: Upon the death of the party of the first part, the net income of said trust estate shall be paid, in quarterly installments, to his said wife, Pauline Livingston Foster, (provided that at the time of the death of the party of the first part she shall have been living with him as his wife) for and during the term of said Pauline Livingston Foster's natural life; said payments, however, to be made to the said Pauline Livingston Foster for the purpose of being expended for her own living expenses and for the maintenance, education and support of the lawful child or children of the party of the*2082 first part living at the time of his death. * * *
FOURTH: Upon the death of both the party of the first part and the said Pauline Livingston Foster, his wife, or upon the death of the party of the first part at a time when the party of the first part and said Pauline Livingston Foster, his wife, shall not be living together as man and wife, the Trustee shall pay, in quarterly installments, the net income of said trust estate to such of the children of the party of the first part as may then be living and over the age of twenty-one years, and to the Guardian or Guardians of such children of the party of the first part as may be then living and under the age of twenty-one years, said payments to be for the support and education of said children and in such amount to each child as said Trustee may in its discretion *719 deem wise and best for the interests of such child or children; said income shall not be accumulated but be paid out each year as received; * * *
FIFTH: Upon the youngest child of the party of the first part becoming the age of forty years, provided the party of the first part and his wife the said Pauline Livingston Foster are both dead, or if the party of*2083 the first part is dead and the said Pauline Livingston Foster, though living, shall prior to the time of his death have ceased to live with him as his wife, said trust shall cease and determine, and the principal thereof shall be divided equally among the lawful children of said party of the first part, share and share alike. If the party of the first part is living at the time said youngest child becomes forty years of age, then upon his death but only if the said wife of the said party of the first part shall have failed to survive him or live with him as his wife, said trust shall cease and determine as provided for in this paragraph. If said wife survive and shall have lived with said party of the first part as his wife up to the time of his death and she, the said wife, is still living when said youngest child attains the age of forty years, then upon her death only shall said trust cease and determine as provided for in this paragraph. If one or more of said children of the party of the first part shall have died prior to the termination of said trust, leaving lawful issue surviving him or her, then such lawful issue shall take the share of said deceased parent per stirpes*2084 and not per capita.
SIXTH: If at any time hereafter it shall be impossible for any cause whatsoever, to further carry out the terms of this agreement as to the distribution of said income, or trust estate, then and in that event said trust shall cease and determine, and the said estate be distributed to the then legal heirs of the party of the first part.
SEVENTH: During the lifetime of the party of the first part the Trustee shall not sell or reinvest any of the assets or funds of said trust estate without the written consent of the party of the first part being first had and obtained. The party of the first part shall have the right during his lifetime to direct the Trustee to sell or dispose of the assets of the trust estate, and the reinvestment of the money or funds so realized shall be made only as consented to by the party of the first part, as herein provided. The recommendation of said party of the first part shall be, if acted upon, sufficient warrant to said Trustee to invest in the manner recommended. In the event of the failure of the Trustee and the party of the first part to agree upon such investment or reinvestment, the matter shall be submitted to the then*2085 Judges of the Orphans' Court of Allegheny County, whose decision shall be final and binding upon the parties.
The following table shows various facts in regard to the securities which the petitioner sold to the trustee in the year 1923:
| Date of purchase | Date of sale | Amount and kind of security | Cost | Sale price | Fair market value at date of sale | Loss claimed on return |
| 2/27/23 | 7/19/23 | 1,000 shares Mother Lode Coal Mines Co | $13,150.00 | $8,000 | $9,000 | 5,150.00 |
| 1916 | 12/31/23 | 195 Independent Brewing Co | 3,112.20 | 975 | 975 | 2,137.20 |
| 7/24/22 | 11/22/23 | 400 Sinclair Oil common | 11,910.00 | 6,800 | 7,700 | 5,110.00 |
| 1922 | 11/2/23 | 400 Texas Co | 20,010.00 | 14,000 | 14,000 | 6,010.00 |
| 1922 | 11/2/23 | 100 Sinclair Oil common | 2,977.50 | 1,700 | 1,925 | 1,277.50 |
| 1922 | 10/25/23 | 100 Texas Co | 5,002.50 | 4,000 | 4,050 | 1,002.50 |
| 2/20/22 | 4/25/23 | $15,000 Par Third Ave. 5's | 8,572.50 | 8,000 | 8,000 | 572.50 |
| Total | 21,259.70 |
The Commissioner disallowed the losses claimed.
*720 OPINION.
MURDOCK: Counsel for the petitioner agreed that in some instances the securities had been sold for less than their fair market value on the day of sale. Thereafter, *2086 he limited his claim to the amount of the difference between the total cost and the total fair market value. The Commissioner stated in his deficiency letter that the trust was valid and he eliminated the income of the trust from the petitioner's income. But he said the petitioner could not deduct these losses under section 214(a)(5) because by the trust instrument the petitioner was the equitable owner of the corpus of the trust fund and the alleged sales were merely changes in form without any change in substance.
The respondent's position is that the remainders attempted to be created in the trust instrument are to a class and may not vest until a child of the petitioner, not living at the date of the instrument, becomes forty years of age; thus the remainders are void under the rule against perpetuities; the preceding estates are valid; but by reason of the failure of all of the estates in remainder a resulting trust arises in favor of the grantor and his heirs and next of kin with respect to the principal; therefore, there can be no loss through such alleged sales. He cites a number of Pennsylvania cases in support of his rationale but he cites no authority for his conclusion. *2087 We will assume that he has correctly applied the law of Pennsylvania.
The life estates and the estates for years are valid and sufficient to support the trust. ; . They are not "mere agencies to accomplish a transgression" of the rule against perpetuities. A transgression of the rule was not the dominant intent of the settlor. Such cases as ; , and ; , have no application.
The petitioner retained no right to revoke the trust and consequently has no such right. The trust is a taxable entity separate from the petitioner and has been so treated by the Commissioner. None of the income of the trust is payable to the petitioner for his own use during the continuation of the trust. The trust may continue long after the death of the petitioner. If he gives property to the trust he suffers no loss for tax purposes. But here he did not give, unless, as in the opinion of some, the excess of fair market value over sales price*2088 would be a gift. He sold. The bona fides of these sales has not been questioned. We have heretofore held that sales under similar circumstances establish losses. ; ; Ida C. Calloway et al.,*721 . There is no reason why a different rule should be applied in this case. The claim for losses amounting to $19,084.70 is sustained.
Judgment will be entered under Rule 50.