*962 This is a proceeding for the redetermination of a deficiency in income tax for 1928 in the amount of $8,815.38.
The issues involved are whether the petitioner is liable for tax upon the income of three certain trusts created by him upon the ground that the said trusts were revocable within the meaning of section 166 of the Revenue Act of 1928, or whether any part of the income from said trusts could in the discretion of the grantor be distributed to the grantor or be held or accumulated for future distribution to him within the meaning of section 167 of the Revenue Act of 1928.
With the exception of copies of the trust instruments and a copy of the 30-day letter, the facts were stipulated.
FINDINGS OF FACT.
The petitioner is an individual, residing in Scranton, Pennsylvania.
Under date of June 30, 1921, the petitioner entered into a certain trust agreement with the Lackawanna Trust Company as trustee and naming petitioner's daughter, Mary C. Bliss, as beneficiary, the trust thereby established being referred to as the Mary C. Bliss Trust.
*1215 On the same date, the petitioner entered into a certain trust agreement with the same trust company as trustee, naming his daughter, Eleanor E. Bliss, as beneficiary. This trust is referred to as the Eleanor E. Bliss trust.
Under date of March 1, 1928, the petitioner entered into a certain trust agreement with the North Scranton Bank & Trust Company as trustee, naming petitioner's daughter, Natalie R. Bliss as beneficiary, this trust being referred to as the Natalie R. Bliss trust.
The said trusts were in full force and effect under the said trust agreements from the respective dates of their execution to the close of the taxable year 1928.
The said Mary C. Bliss trust had a net taxable income for 1928 in the amount of $55,383.03, of which $6,866.33 consisted of ordinary net income and $48,516.70 consisted of capital net gain, being profits realized on the sale or disposition of securities held for a period of more than two years prior to the date of their sale or other disposition.
*963 The Eleanor E. Bliss trust had a net taxable income for 1928 in the amount of $3,755.64, of which $3,658.54 consisted of ordinary net income and $97.20 consisted of capital net*1216 gain, being profits realized on the sale or disposition of securities held for a period of more than two years prior to the date of their sale or other disposition.
The said Natalie R. Bliss trust had a net taxable income for the year 1928 in the amount of $425.
The trustee named in the aforesaid trust agreements filed income-tax returns in behalf of the Mary C. Bliss and Eleanor E. Bliss trusts for the taxable year 1928. The return so filed for the Mary C. Bliss trust showed an income tax to be due in the amount of $5,923.60, which was in due course assessed and paid. The return filed for the Eleanor E. Bliss trust showed no tax to be due and none was paid.
No return of net income was filed by the trustee for the Natalie R. Bliss trust, for the reason that the net income of the said trust was less than the specific exemption allowed by law.
The petitioner filed an income-tax return as required by law for the taxable year 1928 and included in the return so filed none of the income of the aforesaid trusts.
In his final determination of tax as set forth in the deficiency letter, the respondent has included in the taxable income of the petitioner the ordinary net income*1217 of $6,866.33 and the capital net gain of $48,516.70 applicable to the Mary C. Bliss trust, the ordinary net income of $3,658.44 and capital net gain of $97.20 applicable to the Eleanor E. Bliss trust, and the ordinary net income of $425 applicable to the Natalie R. Bliss trust.
No part of the income of the aforesaid trusts was distributed to the beneficiaries named in the trust agreements and no part of the said income was distributed to the petitioner or any other person during the taxable year 1928 or at any other time prior to the close of the said taxable year.
All the income of the aforesaid trusts has been accumulated and held by the respective trustees under the provisions of the respective trusts.
Mary C. Bliss was born on June 5, 1915, Eleanor E. Bliss was born on September 27, 1920, and Natalie R. Bliss was born on March 9. 1922; all the said children of petitioner are still living at this date, April 26, 1932.
The three trusts were substantially the same. The trustees were conveyed certain securities with the right to "invest and reinvest any and all monies received by reason hereof, and all other monies at any time in its hands by reason hereof, in securities*1218 and investments, real or personal, corporate, public or private, as, in its judgment, it may deem advisable. Sell, assign, transfer, collect and satisfy, any *964 and all investments and securities by it held hereunder, as and when it may deem the same advisable."
Provision was also made for the voting of any stock held by the trustee; for uniting with other owners of similar property in carrying out any reorganization of any corporation whose securities form a portion of the trust fund; for exchanging such securities for others issued by the same or any other corporation; for consenting to the consolidation, affiliation or merger of any other corporation whose securities are held by the trustee; and for payment of any assessments or expenses which it may deem expedient for the protection of its interest as holder of any securities. The trust instrument also provided as follows:
In the connection with the exercise of any discretionary powers, hereinabove enumerated, the said Trustee shall consult with the said Sydney R. Bliss. In the event of the death of the said Sydney R. Bliss, during the term or life of this trust agreement, then and in such event the said Trustee*1219 shall consult with Helen Jones Bliss. * * *
The Lackawanna Trust Company, its successors or assigns, shall use and apply the whole, or such part as it may deem fit, of the net income for the personal maintenance, care, comfort and support of my daughter, Eleanor Elizabeth Bliss, until such time as she shall reach the age of thirty-five (35) years, to wit: on the 27th day of September A.D. 1955. Provided, however, that all payments of income made by reason hereof, shall be made by the said Lackawanna Trust Company, its successors and assigns, only upon the written order of the said Sydney R. Bliss, or his wife, Helen Jones Bliss; in the event of the death of both Sydney R. Bliss and his wife, payments to be made at the discretion of the Lackawanna Trust Company.
Third. The right is hereby reserved to alter, amend or revoke, in whole or in part, the terms and conditions of this agreement at any time or times prior to the 27th day of September, A.D., 1955, which power or revocation, alteration and amendment is reserved to Helen Jones Bliss upon her written order, and the said Sydney R. Bliss has no interest whatsoever in said right or power.
In the event of the death of his*1220 daughter, Eleanor Elizabeth Bliss, prior to the termination of this trust agreement, leaving issue of her body, then and in such event, but subject to the power of revocation and amendment hereinbefore set forth, this trust shall cease and determine, and the said Lackawanna Trust Company, its successors or assigns, shall distribute and pay over the corpus or principal of the trust fund, together with all unexpended income, to the issue of his said daughter, Eleanor Elizabeth Bliss, share and share alike, and the income thereof or so much of such income as may be necessary, to be used for the support and education of such issue, until each shall have attained the age of twenty-one (21) years, at which time, and times, the principal of said fund shall be distributed and paid to said issue.
In the event of the death of his said daughter, Eleanor Elizabeth Bliss, prior to the termination of this trust agreement, leaving no issue of her body, then and in such event, this trust shall cease and determine, and the said Lackawanna Trust Company, its successors or assigns shall distribute and pay over the corpus or principal of the trust estate, together with all unexpended income, to the*1221 said Sydney R. Bliss. In the event that the said Sydney R. Bliss be deceased at such time, then to the legal heirs then living of him, the said Sydney R. Bliss, under the intestate laws of the Commonwealth of Pennsylvania.
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Sixth. *965 At and upon the termination of the Trust Estate herein created, as hereinbefore provided for, the Lackawanna Trust Company, its successors or assigns, shall make distribution of the corpus or principal of the Trust Estate, together with all unexpended income, in kind, or in its discretion, partly in kind and partly in cash, either or both. Any premium or profits received on or in connection with the sale and conversion of any security forming part of the trust fund shall be taken and held as part of the principal of the trust fund.
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Eighth. In the event that the trust hereby created shall be in force and effect on the 27th day of September A.D. 1955, then and in such event and on said date, this trust shall cease and terminate and the said Lackawanna Trust Company, its successors and assigns, shall distribute and pay over the corpus or principal of the trust estate, and all unexpended income to his said daughter, Eleanor*1222 Elizabeth Bliss, or if she then be not living, as hereinbefore provided, to the issue of his said daughter, or to his next of kin under the intestate law.
The instrument quoted above in part is the trust agreement in the Eleanor E. Bliss trust. The other trust instruments contain similar provisions.
OPINION.
TRAMMELL: It is clear that under section 161(b) of the Revenue Act of 1928 the petitioner is not liable for the tax upon the income of the trusts unless he has reserved to himself the power to revest in himself title to the corpus of the trusts, or unless it appears that the income of the trusts may in the discretion of the grantor be distributed to him or be held or accumulated for future distribution to him.
The pertinent provisions of the Revenue Act of 1928 are as follows:
[SEC. 161.] (b) * * * The tax shall be computed upon the net income of the estate or trust, and shall be paid by the fiduciary, except as provided in section 166 (relating to revocable trusts) and section 167 (relating to income for benefit of the grantor). * * *
[SEC. 166.] Where the grantor of a trust has, at any time during the taxable year, either alone or in conjunction with any*1223 person not a beneficiary of the trust, the power to revest in himself title to any part of the corpus of the trust, then the income of such part of the trust for such taxable year shall be included in computing the net income of the grantor.
[SEC. 167.] Where any part of the income of a trust may, in the discretion of the grantor or the trust, either alone or in conjunction with any person not a beneficiary of the trust, be distributed to the grantor or be held or accumulated for future distribution to him, or where any part of the income of a trust is or may be applied to the payment of premiums upon policies of insurance on the life of the grantor (except policies of insurance irrevocably payable for the purposes and in the manner specified in section 23(n), relating to the so-called "charitable contribution" deduction), such part of the income of the trust shall be included in computing the net income of the grantor.
We think it is clear from the trust instruments that the grantor had no power to revest in himself title to any of the corpus of the trusts. The petitioner did not reserve the right to alter, amend or revoke in whole or in part the terms or conditions of the*1224 trusts, by himself or in *966 connection with any other person. The right to revoke, alter or amend was vested exclusively in Helen Jones Bliss, and it was specifically provided in the trust instruments that the grantor had no interest whatever in such right or power. Clearly, the trust instruments did not come within the provisions of section 166 of the Revenue Act of 1928.
Nor was any part of the income of the trusts distributable in the discretion of the grantor to himself, either alone or in conjunction with any other person, nor was it to be held or accumulated for future distribution to the grantor, nor was any part of the income to be applied to the payment of premiums upon life insurance policies upon the life of the grantor, nor were any other facts present which would in any way bring the trust instruments within the purview of section 167 of the Revenue Act of 1928.
Where the terms of a trust instrument do not bring it within section 166 or 167 of the Revenue Act of 1928, then, under section 611(b) of the same act, the tax must be computed upon the net income of the estate or trust and shall be paid by the fiduciary.
*1225 We think it is of no importance that, in the event of the death of the beneficiary without issue prior to her attaining the age of 35 years, the trust is to terminate and the corpus be distributed to the grantor or his heirs. See . Nor do we think it of any importance that the grantor or his wife had to be consulted and a written order be obtained from either of them before making payments in connection with the maintenance, care, comfort and support of their minor children. This does not mean that the grantor of the trust had any right to alter the trust or to revoke the trust, or to have any of the income distributed to him or accumulated for his benefit. Nor do we think it of any importance that the grantor would have to be consulted in connection with certain discretionary powers as to investments and exchanges or sales of securities. The fact that he should be consulted does not mean that he had any power to prevent the trustee from exercising its best judgment, and, in any event, it does not indicate that the grantor had any power of revocation or alteration, or to obtain or secure any of the income for himself.
The*1226 respondent, in his memorandum, referred to the brief filed by him in the case of Valentine Bliss, apparently upon the theory that there is some similarity between that case and this case. Any similarity between the two cases is too remote to have any bearing upon the consideration of this case.
Judgment will be entered for the petitioner.