*1642 1. Personal property bequeathed in trust for an indeterminate period, not to exceed five years, held to have been acquired by the legatees on the date of decedent's death.
2. Value of certain corporate stocks at date of acquisition determined.
*436 These are proceedings for the redetermination of deficiencies in income tax, asserted by the respondent for the year 1925 in the following amounts:
| Docket No. | Deficiency |
| 37693 | $795.68 |
| 37694 | 1,611.89 |
| 47695 | 1,072.16 |
| 37696 | 864.83 |
| 40546 | 1,004.73 |
| 41034 | 2,488.31 |
In each proceeding the deficiency was based upon gain derived from the sale of stock in a realty company and in a hotel company, and of a certain piece of real estate. As a basis for determining the gain, the respondent used the date when the property descended to the petitioners, in trust, at the death of Julius D. Abeles. In each proceeding, except Docket No. 37693, it is alleged that error was committed in using the said date instead of a later one, when the property was actually distributed to the beneficiaries. *1643 In all the proceedings it is alleged that respondent's determination of the value of the aforesaid stocks and real estate was erroneous.
The proceedings were consolidated for hearing and decision. The contention as to the real property was abandoned at the hearing.
FINDINGS OF FACT.
One Julius D. Abeles died August 15, 1920. By his will he bequeathed all of his property, including 470 shares of the capital stock of the Terminal Hotel-Arcade Company and 370 shares of the capital stock of the Martha Realty Company, to his sons Robert and John T. Abeles, in trust for the benefit of James A., John T., Robert, Clifford, Charles T., Alfred T., and Francis Abeles. As to all of the beneficiaries, except Francis, the trust was to terminate and the property to be distributed, one-seventh to each beneficiary, five years after the testator's death, but the trustees were given power to terminate the trust earlier in their discretion.
During the five-year trsut period, six-sevenths of the net income from the property was to be paid quarterly and in equal shares to each of the beneficiaries, except Francis. As to the latter the trust was declared to be a spendthrift trust, terminable*1644 only at his death or in the discretion of the trustees. Income from one-seventh of the property was to be paid to Francis in such amounts and at such times as the trustees in their discretion might determine.
Robert Abeles assigned his share of the property in trust to his wife, Katherine P. Abeles.
*437 The Terminal Hotel-Arcade Company was organized in 1895. It obtained a forty-year lease, terminable on two years notice, of some land in St. Louis, Mo., whereon the company built a hotel and furnished and operated it. The company's capital stock was $150,000. The cost of the hotel and furnishings amounted to $190,000.
For some years the hotel was successful, and its stock was worth approximately $200 per share in 1913. Later its earnings decreased somewhat, and on August 15, 1920, the stock of the hotel company had a fair market value of $150 per share.
The Martha Realty Company was organized in 1905, with a capital stock of $100,000. That company owned a ninety-nine year leasehold on land at the corner of Grand and Washington Avenues in the city of St. Louis, Mo. The property had a frontage of 100 feet on each of those streets and a depth of 150 feet. The*1645 Realty Company at once erected a six-story fireproof office building, fronting 100 feet on Grand Avenue, with a depth of 70 feet, at a cost of $165,000. A few years later the company erected another building, fronting on Washington Avenue, at a cost of $25,000.
On March 1, 1913, the value of the Realty Company's leasehold was $175,000 and the buildings had increased somewhat in value. At that time the company owed $65,000 and its stock had a value of $300 per share.
Prior to August 15, 1920, the company had acquired the fee of the land which it had held under lease, and on that date the Realty Company's stock had a value of $340 per share.
On November 10, 1923, the trustees under the will of Julius D. Abeles terminated the trust as to six-sevenths of the property and made distribution of the stock to the six beneficiaries. One week later the property was sold at a price which netted to the owners of the stock of the Martha Realty Company $390 per share, and which netted $166 per share to the owners of the Terminal Hotel-Arcade Company's stock. The trust with reference to Francis Abeles was not terminated in the above distribution of the trust property.
OPINION.
*1646 MARQUETTE: The petitioners received their stocks in the Martha Realty Company and the Terminal Hotel Company by bequest from Julius D. Abeles, who died on August 15, 1920. That date was used by the respondent as a basis for determining gain or loss from the sale of the stocks. Each petitioner, except the estate of Francis Abeles, alleges that the proper date to be used should be November, 1923, the time when the stocks were actually released from the trust created by Julius Abeles and distributed to the legatees.
*438 The Revenue Act of 1926, section 204(a)(5), provides that in determining gain or loss from the sale of property acquired by bequest, "the basis shall be the fair market value of such property at the time of acquisition."
In , the Supreme Court held that upon the death of the owner of personal property his heirs or legatees were immediately vested with the right to respective distributive shares after proper administration; and that a decree of distribution conferred no new right upon the heirs or legatees, but merely identified the property, evidenced their rights of possession, and the legal title so given*1647 related back to the date of death of the decreased.
We can see no essential difference, as to the principle involved, between that case and the present proceedings. There, possession and dominion by the legatees was deferred during an indeterminate period of administration; here, possession is postponed for not to exceed a five-year trust period, the legatees meanwhile receiving the income earned by the stocks. We hold, therefore, that the stocks in question were acquired upon the death of Julius D. Abeles on August 15, 1920.
The remaining question concerns the fair market value of those stocks at the time of acquisition. The respondent apparently valud the Martha Realty Company stock at $150 per share on August 15, 1920. In so doing, we think he was in error. We have found as a fact that the value on that date was $340 per share and that amount, therefore, is the proper basis upon which to compute gain derived from sale of the stock.
As to the Terminal Hotel Company stock, we have found that its fair market value on the basic date was $150 per share. The respondent used the same amount in reaching his determination. On that basis his determination should stand.
*1648 Judgment will be entered under Rule 50.