*1796 Gain realized on the sale of property, a part of which was to be held in trust for decedent's widow until her death or remarriage, and a part until a child attained his majority, is not distributable income and is taxable to the fiduciary and not to the widow and minor child.
*1005 The respondent determined a deficiency in income tax for the calendar year 1923 in the amount of $4,911.68. The issue is whether a profit realized on the sale of certain property is taxable to the fiduciary or to the beneficiaries under decedent's will. The respondent now concedes that three-fifths of the profit was not taxable to the fiduciary by reason of the fact that at the time of the sale three of the five beneficiaries had attained majority and were entitled, under the will, to their shares in fee.
FINDINGS OF FACT.
By decedent's will he gave his dwelling house and property known as No. 429 West 147th Street, New York, and certain other property to his wife on the following terms:
* * * to have and hold during her natural life or until she re-marry, *1797 and upon her death or re-marriage, unto my children then living, or per stirpes, dead leaving lawful issue then surviving, for themselves, their heirs and assigns forever, and I do hereby empower my wife at any time, together with my *1006 children then of age and my Trustees, hereinafter named, for any of my children then under the age of twenty-one years * * * to sell the fee absolute of any and all of the aforesaid property, * * *
The residue of his property, after certain other specific bequests, he directed to be divided into "as many equal parts as there are surviving me, my wife and children," one of which parts was given outright to each child over the age of twenty-one. The remaining parts were given to trustees for the purposes (a) of paying to the widow the income from the part set aside for her until her death or remarriage, her share then to go to the children; (b) of paying to the guardians of the minor children the income from their shares during minority, and as each child reached the age of twenty-one his share was to become his absolutely. Provision was also made for the distribution of the share of any child dying before he came into possession of his*1798 share, but such provisions are not material here.
The property designated in the will as No. 429 West 147th Street, and two pieces of real estate included in the residuary estate, were sold in 1923 at a profit of $52,391.28. Of this sum $9,500 represents the profit realized on the premises 429 West 147th Street.
Prior to the time of the sale three of decedent's four children had become twenty-one and entitled to their shares absolutely.
For the year 1923 petitioner filed a fiduciary return for the decedent's estate. He also filed an income-tax return for the one child then a minor, Herbert McCabe, and each of the other children and decedent's widow filed returns. In each of these latter five returns there was included one-fifth of the profit realized on the property sold in 1923.
The respondent added the entire profit to the income shown in the fiduciary return.
OPINION.
ARUNDELL: As set forth in our preliminary statement, counsel for respondent has conceded that three-fifths of the profit realized on the sale in 1923 is properly taxable to the three children who had attained majority prior to the time of the sale. In view of this concession, made at the hearing*1799 and accepted by counsel for petitioner, there is left for us to determine only to whom the remaining two-fifths of the profit is taxable. Respondent contends that this two-fifths is taxable to the fiduciary. We think the respondent's position is correct. The profit realized was not ordinary income distributable to the widow and the minor child, but was a realization of increase in value of the corpus which is not distributable until the termination of the trust. ; .
Decision will be entered under Rule 50.