Rehearing Denied Apr. 28, 1941
See 313 U.S. 598 , 61 S.Ct. 937, 85 L.Ed. --.
Mr. Robert H. Jackson, Atty. Gen., and Helen R. Carloss, of Washington, D.C., for petitioner.
Mr. Allin H. Pierce, of New York City, for respondent.
Mr. Justice DOUGLAS delivered the opinion of the Court.
The questions involved here are in part the same as those in Maguire v. Commissioner, 313 U.S. 1 , 61 S.Ct. 789, 85 L.Ed. --, decided this day. Respond- [313 U.S. 11, 12] ent was a remainderman under a trust created by the will of his grandmother1 who died in 1897. The trust res, consisting of personalty, was delivered by the executors to themselves as trustees in 1898. The life beneficiary, respondent's mother, died in March, 1928. On May 5, 1928, the trustees delivered the corpus to respondent as remainderman. Some of the property was part of the original trust res, and some was purchased by the trustees both prior to and subsequent to March 1, 1913. During the year 1930 (in February, on May 6, and in June) respondent sold some of the property in each group. The Board of Tax Appeals (38 B.T.A. 981) and the Circuit Court of Appeals (2 Cir., 112 F.2d 530) held: (1) that for the purpose of determining gain or loss on the sale of the property in question the basis to respondent by virtue of 113(a)(5) of the Revenue Act of 1928, 45 Stat. 791, 26 U.S.C.A. Int.Rev.Acts, page 380, was the fair market value of the property on the date when the corpus was delivered to [313 U.S. 11, 13] respondent; and (2) that the property sold in February, 1930, had not been held by the taxpayer for more than two years and was, therefore, not a capital asset within the meaning of 101(c) of the 1928 Act, 26 U.S.C.A. Int.Rev.Acts, page 371, while that sold on May 6 and in June, 1930, had been held by respondent for more than two years and was therefore a capital asset.
The rulings on the first question were erroneous. For the reasons stated in Maguire v. Commissioner, supra, the basis under 113(a)(5) for the property delivered to respondent by the testamentary trustees was its value when distributed by the executors to the trustees if the property was owned by the decedent at her death, and cost to the trustees if it was purchased by them.