[671]*671OPINION.
Aeundell :
Muriel D. Huggett, wife of the petitioner, was named as a remainderman in the will of her grandmother, who died in 1912, subject to a life estate in Mrs. Huggett’s mother. On the termination of the life estate in 1924, securities forming a part of the original estate were distributed to Mrs. Huggett as remainderman in accordance with the will. These same securities (disregarding change in form following reorganization) were sold by Mrs. Huggett in 1925 and 1926 for more than their March 1, 1913, value and more than their value at the time of distribution in 1924. Petitioner concedes that, for the purposes of this case, the conversion of the original stock into new preferred and common stock may be disregarded.
Section 204 of the Revenue Act of 1926 provides that the basis for determining gain or loss on the sale of property acquired by bequest, devise, or inheritance shall be the fair market value at the time of acquisition, or, if acquired before March 1, 1913, the value at acquisition or March 1, 1913, value, whichever is greater.
Petitioner claims that the date of acquisition is the date of termination of the life estate when the remainder ripened into a fee, at which time, as stipulated, the stock subsequently sold was worth [672]*672$1,065.59 per share. Bespondent originally held that the basic value was the March 1, 1918, value of the stock, namely, $465.90 per share. By amended answer respondent now claims that the proper basis is the March 1, 1913, value of Mrs. Huggett’s vested remainder, which, translated into stock value, amounts to $195.45 per share.
The facts in this proceeding are on all fours with those in Rodman E. Griscom, 22 B. T. A. 979. In that case we held as set forth in the syllabus that:
The basis to be employed in determining gain or loss on the sales was the fair market value of the shares on March 1, 1913.
Petitioner in the present case asks that we reconsider our holdings in the Grisoom case, one of the grounds being that Brewster v. Gage, 280 U. S. 327, which we relied on as a precedent, is inapplicable, because in the Brewster case there was no intervening life estate.
The parties are agreed that upon the death of the testatrix Mrs. Huggett acquired a vested remainder. This seems to be in accordance with the law of Pennsylvania. In re Bache’s Estate, 246 Pa. 276; 92 Atl. 304; In re Walker’s Estate, 277 Pa. 444; 121 Atl. 318; Houston’s Estate, 276 Pa. 330. Mrs. Huggett’s title therefore relates back to the date of death of the testatrix. This principle of law, applicable alike to this case and the Brewster case, was a major premise in the decision of the latter. While it is pointed out that there is a difference between the passing of real estate and personalty, the conclusion is reached that despite the difference “the legal title ” to the personalty “ relates back to the date of death ” as in the case of real estate. It is then pointed out that in the case of real estate and specific bequests of personal property “ undoubtedly the basis * * * is its value at the time of decedent’s death.” Upon these premises the court holds that the same basis should apply alike to real estate, specific bequests of personal property and other property. The same analogy may be made in the present case with the same result. The fact of an intervening life estate does not destroy or even change the source of the remainder-man’s title. The doctrine of relation back holds good whether or not there is an intervening estate. Coolidge v. Long, 282 U. S. 582, involved trust deeds under which income from the trust property was reserved to the settlors for life, and upon the death of the survivor of the settlors the principal was to be divided among their sons. On the death of the survivor the State attempted to impose a succession tax under a statute enacted after the execution of the trust deeds. The Supreme Court held that the gift to the sons was completed by the trust deeds prior to the enactment of the taxing statute, saying in part:
[673]*673By the deed of each grantor one-fifth of the remainder was immediately vested in each of the sons subject to be divested only by his death before the death of the survivor of the settlors. It was a gift in praesenti to be possessed and enjoyed by the sons upon the death of such survivor. * * * The provision for the payment of income to the settlors during their lives did not operate to postpone the vesting in the sons of the right of possession or enjoyment.
*******
The rights of the remaindermen, including possession and enjoyment upon the termination of the trusts, were derived solely from the deeds. The situation would have been precisely the same if the possibility of divestment had been made to depend upon the death of a third person instead of upon the death of the survivor of the settlors.
*******
The fact that each son was liable to be divested of the remainder by his own death before that of the survivor of the grantors does not render the succession incomplete. The vesting of actual possession and enjoyment depended upon an event which must inevitably happen by the efflux of time, and nothing but his failure to survive the settlors could prevent it. * * * Succession is effected as completely by a transfer of a life estate to one and remainder to another as by a transfer in fee.
Another objection made by petitioner to following Brewster v. Gage, is that inequalities in taxation may result where, for example, blocks of stock having widely different values at the date of testator’s death are of equal value at the time the remaindermen come into possession. We find, upon examination of the taxpayer’s brief filed in the Supreme Court in Brewster v. Gage, that much the same argument was presented there. It was apparently thought by the court that the suggested inequalities were not a sufficient reason for disturbing the basis long used by the Commissioner.
It was also argued by petitioner that in cases of this kind there has been no long established ruling of the Commissioner’s office. We find, however, that in Solicitor’s Opinion 35 (C. B. 3, p. 50) the rule is laid down with respect to real estate that the basis is the fair market value of the rights of the remaindermen at the time they vested, or March 1, 1913, value, if they vested prior thereto. That ruling was promulgated in 1920 and as far as we know it has been the rule of the Commissioner’s office all during the intervening eleven years. While that ruling purported to apply only to real estate, it has not been brought to our attention that any contrary ruling prevailed with respect to personalty. Since the promulgation of I. T. 1622 (C. B. II-1, p. 135) in 1923 the same ruling as in Sol. Op. 35 has been applied to personal property.
We accordingly hold, as in the Griscom case, that March 1, 1913, is the basic date.
The respondent contends that we erred in the Griscom case in holding that the basic value is that of the stock rather than the [674]*674remainderman’s interest in the property.
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[671]*671OPINION.
Aeundell :
Muriel D. Huggett, wife of the petitioner, was named as a remainderman in the will of her grandmother, who died in 1912, subject to a life estate in Mrs. Huggett’s mother. On the termination of the life estate in 1924, securities forming a part of the original estate were distributed to Mrs. Huggett as remainderman in accordance with the will. These same securities (disregarding change in form following reorganization) were sold by Mrs. Huggett in 1925 and 1926 for more than their March 1, 1913, value and more than their value at the time of distribution in 1924. Petitioner concedes that, for the purposes of this case, the conversion of the original stock into new preferred and common stock may be disregarded.
Section 204 of the Revenue Act of 1926 provides that the basis for determining gain or loss on the sale of property acquired by bequest, devise, or inheritance shall be the fair market value at the time of acquisition, or, if acquired before March 1, 1913, the value at acquisition or March 1, 1913, value, whichever is greater.
Petitioner claims that the date of acquisition is the date of termination of the life estate when the remainder ripened into a fee, at which time, as stipulated, the stock subsequently sold was worth [672]*672$1,065.59 per share. Bespondent originally held that the basic value was the March 1, 1918, value of the stock, namely, $465.90 per share. By amended answer respondent now claims that the proper basis is the March 1, 1913, value of Mrs. Huggett’s vested remainder, which, translated into stock value, amounts to $195.45 per share.
The facts in this proceeding are on all fours with those in Rodman E. Griscom, 22 B. T. A. 979. In that case we held as set forth in the syllabus that:
The basis to be employed in determining gain or loss on the sales was the fair market value of the shares on March 1, 1913.
Petitioner in the present case asks that we reconsider our holdings in the Grisoom case, one of the grounds being that Brewster v. Gage, 280 U. S. 327, which we relied on as a precedent, is inapplicable, because in the Brewster case there was no intervening life estate.
The parties are agreed that upon the death of the testatrix Mrs. Huggett acquired a vested remainder. This seems to be in accordance with the law of Pennsylvania. In re Bache’s Estate, 246 Pa. 276; 92 Atl. 304; In re Walker’s Estate, 277 Pa. 444; 121 Atl. 318; Houston’s Estate, 276 Pa. 330. Mrs. Huggett’s title therefore relates back to the date of death of the testatrix. This principle of law, applicable alike to this case and the Brewster case, was a major premise in the decision of the latter. While it is pointed out that there is a difference between the passing of real estate and personalty, the conclusion is reached that despite the difference “the legal title ” to the personalty “ relates back to the date of death ” as in the case of real estate. It is then pointed out that in the case of real estate and specific bequests of personal property “ undoubtedly the basis * * * is its value at the time of decedent’s death.” Upon these premises the court holds that the same basis should apply alike to real estate, specific bequests of personal property and other property. The same analogy may be made in the present case with the same result. The fact of an intervening life estate does not destroy or even change the source of the remainder-man’s title. The doctrine of relation back holds good whether or not there is an intervening estate. Coolidge v. Long, 282 U. S. 582, involved trust deeds under which income from the trust property was reserved to the settlors for life, and upon the death of the survivor of the settlors the principal was to be divided among their sons. On the death of the survivor the State attempted to impose a succession tax under a statute enacted after the execution of the trust deeds. The Supreme Court held that the gift to the sons was completed by the trust deeds prior to the enactment of the taxing statute, saying in part:
[673]*673By the deed of each grantor one-fifth of the remainder was immediately vested in each of the sons subject to be divested only by his death before the death of the survivor of the settlors. It was a gift in praesenti to be possessed and enjoyed by the sons upon the death of such survivor. * * * The provision for the payment of income to the settlors during their lives did not operate to postpone the vesting in the sons of the right of possession or enjoyment.
*******
The rights of the remaindermen, including possession and enjoyment upon the termination of the trusts, were derived solely from the deeds. The situation would have been precisely the same if the possibility of divestment had been made to depend upon the death of a third person instead of upon the death of the survivor of the settlors.
*******
The fact that each son was liable to be divested of the remainder by his own death before that of the survivor of the grantors does not render the succession incomplete. The vesting of actual possession and enjoyment depended upon an event which must inevitably happen by the efflux of time, and nothing but his failure to survive the settlors could prevent it. * * * Succession is effected as completely by a transfer of a life estate to one and remainder to another as by a transfer in fee.
Another objection made by petitioner to following Brewster v. Gage, is that inequalities in taxation may result where, for example, blocks of stock having widely different values at the date of testator’s death are of equal value at the time the remaindermen come into possession. We find, upon examination of the taxpayer’s brief filed in the Supreme Court in Brewster v. Gage, that much the same argument was presented there. It was apparently thought by the court that the suggested inequalities were not a sufficient reason for disturbing the basis long used by the Commissioner.
It was also argued by petitioner that in cases of this kind there has been no long established ruling of the Commissioner’s office. We find, however, that in Solicitor’s Opinion 35 (C. B. 3, p. 50) the rule is laid down with respect to real estate that the basis is the fair market value of the rights of the remaindermen at the time they vested, or March 1, 1913, value, if they vested prior thereto. That ruling was promulgated in 1920 and as far as we know it has been the rule of the Commissioner’s office all during the intervening eleven years. While that ruling purported to apply only to real estate, it has not been brought to our attention that any contrary ruling prevailed with respect to personalty. Since the promulgation of I. T. 1622 (C. B. II-1, p. 135) in 1923 the same ruling as in Sol. Op. 35 has been applied to personal property.
We accordingly hold, as in the Griscom case, that March 1, 1913, is the basic date.
The respondent contends that we erred in the Griscom case in holding that the basic value is that of the stock rather than the [674]*674remainderman’s interest in the property. The petitioner claims that what was sold was stock, hence the stock itself must be valued. Bespondent’s argument is that it was an interest in property that was acquired by will and an interest in property that was sold and that, therefore, it is the interest that must be valued and used as a basis.
It is, of course, well established that a remainderman under a will has the right to any increment in value that may inure to the corpus during the existence of the life estate. Gibbons v. Mahon, 136 U. S. 549. Such increment when realized is subject to tax as income. Had the trustee sold at a profit the gain realized would be subject to tax in his hands. And there is nothing in the revenue act that exempts a gain merely because its realization is postponed from the trustee to the remainderman. Only the gift itself is exempt (sec. 213 (b) (3), Bevenue Act of 1926), and this is the property acquired at the death of the testator. It is, we think, also evident that the sale of a remainder interest for more than its value at testator’s death would give rise to gain taxable to the remainderman. Suppose that, in the case of a tenancy for years with remainder over, the remainderman sells on the last day of the intervening estate when his remainder is worth as much as the fee. In such case there would be a taxable gain of the difference between the value of the remainder at the testator’s death and the selling price. But if, in such a case, he sold on the following day, when his remainder had ripened into a fee, under petitioner’s theory there would be no taxable gain because the property was not “ acquired ” by the remain-derman until the termination of the preceding estate. Plainly such an incongruous result can not be the intent of the revenue act. In the opinion of the Circuit Court of Appeals in Brewster v. Gage, 30 Fed. (2d) 605, it is said:
It surely was not the intent of Congress that the acquisition of a mere legal title should completely wipe out and render untaxable the gain which had been acquired by the equitable ownership, and which was, in fact, realized upon the sale made when the date of distribution arrived.
As above pointed out and as held in the Griscom and Brewster cases, the time of acquisition within the meaning of the taxing act is the date- of the testator’s death. A property right was then acquired by the remainderman which was as perfect at that time as at the termination of the life tenancy. Nichols v. Levy, 5 Wall. 433. When the sales were made in the taxable years the remainderman thereby parted with the identical rights vested in her by the will of the testatrix. Nowhere along the line was there any conversion of property rights which permits of a revaluation or new basis for gain or loss purposes.
[675]*675Section 204 of tbe 1926 Act provides throughout that in determining gain or loss on-the sale of property the basis shall be the cost or fair market value of such property. Upon this is predicated the argument that the thing sold in the taxable year was not the same thing acquired by bequest in 1912. But the same objection could be made in a case where the taxpayer purchased the remainder interest and sold the property after the life estate fell in. In such a case cost would clearly be the basis. The only cost that could be used is the cost of the remainder. We would' not say that that cost should be increased by reason of the change wrought by the efflux of time, namely, the conversion of the remainder into a fee.
We think there is no merit to the claim that the rule announced herein is a harsh rule merely because the tax is higher than under the method advocated by petitioner. In another case the property might be sold at a loss and the same rule would work in the taxpayer’s favor.
Neither do we think it proper to test the soundness of the rule by saying that the effect of postponing the vesting in possession is to increase the tax. It so happens in this case that the tax is increased by reason of the continued rise in the value of the property. On the other hand, had the property consisted of wasting assets, for example, mines or patents, the value would have diminished, and the taxes consequently decreased with .each year that the remainder-man was kept out of possession. .
As we construe the stipulated facts, the parties have agreed that the fair market value of the remainder interest adjusted to a per share value of the stock was $195.45 on March 1, 1913. We may assume that in reaching this agreed figure the parties have started with an accepted value for the stock of $465.90 on March 1, 1913, and have determined the value of the remainder interest by reducing the fair market value of the stock to the extent of the life tenant’s interest, based on a life expectancy of 22.36 years. This method of determining value by the use of mortality tables has been sanctioned in Simpson v. United States, 252 U. S. 547, and Ithaca Trust Co. v. United States, 279 U. S. 151. In the latter case the court points out that as the gifts to the remaindermen “ were subject to the life estate of the widow, of course their value was diminshed by -the postponement that would last while the widow lived.” It has been suggested that in reaching our conclusion two dates of acquisition were used, namely, March 1, 1913, and the date of death of the life tenant, and that the value on both occasions entered into the computation. We think there is-no merit in this criticism. The effective date was March 1, 1913, and only the factors present as of that date were used.
[676]*676Viewing the case in this way, we now think that we erred in the Griscom case in taking as the basic value the value of the stock itself, and that the correct value is the value of the taxpayer’s interest therein at the basic date, which in this case is stipulated to be $195.45 per share.
Eeviewed by the Board.
Decision will be entered under Bule 50.
Matthews dissents.
Smith dissents on the second point.