[586]*586OPINION.
Black:
The Commissioner, in including the net income of the Frances S. Willson trust as a part of petitioner’s net income for each of the years in question, relies upon section 167 (a) of the Revenue Act of 1936, printed in the margin.1
Petitioner, in contending that the income of the trust is not taxable to her, relies upon two propositions as follows:
[587]*587(1) That the part of the trust income used in 1936 and 1937 to pay premiums on insurance policies insuring the life of petitioner’s husband, George C. Willson, which policies were payable to the trustee, was not taxable to petitioner as grantor of the trust which produced the income.
(2) That the part of the 1936 and 1937 trust income which remained after the payment of insurance premiums and was accumulated and added to trust corpus was not taxable to petitioner as grantor of the trust which produced the income.
We shall take up and discuss these two propositions in their order.
(1) To sustain her first proposition, petitioner cites Lucy A. Blumenthal, 30 B. T. A. 591; Gail H. Baldwin, 36 B. T. A. 364. These cases support petitioner.
In the Blumenthal case the policies of insurance were not taken out on the life of the settlor of the trust but on the life of her husband. The policies were payable to the trustee, who was to collect the proceeds upon the death of the insured and use the money as a trust fund, the income from which was to be paid to the settlor and her children. Under such circumstances we held that portion of the income of the wife’s trust which was to pay the insurance premiums on the policies of insurance taken out on the life of Sidney Blumenthal, Lucy’s husband, was not taxable to her. On the other hand, we held that the portion of the income of the trust which was used to discharge the liability of Lucy to the Guaranty Trust Co. of New York on a collateral note for money borrowed was taxable to her. Our decision on this latter point was affirmed by the Supreme Court per curiam in Helvering v. Blumenthal, 296 U. S. 552, following Douglas v. Willcuts, 296 U. S. 1. No appeal was taken by the Commissioner from our decision on the first point.
It should be noted that the income of the trust in the instant case was not to be used to discharge any legal obligation of the settlor, as was the case in Douglas v. Willcuts, supra, or the $31,500 indebtedness of Lucy A. Blumenthal in the Blumenthal case.
On authority of Lucy A. Blumenthal, supra, and Gail H. Baldwin, supra, we sustain petitioner on this point.
(2) In support of her second proposition, petitioner cites Fanny M. Dravo et al., Executors, 34 B. T. A. 190. In the Drmo case, under the terms of the trust indenture, the income could be accumulated and added to corpus and the income only on the aggregate corpus was distributable to the grantor, upon his wife’s death. Under these conditions we held that the income of the trust for the taxable year which was to be accumulated and become a part of the corpus of the trust and was never to be distributed to the grantor was not taxable to the grantor under section 167 of the Eevenue Act of 1928. In stating our conclusions we said, among other things:
[588]*588It is true that the caption of section 167 of the Revenue Act of 1928 reads “income fob benefit of grantor.” But the section provides that the only-income taxable to the grantor of the trust under this section is income which “may * * * be distributed to the grantor or be held or accumulated for future distribution to him * * The explicit and definite wording of this provision affords no justification for .extending its boundaries to include income which, under the terms of the trust instrument or as a result of the exercise of a reserved power, never can be “distributed” to the grantor. Helvering v. City Bank Farmers Trust Co., 296 U. S. 85. The fact that he may receive income produced from the investment of the accumulations does not make such accumulations distributable to him. * * *
Following Fanny M. Dravo et al., Executors, supra, we hold that the income of the trust in each of the taxable years which was accumulated and added to the corpus of the trust is not taxable to petitioner.
The Commissioner, in support of his position, relies principally upon Commissioner v. Morton, 108 Fed. (2d) 1005, and Margaret B. Phipps, 42 B. T. A. 829.
We think these cases are distinguishable on their facts. For example, in the Morton case, in the first trust therein involved, the grantor was originally and continued to remain beneficiary of all eight life insurance policies, which were retained by grantor and were never assigned to the trustee. Also grantor was originally and continued to remain the owner of the loan and cash surrender values and of the right to change the beneficiary. In the second trust involved in the Morton case, the grantor and/or her husband, the insured, owned the loan and cash surrender values and the right to assign the policy and to change the beneficiary. Also the trust could be terminated by grantor’s husband, the insured, whereupon grantor’s husband would receive accumulated income and the grantor, if living, would receive the remainder of the property. The aforementioned features which were present in the Morton trusts are not present in the instant case.
In the trust indenture involved in the Phipps case it was provided that the trustee should collect the insurance upon the death of the grantor’s husband and should use the proceeds and any other trust property to pay inheritance and similar taxes which might be payable on grantor’s share of the estate of her husband, the insured. Also it was provided that one year after the death of the grantor’s husband, the insured, the trustee was bound to transfer to grantor, if living, the trust assets remaining after payment of taxes on grantor’s share of her husband’s estate. No such provisions are contained in the trust indenture involved in the instant case.
Because of the aforementioned differences and others which we might mention, we think the instant case is distinguishable from the Morton case and the Phipps case.
[589]*589The case of White v. Wiggins, 116 Fed. (2d) 312, was decided by the First Circuit subsequent to the filing of briefs in the instant case. Therefore, it was not cited by either party. We have not overlooked that case, however, in connection with the question we have here to decide and we find that the facts involved have a striking similarity to those present in the Morton case. The decision of the First Circuit in White v. Higgins was in favor of the Government, following the decision of the Supreme Court in Helvering v. Clifford, 309 U. S. 331.
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[586]*586OPINION.
Black:
The Commissioner, in including the net income of the Frances S. Willson trust as a part of petitioner’s net income for each of the years in question, relies upon section 167 (a) of the Revenue Act of 1936, printed in the margin.1
Petitioner, in contending that the income of the trust is not taxable to her, relies upon two propositions as follows:
[587]*587(1) That the part of the trust income used in 1936 and 1937 to pay premiums on insurance policies insuring the life of petitioner’s husband, George C. Willson, which policies were payable to the trustee, was not taxable to petitioner as grantor of the trust which produced the income.
(2) That the part of the 1936 and 1937 trust income which remained after the payment of insurance premiums and was accumulated and added to trust corpus was not taxable to petitioner as grantor of the trust which produced the income.
We shall take up and discuss these two propositions in their order.
(1) To sustain her first proposition, petitioner cites Lucy A. Blumenthal, 30 B. T. A. 591; Gail H. Baldwin, 36 B. T. A. 364. These cases support petitioner.
In the Blumenthal case the policies of insurance were not taken out on the life of the settlor of the trust but on the life of her husband. The policies were payable to the trustee, who was to collect the proceeds upon the death of the insured and use the money as a trust fund, the income from which was to be paid to the settlor and her children. Under such circumstances we held that portion of the income of the wife’s trust which was to pay the insurance premiums on the policies of insurance taken out on the life of Sidney Blumenthal, Lucy’s husband, was not taxable to her. On the other hand, we held that the portion of the income of the trust which was used to discharge the liability of Lucy to the Guaranty Trust Co. of New York on a collateral note for money borrowed was taxable to her. Our decision on this latter point was affirmed by the Supreme Court per curiam in Helvering v. Blumenthal, 296 U. S. 552, following Douglas v. Willcuts, 296 U. S. 1. No appeal was taken by the Commissioner from our decision on the first point.
It should be noted that the income of the trust in the instant case was not to be used to discharge any legal obligation of the settlor, as was the case in Douglas v. Willcuts, supra, or the $31,500 indebtedness of Lucy A. Blumenthal in the Blumenthal case.
On authority of Lucy A. Blumenthal, supra, and Gail H. Baldwin, supra, we sustain petitioner on this point.
(2) In support of her second proposition, petitioner cites Fanny M. Dravo et al., Executors, 34 B. T. A. 190. In the Drmo case, under the terms of the trust indenture, the income could be accumulated and added to corpus and the income only on the aggregate corpus was distributable to the grantor, upon his wife’s death. Under these conditions we held that the income of the trust for the taxable year which was to be accumulated and become a part of the corpus of the trust and was never to be distributed to the grantor was not taxable to the grantor under section 167 of the Eevenue Act of 1928. In stating our conclusions we said, among other things:
[588]*588It is true that the caption of section 167 of the Revenue Act of 1928 reads “income fob benefit of grantor.” But the section provides that the only-income taxable to the grantor of the trust under this section is income which “may * * * be distributed to the grantor or be held or accumulated for future distribution to him * * The explicit and definite wording of this provision affords no justification for .extending its boundaries to include income which, under the terms of the trust instrument or as a result of the exercise of a reserved power, never can be “distributed” to the grantor. Helvering v. City Bank Farmers Trust Co., 296 U. S. 85. The fact that he may receive income produced from the investment of the accumulations does not make such accumulations distributable to him. * * *
Following Fanny M. Dravo et al., Executors, supra, we hold that the income of the trust in each of the taxable years which was accumulated and added to the corpus of the trust is not taxable to petitioner.
The Commissioner, in support of his position, relies principally upon Commissioner v. Morton, 108 Fed. (2d) 1005, and Margaret B. Phipps, 42 B. T. A. 829.
We think these cases are distinguishable on their facts. For example, in the Morton case, in the first trust therein involved, the grantor was originally and continued to remain beneficiary of all eight life insurance policies, which were retained by grantor and were never assigned to the trustee. Also grantor was originally and continued to remain the owner of the loan and cash surrender values and of the right to change the beneficiary. In the second trust involved in the Morton case, the grantor and/or her husband, the insured, owned the loan and cash surrender values and the right to assign the policy and to change the beneficiary. Also the trust could be terminated by grantor’s husband, the insured, whereupon grantor’s husband would receive accumulated income and the grantor, if living, would receive the remainder of the property. The aforementioned features which were present in the Morton trusts are not present in the instant case.
In the trust indenture involved in the Phipps case it was provided that the trustee should collect the insurance upon the death of the grantor’s husband and should use the proceeds and any other trust property to pay inheritance and similar taxes which might be payable on grantor’s share of the estate of her husband, the insured. Also it was provided that one year after the death of the grantor’s husband, the insured, the trustee was bound to transfer to grantor, if living, the trust assets remaining after payment of taxes on grantor’s share of her husband’s estate. No such provisions are contained in the trust indenture involved in the instant case.
Because of the aforementioned differences and others which we might mention, we think the instant case is distinguishable from the Morton case and the Phipps case.
[589]*589The case of White v. Wiggins, 116 Fed. (2d) 312, was decided by the First Circuit subsequent to the filing of briefs in the instant case. Therefore, it was not cited by either party. We have not overlooked that case, however, in connection with the question we have here to decide and we find that the facts involved have a striking similarity to those present in the Morton case. The decision of the First Circuit in White v. Higgins was in favor of the Government, following the decision of the Supreme Court in Helvering v. Clifford, 309 U. S. 331. For the same reasons that we have distinguished the Morton case, we distinguish White v. Higgins and hold that it is not controlling on the question we have here ,to decide.
Is the income of the trust taxable to petitioner because of that provision which reads: “In case the said net income from such new Trust Fund shall in the judgment of the Trustee be insufficient to properly maintain and support the Settlor in the manner in which she is accustomed to live, then the Trustee is authorized to use such part of the principal of the Trust Estate as shall be necessary so to maintain and support the Settlor” ? We think not.
There is a distinction between a trustee’s absolute and unconditional power to surrender to the grantor a part of the trust corpus, on the one hand, and a fiduciary’s duty to make a determination of conditions the existence of which would justify the trustee in surrendering to the grantor a part of the trust corpus, including accumulated income added thereto.
Because of the restrictions on the trustee’s right to distribute trust corpus, including accumulated income, in the instant case the right to invade corpus under restricted conditions does not render the trust income taxable to -the grantor. Cf. Katharine Boyd Morehead, 42 B. T. A. 851; Lewis Hunt Mills, Administrator, 39 B. T. A. 798.
Reviewed by the Board.
Decision will loe entered for petitioner.
Disney concurs only in the result.