Security-First Nat'l Bank v. Commissioner

*72 The Commissioner determined a deficiency of $1,388.99 in the petitioner's income tax for 1932. Petitioner assails the disallowance of a deduction of state real property taxes which were paid by it in 1932.

FINDINGS OF FACT.

Robert W. George died testate on January 15, 1931. Petitioner, a national banking association with principal office at Los Angeles, California, after being executor of the estate until April 5, 1932, when a decree of distribution was entered, has since been the trustee of a testamentary trust created by the third clause of the will. By this clause decedent devised and bequeathed all the residue of his estate (except realty in Illinois) to petitioner in trust to hold, manage, *73 and invest, to collect*783 the income therefrom and after deduction of maintenance and other expenses, to pay the income to five designated beneficiaries in specified monthly amounts during their respective lives and to pay the remainder monthly to his daughter, Sadie Wilson Blake, during her life. Provision was further made for distribution of corpus upon the deaths of the several beneficiaries.

In November and December 1932 petitioner paid taxes aggregating $16,992.28 to the counties of Los Angeles and Orange and to the city of La Habra, California, on several parcels of real estate which were owned by decedent at the date of his death and comprised a part of the trust estate at the date of the decree of distribution and of payment. Of this total $8,787.85 covered taxes imposed for the fiscal year July 1, 1931, to June 30, 1932, which became a lien on the real estate on the first Monday in March 1931. The remainder, $8,204.43, covered taxes imposed for the fiscal year July 1, 1932, to June 30, 1933, which became a lien on the real estate on the first Monday in March 1932.

The executor of the estate kept its books of account on a cash receipts and disbursements basis. No portion of the above taxes*784 was claimed or allowed as a deduction in computing the estate's net income for any period; its gross income from the several parcels on which the above taxes were assessed and paid was reported in the estate's income tax returns. As trustee of the trust, petitioner keeps its books of account also on the cash receipts and disbursements basis, and so reported the trust income in its income tax return for 1932.

OPINION.

STERNHAGEN: The petitioner is trustee of the testamentary trust to which the real property was devised. Although it acquired possession in April 1932, its ownership related back to the date of the testator's death, notwithstanding the intervening administration of the decedent's estate. Deering's Probate Code of California, sec. 300; ; ; ; ; ; . See .

The taxes in question covered the period beginning July 1, 1931, and ending June 30, 1933, and were therefore in the clearest sense*785 the petitioner's taxes - taxes on its own property. Petitioner alone was chargeable with them, and since its accounts and returns were on the basis of receipts and disbursements, it was entitled to deduct them when it paid them.

Judgment will be entered for the petitioner.