The opinion
Smith,
dissenting: The annuities payable to Effie E. Smiley and Ellen E. Sanborn are made a charge upon the “ Lake Mohonk property.” The petitioners are devisees of the property subject to the annual charges.
If petitioners had operated the Lake Mohonk property as executors of the will of their father they would not have been entitled to deduct the amounts paid to the annuitants in 1930, for the annuities were payable at all events. Burnet v. Whitehouse, 283 U. S. 148 ; Helvering v. Pardee, 290 U. S. 365 . The annuities were received by the annuitants as legacies. They did not constitute taxable income to them. The devisees and legatees of the residuary estate were not entitled to the deduction of the annuities. Helvering v. Pardee, supra.
In the majority opinion it is held that the taxable profits from the operation of the hotel in 1930 are after the deduction of the annuities paid. I do not think that this is so. Cf. Corbett Investment Co. v. Helvering, 75 Fed. (2d) 525. The petitioners had to pay the annuities. But they were not deductible expenses to them. They constituted capital charges.