Stern v. Commissioner

CORA S. STERN, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

PHILIP L. SEASONGOOD, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Stern v. Commissioner

Docket Nos. 16692, 18862.

United States Board of Tax Appeals

14 B.T.A. 444 ; 1928 BTA LEXIS 2973 ;

November 27, 1928 , Promulgated

*2973 1. Petitioners seek deductions of proportionate parts of losses sustained upon two pieces of property in the taxable year, claiming absolute ownership, a vested legal and equitable title to their respective shares in the properties under the wills of their father and mother. The properties originally were owned jointly or in common by petitioners' father and maternal grandfather, who by will devised their respective interests in trust. Petitioners' mother likewise by will devised her interest in the properties under her father's will, in trust. Held, the evidence fails to establish that the several trusts created in these properties had been terminated and that the petitioners' legal title to their respective shares therein had vested at the time the losses were sustained.

2. Losses upon property held in trust are deductible, if at all, by the trust estates and not in proportionate shares by the beneficiaries of the estates.

Lester A. Jaffe, Esq., for the petitioners.

Harry LeRoy Jones, Esq., for the respondent.

VAN FOSSAN

*444 The Commissioner has determined deficiencies in income taxes for the calendar year 1920, in the sum of *2974 $380.49 against Philip L. Seasongood, and in the sum of $241,40 against Cora S. Stern. These proceedings are for a redetermination of said taxes. It is *445 alleged that the Commissioner erred (1) in refusing to allow deductions for losses sustained upon the sale of one piece of real property, and (2) in refusing to allow deductions for losses by fire, not compensated for by insurance or otherwise, sustained on other real property. It is claimed that each petitioner was the owner of a three-fortieths interest in both properties at the time said losses were sustained. Both proceedings arise out of the same facts and circumstances, and present identical issues. Upon motion of the respondent, made at the hearing, it was ordered that the proceedings be consolidated for hearing and decision.

FINDINGS OF FACT.

The petitioners are individuals, with their principal offices at 1102 Union Trust Building, Cincinnati, Ohio.

Philip L. Seasongood and Cora S. Stern are the son and daughter, respectively, two of eight children, of Lewis Seasongood and Emma Seasongood. Emma Seasongood was the daughter of Jacob Seasongood.

Jacob Seasongood and Lewis Seasongood owned jointly *2975 or in common, among other property, two parcels of real estate in the City of Cincinnati, Ohio, one located at 819-821 Central Avenue and 409 West Ninth Street, hereinafter called the Central Avenue property, and the other located at 18 East Second Street, hereinafter called the Second Street property. Some of the jointly owned property was held in the individual name of one of the owners and some was held in the joint names of both owners. The Central Avenue property was held in the name of Lewis Seasongood, but it does not appear in whose name the Second Street property was held. Each owner died seized of an undivided one-half interest in both pieces of real property, which passed as a part of their respective residuary estates under their separate wills.

In March, 1920, the estate of Jacob Seasongood, A. J. Seasongood, Executor, and the estate of Lewis Seasongood, Philip L. Seasongood, Executor, sold the Central Avenue property to the Banquet Chocolate Co. for $23,000, payable $3,000 in cash and the balance in six annual equal installments of $3,333.33 1/3 each. The cash payment of $3,000 was paid by the Banquet Chocolate Co., $100 on March 8, 1920, and $2,900 on April 28, 1920, and *2976 was entered upon the books of J. and L. Seasongood, covering property owned jointly by the Jacob Seasongood and Lewis Seasongood estates, under "Real Estate, Ninth and Central Avenue." No entries appear upon said books to the individual beneficiaries of said estates. The balance of the purchase price of said property was paid in 1921. A real estate *446 brokerage commission of 4 per cent on $23,000, or $920, was paid by the sellers to Harry L. Lynch on May 3, 1920.

The sale was made in the form of an agreement of lease, dated March 27, 1920, by which Philip L. Seasongood, Clifford Seasongood, Cora S. Stern, Lillian S. Adler, Daisy S. Cohn and Clara S. Berolzheimer, Children of Lewis Seasongood, deceased, and Philip L. Seasongood and Murray Seasongood, Trustees under the last will and testament of said Lewis Seasongood for Alma S. Bettman and Albert Seasongood, leased said property to the Banquet Chocolate Co., a corporation, for a term of six years, with the option to purchase for the sum of $20,000, payable in six annual equal installments, provided the full purchase price be paid before the termination of the term of the lease. The option to purchase was exercised by *2977 the Banquet Chocolate Co. pursuant to a resolution of its board of directors adopted April 24, 1920. Sometime later a quit-claim deed to this property was obtained by the purchasers or their successors in title from the heirs of Jacob Seasongood.

The value of said Central Avenue property in November and December, 1919, was approximately the same as the value thereof on the date of sale.

The building or buildings upon the Second Street property were destroyed by fire in January, 1920. This property was held for business purposes, having been rented to the Newton Tea & Spice Co. prior to the fire, and was an income-producing property. The fair market value of the buildings in November and December, 1919, and at the time of their destruction by fire, was $20,016. The gross amount of insurance received was $15,000. The walls left standing after the fire had to be corn down and the debris cleaned up and removed; upon orders from the city authorities. The estates of Jacob Seasongood and Lewis Seasongood spent $1,128.50 for tearing down the walls and cleaning up and removing the debris.

Jacob Seasongood died between January 26 and March 18, 1884, leaving a last will and testament *2978 and codicil thereto, the material provisions of which are:

Thirteenth. - It is my earnest desire, that after my death the remainder of my estate shall be kept intact, and in same form and condition as that in which I shall leave it, until such time as it may become necessary, or my said Executors shall deem it most practicable and advisable to make partition of the same, and so long as my Estate so remains intact and undisturbed in form, I give and devise to my children Emma Seasongood, wife of Lewis Seasongood, Jennie Bohm, wife of Joseph Bohm, Julia Reis, wife of Julius Reis (subject to the provisions hereinafter made as to said Julia's share) Adolph J. Seasongood and Charles Seasongood, each an equal share of the income thereof, the same to be divided between them (except as hereinafter set forth as to said Julia) semi-annually - * * * Should partition of my Estate be made as above provided for, then and in that case, I will and devise, that the same *447 be made by the mutual consent of my said Executors, and without the intervention of any Court, and the better to enable such partition to be made, it is my will, and I hereby authorize my Executors to sell and dispose *2979 of to such person or persons, and upon such terms and conditions, as they deem best, any of my estate, Real or Personal, or to purchase the interest of any person or persons with whom I may own Realty in Common, if in their judgment it will encure (sic) to the benfit of the estate to do so; and in making sales of any of my real estate, my said Executors may designate any one or two of themselves, by written authority of the others of them, to make, execute, acknowledge and deliver, all necessary Deeds or other Instruments of Writing to perfect such sale or sales, and to do all other necessary acts and things to complete such transactions, and in the partition or division of said Estate, each of my children, to-wit Emma, wife of Lewis Seasongood, Jennie, wife of Joseph Bohm, julia, wife of Julius Reis (subject to the provisions hereinafter made as to said Julia), Adolph J. Seasongood and Charles Seasongood, shall receive an equal amount, that is share and share alike.

* * *

Fifteenth. - In the event either of my said children shall be dead, at the time of my decease, leaving issue, so long as no partition is made of my Estate as hereinabove provided, the income of the share *2980 that such deceased child would otherwise have received (except in the case of my daughter Julia) shall be paid to the husband or wife, relict of such deceased child, until said issue arrive at the age of majority respectively, and as each of said issue attains the age of majority, he or she shall thereafter receive an equal share of said income. And whenever partition of my said estate shall thereafter be made, then it is my will, that the share such deceased child would otherwise have received, shall be equally divided among the issue of such deceased child, share and share alike, the said shares of such issue however, during their minority, to be so invested by my said Executors, as they deem best and most profitable, the income thereof to be paid to the husband or wife, relict of such deceased child, until such issue arrive at the age of majority, respectively, when such issue shall receive his or her share respectively, of the estate such deceased parent would otherwise have received.

Lastly. - I nominate and appoint my sons Adolph J. Seasongood and Charles Seasongood and my son-in-law Lewis Seasongood, Executors of this my Last Will and Testament and request that they *2981 be not required to file any Inventory of my Estate, or to give Bond for the faithful performance of their trust, as I have implicit confidence in their honesty, integrity and ability. Should either of my said Executors be incapacitated from serving as such, or should decline to do so, then I desire, that the others of them will perform said trust, as hereinabove set forth. * * *

CODICIL. * * * And as to the real estate owned by me and my son-in-law Lewis Seasongood jointly, some of which is in my individual name, some in said Lewis individual name, and some in our names jointly, it is my will, that whenever it becomes necessary or advisable to make partition of the same, should said Lewis survive me and my Executors be unable among themselves to agree upon a division of said real estate, said Lewis shall select an appraiser, and my sons Adolph J. and Charles together select an appraiser, and the two so chosen shall appraise said real estate, and should they be unable to agree, the two appraisers so chosen, shall select a third, and these three shall then appraise the same, and said Lewis shall thereupon have the privilege of purchasing my half interest in said real estate, at *2982 the appraised value, upon the following terms to wit: one third of the purchase price, payable in one year, *448 one third in two years and one third in three years after date of purchase, said payments to be secured by Mortgages upon the premises, if so desired or upon such other terms as my sons Adolph J. and Charles and said Lewis may agree upon. * * *

No partition or division and distribution or other disposition of Jacob Seasongood's interest in the two properties in question was made during the lifetime of Emma Seasongood or at any time prior to 1920.

Emma Seasongood died December 15, 1916, leaving a last will and testament and codicil thereto, the material provisions of which are:

Item 6. Should my husband, Lewis, not survive me, then I give, bequeath and devise to my executors and the survivor or survivors of them all the said rest and residue of my said property wherever situate, to have and to hold the same for the equal use and benefit of all my children, share and share alike, as hereinafter directed, and as to such as will be severally of age at my demise said executors shall hold same until they shall have survived a period of three years thereafter *2983 or die, whichever of said events may first happen; and as to such as shall be minors at my demise, until they shall have survived a period of three years after respectively attaining her majority or die, whichever of said events may first happen - with power vested in said executor or executors to sell, convey or lease for years any part of my real estate whenever my executors may think it necessary or expedient, and for such prices and upon such terms as they may deem safe and advantageous to said estate, to dispose of, invest and re-invest all or any parts of my personal property, not herein otherwise disposed of and provided for, to invest and re-invest the proceeds of the sales and other disposition of my real and personal property, as well as its income and net surplus of same, according to their best judgment and discretion and with such other and further powers as are hereinafter conferred on them. * * * I also will and direct that my executors pay semi-annually to each child, who is of age at my decease and such minors of them, when she arrives at age after my decease, his or her equal proportionate share of the net income of my estate, or so much thereof as they respectively *2984 may request; and, semi-annually to the Guardian of each of my minor daughters, for her maintenance, support and education, her proportionate equal share of said income or so much thereof as may be, from time to time agreed to between said executors and her guardian, to be a fair and liberal allowance. * * *

Item 7. To each child who shall survive, respectively said several periods of three years as in Item 6 described and provided for, and at the end of each said period, (if he or she live so long) said executors shall apportion, convey and transfer to him or her, his or her equal share of my said residuary estate herein given to him or her as nearly as may be, after making all deductions and charges against the same respectively as herein directed or intended, so as to equalize each one with the other as nearly as possible. Upon conveying to each and all of them his or her proper portion, said executors shall be entirely released and discharged of and from all further duty or liability by reason of their said trust, faithfully performed and executed on their part.

Item 8. Whenever my executors deem it proper or necessary in the discharge of their trust, hereunder, to *2985 sell, convey or otherwise dispose of, to buy, or otherwise acquire any property whatsoever, they are empowered so to do, by any manner or means they deem proper and advantageous to the trust, with or without advertisement, according to their discretion and without the intervention *449 of any processes of Law or of Court; in any division, partition or other form or mode of distribution my estate or any part thereof, to and among the beneficiaries under this Will or any of them, whether final or otherwise, the executors are empowered to make sales and conveyances and execute all other modes and forms of disposition of property, to buy and execute all other modes and forms of acquiring rights and interests in property and accept conveyances, as well as other forms of acquisition, as they may deem proper and advantageous, and they are empowered so to do, without the intervention of any processes of Law or of Court. They shall have further power in the partitioning and division of my interest of my father's estate, to do all things they think proper and necessary, the same as if I could or would do if I should survive to act for myself in said partition and division; and they shall *2986 have for said purpose, so far as they think them applicable, all and every the powers herein conferred on them in and for the execution of their trust of my estate.

Item 9. In the discharge of their trust and office hereunder, my executors shall be authorized and empowered to make such improvements, alterations, remodelling, rebuilding, and repairs on my property as they may deem necessary; and to make, execute, deliver and accept all instruments, documents and writings, and enter into all contracts they may consider proper and necessary in the performance of their trust under this Will. They shall under no circumstances be held answerable for anything done or omitted by them or either of them in the discharge of their trusts hereunder, when acting in good faith. I will that whatsoever said Executors or their survivors are herein empowered to do may be done by any two of them, and if and whenever one only survives or holds said executorship, then by him alone. I also will and direct that in no event shall the purchaser, lessee or any person paying money or other consideration for any conveyance, transfer or lease from my executors or executor under this Will be acquired (sic) *2987 to see to the application of the purchase or any other money or consideration paid or delivered to any said executor or executors.

Lewis Seasongood died November 29, 1914, leaving a last will and testament and codicils thereto, the material provisions of which are:

ITEM I. I hereby nominate and appoint my sons Philip L., Albert and Clifford Seasongood, and my nephew, Murray Seasongood, the executors of this my last will and the trustees of the trusts in this my last will contained. In case any of them decline, die, or for any reason fail or cease to be executor or trustee, then the others, or other, shall be and act as executors and trustees and successors in said office or offices. I appoint my son, Clifford and my nephew, Murray Seasongood, counsel for my executors and trustees.

ITEM II. Wherever under this will any authority or power is vested in executors or trustees, the same shall be likewise vested in their survivors or their successors (including among them, administrator, or administrators, with the will annexed). I request that none of the executors or trustees, their survivors or successor be required to give any bond to qualify or serve in their capacities *2988 under this will; and that no inventory, appraisement or account of my estate be required in any court; I also dispense with the filing of any partnership inventory or appraisement.

FIRST CODICIL: I hereby revoke and cancel the paragraph designated as "Item XIV" in the aforesaid last Will and Testament contained and in its place and stead, I will and declare as follows:

Subject to the payment of my debts and the bequests hereinbefore made and directed, I give, devise and bequeath to my sons PHILIP L., ALBERT and CLIFFORD *450 SEASONGOOD and to my nephew, MURRAY SEASONGOOD, and the survivors or survivor of them, all my estate of every nature, real, personal and mixed, wherever situate, which I may have or in any way be entitled to have, or to have an interest in, at the time of my decease, in trust nevertheless, to have and to hold the same for the equal use and benefit of all my children share and share alike until the period of distribution of my estate shall arive which period of distribution I hereby direct shall be upon the death of the last survivor of my sons PHILIP L. and CLIFFORD SEASONGOOD or five years from and after the date of my decease, whichever event may *2989 first happen, except, however, if either of my sons, PHILIP L. or CLIFFORD SEASONGOOD be living five years from and after the date of my decease and in the event that the trustees then acting think it advisable and beneficial for the estate that the period of distribution be postponed, then and in that event the said period of distribution shall be postponed until the death of the last survivor of my sons PHILIP L. and CLIFFORD SEASONGOOD or until nor more than seven years from and after the date of my decease, whichever event may first happen. In case any of my children die before distribution leaving no lawful issue surviving, the share so intended for him or her shall be held by my said trustees for the surviving children in equal shares until said period of distribution as aforesaid. If any of them should die before distribution leaving lawful issue surviving him or her, such issue, if of age, and, if not, the guardian or guardians of such issue, for and in behalf of such issue, shall receive from said trustees at the time distribution is made as aforesaid, in equal shares (if there be more than one) the share or portion my deceased child would have had of my estate.

SECOND: *2990 I hereby direct and declare that wherever, in the aforesaid last Will and Testament, and more especially in the paragraph designated "Item XV" thereof, I have referred to investing, reinvesting, keeping invested, converting or changing, renewing or continuing investments, it is my intention that my executors and trustees be not restricted or confined to the so-called trust or court securities but that they have the right to exercise as wide and unrestricted a discretion in investing, reinvesting, keeping invested, converting or changing, renewing or continuing the investment of either principal or income as I myself could or would have in doing such acts if living.

ITEM XV. I authorize and empower my executors and trustees to sell, convey or lease for years or perpetually any part of my real estate, not otherwise herein disposed of (including any which I may hold jointly with any other person or persons or estate), whenever they may deem it necessary or expedient, and for such prices and upon such terms as they may deem safe and advantageous to my estate, also to sell and dispose of my personal property, not otherwise herein disposed of; and also to invest and reinvest the proceeds *2991 of said real or personal property, as well as the surplus income or profits of my estate in such securities or investments as they think advisable, and according to their best judgment. They shall also have full power to convert and change investments from time to time if, and as, they deem proper, and also to renew or reinvest, continue or increase such profitable income bearing investments as I may possess.

ITEM XVI. Out of the income of the residuary estate so devised to said trustees, after first defraying taxes, repairs, insurance, necessary improvements, necessary alterations, remodeling or re-building and other necessary expenses of said trust, including the allowance to said trustees as compensation for services, they shall pay first, to my wife the said annual payment of twenty *451 thousand ($20,000.00) dollars, secondly, to each of our children until the distribution of their shares, as herein directed, they shall pay annually to him or her between February 1 and 15 of each year, or, if in the opinion of the trustees, payment semi-annually is more practicable or desirable, then semi-annually between February 1 and 15 and between August 1 and 15, his or her equal *2992 share of the net annual income of said trust; should my executors or trustees before the distribution of any share, unanimously deem it of advantage to any of my sons to make from his share advances to him at any time or times, to enable him to engage in business or in a profession, they are hereby authorized and empowered to make such advances; the payment so made to each shall be charged against and deducted from his or her share in the final settlement and division; finally, to each beneficiary who shall survive the period of distribution said trustees shall at said period of distribution apportion, convey and transfer to him or her the equal share of said residuary estate herein given as nearly as may be, after making all deductions and charges against the same respectively, as herein directed or intended, so as to equalize out of the residuary estate each one's share with the other's as nearly as possible. Upon conveying to each and all of them his or her portion, said trustees shall be entirely relieved, discharged of and from all further duties and liabilities by reason of said trust performed in good faith.

* * *

ITEM XX. I empower the executor of executors, trustee *2993 or trustees, serving under this will to make all and every purchase and sale and make and accept all and every conveyance that I, if living, would be entitled to make and accept, of all rights, titles and interests in real estate wherever situate held by me jointly or in common with any other person or persons in whatsoever capacity, and especially with the late Jacob Seasongood, his heirs, trustees or estate, as the case may be, and also to collect any compensation, fees, or commissions due me as executor and trustee of said estate, or otherwise.

ITEM XXI. Whenever either my executors or trustees deem it proper or necessary in the discharge of their respective trusts, to sell, convey, or otherwise dispose of, to buy or otherwise acquire any property whatever they are respectively empowered so to do, by any manner or means they severally deem proper and advantageous to the trust, with or without advertisement according to their discretion and without the intervention of any processes of law or of court; in any division or partition or other form or mode of distribution of my estate, or any part thereof, to and among the beneficiaries under this will, whether final or otherwise, *2994 the executors and trustees in their respective capacities are empowered in their several offices, powers and duties hereunder to make sales and conveyances, and execute other modes and forms of disposition of property, to buy and execute other forms and modes of acquiring rights, titles and interests in property, and accept conveyances as well as other forms of acquisitions as they may deem proper and advantageous to the estate; and they are severally empowered so to do without the intervention of any processes of law or of court, and their action shall in each case be conclusive and exclusive evidence of the exercise of their judgment in that behalf.

ITEM XXII. I will and direct that the real property owned in common or jointly by myself and Jacob Seasongood, his heirs or his estate, whether record title to the same be in me or him, his estate or heirs, be divided, partitioned, or otherwise disposed of as soon as practicable after my demise, so that interests represented by the heirs of Jacob Seasongood and my heirs may be separated and I urge upon all the interests involved that such separation be *452 amicably made, if possible. And for the purpose of making such partition, *2995 division or separation whenever it may be made, I hereby confer upon my executors and trustees power to make the same in their respective capacities, the power to perform all acts, enter into all agreements, make all conveyances, transfers and other modes and forms of disposition of property, as well as accept all conveyances, transfers and other forms of acquisition of property, as they may respectively consider proper and necessary for such purpose; and I empower them respectively in their respective capacities to purchase, sell or exchange any of said undivided interest, or any part thereof, and if they think necessary to make, give, execute or accept purchase money notes and mortgages in such amounts and terms, and secured on such parts, parcels and interests of and in such property so acquired or disposed of, as may be agreed upon by the contracting parties, and I reserve and give to my executors and trustees, or executor and trustee, all the rights conferred upon me under the will and condicil of the late Jacob Seasongood, in connection with said lands.

ITEM XXIII. I direct that whenever under this will any authority or power is given to or any duty is enjoined on the executors *2996 or trustees, or their successors, or any act is to be done by them, they may exercise the power or authority and discharge the duty or do such act in any manner and by means of any form of proceeding not prohibited by law they may deem proper, and by executing, delivering or accepting any and all lawful forms or instruments, documents and writings they may elect, or by any other lawful mode they may think proper. And their acts shall be conclusive evidence of their decision and discretion in that behalf. And if there be more than two (2) acting in any said trust capacities, the decision, action or signature of a majority then acting shall be competent and sufficient for the full and complete exercise of such authority or power or performance, except where otherwise stated herein.

By the third codicil to the will the testator revoked the nomination and appointment of his son Albert Seasongood as one of his trustees, and revoked and canceled all provisions for a device or bequest or both, in trust or otherwise, to two of his children, Alma Seasongood Bettman and Albert Seasongood, whose respective shares or portions he directed should be held by designated trustees to the specific *2997 uses, purposes and trusts therein named. The will further provided that the testator's sons named as trustees should be allowed jointly each year a commission of 5 per cent of the annual net income derived from the revenue of their trust for their services as trustees.

Under the wills and codicils thereto of Lewis Seasongood, deceased, and Emma Seasongood, deceased, each of the petitioners was entitled to a three-fortieths interest in both said pieces of real property.

In December, 1919, the then present acting executors and then present acting trustees of the last will and codicils thereto of Lewis Seasongood, deceased, made application to the Probate Court of Hamilton County, Ohio, representing that all the debts of the decedent had been paid and that they still held certain securities of the estate, as shown on a list attached thereto; that they had filed their final accounts therein; that the trustees did not think it advisable or beneficial to the estate to postpone the period of distribution *453 beyond five years from the date of decedent's death; that the decedent died November 29, 1914; and that they believed it to the best interests of the beneficiaries of the *2998 estate that the securities be distributed in kind. It was therefore prayed that the court make an order authorizing them to distribute said securities to the beneficiaries, as shown on lists thereto attached. Also attached to the application, and made a part thereof, was the written consent and approval of all the persons entitled to distribution of the estate, who thereby joined in said application. The court entered its order on December 19, 1919, authorizing and directing the executors and trustees to distribute said securities among the distributees of the estate, as prayed for in the application.

No conveyance or transfer has been made at any time by the trustees or the executors under the wills of Jacob Seasongood, Lewis Seasongood and Emma Seasongood of the two pieces of real property in question, or proportionate shares therein, to the beneficiaries individually. At the date of this hearing there were some pieces of real property belonging to the estates of the several decedents that remained unsold and that had not been disposed of.

The estate of Lewis Seasongood, deceased, filed a fiduciary return of income for Federal tax purposes for the year 1921.

The estate *2999 of Jacob Seasongood, deceased, filed fiduciary returns of income for Federal tax purposes for the years 1920 and 1921. Upon the return for 1920 this estate reported income from both the Central Avenue property and the Second Street property; reported the sale of the Central Avenue property and took as a deduction one-half of the alleged loss on said sale; and also took as a deduction one-half of the alleged loss by fire on the Second Street property. Upon the schedule of distribution of income attached to the 1920 return the estate reported the sum of $3,237.95 distributed to the estate of Emma Seasongood. Upon the return for 1921 the estate reported income received from the Central Avenue property, and upon the schedule of distribution of income attached thereto reported the sum of $5,844.27 distributed to the estate of Emma Seasongood.

The estate of Emma Seasongood, deceased, filed a fiduciary return of income for Federal tax purposes for the year 1921 and reported thereon income in the amount of $5,844.27 received from the estate of Jacob Seasongood.

The petitioner, Philip L. Seasongood, filed individual income-tax returns for the calendar years 1920 and 1921, and reported *3000 thereon income received in each of said years from the estate of Lewis Seasongood and the estate of Emma Seasongood, and also commissions received by him as trustee under the will of Lewis Seasongood. deceased. The petitioner, Cora S. Stern, filed an individual incometax *454 return for the calendar year 1920 and reported thereon income received from the estate of Lewis Seasongood and the estate of Emma Seasongood.

OPINION.

VAN FOSSAN: In these proceedings each of the petitioners seeks to deduct from gross income a proportionate part of losses alleged to have been sustained in the taxable year on two pieces of real property. It is contended that each petitioner was the absolute, legal and equitable, owner of a three-fortieths interest in both properties during the taxable year and at the time of the losses, such interests, it is claimed, having been acquired in the preceding year under the wills of Lewis Seasongood, deceased, and Emma Seasongood, deceased, father and mother, respectively, of the petitioners. The properties in question were originally owned jointly or in common by Lewis Seasongood and Jacob Seasongood, father of Emma Seasongood, and such interest as *3001 Emma Seasongood had came to her under the will of her father. The respondent refused to allow the deductions upon the ground that both properties were still held in trust under the wills of the original owners during the taxable year and at the time of the losses, and that any losses sustained are deductible by the estates and not by the individual beneficiaries thereof.

The controlling question before us is whether or not the trusts created as to these properties by the wills of Jacob, Lewis and Emma Seasongood had terminated at or before the taxable year, and the legal title, as well as the equitable and beneficial title, of the petitioners to their respective interests in the properties had vested in possession at that time and at the dates of the losses. If the trusts had not terminated on or before the dates of the losses, and if the legal title to these properties at that time was still held by the trustees, or in trust by the executors, of the estates jointly or in common, and had not then, or prior thereto, vested in the petitioners and other beneficiaries, any losses sustained on the properties can not be deducted in any amount by the petitioners from their individual *3002 gross incomes. In the latter event such losses are deductible, if at all, by the respective estates in their proper proportion in computing the net income of the estates, and are not deductible by the petitioners, in proportionate shares, as beneficiaries of the estates. See section 219(b) of the Revenue Act of 1918; ; affd. ; ; ; and .

That Jacob, Lewis, and Emma Seasongood devised their respective interests in the properties in trust is not questioned nor is the validity of the several trusts attacked. The petitioners contend that *455 the trusts had terminated and absolute title to their respective shares in these properties had vested in them at or before the time the alleged losses were sustained. It becomes necessary, therefore, to examine the wills of these testators and the applicable law to determine the title or estate vested in their trustees, the duration of the trust, and the nature of the estate *3003 in these properties held by petitioners.

The title or estate acquired by trustees in trust property is fixed by the requirements of the trust (see ) and is coextensive with the powers conferred and the duties imposed. If a legal estate in fee be necessary to the proper execution of the trust, as where the trustee is empowered to sell property and reinvest the proceeds or income, or is directed to distribute and convey the property to the beneficiaries, such an estate will vest in the trustee. See . The legal title having vested in the trustee, it can not be divested without a conveyance by him or by order of court. . Generally, in the absence of a provision in the will or other instrument requiring the trustee to convey the legal title will vest by operation of law in the beneficiaries immediately upon the termination of the trust. The trust will not terminate, however, until the expiration of the time limited for its duration and the purposes of the trust have been performed or have failed. In some *3004 cases where the trust has been completely executed, it may be terminated prior to the expiration of the time prescribed for its existence by order of court or by agreement between all parties beneficially interested.

The direction in a will that the trustee shall divide, distribute and convey trust property to the beneficiaries upon the expiration of the trust period is an imperative duty of the trustee and an express purpose of the trust, just as the instruction to pay the income of the estate to designated persons and to pay annuities are duties and purposes of the trust. See . This duty is one imposed upon the trustee and is to be discharged by him in the exercise of powers conferred by the will. In such cases, the trust will continue and the legal title will remain in the trustee until he divides, distributes and conveys the estate to the beneficiaries, notwithstanding the will directs that the division, distribution and conveyance be made at or within a certain time. So long as the trust continues and the legal title remains in the trustee, the beneficiaries of the estate have only an equitable title or interest therein. *3005 They can have no legal title, or right of possession, to any specific part of the trust property, real or personal. . See also

*456 Although the duty of a trustee to convey the estate to the beneficiaries arises when the trust has terminated either by the expiration of time and the complete execution of the purposes thereof, or by the happening of the contingency upon which the conveyance is to be made, a conveyance will be presumed only in the absence of evidence to the contrary. And where it appears as a fact that no conveyance of the estate was ever made by the trustee, the legal title remains in him. See . A valid trust once established is presumed to continue and the burden of proof is upon him who denies that it longer exists. See .

Jacob Seasongood devised and bequeathed his residuary estate to executors in trust for five of his children, of whom Emma Seasongood was one, until such time as it might become necessary, or his executors should deem it most practicable *3006 and advisable to make partition of the same, the income therefrom to be paid in equal shares to said five children. He further directed that "should partition of my Estate be made as provided for, then and in that case, * * * the same (shall) be made by the mutual consent of my said executors, and without the intervention of any court." To that end he authorized the executors, in their discretion, to sell and dispose of any of his estate, real or personal, and to purchase the interest of any person or persons with whom he might own realty in common. He further provided that the real estate owned jointly with Lewis Seasongood, "whenever it becomes necessary or advisable to make partition of the same," should be appraised and that said Lewis should have the privilege of purchasing the testator's half interest at the appraised value.

Jacob Seasongood's one-half interest in these properties thus passed to his executors and legal title thereto vested in them, in trust for the five children named. The duration of the trust is not definitely fixed, but it was to continue until it became necessary, or the executors deemed it most practicable and advisable, to make partition of the estate.

*3007 The record is silent as to the administration, partition and distribution of Jacob Seasongood's residuary estate. It does not appear when, if at all, partition was made, or that partition at any time became necessary or was deemed by the executors most practicable and advisable. It does appear, however, that the real estate owned jointly with Lewis Seasongood was not appraised, as directed, and said Lewis did not exercise his privilege of purchasing Jacob's half interest. Furthermore, Jacob's estate filed fiduciary returns for the years 1920 and 1921 upon which income from the properties in question was reported and the distribution of income to beneficiaries was set forth. Upon the return for 1920 the estate claimed deductions *457 for one-half the losses alleged to have been sustained on each of the two properties.

The evidence does not establish that the trust created by Jacob Seasongood, which included his interest in these properties, was terminated during or prior to the taxable year. It appears that legal title to his property included in the trust at that time remained in his trustees or executors. Accordingly, Emma Seasongood acquired no legal title or estate *3008 in these properties under her father's will and could pass no such title by her will to the petitioners. It seems unnecessary, therefore, to review at length the provisions of Emma Seasongood's will. We may observe, however, that she also devised her residuary estate, including such interest as she had in these properties, in trust, and that no evidence has been introduced to show that this trust was terminated during or prior to the taxable year. On the contrary, the fact that her estate filed a fiduciary return for 1921 and reported thereon income received from the estate of Jacob Seasongood seems to indicate that the trust created by her had not been terminated prior to that year.

Lewis Seasongood devised and bequeathed his one-half interest in these properties in trust for his children, of whom the petitioners are two. The trust was to continue for five years following his decease or until the death of the last survivor of his two sons named in the will, whichever should happen first, with the option or discretion in the trustees, if either son should survive the five-year period, to extend the trust to seven years or to the death of the last survivor of his two sons, whichever *3009 should happen first. The five-year period expired in November, 1919, and at that time one of the sons, Philip L. Seasongood, was living and is now living. It does not appear whether or not the other son, Clifford Seasongood, survived the five-year period. The trustees were directed to pay the income of the estate to the children in equal shares and at the time of final distribution, to apportion, transfer and convey to each child his or her equal share of the estate. The trustees were empowered and authorized to sell or dispose of any of the estate, real or personal, and in their discretion to purchase any property, including the interests held jointly or in common with other persons. The testator expressly directed that the real property owned in common or jointly with Jacob Seasongood, his estate or heirs, be divided, partitioned or otherwise disposed of as soon as practicable after his death, so that the interest of each might be separated. To that end he authorized his executors and trustees to make any and all sales, conveyances and purchases and to perform any and all acts necessary for the purpose.

The legal title to Lewis Seasongood's half interest in these properties *3010 was thus vested in the trustees and remained in them until they *458 should partition, distribute and convey the same to the beneficiaries, as directed in the will, or the trust was otherwise properly terminated. The direction to partition and convey was a duty imposed upon the trustees and the specific direction to partition, divide or otherwise dispose of real property owned jointly with Jacob Seasongood was a mandatory duty imposed upon the executors and trustees, the performance of which was essential to divesting them of the legal title to the testator's interest therein.

The evidence does not establish that there was a termination of the trust in these properties created by Lewis Seasongood at any time during or prior to the taxable year. The only evidence indicative of a termination of the Lewis Seasongood trust is the application of the trustees to the probate court for authority to distribute, and an order of the court in December, 1919, authorizing the distribution of certain securities held by them, but it does not appear definitely when the securities were actually distributed to the beneficiaries pursuant to that order. *3011 Nor is that alone sufficient to establish that the trust was terminated as to all the property held in trust. It may well be, where real and personal property are held in trust, that the trust has been terminated as to the personal property and continued as to the real property. See . No evidence whatever was offered to show that the real property, which included testator's interest in the properties here in question, was ever partitioned and distributed, or that the trust as to such property was ever terminated in any manner. The properties in question were not partitioned, or otherwise disposed of by the trustees, as expressly directed by the testator in Item XXII of his will, at any time prior to the taxable year. No conveyance of these properties, or proportionate shares therein, has been made at any time by the trustees to the petitioners and other beneficiaries. It is also noted that Lewis Seasongood's estate filed a fiduciary return for 1921, a fact inconsistent with a termination of the trust and a distribution of the estate to the beneficiaries severally. On the evidence before us, it can not be said that the trust *3012 created by Lewis Seasongood had been terminated at or prior to the time of the alleged losses. So far as the record discloses, the legal title to his interest in these properties remained in the trustees.

The petitioners claim that in the taxable year and prior thereto they each hold the vested legal, as well as equitable, title to a three-fortieths interest in both properties in question. To sustain their contention, the burden is upon them to prove that the trusts created by Lewis, Jacob and Emma Seasongood had been terminated and the legal title to these properties had vested in the beneficiaries at that time. This they have failed to do. Whether or not, by proper proceeding in a court equity, the trusts could have been terminated and *459 the trustees compelled to convey these properties to the petitioners and other beneficiaries is a question not presented to us (see ), and upon which we make no comment. Upon the record before us we hold that the properties in question were held in trust during the taxable year and that the petitioner did not have legal title to any interest therein at that time. See *3013 .

Accordingly, any loss sustained upon the sale of the Central Avenue property and any loss sustained from the fire on the Second Street property, are deductions allowable, if at all, to the estates of Jacob Seasongood and Lewis Seasongood in their proper proportions, and such losses are not allowable deductions to the petitioners, beneficiaries of the estates, to any extent. The respondent, therefore, did not err in refusing to allow the deductions to the petitioners.

Our conclusions render unnecessary any determination of whether or not the alleged losses were sustained in the taxable year or of the amount of such losses.

Reviewed by the Board.

Judgment will be entered for the respondent.

PHILLIPS concurs in the result.