The opinion
Disney, /., dissenting: The majority opinion in my opinion is opposed to statute, departmental regulation and attitude, and decisions hoth of this Court and others.
The life estate sold by the petitioner was received by devise. Section 113 (a) (5) provides that property received by devise has a basis of the value at the time of acquisition — in this case value at the date of the death of petitioner’s husband. That a life interest in a trust fund (not inalienable by its terms) is a property interest is too firmly established to require argument. Blair v. Commissioner, 300 U. S. 5 . That a life estate is alienable (in the absence of restrictions upon alienation) can not be denied in the face of many decisions. Bell v. Commissioner, 137 Fed. (2d) 454, reversing 46 B. T. A. 484; Sayers F. Harman, 4 T. C. 335 (acquiescence by Commissioner, I. R. B. No. 6, Mar. 26, 1945); Estate of Johnson N. Camden, 47 B. T. A. 926; affd., 139 Fed. (2d) 697; Orrin G. Wood, 40 B. T. A. 905; Elmer J. Keitel, 15 B. T. A. 903. It is alienable “like any other property,” Commissioner v. Field, 42 Fed. (2d) 820. Indeed, I do not understand that the majority opinion disagrees with those decisions or denies the alienability. That the life estate here was not inalienable as set up by a spendthrift trust is settled for us by the decision of the local court allowing the alienation. Though only by inference so holding, that court could not, without so holding, have rendered the decision it did, and such opinion, though only by inference, binds us. Irving National Bank v. Law, 10 Fed. (2d) 721.
We have, then, in this case, sale of alienable property having a base provided by statute. Of course that value must be ascertained, and the Treasury Department has devised a way to so value a life interest— by the use of expectancy tables based upon the life expectancy of the recipient of the life interest at the date of acquisition. I. T. 2076, C. B. III-2, p. 18, provides specifically for such valuation. The use of such tables is too well settled to be arguable. I. T. 2076 is altogether consistent with the statute, section 113 (a) (5). Thus we arrive at the petitioner’s base for her life estate. But Regulations 103, section 19.113 (a) (5)-l (e), specifically provides that such base is always the same (except of course for the necessary adjustment for depreciation or depletion upon property subject thereto). There being no such depreciation or depletion applicable here, the basis petitioner had at acquisition of the property remains the same, and when sue sold for $55,000 she took a capital loss, the basis being a greater amount.
The majority opinion is obviously based upon some idea or fear that the petitioner should not be allowed her original base because she had enjoyed the income from the life estate from acquisition to date of sale. The answer is, first, that base in property is not affected or adjusted by the mere receipt of income therefrom; and, second, that if there should be adjustment of the base because of lapse of time, it is the function of Congress, and not of this Court, to provide the adjustment. I see no reason to indulge here in judicial legislation, most particularly when Congress has specifically prescribed the base in section 113 (a) (5), and the Treasury Department has followed it in regulation and ruling.
Section 24 (d) offers no aid on this subject. The words of the sec - tion referring to “deduction” may not, with reason, be held to apply to the computation of gain or loss on sale of property; and the Committee Report thereon plainly shows such to be the intent. H. R. No. 350,1st sess., 67th Cong., Aug. 16,1921 (C. B. 1939-1, pt. 2, p. 177). The regulations, too, make it clear that the only intent of the section was to prevent capitalization of a life interest and deduction of a portion thereof by amortization. Regulations 103, section 19.24-7, after quoting the pertinent part of the statute, adds: “In other words, the holder of such an interest so acquired may not set up the value of the expected future payments as corpus or principal and claim deductions from shrinkage or exhaustion thereof due to the passage of time. (See section 113 (a) (5).)” I suggest that the situation so explained is a long step from computing gain or loss upon sale of the property interest.
Finally, I see no reason on this question to refuse to follow either our own opinion on this particular question in Sayers F. Harman, supra, and that of the Circuit Court of Appeals for the Eighth Circuit, reversing our earlier view, in Bell v. Commissioner, supra. The latter reviews the field of authority, including Irwin v. Gavit, 268 U. S. 161 , upon which the majority opinion here leans, and Helvering v. Horst, 311 U. S. 112 ; and Harrison v. Schaffner, 312 U. S. 579 , held assignments of life interests to be transfers of interest in trust assets and not merely assignments of income and concluded that a sale of a life interest resulted in capital gain. I think we should follow it. Fear that the petitioner may have a loss is offset by the fact that it might have been a gain — for the trust fund might well have appreciated, by wise investment.
As pointed out in the Bell case, the Supreme Court has had opportunity to overrule the Blair case, and has not “either expressly or by implication,” done so. That case squarely decrees that a property interest was owned by the petitioner, and such cases as Harrison v. Schaffner, involving mere assignment of income, do not apply. I think it late to hold, as the majority opinion does in essence, that sale of the life estate here involved is anticipation of income. I respectfully dissent.
Black, Jagrees with this dissent.