The opinion of the court was delivered by: MOSCOWITZ
MOSCOWITZ, District Judge.
This is a motion for judgment on the pleadings in an action brought for the recovery of $14,247.51, with interest, alleged to have been illegally collected from the plaintiff by the defendant, who is collector of internal revenue of the United States for the First district of New York, as income tax for the calendar year 1928.
A similar motion has been made in the action entitled James W. Lane, Jr., Plaintiff v. Walter E. Corwin, Collector of Internal Revenue for the First District of New York, Defendant No. L-4973. The action in that case is to recover the sum of $14,167.60.
The facts in each case are the same; the only difference is in amounts. The motion is based upon the complaint and answer; the facts are not in dispute.
For convenience, the court will refer to the plaintiff in this action and the plaintiff in the action of James W. Lane, Jr., v. Walter E. Corwin, Collector of Internal Revenue for the First District of New York, L-4973, in which action a similar motion is made, as the plaintiffs.
On October 29, 1922, Eva B. Lane, a resident of Suffolk county, N.Y., and mother of the plaintiffs, died, leaving a will wherein, among other things, she devised to certain trustees named in the will, for the benefit of the plaintiffs and two other sons, a certain piece of property described as lot 2, section 10, block 5832, borough of Brooklyn, and commonly known as "Owls Head Park," at Sixty-Eighth street and Colonial road. The trust was for the duration of the lives of the plaintiffs. It was further provided that the trustees, acting unanimously and in their discretion, could terminate the trust in whole or in part at any time and distribute the corpus thereof to the beneficiaries, and also, if it was decided to terminate the trust, the trustees should immediately convey the legal title of the real property equally to all of the sons of the testatrix.
The value of the tract in question at the date of death of the testatrix was $379,500.00, at which value it was returned for federal estate tax purposes.
On June 8, 1928, the trustees conveyed the property to the four sons of the decedent by appropriate deed. Subsequently, and on August 20, 1928, the plaintiffs and the two other sons duly conveyed the tract to the city of New York for park purposes in consideration of a purchase price of $835,000. On their income tax returns filed for the year 1928, the plaintiffs, in reporting their income derived from the sale of the property, treated their interest as having been acquired on June 8, 1928, and as having a value on that date of $208,750, or one-fourth of $835,000, the price for which it was sold about two months later, and reported no gain or loss from the transaction.
Subsequently, and upon an audit of the returns so filed, the Commissioner of Internal Revenue determined that the plaintiffs had acquired their interest in the property in question upon the death of their mother, on October 29, 1922, and that their respective interests had a value on that date of $94,875, or one-fourth of $379,500, the value of the entire tract on that date. As a result, the Commissioner of Internal Revenue assessed against the plaintiff the additional taxes sought to be recovered, which were duly paid to the defendant, as collector of internal revenue. Proper claims for refund of the amounts so paid were timely filed and rejected in full by the Commissioner of Internal Revenue, whereupon these actions were begun.
The pertinent parts of the decedent's will are as follows:
"C. (a) I give, devise and bequeath to my Trustees hereinafter named, all of the pieces and parcels of real estate now owned by me in the Borough of Brooklyn, County of Kings, State of New York, and belonging to me at the time of my death, wheresoever situated therein, and whether contiguous or not, and whenever and however the same have been acquired by me, with all buildings, improvements, easements and appurtenances of every nature and description relating to or connected with the same. * * *
"(b) All of the foregoing assets shall be held and disposed of by my Trustees, their successors and assigns, upon the trusts, and with the powers set forth in this Clause Second, Subdivision E, paragraphs a to i inclusive, of this will. * * *
"(c) The duration of the said trust shall be the lives of my sons, James W. Lane, Jr., and George Bliss Lane, or if either of them predecease me, then the lives of the youngest two of my sons who shall survive me, provided, however, that my individual Trustees hereinafter named and their successors, (including the corporate Trustee if it shall act as sole Trustee as hereinafter provided) shall, in case they have sold all or any portion of the said real estate, have power in their unrestricted discretion, to distribute at one time or from time to time the proceeds of any such sale or sales among the persons entitled thereto as stated in this Subdivision C, paragraph (e), and to terminate the trust as to all amounts thus distributed. * * *
"(d) I direct my Trustees to receive all of the net rents, income, profits and increment from and of any and all securities, assets and property now or hereafter held in trust hereunder, and to pay over the balance in equal parts and at quarterly periods during the existence of the trust to each of my sons, Mortimer Bliss Lane, Arthur Bliss Lane, James W. Lane, Jr., and George Bliss Lane. * * *
"E. I give, devise and bequeath unto my Executors and Trustees hereinafter named those parts of the respective shares or portions of my said sons or issue of deceased sons which they will not be entitled to receive immediately upon my death.
"In trust, however, to hold, manage and dispose of the same as hereinafter authorized, to wit: * * *
"i. I further direct my said Trustees to receive the rents, profits, income and interest from the various portions thus held pursuant to the respective trusts created hereunder, and to pay the same to the beneficiaries of said trusts during the respective periods thereof."
The only question for determination is the value to be used in determining the gain or loss upon the sale of the property, whether the value should be fixed at the date of death of the testatrix, or its ...