13 T.C. 897">*897 The Commissioner has determined a deficiency of $ 4,551.27 in petitioner's income tax for the taxable year ended December 31, 1944.

The sole issue in this case is whether the petitioner is entitled to a deduction in the amount of $ 2,950 for the calendar year 1944 under the provisions of section 23 (e) (1) and/or (e) ( 2) of the Internal Revenue Code.

The case has been submitted on a1949 U.S. Tax Ct. LEXIS 19">*21 stipulation of facts, exhibits, and oral testimony.

FINDINGS OF FACT.

Petitioner is an individual, residing in Franklin, Massachusetts. Petitioner's individual income tax return for the calendar year 1944, prepared on a cash receipts and disbursements basis, was filed with the collector of internal revenue for the district of Massachusetts.

During the years 1942 and 1944 petitioner was general manager and vice president of the Premier Worsted Mills, hereinafter sometimes referred to as Premier. In addition, petitioner was treasurer and major stockholder of Whitney Worsted Co., referred to hereinafter as the company, of Franklin, Massachusetts, and from July 20, 1942, through 1944 was the sole trustee of the Whitney Worsted Trust, referred to hereinafter as the trust, successor to the Whitney Worsted Co. He also held stock and had duties to perform in other mills located in Massachusetts and Rhode Island.

Petitioner visited each plant regularly and he had arranged for a private chauffeur, Eddy Thibeault, to drive him in his own car to and from the various mill sites. Petitioner's employment of Thibeault was on an hourly basis and Thibeault's compensation while so engaged as petitioner's1949 U.S. Tax Ct. LEXIS 19">*22 chauffeur was paid in cash by petitioner.

13 T.C. 897">*898 As a result of recommendations of engineers that a merger of the northern mills into the Premier Co. and their removal to a North Carolina site would result in substantial economies of operation, the petitioner, acting for the company, purchased a plant in Raleigh, North Carolina, as a site for the Premier mills. All of the machinery and equipment of these mills has been or is being removed to that plant.

On July 20, 1942, the directors of the Whitney Worsted Co., which was controlled by the petitioner, voted to liquidate and, in order to facilitate its liquidation, to transfer all its assets to the trust of which petitioner was sole trustee. Among the assets of the company so transferred was the truck involved in the accident described below.

The trust sold machinery to Premier and many carloads of equipment of the trust's mill and other mills merged with Premier were shipped under petitioner's supervision to its new location in Raleigh.

From January 1 to July 20, 1942, Thibeault was employed by the company and later by the trust. During the year 1942 Thibeault was employed on an hourly basis and received no weekly salary. Thibeault's1949 U.S. Tax Ct. LEXIS 19">*23 duties while employed by the trust consisted of driving and operating the above mentioned truck between the various plants. Payments for work done for the company and the trust were made by check.

On the morning of December 1, 1942, Thibeault went to Whitney's house with the truck to receive his orders for the day. No one there gave him directions, and after spending a short time at the petitioner's garage, he returned to the office of the old Whitney mill for orders. Again there was no one present to give him instructions. He started then for the Onawa Co. which adjoined a branch of Premier in Woonsocket, Rhode Island, where he expected to find petitioner or Teressa Sheehan, a 30-year employee of the petitioner in his various enterprises, to get his orders from one of them.

On his way to Woonsocket, Thibeault had to retrace the course he had traveled earlier that morning to petitioner's residence. When on this stretch the sun blinded him and he drove the truck against the rear of a Massachusetts state truck and thrust this state truck against Charles D. McQuesten, a state employee, and pinned him against a concrete post and wire fence, severely injuring him. As a direct result1949 U.S. Tax Ct. LEXIS 19">*24 of these injuries, McQuesten died on December 20, 1942. Thibeault was, at the time of this accident, employed by the trust and acting within the scope of his duties.

Thibeault was arrested and fined $ 200, which on appeal was reduced to $ 100. Petitioner paid the fine, as Thibeault had no means.

The administratrix of the estate of Charles D. McQuesten instituted suit against Thibeault and the company, each for damages of 13 T.C. 897">*899 $ 25,000. No suit was instituted or commenced by the administratrix of the estate of Charles D. McQuesten against petitioner personally or against the trust on account of the injuries and wrongful death of McQuesten.

The administratrix, upon discovering that the assets of the Whitney Worsted Co. had been transferred to the Whitney Worsted Trust, attached real estate in the name of Charles D. Whitney, trustee of the Whitney Worsted Trust.

The company carried compulsory insurance of $ 5,000 on the truck involved in the accident. The insurer of the truck paid the $ 5,000 in settlement of the suit instituted by the administratrix of the estate against the company. After several conferences, petitioner's counsel advised him that he would become personally1949 U.S. Tax Ct. LEXIS 19">*25 liable for any judgment above the $ 5,000 insurance. In March 1944, acting on counsel's advice, petitioner settled the suit instituted against Thibeault by paying $ 2,750 to the administratrix of McQuesten's estate. Petitioner's counsel charged $ 200 for his services, which made a total of $ 2,950.

On his income tax return for the calendar year 1944 petitioner claimed as a "casualty loss" a deduction in the amount of $ 2,950. The $ 2,950 consisted of $ 200 paid to petitioner's attorney and $ 2,750 paid to the administratrix of the estate of Charles D. McQuesten, these amounts having been paid in 1944. The Commissioner disallowed this claim.

OPINION.

Petitioner in his income tax returns claimed the amount of $ 2,950 as a "casualty loss," but on brief he appears to have abandoned that position, as well he may, as the losses allowable under section 23 (e) (3) are specifically limited to losses of property arising from casualty, and damages paid for injuries and wrongful death are plainly without the provisions of the statute. B. M. Peyton, 10 B. T. A. 1129; Samuel E. Mulholland, 16 B. T. A. 1331; W. S. Dickason, 20 B. T. A. 496.1949 U.S. Tax Ct. LEXIS 19">*26

As the matter is now presented, petitioner urges that he is entitled to the loss as one incurred in his trade or business under section 23 (e) (1), or in any event as a loss incurred in a transaction entered into for profit, although not connected with a trade or business, under section 23 (e) (2). Even though it be conceded for the purposes of this opinion that petitioner's activities in the textile industry were sufficient to constitute the carrying on of a trade or business, a matter which we need not and do not decide, it seems only too clear from our findings of fact that at the time of the accident Thibeault was not in the employ of petitioner as an individual, but was working for and being paid by the Whitney Worsted Trust, which was the successor to 13 T.C. 897">*900 and engaged in the liquidation of the assets of the Whitney Worsted Co., a corporation. The truck being driven at the time of the accident was the property of the company and/or the trust, and not the property of petitioner. Even in those cases where the activity of an individual operating largely through various corporations has been held to constitute the carrying on of a trade or business, it has never been held1949 U.S. Tax Ct. LEXIS 19">*27 that an employee of such a corporation was an employee of the individual.

Petitioner raises a much more serious point in his contention that as trustee of the Whitney Worsted Trust he was personnaly liable for the torts of an employee of the trust and that the payment made by him personally in the sum of $ 2,750 in full settlement of the suit against Thibeault was on the representation to him by his counsel that he was so liable.

The suit which was instituted by the McQuesten estate was against Thibeault and the company. The trust was not even named as a party defendant, although it does appear that the real estate held by the trust was attached when it was learned that the assets of the company had been transferred to the trust. No proceeding of any sort was at any time formally brought against petitioner.

In spite of this posture of the suit brought to recover damages resulting from the accident, petitioner contends, as we have already stated, that under the law of Massachusetts a trustee is personally liable for the torts of an employee of a trust. The rule is concisely set forth in Restatement on Trusts, vol. I, sec. 264, wherein it is said, "The trustee is subject to personal1949 U.S. Tax Ct. LEXIS 19">*28 liability to third persons for torts committed in the course of the administration of the trust to the same extent that he would be liable if he held the property free of trust." The fact that in Massachusetts suit may be now brought directly against a trust as an entity under Mass. G. L. (Ter. ed., 1932) ch. 182, § 6, does not change the rule which imposes personal liability on the trustee. Tebaldi Supply Co. v. Macmillan, 292 Mass. 384">292 Mass. 384; 198 N.E. 651, citing Larson v. Sylvester, 282 Mass. 352">282 Mass. 352, 282 Mass. 352">359; 185 N.E. 44.

While the cited authorities would seem to place a liability on the trustee to answer in damages in his personal capacity for the tort of an employee of a trust, a loss to be deductible under the revenue statutes must nevertheless be one that is "not compensated for by insurance or otherwise." The law of Massachusetts seems to be clear that a trustee required to answer in damages for the negligence of a trust employee has a right to indemnify himself from trust assets for any payments so made. Mason v. Pomroy, 151 Mass. 164">151 Mass. 164;1949 U.S. Tax Ct. LEXIS 19">*29 24 N.E. 202; Hamlen v. Welch, 116 Fed. (2d) 413. In Scott on Trusts, vol. 2, sec. 247, the rule is stated as follows: "A trustee who has incurred a liability in tort to a third person is entitled to indemnity out of 13 T.C. 897">*901 the trust estate if the liability was incurred in the proper administration of the trust and the trustee was not personally at fault in incurring it." There is no suggestion in the record that the petitioner was personally at fault in incurring the liability, and quite obviously on the record he was not at fault. There is also no suggestion in the record that the trust assets were insufficient to fully reimburse petitioner. In any event, the burden rested on him to establish his inability to recoup his outlay in settling the damage suit. Burnet v. Houston, 283 U.S. 223">283 U.S. 223; Boehm v. Commissioner, 326 U.S. 287">326 U.S. 287. Losses, to be deductible under the revenue laws, must be actual, realized losses, and in any case where there is a reasonable ground for reimbursement the taxpayer must seek his redress and may not secure a loss deduction until1949 U.S. Tax Ct. LEXIS 19">*30 he establishes that no recovery may be had. "It is a startling proposition that a taxpayer may, for reasons of his own, decline to enforce a valid claim against a responsible concern and then assert that he has sustained a business loss which the Government should share." Lee Mercantile Co. v. Commissioner, 79 Fed. (2d) 391. It is true one does not have to be an incorrigible optimist, and, if there is no reasonable ground to expect reimbursement, the loss is allowable, although perchance recovery may be had in a later year. Moreover, should the claim which petitioner had against the trust be regarded as in the nature of a debt, he has likewise failed to establish that it was not collectible and became worthless in the taxable year. See section 23 (k) of the Internal Revenue Code.

The deductibility of the legal fees in the sum of $ 200 stands in no better position than the major item.

In our opinion respondent's denial of the claimed deductions was correct.

Decision will be entered under Rule 50.