17 T.C. 1237">*1237 The Commissioner determined a deficiency of $ 11,102.71 in the income tax of the petitioner for 1945. The issues for decision are whether the petitioner is entitled, (1) to deductions for trustee's commissions, attorneys' fees, and miscellaneous expenses paid by the trustee in 1945 in connection with its fiduciary duties in handling the trust property, in making a final accounting as trustee, and in distributing the assets of the trusts; (2) to the benefit of capital loss carry-overs resulting from net capital losses sustained by the trusts during the years 1942, 1943, and 1944; and (3) to a deduction for depreciation in the amount of $ 1,200 on a residence in Convent, New Jersey.

FINDINGS OF FACT.

The petitioner at present lives in the Bahamas, British West Indies. His income tax return for 1945, which was prepared on a cash basis, was filed with the collector of internal revenue for the fifth district of New Jersey.

17 T.C. 1237">*1238 Charles Neave, the father of the petitioner, created an inter vivos trust on April 20, 1932. The father died on September 10, 1937, and by his last will 1952 U.S. Tax Ct. LEXIS 283">*285 created a testamentary trust. The Bank of New York was named trustee of each trust. The laws of the State of New York apply to each trust.

The petitioner's mother, who survived her husband, was entitled to the income of each trust for her life. The mother had a limited testamentary power of appointment over the principal and income of the inter vivos trust, but if she failed to exercise the power, the principal of the trust fund in the hands of the trustee at her death was to be distributed to the settlor's two sons, the petitioner and his brother, Alexander, in equal shares if living. The mother died on March 29, 1945, without having exercised the power of appointment. Her two sons survived her.

The petitioner and his brother were entitled to the principal of the testamentary trust in equal shares upon the death of their mother.

The trustee of the two trusts was advised of the death of the life beneficiary, and of the desire of the remaindermen for prompt distribution of the corpora of the trusts. The trustee continued to receive interest and dividends but made no changes in investments thereafter. It distributed to the petitioner and his brother assets of the inter vivos trust1952 U.S. Tax Ct. LEXIS 283">*286 in the amount of $ 806,258.30 and assets of the testamentary trust in the amount of $ 1,034,674.68 in the latter part of April 1945, leaving as the only assets in the inter vivos trust United States Government Series "G" bonds and cash in the amount of $ 40,377.27, and as the only assets in the testamentary trust, notes, mortgages, and miscellaneous assets in the amount of $ 107,345.55 and United States Government Series "G" bonds and cash in the amount of $ 43,681.99. The trustee, as registered owner, obtained cash on June 7, 1945, for the "G" bonds of the par value of $ 43,600, retained in the inter vivos trust, and of $ 37,400, retained in the testamentary trust. The trustee distributed the cash and remaining assets of the trusts during September 1945.

The petitioner received more than one-half of the inter vivos trust distribution and less than one-half of the testamentary trust distribution in April, in accordance with an agreement with his brother as to which securities each would take. Equalizing distributions in cash were made in September 1945.

The trustee prepared a consolidated accounting of its administration of the two trusts as of July 12, 1945. The accounting was1952 U.S. Tax Ct. LEXIS 283">*287 submitted to the petitioner and his brother. The bank, at the request of the remaindermen, agreed to forego a judicial settlement of its accounts as trustee of the trust. The petitioner and his brother approved the consolidated accounting and executed a final receipt and 17 T.C. 1237">*1239 release to the trustee on or about August 31, 1945, in which they acknowledged receipt of the securities received in the April partial distribution and of the notes, mortgages, miscellaneous assets and cash received in the September distribution, authorized the trustee to pay itself the trustee's commissions to which it was entitled on the principal of the two trusts and to pay attorneys' fees, approved miscellaneous expenses previously paid, authorized the establishment of a reserve of $ 1,000 from the testamentary trust for payment of possible future charges against the two trusts, and agreed to indemnify the trustee against any proper claims which might be made against it by reason of the distributions.

The trustee on August 31, 1945, paid itself $ 16,932.71, representing the trustee's commissions to which it was entitled on the principal of the inter vivos trust, and $ 21,672.56, representing similar1952 U.S. Tax Ct. LEXIS 283">*288 commissions on the testamentary trust. It paid legal fees of $ 2,000 on September 13, 1945, for services rendered after the death of the life tenant, and it paid during the period of settlement various miscellaneous administration expenses, including transfer taxes incurred in connection with the distribution of the assets. The trusts filed returns for 1945 showing no tax. Deductions were taken on those returns for the trustee's commissions, the legal fees, and the various miscellaneous administration expenses described above. The deductions exceeded the income reported.

$ 14,766.70, representing one-half of the expenses of administration and settlement of the two trusts allocated to taxable income, was claimed as a deduction on the petitioner's 1945 income tax return. The Commissioner, in determining the deficiency, disallowed that deduction with the explanation that "Expenses or losses designated 'Bank of New York, Trustee', * * * are not allowable under Section 23 (a) (2) or any other provision of the Internal Revenue Code."

The inter vivos trust on its return for 1945 reported net gain of $ 996.63 which it subtracted from capital loss carry-overs from prior years to arrive1952 U.S. Tax Ct. LEXIS 283">*289 at $ 2,357.44 which it deducted in reporting income. The testamentary trust reported a net short term gain of $ 9.84 and a net recognized long term loss of $ 10.96 for 1945. It subtracted the gain from, and added the loss to, its capital loss carry-overs from prior years and deducted the resulting amount of $ 9,859.31 in reporting income on its return for 1945. The two trusts for 1945 had capital loss carry-overs from the years 1942, 1943, and 1944 of $ 13,112.26. The petitioner, in his schedule of capital gains and losses on his 1945 return, included $ 6,556.15 to represent one-half of those capital loss carry-overs of the trusts. He also reported in that schedule $ 4.92, representing one-half of the net short term gains 17 T.C. 1237">*1240 reported by the trusts for 1945, and $ 5.48, representing one-half of the net long term losses deducted by the trusts for 1945, a short term loss of $ 56.98, and a net recognized long term gain of $ 20,938.02 from sales of about one-half of the securities received by him as distributions from the trusts and sold later in the same year, and a short term gain of $ 48.25 and a recognized long term gain of $ 4,388.89 from sales in 1945 of securities other1952 U.S. Tax Ct. LEXIS 283">*290 than those received from the trusts. The petitioner, in computing his gain or loss on the sales of securities received as distributions from the trusts, used the basis of the trustee as his basis. He reported on his 1945 return a net capital gain of $ 18,761.47 which the Commissioner increased by disallowing the capital loss carry-over of $ 6,556.15, with the explanation that the capital loss carry-over was not allowable under section 23 (a) (2) or 117 (e) (1) or any other provision of the Internal Revenue Code.

The petitioner, prior to 1928, acquired about 1 1/2 acres of land in Convent, New Jersey, and built a residence on it. The cost basis of the house was $ 40,000 and its estimated useful life was 33 1/3 years.

The petitioner occupied the property as his residence until the latter part of 1942 when his wife rented an apartment in New York City which she, the petitioner, and their children thereafter occupied. The petitioner became an officer in the United States Army in 1941. His military service terminated not later than 1945. He was away from New York City for extended periods on military duty. He was in Washington until the latter part of 1942, after which his duty 1952 U.S. Tax Ct. LEXIS 283">*291 was in Brooklyn until 1943 when he was sent to England. He returned to the New York apartment at the end of 1944 and lived there until some time in 1946 when he built a house in the Bahamas.

The house in Convent was furnished, with furniture belonging to the petitioner, up to the time of the sale of the property in 1946. The property was rented by the petitioner for 4 months during the summer of 1944 at $ 100 per month and that rent was reported in his 1944 income tax return. The petitioner did not claim a deduction for depreciation or any expense in connection with the property in his 1944 or 1946 income tax returns. The property was listed for sale on October 27, 1944, and continued to be listed until it was sold on August 15, 1946, for $ 32,000. The petitioner claimed a deduction of $ 1,200 for depreciation on the house on his 1945 income tax return. The Commissioner, in determining the deficiency, disallowed the deduction as not allowable under section 23 (l) of the Internal Revenue Code.

The stipulation of the parties is incorporated herein by this reference.

OPINION.

The petitioner contends that the inter vivos trust and the testamentary trust both terminated immediately1952 U.S. Tax Ct. LEXIS 283">*292 upon the 17 T.C. 1237">*1241 death of his mother, and, as a result, he and his brother, rather than the trusts, are the taxpayers entitled to deductions under section 23 (a) (2) for commissions which the trustee thereafter paid to itself, for fees which it paid to attorneys for services in connection with the distribution of the assets of the trusts, the accounting, and the method used for terminating the trusts, and for various miscellaneous administration expenses, including transfer taxes, incurred in connection with the distribution of the trust assets, paid by the trust during the period of settlement. The petitioner's father, who created the trusts, did not intend that they should continue as active trusts after the death of his wife. Nevertheless, they did not terminate immediately upon the death of the life beneficiary but thereafter the trustee had some further duties to perform as trustee before the trusts could terminate. A trustee, required to distribute the trust property to remaindermen, is allowed by the laws of New York a reasonable time after the death of the life beneficiary within which to perform that duty and conclude its trusteeship. The corpus and income continue1952 U.S. Tax Ct. LEXIS 283">*293 to belong to the trust during that period. Della M. Coachman, 16 T.C. 1432, and cases cited therein. No undue delay on the part of the trustee in making the distribution and in concluding its fiduciary duties appears in this case. It received fees for acts performed as trustee in each trust after the life tenant died. They included fees for receiving income and fees based upon corpus distributed. The trustee's fees, which the petitioner seeks to deduct, were paid by the trustee to itself for duties performed after the death of the life tenant and obviously were not for duties performed after there ceased to be any trusts. The attorneys' fees were for services rendered to the trustee during the continuation of the trusts after the death of the life tenant, and the miscellaneous expenses were incurred and paid by the trustee during that same period. These amounts were not expenses of the remaindermen but were expenses of the trusts. They were not paid by the remaindermen but were paid by the trustee. They were not paid on behalf of the remaindermen but were paid on behalf of the trustee as a part of its duty as trustee. The remaindermen were1952 U.S. Tax Ct. LEXIS 283">*294 under no obligation to pay any of the amounts. These facts distinguish this case from such cases as Hord v. Commissioner, 95 F.2d 179, Estate of John E. Morrell, 43 B. T. A. 651, and Martin Thomas O'Brien, 47 B. T. A. 561, cited by the petitioner. The trusts, still taxable entities, deducted these expenses on their income tax returns for 1945. They were the taxpayers to which the law allows the deductions because they incurred and paid the expenses. The petitioner was not the taxpayer who either paid or incurred the expenses, and is not the taxpayer to which they are allowed by the law as deductions. Anstes v. Agnew, 16 T.C. 1466.

17 T.C. 1237">*1242 The petitioner makes a separate argument that he is entitled to these deductions upon a theory based upon principles set forth in Helvering v. Clifford, 309 U.S. 331">309 U.S. 331. He claims that he and his brother were in control of whatever trusts existed after the death of their mother. The trustee complied with their wishes in distributing the corpora of the trusts, but these were 1952 U.S. Tax Ct. LEXIS 283">*295 not retained-control trusts similar to the trust involved in the Clifford case. The reasons for disregarding the Clifford trust for tax purposes do not apply to these for the short period in 1945 after the death of the life beneficiary. The Court finds no merit in this argument of the petitioner. Cf. Marie E. Meier, 16 T.C. 425.

The next issue is whether the petitioner is entitled to the benefit of capital loss carry-overs resulting from net capital losses sustained by the trusts from the sale of securities during the years 1942, 1943, and 1944, while the life beneficiary was living. Section 117 (e) (1) provides:

If for any taxable year beginning after December 31, 1941, the taxpayer has a net capital loss, the amount thereof shall be a short-term capital loss in each of the five succeeding taxable years to the extent that such amount exceeds the total of any net capital gains of any taxable years intervening between the taxable year in which the net capital loss arose and such succeeding taxable year.

There is no indication in the Internal Revenue Code or its legislative history that Congress intended this provision to apply to any remainderman1952 U.S. Tax Ct. LEXIS 283">*296 taxpayer who in no sense sustained the losses. Cf. Marie E. Meier, supra. The petitioner claims, nevertheless, that he is entitled to benefit from these carry-overs on his own tax return for 1945 "under the doctrine of substitution." His argument is that he must use the trust's basis and holding period upon securities which were distributed to him from the trust and, therefore, he must also be treated as standing in the place of the trustee for the purpose of applying the capital loss carry-overs resulting from sales of other securities made by the trustee in prior years while the life beneficiary was still alive. The conclusion does not follow. The trusts used the carry-overs to offset their own gross income for 1945 in accordance with the above provision of the Internal Revenue Code. Their returns for 1945 show no net income and no distributable income. The petitioner never had any claim or right to the assets which the trustees sold in prior years, from which sales the carry-overs resulted. There is no relation whatsoever between those sales and the petitioner's income for 1945. The basis and holding period for particular securities have a 1952 U.S. Tax Ct. LEXIS 283">*297 close relation with each other for income tax purposes but no such relationship exists between the petitioner's income for 1945 and the prior losses of the trusts. Likewise, there is reason for holding that income and deductions of a trust sometimes retain their character for tax purposes when reported by an income beneficiary, 17 T.C. 1237">*1243 but such reasons do not apply in the present case. The petitioner being a different taxpayer from the one which sustained the losses is not entitled to the benefit of the carry-overs. Cf. New Colonial Ice Co. v. Helvering, 292 U.S. 435">292 U.S. 435.

The final question is whether the petitioner is entitled to a deduction for depreciation in 1945 on a residence in Convent, New Jersey. He built and occupied the residence as his home. He later entered the military service of the United States. Thereafter, he never occupied the house as a residence, but he left most of his furniture in it. He rented the property for a short time during the summer of 1944 for what appears to have been an unusually low rental. There is no evidence to indicate that he wanted or tried to rent the house in 1945. The property was listed for sale1952 U.S. Tax Ct. LEXIS 283">*298 on October 27, 1944, and the listing continued until it was sold on August 15, 1946, for $ 32,000. A taxpayer, who owns and occupies a residence as his own home, is not allowed a deduction for loss on the property or deductions for depreciation on the property, other than for periods during which it is actually rented, unless he abandons the property as his home and converts it to an income-producing use. This conversion is not accomplished by listing the property for sale. Cf. Warren Leslie, Sr., 6 T.C. 488; Allen L. Grammer, 12 T.C. 34. It could be accomplished by offering it for rent or by actually renting it under circumstances indicating that it was not to be further occupied as a home. William C. Horrmann, 17 T.C. 903. The temporary renting for a few months in one summer is not determinative. Neither the petitioner nor his wife testified. They did not acquire another permanent home until 1946. They did not remove their furniture from the house until at or about the time of the sale. Thus, they could have returned to it at any time during 1945. The evidence does not show that1952 U.S. Tax Ct. LEXIS 283">*299 the petitioner intended to convert or actually converted this property from residential to business or income-producing use, and, consequently, does not justify reversing the Commissioner's determination. Furthermore, even if it did, there would still be the question of the basis for a deduction for depreciation on the house. The basis for converted residential property is not necessarily the original cost basis of the property and can not exceed the value of the property at the time converted. Heiner v. Tindle, 276 U.S. 582">276 U.S. 582; Charles J. Thatcher, 24 B. T. A. 1130; Ralph Perkins, 41 B. T. A. 1225, affd. 125 F.2d 150; Gilbert Wilkes, 17 T.C. 865. Here, the later sale of the entire property for $ 32,000 indicates that the value of the house at the date of any possible conversion might have been substantially less than the cost basis of $ 40,000. The difference would not be a part of the basis but would represent a loss on a residential property which is not deductible either through depreciation or otherwise.

Decision will 1952 U.S. Tax Ct. LEXIS 283">*300 be entered under Rule 50.