23 T.C. 534">*534 These proceedings involve deficiencies in the income taxes of the petitioners, as follows:

In the statutory notices of deficiency respondent determined deficiencies of $ 10,020.24, $ 12,377.36, and $ 7,659.25 in the 1950 income taxes of W. T. and Mary C. Moore, Sam G. Moore, and Vida G. Moore, respectively. By amendments to his answers respondent claims increases1954 U.S. Tax Ct. LEXIS 11">*13 in the deficiencies originally determined for 1950 of $ 1,365 for W. T. and Mary C. Moore, of $ 1,619.80 for Sam G. Moore, and of $ 1,128.40 for Vida G. Moore, making total deficiencies for 1950 as set forth above.

The question for decision is whether the petitioners are taxable individually upon the income of the "Charles M. Moore Trust" which was created by order of the Chancery Court of Knox County, Tennessee, terminating a suit between Samuel G. Moore and W. T. Moore as complainants and Vida G. Moore as defendant.

The cases were consolidated for hearing and opinion.

23 T.C. 534">*535 FINDINGS OF FACT.

Petitioners are residents of Knoxville, Tennessee. They filed their income tax returns for the years here involved with the collector of internal revenue for the district of Tennessee. W. T. and Sam G. Moore (sometimes hereinafter referred to as William T. and Samuel G. Moore) are sons and Vida G. Moore is the widow of Charles M. Moore, deceased. Mary C. Moore is the wife of W. T. Moore.

Charles M. Moore died testate in Knox County, Tennessee, on January 7, 1942. His will, probated January 12, 1942, provided that all his life insurance, his home (including its furnishings), and one-third1954 U.S. Tax Ct. LEXIS 11">*14 of the residue of his estate should go to his wife for life with remainder to his two sons. The remaining two-thirds of the residue of his estate was left one-third each to his two sons. William T. Moore and Samuel G. Moore were named and qualified as executors. Administration of the estate was terminated on March 9, 1948, by order of the County Court of Knox County, Tennessee.

On the same day the Chancery Court of Knox County, Tennessee, in a suit between W. T. and Samuel G. Moore, complainants, and Vida G. Moore, defendant, ordered W. T. Moore and Samuel G. Moore, as executors of the estate of Charles M. Moore, to transfer to themselves, as trustees, the entire residue of the estate, and as trustee to receive, hold, manage, and administer the assets of the estate for and during the life of Vida G. Moore. It further directed the trustees to "pay to * * * Vida G. Moore, her share of the income, if any, as she desires or needs the same, from the properties in which she has a one-third interest for life, and the balance of the income, if any, derived from said Estate may be retained in the trust or distributed to those entitled thereto in the discretion of the Trustees."

The sole1954 U.S. Tax Ct. LEXIS 11">*15 issue in that suit was the desirability of creating the trust. Vida Moore in her answer expressly joined the complainants in their prayer that a trust be established from the residue of the estate. The Chancery Court found that Vida Moore was an elderly person; that her personal estate had been managed by the decedent prior to his death, as she had no business experience; that the sons continued to manage her personal estate as well as her share of the residue; that she was willing and desirous that a trust be created; and that it was in the best interest of the estate and the parties to the suit that the assets remain undivided because of existing and prospective value conditions.

The income tax return for the taxable year 1948 was originally filed in the name of "C. M. Moore Estate." Included in that return was the total income of the estate for the period January 1 to March 9, 1948, and the total income of the trust for the period March 10 to 23 T.C. 534">*536 December 31, 1948. Subsequently, the trustees filed an amended return in the name of the estate for the period January 1 to March 9, 1948, and a claim to recover an alleged overpayment in taxes by it in 1948, amounting to $ 22,404.01. 1954 U.S. Tax Ct. LEXIS 11">*16 In addition they filed a return in the name of the trust for the period March 9 to December 31, 1948. Returns for 1949 and 1950 were filed in the name of the trust.

The net income reported by the trust and the amounts thereof distributed to the beneficiaries for the taxable years 1948, 1949, and 1950 are as follows:

In an amended answer respondent gave notice of additional deficiencies for the 1950 calendar year. These deficiencies were determined from the fact that an amended income tax return filed by the trust for 1950 reported $ 6,000 additional income which had not been reported on the original return. Respondent determined that the additional income to the extent of each petitioner's one-third interest therein, viz. $ 2,000, is includible in each petitioner's total income for 1950.

OPINION.

Petitioners contend that the Charles M. Moore Trust is a valid trust and is taxable for income tax purposes under section 161 (a) (4) of the Internal Revenue Code of 1939. ¹

1954 U.S. Tax Ct. LEXIS 11">*17 Respondent, however, has not challenged the validity of the trust; but contends rather that even though the trust was created by the decree of the Chancery Court, petitioners were for all intents and purposes its grantors; and, since the income therefrom, to the extent of their respective interests therein, could be accumulated or distributed to them within their discretion, the income is taxable to them under the provisions of sections 22 (a)²1954 U.S. Tax Ct. LEXIS 11">*18 and 167 (a) (1) and ( 2) ³ of the Internal Revenue Code of 1939.

23 T.C. 534">*537 We agree that, to the extent of their respective interests therein, the income of the trust is taxable to each of the petitioners under the provisions of section 167 (a) (1) and (2).

Together the petitioners owned the entire assets of the residuary estate of Charles M. Moore, which was transferred to the Charles M. Moore Trust pursuant to the court decree. Although Vida G. Moore was named as defendant in the suit the court decree indicates that the suit was friendly and was instituted1954 U.S. Tax Ct. LEXIS 11">*19 with the consent of all concerned. In her answer to the complaint Vida G. Moore expressly joined the complainants William T. and Samuel G. Moore in their prayer that a trust be established out of the residue of the estate. Further, the Chancery Court specifically found that the defendant, Vida G. Moore, was desirous and willing that the trust be created and that its creation was in the interest of all the parties. By consenting and joining in the prayer that the trust be created she, as well as each of the other petitioners, became a joint grantor of the trust. The fact that they chose to ask the Chancery Court to create the trust rather than joining in a written trust agreement does not make them any the less joint grantors of the trust.

By the express provisions of the trust, as proposed by the parties and adopted by the court, W. T. and Sam G. Moore, as trustees, were required to pay Vida G. Moore her share of the income, if any, as she desired or needed it, and they were authorized to accumulate or distribute their respective shares in their discretion. These provisions bring the petitioners within the language of section 167 (a) (1) and (2) in that the income from the trust1954 U.S. Tax Ct. LEXIS 11">*20 may be "held or accumulated for future distribution to the grantor" in the discretion of the grantor or any person not having a substantial adverse interest in the disposition of that part of the income. Clearly, no petitioner herein has an adverse interest in the share of income belonging to any other petitioner.

Accordingly we hold that the petitioners, to the extent of their respective interests, are taxable on the income of the trust under 23 T.C. 534">*538 section 167 (a) (1) and (2) or section 22 (a) of the Internal Revenue Code of 1939. Theodore G. Bayard, 16 T.C. 1345. It may be that petitioners are also liable under section 162 (b) of the Internal Revenue Code of 1939, ⁴ which provides that income currently distributable to a beneficiary under a trust shall be taxable to that beneficiary whether distributed or not. The income is "currently distributable" within the meaning of this section if the beneficiary has a present right to receive the income under the trust instrument. Freuler v. Helvering, 291 U.S. 35">291 U.S. 35.

1954 U.S. Tax Ct. LEXIS 11">*21 Decisions will be entered for the respondent.