8 T.C. 525">*525 Respondent has determined a deficiency in income tax for the year 1941 in the amount of $ 12,194.86. He has determined that the estate of Robert C. Alston was not under administration in 1941 and that the income of the estate is taxable to petitioner, the sole beneficiary. The question is whether the estate was in process of administration so as to have been a taxable entity in 1941 within the meaning of section 161 (a) (3) of the Internal Revenue Code.

Petitioner filed her return with the collector for the district of Georgia.

FINDINGS OF FACT.

1. Robert C. Alston died testate on February 4, 1938. Petitioner is his widow and the residuary legatee under his will. The will was probated in solemn form in the Court of Ordinary of Fulton County, 8 T.C. 525">*526 Georgia, on March 7, 1938, and petitioner qualified as executrix and received letters testamentary on March 21, 1938.

2. The decedent bequeathed $ 1,000 and his law practice to his brother, Philip H. Alston. 1947 U.S. Tax Ct. LEXIS 261">*263 He bequeathed all the rest and residue of his estate, "after the payment of debts," to petitioner. He provided in his will that the provisions of the will should be in lieu of dower and year's support. He appointed his wife to be the sole executrix of his will. As the executrix, she was empowered to sell any property of the estate, for cash or on terms, without order of and without report to any court; and she was relieved from giving bond and from making inventory and appraisement of the estate.

3. The property of the estate consisted chiefly of marketable stocks and bonds. All of the assets of the estate were collected and in possession of the executrix before the end of 1939, except 200 shares of stock of Standard Oil Co. of New Jersey which had been pledged by the decedent to secure a note of his sister-in-law, Ann du Bignon. The note was not paid until January 24, 1941, at which time the stock was freed from the pledge and recovered by the estate.

4. All of the debts of the decedent and all of the obligations of the estate were paid by the executrix of the estate during 1939 and 1940.

5. With respect to an alleged indebtedness of the estate to the petitioner in the alleged1947 U.S. Tax Ct. LEXIS 261">*264 amount of $ 46,600, the amount of the indebtedness was only $ 16,600, and petitioner was paid in full during 1940 by the estate. The facts relating to this alleged indebtedness are as follows:

Petitioner was entitled to payments for her support under the decedent's will for a period of only 30 days after the date of his death. The will expressly provided that the provisions of the will were in lieu of dower and a year's support. The period of 30 days expired on March 7, 1938. Petitioner qualified as executrix on March 21, 1938. Thereafter, during May and June of 1938, the estate paid a total amount of $ 30,000 to petitioner as a partial distribution of the estate. These payments were made without any authorization of the will or of the probate court. The payments were made to petitioner before the debts of the decedent, estate taxes, and other obligations of the estate were paid. In 1939, when the Federal estate tax return was to be filed, which reported the Federal estate tax in the amount of $ 121,090, the estate did not have sufficient cash on hand to pay the tax in the entire amount. The executrix of the estate desired to keep the assets of the estate intact and wished1947 U.S. Tax Ct. LEXIS 261">*265 to avoid selling any assets to obtain cash for payment of estate obligations. Therefore, in April 1939 petitioner advanced $ 46,600 in cash to the estate. She received a note of the estate for $ 46,600 bearing 3 per cent interest. In the accounts of the estate, the note was entered as a debt of the estate. It was treated as a debt owing to petitioner and the estate made payments of 8 T.C. 525">*527 principal and interest to petitioner during 1939, 1940, 1941, and 1942. During 1939 and 1940 the estate made payments on the note aggregating the total sum of $ 22,125, and it made payments during 1941 and 1942 aggregating $ 24,475. The note was carried as a debt of the estate until some time in 1942.

Petitioner had a savings account. In this account she deposited $ 10,000 of the $ 30,000 advanced to her by the estate in May and June of 1938. During 1938 she deposited in the same account $ 47,121, the proceeds of insurance. In April 1939, before petitioner advanced $ 46,600 in cash to the estate, the balance of the savings account was $ 58,331.35. This balance was the result of deposits made in 1938 and 1939. There were no withdrawals from the account during 1938 and 1939 until $ 46,6001947 U.S. Tax Ct. LEXIS 261">*266 was withdrawn in April 1939. Petitioner owned property in her own name, and she reported in her income tax returns for 1938 and 1939 gross income in the amounts of $ 16,459 and $ 20,409, respectively.

The petitioner repaid the estate in April 1939 the $ 30,000 which the estate had advanced to her in 1938. This repayment was accomplished by her payment of $ 46,600 to the estate. The estate became indebted to petitioner in April 1939 for not more than $ 16,600, and the estate paid this obligation in full during 1939 and 1940.

6. With respect to the 200 shares of stock of Standard Oil Co. which had been pledged by Robert C. Alston, the facts are as follows:

Ann du Bignon, petitioner's sister, lived with petitioner and the decedent. She died in 1944. She was the beneficiary of a trust which paid a small income to her. She owned some securities. On March 13, 1937, she borrowed $ 3,865 from a bank and gave her note for that amount. She used the proceeds to purchase Southern Railway stock. The decedent was not an endorser of the note. He was not obligated under the note. However, he loaned Ann 200 shares of Standard Oil stock, to be pledged by her with the bank to secure payment1947 U.S. Tax Ct. LEXIS 261">*267 of the note, and he paid $ 500 on her note during his lifetime. When the decedent died the balance owing on the note was $ 3,365. After the death of the decedent, Ann did not make any payments on the note. She never made any payments on the note. She took the position that she was not liable for payment of the note and so advised petitioner as the executrix of the estate and the bank when it made demand upon her in 1940 to pay the note. The bank notified the executrix of the estate of Robert C. Alston in the latter part of 1940 that Ann du Bignon had refused to pay the note and that it would have to sue her. There was some controversy between Ann du Bignon and petitioner about the payment of the note. Petitioner, as executrix of the estate, took the position, finally, that the estate should pay the note in order to free the pledged stock, which was an asset of the estate, 8 T.C. 525">*528 from the lien of the debt represented by the note; and the estate paid the bank $ 500 on August 12, 1940, and $ 2,865, the balance, on January 24, 1941, receiving the pledged stock for the estate on that date.

7. The executrix of the estate of Robert C. Alston has never filed an account of the estate1947 U.S. Tax Ct. LEXIS 261">*268 with the probate court in Atlanta, the "Court of Ordinary," and has never been discharged by that court.

8. At the end of 1940, the estate had a balance of cash amounting to $ 14,349.67. During 1941 the estate collected cash in the corpus account totaling $ 5,009.15, and cash in the income account totaling $ 43,788.17. At the end of 1941, the estate's cash balance was $ 35,292.03. During 1941 the estate distributed $ 11,190.36 to petitioner as the residuary legatee in partial distribution of the estate. The estate reported in its return for 1941 gross income amounting to $ 41,421.23 and net income amounting to $ 35,677.

9. In the autumn of 1942 securities held in the estate were transferred to the name of petitioner as the owner, as the residuary legatee of the estate.

10. The period of administration of the estate was not ended on December 31, 1940. The estate was in process of administration during 1941.

OPINION.

Under section 161 (a) (3) of the Internal Revenue Code an estate is a taxable entity "during the period of administration or settlement of the estate." The Commissioner, by section 19.162-1 of Regulations 103, has construed the statutory provisions as follows:

* * 1947 U.S. Tax Ct. LEXIS 261">*269 * The period of administration or settlement of the estate is the period required by the executor or administrator to perform the ordinary duties pertaining to administration, in particular the collection of assets and the payment of debts and legacies. It is the time actually required for this purpose, whether longer or shorter than the period specified in the local statute for the settlement of estates. If an executor, who is also named trustee, fails to obtain his discharge as executor, the period of administration continues up to the time when the duties of administration are complete and he actually assumes his duties as trustee, whether pursuant to an order of the court or not. * * *

In this case petitioner does not contend that the regulation of the Commissioner is invalid. She contends, rather, that the "time actually required for" performance by the executrix of the estate of "the ordinary duties pertaining to administration, in particular the collection of assets and the payment of debts and legacies," extended beyond the year 1940 through and including the year 1941, at least.

The deficiency in this case relates only to the year 1941. The Commissioner has determined 1947 U.S. Tax Ct. LEXIS 261">*270 that the estate of Robert C. Alston was not in process of administration during the year 1941, and, having made 8 T.C. 525">*529 that determination, he has taxed petitioner upon the net income of the estate for the year 1941.

Petitioner is the sole legatee of the estate. Upon termination of the period of administration, the assets of the estate become her property. The assets consist chiefly of income-producing securities. The determination of the respondent in effect treats the estate property as distributable after December 31, 1940, so that the income thereof is taxable to petitioner, individually, as the owner or distributee of the property. In fact, there were no distributions of the corpus of the estate to petitioner until 1942, when the securities were transferred of record into her individual name.

In Estate of J. P. Armstrong, 2 T.C. 731, 734, this Court held that the regulations represented "a valid and reasonable interpretation of the statute on this subject" in so far as they provided "that a period of administration or settlement of an estate is the period required to perform the ordinary duties pertaining to administration." In that case, 1947 U.S. Tax Ct. LEXIS 261">*271 which involved the estate of a decedent who died domiciled in Georgia, the will was probated in 1923. The executors made annual income tax returns for the estate for the years 1923 through 1942, inclusive. The Commissioner determined that the period of administration of the estate ended with the year 1939 and that thereafter, in the year 1940, the estate was no longer an "estate," but was a "trust." We sustained the determination. In so doing, we recognized that in the State of Georgia it is not unusual "for estates to be left open for a considerable period of time," and that in Georgia "there is no requirement in the state statute with respect to the period in which the administration of an estate must be closed." It appears that in Estate of J. P. Armstrong, supra, the executors had not filed a final report and accounting for the estate in a Georgia Court of Ordinary up to 1943, at least, so that they had treated the estate as under administration for a period of at least nineteen years. This treatment was made by the executors despite the fact that all of the estate was reduced to possession by October 15, 1924, and all of the decedent's debts 1947 U.S. Tax Ct. LEXIS 261">*272 were paid within about a year after the death of the decedent, J. P. Armstrong.

This Court expressed the view in Estate of J. P. Armstrong, supra, that the question of what constitutes the period of administration of an estate "is not a matter of local rules of property, but one where, under Burnet v. Harmel, 287 U.S. 103">287 U.S. 103, we must ascertain criteria for construction of an act of Congress, and if regulations upon the subject are fairly and reasonably within the power of the Commissioner, we should look to such regulations." We applied that view in William C. Chick, 7 T.C. 1414. The criteria for construing the statutory provision which the Commissioner's regulation provides is entirely a fact matter. In each case, the facts relating to the executor's performance 8 T.C. 525">*530 "of the ordinary duties pertaining to administration, in particular the collection of assets and the payment of debts and legacies," are to be examined.

In the case of William C. Chick, supra, the facts showed that the will of the decedent was probated in 1929 and that the last claim against1947 U.S. Tax Ct. LEXIS 261">*273 the estate was settled at some time during 1937. The Commissioner determined that the income derived by the estate for the year 1940 was currently distributable to the beneficiaries of a testamentary trust and was, therefore, taxable to them under section 162 (b) of the Internal Revenue Code. In considering the respective contentions of the parties we said:

When this last claim against the estate was settled, we are at a loss to see where there was any reason to prolong the administration any further. We, of course, do not mean to say that the petitioner, as executor of the estate, should have immediately filed his final account as executor in 1937. Naturally, executors are allowed a reasonable time within which to do these things. The Commissioner does not contend otherwise. [Italics added.]

In the Chick case, the respondent's determination was sustained upon the evidence. The evidence did not show that there was necessity for prolonging the administration of the estate beyond the year 1939, ten years after the death of the decedent, Isaac W. Chick.

In this case, the issue presents a close question when consideration is given to the time periods involved. The decedent, 1947 U.S. Tax Ct. LEXIS 261">*274 Robert C. Alston, died in 1938. The executrix took steps in 1942 toward distribution of the estate to herself as the sole legatee by having securities of the estate transferred to her individual name. Thus, it appears, the executrix regarded about four years as the time required within which to perform the ordinary duties pertaining to administration. Thus, at the outset, the facts do not indicate that there has been an effort to unduly prolong the period of administration of the estate. The respondent challenges the position taken by the executrix because of two items involved in the accounts of the executrix: (1) An alleged indebtedness of the estate in the amount of $ 46,600 to the petitioner as an individual, and (2) the settlement of a lien upon 200 shares of Standard Oil stock which is an asset of the estate. Respondent takes the view that there was no "debt" of the estate to petitioner and that the settlement of the lien upon the pledged stock was not an estate matter, but was, rather, a personal matter which could have been disposed of in 1940 rather than in 1941.

There is merit in respondent's questioning of the item of a debt of $ 46,600, and the findings of fact which1947 U.S. Tax Ct. LEXIS 261">*275 have been made support respondent's contentions, in general, that all of the debts of the estate were paid by the end of 1940. But, it is a fact that the Standard Oil stock was not reduced to possession of the estate until some time in 8 T.C. 525">*531 January of 1941, and the facts show that the settlement of the lien upon the stock was a proper matter of administration of the estate. It was not until late in 1940 that the bank which held the pledged stock determined that collection of the balance due on Ann du Bignon's note could not be collected from her without bringing suit on the note. Under the facts and considering all of the circumstances, we do not find any unreasonable prolongation of the administration of the estate in the item of recovering in January of 1941 the last unrecovered asset of the estate.

As we view the facts here, the respondent's determination has been made with disregard of one of the provisions of his own regulations, which is that the period of administration of an estate is the period required by the executor or administrator to make payment of the legacies, inter alia. Some time was required to put the assets of the estate in distributable form, and1947 U.S. Tax Ct. LEXIS 261">*276 we think that if payment of legacies is narrowly construed to mean only legacies other than the chief bequests to the residuary legatees, here the sole beneficiary, then it would follow that an executor or administrator would not have a reasonable time within which to make his final accounting and arrangements for the closing and last distributions of an estate. The problem here is exactly the kind of problem which was alluded to in William C. Chick, supra, where we expressed the view that "naturally, executors are allowed a reasonable time within which to do these things." We conclude that the ordinary duties pertaining to administration were not completed by the end of the year 1940, but that the executrix required the year of 1941, at least, to complete the duties of administration. Under the facts, the determination of the respondent is reversed. Since the estate was under administration during 1941, the income which the respondent has taxed to petitioner is, rather, taxable to the estate.

Decision will be entered for the petitioner.