13 T.C. 173">*173 The Commissioner determined a deficiency in estate tax in the amount of $ 2,779.29. The only question involved is whether the petitioner is entitled to deduct the amount of $ 9,888.22 for executor's commissions in computing the net estate.

FINDINGS OF FACT.

Alice K. Larkin died on April 12, 1943, a resident of Olean, Cattaraugus County, New York, leaving 1949 U.S. Tax Ct. LEXIS 116">*117 a last will and testament which was duly admitted to probate by the Surrogate's Court of Cattaraugus County, New York. Her surviving husband, George A. Larkin, was named executor in the will and letters testamentary were issued to him by the above named court on April 29, 1943. Since that date he has continued to act as such executor.

The estate tax return for the estate of decedent was filed with the collector for the twenty-eighth district of New York, at Buffalo, New York, on July 11, 1944.

The decedent, in her last will and testament, after directing payment of all her just debts and funeral expenses, bequeathed and devised all the rest, residue, and remainder of her estate to her husband for life, as follows:

Third: All the rest, residue and remainder of my estate, real and personal, of every name and nature and wheresoever situate, I give, devise and bequeath to my said husband, in case he shall survive me, to have and to hold for and during his lifetime. I direct that my said husband shall be entitled to the possession and custody thereof, and that no security be required of him therefor. I further direct that my said husband shall have the right to take, use and expend 1949 U.S. Tax Ct. LEXIS 116">*118 during his lifetime as much of the principal of my said estate as in his judgment is necessary and proper for his maintenance and support in the manner in which we have been accustomed to live and conduct our affairs, and that he shall not be required to account for any portions of the principal of my estate so used and expended.

I hereby fully authorize and empower my said husband during his lifetime, to manage and control my said residuary estate, to retain and hold any stocks, 13 T.C. 173">*174 bonds or other property, real or personal, of which I may die possessed in the same form; to sell, transfer and convey from time to time the same or any part thereof, and invest and reinvest the proceeds thereof in such securities or other property, real or personal, as he may in his absolute discretion deem proper, hereby expressly directing that he shall not be restricted in his investments by any provisions of law which might otherwise be applicable thereto. I further direct that my said husband shall not be held accountable for any losses resulting during his management and control.

* * * ^*

Upon the death of decedent's husband the residuary estate is to be divided into seven equal shares, which1949 U.S. Tax Ct. LEXIS 116">*119 shares are to be distributed to certain beneficiaries named in the will.

The gross estate of decedent, as reported in the estate tax return, consists of the following:

In the estate tax return a deduction was claimed for "Executors' commissions" in the amount of $ 9,888.22. This deduction was disallowed by the Commissioner, with the explanation: "No deduction is made for executor's commissions since the evidence submitted is not sufficient to show the deduction is allowable."

No part of the executor's commissions claimed has been paid.

The executor has disbursed approximately $ 140,000, including Federal estate tax, state inheritance tax, attorney fees, and miscellaneous items of administration.

The decedent's husband in the six years following his wife's death has, under1949 U.S. Tax Ct. LEXIS 116">*120 his right of invasion under the will, invaded the estate in an amount not in excess of $ 8,000. He is 70 years of age.

OPINION.

The petitioner contends that under the law of New York executor's commissions in the amount of $ 9,686.30, computed at the statutory rates on the value of the gross estate as adjusted by the Commissioner ($ 492,815.11), less the value of the real estate ($ 9,500), are allowable as a deduction in computing the net estate under section 812 (b) of the Internal Revenue Code.

The respondent in his brief concedes that statutory commissions on approximately $ 140,000, the amount received and disbursed by the 13 T.C. 173">*175 executor, have been earned by petitioner and should be allowed as a deduction. He contends, however, that no additional commissions are allowable, for the reason that it is utterly impossible to determine with any degree of accuracy what, if any, commissions will ultimately be paid.

The argument of the respondent that, unless and until the securities are converted into cash and the cash distributed, the executor herein will be entitled to no commissions whatsoever, is without merit in view of the provisions of subdivision 5 of section 285 of the 1949 U.S. Tax Ct. LEXIS 116">*121 Surrogate's Court Act, ¹ which accords executors the right to commissions where the property is "distributed or delivered" in specie without actual conversion into cash. In re Pratt's Will, 172 Misc. 756">172 Misc. 756; 16 N. Y. S. (2d) 75, 78.

The cases cited by respondent, viz., In re Ziegler (1916), 219 N.Y. 544; 113 N.E. 553; In re Hogeboom's Will (1927), 219 A.D. 131; 219 N. Y. S. 436; and In re Hurley's Estate (1933), 149 Misc. 68">149 Misc. 68; 266 N. Y. S. 722, holding that 1949 U.S. Tax Ct. LEXIS 116">*122 the executor or administrator of a deceased executor is not entitled to commissions for services performed in distributing the underlying estate, were decided prior to the amendment of section 257 of the New York Surrogate's Court Act by the Laws of 1938 (Sept. 1, 1938) and, therefore, are not applicable herein. The purpose of this amendment, as stated in Cluskey's Estate, 169 Misc. 264">169 Misc. 264; 7 N. Y. S. (2d) 400, was:

* * * to supply a remedy for the situation disclosed in Matter of Hurley's Estate, 149 Misc. 68">149 Misc. 68, 266 N. Y. S. 722, in which the court was compelled to deny any compensation to a fiduciary of a deceased fiduciary who had actually performed the paying-out services for which commissions at half statutory rates are ordinarily payable. This result was not only an unjustifiable hardship on the fiduciary of the deceased fiduciary who was compelled to perform the attendant labor, but resulted in an unjust enrichment of the distributees of the estate who are properly entitled to its net avails only after the deduction of usual administration expenses, of which the ordinary commission1949 U.S. Tax Ct. LEXIS 116">*123 at statutory rates to the fiduciary is one.

The effect of the amendment is to enable the Surrogate, upon distribution, to award to the estate of the deceased fiduciary and to his executor or administrator jointly, a sum equivalent to the statutory commission which would have been earned by the deceased fiduciary had he completed the entire task. Under ordinary circumstances, the allocation of this total full commission will be at one-half rates to the estate of the fiduciary for all sums received by him, with an additional sum equal to a commission at one-half rates for sums which he expended, and to his executor or administrator, a commission at one-half rates for sums which he disburses.

The procedure will have the effect of accomplishing substantial justice to all concerned, to the deceased fiduciary, since his estate receives the benefit of his 13 T.C. 173">*176 actual labors, to his executor or administrator, since it recompenses his actual performance, and to the beneficiaries of the estate, since it takes from them merely that which would have been allowed by law as the remuneration of the deceased fiduciary had the latter lived to complete the task. In addition, it will frequently1949 U.S. Tax Ct. LEXIS 116">*124 result that in this manner the appointment of a successor fiduciary will be obviated, with a resulting saving to the ultimate distributees of an additional commission at half rates.

* * * *

To the same effect see also In re Morrisey's Will, 170 Misc. 1016">170 Misc. 1016; 11 N. Y. S. (2d) 640; and In re Hutchinson's Will, 175 Misc. 175">175 Misc. 175; 22 N. Y. S. (2d) 867.

Moreover, in 149 Misc. 68">Hurley's Estate, supra, it was held that the estate of the deceased executor was entitled to receive commissions at one-half the statutory rate upon the property which came into his hands prior to his death, plus an additional one-half commission on such portions thereof as were paid out by him. In the will involved in Hogeboom's Will, supra, the husband of testatrix, who died in October 1918, was named executor and life tenant, with the right to use so much of the principal, together with the income thereof, as would be necessary for his comfortable maintenance and support. Upon his death, except for some small bequests, the remainder 1949 U.S. Tax Ct. LEXIS 116">*125 was to be distributed to two brothers of testatrix, one of whom was named in the will to succeed the husband as executor. The husband-executor died in July 1924, leaving a will in which he named his second wife as executrix. The Appellate Court stated, in part, as follows:

Upon his accounting in 1919, Dr. Hogeboom was allowed full commissions, and he was directed to pay out and distribute "as provided by the will." While in some cases the same person in the same estate may have commissions both as executor and trustee, this is not the rule --

"in every instance where trust duties are imposed upon an executor. Where, by the terms or true construction of the will, the two functions with their corresponding duties coexist, and run from the death of the testator to the final discharge, interwoven, inseparable and blended together, so that no point of time is fixed or contemplated in the testamentary intention at which one function should end and the other begin, double commissions or compensation in both capacities cannot be properly allowed." Johnson v. Lawrence, 95 N.Y. 154, 160; Matter of Ziegler, 218 N.Y. 544, 551, 113 N.E. 553, 554.1949 U.S. Tax Ct. LEXIS 116">*126 [Emphasis supplied.]