The taxpayer's share of a testamentary trust, established pursuant to the will of her father, was delivered to her in kind in 1923. The property was personalty, part of which had been owned by the decedent and part purchased by the trustees. The decedent died in 1903 and his executors were discharged by the probate court in 1905. Pursuant to that order the executors turned over to themselves, as trustees, all of the residue of the estate. From that residue the taxpayer's claim to the property in question derived. During the year 1930 parts of both groups of property were sold. The questions presented relate to the proper basis under the Revenue Act of 1928, 45 Stat. 791, for determining gain or loss upon those sales: (1) whether the basis in case of the personalty owned by decedent is its value when received by the trustees from the executors or its value at the date of delivery by the trustees to the taxpayer; and (2) whether the basis in case of the personalty purchased by the trustees is its cost to the trustees or its value at the date of delivery by the trustees to the taxpayer. The case is here on a petition for certiorari which we granted because of a conflict among the circuits on those two questions.
I. As respects the property owned by the decedent at his death, we are of the view that the date when it was received by the trustees from the executors, rather than the date when it was delivered by the trustees to the taxpayer, governs. In the case of general bequests, § 113(a)(5) of the Revenue Act of 1928, 26 U.S.C.A.Int.Rev.Acts, page 380, provided that 'the basis shall be the fair market value of the property at the time of the distribution to the taxpayer.' But in case of specific bequests of personalty or in case of realty, the basis was the fair market value of the property at the death of the decedent. Sec. 113(a)(5). In the latter cases the property either vested in the heir or devisee at death or was rather definitely marked at the time of death for the legatee. In the former the legatee normally must have awaited administration of the estate before the property bequeathed to him could have been identified with certainty. That difference suggests the distinction in treatment under § 113(a)(5) of general bequests of personalty. It emphasizes that the words 'at the time of the distribution to the taxpayer' meant the time when the distribution was made out of the estate. It supports the view that Congress focused s 113(a)(5) on the decedent's death and the administration of his estate, and not on subsequent transfers or transmissions of the property.
The legislative history of § 113(a)(5) lends support to that conclusion. Prior to the 1928 Act the basis for property obtained by bequest, devise, or inheritance was the fair market value 'at the time of such acquisition'. The House Bill which became the Revenue Act of 1928 provided that the basis for all property acquired by bequest, devise, or inheritance should be the fair market value of the property at the date of the decedent's death-a provision designed to clarify the meaning of 'acquisition' in the earlier acts. In the Senate that language of § 113(a)(5) was changed to the form in which it appeared in the Revenue Act of 1928-a change specifically designed to avoid the confusion as to the basis on which gain or loss on the sale of property purchased by the executor and distributed to beneficiaries was to be determined.
There does not appear to be the slightest suggestion that this change was designed as a substantial departure from the value-at-death rule. To be sure, it did produce a limited deviation from that principle in that no income tax effect was to be given changes in value of personal property, passing otherwise than by specific bequest, during the administration of the estate. But to hold that it effected the change which petitioner urges would be to impute to Congress a purpose to go far beyond the exigencies of the specific situations with which it was dealing.