The Court of Appeals for the Eighth Circuit, 72 F.(2d) 352, affirmed a ruling of the Board of Tax Appeals, 27 B.T.A. 952, and held that under section 202 of the Revenue Act of 1921, c. 136, 42 Stat. 227, 229, and section 204 of the Revenue Act of 1924, c. 234, 43 Stat. 253, 258 (26 USCA § 935 and note), the basis for computing gain or loss on the sale of property, and its depletion or depreciation, for purposes of taxing income returned by the petitioner, an executor, is its value at the date of the decedent's death, rather than the cost to the decedent, or the value on March 1, 1913, if acquired before that date.
We granted certiorari, 294 U.S. 700, 55 S.Ct. 507, 79 L.Ed. -, to resolve a conflict of the decision below, and of the like decision, under section 202 of the 1918 Revenue Act, c. 18, 40 Stat. 1057, 1060 of the Circuit Court of Appeals for the Sixth Circuit in Eldredge v. United States, 31 F.(2d) 924, 930, with that of the Court of Claims in McKinney v. United States, 62 Ct.Cl. 180. See Elmhirst v. United States, 38 F.(2d) 915; Myers v. United States, 51 F.(2d) 145; compare McCann v. United States, 48 F.(2d) 446, each decided by the Court of Claims.
Petitioner's tax returns were for the calendar years 1924 and 1925. Sections 202(a, b) and 214(a)(8), (10) of the 1921 Act, 42 Stat. 229, 239-241, and section 204(a), (b), (c) of the 1924 and 1926 Acts (26 USCA § 935 and note) provide that the basis for computing gain or loss on the sale of property, and depreciation and depletion, shall be its cost, or its value on March 1, 1913, if acquired before that date. None of the acts specifically provide a basis for making the computations where return is made of income received by the estate of a decedent in the course of administration. But in the case of property acquired by 'bequest, devise, or inheritance' section 202(a)(3) of the 1921 Act, 42 Stat. 229, and section 204(a)(5) of the 1924 and 1926 Acts, 26 USCA § 935 and note, provide that the basis shall be the fair market value 'at the time of acquisition.'
The revenue acts consistently treat the estate of a decedent in the hands of an administrator or executor as a separate taxpayer. By section 2 of the 1921 Act, 42 Stat. 227, and 1924 and 1926 Acts, 26 USCA § 1262, the estate of a decedent is embraced within the term 'taxpayer.' Each act specifically provides for taxation of the income of an estate during administration. Section 219 of the 1924 Act, 42 Stat. 246, and 1924 and 1926 Acts, 26 USCA § 960 note. Each includes profits from the sale of property by the taxpayer in taxable income, section 213 of the 1921 Act, 42 Stat. 237, 238, and 1924 and 1926 Acts, 26 USCA § 954 and note, and provides for the deduction of losses from gross income in arriving at taxable income, section 214 of the 1921 Act, 42 Stat. 239, and 1924 and 1926 Acts, 26 USCA § 955 and note. See Merchants' Loan & Trust Co. v. Smietanka, 255 U.S. 509, 516, 517, 41 S.Ct. 386, 65 L.Ed. 751, 15 A.L.R. 1305. Each makes provision for the imposition of a tax upon the estates of deceased persons, and the 'gross estate' which is the basis for computing the tax is the value of the decedent's property at the time of his death. Section 402, 1921 Act, 42 Stat. 278; section 302, 1924 and 1926 Acts, 26 USCA § 1094 note.
The Court of Claims held that the time of acquisition, indicated by section 202(a) of the 1921 Act and section 204(a) of the 1924 and 1926 Acts as the controlling date for calculating gain or loss to the estate in the course of administration, must be taken to be the date of acquisition by the decedent rather than the time of acquisition by the executor or administrator on the decedent's death. This conclusion, it was thought, was compelled by the statutory command that the basis of computation shall be 'cost,' which could have no application to the acquisition by the executor or administrator, who is not a purchaser of the estate which be administers. McKinney v. United States, supra, 62 Ct.Cl. 180, 188. But this specification is not enough to restrict the effect of the general provisions of these acts which impose a tax on the income, including capital gains, of taxpayers. The use of the word cost does not preclude the computation and assessment of the taxable gains on the basis of the value of property, rather than its cost, where there is no purchase by the taxpayer, and thus no cost at the controlling date. See Heiner v. Tindle, 276 U.S. 582, 585, 586, 48 S.Ct. 326, 72 L.Ed. 714; Lucas v. Alexander, 279 U.S. 573, 578, 579, 49 S.Ct. 426, 73 L.Ed. 851, 61 A.L.R. 906.
