Huesman's Estate v. Commissioner of Internal Revenue

On May 3, 1944, Ralph R. Huesman died testate, a resident of .the state of California. At the time of his death there was due and owing him from Desmond’s, a California corporation, the sum of $80,517 as a bonus for services rendered. Huesman’s last will and testament was admitted to probate. The net value of the estate exceeded $250,-000. The provisions of the will involved in the instant case are appended.

The executors of the estate, in that capacity and in their capacity as testamentary trustees, procured an order and decree from the probate court for distribution of the $80,517 bonus. The probate court made a finding and entered an order based thereon.

On April 30, 1945, the sum of $80,517 bonus was paid to the executors. On the same day the executors paid to the testamentary trustees the said sum of $80,517. The same day the trustees paid to Loyola University the said sum. At the time of receipt of said sum of $80,517 by the testamentary trustees and its distribution by them said sum constituted the only cash asset of the trust estate.

Petitioners (executors of the estate) operated on a cash receipts and disbursements basis. Petitioners filed a fiduciary income tax return…