John R. Upton, Anna L. S. Upton and Margaret St. Aubyn v. Commissioner of Internal Revenue

The named petitioners seek reversal of two decisions of the Tax Court rendered in consolidated proceedings to redetermine tax deficiencies and reported in 32 T.C. 301 . The principal question presented here relates to the apportionment of percentage depletion allowances as between the life beneficiaries and the trustees of a testamentary trust in computing federal income taxes on oil well royalties.

The testator, William R. Sloan, died on April 14, 1923, leaving his widow, Agnes G. Sloan, and two daughters, Anna L. Sloan (now Upton) and Margaret R. Sloan (now St. Aubyn). The two daughters, Anna and Margaret, and Anna’s husband with whom she filed joint returns are the petitioners here.

Most of Sloan’s estate was distributed to trustees named in his will. They were directed to receive the rents, issues, profits and income of the property and to dispose of the same as provided in the will after paying necessary and proper expenses. Sloan’s sister-in-law, Anna M. Kiernan, was to receive twenty-five dollars a month as long as she lived, and the widow was to receive the rest of the net income as long as she lived. Upon the death of the widow and her sister all of such net income…