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McAllister’s will established a trust fund of $100,000 with the income to be paid to his son for life and on the son’s death without children to the son’s wife (P). On the death of P, the trust was to terminate and the residue going to the testator’s wife and his son Richard. The testator died in 1926, his widow in 1935 and John in 1937. Except for the stock in the McAllister Corporation, John did not leave assets sufficient to meet his debts and in order to obtain immediate funds, P, brought suit in Chancery Court to end the trust. Richard the remainderman was to take over the stock for $50,000 and was to pay P $55,000 in release of all interest in the trust and consent to termination and cancellation. P reported a capital loss of $8,790.20 as the difference between the value received and the value of the estate under 1.1014.5. P contends that the life estate was a capital asset and the Tax Court agreed with the Commissioner that the payment was merely an advance payment of income.

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