Plaintiff, as trustee under a trust created in 1926 by one Westinghouse, in 1934 sold certain bonds at a profit. One hundred sixty of the bonds had been acquired from the creator of the trust in 1927 and 1929; thirty of them the trustee had purchased out of trust funds in 1932 prior to the death of the grantor in 1933 and the balance were purchased by the trustee after the grantor’s death. The trust was for the benefit of the grantor for life and revocable by him during his lifetime. After his death his widow was to be the beneficiary for her life, and on her death the corpus was to be distributed forty percent to certain named charitable and educational institutions and sixty percent to designated individuals. The grantor died November 18, 1933, without having revoked the trust.
In its income tax return for 1934 the trustee showed a capital gain from the sale of the bonds and for the purpose of section 117 of the Revenue Act of 1934 computed the holding period of the bonds' from the grantor’s death in 1933. On October 16, 1937 the trustee filed a claim for refund of income taxes paid for 1934 on the ground that in computing the capital gain on the securities sold the period of holding by the trustee started at the time when it acquired legal title, namely, 1927 and 1929 as to those bonds transferred by the creator of the trust and 1932 in the case of those purchased by it prior to the grantor’s death. Upon the rejection of the claim for refund, timely suit was commenced in this court.
The dispute in this case therefore relates to the time from which the holding of the trustee dates for the purpose of determining what percentage of the profit realized must be returned for taxation under section 117(a) of the Revenue Act of 1934. There is no controversy as to the bonds acquired after the grantor’s death. As to the others, the defendant argues that the holding dates from the grantor’s death, while plaintiff claims' that the holding dates from the acquisition of legal title by it.
Plaintiff had, in a sense, “held” the bonds from the dates of the transfer by the creator of the trust and the purchase by it since it had acquired legal title and the responsibilities of trustee ownership on those dates. Our question is whether it began to “hold” the bonds within the meaning of the Revenue Act of 1934 on those dates. It is plain that when the creator of the trust transferred these bonds to the trustee in 1927 and 1929 the trustee did not then begin to “hold” them for the purpose of measuring the length of time that they were held. Section 117(c)-(2) of the Revenue Act of 1934 is specific that where the property in the hands of one person has under Section 113 the same basis for valuation that it had in. the hands of another person, the holding of that other person should be included in the time of holding. Section. 113(a) (3) 26 U.S.C.A. Int.Rev.Acts, page 697, provides that in the case of an-inter vivos transfer in trust, the basis-of valuation shall be the same as it would have been in the hands of the grantor. . The effect of the two sections is-that the transfers by the creator of the trust to the trustee in 1927 and 1929 were, at that time, of no significance either for the purpose of fixing a basis for the valuation of the property, or a beginning of the time of holding. If the trustee had at any time before the death of the creator of the trust in November 1933 sold the bonds, both the basis of their valuation and the beginning of their period of holding would have been fixed as-if the conveyance to the trustee had never taken place and the creator of the trust-had continued to own them.
Upon the death of the grantor in 1933,. the provisions of section 113(a) (5) became applicable. The statutory language-is: “In the case of property transferred-in trust to pay the income for life to or upon the order or direction of the grantor, with the right reserved to the gran*431tor at all times prior to his death to revoke the trust, the basis of such property in the hands of the persons entitled under the terms of the trust instrument to the property after the grantor’s death shall, after such death, be the same as if the trust instrument had been a will executed on the day of the grantor’s death.” The basis of valuation then became the date of the grantor’s death, as both parties agree. Shall the 1927 and 1929 dates, which were, from those dates until the grantor’s deadi in 1933, insignificant for income tax purposes, be regarded as having become retroactively controlling as to the period of holding after the grantor’s death ?
While the question is by no means free from doubt, we think that Congress did not intend the result for which plaintiff contends. Section 113(a) (5) was first put into the Revenue Act in 1928, 26 U. S.C.A. Int.Rev.Acts, page 380. The Conference Report said: “A special rule is provided in section 113(a) (5) by which to determine the basis of property transferred in trust with the right reserved to the grantor at all times prior to his death to revoke the trust where the sale or other disposition of the property occurs after the death of the grantor. This rule includes sales or other disposition by the trustee and also by a beneficiary of the trust. In view of the complete right of revocation in such cases on the part of the grantor at all times between the date of the creation of the trust and his death, it is proper to view the property for all practical purposes as belonging to the grantor rather than the beneficiary and to treat the property as vesting in the beneficiary according to the terms' of the instrument, not at the date of the creation of the trust, but rather on the date of the grantor’s death, for the purpose of determining gain or loss on sale or other disposition of the property on the grantor’s death by the trustee or a beneficiary. Accordingly, it is provided that the basis of such property in the hands of the persons entitled thereto by the terms of the trust instrument after the grantor’s death shall be the same as if the instrument had been a will executed on the day of his death. Thus property acquired by virtue of revocable trusts of the kind described is treated, for all purposes the same as though it had been transmitted by the grantor by will at his death. (Conference Report No. 1882, 70th Cong., 1st Sess., p. 15.)” The last sentence in this report is a strong indication that Congress did not intend that the other provisions of the statute relating to the period of holding, section 101 of the 1928 act, 26 U.S.C.A., Int.Rev.Acts, page 370, now section 117, should be regarded as ignoring the revocable nature of the trust and carrying the holding period back beyond the grantor’s death.1
The importance which Congress attached to the revocable nature of the trust is further shown by the fact that according to the statutory scheme of sections 113 and 117, a transfer in trust such as this, but without provision for revocation, would have, even after the death of the grantor, as to trustee and beneficiary, left both the basis of value and the period of holding to be determined as if the grantor had never conveyed the property to a trustee. See Russell v. Bowers, D.C.S.D.N.Y., 27 F.Supp. 13.2
Since we regard as controlling the attitude of Congress toward the quality of revocability in the trust, it follows that our reasoning applies also to the bonds purchased by the trustee in 1932 and we conclude that the beginning of their “holding” by the trustee within the meaning of section 117 as well as their basis of value, is the time of the death of the grantor.
We recognize that it is not a necessary part of the statutory scheme that the beginning of the period of holding should in all cases coincide with the time as of which the valuation basis is fixed. Cf. McFeely v. Commissioner, 296 U.S. 102, 56 S.Ct. 54, 80 L.Ed. 83, 101 A.L.R. 304; Helvering v. Gambrill, 313 U. S. 11, 61 S.Ct. 795, 85 L.Ed. 1155. In those cases, as here, the question was one of statutory interpretation, but the lan*432guage there construed is not the language here under construction and those cases are therefore not controlling.
We hold therefore that the death of the grantor which ended the revocability of the trust and fixed the basis for the valuation of the property also began the period of holding of the trustee within the meaning of Section 117(a).
It follows that plaintiff did not overpay its taxes and the petition is dismissed. It is so ordered.
WHALEY, Chief Justice, and JONES and LITTLETON, Judges, concur.