¶1concurring: While it is unnecessary in this case to decide a related question, namely, whether the trust realized any gain from the receipt of $500,000 from the first trustee, I believe it should be concluded from the facts, in determining the main question which is involved in this case, that the $500,000 represented a recovery from the trustee for a breach of trust. There is in evidence, as petitioner’s Exhibit 5, a copy of the decree (entitled “Summary”) of the judge of the Probate Court of Massachusetts which heard the complaint regarding the first trustee’s accounts. This “Summary” shows that questions were raised by the complainants as to the propriety of the trustee’s actions. It was alleged that the trustee improperly retained in the trust the investment in stock in Greylock Mills and Berkshire Manufacturing Co. As to this, the court found that the retention was proper. But the court found that it was not proper for the trustee to vote the shares of stock in Berkshire and Greylock in the exchange of those stocks for stock of Berkshire Fine Spinning Associates, Inc., and that the investment by the trustee in stock of Berkshire Fine Spinning Associates, Inc., was not a proper investment by the trustee, under the terms of the testamentary trust. The court found that in the entire matter the trustee failed to exercise the required “care and consideration of a fiduciary under like circumstances.” The court was asked to surcharge the trustee for its failure to sell the Greylock and Berkshire stock sometime prior to the merger of those companies with Berkshire Fine Spinning Associates, Inc. The court found that the trustee must be charged with the inventory value of the Berkshire and Greylock stocks. The above indicates clearly that the Massachusetts court found that the trustee committed a breach of trust and surcharged the trustee $500,000. From the above, it would seem to follow that there was no “sale or exchange” of securities in the trust for $500,000 as that term is used for income tax purposes, and that the question in this case does not involve any realization of gain by the trust.
¶2The $500,000 represents a recovery from the trustee for a breach of trust. It is a rule that property recovered from a trustee, under such circumstances, should be apportioned between trust income and trust capital so as to put the income beneficiary and the corpus beneficiary in as nearly the position as each would have been in if there *713had not been a breach of trust. That is what the court ordered in the Parsons v. Winslow case. See Bogert, Trusts and Trustees, vol. 4, p. 2385, and comment on the Parsons case at p. 2384. In this case the local court, somewhat belatedly, ordered distribution of the sum recovered to trust income and trust principal. It could have done this in its first decree surcharging the trustee. Nevertheless, by court order, $70,000 was income, and $430,000 was principal. Petitioner could not at any time receive any distribution of trust principal. His rights were limited to receipt of trust income. The $70,000 was income distributable to petitioner in 1934, and it is taxable to petitioner under section 162 (b).