upon the approval by the Orphans' Court and the Orphans' Court did give it its formal approval and that, it seems to me, is tantamount to a formal decree.
In Re Jones' Estate, 54 Pa.Dist.& Co.R. 364, 61 Montg. 289, the court held that the Apportionment Act does not create new substantive rights, it merely spells out those already existing and implements their enforcement by giving Orphans' Court jurisdiction over persons found liable to pay prorated portions.
The agreement specifically cited the impact of the Apportionment Act on the controversy in stating, 'Whereas a question has arisen as to whether, under the provisions of the Act of July 2, 1937, P.L. 2762, the executors may require the widow to reimburse them for the portion of the Federal estate tax and the Pennsylvania additional estate tax which is attributable to the inclusion of such real estate and personal property in the decedent's gross estate.' The only other heir, in addition to the taxpayer, gave her formal assent to the agreement and joined in the request that the court give it its approval. The Orphans' Court of Montgomery County in approving the agreement certainly was fully and completely informed of the facts and their relationship to the Apportionment Act.
The taxpayer's contentions that at the inception and during the course of the administration of the estate there existed a reasonable doubt whether the taxpayer was liable under the Pennsylvania Apportionment Act to pay a proportionate share of the Federal and Pennsylvania estate taxes, also that no payment in cash was made to the taxpayer, are, in my judgment, of no consequence.
When a taxpayer's obligations are assumed by another or reduced or cancelled as part of a business transaction, and the taxpayer is thereby enriched, taxable income will result.
In Helvering v. Gordon, 8 Cir., 87 F.2d 663, at page 667, the court said: ' * * * It is not essential under the income tax laws that a taxpayer actually received money to which he is entitled before he is required to include it in his income tax returns. Whenever it is available to him and he is authorized to receive it or to direct its payment to some other party, it must be accounted for by him for income tax purposes. * * * If having power and control over it during the taxing period he voluntarily places it beyond his reach, he cannot be heard to say that he did not receive it within the period. * * * '
Of course, there is no income unless and until there has been a release of liability; nor is a contingent cancellation of debt income; nor does the compromise and settlement of a claim in dispute give rise to taxable income to the debtor.
In the instant case, however, I hold that under the provisions of paragraph Sixth of the will in question the testator made no provision for the payment of estate taxes on any property in which prior to his death he may have had an interest save only that passing by his will.
Secondly, the tax on the property held by the entireties came within the purview of the Pennsylvania Apportionment Act and was so processed by the Orphans' Court of Montgomery County.
Thirdly, the taxpayer in return for an acquittance from the liability of a substantial estate tax claim applied her share of executors' commissions in the sum of $ 48,116.12 as a quid pro quo.
Fourthly, the taxpayer was actually enriched at least to the extent of the amount of executors' commissions to which she was entitled and which she thus applied.
Therefore, by using the $ 48,116.12 in commissions to obtain a release from the estate of its claim against her, the taxpayer realized that amount, which is taxable under Section 22(a) of the Internal Revenue Code as her personal income.
The taxpayer is not entitled to a refund or any part of the taxes or interest claimed by her in this action. The defendant is entitled to judgment against the taxpayer for its costs.