not enjoy substantial economic benefits from the trusteed stock. This case, submitted on a stipulation of facts, presents a limited record. There is no statement of facts relating to the voting rights of any of the stock in question. This lack of evidence does not aid petitioner, but rather weighs against him and, in the absence of such material evidence, a presumption may not be made that any stock or any class of stock did not carry voting rights. The question to be decided turns upon the powers which the grantor-trustee of the trusts had over the property in the trusts and the income of the trusts. The failure of petitioner to dispel any suggestion that control over the stocks of the companies of which the grantor was an executive may have determined the manner of creating the trusts, Helvering v. Stuart, supra, constitutes a serious defect in petitioner's effort to overcome the prima facie correctness of respondent's determination. See Anna Morgan, 5 T. C. 1089, 1095.

There is no evidence about the operation of the businesses of the two corporations involved, but, since petitioner was the president of both corporations, it must be assumed that he was actively interested in both businesses. It is stipulated that he received salaries from both corporations. The fiduciary returns for the year 1941 indicate that no dividends were paid by the corporations in that year. Since no dividends were paid but petitioner received salaries from the corporations in 1941, petitioner was the only member of the family to receive any economic benefit from the corporations in that year. See Anna Morgan, supra.

The situation strongly suggests an instance of retention of corporate control by means of the creation of trusts. Anna Morgan, supra; Frederick B. Rentschler, 1 T. C. 814; Lillian R. Chertoff, 6 T. C. 266. The trusts in question are long term trusts, to extend over twenty years, unless a trust is sooner terminated by the death of a beneficiary. During this entire period the grantor-trustee has the absolute power to control the paying out or the accumulation of the trust income and to determine what constitutes income and principal of the trusts. He may exercise absolute discretion to invade the principal and pay out whatever he desires for the support, maintenance, care, education, or welfare of a beneficiary, and this discretion is broad, for "welfare” is a general term which embraces a wide range of uses. This control of the purse is similar to that in Louis Stockstrom, supra, with the difference that there is lacking here the power to apportion income among various beneficiaries.

However, the question is determined not by consideration only of these broad powers over the use and withholding of income and principal, but also by consideration of the other broad powers of the

grantor-trustee over the property of the trusts. In this aspect of the case, it is clear that the grantor-trustee has the broadest possible powers. He may continue to conduct "any business transferred to this trust"; and he "shall have the right to deal with said property and every part thereof, that he would have if as an individual he were the absolute owner thereof." Thus, such broad powers of management and control in the grantor as trustee are similar to those existing in the Stockstrom, Edison, and Funsten cases.

The beneficiaries of the trusts were minors. The incorporated businesses were family-controlled, from which petitioner derived economic benefits. The creation of the trusts and the transfers of property to the trusts did not in any way, as far as the record shows, diminish petitioner's enjoyment of control over the property given to the trusts and the income derived from the property. Under the circumstances and in view of the broad powers of control over the property and the income of the trusts which remained in petitioner as trustee of the trusts, the issue is controlled by the Clifford case. Respondent's determination is sustained.

It should be said that petitioner on brief has correctly pointed out inaccuracies in inept statements in respondent's brief. We have, of course, taken note of such inaccuracies and have considered the issue independently.

Neither petitioner nor respondent has cited Anna Morgan, supra, (promulgated Nov. 26, 1945); and Alma M. Myer, 6 T. C. 77 (promulgated Jan. 16, 1946), because the briefs of the parties were submitted prior to the promulgation of those cases. In holding as we do in this case that petitioner is taxable on the income of the three trusts, we follow the rationale of the Anna Morgan case, which was controlled to a large extent by the Louis Stockstrom case. We said in Anna Morgan, supra, at p. 1095:

In the aspect of the present proceedings that petitioners were in a position to accumulate trust income, add it to principal, and thereby succeed in changing the recipient from the income beneficiary to the remainderman, the situation is similar to that in Louis Stockstrom, 3 T. C. 255; affd. (C. C. A., 8th Cir.), 148 Fed. (2d) 491; certiorari denied, 326 U. S. 719; and see Stockstrom v. Commissioner (C. C. A., 8th Cir.), 151 Fed. (2d) 353. The broad powers of management and control in the grantors as trustees were similar here to those existing in the Stockstrom case.

In one respect, however, they appear actually to be more extensive. Unlike those circumstances, the subject matter of the present trust was stock of corporations in which the petitioners were actively interested.

In the Louis Stockstrom case (see 3 T. C. 255, 257), the trustee was authorized to deal with the trust estate in all ways that he would do if he were the individual owner thereof. The facts here closely resemble the facts in Anna Morgan in the following respects: The trustees

could permit the income of a trust to accumulate until the primary beneficiary became 30 years of age; upon the death of a beneficiary, the surviving children, if any, were to receive the benefits of the trust, and, if none, the trust was to be distributed to the surviving brothers and sisters of the beneficiary; the trustees had very broad powers of control over the trust property, so that they could treat the property of a trust as "if they were the owners thereof as individuals," and they could vote corporate stock and hold compensating offices in corporations in which the trust had an interest, and fix their own compensation. Also, in the Anna Morgan case, the trusts received stock of corporations which were owned by the taxpayers and paid salaries to one of the grantors of the trusts, and the net income of the trusts was invested from time to time in additional stock of the corporations.

Having in this case practically the same set of relationships, i. e., family-owned corporations, the grantor serving as trustee of trusts holding stock of said corporations, and the trustee having broad powers of control over the trust property, the trust income, and the trust principal, we must conclude that the Anna Morgan case is to be followed here in deciding whether or not this case is controlled by the Clifford case doctrine as applied in the Louis Stockstrom case. It is the degree of control which is determinative. In so doing, we take the view that this case is distinguishable from the case of Alma M. Myer, supra.

In the Alma M. Myer case, the petitioner created a trust on December 19, 1934, for the benefit of her son who was born on January 19, 1917, so that he was nearly 18 years of age at the time the trust was created. The trust was to endure until he was 30 years of age, at which time it was to terminate and the property of the trust was to be distributed to him. Thus, the trust was for a period of just about 12 years. The property transferred to the trust consisted of cash and numerous Federal, state, and municipal bonds. The grantor was the trustee, and she had the power to pay out or accumulate the trust income during the term of the trust. The trust was for a shorter period than the trusts here, and the grantor-trustee did not have any personal or business interest in the corporation, the stock of which was held by the trust. In the absence of any such interest in corporations, the powers of the trustee over the property of the trust were far less extensive than is the power of the trustee in the trusts here. The differences in the degree of control of the grantor-trustee throws this case out of the ambit of the Alma M. Myer case.

Reviewed by the Court.

Decision will be entered for the respondent. ARUNDELL, VAN FOSSAN, BLACK, and TYSON, JJ., dissent.

WILLIAM A. FALLS, PETITIONER, V. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Docket No. 6981. Promulgated June 10, 1946.

The petitioner in 1941 paid $5,456.58 as his share of legal fees and
expenses incurred in defending a suit instituted against him and
associates for an accounting for royalties received by them for the
use of certain patents and to compel the transfer of such patents
alleged to be held by them as trustees ex maleficio. Held, that
such expenditures were made both in defense of title to property and
for the "production or collection of income," and that the portion
of such expenditures allocable to the defense of title to property is not
deductible, but that the remaining portion thereof is deductible un-
der section 23 (a) (2), Internal Revenue Code.

John P. O'Hara, Esq., for the petitioner.
William F. Robinson, Esq., for the respondent.

The Commissioner determined a deficiency of $3,431.76 in income tax for 1941. The question to be determined is whether the amount of $5,456.58, allegedly expended for legal fees and expenses, or any portion thereof, is deductible from gross income under section 23 (a) (2) of the Internal Revenue Code.

FINDINGS OF FACT.

The petitioner is a resident of Detroit, Michigan. He has been engaged for 35 years in the business of manufacturing springs for automobile seat and back cushions. He is president and general manager of the Falls Spring & Wire Co. of Detroit; of Great Lakes Spring Corporation, of Chicago, Illinois; and Chelsea Spring Co. of Chelsea, Michigan. At one time he was general manager of L. A. Young Spring & Wire Corporation, a Michigan corporation, hereinafter referred to as Young Corporation.

On October 19, 1938, Young Corporation filed a bill in equity in the Circuit Court for the County of Wayne, Michigan, against William A. Falls (petitioner herein), Desire H. Van Hove, Thomas Mahoney, Newton E. Shockey, Mabel C. Ruppert, administratrix of the estate of Albert A. Ruppert, deceased, Elizabeth Burch, alias Lizzie Burch, assignee from and successor trustee to Fred Burch, deceased, Austin G. Van Hove, and General Motors Corporation, a Delaware corporation, for an accounting and to hold all defendants, except General Motors Corporation, as trustees ex maleficio of United States Letters Patent No. 1,793,421, issued February 17, 1931, and No. 1,924,022, issued August 29, 1933, covering improved methods of making seat and back springs for automobile cushions, and the royalty proceeds therefrom. It was alleged, among other things, by Young Corporation that Falls, Desire H. Van Hove, Mahoney, and Shockey, who, other than its

president, L. A. Young, were the principal officers and executives of Young Corporation during the time of the transactions in question, in breach of their duties as trusted officers and employees, fraudulently, maliciously, and intentionally conspired among themselves and with Burch, brother-in-law of Desire H. Van Hove, and Ruppert, trim engineer of General Motors, to deprive it of certain inventions in spring constructions for seat and back cushions and to convert and misappropriate such inventions to their own benefit by using Burch as the pretended inventor; that Burch obtained patents for such inventions and granted manufacturing licenses thereunder to General Motors; that Burch and Elizabeth Burch, as trustees, had collected royalties of approximately $181,000 from General Motors and divided such royalties among the defendants, except General Motors. It was also alleged in general that as trusted officers and employees it was the duty of Falls, Van Hove, Mahoney, and Shockey to disclose and make known to Young Corporation all designs, improvements, and inventions pertaining to the spring-manufacturing business and not to appropriate and convert any such designs, improvements, or inventions to their own use and benefit. Young Corporation in its complaint prayed, inter alia, that the court by its decree compel all of the defendants, except General Motors, to execute and deliver over to Young Corporation the letters patent involved and that all of the defendants account for and pay over to it all moneys, royalties, and other profits collected or received by them and each of them from the exploitation and use of such letters patent.

General Motors, in its cross-complaint and amendments, admitted the royalty agreement with Burch, the payment of royalties to Burch and his wife as trustees, the granting of sublicenses under the Burch patents, and the collection of sublicense royalties in the amount of about $88,000, of which about $54,000 was collected from Young Corporation. It also admitted the alleged fraud and conspiracy between its trim engineer Ruppert and Young Corporation's executives and it alleged that by reason of such fraud and conspiracy the individuals became trustees ex maleficio for its benefit as to all royalties it had paid to Burch and his wife as trustees. It further alleged that by virtue of an agreement it had the right to the free use of all inventions, discoveries, and patents covering same relating to the construction of seat back and seat bottom springs owned by Young Corporation. It prayed among other things that the royalty agreements with Burch be canceled, that the Burch patents be assigned to Young Corporation, subject to their use by General Motors free of charge, and for an accounting by Young Corporation and individual defendants.

The defendants answered, admitting the trust agreement between them and Burch and the receipt of a share of the royalties paid by