tioner and his wife, bore the name of the petitioner alone. The transfer form printed on the back of the certificates was signed by petitioner in blank. It does not appear when this was done. Petitioner testified that the certificates were endorsed "usually" and "about the time they were received mostly." He admitted on cross-examination that he had never made any gift tax returns. On brief, petitioner now contends that with respect to the stocks and bonds acquired prior to January 1, 1938, he had made a gift of one-half thereof to his wife. Clearly, the evidence is insufficient to establish a gift or other transfer of such securities. The many infirmities in the evidence seriously impair or wholly destroy its probative value. Petitioner's general assertions carry little weight in view of the many inconsistencies in petitioner's treatment of the property for tax purposes. We conclude that petitioner has failed to establish the ownership of these securities by the entirety. We find no error in respondent's determination that the dividends from the shares of stock other than those issued in the joint names, and the interest on the bonds, belonged to petitioner in the respective taxable years.

Reviewed by the Court.

Decision will be entered under Rule 50.

OPPER, J., dissenting: The futility of attempting to deal with the proper apportionment of income tax burden in our present-day economy by resorting to complicated and technical rules of ancient property law seems to me aptly illustrated by this proceeding. Tenancies by the entirety have grown up over the centuries accompanied by concepts, traditions, and developments which I doubt we are even in a position to assay correctly without deep study and careful historical research.

But even a casual acquaintance with the background of titles by the entirety shows that the varied principles upon which they are founded are at war with the theories to which we resort in dealing with current tax problems, and that if they are employed, they lead to results which are both absurd and contrary to the superficial consequences. Thus, the very foundation of a tenancy by the entirety is that both husband and wife own all the property. They each have it all, and not half"per tout et non per mie." Alles v. Lyon, 216 Pa. 604; 66 Atl. 81. If we say that the husband is not to be taxed because he does not own this income, that conclusion is at variance with the legal fact that he does. 66* * * the accruing income * belongs in its entirety to each of the two *" O'Malley v. O'Malley, 272 Pa. 528; 116 Atl. 500. Use of the concept should reduce to the absurdity that both are taxable on all of it.

*

Correspondingly, the doctrine derives from the ancient assumption

that husband and wife are one; yet our tax law treats them as two, and only such treatment could lead to the result reached in the opinion in this proceeding. It is even doubtful whether such changes as have been made in the legal status of married women entitled petitioner's wife to any of this income as a matter of law. The implication from the Pennsylvania cases at least is that, if the husband secures the income, he is entitled to retain it in the absence of a severance of the matrimonial relationship by divorce. O'Malley v. O'Malley, supra; cf. Jones v. Smith & Co., 149 N. C. 318; 62 S. E. 1092.

For my part, I should have been satisfied to see this situation treated as we would if it were the ordinary carrying on of a business in which the parties to the marriage participated to a greater or less extent. This might require an ascertainment of the contribution in property and services made by petitioner and his wife, respectively, to the earning of the income which is sought to be taxed. But that is no insuperable obstacle. Cf. Max German, 2 T. C. 474.

ARUNDELL and HARRON, JJ., agree with this dissent.

J. M. LEONARD, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

MARY LEONARD (MRS. J. M. LEONARD), PETITIONER, V. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

MARY LEONARD TRUST #1, J. M. LEONARD, Trustee, PetitionER, V. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. MIRANDA LEONARD TRUST #1, J. M. LEONARD, TRUSTEE, PETITIONER, V. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

MARTHA LEONARD TRUST #1, J. M. LEONARD, TRUstee, PetitioneR, V. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Docket Nos. 555, 556, 578, 577, 579. Promulgated April 30, 1945.

In 1938, petitioners, husband and wife, transferred community property to the husband as trustee for their three minor daughters. The trusts were irrevocable and for long terms. Only in the event the grantors, as parents, were unable to support the beneficiaries could the trustee in his sole discretion distribute any income prior to the beneficiary attaining the age of 21. Distribution of certain percentages of the trust estate was mandatory when beneficiary attained the ages of 21 and 30, and the trustee in his discretion could distribute a certain part of the trust estate when beneficiary became 25 and could distribute all and terminate the trust when beneficiary reached age 30. Termination was mandatory when beneficiary reached age 50, and in any event at the expiration of 20 years and 10 months after the death of the last daughter living when the trusts were created. In case of death of a beneficiary the remainder went

to others than the grantors. No powers were reserved to alter or
amend the trusts in any way. Provision was made for additional
trustees. No part of the trusts was used for support of the children.
In 1940 three additional substantially similar trusts were created by
the same petitioners for the same beneficiaries. In the taxable years
the beneficiaries were all minors. The net income of each of the
trusts was accumulated by the trustee in behalf of the respective
beneficiaries. Held, no part of the income of the six trusts is taxable
to the grantors under sections 22 (a), 166, or 167 of the Revenue Act
of 1938 and of the Internal Revenue Code. Frederick Ayer, 45 B. T. A.
146, and Davil Small, 3 T. C. 1142, followed. Louis Stockstrom, 3
T. C. 255, affirmed by the Eighth Circuit Court of Appeals,
distinguished.

Charles P. Swindler, Esq., for the petitioners.

Paul E. Waring, Esq., for the respondent.

These consolidated proceedings involve deficiencies in income tax determined by respondent against petitioners for certain calendar years, as follows:

In statements attached to the deficiency notices in Docket Nos. 555 and 556, the respondent adjusted the net community income as disclosed by each petitioner's returns for the calendar years 1938, 1939, and 1940 by adding to such net community income the amounts of $29,033.74, $30,700.44, and $140,112.56, respectively, which adjustments he explained in six separate explanations that we consolidate into one, as follows:

It is held that the net income of the trusts listed below [NOTE: The net income of the trusts listed below for 1940 was referred to in the separate explanations as the "adjusted" net income] constitutes income taxable as community income to J. M. Leonard and Mrs. J. M. Leonard, grantors of such trusts:

By appropriate assignments of error petitioners in Docket Nos. 555 and 556 contest the above adjustments to their net community income and they allege further that the respondent erred in his failure to find that any deficiency in the tax for 1938 is barred by the statute of limitations. At the hearing counsel for petitioners waived the assignment of error relative to the statute of limitations. In the above mentioned statements the respondent also made several other adjustments to the net community income, but these adjustments are not contested and will be given effect in a recomputation under Rule 50.

In statements attached to the deficiency notices in Docket Nos. 578, 577, and 579 the respondent adjusted the net income as disclosed by each petitioner's return for the calendar year 1940 by adding thereto as "short-term capital gain" the amount of $5,331.91. By appropriate assignments of error each petitioner contested this adjustment, and in addition alleged that:

(b) Respondent erred in adding one-half of petitioner's adjusted net income [$37,354.12 in Docket No. 578, $37,354.91 in Docket No. 577, and $37,350.53 in Docket No. 579] for 1940 to the taxable income for that year of each J. M. Leonard and Mary Leonard, as community income, as set forth in deficiency notices to each dated October 19, 1942.

Petitioners in Docket Nos. 578, 577, and 579 now concede that the respondent was correct in making the "short-term capital gain” adjustment, and they also concede the correctness of the deficiencies so determined by the respondent, providing this Court should hold and decide in Docket Nos. 555 and 556 that the adjusted net income of the respective trusts for the year 1940 is taxable to the trusts and not to the grantors. If, on the other hand, this Court should hold and decide in Docket Nos. 555 and 556 that the adjusted net income of the respective trusts for the year 1940 is taxable to the grantors and not to the trusts, then petitioners in Docket Nos. 578, 577, and 579, in connection with assignment of error (b) above, claim overpayments for 1940 in the amounts of $6,854.65, 6,864.88, and $6,863.63, respectively. The respondent concedes that if the latter should be our holding and decision relative to whom the adjusted net income of the trusts for the year 1940 is taxable, then the claimed overpayments can be disposed of under Rule 50.

FINDINGS OF FACT.

Many of the facts have been stipulated. The stipulation is incorporated herein by reference.

Petitioners, J. M. Leonard, born on February 10, 1895, and Mary Leonard, born on January 12, 1907, are husband and wife, both residing during the taxable years 1938, 1939, and 1940 and at all times material

664385m-45-vol. 481

(1271) to these proceedings at Fort Worth, Texas, where they were married. on March 8, 1931. Each filed a separate income tax return for each of the years 1931 to 1940, inclusive, on the community property basis with the collector of internal revenue for the second district of Texas, at Dallas, Texas, and reported large amounts of community income thereon.

On April 1, 1931, Leonard Bros. was organized and incorporated under the laws of the State of Texas, with an outstanding capital stock of 90,000 shares of common stock with a par value of $10 per share. During the period April 1, 1931, to December 31, 1940, inclusive, this corporation was engaged in diverse merchandising, both wholesale and retail, dealing in clothing, food stuffs, drugs, furniture, etc. During this period the capital stock and surplus (including reserve for income taxes), the gross sales, officers' salaries paid to J. M. Leonard and O. P. Leonard, and the net income of this corporation as reported on its income tax returns were as follows:

During the years 1935 to 1940, inclusive, the capital stock of Leonard Bros. was registered in the names of the persons or trusts, and dividends were paid by Leonard Bros. to the registered owners thereof, as follows: