is the power to dispose of the principal during his life. But since the principal is but such a small part of the wealth of each of the petitioners and since they felt that they would only want the principal during life in an extraordinary circumstance, the giving up of that incident of ownership may not be said to preclude them from being the owners of the income under section 22 (a). We have found it unnecessary to consider the second argument of the respondent that each of these trusts was created by the petitionerlife beneficiary thereof under the doctrine of reciprocal trusts and that the income thereof was taxable to him under sections 166 and 167, supra. Since our opinion does not rest upon the proposition that the transfers in trust were not gifts, the question as to whether we have jurisdiction over the gift taxes paid for the year 1935 is not before us, but in any event that question has been answered in the negative. Commissioner v. Gooch Milling & Elevator Co., 320 U. S. 418; Robert G. Elbert, 2 T. C. 892. The sums of $229, $229, and $297 expended by petitioner Edward E. Bishop during the years 1938, 1939, and 1940, respectively, for statistical services used by him in the management and conservation of his investments are deductible as nonbusiness expenses under section 23 (a) (2) of the Internal Revenue Code. Petitioner conceded that the $70 spent in each of those years for accountant's fees in the making of his income tax returns is not deductible. Decisions will be entered under Rule 50. EDGAR M. SORENG, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. MARY SORENG, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Docket Nos. 3916, 3917. Promulgated February 28, 1945. Pursuant to proper corporate authority, the X corporation made payment of dividends to its stockholders, including petitioners. This was done pursuant to a plan by which X was to acquire all of its 1 Section 23 (a) (2) was added by section 121 of the Revenue Act of 1942 and was made retroactive by section 121 (d) and (e) of that act. It reads as follows: "SEC. 23. DEDUCTIONS FROM GROSS INCOME. "In computing net income there shall be allowed as deductions: "(2) NON-TRADE OR NON-BUSINESS EXPENSES.-In the case of an individual, all the ordinary and necessary expenses paid or incurred during the taxable year for the production or collection of income, or for the management, conservation, or maintenance of property held for the production of income." own stock with the exception of that owned by petitioners. Peti- L. M. McBride, Esq., for the petitioners. Harold H. Hart, Esq., for the respondent. Respondent determined a deficiency in the income tax of petitioner Edgar M. Soreng for the year 1940 in the sum of $1,213.89, and of petitioner Mary Soreng for the year 1940 in the sum of $237.75. That part of these deficiencies is in issue here which arises from respondent's determination that petitioners received during the taxable year dividends from the Soreng-Manegold Co. FINDINGS OF FACT. A stipulation of facts has been filed by the parties and we find those facts to be as stipulated. They may be summarized as follows: Petitioners, husband and wife, filed their income tax returns for the year 1940 with the collector of internal revenue at Chicago, Illinois. They are owners of common stock of the Soreng-Manegold Co., an Illinois corporation with offices in Chicago, engaged in the manufacture and sale of electrical appliances. As of January 22, 1940, Frank W. Manegold was its president, petitioner Edgar M. Soreng was its vice president and general manager, and Mary F. Farrell was its secretary. All three were directors. The stock of the Soreng-Manegold Co., on January 22, 1940, was held as follows: Under date of January 15, 1940, Soreng-Manegold Co. obtained options from all the above members of the Manegold family and from Roy M. Hood to acquire their preferred shares at $100 per share and their common shares at $8 per share. The options expired at 5 p. m. on January 26, 1940. None of the options could be exercised unless all were exercised. The deficit of the Soreng-Manegold Co. for income tax purposes as of December 31, 1939, was $1,335.14. The paid-in surplus as of December 31, 1939, was $45,667.68, according to the books of the company. The Soreng-Manegold Co. filed its corporation income tax return and its excess profits tax return for the calendar year 1940 with the collector of internal revenue at Chicago, Illinois. Its correct net income for 1940 was $71,953.51. The income and defense tax of the corporation for 1940 totaled $17,268.85, and its excess profits tax totaled $9,206.22. Its earnings for 1940 available for dividends totaled $45,478.44. In 1940 it paid dividends of $434 on its preferred stock. The 1940 earnings of the corporation available for dividends on common stock totaled $45,044.44. A dividend of $1 per share, aggregating $2,410.75, was paid on common shares on August 5, 1940. A special meeting of the Soreng-Manegold Co. was held on January 22, 1940. The minutes of that meeting read in part as follows: The President then announced that the officers of the corporation deemed it advisable to redeem 290 of the 350 preferred shares of the corporation held by Frank W. Manegold, at the redemption price of $105 per share, to pay a liquidating dividend in cash out of paid-in surplus, of $5.35 per share on all common stock of the corporation, to common stockholders of record as of January 22, 1940, to acquire the 5,9254 shares of common stock of the corporation now held by Frank W. Manegold, Molly A. Manegold, Mina Manegold, Alice R. Manegold, Richard F. Manegold and Roy M. Hood, to procure cash from Walter E. Heller & Company, of Chicago, Illinois, to authorize the execution and delivery of all instruments necessary in connection with the procurance of such cash, and to call a special meeting of the stockholders of the corpora tion to approve the payment of said liquidating dividend and to approve the sale of accounts receivable and the execution and delivery of a chattel mortgage to said Walter E. Heller & Company. Thereupon, upon motion duly made, seconded and unanimously carried, the following resolutions were adopted: BE IT RESOLVED, that 290 of the 350 preferred shares of the corporation now issued and outstanding in the name of Frank W. Manegold be redeemed at the redemption price of $105.00 per share, which said 290 preferred shares shall, after the redemption thereof, be held by the corporation as treasury stock, and the officers of the corporation are hereby authorized and directed to do all things necessary in connection with said redemption; and BE IT FURTHER RESOLVED, that it be recommended to the stockholders of the corporation that a liquidating dividend of $5.35 per share be paid in cash out of paid-in surplus on all common stock of the corporation, said liquidating dividend to be paid to common stockholders of record as of January 22, 1940, and the President of the corporation is hereby authorized and directed to call a special meeting of the stockholders of the corporation for the purpose of submitting the question of the payment of said liquidating dividend to the stockholders of the corporation; and BE IT FURTHER RESOLVED, that the 5,9254 shares of common stock of the corporation issued and outstanding in the names of the following persons, be pur chased by the corporation for a total purchase price of $13,189.26, and that said stock after the acquisition thereof be held by the corporation as treasury stock: and that the 401 shares of common stock of the corporation issued and outstanding in the name of Roy M. Hood be purchased by the corporation for a total price of $1,062.65, and that said stock after the acquisition thereof be held by the corporation as treasury stock; The directors also authorized the sale of accounts receivable to Walter E. Heller & Co., and the borrowing of $15,825 from that company. On the same date a special meeting of the shareholders of the Soreng-Manegold Co. was held. The minutes of that meeting read in part as follows: The President then announced that the meeting had been called pursuant to a resolution adopted by the Board of Directors at a special meeting held on Monday, January 22, 1940, at which meeting the Board of Directors (a) recommended the payment of a liquidating dividend, in cash, of $5.35 per share on all common stock of the corporation now issued and outstanding, said liquidating dividend to be paid out of paid-in surplus, and (b) authorized the redemption by the corporation of 290 of the 350 shares of preferred stock of the corporation now held by Frank W. Manegold, for $105.00 per share, and of the acquisition by the corporation of all or any portion of 5,9254 shares of common stock of the corporation now held by various shareholders for $14,251.91. The President further announced that the corporation did not have sufficient cash on hand for the purposes specified above, and that it would, therefore, be necessary to obtain additional cash from Walter E. Heller & Company, and to transfer, sell and assign all or a part of the accounts receivable of the corpo ration to Walter E. Heller & Company, and to execute and deliver a chattel mortgage on the plant, tools, equipment and fixtures of every kind and description of the corporation to Walter E. Heller & Company for the purpose of securing such cash. Thereupon, upon motion duly made, seconded and unanimously carried, the following resolutions were adopted: BE IT RESOLVED, that the officers of the corporation be and they hereby are authorized to pay a liquidating dividend, in cash, of $5.35 per share on all shares of common stock of the corporation to all owners of such common stock of record as of January 22, 1940, which such liquidating dividend shall be paid out of paid-in surplus of the corporation pursuant to the terms and provisions of Section 60 of the Business Corporation Act of Illinois; and The stockholders also authorized the sale of accounts receivable to Walter E. Heller & Co. and the borrowing from that company of $15,825. The actions of the directors and stockholders were by unanimous vote. 664385m-45-vol. 4 -56 On January 26, 1940, the Soreng-Manegold Co. made dividend payments in accordance with the resolutions enacted at the said meetings with respect to its common stock equal to $5.35 per share. The dividend was disbursed by checks delivered in the office of Glore, Forgan & Co. All dividend checks, except those in favor of petitioners, were made payable to the order of Glore, Forgan & Co., and each was identified for the particular person for whose benefit the checks were issued on the reverse side thereof. Dividend checks were issued payable to the order of Mary Soreng for $3,557.75 and to Edgar M. Soreng for $8,804.75. On January 26, 1940, a check was made payable by the SorengManegold Co. to the order of Glore, Forgan & Co. in the sum of $30,450. On the reverse side of this check notation as follows is contained: "Redemption of 105 of 290 Prfd. shrs. of Frank W. Manegold." Also delivered to Glore, Forgan & Co. on January 26, 1940, were checks of private individuals aggregating $6,000, for the purchase of 60 preferred shares, at $100 per share, owned by Frank W. Manegold. On January 26, 1940, there were also delivered checks of the SorengManegold Co. for the purchase of its common shares held by all stockholders except Edgar and Mary Soreng. All of these checks were made payable to Glore, Forgan & Co. and were identified on the reverse side thereof as the purchase price of common stock held by the various stockholders. On January 26, 1940, after the completion of the payments described above, certificates, endorsed in blank, evidencing all the preferred and common shares of the Manegold family and Roy M. Hood were delivered through Glore, Forgan & Co. to Soreng-Manegold Co. Thereafter 60 shares were transferred on the stock records of the company to the private individuals purchasing the preferred stock. After these stock transactions were completed, there were 60 shares of preferred and 2,31034 (being the shares owned by Edgar and Mary Soreng) shares of common stock issued and outstanding, the remaining shares thus acquired from the Manegold family and Roy M. Hood being held in the treasury of the company. The $5 per share premium on the redemption of the 290 preferred shares and the dividend of $5.35 per share on the common shares were debited against paid-in surplus on the books of Soreng-Manegold Co. Of the amount of the checks of the Soreng-Manegold Co. issued in purchase of the common stock, $8,326.66 was debited against surplus on the books of the company. The dividend checks of January 26, 1940, payable to Edgar M. Soreng in the sum of $8,804.75 and Mary Soreng in the sum of $3,557.75, were deposited by them in their respective personal bank accounts. Each of them issued his own personal check, dated January 27, 1940, for the respective amounts received by them as dividends, |