Decedent and his wife were married on April 12, 1897. There was no issue of this marriage. Decedent's profession was that of a newspaper writer most of his life, but in later years he confined himself to freelance writing. On March 20, 1939, decedent executed his last will, whereby he devised and bequeathed all of his property to his wife should she survive him. For many years decedent and Laura Rosebault were joint owners of certain securities held in an account with Hemphill, Noyes & Co., a New York Stock Exchange firm. She contributed no assets to the joint account. On June 18, 1941, the value of this account was somewhat in excess of $120,000. Over the same period Laura Rosebault had an individual account with the same firm which was worth approximately $40,000 on June 18, 1941. The securities in this account resulted largely from various gifts received from her husband, but were also purchased with a few thousand dollars she had earned by giving piano lessons. The financial management of both of the above accounts was always handled exclusively by the decedent. His wife never withdrew funds from the joint account for her personal use, but relied on her individual account for such purposes. On June 18, 1941, decedent withdrew securities from the joint account worth approximately $40,000 and transferred them to his wife as an absolute gift. Though he was 76 years old at the time of the transfer, decedent was in normal good health and had no apprehension of death. The donor had never previously made a transfer to the donee out of this account. Two principal desires motivated decedent at the time he turned these securities over to his wife. First, he was worried over the reduction of their resources and desired to reduce his income taxes by equalizing the value of securities in the joint account and in his wife's individual account. Secondly, he felt a moral obligation to make up losses in Mrs. Rosebault's own securities which occurred in the crash of 1929-30, due to poor advice he had given her in the purchase of securities. Laura D. Rosebault's holdings had been thereby reduced between $35,000 and $40,000 and she had never recouped this loss. At all times prior to his death decedent was in good health and carried on his normal business and social pursuits. Until the very end decedent was actively engaged in writing articles and books. During the war years he attended first aid classes regularly. He was a member of several writers' clubs and participated in their meetings at all times. Until the day he died, decedent had no presentiment of impending death. On the evening of March 19, 1944, decedent and his wife invited friends to dinner and played cards with them that evening. As de cedent prepared to retire for the night, he was suddenly stricken with a coronary occlusion and died. The securities transferred to his wife by decedent on June 18, 1941, were valued at $47,214.05 at the time of decedent's death. Respondent in his deficiency notice, under "Explanation of Adjustments," stated as follows: Transfers: Transfer of securities from the decedent to his wife Returned Determined $0.00 $47, 214. 05 on June 18, 1941. It is held that under the Federal estate tax laws and regulations pertaining thereto, that the transfer to the wife is subject to Federal estate tax. Other corrections made by the Commissioner increased the net value of the decedent's estate by $341.89. As a result of these adjustments the Commissioner determined a deficiency of $13,319.72 in the estate tax of the decedent. The transfer of securities by decedent to his wife on June 18, 1941, was not in contemplation of death. OPINION. HILL, Judge: The sole issue in this case is whether the transfer by decedent to his wife of approximately $40,000 worth of securities on June 18, 1941, was made in contemplation of death. It is well established that the words "in contemplation of death" mean that the thought of death is the impelling cause of the transfer and, furthermore, that the estate tax does not cover a gift inter vivos which springs from a different motive. United States v. Wells, 283 U. S. 102. Hence, in the instant case we must detect the donor's dominant motive in the light of his bodily and mental condition at the time of the transfer and determine whether it was associated with life or with death. We have found as a fact that up until the time of his sudden death, including the period when the transfer was made, decedent was in normal good health, regularly engaged in his business and social pursuits, and had no reason to apprehend death. It is true that decedent was 76 years old at the time of the gift, yet age in itself can not be regarded as a decisive test of the motive behind the transfer. United States v. Wells, supra, and Estate of Oliver Johnson, 10 T. C. 680. Thus, the preponderance of evidence relating to the donor's physical condition leads to the conclusion that the gift was not motivated by any premonition of death. It is noteworthy that decedent transferred these securities to his wife more than two years after he had written his last will and almost three years before his death. Therefore, there is no such propinquity funds; in 1919 they began a clothing business financed by a joint 2. As the taxpayer's four sons became mature, each was employed (a) On the evidence, held, that compensation paid to the eldest (b) Equal bonus payments, representing a percentage of business Wilson S. Wiley, Esq., and Rollin P. Rodolph, C. P. A., for the petitioner. Robert G. Harless, Esq., for the respondent. The Commissioner determined deficiencies of $1,479.55 and $7,269.41 in petitioner's income taxes for 1944 and 1945, respectively, by adding to his income one-half the profits of a clothing business which his wife had reported on her return, and by disallowing the deduction of a part of amounts paid in 1945 as salaries to his four sons, three of whom were in the armed forces. By amended answer the Commissioner prays for increased deficiencies, alleging error in his failure to disallow deductions for the sons' salaries in 1944 and failure to disallow more of the amounts paid as salaries in 1945. Petitioner contends that a valid partnership existing between himself and wife should be recognized for tax purposes and that the amounts paid to the sons are deductible as reasonable compensation for services rendered by them or as an inducement for their return to his employ after the war. FINDINGS OF FACT. Petitioner, a resident of Klamath Falls, Oregon, filed his income tax returns for 1944 and 1945 with the collector of internal revenue for the district of Oregon. His wife, Edna Pearl Drew, filed separate returns. They also filed partnership returns for 1944 and 1945, reporting as income distributable half to each, the profits of a men's furnishing business, operated under the name of Drew's Manstore. Petitioner and his wife were married at Mesa, Arizona, in 1914. Both were then residents of Arizona, a community property state, and at the time of their marriage each owned about $500. Petitioner was working for a lumber company, in which he then owned and still owns an eighth interest, and his wife was employed as stenographer by a law firm. She continued to work for about a year after marriage. Early in 1918 they settled at Klamath Falls, Oregon, and established a dry cleaning business with their joint savings of $2,500, to which each had made about equal contribution. On a trade name certificate filed with the proper county official petitioner and his wife declared themselves joint owners. In January 1919 they opened a store for the sale of workmen's clothing, financing it with $2,000 borrowed on a joint note which both signed. Otherwise, no outside capital has ever been used in petitioner's enterprises. Selling the dry cleaning establishment about 1929, petitioner and his wife have since operated the clothing business, which, under the trade name of Drew's Manstore, has grown from a shop of cheaper wares into one of the two largest men's furnishing stores in Klamath Falls. The volume of sales was $35,000 in 1937, and, after a change begun that year in the quality of merchandise handled, it steadily increased, reaching $214,000 in 1945 and $278,000 in 1946. Petitioner's wife participated actively in the business ventures. She took charge of all silks and fancy articles and assisted with the bookkeeping and credits in the dry cleaning establishment. She participated in all phases of the operation of the clothing store, assuming responsibility of management during petitioner's absences. She rendered services regularly during business hours and often thereafter, having charge of the books, cash, banking, correspondence, and other office matters. She also assisted in selling and in buying stock, sometimes accompanying petitioner on his purchasing trips to San Francisco, Los Angeles, Portland, and Seattle, and he deferred to her judgment in the selection of gift items and articles sold to women. To free her from the full burden of home duties, petitioner employed a housekeeper for domestic work and to aid in the care of their four sons while young. The sons likewise took part in the business, helping out during school age in such ways and at such times as they could. They were encouraged to prepare themselves to be merchants; all were interested in doing so; all took courses in business administration; and since maturity all have been employed at the store. The eldest son, Greer Drew, born in 1915, graduated as a B. A, in business administration, from the University of Oregon in 1936 and received an M. A. degree in 1937 from New York University, where he specialized in retailing. He obtained practical experience as a part of his course, and, after completing it, declined several offers of executive positions in New York department stores. Returning to Klamath Falls, he entered petitioner's employ in the summer of 1937. He has remained continuously employed since that time, engaging in all phases of the business, but primarily in the buying of stock. Obtaining good merchandise was difficult during the war years, and he spent about half his time on trips, seeking salesmen and manufacturers who would make or increase allotments of goods for the store. Petitioner and wife usually accompanied him on these trips, and because of his training and increased experience they came to rely more and more on his judgment. Greer also assisted with accounts, and on occasion took charge of the store. He was deferred from military service because of a dependent wife and 2 children. During the middle of 1944 and at his draft board's suggestion, Greer accepted employment from a lumber company at $275 a month for about 6 months, and in 1945 he spent some 5 months in performing a contract for delivery of logs to the company, deriving a profit of about $10,000 from the venture. This work was conducted at a distance of 42 miles from Klamath Falls, but it fell during the time of low activity in the clothing business. He kept in constant touch with the store throughout, and continued to do its buying. Petitioner's second son, Frank Drew, born in 1916, entered the employ of Drew's Manstore after graduating from the University of Oregon in 1939. He first worked with his brother Greer in learning buying, and abetted Greer's efforts in inducing petitioner to handle more expensive merchandise and attract a different clientele. Frank was active socially, thereby aiding the store's business; he became a member of the junior chamber of commerce and president of a local club. He initiated and handled an advertising program for the business, worked with credits and accounts, and, when his parents and Greer were out of town, took charge of the store. In February 1942 he entered the Navy as an ensign, and during periods of training near Chicago and near Boston in 1944 he succeeded in buying for the store about $1,700 worth of merchandise. During a month's leave in November 1944 he worked in the store and made a purchasing trip to Portland, where he bought about $5,000 worth of goods. While stationed in London, England, he made contacts with manufacturers there from whom goods have been acquired since the war. Upon termination of his naval service in October 1945 he proceeded to San Francisco, where he procured about $15,000 worth of goods in addition to what the store's suppliers there had previously agreed to fur |