Heller v. Commissioner , 41 B.T.A. 1020 ( 1940 )

EDWARD H. HELLER, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Heller v. Commissioner

Docket Nos. 94794, 94795.

United States Board of Tax Appeals

41 B.T.A. 1020; 1940 BTA LEXIS 1112;

May 1, 1940, Promulgated

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">*1112 1. Petitioner and other relatives of his children contributed money and securities to custodian accounts for the children. The accounts were set up by the custodian bank by using petitioner's name as trustee. No declarations of trust were set up, and trusts were not intended. Petitioner managed and controlled the accounts, but withdrew no moneys therefrom, except in case of a few errors; none was loaned to anyone, and none used to maintain, educate, and support the children. Held, the contributions were present gifts and not by way of trust.

2. Petitioner and his mother contributed separate amounts to a revocable trust for the benefit of one of petitioner's children. Held, petitioner is taxable upon the income from the amount contributed by him.

Sidney M. Ehrman, Esq., and Lloyd W. Dinkelspiel, Esq., for the petitioner.

Harry R. Horrow, Esq., and H. G. Potthoff, Esq., for the respondent.

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DISNEY

">*1020 These proceedings, duly consolidated, involve income taxes for the calendar years 1934 and 1935 in the amounts of $1,880.92 and $8,993.62, respectively. Two issues are involved, but only one requires examination here. ">*1113 The first issue is as to whether petitioner realized capital gain or ordinary gain from disposition of portions of his one-twelfth interest in certain lands called Repetto Ranch. That question has this day been determined in proceedings involving the petitioner and his family and cotenants in proceeding Nos. 92448 (Florence H. Ehrman), 92449 (Clara Hellman Heller), and 92450 (I. W. Hellman, Jr., Deceased, Frances J. Hellman and Wells Fargo Bank & Union Trust Co., Trustees under the Last Will and Testament), which cases involved the same facts herein involved and were consolidated herewith for hearing upon that question. We therefore, by reference, find the facts therein found as the facts herein upon the first issue; and, upon the authority of the opinion therein and the cases cited we conclude and hold that petitioner herein realized ordinary gain, and not capital gain, from disposition of property in the Repetto Ranch.

The second issue involves the question whether the petitioner is taxable upon the income from certain securities and funds in agency accounts for his minor children, and upon income of a certain trust.

FINDINGS OF FACT.

">*1114 The parties stipulated extensively as to the facts, including documents referred to therein, 41 B.T.A. 652">41 B.T.A. 652, and introduced as part ">*1021 thereof. In addition, evidence, both parol and documentary, was introduced. We find the facts to be as stipulated. We epitomize the stipulated facts, and indicate those found from the evidence aside from the exhibits, as follows:

Petitioner is a resident of Atherton, California, and for each taxable year filed his income tax return on a basis of cash receipts and disbursements with the collector for the first district of California. He is the father of three children, Emanuel Clarence Heller (hereinafter called Emanuel), both August 16, 1926, Alfred Edward Heller (hereinafter called Alfred), born April 14, 1929, and Elizabeth Heller (hereinafter called Elizabeth), born August 1, 1931. He is the only son of Clara Hellman Heller. His wife's name is Elinor R. Heller. It was the practice of the family to make presents upon such occasions as births and birthdays. All have at all times relevant been heavy stockholders in the Wells Fargo Bank & Union Trust Co., a San Francisco bank, and had substantial funds on deposit therein, ">*1115 and securities in custodian or agency accounts therein, of which only the principals had management. Petitioner has since prior to 1926 been engaged in the stock brokerage and investment business as a partner in the firm of Schwabacher & Co., with offices in San Francisco. An account for each of the three children was set up on the books of the Wells Fargo Bank & Union Trust Co. (hereinafter called the bank), the books referring to petitioner as trustee in each instance.

In the case of Emanuel Clarence Heller, a declaration of trust in writing was entered into. It was set up between petitioner and his mother as trustors, petitioner as trustee, and the bank as substitute trustee (in case of the death of petitioner), by declaration dated August 17, 1926, which was on the day after the birth of Emanuel. The agreement recited and provided, inter alia, contribution to the trustee by petitioner's mother of $5,000 bonds and $5,000 cash, and $1,000 cash by petitioner, all to be managed and controlled, invested, disposed of, or exchanged, together with any additions, by the trustee, and the entire income applied, within the discretion of the trustee, to the use of Emanuel. The principal">*1116 was to be paid to Emanuel under certain conditions at certain ages after majority. The trust was revocable by joint instrument in writing by the trustors, or by the survivor. The trust agreement also provided:

The said Trustee, and as hereinafter set forth, the Party of the Third Part as Substitute Trustee, shall manage and control all of said property hereinbefore mentioned and specified and any and all property, real or personal, which may hereafter from time to time be declared to be subject to the conditions of this agreement and be delivered by the Trustors or either of them to the Trustee or to the Substitute Trustee, and declared to be subject to the terms and conditions of this agreement * * *.

The ">*1022 bank on August 30, 1926, opened a custodian or agency account, No. 3443, in the name of petitioner as "Trustee for Emanuel Clarence Heller", and in that account were carried the bonds, and the proceeds of the $6,000 in cash which had been deposited in and transferred from a savings account in the name of petitioner as "Trustee for Emanuel Clarence Heller", and invested in part in bonds. The $6,000 cash after investment thereof and the $5,000 bonds produced in">*1117 1934 income of $711 and in 1935, $1,185.77. From time to time there were deposited in account No. 3443 contributions from Emanuel's mother, grandmother and great-aunts, and the petitioner, on birthdays and like occasions, and on other occasions. Among these were contributions by Emanuel's grandmother, through his mother, of $50 on September 26, 1929, and of $1,100 from his grandmother and aunt, through his mother, on September 6, 1932, with directions by letter to deposit to the account of "Emanuel Clarence Heller (Edward H. Heller, Trustee)." Other deposits were not so designated. In communications to the petitioner the bank sometimes referred to him as trustee for Emanuel. The total of all cash contributions to account No. 3443 was, on December 31, 1935, $15,690.90. The other contributions were commingled with the proceeds of the original $6,000 cash and $5,000 bonds. Securities were purchased, generally from Schwabacher & Co., in the total amount on December 31, 1935, of $43,460.78. On December 31, 1935, there had also been received in account No. 3443 from the petitioner, purchased by him with his own funds, and not with the funds of the account, securities of a total par">*1118 value of $13,700 (including five shares of Farmers & Merchants National Bank of Los Angeles, received August 2, 1927, and sold March 16, 1933), also stocks sold for $2,667.11, others purchased for $1,033.75, and a life insurance policy in the name of Emanuel providing him monthly life income of $60.22 at age of 50, with death benefit to the petitioner, if living. Schwabacher & Co.'s sales slips showed sale of the securities to petitioner as trustee.

On January 7, 1928, there were received in the account two $500 Metropolitan Properties Co. bonds, the bank acknowledging receipt of one to petitioner and of one to the petitioner's wife. On March 7 one of these bonds was delivered to petitioner and not returned. There were also delivered to petitioner, and not returned, the following certificates: On October 6, 1931, 300 shares of Bond Share Co., Ltd., capital stock; on July 13, 1933, 20 shares of First National Corporation of Portland, evidenced by a certificate in the name of petitioner as "Trustee for Emanuel Clarence Heller"; on March 22, 1935, 200 shares of Roos Bros., Inc., with certificate in the name of petitioner's wife.

On March 15, 1933, the petitioner, in response">*1119 to inquiry from the Farmers & Merchants National Bank of Los Angeles about the five ">*1023 shares of its stock above referred to, standing in his name as trustee for Emanuel, by letter informed the bank that at the time the certificate was issued no agreement was executed, and that the reason for such issuance in petitioner's name as trustee was that Emanuel was a minor.

All income from account No. 3443 for 1934 and 1935 was reported and income tax returns filed, i.e., fiduciary return on form 1041, indicating as the name of the trust "Edward H. Heller", as name of the fiduciary "Edward H. Heller", and Emanuel as beneficiary; also an individual income tax return on form 1040-A in the name of Emanuel as a minor.

On August 3, 1931, two days after the birth of Elizabeth, her grandmother, Clara Hellman Heller, directed the bank to deposit from her funds $5,000 in a trust account for Elizabeth. The bank informed the petitioner that they had at the grandmother's request deposited $5,000 in a trust account in his name as trustee. On August 14, 1931, the bank opened an agency account, No. 5010, in the name of the petitioner as "Trustee for Elizabeth Heller" and noted the $5,000">*1120 as first entry therein. On August 18, 1931, the petitioner wrote the bank, enclosing two checks and asking deposit thereof in the savings account of "Edward H. Heller, Trustee for Elizabeth Heller, if one has been opened. If one has not been opened, will you kindly do so?" The checks were presents from two of Elizabeth's great-aunts. They were deposited in the account. On Elizabeth's first birthday her grandmother presented her with $1,000, through her mother, who requested the bank to deposit it in the "savings account of Elizabeth Heller (Edward H. Heller, Trustee)." Elizabeth's mother did the same about September 17, 1932, with a $50 check. On March 21, 1933, the petitioner forwarded to the bank checks payable to his order, birthday gifts to him, advising the bank to deposit $90 to the account of Elizabeth Heller, and of the remainder $95 to the account of Alfred and $90 to the account of Emanuel. Thereafter other funds were received by the bank and taken into account No. 5010, under similar instructions. Up to December 31, 1935, contributions of cash (other than from sale or redemption of securities and income therefrom) to account No. 5010 were $8,815. The bank from time">*1121 to time received instructions, both verbal and in writing, from the petitioner as to purchase and sale of securities. The total of such purchases up to December 31, 1935, was $11,606.25. From time to time the bank received into account No. 5010 from the petitioner additional securities purchased with his own funds and not with funds of the account. The total thereof on December 31, 1935, was $9,000 par value, a stock dividend of $7.48, and an insurance policy in Elizabeth's name providing her a monthly ">*1024 life income at age 50, with death benefit to the petitioner, if living, and all rights, including right to change beneficiaries, reserved to him. The premiums were paid by the petitioner. In December 1936 the bank's records show receipt and withdrawal of $3,500. The amount was actually not received in or withdrawn from the account, but the entry evidences a payment direct to petitioner on account of a promissory note deposited in the account after December 31, 1935. There was no written declaration of trust made or declared by petitioner as to account No. 5010, or the money, securities or properties therein, except as indicated by reference to him as trustee on documents. ">*1122 No income tax returns were filed for account No. 5010 for 1934, the total income amounting to less than $1,000. For 1935 all income was reported by fiduciary return, on form 1041, in the name "Edward H. Heller Trust," showing petitioner as fiduciary and Elizabeth as beneficiary; also by individual income tax return on form 1040-A.

On April 15, 1929, one day after the birth of Alfred Edward Heller, the petitioner deposited $1,500 in a savings account at the bank in his name as "Trustee for Alfred Edward Heller." Two days later Alfred's grandmother did the same as to $5,000. About the same date petitioner purchased through his firm, in his name as trustee for Edward, securities costing $3,938.75. The brokerage statements referred to petitioner as trustee, and petitioner gave instructions to the trust department of the bank to pay bills from the account, describing it as in his name as trustee, and to open a custodian or agency account in his name as trustee. This was accordingly done, the account being No. 4155. From time to time there were received in account No. 4155 cash and securities, both from petitioner and other relatives of Alfred. On April 12, 1932, Alfred's grandmother">*1123 directed the bank to deposit $1,000 in the account. The bank notified petitioner of the deposit to the credit of "Alfred Edward Heller's Savings Account." On March 21, 1933, the petitioner forwarded checks with instructions to the bank to deposit a part thereof to the account for Alfred. On April 17, 1933, Alfred's mother forwarded a $1,000 gift from petitioner's mother, with directions to deposit it to the "savings account of Alfred Edward Heller (Edward H. Heller, trustee)." She used the same expression again on April 26, 1935. Thereafter other moneys were deposited, with instructions similar to the above. The total cash contribution to the account up to December 31, 1935, was $12,824.90. From time to time the bank received and acted upon the instructions of the petitioner as to purchase and sale of securities for the account - generally purchased from petitioner's firm. Among such purchases were 25 shares of Anglo National Corporation stock purchased July 30, 1929, and ">*1025 sold March 16, 1933. The total of such purchases to December 31, 1935, was $22,553.25. From time to time the petitioner purchased securities from his own funds and had them delivered into the">*1124 account. The total thereof to December 31, 1935, was $9,076.88, an addition to some stock rights, value not shown, and a life insurance policy in the name of Alfred, providing a monthly life income of $60.22 per month at age 50, with death benefit to petitioner, if living. Premiums were paid by petitioner who retained all rights, including the right to change beneficiaries. There was no written declaration of trust made or declared in connection with account No. 4155, except as derived from the documents or from the recitations above noted.

The General Motors Corporation in June 1931 requested petitioner to produce a copy of a trust agreement because of purchase of stock in General Motors in the name of petitioner as "trustee for Alfred Edward Heller." Unable to so produce, petitioner had the stock transferred to his name as guardian. In transmitting the certificate and dividend check thereon to the bank, petitioner referred to himself as trustee for Alfred. On March 14, 1933, petitioner wrote the Anglo-California National Bank, which as transfer agent had refused to transfer the 25 shares of Anglo National Corporation stock above referred to, to the name of petitioner as "Trustee">*1125 for Alfred Edward Heller", the stock being in his name as trustee. The letter stated that at the time of issuance of the stock there was no agreement, the shares being so issued in petitioner's name as trustee because Alfred was a minor. No income tax returns were filed for 1934 for account No. 4155, the total gross income being less than $1,000. For 1935 all income was reported and there was filed a fiduciary return on form 1041, giving the name of the trust as "Edward H. Heller" and naming the petitioner as fiduciary and Alfred as beneficiary; also an individual income tax return on form 1040-A in Alfred's name and an individual return form 1040-A in the name of "Edward H. Heller Trust, Edward H. Heller, Trustee."

The three accounts had income as follows:

Name	Number of account	Year	Ordinary income	Dividends
Elizabeth Heller	5010	1934	$391.58	$452.00
Do	5010	1935	389.67	1,386.73
Emanuel C. Heller	3443	1934	1,006.47	586.70
Do	3443	1935	1,423.89	1,402.43
Alfred E. Heller	4155	1934	336.91	568.33
Do	4155	1935	1,769.91	2,305.65

In the case of each of the three accounts the bank acted only as custodian, had no powers of">*1126 management, and carried out in all things the instructions of the petitioner. All moneys, securities, and ">*1026 properties in each account were commingled upon the bank's records and those from the petitioner were not kept separate. No loans were made from any account to the petitioner or anyone else, aside from certain withdrawals by error, elsewhere herein set forth. The only disbursements aside from purchases of securities were custodian's fees to the bank, fees incurred in purchase or sale of securities, postage, and notaries' fees. No funds from any account were used to support, educate, or maintain any of the children, all such expenses having been borne by the petitioner. He was never appointed legal guardian of any of the children.

In addition to the stipulated facts above summarized, we also find from the evidence as follows:

The petitioner did not intend to create a trust for any of his three children in connection with the accounts set up in the bank, and, aside from the trust instrument of August 17, 1926, with Emanuel as beneficiary, he has never verbally or in writing declared a trust for any of his three children. He used the word "trustee" because">*1127 his father had used it with respect to him, and the word trustee to him seemed a designation of the account to keep it separate from his own. He considered the assets in the accounts as belonging to the children and that he was responsible for the property and accountable to the children. He generally secured transfer of securities without question, because his firm is satisfied to guarantee his signature without a written trust agreement, even though the security may show him as trustee. He had forgotten about the existence of the trust for Emanuel and was surprised to hear of it when the matter came up.

He knew that money was from time to time paid into the accounts in his name as trustee. He is cotrustee in a trust where the University of California is beneficiary, and he and the Wells Fargo Bank & Union Trust Co. are cotrustees for three or four accounts, including a trust for his mother. He is not a lawyer, and does not altogether understand the term "trustee." In those cases where he was trustee he felt bound by a written document to carry out its terms. As to his children, he felt he should look after their interests as his own and try to do the best he could for them. ">*1128 He intended to sell the securities in the accounts from time to time, upon favorable market conditions, with no intention of securing approval of a court. He was never appointed by a court as legal guardian, but considered himself such. In many cases his individual purchases and sales of securities coincided with those made for the accounts, but practically never were they made in connection with his trading operations for his own account. They were for the most part made separately and independently of each other. In most cases the securities purchased or sold for the accounts were not those ">*1027 in which he was trading. $3,500 was paid out of Elizabeth Heller's account to the petitioner and never went back into the account before the date of trial. He did not feel free to receive payments of money, or securities, in the accounts, and the $3,500 was "Pure carelessness and sloppiness" on his own part. As to the $3,500, the Santa Inez Co. owed him money, and he also owed money to each of the children, and he supposed he did not pay very much attention to the amount paid him and assumed each child had received his share. The bonds of the Metropolitan Properties Co., ">*1129 Bond & Share Co., Ltd., First National Corporation, and Roos Bros., Inc., were apparently delivered to his account by error and he first knew of it when it arose in the case. He thinks an error was made by his firm, and not by the bank. He intended to accumulate the income of the accounts and reinvest it for the benefit of the children and build up an estate for them, but not to use it for their maintenance, education, or support.

He knew at the time what was done with the $6,000 cash and $5,000 bonds, under the trust declared for Emanuel in 1926, and at that time recognized that those funds were trust funds. His mother gave him no instructions other than advising him to invest the money carefully. The income of the funds was reinvested and not devoted to or paid over to the children. There were other mistakes made, aside from the bonds and the Santa Inez matter, but most of them were caught. On March 4, 1937, he advised the bank to credit, one-third to each of the children, certain stocks upon which they had credited him, instead of the children, with the dividends. The Roos Bros. stock stood in the name of Elinor R. Heller, his wife. He never instructed the bank to segregate">*1130 the securities purchased with his own funds which he placed in the account.

The bank's records show account No. 5010 set up as follows:

AGREEMENT WITH

TRUST No. 5010

Edward H. Heller, Trustee for Elizabeth Heller

Sheet No. 1

Date

1931

Aug. 4 Recd from Clara Hellman Heller

$5,000.00

[After which follow other transactions.]

The books as to accounts Nos. 4155 and 3443 are captioned in the same way with reference to petitioner as trustee. The bank in a letter to petitioner of August 6, 1931, referred to the account with petitioner as trustee for Elizabeth Heller and informed him that they were debiting the account in their trust department; likewise, a receipt dated August 21, 1931, referred to "Trust No. 5010" and to ">*1028 petitioner as trustee for Elizabeth Heller. Schwabacher & Co., petitioner's firm, in a receipt dated "8-18-1931" referred to the account of "E. H. Heller Tr. for Alfred E. Heller", and a sales slip dated "8/17" refers to petitioner as trustee for Emanuel. This bears a notation signed by the petitioner that it is to be charged to his personal account.

The individual income tax return for 1935 for Emanuel, a minor, bears">*1131 petitioner's affidavit as guardian, but has attached a large number of ownership certificates as to securities showing the owner to be petitioner as trustee for Emanuel. The same recitation appears on the individual returns for Elizabeth and Alfred, and on the individual income tax return for 1935 by the petitioner for the Alfred Edward Heller matter, which is signed "Edward H. Heller, Trustee" also as "grdn" of the "Edward H. Heller Trust, Edward H. Heller, Trustee." He signed the same upon fiduciary returns, as to each child for the year 1935. The blank for "Name of Estate or Trust" on each form is filled in "Edward H. Heller", as is the blank for the name and address of fiduciary. The fiduciary return for 1934 for Emanuel is signed merely Edward H. Heller.

Petitioner never obtained any order of any court authorizing purchase, sale, investment, or reinvestment of any of the properties, securities, or funds in any of the accounts for his children.

OPINION.

DISNEY: Did respondent err in including in petitioner's income the amounts of income earned in the three accounts set up for his children? The petitioner contends that the accounts contained only gifts, from him and">*1132 other relatives of the children; respondent, that no present gifts were made or completed, but, in the alternative, that if made they were by way of trust, leaving the petitioner liable for the income thereof. Petitioner denies that any trust was intended or made, with the exception of the $10,000 in cash and bonds, contributed by his mother, and $1,000 by petitioner, to Emanuel on August 17, 1926, by declaration of trust then set up.

Our first question is whether petitioner with others made present gifts to the children. Respondent urges perhaps most particularly the inability of the children under California law to be donees when they had no legal guardian, and the reservation of management by the petitioner.

The evidence here is uncontradicted that there was a custom in petitioner's family to make gifts upon such occasions as births and birthdays and other occasions. This is demonstrated by the gifts to each child at birth and by the fact that the contributions were by the grandmother and great-aunts as well as the father and mother of the ">*1029 children. A birthday present is not ordinarily, we think, thought of as other than a present gift. No reservation or">*1133 provision as to future enjoyment appears in the contributions from any of the female relatives. A mere provision for future enjoyment would, of course, not convert into a future interest if title vested immediately.

We can not agree with respondent's view that a minor in California, without legal guardian, can not be a donee. The cases cited merely demonstrate that a legal guardian is necessary for a minor's property to be disposed of, but not that the minor can not acquire by gift without a guardian. The latter does not follow from the former principle, which is of course sound. Certainly the general law is that a child, without a guardian, can be a donee. "The rule may be broadly stated that any person has the capacity to accept a gift where it is manifestly for his benefit." 28 C.J. 627, citing McDonogh v. Murdock,15 How. 367">15 How. 367. There is a presumption of validity of a gift to a child. Towson v. Moore,173 U.S. 17">173 U.S. 17; Jenkins v. Pye,12 Pet. 241. "* * * such a deed or gift is natural and reasonable, and is sustained by the presumption that it was inspired by parental affection and devotion." ">*1134 Sawyer v. White,122 F. 223. In Haynes v. Gwin,209 S.W. 67">209 S.W. 67, a gift to a child by the father the natural but not legal guardian, was upheld, his possession as natural guardian being held to be that of the infant. The law makes a clear distinction between delivery necessary between nonrelatives and between those living together in the same family. We decline to apply the same rule to a gift to a minor child from his father. Acceptance by a minor is presumed. McKinnon v. First National Bank,82 So. 748">82 So. 748 (wherein a father, not legal guardian, deposited moneys in a bank to the credit of his minor children); Emil Frank,27 B.T.A. 1158">27 B.T.A. 1158 (involving brokerage accounts set up and managed by a father for minor children, and citing cases as to a father's right as natural guardian to exercise dominion over a gift to his minor child); Donner v. Palmer,31 Cal. 500">31 Cal. 500; De Levillain v. Evans,39 Cal. 120">39 Cal. 120; Turner v. Turner,173 Cal. 782">173 Cal. 782; ">*1135 161 P. 980. We hold that petitioner's minor children were competent donees, though without legal guardians.

We think, too, that the requirements of delivery to a minor child were fulfilled. "While the mere fact that the donee is the child of the donor does not dispense with the necessity of a delivery in order to constitute a valid gift, the formal ceremony of a delivery is not absolutely necessary, but it is sufficient if it appear that the donor intended an actual gift at the time and evidenced his intention by some act which may be fairly construed into a delivery." 46 C.J. 1320. Practically the same language appears in Allen Co. v. Edwards,154 P. 1066, a California case. In fact, it appears that ">*1030 as to a considerable number of the contributions to the custodian accounts the delivery was sufficient even in the case of an adult, for certificates for the stocks involved appear often in the names of the different children. Placing stock in the name of the intended donee constitutes without more sufficient delivery, even though the donor actually retains the certificates in his possession. ">*1136 Kathryn Lammerding,40 B.T.A. 589">40 B.T.A. 589, and cases there cited and discussed, including D. D. Malernee,31 B.T.A. 662">31 B.T.A. 662, and Marshall v. Commissioner, 57 Fed.(2d) 633. Herein, to the extent of such stocks at least, there was sufficient delivery.

As to others not appearing in the name of the children, and cash and other property, we believe petitioner retained only such management and control as is reasonably consistent with the position and duty of a father as natural guardian to serve the interests of his children. There is no retention of any management or control by any of the contributors except the petitioner. As to the grandmother, mother and great-aunts, there is no indication at all of incompleteness of gift by reason of retention of control. Respondent on brief admits as to such funds, "Clearly with respect to the income from these funds the petitioner would not be taxable," and relies only upon the failure to segregate same from those contributed by the petitioner and presumption of correctness of his determination of deficiency; and petitioner does not ask segregation but argues merely that the contributions by the other">*1137 relatives, in the same general manner as his own, indicate that all were gifts. Considering respondent's statement above quoted, and the evidence as to intention of all parties in making the contributions to the accounts, we think petitioner's contention is sound and should be sustained, as to all sums or properties deposited. Had petitioner died and a guardian been appointed for the children, such guardian, in our opinion, clearly could have held the funds and properties in the accounts, against the executors of petitioner's estate had such executors made claim therefor.

Cases such as Benjamin F. Wollman,31 B.T.A. 37">31 B.T.A. 37, involving a short term trust and retention of "the substance of ownership" and control are not helpful, for such retention of control was inconsistent with passage of title, whereas here it is wholly consistent for a father to look after property for minor children. William C. Rands,34 B.T.A. 1107">34 B.T.A. 1107, rests primarily upon the fact that only a right to dividends, and not corpus, was transferred. ">*1138 Giselman v. Starr,40 P. 8 (Cal.), involved only a declaration, and no overt act to indicate gift, as the court held. Lefrooth v. Prentice,259 P. 947 (Cal.), cited by respondent, involved attempted fraud upon creditors, and the proceeds of securities sold were used by the father for his own use. The ">*1031 record here negatives completely such an element, for the petitioner neither used for his own use, nor for the maintenance, education, or support of the child any of the funds, and never borrowed from the accounts. It is true that by error some items were placed in the petitioner's name, but we think the record satisfactorily shows them to be error, and not intentional reservation for personal use by the petitioner.

Had the father, as the respondent argues, merely intended in the future to make gifts, his handling of these accounts was unnecessarily cumbrous, for, without the embarrassment occasioned when transfers were refused because of use of the expression "trustee", he could have handled the funds in his own individual name and later have made the gifts. Instead, he went to considerable trouble to segregate what he had">*1139 bestowed upon the children, and treated it just as he treated what were clearly gifts from his mother and aunts. He testified positively as to his intent, and, though not conclusive, the affirmative and uncontradicted assertion of intent to make gifts can not but carry weight. His actions are consistent therewith. The result might be different if systematic, or even occasional, personal use of the funds or securities by petitioner appeared; but we here see a consistent segregation and preservation of the funds for the use of the children, and, except by error, only such control as a father would in any event exercise over a child's property, and similar to the control which in Tracy v. Commissioner, 70 Fed.(2d) 93, the court held to be not unusual between husband and wife. Such management is even more logically approved between father and minor children, particularly when starting from the date of birth. In addition, some of the contributions were accompanied by written statements, and written statements have often been held to obviate necessity for manual delivery. Petitioner, clearly, by using the descriptive term "trustee" and by separating the funds from">*1140 his own, demonstrated intent to segregate the funds for the child particularly named in the custodian account. By such action and designation we think petitioner well evidenced a gift, when, as above seen, delivery to and acceptance by a minor child are not to be viewed in the same light as in case of an adult. In Reginald Fincke,39 B.T.A. 510">39 B.T.A. 510, a father opened a brokerage account for a minor daughter, managed and controlled it, and never converted any part of the funds for his personal use - all in a manner similar to the actions of the petitioner here. We held that the father was not taxable upon the profits from the account. After reviewing all of the evidence, we conclude and hold that petitioner made present gifts to each of his children.

The next question for determination is involved in respondent's alternative proposition that if there were gifts they were by way of ">*1032 trust and that the income thereof was taxable to the petitioner under sections 166 and 167 of the Revenue Act of 1934. Respondent contends particularly that they are revocable trusts under section 166 because of section 2280, Civil Code of California, which makes voluntary trusts">*1141 revocable in the absence of an express provision for irrevocability. The section is quoted by respondent, as follows:

2280. Revocation of trusts. Unless expressly made irrevocable by the instrument creating the trust, every voluntary trust shall be revocable by the trustor by writing filed with the trustee. When a voluntary trust is revoked by the trustor, the trustee shall transfer to the trustor its full title to the trust estate. Trusts created prior to the date when this act shall become a law shall not be affected thereby.

However, the last sentence in the statute, on the facts herein, eliminates the above statute from consideration, for the trusts, if any, for each of the three children were "created prior to the date when this act shall become a law." If trusts were set up at all, it was when the accounts were opened. The account for Emanuel was set up in 1926, that for Edward in 1929, that for Elizabeth on August 3, 1931. Section 2280, supra, was approved June 15, 1931, and therefore necessarily became effective after August 3, 1931, since under the Constitution of California, article IV, section 1, a legislative act does not go into effect until 90 days after">*1142 adjournment of the legislature enacting it, and approval must be not latter than 30 days after adjournment. Section 2280, prior to amendment by California Stats., 1931, p. 1955, read:

A trust cannot be revoked by the trustor after its acceptance, actual or presumed, by the trustee and beneficiaries, except by the consent of all the beneficiaries, unless the declaration of trust reserves a power of revocation to the trustor, and in that case the power must be strictly pursued.

The general law on the subject has been stated as follows:

Except as is otherwise provided by statute, although a trust is a voluntary one, in the absence of a power of revocation reserved, provided it is executed, it is irrevocable without the consent of the beneficiaries, or of all persons beneficially interested, as provided by statute. [65 C.J. 341.]

The above California statute, prior to amendment, has been construed to preclude revocation, except with the consent of the beneficiaries, of a trust not containing reservation of power of revocation. ">*1143 Roberts v. Taylor,300 F. 257. Respondent suggests that the deposit by petitioner of moneys in bank constitutes a revocable trust. He and others deposited moneys which were invested in stocks and securities. "One holding corporate stock in trust for others could not, because of Civ Code § 2280, by his own actions and at his own will, divest owners of such property of their interest therein." Tillotson v. Findley,87 Cal. App. 654; 262 P. 438. If we assume, Arguendo, that a trust was ">*1033 created, plainly it was irrevocable. That the father might have secured possession of the trust res does not show revocability. Many trustor-trustees have no doubt violated trusts, which were none the less irrevocable.

It thus appears that, since acceptance by minors is presumed and none of the accounts reserves a power of revocation to the trustor, the accounts, even if they constituted trusts, were not revocable under the California statute then in force, and within the intendment of section 166 of the Revenue Act of 1934.

Aside from the effect of the above statute, however, we think no trusts were in fact created. Section">*1144 2221 of the Civil Code of California, provides:

Voluntary trust, how created as to trustor. Subject to the provisions of section eight hundred and fifty-two, a voluntary trust is created, as to the trustor and beneficiary, by any words or acts of the trustor, indicating with reasonable ccertainty:

1. An intention on the part of the trustor to create a trust, and,

2. The subject, purpose and beneficiary of the trust.

As to the first subsection of the statute, petitioner categorically denied intent to create a trust. Such denial, of course, is only evidential, yet his letters on March 14 and 15, 1933, to the Farmers & Merchants National Bank and Anglo-California National Bank, respectively, stating that no trust agreement had been set up for Emanuel or Edward, indicate that long prior to his testimony in this proceeding he was taking the same view.

Nor under the second subdivision can we find the petitioner, "by any words or acts of the trustor indicating with reasonable certainty: * * * The subject, purpose and beneficiary of the trust." The only words are the expression "trustee" used as to the accounts - contradicted as above set forth. The acts of petitioner are">*1145 consistent with those of a father who is desirous of preserving his children's property. The beneficiaries of the trusts, in case of the death of the children or any of them, are nowhere indicated. No term is set. We think the reasonable certainty required is absent. McMonagle v. McGlinn,85 F. 88, construing section 2221 above, and pointing out failure to prove the alleged trust. The word trustee alone is only evidential. Morsman v. Commissioner, 90 Fed.(2d) 18. Petitioner did not always use it, but sometimes referred to himself as guardian, although in fact he was not legal guardian, and explained the term as merely used for the purpose of distinguishing the accounts from his own. The necessity for some designation to distinguish from petitioner's personal accounts is plain. Petitioner's actions are consistent with his denial of trusts at the hearing and in 1933, and with the acts of a father ">*1034 attending to the affairs of his minor children. We think that trusts, except the one set up for Emanuel, have been negatived.

Respondent also suggests that the petitioner may also be deemed taxable under section 167 of the">*1146 Revenue Act of 1934, on the ground of control of trust income and power therefore to use it for the support and maintenance of his children. He cites J. S. Pyeatt,39 B.T.A. 774">39 B.T.A. 774. There the trustor was not trustee as here, if we assume a trust. The present situation is parallel to that in Martin F. Tiernan, Trustee,37 B.T.A. 1048">37 B.T.A. 1048, where the trustor-father was also trustee, and we held, following E. E. Black,36 B.T.A. 346">36 B.T.A. 346, that section 167 did not apply, where, though the trustee might in his descretion apply income to discharge his duty to support, educate, and maintain his children, the income was not so used - precisely as is the case herein. The situation and conclusion were essentially the same in Alfred C. Berolzheimer,40 B.T.A. 645">40 B.T.A. 645, where the father-trustor-trustee was held not taxable on income not distributed for or used for education, maintenance, and support. We hold that petitioner is not taxable upon the income of the accounts under section 167 of the Revenue Act of 1934.

By memorandum the respondent suggests the applicability of ">*1147 Helvering v. Clifford,309 U.S. 331">309 U.S. 331. That case was based squarely upon section 22(a) of the Revenue Act of 1934, as is emphasized in Helvering v. Wood,309 U.S. 344">309 U.S. 344, wherein the Commissioner was not allowed to rely upon section 22(a) after relying upon section 166. Aside from the fact that section 22(a) has herein not been earlier relied upon, we think it plain that the Ratio decidendi in the ,Clifford case does not apply here, for the reasons above outlined, in effect that the father's actions were consistent with the position and duty of a father to preserve the property of his child, donated by others as well as himself, and do not indicate retention of the benefits of ownership in himself. He could not retain ownership of that which was contributed by others. He treated what he had contributed in the same manner, all, we think, in a manner indicating recognition of the rights of the children, rather than claim of ownership in himself.

The trust as to Emanuel was in writing, entered into in 1929, revocable in the taxable year by the grantors by joint written instrument, or by the survivor. The mother of petitioner had no substantial">*1148 interest adverse to him in the disposition of corpus or income. It is plain therefore that it comes within the ambit of section 166 of the Revenue Act of 1934, and that petitioner is taxable upon the income of at least that part of the trust corpus contributed by him. Questions to be answered are therefore, whether the trust extended only to the original $11,000 corpus, or also to the deposits ">*1035 later made in account No. 3443, in which the proceeds of the $11,000 were placed, and whether, if the trust extends to such later deposits, petitioner is taxable upon the income of amounts not contributed by him. The declaration of trust specifically covers and describes $5,000 par value of bonds and $5,000 in cash, all contributed by petitioner's mother, and $1,000 contributed by petitioner, after which it provides that the trustee:

* * * shall manage and control all of said property herein before mentioned and specified and any and all property, real or personal, which may hereafter from time to time he declared to be subject to the conditions of this agreement and be delivered by the Trustors or either of them to the Trustee or to the Substitute Trustee, and declared">*1149 to be subject to the terms and conditions of this agreement, and said Trustee, * * * may sell, exchange or otherwise dispose of any or all of said property * * * and shall invest and reinvest said trust property or the proceeds of the sale or other disposition of such property * * *. [Italics supplied.]

It is apparent from the above language that, unless both delivered to the trustee and declared subject to the conditions of the declaration of trust, later deposits do not become a part of the trust estate. Additional deposits were made in account No. 3443, but that account is not provided for by the declaration of trust. The account is in evidence, showing that the later deposits were not declared subject to the original trust agreement. Therefore the trust must be considered limited to the original $11,000 unless the later deposits in account No. 3443 become subject to the trust agreement, its terms and conditions, on the doctrine of commingling, as argued by the respondent. All moneys, securities, and property in each account were commingled, but the bank kept a ledger of all receipts and disbursements and a record of securities received, purchased, and sold in each">*1150 account. Considering the specific character of the provision above quoted as to necessity for later additions being declared subject to the conditions of the agreement, the doctrine of commingling should be sparingly applied, for it is obvious that there was intent to limit the trust to the original allowance named and "specified" in the trust instrument, in the absence of express declaration. Delivery is particularly made insufficient as a reason for inclusion in the trust. Any addition must be delivered and declared subject to the trust. The expression as to declaration is repeated, apparently for emphasis. The parties have by stipulation agreed that the original $11,000 bonds and cash produced income of not more than $711 in 1934 and $1,185.77 in 1935. It thus appears that the original $11,000 was not so commingled with later deposits in account No. 3443 as to make the income undistinguishable or indivisible from the income of the later deposits.

">*1036 We are here interested only in the income. The equitable doctrine of commingling protects a cestui que trust's right of recovery, and to the extent necessary treats the entire commingled property as subject">*1151 to the trust, but this does not necessarily answer the question of fact here at hand, namely, whether income from the entire commingled funds was a part of the trust, so that the entire income is taxable to a trustee under a declaration as to a part of the corpus. Therefore, considering the definite nature of the provision as to the necessity of additions being specifically made a part of the trust by declaration, the absence of such declaration, the fact of divisibility, and our conclusion that accounts similar to account No. 3443, for the other two children, did not establish trusts, we conclude and hold that the express written trust extended only to the $11,000 in bonds and cash and the proceeds thereof.

Of what effect is the fact that each grantor contributed separate amounts? Petitioner urges that under W. L. Honnold,30 B.T.A. 774">30 B.T.A. 774, neither was a grantor as to the amount contributed by the other, so that petitioner was not taxable upon the income from the $10,000 contributed by his mother. Respondent upon brief says that as to the funds contributed to the agency accounts by others than petitioner, "Clearly, with respect to the income from these funds the">*1152 petitioner would not be taxable", but points out that there has been no segregation, that respondent's determination is presumed to be correct, and therefore the entire income must be deemed taxable to the petitioner. The same admission and contention is applicable to the income from the $11,000 under the written declaration. We think that, under the wording of section 166, the petitioner's cotrustor had no interest in the $1,000 contributed by him, nor he in the $10,000 contributed by her. The statute speaks of power to revest "any part of the corpus", in the grantor, apparently not intending to make the corpus an indivisible whole, even though contributed by different trustors. The interest of each grantor in having the whole fund devoted to the purpose of the trust is not such an interest as to make each taxable upon the income of the whole. By the terms of the trust instrument in case of the child's death any part of the trust estate not already vested in him shall go to his issue; if none, then according to his will; and if none, then to his heirs at law, so that no part of the income can be said to be held or accumulated for future distribution to the grantors under section">*1153 167.

We hold that the grandmother had no substantial adverse interest in the disposition of the $1,000 and therefore that the trust to that extent was revocable by the petitioner, and that he is taxable upon the income thereof, but not upon the income from the $10,000. Though petitioner does not ask segregation, he nevertheless argues, ">*1037 and, as above seen, respondent inferentially admits, that (except for the commingling of funds) he is not taxable upon his mother's contribution. For the reasons above discussed, we think that the failure to segregate is not here decisive. The maximum income of the $11,000 cash and securities or proceeds thereof is stipulated as $711 for 1934 and $1,185.77 for 1935. We hold that petitioner is taxable upon one-eleventh of these amounts.

Decision will be entered under Rule 50.