Court Opinion

ID: 4594277
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:12:36.141621+00
Date Added: 2024-06-11T07:51:13.284023
License: Public Domain

DAVID COPLAND, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Copland v. CommissionerDocket No. 9557.United States Board of Tax Appeals15 B.T.A. 238; 1929 BTA LEXIS 2885; February 7, 1929, Promulgated *2885 Held, that the evidence is not sufficient to show that what the petitioner assigned to his wife was other than income to arise in the future.  Such income is, therefore, taxable to the petitioner.  M. J. Feldman, Esq., for the petitioner.  Brice Toole, Esq., for the respondent.  TRAMMELL*238  This is a proceeding for the redetermination of a deficiency in income tax for the calendar years 1919 and 1920 in the amounts of $8,814.60 and $424.45, respectively.  The petitioner assigns as errors the action of the Commissioner in including $27,000 in his income for 1919 and $1,800 in his income for 1920, contending that these amounts should have been included in the income of his (petitioner's) wife for said years.  FINDINGS OF FACT.  The petitioner is a resident of Chicago, Ill.  In the latter part of May, 1919, the petitioner entered into a joint venture with Elias Mayer and Max Epstein in connection with the sale of certain shares of the capital stock of the North American Oil & Refining Corporation.  The petitioner and his associates entered into a contract with that corporation under which they agreed jointly to purchase certain stock*2886  of that company and to dispose of it.  They were to divide the profits and bear any losses arising from the transaction in equal shares, one-third each.  When the contract had been entered into the petitioner executed the following instrument: *239  KNOW ALL MEN BY THESE PRESENTS, That for and in consideration of the sum of One Dollar ( $1) and other good and valuable considerations to me in hand paid, receipt of which is hereby acknowledged, I, DAVID COPLAND, of Chicago, Cook County, Illinois, do hereby transfer, assign and set over unto MILDRED COPLAND, of Chicago, Cook County, Illinois, all of my right, title and interest in and to a certain agreement bearing date the day of May, 1919, made and entered into by and between North American Oil & Refining Corporation, as first party, and Max Epstein, David Copland and Elias Mayer, of Chicago, Illinois, as second parties, and all my right, title and interest in and to any profits, issues and income that may arise thereunder; and I do hereby authorize, empower and direct Elias Mayer to account to and with the said Mildred Copland for all profits, issues and income arising under said contract in the same manner and with the same*2887  force and effect as if such accounting were had and made with me personally.  IN WITNESS WHEREOF, I have hereunto set my hand and seal, this 2nd day of June, A.D. 1919.  DAVID COPLAND (Seal) Eighty-one thousand dollars net profits were derived from this transaction in 1919, one-third of which, or $27,000, was paid, pursuant to the contract and its assignment, to Mildred Copland.  The money was deposited in the bank in her name the latter part of December, 1919.  Copland decided to give his wife a substantial sum of capital in order to put her in an independent position and to protect her, as he was inclined to gamble and speculate and desired that his wife be placed "on the safe side so if anything happened to me or to my affairs she would be protected." Mildred Copland permitted the petitioner to make investments for her in such stocks, bonds and other securities as he deemed wise, and on December 3, 1919, the petitioner purchased for and on behalf of Mildred Copland, 100 shares of Great Northern preferred stock and 200 shares of Pennsylvania Railroad common stock through Clements, Curtis & Co., brokers, and instructed said brokers to have the said stock issued in the name of*2888  Mildred Copland.  Mildred Copland signed a check for $26,000, which was used for the purchase of this stock.  The check was payable to the order of Clements, Curtis & Co., brokers.  The brokers, however, credited the account of David Copland, the petitioner, with said sum of $26,000 and delivered the stock on January 16, 1920, to Mildred Copland.  The above stock certificates were endorsed in blank by Mrs. Mildred Copland.  The books of account of Clements, Curtis & Co. show that from March 5, 1917, to September 5, 1917, there stood in the name of David Copland, the petitioner, 400 shares of the preferred stock of the Great American Tank Car Co., and that on March 26, 1920, said 400 shares of preferred stock of that corporation were transferred to Mrs. Mildred Copland.  From the time of the transfer of said stock to Mrs. Copland she had exclusive possession thereof, keeping same in her own safe-deposit box in the Illinois Merchants Trust & Savings *240  Bank.  She at all times used the income which she received from said stock as she saw fit.  The petitioner from time to time after these transfers in accordance with his plan, transferred and delivered to his wife various*2889  monies and securities, until in 1927 the total amount transferred to Mildred Copland aggregated approximately $300,000.  The amount of $1,800 which the respondent has added to the income of the petitioner in 1920 represents interest received by Mildred Copland in that year on securities of the St. Louis & San Francisco Railroad aggregating the principal sum of $30,000.  These securities were given by the petitioner to the said Mildred Copland in 1920 and she has at all times received the interest thereon and used the same for her own personal use and benefit.  She reported the amount in her income-tax return and has paid the taxes thereon.  She placed these securities in her own safe-deposit box when she received them from her husband and they have remained there at all times.  The interest on the securities was received by Mildred Copland and deposited by her in her own bank account in the First National Bank of Chicago.  OPINION.  TRAMMELL: For the year 1919 the question is whether the amount of $27,000, being the profits derived from the syndicate, the interest in which was transferred by the petitioner to his wife before any profits were derived therefrom, is taxable as the*2890  income of the petitioner or of his wife, Mildred Copland.  For 1920, the question is whether the $1,800 interest on the securities received in that year from St. Louis & San Francisco Railroad should be taxed to the petitioner or to his wife.  With respect to the assignment of petitioner's interest in the agreement with the North American Oil Co., the real question is whether the petitioner assigned to his wife the asset or corpus from which the income or profit arose or merely assigned the right to receive income or profits.  If the asset giving rise to the income was assigned, then the income is not taxable to the petitioner.  See . But if income or profits only were assigned, they become taxable to the petitioner regardless of their assignment or transfer to the petitioner's wife.  ; ; certiorari denied by the United States Supreme Court, ; , and cases there cited.  The assignment itself is set out in the findings of fact.  We are not advised, *2891  however, of the provisions of the original contract with the corporation whose stock was sold.  That contract was in writing, but was not introduced in evidence.  It may well be that the petitioner was required *241  to render services which gave rise to the profits and continued to do so after the assignment.  The evidence discloses also that the petitioner and his associates agreed to purchase the stock and to sell it.  This may have required a capital outlay or the rendition of services on petitioner's part, or it may be a fact, which the record does not disclose, that the petitioner was merely to receive profits under his contract.  The petitioner's portion of any capital contribution is not shown to have been assigned to his wife.  All that Mrs. Copland received was profits.  If she had become the owner of the principal or the asset giving rise to the profits, she would have become entitled to the portion of the petitioner's capital invested in the enterprise and not merely the profits therefrom.  On the other hand, if the petitioner had rendered services as his contribution to the syndicate, the profits were derived from the services of the petitioner rendered after the*2892  assignment.  The terms of the assignment to the petitioner's wife in connection with the actions of the parties indicate that what was assigned was the right to profits after they had arisen rather than any principal or asset which gave rise to the profits.  The petitioner's wife did not receive the principal invested by the petitioner.  In any event, considering the fact that the record does not disclose the nature of the contract between the petitioner and his associates or its terms and conditions, we are not able to determine that the preponderance of the evidence shows that the action of the respondent in this regard was erroneous.  With respect to the question whether the amount of $1,800 interest on securities received by the petitioner's wife was taxable to the petitioner, we think the evidence clearly shows that this amount was received by the petitioner's wife and that the petitioner had made a gift of such securities to his wife.  Reviewed by the Board.  Judgment will be entered under Rule 50.STERNHAGEN concurs in the result only.  VAN FOSSAN dissents.