dissenting: I respectfully dissent. As I view the issue, the reasoning of the Court of Appeals for the Fifth Circuit in Commissioner v. Estate of Hinds, 180 F.2d 930 (5th Cir. 1950), dictates a holding that decedent did not retain a right to the income from the transferred bonds within the meaning of section 2036, and I think we should follow that reasoning.
In the Hinds case, the husband transferred community property to a trust and provided that the trust income was to be paid to his wife for her life and that the remainder was to go to their children. This Court held in Estate of Hinds v. Commissioner, 11 T.C. 314 (1948), that one-fourth of the transferred property was includable in the deceased husband’s gross estate on the theory that, within the meaning of the predecessor of section 2036, the decedent had retained the right to the income from that portion of the transferred property. The Commissioner appealed, arguing that one-half, rather than only one-fourth, of the transferred property was includable in the decedent’s gross estate. The taxpayer did not appeal but asked the Court of Appeals to affirm this Court’s decision, not because it was right, but because "it gave the Commissioner more than he was entitled to.” The court agreed with the taxpayer, explaining at page 932:
whether the income be regarded as separate property of the wife or as community income from the wife’s separate property, the taxpayer retained neither "the possession or enjoyment of, or the right to the income from,” the property so as to make applicable * * * [sec. 2036], invoked by the commissioner and in part applied by the Tax Court.
Speaking for the Court of Appeals, Judge Hutcheson stated that he based this conclusion "upon the authority of the settled Texas law.” The law of Texas which he cited was Vernon’s Ann. Civ. Stat., art. 4614 (which included a provision that "the wife shall have the sole management, control and disposition of her separate property, both real and personal”);1 Arnold v. Leonard, 114 Tex. 535, 273 S.W. 799 (1925); Hawkins v. Britton State Bank, 122 Tex. 69, 52 S.W.2d 243 (1932); In re Gutierrez, 33 F.2d 987 (S.D. Tex. 1929); and Whitney Hardware Co. v. McMahan, 111 Tex. 242, 231 S.W. 694 (1921).
In one of these cited opinions, one which Judge Hutcheson wrote as a district judge, In re Gutierrez, supra, allowing a wife to recover from her husband’s bankruptcy estate sums he had contracted on behalf of the community to pay her for services, the holdings of Arnold v. Leonard, supra; Whitney Hardware Co. v. McMahan, supra; and other decided cases on the subject are summarized as follows (33 F.2d at 990);
From these decisions it seems plain to me that there are now, roughly speaking, three kinds of property recognized under our marriage laws:
1. The ordinary community property of husband and wife, the management, control, and disposition of which is vested in the husband.
2. The separate property of the wife, the management and control of which is vested in the wife, and
3. That part of the community property consisting of the wife’s personal earnings, rents, revenues, etc., from her separate estate, the complete management and control of which is vested in the wife and as to which the wife has full and complete contractual capacity.
As I read this analysis and the cases cited by Judge Hutcheson, they hold that property given to a wife by her husband becomes her separate property. The income from such property is community property, but, consistent with the language of art. 4614, supra, the wife has an exclusive right to its management, control, and disposition. Such income cannot be seized by her husband’s creditors and, without her consent, cannot be conveyed by him to his creditors. The wife has the sole right to create contractual obligations with respect to such income. She has the right to exclusive possession of the property and the right to dispose of it. In her discretion, she can give it away or invest it in non-income-producing or income-producing property. She is free to deal with the community income from her separate property without the participation, consent, or interference of her husband.
These extensive attributes of ownership led the Court of Appeals in the Hinds case to conclude, correctly I believe, that under Texas law a husband who transfers property to his wife does not retain the right to the income therefrom within the meaning of section 2036.
Judge Waller’s concurring opinion in the Hinds case indicates that he would have limited the court’s holding to the situation where the property was transferred, as in the Hinds case, to a trust for the benefit of the wife for her life. To support this view, Judge Waller relied on the rule in Texas that the rents, increase, profits, and the like of property conveyed in trust for the benefit of a wife become her separate property if the trust instrument " 'in the most precise and definite way, and by the use of language of unmistakable intent, make[s] that desire and intention clear.’ ” See 1 Oakes, Speer’s Marital Rights in Texas, sec. 420, p. 622 (4th ed. 1961). But Judge Hutcheson, speaking for the majority, did not so limit the opinion. He stated that the property was not includable in the deceased husband’s estate "whether the income be regarded as separate property of the wife or as community income from the wife’s separate property.” He apparently concluded that, even though the third kind of property described in the above quotation from his In re Gutierrez opinion is community property, the husband’s rights with respect to it are so limited that they do not constitute a retained right to income within the meaning of the predecessor of section 2036.
The Hinds opinion in the appellate court thus supports the conclusion that the decedent in the instant case did not retain the right to the income of the transferred bonds. I would follow that opinion in the instant case and so hold.
Drennen, Dawson, and Goffe, JJ., agree with this dissent.This Texas statute has been recodified and the new version and related provisions are quoted in fns. 4, 5, and 6 of the majority opinion. This new version does not diminish the wife’s rights over the income derived from her separate property.