dissenting: I do not think the Second Circuit’s decision in Johnson v. Commissioner, 86 Fed. (2d) 710, is controlling in this proceeding. The facts in the Johnson case were very different from those which are present in the instant case. In the Johnson case the court, in the very first part of its opinion, drew attention to the controlling facts in the following language:
* * * The facts reveal an ingenious attempt to reduce taxes by means of a plan which was intended to give the character of interest payments to money used to pay insurance premiums on policies upon the life of the petitioner. There were 15 such policies, all of them payable to his wife. The total annual premiums amounted to about $21,000, and prior to the year 1931 Mr. Johnson had paid them. In that year money for the premiums was provided pursuant to the transactions which are now to be described.
The court then went on to describe in detail the facts upon which it held that the alleged gift was not a gift at all, but a mere gesture.
We have no such facts in the instant case. The taxpayer did not set up a trust under which the trustee was to use the net income to discharge some debt or obligation of the settlor, as was the case in Johnson v. Commissioner, supra. Here the taxpayer set up what seems to me a perfectly legal trust for the benefit of his wife and eight children. Notwithstanding the multitude of decisions under Helvering v. Clifford, 309 U. S. 331, some of them contradictory and confusing, a husband and father can still set up a trust for the benefit of his wife and children and not be taxable on the income therefrom. The La Crosse Trust Co., with which petitioner was not connected as a stockholder, officer, or employee, was made trustee of the trust. The net income of the trust in each year was to be paid to Ellen Skemp, wife of the settlor, during her life in as nearly equal monthly installments as shall be practicable. Remainder was to go to the settlor’s children. During the taxable year the trustee paid $2,850 from the income of the trust to Ellen Skemp, the life beneficiary of the trust, and she was privileged to use the income in any way she pleased.
I know of no reason why petitioner should be denied the deduction for rent which he claims. The majority opinion makes no holding that this is a Helvering v. Clifford case and I certainly do not think that it is. The holding of the majority» is that the facts bring it within the ambit of the Johnson case and that this is so because the petitioner-settlor reserved an option to rent the property from the trustee at a “rental to be determined by the trustee.” As I have already pointed out, the trustee was a corporation in which petitioner was not a stockholder, officer, or employee. What reason is there to suspect that the trustee would rent to petitioner for any less amount than could be obtained in an arm’s length transaction ? None that I know of, and the findings of fact do not apprise me of any. The $500 per month which petitioner paid as rental for these premises was fair, so far as the record shows. If it was not a fair rental it would doubtless have been very easy for the Commissioner to show that fact to bolster up his case. He made no effort to do so. Therefore, we may safely assume, and I do assume, that the $500 per month represented a fair rental for the premises. The petitioner had made a complete conveyance of the two-story building in question to the trustee. It was beyond his recall. I think that without doubt he would be taxable on the value of the property as a taxable gift. Therefore, I see no reason whatever why petitioner should not be allowed a deduction in the taxable year for the $3,800 rent which he paid to the trustee for the rental of 'the building, title to which was vested in the trustee and in which petitioner’s wife and eight children owned the beneficial interest.
Because of the foregoing reasons, I respectfully dissent.
Tyson, /., agrees with this dissent.