*600OPINION.
Morris:The amount of the profit realized by the taxpayer on the sale of the land is not in dispute, the principal question being whether such profit should be returned for income-tax purposes in the year 1920 or 1922. The taxpayer contends that while in some instances payment to an agent is payment to the principal, and consequently receipt of income by the agent in a given year should be returned by the principal for such year, yet, where grave legal doubt arises as to the agency and the facts and circumstances surrounding the transaction in which the agent is involved, income is not taxable until the same actually passes into the hands of the recipient. It is clear from the record that the Wentz Co. was the duly authorized agent to execute the sale of the property to Thompson. Some question is raised in the taxpayer’s brief as to the extent of that agency, and it is contended therein that Wentz had no authority to make final settlement and collect the money. There is no evidence before us, however, of such a limitation. In our opinion the well-established principle that receipt by the agent is receipt by the principal must *601govern this transaction. Maryland Casualty Co. v. United States, 251 U. S. 342. This conclusion is supported by the contentions of the taxpayer and the ojnnion of the Supreme Court of Nebraska in the case of Strauss v. Ackerman, 187 N. W. 762, set forth in the following language of the decision:
In a proceeding by tbe state of Nebraska to wind up tbe affairs of tbe bank, claimants, by formal pleas, presented for allowance the following items: A claim that they are the owners of tbe two notes described, one for $8,000 and tbe other for $4,000, aggregating $12,000 payable on their face to Charles W. Wentz and secured by mortgage on 120 acres of land sold by claimants to Itoscoe C. Thompson, the knowledge of Wentz being imputed to the bank and the latter being obliged to restore the property of claimants to them; a claim for the cancellation and the surrender of two promissory .notes, one for $5,000 and the other for $3,750, aggregating $8,750, payable to the bank, executed by claimants Julia A. Strauss and Mamie E. Kingston, respectively, payment having been made according to agreement out of the proceeds which Wentz received for claimants directly from the purchasers of the land sold by claimants, $25,000 of the same, in money and securities, having been deposited in the bank to the credit of the Wentz Company, the bank knowing the rights of claimants ; a claim for the balance of the purchase money to the extent of $4,250, being part of what AVentz received and deposited in the bank to the credit of the Wentz Company, claimants asserting the rights of depositors.
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The purchase money notes were the property of claimants. Others could hold, use or transfer them as trustees only unless protected by the negotiable instruments law as innocent purchasers or holders for value before maturity,
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It follows that neither the bank nor the receiver is an innocent purchaser oí-an innocent holder. There is no error in the order directing the receiver to transfer these notes to claimants.
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The remaining item to be considered is the claim for $4,250 allowed by the trial court as the balance of a deposit. This balance is explainable as follows: Out of the purchase price AArentz received for claimants $25,000 in cash and securities. The receiver is entitled to credit for the two purchase money notes, aggregating $12,000, which he is ordered to transfer to claimants. He is also entitled to credit for the two other notes, aggregating $8,750, which he is ordered to return to the makers marked “ Paid.” The sum of these two credits is $20,750. The difference between the latter item and the $25,000 received by AVentz for claimants is $4,250, the amount of the claim. AVas it properly allowed by the trial court as a deposit? It belonged to claimants. Wentz received it as trustee for them and it was in fact deposited in the bank. Knowledge of claimants’ rights and of AVentz’s trusteeship was imputable to the bank. The deposit, therefore, though made in the name of the Wentz Company, inured to the benefit of the beneficiaries of the trust, the claimants, and they are entitled to protection as depositors.
We are of tbe opinion that the taxpayer should return the profit on the sale of the land in the year 1920. As the taxpayer’s books were kept on the cash receipts and disbursements basis, the item of $5,000 attorneys’ fees paid in 1922 is not deductible in the year 1920.
AeuNdell not participating.