*698 The petitioner and his wife executed a warranty deed conveying certain properties to a corporate entity, which was organized and incorporated under the laws of the State of Florida for the specific purpose of receiving such properties. He caused the deed to be recorded. The act of recordation, without more, is prima facie evidence of delivery of the deed and of its acceptance by the grantee under the laws of the State of Florida. Held, having failed to overcome the presumption of delivery and acceptance by proof to the contrary, the respondent's denial to this petitioner of certain statutory deductions, incurred in connection with such properties, is approved.
*543 The respondent having determined deficiencies in income tax of $107.07 and $316.29, for the taxable years 1932 and 1933, respectively, the petitioner brings this proceeding for its redetermination, claiming error by reason of the refusal to allow losses sustained and taxes paid by him in said years upon properties allegedly belonging to him, the legal title to which was in a certain corporation.
*699 FINDINGS OF FACT.
The petitioner, an individual, resident of Miami, Florida, having attached his signature to a number of promissory notes during a real estate boom in that state, as a precautionary measure in the event of action against him thereon and to the end that he might effect an orderly liquidation of his properties, upon advice of counsel, decided to organize a corporation and to transfer certain of his properties to it. This resulted in the organization of a personal holding company, Alra, Inc., under the laws of the State of Florida. November 23, 1931, the incorporators of which held their first meeting January 5, 1932, at which, among other things - including the adoption of by-laws - F. G. Railey, the petitioner, Lilburn R. Railey, the petitioner's brother and attorney, and Alpha W. Railey, petitioner's wife, were elected and thereafter constituted the board of directors.
Petitioner's counsel prepared and delivered a warranty deed to the petitioner, which was executed by him and his wife and notarized under date of April 27, 1932, by which they, for "TEN DOLLARS and other good and valuable consideration to them in hand paid by the party of the second part [Alra, *700 Inc.], the receipt whereof is hereby *544 acknowledged", bargained and sold to Alra, Inc., certain described parcels of property in Dade County, Florida, and in the city of Miami, subject to assessments for municipal improvements and taxes accrued thereon. The instrument was "Signed, sealed and delivered in the presence of" two witnesses whose signatures were thereto affixed; was duly filed for record by the petitioner with the clerk of the Circuit Court on June 20, 1932, and was thereafter placed in his safe. Those properties had value greatly in excess of $500.
Under date of September 17, 1934, Lillian Metz, C. A. Wiley, and Charlotte Williams - one of whom was secretary to petitioner's counsel and the others employees of an accountant's office, all of whom were the original incorporators of Alra, Inc., and composed the first "meeting of the incorporators" on January 5, 1932 - met as such incorporators and passed the following resolution:
WHEREAS, on the 23rd day of November 1931, a certificate of incorporation was filed in the office of the Secretary of State of the State of Florida under the name of Alra, Inc., and whereas on the 27th day of April 1932, a deed was*701 made by F. G. Railey and Alpha W. Railey, his wife, conveying to Alra, Inc., said corporation, the property hereinafter described and said deed was filed for record in the office of the Clerk of the Circuit Court in and for Dade County, Florida, on the 20th day of June 1932, recorded in Deed Book 1492, page 100, and whereas at the time of the execution of said conveyance the parties had intended to completely organize said Alra, Inc., a corporation, but whereas no stock of said corporation was ever issued and no stockholders' meeting was ever held, and the acceptance of said conveyance was never approved by the stockholders of said corporation at a stockholders' meeting and no stock was ever issued and no consideration ever paid therefor, and whereas the real equitable ownership of said property has always remained in F. G. Railey, and whereas F. G. Railey has received no benefit or consideration for the conveyance, * * *
On September 18, 1934, the said Charlotte Williams, acting as president of Alra, Inc., after reciting the substance of the aforesaid resolution, executed an indenture conveying back to the petitioner the same said parcels of property which he had theretofore deeded*702 to Alra, Inc., on April 27, 1932. This instrument, bearing the words "Corporate Seal", circumscribed by a scroll, with documentary stamp attached thereto, "Signed, sealed and delivered in the presence of" two witnesses, was recorded on February 1, 1935, by the clerk of the Circuit Court of the County of Dade.
On July 29, 1935, there was "A meeting of the incorporators and Board of Directors of ALRA, INC." and the following resolution was adopted:
WHEREAS, on April 27, 1932, F. G. Railey and Alpha W. Railey, his wife, executed a Warranty Deed to this corporation purporting to covery Lot 4, Block 14, South, of the City of Miami, according to the plat thereof recorded in Plat Book "B", at page 41, of the Public Records of Dade County, Florida, and,
*545 WHEREAS, the acceptance of such conveyance was not and has never been approved by the stockholders or the Board of Directors of this corporation, and,
WHEREAS, no consideration was paid to the said F. G. Railey and Alpha W. Railey by this corporation for the execution and delivery of said deed, and
WHEREAS, this corporation claims no right, title or interest in or to said land be reason of said conveyance, and
WHEREAS, *703 said F. G. Railey, has requested this corporation to execute with him a conveyance to Ramico Properties, Inc., a Florida corporation, in order to perfect the record title to said land;
BE IT RESOLVED, That, in order to release any apparent right, title or interest which this corporation has or claims to have in the real property hereinabove described, the president of this corporation is hereby authorized and directed to execute and deliver to Ramico Properties, Inc., a Florida corporation, its nominee or assignee, such deed or deeds as may be necessary releasing and conveying to said Ramico, Properties, Inc., its nominee or assignee, all right, title or interest which this corporation may appear to have in or to said land;
BE IT FURTHER RESOLVED, That for the purpose of making said conveyance there is hereby adopted as the seal of this corporation a scroll seal consisting of a circle surrounding the words "SEAL - ALRA, INC., A FLORIDA CORPORATION, INCORPORATED 1931"; and the secretary of this corporation is authorized to affix such seal to such deed of release and conveyance.
Alra, Inc., was formally dissolved on February 15, 1935.
Other than the activities hereinbefore*704 shown Alra, Inc., was dormant during its legal existence. It issued no capital stock. No stockholders' meetings, as such, were ever held.
There were three buildings located on the properties in controversy - two of concrete block construction and one of frame - a mercantile building, built in 1925 at a cost of $40,000, and two dwellings, one built in 1925 at a cost of $9,900, the other in 1925 at a cost of $3,500. In addition to taxes of $1,792.38 and $1,135.12, paid by the petitioner on those properties in 1932 and 1933, the following is a schedule of depreciation (4 percent) thereon and expenses incurred and paid by him in connection therewith, and the amount of income received from each, also the amount of profit or loss claimed in his individual income tax returns filed for said years:
| 1932 | |||||
| Income | Cost | Depreciation | Expenses | Profit or (loss) claimed in return | |
| Mercantile | $260.00 | $40,000.00 | $1,600.00 | $34.60 | ($1,374.60) |
| Residence | 305.00 | 3,500.00 | 140.00 | 143.64 | 21.36 |
| 1933 | |||||
| Dwelling #853 | $270.00 | $9,900.00 | $396.00 | $421.14 | ($547.14) |
| Frame construction WF | 225.00 | 3,500.00 | 140.00 | 482.56 | (397.56) |
| Mercantile | 40,000.00 | 1,600.00 | (1,600.00) |
For some period prior to 1933 a portion of the so-called mercantile building was rented. This tenancy was terminated in or about 1933 and one of the petitioner's corporate interests used the upper floor for storage space, rent free. He used the lower floor for the storage of cars. This corporate interest did, however, defray the cost of repairs and insurance on that building.
The respondent disallowed the claimed losses aforesaid on the ground that the properties upon which the expenditures were made and depreciation sustained were those of Alra, Inc., hence could not be allowed as deductions to the petitioner.
OPINION.
MORRIS: It is contended by the petitioner, on the one hand, that he was the legal and equitable owner of the properties conveyed, or purported to have been conveyed, to Alra, Inc., by his warranty deed of April 27, 1932, and that, therefore, notwithstanding the bare record ownership was in Alra, Inc., he was, nevertheless, entitled to deduct taxes, insurance, repairs, and depreciation on those properties. The respondent contends, *706 on the other hand, that these properties were not owned by the petitioner but by Alra, Inc., and that, therefore, it, and not he, should report the income therefrom and claim the deductions therefor.
Fully realizing, as we must in all cases where personal advantages are a factor, that the petitioner, had the contemplated emergency actually existed, that is, had the corporate entity become necessary as a shield against judgment creditors and in the defense of his properties, would just as vehemently have asserted the validity of the corporation and its ownership of the properties transferred by his warranty deed of April 27, 1932, as he now urges contrariwise, we can not too lightly seize upon technicalities - such as the absence of activity, no formal issuance of stock, the failure of stockholders to exist of record or to hold formal meetings, and the like - in our determination of whether or not he is entitled to the deductions claimed. In such a case the general rule that substance and not form should prevail in the adjudication of tax questions (*707 ) should be strictly adhered to.
The first and principal argument advanced by the petitioner is that under the laws of the State of Florida delivery of the deed by the grantor and its acceptance by the grantee are essential factors to the conveyance of title to real property, citing ; . This we concede. But, the general rule is that the filing of a deed for recordation by the grantor is prima facie *547 a delivery of the deed to the grantee and acceptance by him where a beneficial interest is conferred upon the grantee. The rule is stated by the Supreme Court of Florida in ; , as follows:
* * * The delivery of a deed by the grantor, and its acceptance by the grantee, are essential to covey title; and when a grantor causes an acknowledged deed, conferring substantial benefits on the grantee, to be recorded, there can be no doubt that it will afford prima facie evidence, and even strong presumptive evidence, of a delivery to, and acceptance*708 by, the grantee, but such presumption can be overcome by evidence that no delivery in fact was intended and none made. At least, the clear weight of authority holds that to be the correct rule. Webb, Record Titles (section 144) says: "As a general rule, delivery of a deed or other instrument is essential of its valid registration, for the reason that until delivery the deed is incomplete, and its record cannot impart constructive notice of a change of ownership that has not occurred. * * * The recording of a deed is not equivalent to delivery, but, like possession of it, is prima facie evidence of that fact, subject to be overcome by contrary proof." The following authorities sustain this view: ; ; ; ; Samson v. Thornton, 3 Metc. (Mass.) 275; ; , *709 , and note; ; Devl. Deeds, § 292.
There is no evidence whatsoever indicating any change in the circumstances between the time Alra, Inc., was organized and the time when it was finally dissolved from which we might reasonably deduce that the petitioner's intention and plan had been altered or abandoned. In fact just the contrary appears to be admitted by a sworn statement on the part of the petitioner saying that "In the spring of 1935, the emergency for which the corporation was formed having passed, I exercised my control over the corporation and caused an organization meeting to be held and the legal title to all property involved be reconveyed to me."
While the petitioner's brother, as a witness, so testified, as did the petitioner himself, that there was no delivery of the deed, we find ourselves unwilling to attach full significance to the former's testimony for the reason that circumstances clearly of record convince us that he was in no position to know with reasonable certainty what had happened to the deed after its preparation by him and delivery to his brother for examination. *710 When asked by counsel for the respondent, on cross-examination, how the happened to know that the deed was never delivered, he said that he turned it over to his brother for examination, that his brother was to return it to him if they were to proceed with the corporation, and after that, "I don't know what else happened relative to that deed." The petitioner, when asked what he meant when he testified that there was no delivery of the deed, said that after its recordation he put it in the *548 files of his safe and that he forgot all about having the deed until the question of title later arose. What he failed to tell us was whether or not those files were intended by him as, or were in fact, the depository for corporate documents of Alra, in which event the mere placing of the deed therein, by him, as grantor, would constitute a delivery through him, either as agent for the corporation or as one of its directors, to the corporation itself.
The really vital defect in the proof to overcome the presumptive correctness of the respondent's determination, also the presumption to which we have referred, is the fact that the deed itself was executed with all the formalities of*711 law and, notwithstanding that two witnesses affixed their signatures thereto beneath the legal terminology "Signed, sealed and delivered in the presence of us", neither of them was called upon to testify at this proceeding. It seems to us that for the petitioner to prevail in so vitally varying the terms of that formal document it should be shown by these witnesses that that they did not mean what they said when they placed their signatures thereon, attesting the fact that the deed had not only been signed and sealed in their presence, but that it was actually "delivered."
The evidence does not, therefore, refute the presumption of "delivery" and acceptance.
A further argument of the petitioner is that even assuming the corporation had title to the properties by reason of recordation, the petitioner, nevertheless, should be entitled to the deductions because the corporation was formed solely for the purpose of holding the title; it issued no stock; had no paid-in capital; held no regular corporate meetings; paid no dividends; and exercised none of the rights or privileges of corporate ownership. Having held that title to the properties in controversy vested in the corporation*712 and having found as a fact that those properties had a value greatly in excess of $500, we, of course, can not agree with the petitioner that it had no paid-in capital, irrespective of the fact that it issued no stock therefor, which has repeatedly been held unnecessary to the existence of a valid stock ownership. . The State of Florida having breathed life into the corporation, and it having complied with the laws of that state giving it the right to transact business under its charter, even though it did nothing more than receive the properties which the petitioner conveyed to it, as we have found, by deed of April 27, 1932, a separate entity exists for tax purposes, be it de jure or de facto, it matters not, which will not be ignored except under unusual circumstances. ; ; . As we have said heretofore *549 (*713 ), "Where a corporate cloak is resorted to for its business benefits the burdens, if any, must also be assumed."
We are, therefore, of the opinion that the deductions claimed by the petitioner were correctly disallowed by the respondent.
Judgment will be entered under Rule 50.