*348 This proceeding is for the redetermination of a deficiency in income tax for the year 1924 amounting to $445.90.
The petitioner alleges that the respondent erred by including in petitioner's income, as community property, certain income which belonged to his wife as her separate property and which was reported by her in a separate return for the same year.
FINDINGS OF FACT.
Petitioner lives in San Francisco, Calif., where he has resided since his arrival in this country from Italy more than forty-three years ago. He married Blanche Devincenzi and, at the time of the hearing of this proceeding, they had lived together as husband and wife for about forty years. At the date of his marriage petitioner had no property.
Petitioner was engaged in the grading contracting business, which he carried on individually for many years until about April 1, 1924, when he sold a one-third interest to one Stanley Haskins and a one-third interest to Anthony Devincenzi, entering into a partnership with them. On the same date petitioner retired from active*2422 business and ceased to take any part in the management of the grading contracting business.
On December 22, 1923, the petitioner signed a document reading as follows:
*349 Mrs. BLANCHE DEVINCENZI,
San Francisco, Calif.
MY DEAR WIFE: Confirming our former understanding, I do hereby, in consideration of love and affection, and other good and valuable considerations, recognize and grant your claim in and to an undivided one-half interest and ownership in the real estate and buildings, of which we are at this time possessed; together with one-half interest in the income derived therefrom; and proceeds arising out of the conversion, investment, and reinvestment of the same.
Further, this instrument will confirm to you our understanding that I would and do hereby assign, set over and transfer to you an undivided one-half interest in the grading contractor's business, now conducted by me, together with a proportionate share of the profits accruing therefrom, commencing January 1, 1924; provided, however, that you shall be chargeable with one-half of any loss arising from said business. It is understood and agreed that such specific share of capital and profit as is*2423 stated herein, is subject to your direction and use.
I do not believe that it will be necessary to make a more formal document than this which I do now on the 22nd day of December 1923 voluntarily execute and sign in your favor.
Your affectionate husband,
L. DEVINCENZI.Witness:
A. S. HASKINS.MAY DEVINCENZI.
At the time the foregoing document was signed by the petitioner there were present the two witnesses, namely A. S. Haskins and May Devincenzi, and the petitioner's wife, Blanche Devincenzi. After signing the document the petitioner deposited it in a safe-deposit box to which petitioner, his wife, Blanche Devincenzi, his daughter, May Devincenzi, and one Stanley Haskins had access. The document remained in the safe-deposit box until needed for production at the hearing of this proceeding.
It was common knowledge in the petitioner's family that he had executed the document hereinbefore set forth.
All of the income involved in this proceeding was derived from the grading contracting business and none from any real property.
In his income-tax return for the year 1924 petitioner reported one-half of the income derived from the grading contracting business*2424 during that year, paying the tax thereon, and his wife reported the other half of such income in a separate return. The respondent held that the whole income received was community property and taxable to the petitioner alone.
OPINION.
VAN FOSSAN: The only question for our consideration is whether or not petitioner effectively transferred to his wife one-half of his interest in the grading contracting business so that the profits of such *350 one-half interest for the year 1924 became her separate property. Since income derived from real property is not involved in this proceeding, it is not necessary to determine whether the document set out in the findings of fact would effect conveyance to the petitioner's wife of an undivided one-half interest in any real property belonging to him or to the marital community consisting of the petitioner and his wife.
Under the law of the State of California, a husband and wife may enter into any engagements with each other respecting property which each might enter into if unmarried. They may thus alter their legal relations as to property and thereby change the character of their property from community to separate property. *2425 Mutual consent is a sufficient consideration for the agreement. Sections 158, 159, 160, Civil Code of California; ; ; ; . Under the law of California, however, it is a presumption that all property acquired after marriage by either spouse is community property, except that acquired by gift, bequest, devise or descent, with the rents, issues and profits thereof, and this presumption can be overcome only by evidence of a clear, certain and convincing character establishing the contrary. ; ; ; ; ; .
The document dated December 22, 1923, set forth in the statement of facts purports to transfer to petitioner's wife a one-half interest in his property and in the revenue derived or to be derived therefrom. It was signed by*2426 the petitioner in the presence of his wife and others. It does not appear, however, that it was ever delivered to petitioner's wife or was read by or to her. It was deposited in a safe-deposit box to which the petitioner as well as his wife and others had access. The wife, therefore, had no separate control over it. The petitioner took the document from the safedeposit box for use at the hearing of this proceeding. At the date the document was signed the petitioner alone owned and operated the grading contracting business. On or about April 1, 1924, he sold a two-thirds interest in that business to two individuals and the business was thereafter carried on as a partnership. It does not appear that the petitioner's wife joined him in the sale of the said two-thirds interest, was consulted in regard to it, or that the petitioner acted as her agent in respect thereto. On the contrary, the evidence is to the effect that the petitioner alone sold it.
It follows that on or about April 1, 1924, the petitioner was managing the grading business and disposing of an interest in it as if it were community property and his wife was not exercising any *351 dominion or control over*2427 it as her separate property. There is testimony that it was stated in the income-tax return for 1924 filed by the said partnership that one-sixth of the profits of the partnership for that year belonged to the petitioner's wife, but the partnership's return itself was not produced or offered in evidence. MoreoverThere is no evidence that any of the profits of the partnership were ever actually paid to petitioner's wife or deposited in any bank to her credit or paid to any person for her account.
We are, therefore, of the opinion that the evidence is not of a character clearly, certainly and convincingly establishing the contrary of the presumption that the income in question was community property. Hence, the principles stated in , are applicable. The petitioner had control and dominion of the whole of the income and it is therefore taxable to him.
Decision will be entered for the respondent.