*3718 Under the facts in this case, a transfer of land by petitioner to his son-in-law to the end that the son-in-law might handle the land conveniently in the payment of petitioner's debts, was not a sale of that land, but rather a trust agreement which resulted in no profit as on the disposition of capital assets.
*808 This proceeding is for the redetermination of a deficiency in income tax for 1921, in the amount of $1,005.81, and a delinquency penalty of $241.45.
There are a number of assignments of error but they all may be resolved into two assignments, viz: That the Commissioner erred in holding that a certain transaction between the petitioner and his son-in-law, Ralph Ayars, on March 30, 1921, was a sale of land by petitioner to Ayars, and, second, that the Commissioner erred in placing a March 1, 1913, value on the land in question of $15 per acre, instead of $35 per acre.
FINDINGS OF FACT.
Petitioner is an individual who resides near the town of Moweaqua, Ill.
In 1921 he owned a tract of 640 acres of land situated in Colorado County, Texas, *3719 which he acquired prior to 1913. In 1921 petitioner was over eighty years old and was, at the beginning of that year and some time prior thereto, in serious financial embarrassment. His son-in-law, Ralph Ayars, had been in the banking business but at that time had sold out his banking interest, and was worth, financially, about $50,000. As a result of family conferences it was agreed by and between petitioner and Ayars that petitioner should convey to Ayars to 640 acres of land in Texas in consideration of the aggregate amount of the debts then owed by petitioner, to wit, $23,385.41, and that Ayars should sell or trade that land as he deemed best, and reimburse himself for some debts of petitioner that he had at that time taken up, and others that he might subsequently pay off, and in the event he sold the land for more than the aggregate amount of the debts, the excess should be paid to petitioner. Pursuant to such agreement, petitioner executed and delivered to Ayars a straight warranty deed with a recited consideration of $23,385.41 paid, dated March 30, 1921, and recorded in Colorado County, Texas, on May 21, 1921. Among the debts owed by petitioner at the date of the deed*3720 above mentioned was a note for the principal sum of $12,000 secured by a mortgage on 140 acres of land which was and is the home of petitioner in Illinois.
At the date of hearing, Ayars had paid off (either before or after date of said deed) all the debts except the $12,000 mortgage on the home place, which had not been paid in whole or in part. In the deed no mention is made of the debts and hence Ayars, by the terms of that deed, did not assume payment of any of those debts.
*809 The value of the 640 acres of land in Texas on March 1, 1913, was $35 per acre, $22,400.
OPINION.
LOVE: The decision of this case depends upon the answer to the question as to whether or not there was a sale made by petitioner to his son-in-law, Ayars, on March 30, 1921, and if there was a sale, what was the March 1, 1913, value of the land.
The record does not disclose the fact that Ayars was to pay off all the debts, whether or not he disposed of the 640 acres of land for enough to balance the amount of the debts. So far as the record discloses, it was the understanding and agreement that should there be an excess above the amount of the debts, realized on such sale, such excess*3721 would be paid to petitioner. Under the law of the case, in the absence of a written agreement to assume such debts, Ayars could not be held liable for their payment, either by petitioner or the creditors. Twelve thousand dollars of the total consideration named in the deed has not yet been paid and on the record, petitioner and his home in Illinois would still be liable for that debt. It does not seem reasonable to challenge the terms of the deal between petitioner and Ayars, as testified to by Ayars, and if such were the conditions of that deal, the deed from petitioner to Ayars, while absolute on its face, did nothing more than constitute a trust for the benefit of creditors. The 640 acres of land in Texas, at date of hearing, had not been sold by Ayars, hence we do not know what price petitioner may ultimately receive therefor under his agreement with Ayars. On this point the action of the Commissioner is reversed.
Having decided that there was no sale, it is unnecessary to discuss the March 1, 1913, value of the land. However, we have found as a fact that the land then had a value of $22,400. There is no deficiency and there is no delinquency penalty due by petitioner*3722 for the year in question.
Judgment will be entered for the petitioner.