*943 Prior to July 29, 1927, petitioner and her husband, while residing in the State of California, acquired, either on their joint credit responsibility or with their joint funds, certain shares of corporate stock which were registered in petitioner's name and thereafter held in petitioner's name, but concerning which there was at all times an oral agreement and understanding that the ownership of the stock should be on a share and share alike basis between husband and wife. Held, such shares were not the separate property of petitioner nor community property of petitioner and her husband, under the laws of the State of California, but were owned by them as tenants in common, and petitioner is taxable with only one half of the dividends received thereon, and not with the entire dividends as the Commissioner has determined.
*501 In these proceedings petitioner seeks a review of the determination of the respondent affecting her income tax for the years 1930 and 1931, the respondent having determined a deficiency against her for the year 1930 in the sum of $7,329.40*944 and for the year 1931 in the sum of $340.34. The proceedings were consolidated.
*502 The error assigned in each proceeding is as follows:
Respondent erred in holding that certain stock which was carried in petitioner's name was her separate property and further erred by including in petitioner's net income the amount of dividends received from said stock and assessing the amount of surtax thereon to this petitioner.
FINDINGS OF FACT.
Petitioner and her husband, Charles G. Bullis, were married in Los Angeles, California, on March 15, 1913. Neither petitioner nor her husband owned any property at the time of their marriage. Petitioner and her husband lived in British Columbia and Oregon the first year after their marriage and returned to California on July 9, 1914. Neither of them had any property at the time they returned to California. They have ever since July 9, 1914, resided in California.
In or about 1914 Charles G. Bullis was employed by the Murphy Dillon Co. on a small salary basis. However, in and about 1922 his yearly salary as secretary and general manager of the Murphy Dillon Co. was approximately $15,000.
In the year 1922 Charles G. Bullis and*945 petitioner were extended a right to subscribe for 2,000 shares of the stock of the Norwalk Co. by the organizers of that company. Neither petitioner nor her husband had the money with which to purchase the stock. The Murphy Dillon Co. loaned them the $20,000 which was paid for the 2,000 shares of Norwalk Co. stock. The stock was issued in the name of H. H. Bullis, agent. The certificate was kept by Charles G. Bullis in his safe at the office of the Murphy Dillon Co.
No notes were given by either petitioner or Charles G. Bullis for the debt. The loan was made to petitioner and her husband without security because of the existing friendship and the confidence that the Murphy Dillon Co. had in them. The Norwalk Co. later called for an assessment of $20,000 on the stock, and the money with which to pay the assessment was also borrowed by petitioner and her husband from the Murphy Dillon Co. in the same manner as the first $20,000.
Petitioner and her husband paid back these loans out of the dividends received by them on the Norwalk stock.
All of the dividends from the Norwalk stock were deposited in the joint bank account of petitioner and Charles G. Bullis at the Hellman*946 Bank, which was later changed to the Bank of America. The account stood on the bank's books as "Helen Hannah Bullis and/or C. G. Bullis." Both petitioner and her husband could had did draw checks on the account.
*503 The checks given in repayment of the loans to the Murphy Dillon Co. were drawn on this joint bank account; also all of the money used in the purchase, by petitioner and her husband, of other stocks and securities. All of such stocks were issued and carried in petitioner's name.
There was an oral agreement and understanding between petitioner and her husband that the stocks so purchased belonged to them, share and share alike, and that the stocks were theirs together.
The dividends that were treated by the respondent in his deficiency notice for the taxable years 1930 and 1931 as constituting taxable income to petitioner in their entirety are as follows:
| 1930 | |
| Name of corporation | Amount of |
| dividend | |
| Norwalk Co | $ 92,000.00 |
| Gladding McBean Co | 630.00 |
| L. A. Investment Co | 540.00 |
| Standard Oil Co. of California | 1,672.48 |
| 94,842.48 |
Of the above listed securities, the Standard Oil Co. of California stock was the sole and separate*947 property of petitioner, having been acquired by her as a gift from her father. The remaining stocks were acquired by petitioner and her husband with joint funds, and were owned by them as tenants in common.
| 1931 | |
| Name of corporation | Amount of |
| dividend | |
| Norwalk Co | $ 22,000 |
| Gladding-McBean Co | 371 |
| Fullerton Oil Co | 100 |
| Standard Oil Co. of California | 1,812 |
| Standard Oil Co. of California | 1,750 |
| 26,033 |
Of the above listed securities, the Standard Oil Co. of California stock upon which dividends were received in the amount of $1,750 was the sole and separate property of petitioner, having been acquired by her as a gift from her father. The remaining stocks were acquired by petitioner and her husband with joint funds, and were owned by them as tenants in common.
OPINION.
BLACK: The definition of separate property of husband and wife as provided in volume 13, California Jurisprudence, p. 815, sec. 22, is as follows:
All property, real or personal, owned by either husband or wife, before marriage, and that acquired afterwards by gift, bequest, devise or descent, with the rents, issues and profits thereof, is their separate property.
*504 *948 It has been clearly shown by the testimony in this proceeding that neither petitioner nor her husband owned any property before their marriage in 1913, that neither owned any property upon their arrival in California in 1914, that the stocks in question, except that particular stock of the Standard Oil Co. of California which it has been stipulated and agreed was the separate property of petitioner, were not acquired by either of them by gift, devise, etc.
The respondent has not filed a brief, but his position as indicated in the deficiency notice seems to be that because the stocks were registered in petitioner's name, they are therefore her separate property. The mere fact that stocks were carried in petitioner's name is not conclusive that they were her separate property. This presumption has been successfully overcome by petitioner.
Section 161 of the Civil Code of California provides:
A husband and wife may hold property as joint tenants, tenants in common, or as community property.
Sections 685 and 686 of the Civil Code of California, regarding interests in common, provide as follows:
[Section 685.] An interest in common is one owned by several persons, not in*949 joint ownership or partnership.
[Section 686.] Every interest created in favor of several persons in their own right is an interest in common, unless acquired by them in partnership, for partnership purposes, or unless declared in its creation to be a joint interest, as provided in section six hundred and eighty-three, or unless acquired as community property.
Section 687 of the Civil Code of California defines community property as follows:
Community property is property acquired by husband and wife, or either, during marriage, when not acquired as the separate property of either.
In ; affd., , we held that an agreement (oral) existed between the petitioner and his wife, residents of California, that compensation received by her for personal services should be her separate income and separate property. She made a separate income tax return of such compensation received and asked that the compensation be not treated as community income and taxed to the husband. We upheld the validity of the agreement.
In affirming our decision in that case, the United States Circuit Court of Appeals, Ninth*950 Circuit, quoted from the case of , wherein sections 158 and 159 of the California statutes are referred to as follows:
Section 158 of the Civil Code provides that "either husband or wife may enter into any agreement or transaction with the other, or with any other person, respecting property which either might if unmarried"; and section 159 of the *505 same code provides that a husband and wife may by contract alter their legal relations as to property and the succeeding section makes the mutual consent of the parties thereto a sufficient consideration for such an agreement, etc.
It seems reasonable to hold that, if the husband and wife can contract with each other that certain property which would otherwise be community property shall be the separate property of the wife, they can also contract that certain property acquired prior to July 1927, which would ordinarily be community property in which the wife would have only a mere expectancy, shall be owned as tenants in common, in which each owns a vested one-half interest. This it appears they have effectively done in the instant case.
Undoubtedly the stocks in*951 question, except the one block of stock in the Standard Oil Co. of California, given petitioner by her father, would have been community property in which the wife held only a mere expectancy, if it had not been for the express agreement between the husband and wife that all their stocks should be owned by them, share and share alike. This agreement concerning only personal property did not have to be in writing and was, in our judgment, sufficient to overcome the presumption that all such property was community property under the California statutes.
The Board has held in several cases that where husband and wife have a joint bank account on which either can check at will, they are joint tenants or tenants in common in the ownership of the account, depending upon the nature of their agreement, and that shares of stock purchased with the proceeds of such account belong equally to both unless a contrary proportion is agreed upon. Cf. ; ; *952 .
On the strength of the foregoing cited statutes and authorities, we hold that the stocks in question were owned by petitioner and her husband, Charles G. Bullis, as tenants in common, except the stock of the Standard Oil Co. of California that was given to petitioner by her father, and the Commissioner was in error in taxing petitioner with the entire amount of dividends shown in our findings of fact, and that the deficiency should be redetermined by taxing petitioner with only one half of the dividends except as to $1,672.48 dividends received in 1930 and $1,750 dividends received in 1931 by petitioner. These latter dividends petitioner concedes were her separate property and taxable to her alone.
The facts in the instant case are distinguishable from those which we had before us in . In the Weeks case we held that, where the petitioner borrowed funds from a bank with which to purchase certain corporate stock and gave his personal note therefor, at the same time depositing the stock with the bank as security for the loan, the legal presumption in California*506 being that*953 the petitioner acted for and in behalf of the community and that presumption not having been overcome by evidence that the loan was made upon the faith and credit of his separate property, the community property presumption became absolute and conclusive, and, therefore the profit derived from the sale and the dividends received during the ownership of that stock constituted community income. We held that, the stocks having been acquired subsequent to July 29, 1927, the effective date of the amendment to the California community property law by which the wife was given a vested interest in community property, the dividends and profits were taxable one half to the husband and one half to the wife.
In the instant case, if we were to hold that the dividends were the community property of Charles G. Bullis and Helen H. Bullis, they would all be taxable to the husband, Charles G. Bullis, because the stocks from which the dividends were paid were acquired prior to July 29, 1927. Cf. , and *954 ; certiorari denied, .
As we have already pointed out, however, we have in the instant case, contrary to what we had in the Weeks case, evidence which we think is ample to overcome the presumption of the California statute that the stocks in question acquired by Charles G. Bullis and Helen H. Bullis during coverture were community property.
Reviewed by the Board.
Decision will be entered under Rule 50.