*1082 A husband, having an account with brokers in his name, arranged for an account to be opened in the name of his wife. Thereafter he ordered the brokers to make purchases and sales for the account of his wife. The only stocks purchased for the wife's account were those ordered sold by the husband on the same day and the stocks sold for the account of the wife were purchased on the same day for the account of the husband. He furnished the funds to pay for the securities acquired for the wife's account. The stocks in the name of the wife were kept in the husband's safety deposit box with stocks in his name. She never saw them until after his death. Held, evidence fails to show that husband relinquished dominion and control of stocks, or that the account in the name of his wife was not in reality his account, and the deduction of claimed losses is disallowed.
*162 Respondent determined a deficiency in the income tax of Eliot W. Mitchell, deceased, in the amount of $6,301.22 for the calendar year 1931. The sole question for determination*1083 is whether or not he erred in disallowing the deduction from gross income of $44,634.64 claimed in the return as a loss.
FINDINGS OF FACT.
Eliot W. Mitchell died testate on November 11, 1932. Petitioners are the duly appointed, qualified, and acting executors of his estate.
The decedent filed a joint return of income for himself and his wife for the year 1930, reporting therein a gross income of $64,548.94 and claiming deductions aggregating $66,993.09. The deductions consisted chiefly of losses alleged to have been sustained upon the sale of 18 blocks of securities on December 29, 1930.
The wife had no independent means of her own and had never purchased or dealt in stocks or bonds previous to the year 1930. The records of a firm of brokers show that on January 1, 1931, an account was opened in her name with an initial debit to the account in an amount equivalent to the net amount reported in the joint return of income for the year 1930 as received from the sale of several blocks of stock. The decedent furnished the initial deposit to said account. During the month of January 1931, the same number of shares of the same stocks which were reported in the joint return*1084 as disposed of at a loss on December 29, 1930, were received into the wife's account. This was the sole activity in the account until December 19, 1931.
In a schedule attached to the return for 1930, the following securities, among others were listed as sold at a loss on December 29, 1930:
| Shares | |
| Anaconda Copper | 88 |
| General Motors | 116 |
| M. & T. Trust Co | 566 |
| M. & T. Securities | 446 |
| Marine Midland | 200 |
The loss claimed in the return for the year 1930 in connection with the five blocks of securities shown above was $23,556.72. No deficiency in tax has been determined by the respondent for the year 1930.
For the calendar year 1931 the decedent filed, with the collector of internal revenue for the 28th New York district, a joint return of income for himself and his wife, reporting a gross income of $60,593.65 and a net income of $12,154.52. There was claimed as a loss deduction $44,634.64, designated "losses on sale of stocks and bonds", the stocks and bonds alleged to have been sold being shown in schedule *163 C attached to said return. The cost, selling price, and loss attributed to five blocks of securities listed in said schedule are as*1085 follows:
| Name | Number of shares | Cost | Selling price | Loss |
| Marine Midland | 200 | $3,675.00 | $1,934.20 | $1,740.80 |
| Anaconda | 80 | 2,292.00 | 828.40 | 1,463.60 |
| General Motors | 100 | 3,429.90 | 2,262.10 | 1,167.80 |
| M. & T. Trust Co | 550 | 37,141.00 | 15,329.05 | 21,811.95 |
| M. & T. Securities | 400 | 4,566.90 | 1,129.20 | 3,437.70 |
| Total | 51,104.80 | 21,482.95 | 29,621.85 |
The return shows that the alleged sale of the stocks occurred on December 18, 1931. The records of the brokers show that said stocks were delivered out of the wife's account on December 19, 1931, and on December 21, 1931, the same number of the same stocks entered the account of the decedent.
The return does not show that $29,621.85 of the amount claimed as a loss in the return of income for 1931 resulted from the transactions of the wife; but the total amount claimed in the return as a loss included said amount.
In addition to the five blocks of securities, there were also listed in schedule C of the return 13 other blocks of securities reported as sold on December 18, 1931, in which the cost, selling price, and loss were reported as follows:
| Name | Number of shares | Cost | Selling price | Loss |
| General Foods | 120 | $4,940.00 | $3,547.20 | $1,392.80 |
| General Mills | 100 | 3,652.50 | 2,906.00 | 746.50 |
| Great Northern Ore | 100 | 2,387.50 | 1,048.00 | 1,339.50 |
| Paramount Publix | 25 | 933.13 | 158.50 | 774.63 |
| Pillsbury Flour Mills | 150 | 4,997.50 | 3,012.75 | 1,984.75 |
| Amer. Tel. & Tel | 50 | 7,250.00 | 5,754.25 | 1,495.75 |
| Borden Co | 100 | 5,205.00 | 3,734.00 | 1,471.00 |
| E. I. DuPont | 100 | 6,817.50 | 5,269.20 | 1,548.30 |
| Niagara Hudson Power | 500 | 4,587.50 | 3,023.00 | 1,564.50 |
| Sears, Roebuck & Co | 100 | 4,652.50 | 3,181.00 | 1,471.50 |
| F. W. Woolworth | 100 | 5,517.50 | 3,684.60 | 1,832.90 |
| Kreuger & Toll | 5,000 | 4,900.00 | 2,163.89 | 2,736.11 |
| Commercial Inv. Trust | 5,000 | 5,250.00 | 4,220.21 | 1,029.79 |
| Total | 61,090.63 | 41,702.60 | 19,388.03 |
*1086 All of the securities shown above were in decedent's safety deposit box at the time of his death. The wife had no safety deposit box of her own and she did not have access to the safety deposit box of her husband until she was appointed one of the executors of his estate. The 13 blocks of securities shown above were in the name of the wife at the time of her husband's death, the records of the brokers showing that said stock entered her account on December 21, 1931. *164 The five blocks of securities were in the name of the decedent, the records of the brokers showing that said stocks entered his account on December 21, 1931.
The decedent handled all the transactions and the wife relied entirely upon him. She could not recall ever having seen any of the securities until after his death, though the dividends upon some of them were paid to her during 1931.
When the safety deposit box of the decedent was opened by his executors after his death there were found therein, in addition to the stocks above referred to, carbon copies of two letters addressed to the brokers and bearing date of December 19, 1931. The wife had signed the one reading "Enclosed please find the*1087 following securities which you have sold for my account [listing the five blocks of securities]" before it was delivered to the brokers, and the decedent had signed the other, which was couched in the same language, and in which the 13 blocks of securities were listed. Both letters were prepared at the direction of the decedent.
On December 21, 1931, the wife signed a check drawn on the Marine Trust Co. of Buffalo, New York, against a joint account of her husband and herself payable to the order of the brokers in the amount of $20,657.15. The amount of this check represented the difference between the market price of the 13 blocks of stock entering her account on that date and the market price of the five blocks of stock leaving her account on the same date. On the same date the decedent made a deposit of approximately $19,000 in the joint bank account against which the check was drawn and, if a deposit in that amount had not been made to said account, the check signed by the wife, if cleared against the account would have overdrawn it $19,000.
The claimed loss of $44,634.64, deducted in the joint return of decedent and his wife for 1931 and which was disallowed by the respondent, *1088 was computed in the following manner:
| Loss on sale of securities by wife | $29,621.85 |
| Loss on sale of securities by decedent | 19,388.03 |
| Loss on sale of Liberty Bonds | 1,089.76 |
| Total loss | 50,099.64 |
| Less profit on Niagara Arbitrage Warrants | 5,465.00 |
| Loss on dealings in securities | 44,634.64 |
Petitioners concede that an actual profit of $5,465 was derived from the disposition of the Niagara Arbitrage warrants and they do not question the correctness of the respondent's determination that the loss of $1,089.76 sustained upon the sale of Liberty bonds is a capital net loss rather than an ordinary loss.
*165 OPINION.
MELLOTT: The petition alleges that the respondent erred in disallowing the claimed deductions. It is alleged, apparently in conformity with Rule 5(e) of the Board's rules of practice which requires "clear and concise numbered statements of the facts upon which the petitioner relies", that "Eliot W. Mitchell, during said calendar year 1931, sold certain securities on which he sustained a loss in the total amount of $44,634.64." The evidence fails to support such allegation; but inasmuch as both parties at the hearing construed the issue to*1089 be whether or not valid sales of the stock had been made by decedent and his wife, we have done likewise in making our findings and shall discuss briefly the principles of law deemed pertinent to such issue. Cf. .
It has been said many times that transactions between a husband and wife, or members of a family, are to be subjected to the closest scrutiny, ; ; ; ; and, where the transaction is made "for the avowed purpose of reducing taxation and apparently would not have been consummated otherwise at this time, every requirement of a sale must be met." ; affd., . Taxation is an eminently practical matter and tax laws deal with realities. . "A man can not make a sale to himself", *1090 , nor is an actual loss sustained "unless when the transaction is concluded the taxpayer is poorer to the extent of the loss claimed." ; certiorari denied, .
Upon brief petitioners say, "For a long time it has been well established that a sale may be made for the sole and express purpose of decreasing tax liability." The statement is correct. ; ; . It is also true, as petitioners point out upon brief, that where husband or wife, in good faith, actually makes a sale of stock to the other spouse, the gain or loss will be recognized for tax purposes. ; ; ; affd., ; *1091 ; ; ; affd., ; and ; and this is true, where an actual sale is made through a broker even though a portion of *166 the funds used in making the purchase were, as a matter of convenience, furnished to the purchaser by the one making the sale. In such a case, however, it is necessary that it be shown that "each was financially able to buy and pay for all purchases made", and the furnishing of the funds was a mere convenience and not a necessity without which such purchases could not have been made. ;;; and .
In the instant proceeding it can not be found as a fact that the furnishing of the funds by the decedent to the wife was a "mere convenience and not a necessity." The wife, testifying as a witness, was asked whether she had any other securities or property. *1092 She responded "Aside from that found in the box?" Her counsel then said, "Aside from what was shown in the box. I am just asking whether you had", to which she replied, "No." When asked about the deposit by the husband of $19,000 in the joint bank account and whether she "needed about nineteen thousand to make up this check of $20,657.15", she replied "Yes." This testimony, together with other evidence in the record, might not be sufficient to justify us in concluding that the furnishing of the funds was a necessity without which the purchase could not have been made, but, in the face of it, we are not justified in finding that it was not such a necessity - a finding which must be made if petitioner is to prevail. Our conclusion, however, rests upon other facts and circumstances, in addition to the furnishing of the funds, so we pass this phase of the case without further discussion.
This proceeding, upon its facts, is quite similar to, and requires the application of the rule enunciated and applied by the Board in . Here, as in that case, the transactions were carried out solely on the order of the husband. The obvious object*1093 of all of them was, not to make sales of securities in the normal way, but to establish losses for tax purposes. The decedent and his wife during both years, merely shifted the legal title to the stocks but apparently never intended to divest the husband of his equitable title to them. Though they went through the form of making sales, the decedent never relinquished dominion and control over the securities; they were kept in his safety deposit box and were never even seen by the wife. He decided which should be shifted from his account with the broker to his wife's account with the same broker. When it suited him to do so he caused the same property to be shifted back again. If funds were needed for such purpose he furnished them. She "knew very little about" stock transactions and was satisfied to let him take care of all the details. She, as she expressed it, relied upon him "Entirely." "My husband *167 gave the order. He handled all that business." He wrote the letter instructing the broker to sell the stock standing in her name and all that she did was to sign it. Someone other than the wife prepared the check to the brokers for her signature, for it is obvious*1094 from an examination of the check that the handwriting of the body of the check and the signature are different. When she was asked whether "the proposition of buying this stock and selling it" was ever discussed between her and her husband she replied "Well, yes; he would advise me doing it." To the next question, "He advised you to buy it?" she responded, "Because I knew very little about it." When asked whether she had ever had them in her possession she said, "No, my husband had a safe deposit box and they were kept in there." "I really left that up to him to take them and put them where they belonged. I knew nothing about it. I always, when buying and selling, took his advice and let him handle it."
It is unnecessary to extend this discussion. The evidence is not sufficient to convince us that the decedent relinquished dominion and control over the securities sufficiently to establish a loss within the purview of section 23(e) of the revenue act. In addition and in conclusion, the language used by this Board in , may well be repeated.
* * * Not only did the husband fail to part with dominion and control over the shares, but even*1095 if we were to hold that he sold the shares, he would not be entitled to the deduction, because the account in the name of his wife was in reality his own account. Therefore, he would be held to have purchased substantially identical property within thirty days of the date of the sale, and, under the wash sales provision of the statute, he would not be entitled to a deduction in any event. Sec. 118, Revenue Act of 1928.
The respondent did not err in determining the deficiency.
Reviewed by the Board.
Judgment will be entered for the respondent.
LEECH and DISNEY concur only in the result.
SMITH dissents.