*191 Decision will be entered for the respondent.
The decedent, a resident of California, was assisted by his wife in starting a fertilizer business. They started with no capital. She signed notes with him to borrow money and contributed some services, in the earlier stages. They agreed orally that they would share equally. Later a corporation was formed and the stock was issued in the name of the decedent for assets accumulated by decedent and his wife. A gift of most of the stock was soon thereafter made. Held, on the facts, the gift was not to the extent of one-half made by the wife, one-half of the stock not being received by her as compensation for personal services actually rendered by her, within section 1000 (d) of the Internal Revenue Code.
*828 This proceeding involves a Federal gift tax deficiency in the amount of $ 6,421.41 for the year 1944. The only issue is whether any portion of the property transferred to the donees was received as compensation *829 for personal services actually rendered by H. M. Holloway's wife, Mary L. Holloway.
In accordance with a motion announcing the death on or about October 4, 1947, of H. M. Holloway (hereinafter referred to as decedent), the duly appointed executor of his estate, Harvey S. Holloway, was substituted for the decedent as the petitioner herein.
The case was submitted on a stipulation of facts and oral testimony. The facts as stipulated are so found. Such parts thereof as it is considered necessary to set forth are included with other facts found from evidence adduced in our findings of fact.
FINDINGS OF FACT.
At all times material hereto*193 decedent and Mary L. Holloway lived together as husband and wife. In 1932 decedent and his wife were 63 and 56 years of age, respectively. Neither had any substantial property at that time. During the year 1932 decedent obtained a job as watchman for an oil company in Lost Hills, paying $ 100 per month. He made his home in a small galvanized iron building on the floor of an oil derrick. Decedent's wife joined him at Lost Hills in February 1933, to care for him after he had fallen and broken some ribs. After she decided to remain there with him, he enlarged the building in which he lived and made it more comfortable. Except for a few days visit in Los Angeles, she remained with him from that time on. He continued his employment as guard at the oil derrick until about 1935.
Some time after moving to Lost Hills, decedent took an interest in outcroppings of gypsum in the vicinity of the oil derrick. The first development he did on this project was on property known as the Theta lease. The first work on the lease was with a pick and shovel and a wheelbarrow. He later borrowed a tractor and a plow from a neighbor and plowed the gypsum so that it could be loaded onto trucks with*194 shovels. He would stay at the gypsum property for hours, working in the hot sun. His wife would worry about him and make many trips to see if he was all right. She would also take him his lunch and water to drink.
During the fall of 1934, while still employed as watchman of the oil property, decedent had opportunity to go to work for an oil company in building a gasoline plant located approximately 10 miles from the oil derrick where he and his wife lived. This employment lasted 6 or 8 weeks. His wife took care of the gypsum interest at that time while he was away, in that she watched the trucks as they would come in and told them where to go to load and where to be weighed, also making a memorandum of names, addresses, and truck license numbers of those customers with whom she was not acquainted. Decedent *830 also made frequent trips to the surrounding towns, 60 and 80 miles away, to promote sales of the gypsum, being gone all day and frequently until late at night. His wife would look after the property in a manner similar to that when he was employed in the building of a gasoline plant. In the evenings she would usually go with decedent to get the tickets, and then*195 assist him in computing the poundage and in making up the bills.
Decedent attempted to interest young men in working with him to develop the gypsum property and on several occasions he persuaded some to come there to work with him for their room and board, but they stayed with him for only short periods. The decedent's wife boarded and cooked for the men. Occasionally, when the demand arose, decedent would hire, as extra help on their days off, some of the men working at the oil fields. His wife, in 1934 or 1935, suggested that it would be wise for her to return to Los Angeles to secure employment. He asked her not to do so, for no one else would stay there and help him, and said that if she would remain half of anything they made would be hers.
On several occasions it was necessary to borrow a few hundred dollars. The notes were signed by both decedent and his wife. Decedent and his wife had a joint bank account.
Decedent and his wife had accumulated practically nothing up to the year 1937. Some time during that year decedent began operating a larger lease, known as the Lang property, which was located about two miles from the oil derrick where he and his wife lived at that*196 time. There was no cost to him of the Lang property other than the payment of a royalty upon extraction of the gypsum. As his activities increased he employed help, so that by 1941 he had a number of employees. About 1939 the daughter of decedent and his wife came to live with them and help decedent, which relieved his wife of considerable of her duties. Decedent's wife went to the site of the Lang property but a few times.
Decedent and his wife built a new house in the vicinity of the oil derrick and moved into it in 1941.
H. M. Holloway, Inc., was organized about August 1, 1944, at which time 800 shares of common stock were issued to and in the name of decedent, in exchange for cash and certain properties, consisting of the equipment being used in the business, about $ 41,000 cash, and leases with Security Oil Co. and Richfield Corporation. The assets had been accumulated by decedent and his wife between about 1933 and the date of the incorporation, and particularly from about 1937 onward.
The Lang lease was not assigned to the corporation, which operated it under a mining contract from the decedent.
On or about August 21, 1944, gifts of common stock of H. M. Holloway, Inc., *197 were made as follows: *831
| Donees | Shares | Value |
| H. S. Holloway | 333 | $ 41,625 |
| Marian S. Knox | 333 | 41,625 |
| Claude O. Knox | 111 | 13,875 |
| Total | 777 | 97,125 |
Within the time required by law, decedent and Mary L. Holloway filed separate gift tax returns for the year 1944, on which each reported one-half of the gifts shown above, in the amount of $ 48,562.50, and each paid the tax shown to be due thereon in the sum of $ 352.03. The Commissioner determined that the properties above listed were community properties of decedent and Mary L. Holloway, none of which had been received as compensation for personal services actually rendered by Mary L. Holloway or derived originally from such compensation or from the separate property of Mary L. Holloway.
The gift tax return of decedent for the calendar year 1944 was filed with the collector for the sixth district of California.
OPINION.
Petitioner and respondent agree that the question in this case is controlled by the application of section 1000 (d) of the Internal Revenue Code. 1 The only point on which they disagree is whether any portion of the property which was subject to the gifts in question was received as compensation*198 for personal services actually rendered by the wife. The respondent contends that the question is purely one of fact and that the petitioner has the burden of showing to what extent the personal services rendered by his wife contributed to the acquisition of the property in question. The respondent concedes that it is not necessary, in order to come within the meaning of the term "compensation for personal services actually rendered by the wife," that the wife had to render personal services to some third party and to receive compensation therefor. "It is sufficient if the acquisition of community property under consideration is shown, to some definite extent, to have been economically attributable to the wife's personal services." (Italics ours.)
*199 Language similar to that used by respondent is to be found in the *832 regulations, except for the omission of the above italicized words. We find the following statement concerning the interpretation of the applicable provision of the above mentioned section 1000 (d) of the code in Regulations 108, section 86.2 (c):
Sec. 86.2 Transfers Reached. -- * * *
* * * *
(c) Transfers of community property after 1942. -- During the calendar year 1943 and any calendar year thereafter any gift of property held as community property under the law of any State, Territory, or possession of the United States, or any foreign country constitutes a gift of the husband for the purpose of the gift tax statute (regardless of whether under the terms of the transfer the husband alone or the wife alone is designated as the donor or whether both are so designated as donors), except to the extent that such property is shown (1) to have been received as compensation for personal services actually rendered by the wife or derived originally from such compensation, or (2) to have been derived originally from separate property of the wife. The entire property comprising the gift is prima facie *200 a gift of the husband, but any portion thereof which is shown to be economically attributable to the wife as prescribed in the preceding sentence constitutes a gift of the wife.
At no place in the regulations is the term "to some definite extent" used, nor does it appear that such is required by the language of the code itself. Respondent's position is that the facts presented under the statute and regulations do not prove petitioner's case. The fact that decedent's wife, in the early days of the development of the gypsum interest, would take him his lunch and drinking water is no showing that any portion of the property here in question is to be economically attributable to her services, for it indicates nothing more than a wife's usual duty. The fact that she took care of the property when decedent was working at the gasoline plant and when he was away developing sales for the gypsum does indicate some contribution of a different nature. The fact that when money was borrowed the notes were signed by both decedent and his wife indicates a real contribution by her to the development of the business, perhaps commensurate with its size at that time, but obviously it does not comply*201 with the statute nor the regulations, which require that the source of the gift be traced to personal services actually rendered. Again, the fact that decedent and his wife entered into an agreement that half of anything they made would be hers if she would stay at Lost Hills and help him is evidential in a sense as to her activity, but plainly the statute requires, not contract, but personal services.
No cases cited to us, and none revealed by our search, have covered the question as to what constitutes "personal services actually rendered by the wife" as the term is used in section 1000 (d) of the Internal Revenue Code. On that phrase the regulation is of no help. Upon examination of all of the facts presented by the record, we have found *833 as a fact that decedent's wife at one time contributed some services. Is the gift of stock economically attributable thereto? We do not so consider. The services were performed, in the main, in the earlier years and it appears that there was only a small amount of savings by 1937, when the Lang lease was taken over, after which she seems to have performed no services. Thus there is a break in the connection between her services*202 and any later business or property. Though there is evidence that the property which was turned over to the corporation for stock which was the subject of the gift here involved was accumulated by the decedent and wife after 1933, in the light of the further evidence indicating no services after 1937, we can not say that the property given away in 1944 was economically attributable to her services.
Another difficulty with petitioner's theory here is the fact that the stock donated was issued in part for leases from Security Oil Co. and Richfield Oil Corporation. No showing is made to connect these leases in any way with the wife's personal services. Yet they may have constituted in large degree the consideration for issuance of the stock. We note too from the evidence that the Lang property, earlier held, was not transferred to the corporation, but that the corporation entered into a mining contract with the decedent, and the corporation operated thereunder. Even if the wife had contributed personal services to the Lang lease -- and she "never went there very often. I went a few times" -- the lack of connection or economic attribution between the corporate stock donated and *203 her services is plain; and, of course, it is plainer as to the period prior to the Lang lease and to 1937, by which time such services as she had contributed had resulted in accumulation of "practically nothing." In the light of the evidence, the statute and the regulation interpreting it, we hold that decedent's wife did not contribute such services as to bring her within the meaning of section 1000 (d) of the Internal Revenue Code and that one-half of the property transferred to the donees was not received as compensation for personal services actually rendered by her.
Decision will be entered for the respondent.
Johnson, J., dissenting: In my opinion the facts found disclose participation by the wife in decedent's business to a degree which greatly exceeds "a wife's usual duty" and supports a conclusion that her personal services were a substantial factor contributory to business success and were commensurate with decedent's efforts in the early years. During those years decedent was employed, sometimes at a great distance *834 from the gypsum deposits. During his absences the wife managed their private enterprise, and when he was present, she assisted in *204 the details of operation and accounts. Because her services were valuable, decedent dissuaded her from returning to Los Angeles, although their condition of life near the deposits was not pleasant. I am unable to agree with the majority view, feeling that her services were of the type which have supported contrary conclusions in Estate of Frank D. Neumann, 9 T. C. 1120, and E. T. 20, 1947-2 C. B. 207.
Footnotes
1. SEC. 1000. IMPOSITION OF TAX.
* * * *
(d) Community Property. -- All gifts of property held as community property under the law of any State, Territory, or possession of the United States, or any foreign country shall be considered to be the gifts of the husband except that gifts of such property as may be shown to have been received as compensation for personal services actually rendered by the wife or derived originally from such compensation or from separate property of the wife shall be considered to be gifts of the wife.
[Note: Section 371, Revenue Act of 1948, amends section 1000 (d)↩ by making it applicable only to gifts made after 1942 and before enactment of the Revenue Act of 1948; therefore, the amendment has no effect in this case.]