*2230 The evidence is insufficient to establish that the petitioner made a completed gift to his wife of certain corporate stocks prior to the taxable years, and the action of the respondent in including the dividends therefrom in the petitioner's reported income is approved.
*1260 These are proceedings for the redetermination of deficiencies in income tax for the years 1923, 1924, 1925, and 1926 in the amounts of $4,444.59, $4,154.99, $2,510.11, and $3,402.33, respectively. The *1261 issue is whether the petitioner had, prior to the taxable years, made a completed gift to his wife of certain corporation stocks, so that the dividends received therefrom in the taxable years represented income to her. The respondent determined that said dividends constituted income to the petitioner and included same in computing the deficiencies asserted. This action of the respondent is the only error assigned by the petitioner.
FINDINGS OF FACT.
The petitioner is a married man living with his wife, Helen B. Marshall. He resides in the city of Toledo, *2231 Ohio, and has been engaged in the practice of law since October, 1895.
Up to and including the calendar year 1922 joint returns of income were filed by the petitioner and his wife, but separate returns were filed by the petitioner and for his wife for the taxable years 1923, 1924, 1925, and 1926. The returns filed for the petitioner's wife for the taxable years 1923 to 1926, both inclusive, were not signed by her. The 1923 and 1926 returns were signed by Thomas O. Marlar, attorney for the petitioner herein. The 1924 and 1925 returns were signed by the petitioner for his wife. The returns of the petitioner for the years 1923 to 1926, inclusive, as well as his wife's returns for those years, were prepared by Gertrude M. Reswick, who is the petitioner's confidential secretary and office manager. Miss Reswick has been in the petitioner's employment for more than 20 years.
In his income-tax return for 1923 the petitioner reported dividends on stock of domestic corporations in the amount of $521.50. In the tax return filed by Marlar for the petitioner's wife for the year 1923, dividends in the amount of $10,925.81 were reported as income. In the notice of deficiency to the petitioner*2232 for the year 1923, the respondent held that the following dividends, which were reported as income on the return filed for the petitioner's wife, constituted income to the petitioner:
| Name of corporation: | Dividends |
| Champion Spark Plug Co | $4,000.00 |
| J. D. Insulator Co | 227.68 |
| Tiedeman Glove Co | 315.00 |
| National Supply Co | 525.00 |
| Reserve Building Co | 427.50 |
| Commerce Guardian Trust & Savings Bank | 1,254.00 |
| Fifty Associates Co | 212.00 |
| American Rolling Mills Co | 252,00 |
| Richardson Co | 300.00 |
| Maumee Collieries Co | 1,400.00 |
| Larrowe Milling Co | 1,015.63 |
| Total | 10,201.81 |
*1262 The Champion Spark Plug Co. dividends of $4,000 were paid by four checks of $1,000 each, dated January 20, April 16, September 5, and November 14, 1923, drawn to the order of the petitioner. The first two checks in payment of these dividends were endorsed: "Pay to Commerce Guardian Tr. & Sav. Bank for Sav. a/c Helen B. Marshall, E. J. Marshall, by G. M. Reswick." The remaining two checks were endorsed: "Pay to Commerce Guardian Tr. & Sav. Bk. (for deposit only) E. J. Marshall by G. M. Reswick," and "E. J. Marshall," respectively. The stock record books of the Champion Spark Plug Co. *2233 show that on February 21, 1922, 500 shares of its stock were issued to the petitioner by certificate No. 75, and that these 500 shares of stock were transferred to the petitioner's wife on November 21, 1923, by certificate No. 84.
The evidence does not show the manner of payment of the J. D. Insulator Co. and the Tiedeman Glove Co. dividends of $227.68 and $315, respectively.
The Reserve Building Co. paid to the petitioner by checks dated June 20, and December 31, 1923, two dividends of $157.50 each. These checks were endorsed: "Pay to Commerce Guardian Tr. & Sav. Bk. for s/a of Helen B. Marshall, Edwin J. Marshall, by G. M. Reswick." The evidence does not show the manner of payment of the other Reserve Building Co. dividends. This stock of the Reserve Building Co. was, at the time of the alleged gift to the petitioner's wife, hypothecated with the Toledo Trust Co. to secure the payment of a note. It was sold by the petitioner in 1928 and the proceeds used by him to pay the note.
The Commerce Guardian Trust & Savings Bank dividends of $1,254 were paid by four checks dated January 1, April 1, July 1, and October 1, 1923, and were payable to the order of the petitioner. The*2234 checks were endorsed in the name of the petitioner by G. M. Reswick for deposit in the savings account of Helen B. Marshall, The records of the bank show that on January 1, 1923, 100 shares of its stock were standing in the name of the petitioner; that on September 27, 1923, an additional 227 shares were transferred to the name of the petitioner, making a total of 327 shares standing in his name on said date; that on April 15, 1924, 227 shares were transferred out of the petitioner's name, leaving a balance of 100 shares. Since 1924 the following shares have been transferred to the petitioner; on February 16, 1925, 15 shares; on April 6, 1925, 50 shares; on June 18, 1926, 10 shares; on June 17, 1926, 70 shares, on November 17, 1927, 22 shares; on September 28, 1929, 14 shares, making a total of 281 shares of this stock standing in the petitioner's name at the present time. The records of the bank also show that Helen B. Marshall first became a stockholder on July 29, 1925, when *1263 28 shares were transferred to her by certificate No. 1130 from John D. Hood. On August 13, 1929, an additional 12 shares were transferred to her from Edward G. Kirby, making a total of 40 shares*2235 standing in her name; and no other shares of this stock were ever recorded in her name.
The 227 shares of stock the Commerce Guardian Trust & Savings Bank, which were transferred out of the petitioner's name on April 15, 1924, were sold by the petitioner on that date to E. G. Kirby for a total consideration of $38,778.55, and this amount was used by the petitioner to pay his note held by the First National Bank of Toledo.
During the calendar year 1923 the Fifty Associates Co. paid to the petitioner, on June 30 and December 31, dividends in the amounts of $106 and $159, respectively. These dividends were paid by checks drawn to the order of the petitioner, and were endorsed in the petitioner's name by G. M. Reswick for deposit in the savings account of Helen B. Marshall. During the calendar year 1923, the Fifty Associates Co. also paid to the petitioner's wife dividends amounting to $515 on the stock standing in her name.
In 1923 the petitioner held in his name 53 shares of the stock of the Fifty Associates Co. On February 26, 1926, an additional five shares of the stock of this company were transferred to the petitioner. On April 12, 1911, six shares original issue of*2236 the stock of this company were registered in the name of the petitioner's wife; on March 28, 1917, four shares of original stock were registered in her name, and on May 28, 1929, 93 shares of the stock of this company were transfrred into her name from the name of the petitioner, making a total of 103 shares of this stock recorded in the name of the petitioner's wife at the present time.
In the year 1923 the American Rolling Mills Co. paid to the petitioner dividends amounting to $525.
The Richardson Co. 1923 dividends of $300 were paid by four checks of $75 each, which were payable to the order of the petitioner and were endorsed in the name of the petitioner by G. M. Reswick "for savings Acct. of Helen B. Marshall."
During 1923 the Maumee Collieries Co. paid dividends to the petitioner in the amount of $1,400.
In 1923 the Larrowe Milling Co. paid to the petitioner dividends amounting to $1,015.63 by two checks dated August 1 and November 1, 1923, respectively, each for the amount of $507.81. These checks were made payable to the order of the petitioner, and the first check was endorsed in the name of the petitioner by G. M. Reswick "for deposit only." The second check*2237 was endorsed "E. J. Marshall," but underneath this endorsement appeared the number 34868, which was the number of Mrs. Marshall's savings account.
*1264 The petitioner reported as income in his tax return for 1924 dividends in the amount of $1,747.32, received through the partnership of Marshall & Fraser. In the tax return filed by the petitioner for his wife for the year 1924, dividends in the amount of $12,501.24 were reported as income. In the notice of deficiency for 1924 the respondent determined that the dividends which were reported as income in the return filed by the petitioner for his wife represented income to the petitioner and not income to his wife. So far as shown by the record, the dividends in question were paid as follows:
| Name of corporation: | Dividends |
| J. D. Insulator Co | Amount not shown. |
| Tiedeman Glove Co | Amount not shown. |
| National Supply Co | Amount not shown. |
| Maumee Collieries Co | Amount not shown. |
| Champion | Spark Plug Co |
| $3,000.00 | |
| Reserve Building Co | 1,035.00 |
| Commerce Guardian Trust & Savings Bank | 1,708.00 |
| Fifty Associates Co | 265.00 |
| American Rolling Mills Co | 700.00 |
| Richardson Co | 300.00 |
| Larrowe Milling Co | 2,031.24 |
| Through Marshall & Fraser | 1,747.32 |
*2238 The evidence does not show the amount of the dividends received from the J. D. Insulator Co., Tiedeman Glove Co., National Supply Co. and the Maumee Colleries Co., nor the method of payment, to whom paid, or what disposition was made thereof.
The dividend checks, with a certain exception noted below, were paid to the petitioner. The dividends paid by the Reserve Building Co., Commerce Guardian Trust & Savings Bank, Fifty Associates Co., Richardson Co., and the Larrowe Milling Co. were paid by checks payable to the order of the petitioner, and were endorsed in the petitioner's name by G. M. Reswick for the savings account of Helen B. Marshall.
The record does not show the manner of payment of the dividends of the American Rolling Mills Co., amounting to $700, nor the dividends received by the petitioner through Marshall & Fraser in the amount of $1,747.32.
Dividend checks payable to the order of the petitioner's wife, received in 1924, were as follows:
| Champion Spark Plug Co. (check dated December 31, 1923) | $3,000.00 |
| Champion Spark Plug Co. (1924) | 4,000.00 |
| Fifty Associates Co | 515.00 |
The dividend check of $3,000 dated December 31, 1923, was endorsed*2239 in the name of Helen B. Marshall by G. M. Reswick, for deposit in the savings account of the petitioner's wife. The disposition of the dividends of $4,000 and $515 is not shown.
*1265 In his tax return for 1925 the petitioner reported as income dividends received through the partnership of Marshall & Fraser in the amount of $406.88. In the tax return filed by the petitioner for his wife for the year 1925, dividends in the amount of $16,074.23 were reported as income. In the deficiency notice for 1925 the respondent determined that the petitioner received dividends in the year 1925 in the following amounts:
| Through Marshall & Fraser | $406.88 |
| Through Marshall, Melhorn, Marlar, etc | 32.00 |
| Transferred from return of petitioner's wife | 16,074.23 |
| Total | 16,513.11 |
The respondent having determined that the petitioner received dividends in 1925 in the total amount of $16,513.11, and the petitioner having reported in his individual return dividends amounting to $406.88, the respondent added to the petitioner's reported income as dividends received by him the additional amount of $16,106.23.
The dividends in question, so far as shown by the record, were received*2240 as follows:
| Name of corporation: | Dividends |
| J. D. Insulator Co | Amount not shown. |
| Tiedeman Glove Co | Amount not shown. |
| National Supply Co | Amount not shown. |
| American Rolling Mills Co | Amount not shown. |
| Maumee Collieries Co | Amount not shown. |
| Reserve Building Co | $1,372.50 |
| Commerce Guardian Trust & Savings Bank | 1,090.00 |
| Fifty Associates Co | 265.00 |
| Richardson Co | 300.00 |
| Larrowe Milling Co | 3,251.99 |
| Deflance Machine Works | 1,400.00 |
The evidence does not show the amount or the manner of payment of the dividends which the petitioner received from the five corporations listed above as "amounts not shown."
Checks in payment of the other dividends were made payable to the order of the petitioner, were endorsed in petitioner's name by Gertrude M. Reswick and were deposited in the savings account carried the name of Helen B. Marshall in the Commerce Guardian Trust & Savings Bank.
In the year 1925 the petitioner's wife received the following dividends:
| Fifty Associates Co | $515.00 |
| Commerce Guardian Trust & Savings Bank | 92.00 |
| Champion Spark Plug Co | 3,000.00 |
In his income-tax return for 1926 the petitioner reported as income devidends of*2241 $91. In the tax return which Thos. O. Marlar, counsel *1266 for the petitioner, filed for Helen B. Marshall for the year 1926, dividends in the amount of $20,273.86 were reported as income.
In the notice of deficiency for 1926 the respondent determined that the dividends reported as income in the tax return so filed for the petitioner's wife represented income received by the petitioner.
Checks in payment of dividends received by the petitioner in 1926 from the following corporations were endorsed in the name of the petitioner by G. M. Reswick and deposited in a savings account carried in the name of Helen B. Marshall in the Commerce Guardian Trust & Savings Bank.
| Name of corporation: | Dividends |
| Richardson Co | $300.00 |
| Defiance Machine Works | 1,400.00 |
| Fifty Associates Co | 116.00 |
| Commerce Guardian Trust & Savings Bank | 1,500.00 |
| Reserve Building Co | 855.00 |
| Larrowe Milling Co | 4,878.00 |
In the calendar year 1926 petitioner's wife, Helen B. Marshall, received the following dividends:
| Commerce Guardian Trust & Savings Bank | $224.00 |
| Fifty Associates Co | 515.00 |
| Champion Spark Plug Co | 5,000.00 |
From time to time, at undetermined dates, *2242 the petitioner endorsed certificates of stock which he owned in various corporations, and also executed powers of cattorney and attached to other certificates of stock, all of which he turned over to his confidential secretary, Gertrude M. Reswick, with instructions that the said documents should be placed in a safety box in the Commerce Guardian Trust & Savings Bank under the name of his wife, Helen B. Marshall. The petitioner was a director of some of the corporations referred to, and continued as the record owner of the stock on the records of all the corporations. The dividend checks received on the stock so endorsed and placed in the safety box of his wife, as well as the dividend checks received on certain other stocks not so placed in said box, were endorsed by the petitioner or by his secretary acting for him, and were deposited in a savings account carried in the name of his wife, as above set forth. The petitioner did not deliver any stock certificates to his wife personally, but merely told her in a general way what he was doing. Mrs. Marshall did not make deposits in or withdrawals from the savings account in which the said dividend checks were deposited.
The stock*2243 of the Reserve Building Co. referred to hereinabove was not endorsed by the petitioner for the purpose of transfer to his wife, and was never placed in the safety box under her name, but *1267 was hypothecated with the Toledo Trust Co. to secure the payment of the petitioner's note. In 1928 the petitioner sold said stock and used the proceeds to pay his note.
OPINION.
TRAMMELL: The petitioner here contends that prior to the first taxable year he had made a completed gift to his wife of certain corporate stocks, and that the dividends received therefrom in the taxable years were the property of and constituted income to his wife. The respondent determined that said stocks were the property of the petitioner, and that the dividends in question were taxable to him.
The petitioner testified that he gave these stocks to his wife for the reason that he was paying entirely more than his share of taxes, and further stated, voluntarily, that he gave them to her for the obvious purpose of spreading the tax.
If a valid gift of the stocks was in fact made, the reasons which moved the petitioner are immaterial, but such a situation invites scrutiny to determine whether a completed*2244 gift in good faith was effected, or whether it was a gift in form only for the purpose of reducing tax liability. In , we said:
While there is no question that husband and wife may contract with each other - may buy from and sell to each other - in all such transactions the close relationship of husband and wife is, nevertheless, to be borne in mind, and such transactions are peculiarly subject to scrutiny when they involve the rights of third parties. This applies either to the rights of creditors or to the rights of taxing authorities. Husband and wife may not play fast and loose with their respective properties to the prejudice of creditors, nor may they do the same thing to the prejudice of taxes which they properly owe to the Government.
The sole issue here is whether the petitioner made a bona fide gift of the stocks in question to his wife prior to the taxable years. To constitute a gift in contemplation of law, there must be (1) an intention on the part of the donor to give - that is, to surrender complete control and dominion over the property to the donee; (2) there must be an acceptance of the gift by the donee; and (3) *2245 there must be a transfer of title accompanied by delivery of the property. ; . 1042; ; . In our opinion the record before us fails to establish any of these essential elements of a valid gift, which will be considered in the inverse order of their statement above.
With respect to the transfer of title and delivery of the stocks by the petitioner to his wife, the evidence is deficient and unsatisfactory in that it fails definitely to identify the stocks alleged to have been given or the dates on which given. Three witnesses testified by *1268 deposition on this point, namely, the petitioner, his wife, and his confidential secretary, but none were able to state with reasonable certainty what stocks were given to the wife nor the dates of the gifts.
The petitioner's wife stated frankly that she could not remember the dates, and had only a very hazy knowledge of the stocks involved. Both the petitioner and his secretary testified in substance that the stock certificates were endorsed by the*2246 petitioner or a power of attorney executed and attached thereto, and that the certificates were thereafter turned over to Miss Reswick, who placed them in a safety box at the bank, kept in the wife's name; that the tax returns of the petitioner's wife were prepared by the said secretary, and that all of the stocks, the dividends from which were included as income in the wife's returns, must because of that fact have been so transferred to the wife at some prior date.
Each of these witnesses testified specifically that his was true of the stock of the Reserve Building Co. Such testimony states only a conclusion, and its unreliability is disclosed by the statement of the petitioner's counsel at the hearing that the stock of the Reserve Building Co., alleged to have been given along with the others to Mrs. Marshall, was at the time hypothecated with the Toledo Trust Co. to secure the payment of a note of the petitioner, and that the stock was sold by him in 1928 and the proceeds used by him to pay the note. It is now conceded by the petitioner that no transfer or delivery of said stock was made to his wife and that the respondent's determination, in so far as it involves the stock*2247 of this company, is correct.
Delivery of the stock certificates in question to the petitioner's secretary, Miss Reswick, can not in our opinion be considered under the facts as constituting delivery to the petitioner's wife. There is nothing in the evidence to warrant us in holding that Miss Reswick was the agent of the petitioner's wife, or had any authority to act for her. She was the agent of the petitioner, with specific authority to endorse checks and other documents in his name. The evidence does not show that any of the stock certificates were endorsed to the petitioner's wife, and we can only infer from the testimony that they were endorsed in blank. Nor were any of the certificates turned over or delivered to the petitioner's wife in person.
The evidence further discloses that the petitioner was a director of some of the corporations involved, and that after the alleged transfer and delivery of the stocks to his wife he continued as a director and as the owner of the stocks on the records of the several corporations. From all of the evidence we are unable to conclude that there was a bona fide transfer of the title or delivery of the *1269 stocks to the petitioner's*2248 wife at any time during or prior to the taxable years. Clearly, there is not in any event a preponderance of the evidence to overcome the presumption of the correctness of the respondent's determination that the petitioner did not make bona fide gifts to his wife of the stocks involved.
As to the second element of the gift - acceptance by the donee - the record seems to justify the conclusion that here there was no acceptance, either express or implied, on the part of the petitioner's wife. There was no gift to accept. She was not called upon to accept or decline; she had no voice in the matter. She was merely informed by her husband in a general way of what he was doing. She did not know what stocks were supposed to have been given to her, nor was she permitted by the petitioner to exercise any right of control or dominion over the stocks or the dividends therefrom. On this point the wife testified:
Q. Do you recall any of the stock which Mr. Marshall mentioned to you that he had turned over?
A. Let's see. The Richardson securities, I remember that. And Champion, and I remember the Larrowe - I can't remember them.
* * *
Q. As far as you know you received all*2249 these dividend checks, is that true, through Miss Reswick?
A. Yes. I took two or three of them when I was not supposed to. They came here. When I say I was not supposed to, the check came from the Richardson and I supposed it just was mailed to me and I just cashed it and used it probably for antiques or something like that. * * * I think I did that with two of those because Mr. Marshall asked me if I received them and I said I did; I supposed somebody at the office gave them to me and I used them and he said not to use them any more. * * *
Q. He said not to use them any more?A. He told me not to do that; I should return them to Miss Reswick.
We do not attach any weight to the fact that the stock certificates were placed in a safety box kept in the name of the petitioner's wife, as through his secretary, Miss Reswick, the petitioner exercised control over it and its contents. Clearly the stock certificates were not delivered to the petitioner's wife personally and the evidence does not show a delivery to any one authorized by her to act in her behalf.
In respect to the other element of a gift above set out, the petitioner testified categorically that it was his*2250 intention to give these stocks to his wife, but his intention was a mental condition which can be determined by us only from his actions, and, upon consideration of all the evidence before us, we can not conclude that he had the intention to give. For all practical purposes the petitioner retained as complete and exclusive control and dominion over the stocks after as he did before he had endorsed and placed them in the safety box in the name of his wife. There is no evidence of the *1270 petitioner having received any authority from his wife with respect to handling such securities. He retained to himself such right and control. The whole transaction was conceived for the sole purpose of reducing the individual tax liability of the petitioner, and was not intended to effect a bona fide gift to his wife. The petitioner testified as follows:
I gave to Mrs. Marshall all of the stocks, I don't think I own anything of this nature. The reason I gave them to her is perfectly obvious. All of my income comes here in the shape of cash * * * and I was paying entirely more than my share of taxes. It was allowable to make this gift to Mrs. Marshall for the purpose of spreading*2251 the tax - avoiding the tax, if you please, and I gave it to her for that purpose. * * * As I said before, I know what is required to make a completed gift and this was a completed gift and I filed honest tax returns.
We repeat that the reasons which actuated the petitioner are important only in determining whether or not he in fact made a valid gift of the stocks to his wife, and, for the reasons above set forth, it is our opinion that a bona fide gift was neither made nor intended to be made. The determination of the respondent is approved.
Judgment will be entered for the respondent.