*211 Decision will be entered for the respondent.
1. Decedent and his spouse, residing in a community property state, held property as joint tenants at the time of the decedent's death. The entire value of such joint property is includible in the gross estate of the decedent, except such proportion thereof as may be shown to have originally belonged to the surviving spouse or acquired by the surviving spouse for a full and adequate consideration in money or money's worth.
2. Where a portion of the consideration for such jointly held property was furnished by the surviving spouse from funds in which her personal earnings and separate property have been commingled with community property and there is no evidence as to what portion of the consideration furnished represented compensation for personal services or her separate property, no proportion has been shown to have originally belonged to the surviving spouse or to have been acquired by her for a full and adequate consideration in money or money's worth, within the intendment of the statute.
*970 This case involves a deficiency in Federal estate tax determined by the respondent in the amount of $ 16,435.01. The case was submitted on documentary evidence and oral testimony.
The question presented is whether decedent's wife, as surviving joint tenant with decedent, in a community property state, made any contributions to the property jointly owned at the time of decedent's death, which contributions should be excluded from the gross estate of the decedent under section 811 of the Internal Revenue Code, as amended by the Revenue Act of 1942.
FINDINGS OF FACT.
The petitioner, Louise Seeley (formerly Louise Heidt), is the duly appointed and qualified executrix of the estate of Joseph H. Heidt, who died November 22, 1942, at the age of 99 years and 11 days. At the time of his death the decedent was a resident of North Ridge, California. The Federal estate tax return, Form 706, was filed June 14, 1943, with the collector of internal revenue for the sixth district of California by his widow, who had remarried and*214 was then Mrs. Louise Seeley, as surviving joint tenant.
The decedent, Joseph H. Heidt, and Louise Weise were married in 1893, at which time he was about 50 years of age and she was 18 years of age. At all times subsequent to their marriage they resided in the State of California until the decedent's death.
At the time of their marriage the decedent owned no real estate or personal property, other than his personal effects, and after his marriage he did not acquire any property by gift, devise or inheritance, except about $ 1,000 which his wife gave him to start in business.
The decedent, with the $ 1,000 given him by his wife, started in the business of dealer in produce. He started in a store at the Angel's Flight and then opened a small stall in Central Street Market. He specialized in potatoes and onions and became known as the "Potato King." He leased ground to plant potatoes and onions in California and Idaho. His business was successful and he made a great deal of money, but due to market fluctuations he went broke three times during his business career, but never went into bankruptcy. His *971 business was speculative and he sometimes bought property and had the title*215 put in the joint names of himself and his wife. Their bank accounts were also kept in their joint names. On several occasions he told his wife that if anything happened to him he wanted everything to go to her. It was also understood that if anything happened to her everything would go to him. Decedent continued in business until 1934, when he retired at the age of 91.
During their entire married life decedent supported his wife and paid all of their living expenses from his earnings.
The decedent was never engaged in the real estate business.
Shortly after her marriage decedent's wife engaged in the real estate business and was very successful. She bought and sold real estate, built houses and apartment houses and hotels, and furnished, managed, and operated them. A part of the time she had a real estate license, but most of the time she did not. She had about $ 1,500 when she was married. A part of this, approximately $ 1,000, she gave to her husband to start in the marketing business. About two months after her marriage her parents gave her, as a wedding present, a deed to a house and lot in Colton, California. This Colton house was traded for a store at Angel's Flight*216 on South Broadway, Los Angeles. This property was sold and with a part of the proceeds she bought a lot in Boyles Heights, upon which she built a four-room cottage. In the construction of the cottage she received a gift from her father of $ 400 and $ 800 from her mother. She subsequently sold the Boyles Heights property and bought a house on Washington Street. This property was sold and petitioner bought a place on Ruth Avenue, on which was located an old house. She moved the house and built Boyle Apartments. She furnished the apartment house (twelve apartments) and operated it for about four years, then sold the furniture and leased the building. Decedent's wife continued her real estate operations during her marriage with decedent.
At the death of the decedent there were eight items of property held jointly by the decedent and his surviving spouse. These eight items were reported under schedule E of the estate tax return and, with the exception of item 5 (which was excluded with the notation that "Decedent furnished nothing towards the acquisition of this item"), were included in the gross estate at one-half their value, decedent claiming one-half interest therein. The *217 following facts concerning these items appear in the record.
One. -- This property, known as North Ridge Ranch, was bought by the decedent for approximately $ 28,000 and held in joint tenancy by decedent. The down payment on the property was made with money which he borrowed from a friend. Decedent's wife then sold property, which she had acquired in Palm Springs, for $ 9,000 and gave the *972 money to the decedent to pay back the borrowed purchase money. The Palm Springs property which stood in her name originally consisted of a house and two lots which cost about $ 4,500. Decedent's wife bought it with cash accumulated from different properties which had been sold and built two houses on the lots. The North Ridge Property was sold after decedent's death for $ 30,000.
Two. -- This property, held in joint tenancy by decedent and his wife, consisted of 2 apartment houses located at Dunsmere and Eighth Streets in Los Angeles, California. It was acquired by the decedent for cash (derived from profits from different trades made by the decedent and his wife) about 10 or 12 years before the decedent died. It was sold after decedent's death for $ 55,000.
Three. *218 -- This property, held in joint tenancy by decedent and his wife, consisted of 2 houses, one 5-room and the other 4-room, on Sunset Place (or Sunset Park) acquired about 15 years before decedent's death. The decedent paid $ 12,000 to $ 14,000 for one property, and decedent's wife paid about $ 15,000 for the other with money acquired by working and accumulated from real estate transactions. The property was sold after the decedent's death for $ 18,000.
Four. -- This property, which was used by the decedent and his wife as a home for a time, is located on El Camino in Beverly Hills. It was acquired by the decedent, who took a mortgage on the property as security for a loan. The property was held by decedent and his wife as joint tenants.
Five. -- This property was located on Ruth Avenue and known as the Elmo Hotel. It was built by decedent, and first rented, then sold, by the decedent to a Japanese, who gave a joint promissory note to decedent and his wife, secured by a deed of trust. Decedent's widow did not know the number of rooms or what its cost was.
Six. -- The property involved in this item consisted of a joint bank account in the Bank of America in the amount*219 of $ 21,951.37, some of which was deposited by decedent and some by his wife. At the time of decedent's death approximately $ 10,000 of the amount in the joint account had been deposited by decedent's wife. The money so deposited came from rents from different buildings and apartments. Decedent's wife deposited all the funds from the business transactions which she made in this joint account.
Seven. -- The property involved in this item was $ 1,409.02 deposited in the California Bank, 9941 Wilshire Boulevard, Beverly Hills, to the joint account of decedent and his wife. The money was deposited by the decedent and came from the sale of different properties which had been accumulated.
Eight. -- The property involved in this item consisted of 20 United States defense bonds of a par value of $ 2,000 which had been purchased *973 by the decedent with his own funds. They were put in the joint names of the decedent and his wife.
In computing the deficiency here in question the respondent included in the gross estate the full value of all eight items of jointly owned property set out above.
In addition to the jointly owned property which was reported in the estate tax *220 return, the surviving spouse (decedent's wife) owned considerable property, both real and personal, which stood in her own name and was not included in the estate tax return.
OPINION.
The respondent contends that the petitioner has failed to prove that any amount was contributed by the surviving spouse to the eight items of jointly held property set out in our findings of fact and, therefore, having failed to meet her statutory burden of proof, the entire value of such properties at the time of decedent's death must be included in the gross estate under section 811 (e) of the Internal Revenue Code, 1 as amended by section 402 of the Revenue Act of 1942.
*221 The petitioner contends that the surviving spouse contributed to the acquisition of the jointly held properties certain funds that were acquired *974 as the result of her personal services and the investment and reinvestment of her separate property. She especially contends that the surviving spouse furnished all the consideration for item 1, the North Ridge Ranch, and item 5, the joint note from the Japanese, and, therefore, the value of these items should be excluded from the gross estate of the decedent in their entirety. As to the remaining items in dispute, the petitioner contends they were acquired either from the separate property of the surviving spouse or from the community property derived or acquired through the personal efforts of the surviving spouse and, therefore, at least one-half thereof should be excluded from the gross estate, since not to exceed one-half was subject to the testamentary disposition of the decedent.
The merit of these contentions can not be accurately appraised without some inquiry as to the nature of the consideration furnished by either spouse for their respective interests in the jointly held property.
The question resolves itself into *222 one of fact and the evidence before us is, in the most part, very unsatisfactory. This situation is due primarily to the fact that the principal witness was somewhat advanced in years and the transactions involved covered a period of almost fifty years, a situation that would tax the memory of any witness. In our findings we have included the facts that appear from the record as a whole. Apparently inconsistent statements have been resolved in the light of the whole record and all the surrounding circumstances.
In determining whether the petitioner has met her burden of proof we must keep in mind the requirements of the statute under which the question here arises. Section 811 (e) (1) of the code, as amended by the 1942 Act, requires that there shall be included in the gross estate for estate tax purposes the entire value of the property held by the decedent and any other person as joint tenants, except such part thereof "as may be shown" to have originally belonged to such other person or acquired from the decedent for an adequate and full consideration in money or money's worth.
In 1942 Congress adopted the amendment to section 811 of the Internal Revenue Code, section 811 (e)*223 (2), designed to eliminate what was believed to be an unequal distribution of the tax burdens of estate taxes and to apply to community property the principles of estate taxes which had already been applied to other forms of joint ownership on the death of either of the joint owners. See Fernandez v. Wiener, 326 U.S. 340">326 U.S. 340, 350. The amendment included in the gross estate all of the interest held as community property by decedent and the surviving spouse, "except such part thereof as may be shown to have been received as compensation for personal services actually *975 rendered by the surviving spouse or derived originally from such compensation or from separate property of the surviving spouse." Obviously, under the amendment property "excepted" as compensation for personal services actually rendered, or acquired by such compensation, is treated as having been received or acquired for "an adequate and full consideration in money or money's worth," as used in section 811 (e) (1), applicable to joint tenancies.
The decedent and his wife were married in California and resided there until his death. Under the laws of that state, secs. 162 and 163, *224 Civil Code of California, 1941 Ed., all property of either spouse owned before marriage and that acquired thereafter by gift, bequest, devise, or descent, with the rents, issues, and profits thereof, is his or her separate property, and all other property acquired after marriage by either spouse while domiciled in the state is community property, with certain limitations not material here, sec. 164, C. C. C. Under the laws of that state, sec. 161, C. C. C., a husband and wife may also hold property as joint tenants, and such property may consist of community property transferred to themselves when expressly declared in the transfer to be a joint tenancy.
It is obvious, therefore, that where a husband and wife, in the State of California, acquire property as joint tenants the consideration paid therefor may consist of community property (which may include compensation for personal services), the separate property of either or both spouses, or part community property and part separate property.
The applicable regulations are: Regulations 105, section 81.22, as amended by T. D. 5239, C. B. 1943, p. 1085, but cf. the rule previously applicable as briefly stated*225 in Estate of Paul M. Vandenhoeck, 4 T.C. 125">4 T. C. 125. Section 81.22, as amended, of the above regulations provides in part, as follows:
For the purpose of determining the taxable portion in accordance with the above rules in the gross estate of decedent who died after October 21, 1942, where the joint tenancy or tenancy by the entirety was created by the transfer of property held as community property by such decedent and his spouse such decedent is considered as the original owner of all the community property so transferred, except such part thereof as may be shown to have been received as compensation for personal services rendered by his spouse or derived originally from such compensation or from such separate property of such spouse. Thus, if in the case of a decedent who died after October 21, 1942, property held as community property by such decedent and his spouse was transferred to themselves as joint tenants or as tenants by the entirety, the entire value of such property at the time of decedent's death is includible in his gross estate with the exception stated in the preceding sentence. With respect to the meaning of property derived originally*226 from such compensation or from separate property of the spouse and to the identification required, see section 81.23.
*976 The purpose of the foregoing amendment to section 81.22 of Regulations 105 was to bring it in harmony with section 81.23, relating to the inclusion in decedent's estate of community property owned at the time of his death as provided in section 811 (e) (2) of the code, enacted in the Revenue Act of 1942. The regulation above set out is thus attempting to correlate the rules governing property held jointly or by the entirety with the "Federal tax law" of community ownership. For example, if community property is attributable solely to the earnings or separate property of the husband who predeceases his spouse, the entire property is now includible in his gross estate. The regulations add that if the spouses transform their community ownership into a joint tenancy, the entire property is also taxed as part of the husband's estate.
In other words, the wife's former interest in the community property is not regarded as property originally belonging to her. Decedent died November 22, 1942. Therefore section 81.22 of Regulations 105, as amended, quoted above, *227 is applicable to this proceeding. So far as we can see, it is a reasonable regulation, and we shall therefore endeavor to apply it to the facts as detailed in our findings of fact. It is obviously necessary that the taxpayer identify the proportion of joint property which he seeks to exclude from the gross estate as derived originally from "compensation for personal services actually performed" or from "separate property" if the intendment of the statute is to be carried out.
It is, therefore, incumbent on petitioner to show that the portion of the consideration furnished by the surviving spouse for the joint property which she seeks to exclude from decedent's gross estate was derived from compensation for personal services actually rendered by the surviving spouse or from her separate property in order to bring the claimed exclusion within the statute.
The record shows that the decedent owned no property at the time of his marriage, and that he acquired no property thereafter by gift, devise, or inheritance. It is presumed, therefore, that all of the property he acquired during marriage was community property. The decedent's wife, on the other hand, had about $ 1,500 when she*228 was married and received thereafter, as a wedding present from her parents, the house in Colton, and, somewhat later, gifts aggregating $ 1,200. This was her separate property. Of the $ 1,500, $ 1,000 was advanced to her husband, the decedent, to start in business, and the balance of her separate property was used for household decorations and to acquire real estate. Thereafter by trading, buying, building, and renting real property and by investing accumulated profits, decedent's wife acquired considerable property, some of which was carried *977 in her own name and some of which was in the joint names of herself and the decedent, but all of it so commingled that it is impossible from the evidence to trace either her separate property or that acquired by personal services.
It is true that as to items 1, 3, and 6, we have found that decedent's wife made contributions in the respective amounts of $ 9,000, $ 15,000, and $ 10,000. It may be that if we were concerned only with a joint tenancy in a noncommunity property state the evidence before us would be sufficient to meet petitioner's burden of proof as to these items. Cf. Richardson v. Helvering, 80 Fed. (2d) 548,*229 and see Berkowitz v. Commissioner, 108 Fed. (2d) 319. In the latter case the court held that it was the ownership of profits that was the controlling question and that there was an agreement to share profits. In the instant case the profits from the efforts of both decedent and his wife were the community property of both. Only a portion of it, i. e., the part that is shown to be derived from personal services actually rendered, is to be considered to represent "money or money's worth" within the meaning of section 811 (e) (1).
As to item 1, the record shows that the $ 9,000 which the surviving spouse contributed to the purchase of the North Ridge Ranch was the price received for the Palm Springs property. But the Palm Springs property had been bought with cash accumulated from profits from the sale of different properties, some of which had apparently been held by the decedent and some by the surviving spouse. There is no evidence that any part of such consideration was derived from compensation for personal services actually rendered by the surviving spouse or from her separate property. The same situation existed as to item 3, except it appears*230 that some part of the purchase price represented personal services. The surviving spouse testified that the money was accumulated from real estate transactions "and I worked." But there is no evidence as to what part of the $ 15,000 which she paid for one of the properties represented compensation for personal services and what part represented accumulations from real estate transactions. Item 6 was a joint bank account in the amount of $ 21,951.37. The surviving spouse testified that she had approximately $ 10,000 of her own funds deposited in this account. But here again there is no evidence that any part of such funds represented compensation for personal services actually rendered or the separate property of the surviving spouse. The surviving spouse testified that it came from rents and represented accumulated profits from business transactions, which would be community property includible in the gross estate, Fernandez v. Wiener, supra, unless shown to come within the statutory exception. As to items 1, 3, and 6, petitioner has not shown that she is entitled to *978 the exception claimed under section 811 (e) (1) of the Internal *231 Revenue Code. To allow an exception from the gross estate under section 811 (e) (1) of community property includible therein under 811 (e) (2) would open up a field of tax evasion which, in our judgment, would defeat the very purpose of section 811 (e) (2).
As to items 2, 4, 5, 7, and 8, the petitioner has not clearly shown that the surviving spouse furnished any of the consideration for the property involved. Certainly there is no direct evidence that it was purchased, either in whole or in part, by her separate property or her personal earnings. Much of the evidence is vague and uncertain, but there is evidence that all of these items were purchased or acquired by the decedent and put in the joint names of himself and wife in order that the property would, upon the death of either, go to the survivor.
It is true that decedent's wife performed services in connection with the transactions in real estate which she carried on and that she invested, shortly after her marriage, separate property of the approximate value of $ 1,200, but it is also true that at the time of the decedent's death she owned and carried in her name considerable property, both real and personal, which was not*232 included in the estate tax return. Whether or not this property represented her personal services or the original investment of her separate property does not appear. There is, however, no evidence in the record that she received any property by gift, devise, or descent after the house and $ 1,200 given her by her parents about the time of her marriage, as set out in our findings above, and there is no evidence of the value of the property which she held in her name at the time of decedent's death.
Upon the whole record, we find that the petitioner has failed to show that any part of the value of the eight items of jointly held property in question should be excluded from the gross estate of the decedent on account of consideration furnished by the surviving spouse. The determination of the respondent is therefore approved.
Decision will be entered for the respondent.
Murdock, J., dissenting: A portion of the value of items 1, 3, and 6 should be excluded from the decedent's gross estate because the findings show that parts of those jointly held properties originally belonged to the surviving spouse as a result of her personal efforts and had not been received or*233 acquired by her from the decedent. There has been no failure of proof as to those parts and an allocation could easily be made. Cf. Cohan v. Commissioner, 39 Fed. (2d) 540.
Footnotes
1. SEC. 811. GROSS ESTATE.
The value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated, except real property situated outside of the United States --
* * * *
(e) Joint and Community Interests. --
(1) Joint interests. -- To the extent of the interest therein held as joint tenants by the decedent and any other person, or as tenants by the entirety by the decedent and spouse, or deposited, with any person carrying on the banking business, in their joint names and payable to either or the survivor, except such part thereof as may be shown to have originally belonged to such other person and never to have been received or acquired by the latter from the decedent for less than an adequate and full consideration in money or money's worth: Provided, That where such property or any part thereof, or part of the consideration with which such property was acquired, is shown to have been at any time acquired by such other person from the decedent for less than an adequate and full consideration in money or money's worth, there shall be excepted only such part of the value of such property as is proportionate to the consideration furnished by such other person: Provided further, That where any property has been acquired by gift, bequest, devise, or inheritance, as a tenancy by the entirety by the decedent and spouse, then to the extent of one-half of the value thereof, or, where so acquired by the decedent and any other person as joint tenants and their interests are not otherwise specified or fixed by law, then to the extent of the value of a fractional part to be determined by dividing the value of the property by the number of joint tenants.
(2) Community interests. -- To the extent of the interest therein held as community property by the decedent and surviving spouse under the law of any State, Territory, or possession of the United States, or any foreign country, except such part thereof as may be shown to have been received as compensation for personal services actually rendered by the surviving spouse or derived originally from such compensation or from separate property of the surviving spouse. In no case shall such interest included in the gross estate of the decedent be less than the value of such part of the community property as was subject to the decedent's power of testamentary disposition.↩