*664 In 1936 the petitioner, who had been the sole support of his mother for years prior thereto, entered into a written agreement with his mother whereby the mother transferred to him 133 shares of stock of Belli & Co. upon the condition, among others, that petitioner pay his mother during her life a portion of his salary, the stock being pledged by petitioner to her for the performance of his obligations under the contract. In 1937, with the mother's consent, petitioner and the other two stockholders of Belli & Co. formed a partnership, their interests therein being based on stock held by each, and the business was thereafter conducted as a partnership. During 1938 and 1939 petitioner paid his mother out of his personal checking account approximately $3,700 and $2,600, respectively. Held, upon the evidence, that petitioner did not hold any part of the partnership interest as trustee for his mother, and that the payments made by petitioner to his mother were in part payments under the contract and in part voluntary contributions to her support and maintenance and are not deductible.
*662 The Commissioner determined deficiencies in income taxes against the petitioners in the amount of $208.97 for the year 1938 and $110.72 for the year 1939. It is alleged that the Commissioner erred in disallowing as deductions payments in the amount of $3,500 and $2,650 *663 made in 1938 and 1939 by Ernest Granucci to his mother and in lieu thereof allowing a credit of $400 in each year for one dependent, his mother.
FINDINGS OF FACT.
The petitioners are and were since September 1936 husband and wife and reside in San Francisco, California. They filed a joint return for the years involved with the collector of internal revenue for the first district of California.
Ernest Granucci, hereinafter referred to as the petitioner, left the University of Santa Clara, California, in his senior year upon the death of his father in August 1930 to work for the M. Belli Motor Co., a copartnership engaged in the business of selling automobiles and trucks at retail, in which his father had an interest. This interest was acquired by petitioner's mother, Angelina Granucci. In 1931 the partnership was incorporated. It was a family corporation. The*666 petitioner's mother owned 133 shares of stock of the corporation which were pledged by her to her mother, Ernesta Belli, as security on a note of the Belli Motor Co. in the amount of $10,000 to the Bank of America, the payment of which note had been guaranteed by Ernesta Belli. In 1934 the note was paid and on April 19, 1934, 133 shares were transferred by Ernesta Belli, and a certificate therefor was issued to petitioner.
Until his marriage in September 1936 the petitioner lived with his mother and younger brother and sister, named Reginald and Urbana, respectively. Prior to on or about May 1, 1936, all of petitioner's salary earned as secretary and salesman of the Belli Motor Co. was turned over by him to his mother excepting $25 or $35 a month which petitioner retained for his own use. The mother had no source of income except a nominal amount other than the amounts paid and contributed to her by petitioner. Whatever dividends were declared on the 133 shares were credited on the books of the company to reduce and pay the father's and/or mother's indebtedness to the company, which in 1930 amounted to about $5,000 or $6,000. Under date of May 1, 1936, the petitioner, as first*667 party, and his mother, as second party, entered into an agreement, the preamble of which stated that petitioner had been employed by the M. Belli & Co., Ltd., since its organization; that he had earned upwards of $200 a month, of which he had voluntarily given the greater portion to his mother in return for his board and lodging; that the mother was shares of stock standing in petitioner's name on the books of the corporation; that no dividend could be expected for an indefinite period on such stock; that the mother desired to provide for the future of petitioner and to retain and continue the services of petitioner to the *664 corporation; and that the petitioner desired to continue to work for the corporation and at the same time to provide for the discharge of his filial duty to his mother. The agreement provided in part as follows:
1. Party of the second part hereby transfers, assigns, sets over and conveys to party of the first part all her right, title, interest and equity in and to the said stock, being all her stock in said corporation, and agrees that the same shall be fully, completely and absolutely the property of the party of the first part, subject however*668 to the terms and conditions hereinafter provided, but to such conditions only.
2. party of the first part agrees to pay party of the second part the sum of one hundred twenty-five ($125.00) dollars per month until her death or remarriage, whichever event shall happen first, subject only to the terms and conditions as to deductions from said sum or increase thereof herein provided. Such payments are due and payable on the fifteenth of each month.
The agreement further provided that in the event of petitioner's marriage the amount of $125 a month was to be reduced to $100; that in the event of the death of the mother prior to January 1, 1938, the petitioner was to pay to or for his sister $50 a month until January 1, 1938, or until her marriage, and if the mother died before June 1, 1940, the same amount to or for his brother Reginald until June 1, 1940, or until his marriage or until he became capable of self support; that in the event his sister and/or brother Reginald became gainfully employed and continued to live with the mother the amount payable to the mother was to be decreased by an amount equal to one-third of their respective earnings; that if petitioner's salary was*669 reduced below $200 a month, the amount payable was to be decreased in proportion; that if petitioner's salary was increased above $250 a month, then one-half of the increase was to be payable to his mother; that the petitioner was to pay to his mother during the life of the agreement one-half of any dividends paid on the shares of stock; that the mother have a lien upon the stock to secure the complete performance of the agreement; that 85 percent of the several amounts agreed to be paid by petitioner to his mother were payable "in the discharge of his legal and filial duty to care for and support his mother she could not assign or transfer her rights under the contract; and that if the mother attempted to assign or transfer or cause or permit any lien, levy, execution, or attachment to be made upon "any of her rights" under the contract, then the petitioner:
* * * shall pay her the sum of ten dollars ($10.00) and shall thereupon be relieved of any and all obligations hereunder and the stock aforesaid shall be his sole and absolute property, and the above pledge of said stock shall thereby be ipso facto terminated.
On December 30, 1936, the petitioner executed his last will and*670 testament, pursuant to the terms of the above agreement, in which he bequeathed one-half of the 133 shares to his wife and one-half thereof *665 to his mother. In the event his mother predeceased petitioner, he bequeathed the one-half of the stock to which she would have been entitled to his sister Urbana and brother Reginald in equal shares, provided petitioner died before December 1, 1946, and in the event he did not die before that date he bequeathed such one-half of the stock to his wife.
The following notation was made on the stub of the stock certificate issued to petitioner under date of May 1, 1936:
The stock covered by this agreement is subject to the lien of an agreement of trust dated May 1st, 1936 between Angelina Granucci, and Ernest Granucci.
On or about April 13, 1937, the petitioner purchased from Joseph Belli 24 shares of stock of Belli & Co., Ltd. The remaining stock held by Belli was purchased by the other stockholders, so that there were only three stockholders, who on July 1, 1937, by written agreement formed a copartnership under the name of Belli Motor Co. which took over the assets and business of the corporation. The agreement provided that*671 the interest in the partnership of each of the three partners was as follows:
| Joseph D. Altieri | 11/32 share |
| Ernest Granucci | 11/32 share |
| M. J. Soldavini | 10/32 share |
The agreement further provided, inter alia, as follows:
12. The signature of this agreement by persons who are not parties hereto has been attached to signify their consent to the same and waiver of their rights, if any, to object to its terms but by so signing no such person has become a party to this agreement nor acquired any implied rights hereunder nor become subject to any obligation other than such as arises by waiver of right to object.
* * *
17. Angelina Granucci, by virtue of a contract between herself and Ernest Granucci, had certain rights in the stock of M. Belli and Company Ltd., legally owned by Ernest Granucci and it is hereby recognized that the rights of Ernest Granucci, in the partnership hereby created are to be considered as equitably modified by the rights of said Angelina Granucci. Nothing herein contained shall be construed as any guarantee by the other partners of the performance of the contract between Angelina Granucci and Ernest Granucci but the other partners*672 acknowledge that the interest of Ernest Granucci herein is subject to said contract and in the event of any default on his part therein they agree that Angelina Granucci shall possess the same rights as against the interest of Ernest Granucci in the partnership property as she had in said stock.
The petitioner's mother signed the agreement to signify her consent and approval of the change from corporation to partnership, but not as a party to the agreement.
The petitioner's distributive share of the partnership income was $9,052.44 in 1938 and $7,611.67 in 1939. The total amount paid by the petitioner to his mother by checks drawn on his personal checking account was $3,797.56 in 1938 and $2,681.42 in 1939.
*666 OPINION.
ARNOLD: The respondent determined that the amounts of $3,500 and $2,650 claimed as deductions by petitioner in his returns for 1938 and 1939, respectively, were personal expenses and paid out by petitioner for the support and maintenance of his mother. He disallowed the deductions claimed, but allowed in each year a credit of $400 for one dependent under section 25:b):2) of the Revenue Act of 1938.
The petitioner contends that during the taxable*673 years his mother was a silent partner of the Belli Motor Co. and that he held her partnership interest in trust; that he held 157 shares in the corporation, of which he was the owner of 90.5 shares :1/2 of 133 shares plus 24 shares) and his mother was the owner of 66.5 shares :1/2 of 133 shares) held in trust by him for her, and upon transfer of the corporate assets to the partnership he acquired an interest of 90.5/157 of 11/32 in the partnership and held 66.5/157 of 11/32 interest in the partnership in trust for his mother; that petitioner is taxable only on 90.5/157 of his distributive partnership share, or $5,218.13 for the year 1938 and $4,387.62 for the year 1939, the mother being entitled therefore to $3,834.31 in 1938 and $3,224.05 in 1939 of the partnership income.
The petitioner paid his mother out of his personal checking account $3,797.56 in 1938 and $2,681.42 in 1939. He deducted on his income tax returns for 1938 and 1939 as payments made to his mother the amounts of $3,500 and $2,650, respectively. Whether or not he is entitled to the deductions claimed depends upon whether he became the owner of the 133 shares of stock of M. Belli & Co., Ltd., under the agreement*674 entered into by petitioner and his mother on May 1, 1936. If he owned such shares he was also the owner of the 11/32 interest in the partnership created July 1, 1937, to take over the assets and business of the corporation, which interest the petitioner received as the holder of 157 shares of stock of the corporation, 24 shares of which he purchased on or about April 13, 1937, and 133 shares of which were transferred to him on April 19, 1934. The petitioner concedes that he became the owner of one-half of the 133 shares, or 66.5 shares, under the agreement with his mother, but claims that he held the other half of the stock as trustee for her benefit.
As shown by the partnership agreement the partnership consisted of three partners, Altieri, Soldavini, and the petitioner. Neither in the distribution of partnership earnings nor in the partnership agreement was the mother of petitioner recognized as a partner. Whatever funds she received she received from the petitioner out of his personal funds in the performance of his obligations under the agreement with his mother or as voluntary contributions. Although he now claims *667 that his mother was entitled to $3,834.31 in*675 1938 and $3,224.05 in 1939 of the partnership profits, he paid her only $3,797.56 in 1938 and $2,681.42 in 1939. She signed the partnership agreement not as a partner, but merely to indicate her consent to the transfer of the business from the corporation to the partnership. She was interested because 133 shares had been pledged to her by petitioner for the performance by him of his obligations under the agreement with her. The agreement specifically states that the mother did not sign as a party to the agreement. The partnership agreement recognizes the existence of the agreement between the petitioner and his mother, but expressly provides that the partners Altieri and Soldavini do not thereby guarantee the performance of such agreement. They agree only that, in the event of any default on the part of the petitioner in the performance of his obligations under such agreement, his mother shall have the same rights against the interest of the petitioner in partnership property as she had in the stock of the corporation legally owned by the petitioner.
To determine what rights the mother had in the stock we must look to the agreement of May 1, 1936, entered into by petitioner*676 and his mother. In that agreement the mother transferred all her interest in the 133 shares of stock to the petitioner, retaining only a right of lien as security for the performance of the obligations assumed by the petitioner therein. The agreement provides that the mother right, title, interest and equity property specific. Though the absolute ownership of petitioner was subject to certain terms and conditions, it was complete and absolute nevertheless so long as he performed and abided by such terms and conditions.
The petitioner on brief states that pursuant to the contract he became absolute owner of 66.5 shares upon his marriage in September 1936, that upon the happening of that condition his interest in the contract which petitioner had with his mother, ripened into a vested interest * * *. upon the provision in the agreement requiring the petitioner to keep in force a will during the life of the agreement providing that his mother should receive all the stock if he died unmarried and without legitimate children or one-half thereof either a widow or legitimate issue. that petitioner keep a will in force disposing of the 133 shares of stock indicates that a transfer to*677 the petitioner of all the *668 stock was intended. Furthermore, we can not agree that the above provision makes the marriage of petitioner a condition upon the happening of which title to one-half of the shares would vest in him. If such provision were determinative of title, then the mother retained title to all the stock until the death of petitioner, for it could not be determined until then whether or not he would be survived by either a widow or legitimate issue. There is no provision in the contract which may be construed as vesting title in petitioner to only one-half of the stock upon his marriage. He either acquired all of the stock or none of it under the agreement.
The agreement apparently had two purposes: :1) To provide support and maintenance for the mother during her life, and :2) the acquisition of the 133 shares of stock by petitioner. That the petitioner wanted to acquire the stock and that it was intended that he should acquire it, appears from the transfer to him in 1934 of the 133 shares by his grandmother and his testimony that such transfer was made for the reason that he wanted to enter into an agreement with his mother so that in case anything*678 happened to her he would be protected in the business and the business would go to him instead of his brothers and sister. The petitioner had supported his mother for nearly six years prior to the agreement by giving her the greater part of his salary. Under the agreement he was required to pay to his mother a substantial portion of his salary and in addition one-half of dividends, if any, paid on the stock. It was stated in the agreement, however, that under the conditions then prevailing the payment of dividends could not be expected for an indefinite period. Therefore the petitioner's earnings derived from his personal services were intended to be the source of her support rather than the stock. If he died she would be left without means of support unless some provision was made for that eventuality. The requirement in the agreement that petitioner keep in force a will during the life of the agreement was intended as a provision for the support and maintenance of the mother in the event the petitioner predeceased her. If the petitioner died before his mother he would be unable to provide her support and maintenance out of his salary or earnings during her life and hence in*679 effect a default would occur in his promise to pay her a certain amount a month out of his salary during her life. If the mother had not intended to transfer the stock to petitioner there would have been no necessity to provide for and to keep in force a will of petitioner under which all or a part of the stock would be reacquired by her in the event he died before she did. The agreement is rather long and in considerable detail, from which it would appear that if it had been intended to transfer the stock to petitioner as trustee for the benefit of the mother, provision would *669 undoubtedly have been made for the appointment of another trustee in the event of petitioner's death rather than to have the stock go to the mother through the estate of petitioner Furthermore, if the stock had been transferred to petitioner as trustee the mother would have been entitled only to the dividends paid upon the stock. In the agreement the petitioner pledged the stock to his mother for the complete performance of his obligations thereunder. This also indicates a transfer of the stock to the petitioner.
In our opinion the petitioner held the 133 shares of stock and the partnership*680 interest as owner thereof and not as trustee for his mother. The right of the mother to any of the corporation or partnership income was derived from the agreement she entered into with petitioner on May 1, 1936, and not as owner of the stock, or any part thereof, or as beneficiary of a trust. Although it may be said that, by virtue of her lien upon the stock and partnership interest the mother had an equitable interest therein, nevertheless, under the circumstances herein, petitioner's entire distributive share of the partnership earnings or profits for the years involved is taxable to him. . Cf. Rose v. Commissioner, 65 Fed.:2d) 616.
The payments made by petitioner under the agreement with his mother were in part payment for the stock and in part for the support and maintenance of his mother. There is not sufficient evidence from which we can determine the amount petitioner was required to pay under the contract to his mother. The contract provides that 85 percent of the amounts agreed to be paid by the petitioner were to be in discharge of petitioner's legal and filial duty to care for and support his mother. *681 Any amounts paid by petitioner to his mother in excess of the amount required to be paid under the contract were voluntary contributions to the support and maintenance of his mother or gifts. Such payments are not deductible. In , it is stated that "a taxpayer seeking a deduction must be able to point to an applicable statute and show that he comes within its terms.
It was agreed between counsel that the two adjustments made by respondent were mutually dependent, i.e., in the event that respondent erred in disallowing the deductions of the amounts paid his mother claimed by petitioner in his 1938 and 1939 returns, then he likewise erred in allowing the credit for one dependent, and in the event he did not err in disallowing the deductions claimed, then petitioner is entitled to the credit. Since we conclude that the respondent did not err in disallowing the deductions claimed, the petitioner is entitled to the credit for one dependent in each taxable year as determined by the respondent.
Decision will be entered for the respondent.