(dissenting).
I have no quarrel with the conclusion of the Tax Court and of my brothers that the fact alone that P. O’B. Montgomery, Inc., created by taxpayer to receive formal transfer of his contract was in name and in fact Montgomery’s alter ego and under his complete domination and control, would not of itself require a finding that the corporation was a mere fiction and its entity must be disregarded. I do not doubt that Montgomery could have formed the corporation to really take over his construction contract, and, having formed it, could have made a real assignment of the contract to it with the right in the corporation to earn such part of the profit on the whole job as had not already been substantially earned. Neither, if he had really done this, would I have any doubt that his frankly avowed purpose to lighten his income taxes would not make income taxable to him which was in fact and in law the income of the corporation. But these are academic legal postulates without possible application to the undisputed facts of this case. What is under fire here is a series of pretenses masquerading as realities. A pretense that a corporation was formed for the purpose of relieving Montgomery of the burdens and obligations of the contract. A pretense that Montgomery’s old organization which continued to perform the contract was the corporation’s organization. A pretense that the corporation was really the earner of any of the profits due to the performance by Montgomery and his organization of the contract. Finally, there is the collosal pretense that though Montgomery, with an expenditure of $575,000.00 had earned only $86,000.00, the corporation, with an expenditure of $76,000.00, had earned $80,000.00. What is in question here is whether a taxpayer’s action in transferring profits already largely earned, action taken with no other purpose then to lessen his income tax, can succeed when the undisputed facts show, as here: that the taxpayer was to turn over to it not the construction of the building but a part of the profits due and to become due to the taxpayer when the construction was completed; that to accomplish this purpose the taxpayer went through the form of calling into putative being a corporate creature, bearing his name, officed and managed by him; and that having done this he arbitrarily apportioned to it substantially one-half of the profits though when the device was determined upon all the profits had been largely, if not completely, earned. I am in no doubt that the law is not so hooded that it cannot see through a device so transparent. I am in no doubt that it is not so impotent that it cannot strike it down. It is quite plain, I think that the Tax Court and my brothers have looked on the case with gaze so foreshortened by their preoccupation with sound but inapplicable legal postulates that they have entirely failed to see the glaring discrepancy between what the taxpayer had the right to do and what he in fact did. He had a right to assign an unfinished construction contract with the right in the assignee to such profits as it might earn under the contract. He did not have a right, under the guise of assigning the contract, to assign profits already substantially earned under *317it. That this is the cause for the error is made plain by the statement my brothers make as to the Tax Court’s holding. They say: “The Tax Court held that the contract was not for the personal services of Montgomery, was assignable, and that the profit accruing after the assignment belonged to the corporation, which was organized legally and in good faith, and whose separate entity could not be ignored. * * * We are asked to overrule this decision and to sustain the Commissioner.” Again they say: “It is not found what work had been finished by June 30, and what remained to be done, but the whole was not completed till sometime in September.1 The profits on the work completed to June 30, were returned by Montgomery at $86,009.00. The profits on work done afterwards, $80,209.00, were returned by the corporation. These figures are not in dispute”. The defect in this statement is that, by the undisputed facts of record,2 these figures as to profits are inherently in dispute. They destroy themselves. It is obvious from these figures that if the work had progressed to a point on June 30, where only $76,000.00 remained to be spent, the $80,000.00 coming to the contractor over and above that expenditure had already been largely earned. If we assume, as we must because there is no evidence to the contrary, that the profit on the job was the same throughout, and take $76,000.00 spent after July 1st, as against $575,000.00 spent before, it is quite clear that the apportionment of the $166,000.00 of profit was grossly incorrect. But the conclusion from these figures is not that there should be a reapportionment of the profit: it is that the whole transaction was an unreal one, that Montgomery had substantially finished his job, substantially earned the profit, and that the purpose and effect of what he did was to create the corporation to transfer to it, not the contract but the profits from it. The case is ruled by Gregory v. Helvering, 293 U.S. 465, 55 S.Ct. 266, 79 L.Ed. 596, 97 A.L.R. 1355, Griffiths v. Commissioner, 308 U.S. 355, 60 S.Ct. 277, 84 L.Ed. 319, and three cases from this court, Jones v. Page, 102 F.2d 144, Esperson v. Commissioner, 49 F.2d 259, Atkins v. Commissioner, 76 F.2d 387. My brothers misapprehend the rationale of the decision in the Jones case. While it did involve personal earnings, it also involved the assignment of a valuable contract for an insignificant sum. We said [102 F.2d 145]:
“Conceding that a taxpayer has the right to decrease the amount of his taxes or to avoid them by legal means, in every instance where that is attempted, a court may look through the transaction and determine whether it is legal or violates the intent of the statute. It would be absurd to say that any reasonable man having a contract from which he was to receive a minimum of $100,000 would in good faith transfer it to another for merely $6,-000. Appellant could have set up the trust in favor of his children without the intervention of his father.” (here the corporation) “The conclusion is inescapable that he used his father” (here the corporation) “simply as a conduit.”
But if the view of the Tax Court and of my brothers, that there was a real attempt to transfer the contract and not merely to transfer the profits were accepted, this would not help the taxpayer. The commissioner determined that thé profits were earned not by the corporation but by him, *318and that they belonged to him. The undisputed evidence shows that at least as to the greater part of the profits this was so. It then became the taxpayer’s burden to overthrow this determination by a definite and precise showing as to the part of the profits which had not been earned by him but by the corporation. He made no attempt to do this except by the arbitrary and completely unreal figures he set up, and not having done so, he failed to overthrow the commissioner’s determination. The decision of the Tax Court should be reversed. I respectfully dissent from its affirmance.
The uncontradicted evidence is that the work was completed about the first of September.
The contract, dated December 30,1035, was on a base bid of $993,000 with specified deductions. It provided that the sum to be paid was $776,328, subject to additions and deductions as hereinbefore provided. It provided for payments on monthly certificates of the architect in the sum of 85 per cent of the work performed and materials in place or on the site, the remainder upon final completion and acceptance of the work. It provided that the exterior of the building would be completed on or before June 6, and the entire contract would be completed within 8 months, that is by September 1, 1936. The record does not contain a statement of payments made from time to time to Montgomery, but it shows that by some method not disclosed the taxpayer showed in his income tax return income from the contract up to July 1, 1936, $661,108.65, construction cost $575,099.06, and a profit of $86,009.-59. By the same figurers, the corporation was credited with gross income from the work of $156,404.12, charged with construetiou cost of $76,194.25, with a resulting profit of $80,209.87. No explanation is offered as to why the proceeds are apportioned this way. There is a mere statement that Montgomery and his auditors apportioned the costs and the profits so that for the expenditure of $76,000, the corporation received $80,000 of profits and for the expenditure of $575,000 Montgomery received substantially the same.