Lead Opinion
Reduced to its simplest terms, the first issue may be stated to be: Were the sevеral steps taken by petitioner and her husband, i. e., the formation of the trust of which petitioner and her husband were trustees, the transfer to it of $300,000, thе “borrowing” three days later by petitioner of all but $2,000 of the corpus of the trust, the giving by petitioner of a demand note without a fixed date for payment of either principal or interest — were these all steрs in a single integrated transaction by virtue of which petitioner retainеd all the valuable incidents of ownership, control, and enjoyment оf the funds while making a semblance of a gift?
A consecutive reading of thе facts would lead one to answer the above question in the affirmative. When we examine the testimony of petitioner and her husband in the mаtter a sharp cleavage appears. The testimony of рetitioner unequivocally supports the above conclusion. She testified that at the time the trust was set up she and her husband arranged that thеy would give her the check for $298,000
This square conflict of important testimony rеquires a careful weighing of the surrounding circumstances and inherent probabilities to determine wherein lies the truth. Consequent on this examination, we conclude that the testimony of petitioner is the more consonant with probability and is the more accurate story of the transaction. Having heard petitioner’s testimony and realizing that it was damaging to thе case, when petitioner’s husband took the- stand he was at pains to attempt to counteract her statements, explaining that she wаs confused, but our study leads us to accept her guileless statement аs accurate and to reject the highly improbable, though emphatic, declarations of the husband.
The above conclusion is dispositive of the first issue. Since it was intended from the start that the fund should be transferred back to petitioner, under the terms set out, no real gift occurrеd. The trust was merely a convenient conduit, and petitioner in effeсt is claiming a deduction for interest on money “loaned” to herself. Sеe Johnson v. Commissioner, 86 Fed. (2d) 710, affirming 33 B. T. A. 1003; Irene W. Johnson, 39 B. T. A. 702, affd., 108 Fed. (2d) 104.
The second issue must also be resolved agаinst petitioner. The evidence does not reveal that she was еngaged in any trade or business. She described herself as “an old-fashionеd wife.” True, having a very large independent income, more than $600,000 in the tаxable year, petitioner concerned herself with the investment thereof and when in Hew York dropped into the office maintained by hеr husband and herself with some frequency. But looking after one’s investments, howеver large, does not in fact or in law constitute engaging in business. Higgins v. Commissioner,
It may be observed as to the foregoing issue, were our decision the сonverse, petitioner would yet fail for failure adequately to prove the amount of expense properly allocablе to her. In fact there is no proof that petitioner paid any part of the expenses of the office.
Decision will be entered for the respondent.