Memorandum Findings of Fact and Opinion

HARRON, Judge: The respondent determined a deficiency in income tax for the year 1940 in the amount of $4,474.53. He added to the deficiency the fraud penalty of 50 percent thereof, $2,237.27. The question is whether petitioner is taxable upon funds in the amount of $20,000 which he received from his wife in 1940 under a trust, and, thereafter, converted to his own use in violation of the trust without the consent of his wife. Respondent has waived the fraud penalty.

Petitioner filed his return for the taxable year with the collector for the fifth district of New Jersey.

The facts have been stipulated.

Findings of Fact

During the taxable year 1940, the petitioner received from his then wife, Alicia Conradson, the sum of $20,000, with instructions from her to purchase certain securities on behalf of and for the benefit of Alicia Conradson.

During the taxable year, the petitioner, in violation of the trust so imposed upon and accepted by him, converted the sum of $20,000 to his own use and benefit, all without the knowledge1946 Tax Ct. Memo LEXIS 249" label="1946 Tax Ct. Memo LEXIS 249" no-link"="" number="2" pagescheme="<span class=">1946 Tax Ct. Memo LEXIS 249">*250 or consent of Alicia Conradson.

Petitioner did not report in his Federal income tax return for the taxable year the sum of $20,000 so converted and received.

Petitioner had no right or color of right to the funds he converted and received.

Opinion

The parties are agreed that the question in this proceeding is controlled by (C.C.A.-9, decided March 30, 1945. The Supreme Court of the United States granted a petition for certiorari in the Wilcox case on October 8, 1945. At the time of the hearing in this proceeding the petition for certiorari had been granted.

On February 25, 1946, the Supreme Court of the United States affirmed the opinion of the Circuit Court of Appeals for the Ninth Circuit in the Wilcox case. See .

Under the authority of the decision of the Supreme Court in the Wilcox case, the respondent's determination in this proceeding is reversed.

Decision will be entered for the petitioner.