The only issue presented by this appeal is whether an attempted gift by William R. Tracy to his wife, Helen Gregory Tracy, of a half interest in a trading account with stockbrokers, became effective as against the tax authorities so as to permit one-half of the income of the account to be returned as income of each, and one-half of the interest and losses to be claimed as deductions by each. Separate appeals were originally taken to the Board of Tax Appeals from the deficiency assessments of the respondent, but were there consolidated because of identity of issues. Deficiencies for the taxable years 1925 and 1926 are involved in the appeal of William R. Tracy. A deficiency for 1926 only is involved in his wife’s appeal.
The Board sustained the assessments, and found the facts herein recited. The petitioners reside in Michigan, and William R. Tracy had a marginal stock trading account with Otis & Co., brokers, of Detroit. In the latter part of 1924, he had discussed with his wife the advisability of making the account joint, and she had favored the suggestion. About January 1, 1925, he wrote to Otis & Co. as follows:
“Please make a joint account of my transactions with your firm in the name of W. R. and Helen Tracy, effective January 1st, 1925.
“Orders for transactions in this account will be given to you for the writer.”
Mrs. Tracy acquiesced in the directions given to the brokers, and the account was put on a joint basis for convenience, because of its effect on inheritance taxes, and to harmonize with the practice of the petitioners in their joint holding of real estate. It was Tracy’s view that his wife could trade in and draw on the account, and it was also her understanding that she might trade in it, and that the account would be hers upon her husband’s death. No change was, however, made on Otis & Co.’s books to comply with Tracy’s directions until December 31, 1928. Tracy did all the trading himself, and Mrs. Traey did none. It was the practice of Otis & Co. in handling joint accounts to permit either party to draw on the account independently of the other, and to withdraw dividends from excess funds if the account was properly margined, and it would *94 have permitted either petitioner to have done this after the receipt of the letter. In 1925 and 1926 the petitioners filed separate income tax returns, reporting the income and deductions growing out of the Otis & Co. account as though each had a half interest therein. The respondent held, and his holding was sustained by the Board of Tax Appeals, that the stocks represented by the account were all owned by Tracy, that all dividends and gains derived therefrom were reportable in his return; and that he alone was entitled to deduct the full amount of interest paid and losses sustained. He determined deficiencies against Tracy for both years, and against Mrs. Tracy for 1926.
The holding by the Board that the evidence failed to establish a valid gift was on the ground that the indispensable conditions for effectuating a gift were not present; that the petitioners had failed to establish an intention on the part of the donor to absolutely and irrevocably divest himself of title, dominion, and control of the subject of the gift in prsesenti at the very time he undertook to make it, so that he could exercise no further dominion or control over it, relying upon Lee v. Lee, 55 App. D. C. 344,
The principal, if not the only reason, for the factual inference drawn by the Board, was the instruction in Tracy’s letter that orders for transactions would be given for the writer. Such inference, however, requires an interpretation of his direction as though it read that orders- would thereafter be given only by the writer of the letter, and by no one else. This appears to us to be a strained construction, one not warranted by its phraseology, unsupported by any evidence, and wholly in conflict with the facts as found by the Board.
There is no illegality or impropriety in a gift of stock by a husband to his wife. Marshall v. Commissioner of Internal Revenue,
But, even were we to adopt the interpretation put upon Tracy’s letter by the Board, the respondent would have no better ease. It is not unusual for a husband to have the sole management of a business or joint adventure engaged in by him and his wife, so that his greater business experience shall the more likely contribute to its success. In Commissioner v. Olds,
Our conclusion is that the order of the Board is not only unsupported by the evidence, but that the findings of the Board themselves compel a contrary result. The decision is therefore reversed, and the ease remanded for further proceedings consistent herewith.