Vandenhoeck v. Commissioner

Estate of Paul M. Vandenhoeck, Deceased, Jeanne S. Vandenhoeck, Executrix, Petitioner, v. Commissioner of Internal Revenue, Respondent. Jeanne S. Vandenhoeck, Transferee and Beneficiary, Petitioner, v. Commissioner of Internal Revenue, Respondent Vandenhoeck v. Commissioner Docket Nos. 111609, 111610 United States Tax Court 4 T.C. 125; 1944 U.S. Tax Ct. LEXIS 47; September 30, 1944, Promulgated *47 Decision will be entered in each case under Rule 50. A citizen of Brazil, domiciled in France, was married in France in 1911 and continued to be domiciled there until his death in 1939. Under the law of France all movable property owned at the time of the marriage and all acquired thereafter belongs to the marital community unless there is an ante nuptial agreement to the contrary. No ante nuptial contract had been executed by decedent and his wife. Also, under the French law, no change in the property relations of the spouses can be made during marriage -- except by civil death, divorce, judicial separation, etc., none of which occurred -- nor may the spouses, by contract or other means, change the status of the conjugal property. At the time of decedent's death shares of stock in corporations chartered in the United States were found in his safe, some of which had been registered in his and his wife's names as "joint tenants." He died testate, bequeathing all of the property to his wife. After his death she took possession of all of the stock, although there has been no administration of the estate. Held: (1) The stock was community property and only one-half of the*48 value thereof may be included in decedent's gross estate; (2) The value of stock of the Houdry Process Corporation on the date of the death of the decedent was $ 40 per share; and (3) The surviving wife is liable, as a transferee, for the estate tax. Vernon L. Stover, Esq., for the petitioners. Brooks Fullerton, Esq., for the respondent. Mellott, Judge. MELLOTT *125 These proceedings, duly consolidated, involve a deficiency in estate tax of the estate of Paul M. Vandenhoeck in the amount of $ 75,614.43. In Docket No. 111609 decedent's widow, though not having been formally appointed executrix of his estate, resists imposition of the tax and seeks to recover an overpayment. In Docket No. 111610 respondent asks affirmance of his determination that the widow is liable, as transferee of the property of the estate of her deceased husband, for the estate tax. *126 The issues are whether respondent erred: I. In refusing to recognize "Community" holding by decedent and his wife of shares of stock issued by domestic (United States) corporations; II. In increasing the value of shares of Houdry Process Corporation from the reported value of $ 14 per share to $ 85 per *49 share; and III. In determining that petitioner is liable as a transferee. The issues will be discussed in the order stated. Most of the basic facts have been stipulated and are found accordingly. Others shown in our findings are based upon documentary evidence and the testimony of witnesses. FINDINGS OF FACT. Jeanne S. Vandenhoeck is the widow of Paul M. Vandenhoeck and at the time of the hearing had custody and control of all the assets owned by him at the time of his death. She filed a Federal estate tax return with the collector of internal revenue for the first district of Pennsylvania at Philadelphia on May 10, 1940, and paid the tax shown thereon to be due in the amount of $ 4,090.05. Paul M. Vandenhoeck (hereinafter sometimes referred to as the decedent) was born at Santos, Brazil, February 10, 1888, and remained a citizen of Brazil during his entire lifetime. His parents left Brazil and took him to France when he was quite young and he became domiciled in France, where, except for business trips in connection with his export-import business, he remained until his death. The decedent and petitioner were married in France October 3, 1911. They did not enter into any ante*50 nuptial agreement. It was always their intention to remain in France. They lived in Paris continuously from the time of their marriage. They owned a home in Paris and a country place in Normandy. At the time of the marriage and at the time of the death of decedent the laws of France provided that, unless there is an ante nuptial agreement to the contrary, all movable property owned at the time of the marriage and all property acquired after marriage belongs to the marital community. The French law provides, among other things, that no change as to the property relations of the spouses can be made during marriage and the spouses can not, either by contract or by any other means, change the status of the conjugal property. Either spouse may devise his moiety. On the death of one the surviving spouse retains his moiety. 1 The community may be dissolved by death of one of the spouses, by civil death, by divorce, by judicial separation, or by judicial separation*51 of the property. 2A judicial separation of the property puts an end to the community; but it does not affect the marriage relations of the *127 spouses. During marriage the spouses married under the community regime may not change their ownership of property from that of community to joint tenancy. Marsel v. Boyer, Ct. of App. of Lyons, Dalloz, Second Part, p. 220. 3 *52 Under the regime of community, as established by the laws of France, the spouses are deemed to be at all times co-owners of an undivided half of all the property which is comprised in the community and at the dissolution of the marriage each of the spouses, or the surviving spouse, is entitled to a partition of the community property and to receive one-half thereof. 4 The decedent and his wife, petitioner here, were domiciled in France at the time of their marriage, at the time of decedent's death, and at all times material hereto. Under the French law all of the property now in issue was, at the time of the decedent's death, the community property of the decedent and his wife, Jeanne Amelia Simone Vandenhoeck, each owning one-half thereof. The decedent died testate March 21, 1939. He left surviving him, his wife, Jeanne Amelia Simone Vandenhoeck, three daughters, and one son. By his will decedent bequeathed to his wife all the available portion of his estate which the law allowed*53 him to dispose of by testament, and appointed "Mr. Nordling, General Consul of Sweden in Paris," as his executor. No probate proceeding has been instituted in France or in the United States, nor has any person been appointed executor or administrator. Since decedent's death Jeanne S. Vandenhoeck, his widow, has been in absolute possession of his property. At the time of his death the decedent had in his possession the following stock, issued to him and registered in his name, which came into the possession of petitioner at his death and was reported in schedule B of the estate tax return. One voting trust certificate for 490 shares (par value $ 10) of Houdry Process Corporation, which was incorporated in the State of Delaware July 25, 1931; one stock certificate for 135 shares of Houdry Process Corporation. The Commissioner determined that this stock had a value of $ 85 per share or an aggregate value of $ 53,125 on the date of the death of the decedent, one half of which was includible in gross estate. *128 The decedent also had in his possession at the time of his death certificates of stock registered in his name and in the name of his wife, "as joint tenants with right *54 of survivorship and not as tenants in common," as shown in the schedule below. The certificates, at the time of his death, came into the possession of his widow and, in schedule E of the estate tax return, she reported them at the following values: Description Value Voting trust certificate for 5,000 shares (par value $ 10) Houdry Process Corporation, at $ 14 $ 70,000.00 458 shares Sun Oil Co. common, at $ 60 27,480.00 1,000 shares Socony-Vacuum Oil Co. common, at $ 11.9375 11,937.50 Total 109,417.50 One-half of the above amount, or $ 54,708.75, was included in gross estate since, in the opinion of the widow, expressed in the schedule, "only one-half * * * belonged to * * * [decedent] and upon his death was transmitted by inheritance." Prior to the determination of the deficiency now in issue the Commissioner added to gross estate the other half of the reported value of the property referred to in the preceding paragraph and proposed an additional tax of $ 7,950.30. This amount, together with interest of $ 205.37, was paid by petitioner on November 26, 1940. The estate however -- i. e., petitioner as "executor" -- reserved the right to make claim for refund*55 of said amount, or such amount as may be due, and such refund is now sought. The decedent had purchased the stock of the Houdry Process Corporation, the Socony-Vacuum Oil Co., and the Sun Oil Co. without consulting petitioner and she did not know anything about the registration of it until the certificates were found in the safe after the decedent's death. These certificates were brought by petitioner from France to the United States in May 1939. She has received the dividends on the shares since the death of her husband and has used the amounts so received (the precise amount is not disclosed by the record, but it was in excess of $ 5,000) for her living expenses. The Houdry Process Corporation (sometimes hereinafter called Houdry) was organized July 25, 1931, under the laws of the State of Delaware, with its principal office at Wilmington, Delaware. It was organized for the purpose of acquiring all the assets of a French corporation, including patents in respect of the Houdry process for refining crude petroleum and other processes, and for the purpose of developing and exploiting these processes. Upon organization the authorized capital stock of Houdry was 330,000 shares of *56 no par value. On July 26, 1934, the par value was changed to $ 10 per share. The number of authorized shares was not *129 changed prior to March 21, 1939, and on that date 327,280 shares were outstanding. Vacuum Oil Co., a corporation, acquired shares of Houdry Process Corporation in July 1931 at $ 10 per share which, as a result of a merger during the latter part of 1931, became the property of Socony-Vacuum Oil Co. In 1936 Socony-Vacuum bought 1,252 shares of Houdry stock at an average cost of $ 12.16 per share. In 1937 it bought 1,333 shares at an average cost of $ 38.82 per share. In 1938 it bought 146 shares at $ 40 per share, and in June 1939 it bought 8 shares at $ 40 per share. As of March 21, 1939, Socony-Vacuum owned voting trust certificates for 93,400 shares of Houdry stock. The prices paid ranged from $ 10 per share to $ 40 per share. The company also contributed substantial sums to Houdry for laboratory research. In 1934 Sun Oil Co. acquired 30,000 shares of Houdry Process Corporation stock at $ 10 per share and later purchased more shares at prices ranging from $ 10 to $ 40 per share. On March 31, 1939, Sun Oil Co. owned shares and voting trust certificates*57 for 96,816 shares of Houdry Process Corporation. On March 21, 1939, Eugene Jules Houdry and members of his family owned shares and voting trust certificates for 38,625 shares of Houdry Process Corporation. The shares and voting trust certificates of Houdry Process Corporation were held on December 27, 1938, and June 22, 1939, as follows: Shares as of Shares as of Stockholders Dec. 27, 1938 June 22, 1939 Sun Oil Co 30,657 30,657 Wilmington Trust Co., trustee for Eugene J. Houdry [484] United States Corporation Co., depositary 295,997 295,997 All others 2,862 2,862 Total 330,000 330,000 The shares shown as held by the United States Corporation Co. were held by that corporation as depositary of a voting trust for the following persons: Holders of voting certificates As of Dec. 27, As of June 22, [1939] Eugene J. Houdry 3,750 3,750 Wilmington Trust Company: Trustee for Eugene J. Houdry 25,141 24,891 Trustee for Jacques H. Houdry [250] Trustee for Pierre D. Houdry [250] Genevieve Houdry 9,000 9,000 Sun Oil Co 66,159 66,159 Socony-Vacuum Oil Co 93,400 93,400 All others 98,297 98,297 Total 295,997 295,997 *58 *130 On March 31, 1939, Houdry Process Corporation was the owner of 103 patents which had been issued from August 30, 1927, to March 7, 1939, and which expire 17 years from date of issue. The cumulative costs in respect to issued patents were as follows: To Dec. 31, 1935 $ 2,571,741.14 To Dec. 31, 1937 2,946,174.15 To Dec. 31, 1938 2,987,791.49 To Mar. 21, 1939 3,055,819.63 On March 21, 1939, Houdry Process Corporation had 59 applications for patents pending with the United States Patent Office in connection with the Houdry processes. The dates of such applications ranged from June 1, 1934, to March 14, 1939. The cost of such pending applications to March 21, 1939, was $ 637,809.20. In March 1939 the Houdry Process Corporation had a good patent position in the industry for one type of catalytic cracking, but it did not have a monopoly. Its patents covered the catalyst, the process, and the apparatus for the utilization of the process. It was not the only process, however, and its patent field was not broad enough to preclude any other type of catalytic cracking. Several other processes were being utilized and developed by other companies, including the Kellogg*59 Co., the Standard Oil Co. of New Jersey, the Phillips Petroleum Co., and the Universal Oil Products Corporation. To maintain its patent position Houdry would have to continue its research and compete with other processes. The catalyst is a chemical compound, varying according to the purpose or use to be made of it in the process of production of gasoline from other hydrocarbons. It is a mixture of silicate and aluminum. In the beginning the catalysts were made of natural clays, fuller's type, heat treated to retain the form in which they could be used. A catalyst is not used up in the chemical process and may be used over and over again. The Houdry process consists of a steel container which is filled with an aluminum catalyst in the form of small pellets about the size of an eraser on an ordinary lead pencil. Oil vapors at a temperature somewhat under 900 o Fahrenheit are passed through the catalyst, creating a chemical reaction in which carbon is separated from the hydrocarbon mixture in contact with the catalyst. Other processes known at that time were thermal cracking processes in which the oil is disassociated by a combination of pressure and heat. In 1933 the Houdry process*60 produced a higher octane gasoline than was produced by other processes. There was no substantial improvement in the Houdry process from 1933 through March 1939. High octane gasoline can be used under a heavier compression and, other things being equal, is more efficient and produces more mileage in a car. Low octane gas was improved by adding tetra-ethyl lead. This *131 appreciably increases the cost of the gasoline. It was not necessary to add tetra-ethyl lead to gasoline produced by Houdry processes for automobile use, although it is added to make aviation gasoline. There is a thermal process known as the poliform of the Gulf Refining Co. which produces gasoline of substantially as high octane as that produced by the Houdry process and at about the same cost. The Houdry Process Corporation made its money from the sale of licenses. By March 21, 1939, it had completed licensing arrangements with the following companies: Sun Oil Co. Socony-Vacuum Oil Co. Standard Oil Co. of California Socony-Vacuum Oil Co. (on behalf of Raffineria di Napoli, S. A. I., of Naples, Italy) The license agreements granted to the above companies (a) fully paid-up world-wide, nonexclusive*61 licenses unlimited as to charging capacity in the case of Sun Oil Co. and Socony-Vacuum Oil Co.; (b) nonexclusive license in the case of Standard Oil Co. of California for United States and Canada, limited to a specific amount of charging capacity, but with right to extend the license to additional charging capacity upon payment of additional royalty; and (c) nonexclusive license in the case of Socony-Vacuum Oil Co.; for Italian operations, limited to a specific amount of charging capacity, but with the right to extend the license to additional charging capacity upon payment of additional royalty. Under the licensing arrangements, Houdry Process Corporation received the following royalty payments: [1934] $ 400,000 [1935] 1,900,000 [1936] 1,027,750 [1937] $ 1,549,250 [1938] 1,750,000 [1939] 1,000,000 As of March 21, 1939, Houdry had no other license agreements. Under those referred to above it had no additional license fees or royalties due or to become due unless the Italian plant or the Standard Oil Co. of California should install additional charging capacity. Since the Sun Oil Co. and Socony-Vacuum Oil Co. had fully paid-up licenses for unlimited capacity, no additional royalty*62 could accrue to Houdry from them. The licenses granted to Sun Oil Co. and to Socony-Vacuum Oil Co. provided for an exchange of cross licenses on any further developments made over a period of years by either Houdry or the licensees, and an exchange of technical information; but only by inference was Houdry required to do any further research or servicing. A licensee was required to pay the cost of making an experiment which was solely for its own benefit, but not the cost of experiments for the benefit of all licensees. *132 In its effort to obtain licensees, Houdry prior to March 21, 1939, had been in touch with the principal oil companies, which collectively had about 89 percent of the refining capacity of the United States. Technical papers were presented before engineering societies and numerous technical articles were published in the trade and engineering journals describing the process. Personal contacts and meetings with the presidents, chief engineers and principal executives of various oil companies were made in an effort to get them to take out a license on the process; but only four, Sun Oil, Socony-Vacuum, Standard Oil of California, and the Italian subsidiary*63 of Socony-Vacuum, had taken out licenses prior to March 21, 1939. On March 21, 1939, the paid-up royalty rate being asked by Houdry Process Corporation was $ 250 per barrel of average daily charging capacity. In 1938 and 1939 a study of Houdry processes was made by a representative of the Tidewater Oil Co., looking toward the purchase of a license. From this study it was determined: (1) That the engineering and technical phases of the processes were sound, but indicated a very complicated form of plant and, accordingly, considerable reliance had to be placed on the experience of Sun Oil Co. and Socony-Vacuum Co.; (2) that the patents were very strong in so far as a plant following the process was concerned; and (3) that the financial position of the Houdry Process Corporation was not satisfactory, due to the fact that its prospect of future income was not definite. The Tidewater Oil Co. in 1940 took out a license at a reduced price of $ 150 per barrel charging capacity; but, since Houdry Process Corporation was the only available source of catalyst, the license agreement was signed on the express condition that Sun Oil and Socony-Vacuum should jointly underwrite the corporation's*64 obligations. Eugene Houdry, as president of Houdry Process Corporation, made and published annual reports to the stockholders and directors of the corporation for the calendar years 1932 to 1939, both inclusive. Such reports disclose income earned, dividends paid, and deficit or surplus after the payment of dividends, as follows: Deficit or surplus Year Income Dividends (after payment of 1 earned 2 paid dividends) Per share [1932] None None None [1933] None None None [1934] None None (deficit)$ 65,317.02 [1935] $ 1,422,364.87 $ 4.31 (deficit) 232,564.63 [1936] 678,166.23 2.00 (deficit) 177,164.01 [1937] 983,844.00 3.00 (deficit) 175,341.00 [1938] 1,059,428.00 2.50 (surplus)23,702.00 [1939] 353,784.00 1.00 (deficit)48,639.00 *133 The book value of the shares, as reflected by the balance sheets, was $ 10.03 on December 31, 1938, and $ 9.91 on December 31, 1939. The bid and asked quotations, as shown by the National Stock summary for the period February 9, 1939, to October 9, 1939, ranged from $ 31 to $ 90*65 per share bid and $ 63 to $ 105 asked. The summary shows 5 bids in February ranging from $ 31 to $ 75, with no corresponding offers. On March 8 there was a bid of $ 90, with no offers, and on March 9 ten shares were offered at $ 105, with no takers. These were the only records for March. Thereafter the bid and asked prices steadily declined to $ 58 bid and $ 67 asked on October 9. Forty sales in small lots aggregating 751 shares were reported by brokers between February 29, 1939, and May 29, 1939, at prices ranging from $ 60 to $ 95.75; 502 of these shares were sold to brokers and 249 to customers. The fair market value of the stock of the Houdry Process Corporation on the date of the death of the decedent was $ 40 per share. In the estate tax return the 1,000 shares of Socony-Vacuum Oil Co. stock were valued at $ 11.9375 per share or a total of $ 11,937.50. In determining the deficiency the respondent fixed the value at $ 12.50 per share or a total of $ 12,500. The aggregate fair market value of the 1,000 shares was $ 12,500 on the date of the death of the decedent. OPINION. The first issue is whether all, or only half, of the fair market value of the 5,000 shares of Houdry*66 stock, the 458 shares of Sun Oil Co., and the 1,000 shares of Socony-Vacuum Oil Co. is to be included in gross estate. The second is the value of all of the Houdry stock and the third is the transferee liability. The statutes particularly applicable to the first issue are set out in the margin. 5 *67 Briefly restating the facts, decedent, a citizen of Brazil domiciled in France, had in his possession at the time of his death shares of stock *134 in "domestic corporations," i. e., corporations chartered in the United States. (Sec. 862, I. R. C.) Some of the shares had been issued to him and registered in his name and some of them had been registered in his and his wife's names "as joint tenants with right of survivorship and not as tenants in common." All of the stock was reported in the return filed for his estate and respondent concedes that only one-half of the value of the stock registered in his name is to be included in gross estate. Relying upon section 811 (e), I. R. C., supra, however, he insists that the value of all of the stock registered in the joint names of decedent and his wife must be included in decedent's gross estate. Petitioner, conceding that for the purposes of this case she is "Executor" of her deceased husband's estate (sec. 930, I. R. C., supra), contends that under the laws of France, the domicile of decedent, all of the property of decedent and his wife became community upon their marriage -- no ante nuptial contract having been executed*68 by them -- and continued to be community until the dissolution of the marriage by the death of the decedent. She therefore contends that, regardless of the fact that some of the stock had been registered in their joint names, it was in fact community property, only one-half of which belonged to the decedent and passed at his death. Respondent admits that the decedent was a citizen of Brazil domiciled in France, where he was married without a marriage contract; that under the laws of France all movable property owned prior to, and acquired after, marriage belongs to the marital community; that neither spouse may dispose of more than his own moiety, but that either may devise his moiety; and that on the death of either the surviving spouse retains his moiety. Notwithstanding these admissions, he contends that the situs of the stock in domestic corporations is in the United States under section 862 (a), I. R. C., supra; that under the law of the situs the stock must be regarded as held in joint tenancy; and, therefore, that its entire value must be included in the gross estate of the decedent unless the surviving joint tenant sustains her burden *135 of proving that she furnished*69 her proportionate part of the consideration paid. As we view the case, we are not particularly concerned with the rule of mobilia sequuntur personam, discussed at considerable length by the respondent upon brief. The rule merely means that the situs of personal property, for purposes of taxation, is the domicile of the owner unless there is a statute to the contrary. In re Wheeling Steel Corporation Assessment, 177 S. E. 535. It is a rule of convenience -- not an exclusive rule of universal application. State of Colorado v. Harbeck, 133 N. E. 357; 232 N. Y. 71. Union Refrigerator Transit Co. v. Kentucky, 199 U.S. 194, 206. The stock in question clearly has a situs within the United States for purposes of the estate tax, DeGaney v. Lederer, 250 U.S. 376; Burnet v. Brooks, 288 U.S. 378; sec. 862 (a), I. R. C.; but there is no issue here as to situs. Petitioner admits that decedent's interest is includible in gross estate, the only question being the quantum of such interest. For *70 the answer to this question we must look to the law of France. Cf. Estate of Jose Simon, 40 B. T. A. 651; Herbert Marshall, 41 B. T. A. 1064; Estate of Jose M. Tarafa Y. Armas, 37 B. T. A. 19; Bank of America National Trust & Savings Association v. Rogan, 33 Fed. Supp. 183; Vogel v. New York Life Insurance Co., 55 Fed. (2d) 205; certiorari denied, 287 U.S. 604; United States v. Goodyear, 99 Fed. (2d) 523; Sanchez v. Bowers, 70 Fed. (2d) 715; Restatement of the Law of Conflict of Laws, ch. 7, secs. 290, 292, illustration 1; sec. 303, illustration 2. In proof of her contention that the decedent died possessed of only a one-half interest in the property having a situs in the United States, petitioner introduced evidence of the laws of France governing the relations of the decedent and his wife as to property. The basic facts as to domicile have all been stipulated. The evidence, we think, which includes the opinion of lawyers *71 learned in the French law, excerpts from the Civil Code of France, and decisions of the Court of Cassations, the Supreme Law Court of France, clearly justifies the finding that decedent and his wife were domiciled in France, that under the French law all the property here in issue was, at the time of the decedent's death, the community property of the decedent and his wife, and that each of them owned one-half thereof. That being so, the case is governed by Estate of Jose Simon, supra. What has been said is dispositive of the issue. At the risk of unnecessarily extending the discussion, a few additional remarks may be made. When the decedent purchased stock in American corporations he did so with community funds. Respondent recognizes that this was so as to the stock standing in decedent's name. We do not understand that he is contending otherwise as to the stock registered in their joint *136 names. Section 811 (e), upon which he relies, was never intended to have the effect of changing the ownership of stock owned by nonresidents in the United States. Part III of chapter 3 -- Estate Tax (Sec. 860, et seq., I. R. C.) was enacted for the*72 purpose of subjecting to tax "transfer of the net estate of every decedent nonresident not a citizen of the United States." (Sec. 860, I. R. C.) "Stock in a domestic corporation owned and held [emphasis supplied] by a nonresident not a citizen of the United States shall be deemed property within the United States." (Sec. 862, I. R. C.) The use of the conjunctive indicates that the ownership was at least as important in the eyes of Congress as the holding. We do not intimate that section 811 (e) may not be applied to "joint interests" of nonresidents who are not citizens of the United States. We merely hold that all this decedent owned or could own under the law of his domicile was one-half of the stock. Marsel v. Boyer and cases set out in footnote 3, supra. "State law (law of the domicile) creates legal interests and rights. The Federal revenue acts designate what interests or rights, so created, shall be taxed." Morgan v. Commissioner, 309 U.S. 78, 80. Cf. Sanchez v. Bowers, supra. We agree with respondent that title to the property is not controlling. But that is not to say that the *73 property need not be owned by the decedent. The inquiry always must be: What was the extent of the interest of the decedent which passed at his death? Klein v. United States, 283 U.S. 231; Helvering v. Hallock, 309 U.S. 106. Ownership of community property during continuance of the marriage, and not the power of control and disposition, has always been regarded as the controlling factor in applying Federal revenue laws. Cf. Talcott v. United States, 23 Fed. (2d) 897; certiorari denied, 277 U.S. 604; United States v. Malcolm, 282 U.S. 792. Where the interests of the spouses are present and equal, both are held to have possession and enjoyment of the community property and only one-half may be included in the gross estate of the husband. United States v. Goodyear, supra.(See, however, the change made by the Revenue Act of 1942 as to estates of decedents dying after the date of its enactment.) In France, as in the community property states, the husband has the management and control*74 of the community property, but in the event of the abuse of such management or the failure to exercise it properly the wife may obtain a separation of the community property and assume the management of her portion without effecting a dissolution of the marriage. From these and other facts in evidence we conclude that under the French law the interest of the wife in the community property is present and equal to that of her husband and that the stock held by decedent and his wife as joint tenants was in *137 fact community property in which the decedent held only a one-half interest. We hold therefore that only one-half the value of such stock having a situs in the United States is includible in the gross estate of the decedent. In our judgment the same result would obtain if we consider that the stock was owned and held by petitioner and the decedent as joint tenants, as contended by the respondent. Since it was purchased with community funds, one-half the consideration was furnished by petitioner; therefore, only one-half of the value thereof is includible in gross estate under section 811 (e), supra. In computing the deficiency respondent valued the Houdry stock at *75 $ 85 per share. This is the mean between the high and the low bid prices on the dates nearest to the death of the decedent. No sale was made on the date of his death. A sale of 3 shares at 94 was made by one broker to another broker on the day before and a sale of 7 shares at 87 was made to the same broker by another broker three days later. The 20 sales made during the month of March -- largely from one broker to another -- averaged approximately 7 shares per transaction. The total shares sold between February 29 and May 29, 1939, were only 751, 502 of which were in small lots from one broker to another broker. Since the aggregate outstanding stock was 330,000 shares, it is obvious the number changing hands was proportionately insignificant. We, of course, recognize that transactions between actual buyers and sellers, dealing at arm's length on a fair and unrigged market, is cogent evidence of value. But where, as here, the transactions are so insignificant and the block to be evaluated is substantial, other evidence of value may appropriately be considered. Evidence supporting a much greater value than the book value of the stock (approximately $ 10 per share) includes the*76 ability of the corporation's president, Houdry, the corporation's strong patent position, the efficacy of its process, the value of its patent rights, and its prospects, which, at least until 1938, were bright. Offsetting this is the limited source of its future income, dependent, as it was, largely upon its ability to sell additional licenses and the obvious dearth of prospective licensees. (The cost of a plant to utilize the process commercially was approximately $ 1,000,000.) The subsequently demonstrated fact that additional sales could be made only at greatly reduced prices and the substantial decline in income in 1939 indicate that its officers were not unduly pessimistic in appraising its condition at the end of 1938 as not very promising. While it received substantial income during the years 1935 to 1939 from the sale of licenses, there was but small probability any such large amounts would be received in later years. Its service and research, however, with its attendant expense, had to continue. While the income had been substantial *138 during four of the eight years of its existence, the dividends paid during the four years preceding the death of the decedent *77 had averaged less than $ 3 per share per annum. The average earning per share during the same period had been $ 3.14 per share; but if the earnings during the seven years of the existence of the corporation preceding decedent's death are averaged, the earning per share becomes $ 1.79. On the same basis its dividend record, over the same period, was $ 1.67 per share. Other evidence, directly supporting the value of $ 40 per share which we have found, may be found in the testimony of an officer of the Houdry company and of the Sun Oil Co. He had had considerable experience with the process, being a chemical engineer and having become connected with the Houdry company shortly after its organization. He had conducted the negotiations leading to the licensing agreement with Socony-Vacuum. As a director of the Sun Oil Co. he recommended the purchase by it, in 1939, of additional shares at $ 40 per share, although most of the shares owned by this company had been purchased by it in earlier years at $ 10 per share. The number of shares purchased in 1939 is not disclosed by the record. The valuation of stock, like many questions of fact, can not be completely rationalized. Cf. Estate of Daniel Guggenheim, 39 B. T. A. 251, 293,*78 and cases cited. ( Modified, 117 Fed. (2d) 469, certiorari denied, 314 U.S. 621.) Upon the whole record, we are of the opinion that the Houdry stock had a value of $ 40 per share on the basic date, and finding to that effect has been made. It is now so held. The value of the 458 shares of Sun Oil Co. stock is not in issue. As shown in our findings the value of the 1,000 Socony-Vacuum Oil Co. shares was increased by the respondent from $ 11,937.50 to $ 12,500.00. Since no evidence was adduced indicating that the value determined by the respondent is excessive, it is approved. The last question is whether petitioner is liable as a transferee. Petitioner says the question "is moot since * * * [she], as the alleged transferee and beneficiary of the estate or property of * * * [the deceased], is liable for the tax * * * only if the Estate * * * does not pay it." She seems to be laboring under the impression that the statute, shown in the margin, 6 can not be applied "because *139 there has been no final determination of the Federal estate tax against the estate * * * nor has the estate failed to pay such tax." She asserts *79 that she, "as acting executor," intends to pay the tax found to be due and "there can not be any collection of such tax from the Estate and also from her as transferee and beneficiary." *80 While we agree with petitioner that the tax can not be collected twice -- and we are satisfied that no attempt will be made to exact a dual payment -- and while we have no reason to doubt that she will pay the tax as acting executrix, it can hardly be said that the transferee liability is moot. We think, therefore, it must be determined. The basic facts, all of which have been stipulated, need not be repeated. Briefly stated, petitioner, as provided by her deceased husband's will, took possession of all of his property under a claim of ownership. It is still in her possession. Admittedly it had a value in excess of the estate tax due. Technically, no estate is in process of administration, although both parties here have admitted the applicability of section 930, since petitioner is "in actual possession" of the property of the decedent. It is true, of course, that petitioner, as "acting executor" has not gone through the form of setting over to herself, as beneficiary or legatee, any part of the property; but under the present facts that is immaterial. No opprobrium is necessarily attached to a finding that property has been received under such circumstances as to make the *81 recipient liable at law or in equity for a tax due. "The obligation to be enforced is the liability for the tax." Phillips v. Commissioner, 283 U.S. 589. All of the property of the decedent is in petitioner's possession. Its value is in excess of the tax. Thus there has been a transfer, at or subsequent to decedent's death, which left his estate insolvent. The circumstances recited are sufficient, in our judgment, to make petitioner liable in equity for the tax. Perhaps her present admission that she expects to pay the tax from the property, which she tacitly admits she is holding in trust, may also make her liable at law for the tax. It is unnecessary to draw any fine-spun distinctions between the liability at law and the liability in equity. If either is shown to exist -- the other facts being present, i. e., a transfer without consideration, exhausting the assets and the amount received being in excess of the tax liability -- the burden resting upon the Commissioner has been sustained. Phillips v. Commissioner, supra;United States v. Garfunkel, 52 Fed. (2d) 727. In our judgment*82 the petitioner in Docket No. 111610 is liable as a transferee for the estate tax of her deceased husband in the amount determined in Docket No. 111609. Decision will be entered in each case under Rule 50. Footnotes 1. French Civil Code, secs. 1393, 1394, 1395, 1401.↩ 2. French Civil Code, sec. 1441.↩ 3. In Marsel v. Boyer, the spouses were married under the regime of community property. During marriage they purchased jointly a piece of real property. The husband died and the widow, claiming to be the sole owner of the property, sold it and took the money. In an action by the children to recover their father's interest in the property the Court held the property to be community. In the opinion it said: The matrimonial contract may not be altered in any respect subsequent to the celebration of marriage and the spouses may not depart therefrom even by mutual consent. The real property in question was acquired during marriage and therefore formed part of the community property. The provision for survivorship inserted in the deed violates the basic provisions of the law and is therefore illegal. To substantially the same effect are: Olevinie v. Olevinie, Court of Cassation, France, 1906, Dalloz, First Part, p. 374; Baserve v. Lazousue↩, Court of Cassation, France, 1921, Dalloz 1923, First Part, p. 62. 4. French Civil Code, sec. 1474.↩ 1. Average earning per share, 1935 to 1938, inclusive, $ 3.14.↩ 2. Average dividend paid, 1935 to 1938, inclusive, $ 2.95.↩ 5. SEC. 811. [I. R. C.] GROSS ESTATE. The value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated, except real property situated outside of the United States -- (a) Decedent's Interest. -- To the extent of the interest therein of the decedent at the time of his death; * * * * (e) Joint Interests. -- To the extent of the interest therein held as joint tenants by the decedent and any other person, or as tenants by the entirety by the decedent and spouse, or deposited, with any person carrying on the banking business, in their joint names and payable to either or the survivor, except such part thereof as may be shown to have originally belonged to such other person and never to have been received or acquired by the latter from the decedent for less than an adequate and full consideration in money or money's worth: Provided, That where such property or any part thereof, or part of the consideration with which such property was acquired, is shown to have been at any time acquired by such other person from the decedent for less than an adequate and full consideration in money or money's worth, there shall be excepted only such part of the value of such property as is proportionate to the consideration furnished by such other person: Provided further, That where any property has been acquired by gift, bequest, devise, or inheritance, as a tenancy by the entirety by the decedent and spouse, then to the extent of one-half of the value thereof, or, where so acquired by the decedent and any other person as joint tenants and their interests are not otherwise specified or fixed by law, then to the extent of the value of a fractional part to be determined by dividing the value of the property by the number of joint tenants. SEC. 862. PROPERTY WITHIN THE UNITED STATES. For the purpose of this subchapter -- (a) Stock in Domestic Corporation. -- Stock in a domestic corporation owned and held by a nonresident not a citizen of the United States shall be deemed property within the United States; * * * * * * * SEC. 930. "EXECUTOR", "NET ESTATE", "MONTH", "COLLECTOR". When used in this subchapter -- (a) The term "executor" means the executor or administrator of the decedent, or, if there is no executor or administrator appointed, qualified, and acting within the United States, then any person in actual or constructive possession of any property of the decedent; * * * *↩ 6. SEC. 900. TRANSFERRED ASSETS. (a) Method of Collection. -- The amounts of the following liabilities shall, except as hereinafter in this section provided, be assessed, collected, and paid in the same manner and subject to the same provisions and limitations as in the case of a deficiency in a tax imposed by this subchapter (including the provisions in case of delinquency in payment after notice and demand, the provisions authorizing distraint and proceedings in court for collection, and the provisions prohibiting claims and suits for refunds): (1) Transferees. -- The liability, at law or in equity, of a transferee of property of a decedent, in respect of the tax (including interest, additional amounts, and additions to the tax provided by law) imposed by this subchapter. * * * * (e) Definition of "Transferee". -- As used in this section, the term "transferee" includes heir, legatee, devisee, and distributee.↩