Pedder v. Commissioner

STANLEY PEDDER, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Pedder v. Commissioner Docket No. 29979. United States Board of Tax Appeals 20 B.T.A. 11; 1930 BTA LEXIS 2221; June 2, 1930, Promulgated *2221 Where a husband and wife domiciled in the State of California have a joint bank account and the husband has drawn funds from this account and purchased property in his own name, the income from such property is taxable to the husband. Stanley Pedder, Esq., pro se. O. J. Tall, Esq., for the respondent. MATTHEWS *12 In this proceeding the petitioner seeks a redetermination of his income-tax liability for the calendar year 1923, for which year the respondent has proposed a deficiency in the amount of $1,032.52. The petitioner alleges that the respondent erred in having transferred from the return of his wife to the return of petitioner the sum of $5,891 received from interest, dividends, and profits on investments. FINDINGS OF FACT. Petitioner is an individual residing in San Francisco, Calif., where he is engaged in the practice of law. The income in controversy, an amount of $5,891 which was reported in the separate return of Mabel H. Pedder, wife of the petitioner, for the year 1923, was comprised of the following items: Dividends $ 3,976.94 Interest received 1,268.80 Profits on stock and real estate 645.26 Total 5,891.00 *2222 The petitioner kept a card record of all income received from the sources referred to above, wherein he credited to his wife, Mabel H. Pedder, one-half of such income, which, during the year 1923, consisted of the amount referred to above. The income received by the petitioner during the year 1923 as a result of his law practice was separately returned by him and is not the subject of controversy in this proceeding. The petitioner deposited the income received by him as the result of his law practice in an account with the Wells-Fargo Nevada National Bank, which account was designated as follows: "Mr. Stanley Pedder and/or Mrs. Mabel H. Pedder." He also deposited during the year 1923 in the same joint bank account all other income received by him in the form of dividends, interest, etc. The joint bank account was subject to the check of either party and any balance was to be paid to the survivor of them. It was active in so far as petitioner was concerned, while Mabel H. Pedder, during the year, drew 15 checks in the aggregate amount of $5,130.41. All of the property from which the income in question was derived was, during the year 1923, in the sole name of the petitioner. *2223 Such property had been purchased with funds drawn by the petitioner from the joint bank account. The petitioner had never entered into any agreement with his wife, either written or oral, that she should have a one-half interest or any part of the funds or the property in question. *13 Title to certain real estate purchased by petitioner with funds drawn from the joint bank account was taken in the name of the petitioner and his wife as joint tenants. No income derived from such property is involved in this proceeding. In the income-tax return filed for the year 1923 the petitioner reported $27,218.53 as income from his law practice and describes his share of the income in controversy as income derived from community investments. OPINION. MATTHEWS: The petitioner contends that the joint bank account was a joint tenancy; that the property purchased with funds drawn by him from such account is held in joint tenancy, even though title to the property was taken solely in his name; and that the income from such property is their joint income. Respondent contends that the property in question is community property and that the income derived therefrom is taxable*2224 to the petitioner. Under the presumption which arises by virtue of section 164 of the Civil Code of California, all property acquired after marriage by either husband or wife or both (except that acquired as separate property) is community property. This presumption can be overcome, however, by evidence which establishes that the property is held as joint tenants. The essentials of a joint tenancy are unity of title, unity of interest, unity of time, and unity of possession. (33 Corpus Juris, 907.) Section 683 of the Civil Code of California defines a joint interest as one owned by several persons in equal shares by a title created by a single will or transfer, when expressly declared in the will or transfer to be a joint tenancy. This provision, in so far as it applies to personal property, was construed in ; . It was there held that personal property may be held in joint tenancy and, in the absence of any code provision requiring the execution of a writing to transfer personal property, a joint tenancy may be created by an oral agreement by which title thereto is transferred to two persons as joint*2225 tenants. In the Harris case, the husband and wife in the early years of their marriage, had entered into an oral agreement that all property acquired by them after marriage would be held as joint tenants. The court held that the personal property acquired after marriage was held in joint tenancy under such agreement. In California, therefore, personal property may be held in joint tenancy when acquired under an oral agreement expressly declaring that such property will be held in joint tenancy. There was no such agreement in this case, either as to the property from which the income in controversy was derived, or as to the *14 deposits in the joint account, but petitioner claims that as the origin of the funds which were used for the purchase of the property in question was funds held in joint tenancy, the joint tenant in whose name the property was taken was charged with a trust in favor of the other joint tenant, which trust was actually carried out and observed by turning back to the joint funds all income received from such investments and all of the proceeds of the investments disposed of. Each party to a joint bank account subject to the check of either, whether*2226 such joint account is held in joint tenancy or not, has a right to check on such account and consequently to use the amount drawn in any way he chooses. The petitioner exercised his right to check on the account and to use the money as he saw fit by purchasing personal property and taking the title in his own name. Such property was in the petitioner's possession and he received the income from it. Not one of the unities which must exist in order to have a joint tenancy was present. The depositing of the income from such property in the joint account, and the crediting of one-half to his wife on his books, do not evidence the existence of such unities. The petitioner has failed to show that the property in question was held as joint tenants. The income from the property is taxable to the husband. ; ; and . Judgment will be entered for the respondent.