Cleveland Trust Co. v. Commissioner

THE CLEVELAND TRUST COMPANY, EXECUTOR OF THE ESTATE OF E. C. HENN, DECEASED, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. DORA V. HENN, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Cleveland Trust Co. v. Commissioner Docket Nos. 13227, 26919. United States Board of Tax Appeals 24 B.T.A. 132; 1931 BTA LEXIS 1688; September 24, 1931, Promulgated *1688 1. Held that a certain so-called trust agreement created a relationship of agency. N. H. Boynton,11 B.T.A. 1352, followed. 2. Where the owner of certain identifiable stock certificates establishes that he sold and delivered the same certain certificates, he is entitled to deduct the loss thereby sustained. David A. Gaskill, Esq., and Grover Higgins, Esq., for the petitioners. Arthur Carnduff, Esq., for the respondent. VAN FOSSAN *132 These proceedings were brought to redetermine deficiencies in the income taxes of the petitioners for the year 1920. In Docket No. 13227 the respondent asserted a deficiency of $7,289.18 and in Docket No. 26919 he asserted a deficiency of $11,613.11. The proceedings were consolidated for hearing and report. The allegations of error, originally numerous, have been reduced to the following issues: (1) Whether or not losses resulting from sales of property deposited with the Cleveland Trust Company pursuant to an agreement executed by E. C. and Dora V. Henn on April 30, 1917, are deductible from their respective gross incomes. The question to be determined is whether or not*1689 such agreement constitutes a trust within the meaning of section 219 of the Revenue Act of 1918. (2) Whether there was a gain or loss resulting from the sale of 1,500 shares of the capital stock of the National Acme Company. FINDINGS OF FACT. The petitioner, Dora V. Henn, is the widow of E. C. Henn, who died on August 20, 1924. The petitioner, the Cleveland Trust Company, is the duly qualified and acting executor of the estate of the said E. C. Henn. *133 On April 30, 1917, E. C. Henn and Dora V. Henn, his wife, executed the following agreement familiarly known as a "Business Man's Trust," designating the Cleveland Trust Company as trustee: THIS INSTRUMENT dated the 30th day of April 1917, is to evidence; that we, E. C. HENN and DORA V. HENN, of Cleveland, Ohio, have this day sold, assigned, transferred, conveyed, delivered and set over unto THE CLEVELAND TRUST COMPANY, of Cleveland, Ohio, as TRUSTEE, the property described in "Schedule A", which, initialed by us, is hereto attached and made part hereof, to be held, managed and controlled by The Cleveland Trust Company as Trustee, upon the trusts and for the uses and purposes hereinafter set forth, to-wit: *1690 THE TRUSTEE SHALL HAVE POWER: 1. To sell, lease, transfer and exchange all or any part of said property and all property that may hereafter from time to time be substituted therefor or added thereto, at such prices and upon such terms and conditions and in such manner as it may deem best, including the right to lease for any terms irrespective of the period of the trust; to execute and deliver any proxies, powers of attorney or agreements that the Trustee may deem necessary or advisable in administering this trust; to invest and re-invest money coming into its possession in such loans, stocks, securities or real estate as it may deem proper and suitable for the investment of trust funds, irrespective of any statutes or rules or practices of Chancery Courts now or hereafter in force limiting the investments of trust companies or trustees generally, with power to vary or transpose investments so made into others of like of similar nature, it being our intent that the Trustee shall have unrestricted power to manage all property held by it hereunder as if the absolute owner thereof, subject , however, to the power reserved to us as hereinafter provided. 2. To retain by way of investment*1691 any property or securities transferred to it without liability for depreciation; and in accepting title to real estate, the Trustee shall not be held to have assumed the payment of any incumbrances thereon nor any responsibilities as to the validity of the title conveyed to or held by it. All conveyances executed and delivered by it shall be without convenants of warranty except as against its own acts. 3. To determine whether money or property coming into its possession shall be treated as principal or income, and to charge or apportion expenses and losses to principal or income, according as it may deem just and equitable; to employ suitable agents and attorneys and to pay their reasonable compensation and expenses. The Trustee shall not be liable for any neglect, omission or wrong-doing of such agents or attorneys, provided reasonable care shall have been exercised in their selection; nor, save for its own neglect or wilful default, for any loss of damage. 4. To make advances or borrow money upon such terms and conditions at any time or times during our lives, for such purpose as to it may seem desirable or proper, upon obtaining the written approval of E. C. Henn thereto, *1692 and after his death at any time or times, for the improvement, protection or preservation of the trust estate. For the re-payment of such advances, with interest, the Trustee, shall have a lien upon the trust estate, and for sums so borrowed may issue its promissory notes as Trustee and secure the re-payment thereof by mortgaging or pledging any part of all of the trust estate. *134 5. To compromise, compound and adjust claims in favor of or against the donors or either of them or the trust estate, upon such terms and conditions as it may deem best, provided that during the lifetime of us or of the survivor of us, it shall secure the written approval of us or of the survivor, as the case may be. 6. To appoint, whenever and as often from time to time as it may deem advantageous and proper so to do, any trust company, wheresoever situate, having a capital and surplus of not less than Ten Million ($10,000,000.00) Dollars, as Co-Trustee with it hereunder, or as sole Trustee, and to delegate to the company or companies so selected such powers, duties and responsibilities, and for such length of time as it may deem wise and proper, provided, however, that no such appointment*1693 shall be made during our lives or the life of the survivor of us without our consent or the consent of the survivor of us, as the case may be. 7. To purchase, in event of revocation, any notes and mortgages representing investments made by it, for amount of principal and accrued interest to date of purchase. 8. To determine by a majority vote of its Board of Directors, whose decision shall be conclusive, as to the competency of the donors or either of them whenever the competency of either to act hereunder shall become material. In event either of said donors be so determined incompetent and so long as such incompetency may continue, the other may alone exercise all the rights hereinafter reserved to the donors jointly, in the same manner and to the same extent as though such other were the sole surviving donor. The Trustee shall allow and pay interest on uninvested funds at the rate and in accordance with the rules then governing deposits in its Savings Department, and render to us a quarterly statement of its receipts and disbursements. The entire net income derived from the trust estate shall be paid in quarterly installments or oftener to us during our lives, in*1694 equal shares, and upon the death of Dora V. Henn, to E. C. Henn during the residue of his life, and upon the death of E. C. Henn, to Dora V. Henn until our youngest child attains the age of twenty-five (25), and after such youngest child attains the age of twenty-five (25), one-half of such net income shall be paid to Dora V. Henn during the residue of her life. In addition to the payment of such income, the Trustee is authorized and empowered to deliver to us or the survivor of us from time to time such further amounts from the principal of the trust estate as it may deem necessary or proper for the maintenance, support, comfort and enjoyment of us or the survivor of us, as the case may be, absolute discretion being vested in the Trustee to determine what may be necessary or proper for such purposes. The Trustee is authorized to make or to procure to be made to us or to the survivor of us advances pending accumulation of income or disposition of any part of principal, and for such advances shall have a lien upon any part of the trust estate. The Trustee, whenever practicable, shall secure the written approval of E. C. Henn during his life, and after his death of Dora V. Henn, *1695 to all sales or purchases of securities which it may propose to make. Any person or persons dealing with the Trustee shall not be required to ascertain whether or not such approval shall have been given. Unless requested so to do by us or the survivor of us, the Trustee shall not return for taxation any personal property held by us under this trust, during our lives and the life of the survivor of us, all obligations with respect thereto being assumed by us and the survivor of us. *135 We reserve the right to have all income accruing upon stocks held hereunder paid direct to us until we may otherwise direct, and also the right to exercise the voting privileges upon any stocks standing of record in our respective names. The Trustee shall allow us and the survivor of us the free use and enjoyment of any real estate conveyed to it which we or the survivor of us may desire to occupy as temporary or permanent homes, and during such time shall not be required to see to the payment of taxes or maintenance of insurance thereon unless requested so to do in writing. The Trustee shall allow us and the survivor of us, without making any inventory thereof, the free use and enjoyment*1696 of all household furnishings, pictures, books, jewelry, automobiles, and other similar personal articles. After the death of the survivor of us, all such chattels as may remain unconsumed shall be divided among our children then living. The right is further reserved unto us acting jointly, and unto the survivor of us when approved by the Board of Directors of the Trustee as hereinafter provided, to at any time or times revoke the terms of the settlement hereby evidenced, either in whole or in part, as well as the right to modify in any respects the terms of this settlement, any such revocation or modification to be evidenced by written instruments signed by us or the said survivor of us, as the case may be, and delivered to the Trustee. To whatever extent this settlement may be so revoked, the Trustee shall thereupon deliver to us or to the said survivor of us, as the case may be, such portion or all of the property comprising the trust estate as may have been withdrawn under such revocation, conditioned, however, upon there being repaid to the Trustee any advances made by it and it being satisfactorily indemnified against any liabilities incurred by it in the execution of this*1697 trust. In event the survivor of us shall request a modification or revocation of this settlement, the Trustee shall carefully investigate and ascertain the reasons for such request and shall withhold its approval unless satisfied that such request has not been induced by unjust prejudice, passion, or desire to waste the trust estate. We direct that any and all property received by The Cleveland Trust Company under any will whether heretofore or hereafter executed by either of us, shall be held, managed, controlled and disposed of by the Trustee, under all powers set forth in this trust unless the terms of the will otherwise specifically provide. The execution of this instrument by The Cleveland Trust Company shall constitute its agreement to administer all property so received by it in trust for such purposes. Subject to the rights hereinbefore reserved unto us and the survivor of us, the trust estate shall be held for the equal benefit of our children, Albert E., Oliver L., Ralph F., Viola E., Julie E., Redge F., Carl L. and Richard R., share and share alike, and the net income derived from each child's share, after the death of the survivor of us shall be paid to each such*1698 one during life, subject to the conditions hereinafter imposed. In case Dora V. Henn be the survivor of us, and after the youngest of our said children attains the age of twenty-five (25), one-half of the net income derived from each child's share shall be similarly paid to such one during the residue of the life of said Dora V. Henn. In addition to the payment of income, we authorize and empower the Trustee to pay from the share of the principal held for the benefit of any child so much thereof as it deems necessary or proper for the maintenance and support of such one provided the income be insufficient therefor, absolute discretion being vested in the Trustee to determine what may be necessary or proper for such purposes. *136 In event of the death of the survivor of us shall occur before the youngest child attains the age of twenty-five (25), only so much of said income directed to be paid to each child shall be paid to each such one until attaining the age of twenty-five (25) as the Trustee deems necessary or proper for the suitable education, maintenance and support of such child. Any surplus income shall be aded to the share held for the benefit of each such child. *1699 We also authorize the Trustee to use from the share of the principal held for the benefit of any son so much thereof which to the Trustee shall seem reasonable in its judgment, as he may desire to invest in any business with which he may wish to become identified, provided upon any such request being made, the Trustee, after careful investigation, shall be satisfied that the same is a reasonably prudent enterprise and the son is competent and fitted to engage therein. Any investments so made shall be retained as part of the share of the trust estate held for his benefit, but in such manner as not to fix additional liability upon the Trustee or the trust estate. All earnings therefrom, including stock dividends and profits upon sale or disposition, shall be paid to such son during his life. The Trustee shall not be liable for loss resulting from any such investments. We further authorize the Trustee to use from the principal of the share held for any daughter so much thereof as may be necessary and to the Trustee shall seem reasonable in its judgment to purchase a home for her suitable to her station in life, should she so desire, title to any such property to be taken in the*1700 name of the Trustee. Taxes, assessments, insurance premiums and the cost of repairs shall be deducted from any income otherwise payable to her. The Trustee shall not be liable for any depreciation in any such property. After the death of any such daughter or in case she shall cease to occupy such property as a homestead, the Trustee may sell and dispose of the same. In event of the death of any of our children leaving issue surviving, the income thereafter derived from the share of the principal of the trust estate held for the benefit of such child shall continue to be paid to the issue of such one for a period of twenty-one (21) years after the death of our last surviving child, or until the extinction of such issue prior thereto. Such payments, except as hereinafter provided, shall be distributed per stirpes and not per capita among all of such issue. In event of the death of any of our children without leaving issue surviving, or in case of the extinction of such issue prior to the period hereinbefore fixed. the income derived from the share of principal theretofore held for the benefit of such child shall thereafter be paid to our surviving children and the survivor*1701 of them during the lives of them and the survivor of them. All of such payments of income herein directed to be made to the issue of our children as well as all payments of income hereinbefore and hereinafter directed to be made to our children, are subject, however, to the right hereby conferred upon the Trustee to temporarily withhold or completely discontinue, in whole or in part, any such payments, due consideration being given to the necessities, earning capacity, possession of other resources and habits of life of each of such children or issue. Any income so withheld or discontinued may, at any subsequent time or times, be given to the child or issue from whom the same was withheld, or to the wife or husband of such child or issue, or distributed to the other children and issue, or retained and added to the principal, it being our intent that the Trustee shall have power to make unequal distribution of income among any of our children or among their issue, according to the several needs and habits of life of each of them, but shall not exercise such power except with the approval of the Board of Directors of the Trustee and for good cause in their judgment. *137 *1702 All income derived from the trust estate after the death of the last survivor of our children above such as may be paid to the issue of our children under the trusts hereinbefore set forth, and upon termination of the several trusts as to the issue of our children, the entire net income derived from the trust estate shall be annually expended or appropriated, perpetually, until the principal may have been disbursed, for the charitable uses and purposes set forth in a Resolution adopted by the Board of Directors of The Cleveland Trust Company on the second day of January, 1914, providing for a community charitable trust, designated in said Resolution as THE CLEVELAND FOUNDATION. We further direct that the trust estate, both principal and income, shall thereupon vest in The Cleveland Trust Company and be managed, controlled, administered and disbursed in all respects as provided in said Resolution, reference to which is hereby made, as fully and with like effect as if herein set forth at length. The gifts of income hereinbefore made to our children and their issue shall not be alienated, disposed of or in any manner incumbered by said beneficiaries or any of them while so in possession*1703 and control of the Trustee; and if any of said beneficiaries shall, at any time or times, alienate, charge or dispose of their said respective incomes or any part thereof, or any interest therein, before the same shall have been delivered to them under the provisions of this instrument; or if, by reason of their bankruptcy or other event happening either before or after our deaths, said income otherwise intended for said beneficiaries or any of them shall wholly or in part cease to be enjoyed by them or any of them, as above provided, and the same, or any part thereof or interest therein, shall, or, but for this proviso, would, become vested in some other person or persons, then the trust hereinbefore expressed concerning said income shall thereupon cease and determine as to the beneficiary whose interest may be so affected, and all income otherwise hereinbefore provided for such beneficiary shall thereafter be held and distributed by the Trustee during the residue of the life of such beneficiary, according to the absolute discretion of the Trustee, but the Trustee may pay to such beneficiary, or for his or her maintenance and support, or to the wife, husband, child or children of*1704 such beneficiary, thereafter from such income, such sums, and such sums only, as it, in its absolute discretion, shall think fit and proper, using or retaining any unexpended sums for the benefit of any one or more of the beneficiaries hereunder whose interest is not so affected. The Trustee shall receive for its services hereunder during our lives, such reasonable compensation as may be agreed upon, and upon the death of E. C. Henn five per cent (5%) per annum of the gross income received by it, together with reasonable compensation for any services rendered by its Real Estate or Legal Departments. IN WITNESS WHEREOF, we, the said E. C. Henn and Dora V. Henn, have set our hands, and The Cleveland Trust Company, to evidence its acceptance of the trust herein expressed, has caused its corporate name and seal to be affixed to this instrument in duplicate, at Cleveland, Ohio, this day and year first above written. (Signed) E. C. HENN DORA V. HENN Signed in the Presence of: (Signed) L. E. OAKLEY THE CLEVELAND TRUST COMPANY, (Signed) By F. H. GOFF, President R. R. ALEXANDER, (Signed) R. BAUYER Assistant Trust Officer. *138 The property specifically*1705 described and enumerated in the schedule attached to the said agreement consisted of corporate stocks and bonds, improved and unimproved real estate (including the family residence), life insurance policies, savings accounts, etc., and constituted practically all of the wealth of E. C. and Dora V. Henn. On May 6, 1916, E. C. Henn executed the following will, which was duly probated subsequent to his death on a date not given in the record: I, E. C. HENN, of Cleveland, Ohio, being of lawful age and of sound and disposing mind and memory, do make, publish and declare this my Last Will and Testament, hereby revoking and making null and void all other last wills and testaments by me made heretofore. I. I direct that all my just debts and funeral expenses be paid out of my estate as soon after my decease as shall be found convenient. II. All the rest, residue and remainder of my property, of whatsoever character and wheresoever situate, I give, devise and bequeath to The Cleveland Trust Company, of Cleveland, Ohio. III. I nominate and appoint The Cleveland Trust Company, of Cleveland, Ohio, Executor, of this my Last Will and Testament, hereby granting to it, as such Executor, *1706 full power and authority to sell and convey all or any part of my estate, real personal or mixed, upon such terms and at such prices as it may deem proper. I also grant to it full power and authority in the settlement of my estate to compromise, compound, adjust and settle any and all debts and liabilities due to or from my estate, for such sums and upon such terms and in such manner as my Executor shall deem best. I desire that no bond be required of The Cleveland Trust Company as such Executor. I further direct that in case The Cleveland Trust Company shall not, for any reason, become Executor, or in case, following its appointment, it shall cease to act as such before final settlement of my estate, such officer of The Cleveland Trust Company as shall be designated by its Board of Directors be appointed, such individual Executor to possess all of the powers above conferred upon The Cleveland Trust Company as Executor. IN WITNESS WHEREOF, I have hereunto set my hand to this my Last Will and Testament, at Cleveland, Ohio, this 6th day of May, in the year of our Lord, One Thousand Nine Hundred and Sixteen. E. C. HENN. The decedent, E. C. Henn, exercised the powers over*1707 the deposited property reserved to him in the said agreement dated April 30, 1917. Dora V. Henn took no active part in the management of such property but left its control and operation entirely to her husband. She signed such forms and papers as he directed. E. C. Henn sold the assests of the trust fund and purchased and deposited additional securities in that fund without consulting or requesting the consent of the trustee. Several withdrawals of cash were made for purposes which did not meet the approval of the trustee and likewise Henn purchased securities which the trustee ordinarily did not buy. Large amounts of cash were both withdrawn and deposited by Henn, and formal notices of "revocation" were signed by E. C. *139 and Dora V. Henn relating to both withdrawals from and deposits in the trust fund. Every action of the trustee in connection with the deposited property was taken only after discussion with Henn and subject to his approval. Between May 28, 1919, and August 20, 1924, E. C. and Dora V. Henn secured 46 loans aggregating over $660,000. During the year 1920 eleven loans, aggregating $171,977.50, were obtained. Henn secured the loans either by withdrawing*1708 securities and pledging them as collateral or by obtaining the loans directly from the trustee through the trust fund. The proceeds of these loans were used by E. C. Henn for whatever purpose he chose. Between June 14, 1917, and February 7, 1923, E. C. Henn and Dora V. Henn made 53 separate withdrawals of cash, aggregating approximately $600,000. During the year 1920, 14 such withdrawals, aggregating $133,418.75, were made from the trust fund. Between August 15, 1917, and November 28, 1922, E. C. and Dora V. Henn withdrew 23 blocks of stock aggregating 1,500 shares. During the year 1920 they made one such withdrawal of 7,490 shares in eight corporations. In the year 1922 they withdrew bonds of the par value of $60,000. Between May 10, 1920, and February 20, 1923, 21 notes receivable were added to the corpus of the trust fund. These notes were purchased outright or were the obligations on which E. C. Henn was liable and which were paid from deposited funds and then in turn deposited in the trust fund as a part of its corpus. During the year 1920 such notes, ten in number, aggregated $106,819.98. E. C. and Dora V. Henn retained control of the property deposited in the*1709 trust fund and exercised all powers incident to the ownership thereof. The Cleveland Trust Company acted as a depositary or finance agent of E. C. and Dora V. Henn and served as a convenient aid in and source of borrowing money. E. C. Henn was very generous and loyal to his friends and, consequently, made many investments of questionable value in order to help them. In 1923 the president of the Cleveland Trust Company proposed to him that an irrevocable modification of the trust agreement be made by Henn and his wife in order that the trustee might have full control of and thus conserve his estate. This suggestion met with the approval of Henn and his wife and accordingly on February 20, 1923, the following instrument was signed. THIS INSTRUMENT, of the 20 day of Feby, 1923, is to evidence that we, E. C. HENN and DORA V. HENN, the donors under a certain Trust Agreement entered into by and between us and THE CLEVELAND TRUST COMPANY, of Cleveland, Ohio, as Trustee, under date of April 30, 1917, pursuant to the right of revocation and modification therein reserved, do hereby modify and, to the extent *140 necessary to carry into effect the provisions herein contained but*1710 not otherwise, do revoke the terms of said instrument, in the following respect: We hereby revoke and annul the following provisions of our said Trust Agreement: The right is further reserved unto us acting jointly, and unto the survivor of us when approved by the Board of Directors of the Trustee as hereinafter provided, to at any time or times revoke the terms of the settlement hereby evidenced, either in whole or in part, as well as the right to modify in any respects the terms of this settlement, any such revocation or modification to be evidenced by written instrumentgs signed by us or the said survivor of us, as the case may be, and delivered to the Trustee. To whatever extent this settlement may be so revoked, the Trustee shall thereupon deliver to us or to the said survivor of us, as the case may be, such portion or all of the property comprising the trust estate as may have been withdrawn under such revocation, conditioned, however, upon there being repaid to the Trustee any advances made by it and it being satisfactorily indemnified against any liabilities incurred by it in the execution of this trust. In event the survivor of us shall request a modification or revocation*1711 of this settlement, the Trustee shall carefully investigate and ascertain the reasons for such request and shall withhold its approval unless satisfied that such request has not been induced by unjust prejudice, passion, or desire to waste the trust estate; and, in lieu thereof, we direct that the following be substituted and in every way considered as if originally a part of said Trust Agreement: This settlement is hereby made by us irrevocably and without right or power on our part to modify in any respect its terms, except for the purpose of making definite and certain any of the provisions herein contained, in event such provisions should be ambiguous or fail to clearly express our intention. This right of modification for the aforesaid purpose is reserved to us and to our survivor with the consent and approval of the Board of Directors of the Trustee. In all other respects we hereby ratify and confirm said Trust Agreement of April 30, 1917. IN TESTIMONY WHEREOF, we have hereunto set our hands and caused this instrument to be delivered to THE CLEVELAND TRUST COMPANY, TRUSTEE, the day and year first above written. (Signed) E. C. HENN DORA V. HENN Signed in the*1712 presence of: (Signed) M. E. VERNON M. GUNZENHAUSER CLEVELAND, OHIO, Feby. 20, 1923. Receipt of the foregoing instrument is hereby acknowledged. (Signed) THE CLEVELAND TRUST COMPANY, TRUSTEE, By H. A. ALLYN Fifteen hundred shares of the capital stock of the National Acme Company, represented by certificates Nos. 1545 to 1554, inclusive, for *141 100 shares each, and certificates Nos. 1608 to 1612, inclusive, for 100 shares each, were sold by E. C. and Dora V. Henn in 1920 for $39,694.50. The 1,000 shares of the said stock represented by certificates Nos. 1545 to 1554, inclusive, were purchased through the Bankers' Trust Company on May 23 and 24 and June 2, 1919, for $36,662.50 and the 500 shares of such stock represented by certificates Nos. 1608 to 1612, inclusive, were purchased on August 14, 1919, through Hord, Curtiss & Company for $18,559.25. Therefore, the total purchase price of the said 1,500 shares was $55,221.75. The respondent determined that the cost of the said 1,500 shares of stock of the National Acme Company was $21,750 and thus their sale resulted in a gain of $17,994.50. It was stipulated that during 1920 the loss from the sale of*1713 the other properties forming a part of the trust fund was $64,713.87 and that if the losses involved in these proceedings should be found deductible from the respective incomes of E. C. and Dora V. Henn, then one-half thereof should be deducted from the income of each taxpayer. OPINION. VAN FOSSAN: The first issue in these proceedings is whether or not the agreement executed by E. C. and Dora V. Henn on April 30, 1917, constitutes a trust within the meaning of section 219 of the Revenue Act of 1918. If the document is construed not to be such a trust, then the losses resulting from the sales of property deposited with the Cleveland Trust Company, the trustee named in that instrument, are deductible from the gross incomes of the petitioner, Dora V. Henn and E. C. Henn, whose estate is now represented by the said Cleveland Trust Company as executor. The facts in this case and the phraseology of most pertinent provisions of the so-called trust agreement are strikingly similar to those set forth in . E. C. Henn exercised the powers reserved to him and his co-maker in the so-called trust agreement to a greater extent than did Boynton. *1714 The ownership and control of the property nominally included in the corpus of the trust estate were lodged in Henn and his wife as fully as if no agreement had been executed. See ; . Under the principles laid down in , taxation relates to the actual command over and benefits arising from the property taxed. In the case at bar the settlors had full power to control both the corpus of the estate and the income therefrom to the extent of revesting themselves of the corpus and the income therefrom by withdrawing either the corpus or the income as they saw fit. Only a formal notice of such withdrawal, called a "revocation," was necessary in order to *142 comply with the terms of the trust agreement. . That the practical operation of the trust agreement, as well as its theoretical construction, served to lodge in the settlors all control and other incidents of ownership is conclusively shown by the fact that it became imperative to execute a new instrument in order to give*1715 the trustee the exclusive right and authority to manage the trust property. Under the original agreement the trustee had no power to conserve and protect the estate, it could not object to the so-called "revocation" notices of withdrawals of cash and other assets, and it had no right to select what securities or other property should be added to the trust fund. Furthermore, the Supreme Court of Ohio in , held that an alleged trust agreement, similar to that of April 30, 1917, did not constitute a valid and binding trust, but was merely an appointment of the trustee as the managing agent of the settlor, acting under her direction. We are of the opinion that the agreement of April 30, 1917, did not create a trust within the meaning of section 219 of the Revenue Act of 1918. The respondent urges that the execution of the trust agreement by two persons who own individually the property constituting the corpus of the trust estate, and the consequent requirement of a joint revocation, transforms the agreement from one of agency to a trust instrument within the purview of the statute. He asserts that thus the interest of*1716 each settlor was adverse to that of the other and that, therefore, each was deprived of individual control. He admits that if the trust properties had been jointly owned at the time they were placed in the trust the principles laid down in the Boynton case would govern. In view of our decision that the agreement under consideration was one of mere agency and not a trust instrument, it is immaterial that there were two persons therein. It is a well settled principle of law that joint principals may designate a common agent. Mechem's Law of Agency, vol. 1, p. 132; Tiffany on Agency, p. 194. See . In the case at bar the principals had a community of interest in the successful conduct of the activities which the agent was appointed to carry on. Necessarily, such identity of purpose connotes a convergency rather than a divergency of interest. The principals could terminate the agency agreement at any time by their joint action. A termination of the agreement would only restore to them the form of ownership, the substance of which they continued to enjoy during the period covered by the agreement. *1717 The rule laid down in , holding that since the power to revoke or alter was dependent *143 upon the consent of the one entitled to the beneficial, and, consequently, adverse interest, the trust had passed from the control of the settlor, obviously does not apply under the facts in this case. Therefore, the petitioners may deduct from their respective incomes the loss resulting in 1920 from the sales of property forming a part of the corpus of the so-called trust fund deposited with the Cleveland Trust Company in accordance with the provisions of the agreement of April 30, 1917. The second issue is whether there was a gain or loss resulting from the sale of 1,500 shares of the capital stock of the National Acme Company. This issue rests upon a proper identification of the stock of the National Acme Company purchased in 1919 and sold in 1920. The petitioners have shown clearly that the shares of capital stock of the National Acme Company sold in 1920 for $39,694.50 were the same shares purchased by them in 1919 and represented by certificates Nos. 1545 to 1554, inclusive, and Nos. 1608 to 1612, inclusive. for*1718 an aggregate price of $55,221.75. At the time of purchase the certificates were deposited with the trustee and became a part of the corpus of the trust fund. They were withdrawn therefrom under the usual "revocation" notices and sold in December, 1920. By thus identifying the share so bought and sold, and the cost and sale price thereof, the petitioners have established a basis for the calculation of gain or loss in the transaction. Article 39, Regulations 45, does not apply. ; . Cf. ; ; . The loss of $15,527.25 sustained in 1920 upon the sale of the said 1,500 shares of stock of the National Acme Company is allowed. Reviewed by the Board. Decision will be entered under Rule 50.