Petition for Review of Order of United States Board of Tax Appeals.
Before ALSCHULER, EVANS, and SPARKS, Circuit Judges.
This case involves income taxes for the year 1919 in the sum of $8,814.60, and the appeal is taken from an order of the Board of Tax Appeals, which determined a deficiency in the above amount for the year involved. The case is brought to this court by petition for review pursuant to sections 1001-1003 of the Revenue Act of 1926, c. 27, 44 Stat. 9, 109, 110 (26 USCA §§ 1224-1226).
The facts are undisputed. In May, 1919, petitioner entered into a joint venture with Max Epstein and Elias Mayer in connection with a certain transaction relating to the sale and disposition of certain shares of capital stock of the North American Oil & Refining Corporation. In the latter part of that month the joint adventurers entered into a contract with the North American Oil & Refining Corporation for that purpose. Under the terms of the joint venture, petitioner, Max Epstein, and Elias Mayer agreed to divide any profits or bear any losses arising out of that transaction in equal parts, to wit, one-third to each.
After this contract was signed, a copy thereof was given to the petitioner. Petitioner then desired to assign his interest under that contract to his wife, and on June 2, 1919, executed to Mildred Copland, his wife, a written assignment under seal, which is as follows:
"Know All Men By These Presents, that for and in consideration of the sum of One Dollar ($1) and other good and valuable considerations to me in hand paid, receipt of which is hereby acknowledged, I, David Copland, of Chicago, Cook County, Illinois, do hereby transfer, assign and set over unto Mildred Copland, of Chicago, Cook County, Illinois, all of my right, title and interest in and to a certain agreement bearing date the --- day of May, 1919, made and entered into by and between North American Oil & Refining Corporation, as first party, and Max Epstein, David Copland and Elias Mayer, of Chicago, Illinois, as second parties, and all my right, title and interest in and to any profits, issues and income that may arise thereunder; and I do hereby authorize, empower and direct Elias Mayer to account to and with the said Mildred Copland for all profits, issues and income arising under said contract in the same manner and with the same force and effect as if such accounting were had and made with me personally.
"In witness whereof, I have hereunto set my hand and seal this 2nd day of June, A.D., 1919.
Elias Mayer was the syndicate manager, and as such had complete charge of all of the syndicate's operations. An executed copy of this assignment was, on or about June 2, lodged with Elias Mayer, the syndicate manager, and at all times thereafter Mayer, as manager of the syndicate, recognized and treated Mildred Copland as the party in interest of one of the third parts. After the assignment was made and an executed copy thereof delivered to the syndicate manager, petitioner had no further connection with the transaction and made no claim of any kind in connection therewith.
At the time the assignment was executed and delivered by petitioner to Mildred Copland, no profits had accrued to the joint venture; but thereafter the syndicate marketed the stock of the North American Oil & Refining Corporation, which, in the latter part of November, 1919, resulted in a profit of $81,000 to the syndicate. After this $81,000 profit was realized there was no other transaction; there was no other profit, either before or after, and the syndicate was closed. On December 27, 1919, the syndicate manager, Elias Mayer, distributed the said profits of $81,000 in the following manner: $27,000 to himself, $27,000 to Max Epstein, and $27,000 to Mildred Copland, which distribution was made by the syndicate manager, delivering his check payable to the order of each of said individuals, respectively, and in the aforesaid amounts. Mildred Copland included said sum of $27,000 as part of her gross income for the year 1919, and paid the income taxes thereon.
The check for $27,000 payable to the order of Mildred Copland, representing her one-third share of the profits of the aforesaid transaction, was indorsed and deposited by her in her own bank account in the First National Bank of Chicago, and she has used same for her own personal benefit. Petitioner has at no time made any claim or demand upon her by reason of her receipt of the money, nor has any part of it been returned to petitioner, nor is she in any way indebted to him for that sum, or any part thereof.
The sole question for decision is whether this sum of $27,000 is income of and taxable to the petitioner, as found by the Commissioner, the determination of which is governed by the Revenue Act of 1918, c. 18, 40 Stat. 1057, 1062, and the provisions applicable to this controversy are as follows:
"Sec. 210. * * * there shall be levied, collected, and paid for each taxable year upon the net income of every ...