understanding. The Inland Steel Company supplied the $150,000 by certified check, which was deposited in bank by J. A. Boone. The next day Boone withdrew $50,000 in cash and paid it over to Stover. The partners did not employ Stover to sell their properties and never agreed to pay him any commission. He was the only party they knew in the transaction. By deed of May 10, 1920, Stover conveyed the properties to the Stover Coal Company, a corporation, the capital stock of which was owned by the Inland Steel Company.

The promissory notes covering the remainder of the purchase price were distributed, one to each of the four partners. With the exception of the note due in the fourth year and held by Taylor, which was paid one year in advance of its due date, all the notes were paid at maturity. Petitioners made no attempt to discount or dispose of these notes.

The tax returns of the Brown Coal Company and of the individual partners for the year 1920 were prepared by a firm of accountants from books and records turned over to them. Petitioners, themselves, had little knowledge of accounting, the income tax laws, or the preparation of returns. Although they signed and swore to the returns, they did not know the accounting basis upon which the sale was reported, or that there was more than one way of reporting the transaction. Petitioners reported no income from this transac tion upon payment of the notes. The partnership return for the year 1920 showed a profit from the sale of this property of $115,076.71, computed as follows:

The partners reported upon their individual returns for 1920 their respective shares of the profit from this sale. It is now stipulated that each of the petitioners, except W. F. Boone, derived a profit of $79,564.50 from the transaction.

OPINION.

GOODRICH: Petitioners contend that under the provisions of section 212 (d) as retroactively applied by section 1208, Revenue Act of 1926, the sale of the Brown coal properties in 1920 was an installment sale and that the taxable gain derived therefrom should be computed upon that basis or, in the alternative, if the transaction was not an installment sale, then the notes evidencing the deferred pay

ments had no market value when received and no taxable gain is to be recognized until petitioners have returned to them their capital investment. Respondent has determined, and maintains, that the transaction was not an installment sale within the meaning of the statute because more than one-fourth of the selling price (which he contends was $550,000) was received and, further, that petitioners may not now change the basis upon which they reported the transaction in their returns.

Obviously, we must first determine the amount of the selling price and the amount of the cash payment. We are convinced that these were $500,000 and $100,000, respectively. It is true, as respondent argues, that both the contract of sale and the deed recite a total consideration of $550,000, and a down payment of $150,000, but those recitals are not necessarily conclusive. Here respondent is neither a party nor a privy to the instruments, and in such case it is well. settled that the petitioners may introduce evidence at variance with or in contradiction to the terms of the written instrument to show the real nature of the transaction. Converse & Co., 1 B. T. A. 742; J. W. Solof, 1 B. T. A. 776; Arthur B. Grover, 3 B. T. A. 508; Stratton Grocery Co., 8 B. T. A. 317; Amalgamated Sugar Co., 4 B. T. A. 568, 575; C. I. & L. Ry. Co., 10 B. T. A. 1143. The evidence is conclusive that, so far as petitioners were concerned, their only agreement was to sell the property for $500,000, of which $100,000 was to be paid in cash. They neither demanded nor expected, more, nor, we think, did they receive more. Stover was not their agent. He was the man who purchased from them, whether for himself or for an undisclosed principal, they did not know. The inflation of price in the recital of the contract deed was done for Stover's purposes, at his request and under an agreement to refund to him immediately the excess of $50,000 over the cash payment the partners demanded. Consequently, that excess, when received by petitioners, was impressed with a trust to return it to Stover, to whom the money belonged, and it was not a part of the consideration for which the partnership sold its properties. Therefore, the initial payment did not exceed one-fourth of the purchase price and the transaction falls within the statutory definition of an installment sale. First Savings & Trust Co., 20 B. T. A. 272.

Respecting respondent's contention that because petitioners in their returns for 1920 reported the profit from the sale on an accrual basis they can not now change to the installment basis, we again disagree. We have previously held that there was no statutory authority for reporting income on the installment basis under the Revenue Act of 1918. B. B. Todd, Inc., 1 B. T. A. 762; H. B. Graves Co., 1 B. T. A. 859, Hoover-Bond Co., 1 B. T. A. 929. Obviously, therefore, when

petitioners filed their returns for 1920 they had no right to report the income from this sale on the installment basis. This privilege was accorded them by the provisions of section 212 (d) of the Revenue Act of 1926 as retroactively applied by section 1208 of the same act. To hold that petitioners can not change the method of reporting this installment sale would be contrary to the intention of Congress as expressed in these sections. Laurence H. Lucker, 21 B. T. A. 93; Potter Farms, Inc., 6 B. T. A. 111; Standard Computing Scale Co. v. United States, 52 Fed. (2d) 1018; M. L. Elken, 7 B. T. A. 1160; R. L. Brown Coal & Coke Co., 14 B. T. A. 609. Cf. Key Largo Shores Properties, Inc., 21 B. T. A. 1008.

In this view of the case, it is unnecessary to consider petitioner's alternative contention.

Judgment will be entered under rule 50.

WALTER E. DUNHAM, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Docket No. 66308. Promulgated April 6, 1933.

Where funds were withdrawn from a joint bank account of husband and wife in which the owners have equal rights, and invested in shares of stock with the understanding that profits from the stock would be divided equally between them, only one-half of the gain realized from the sale of shares of the stock is taxable to the husband.

Nelson Trottman, Esq., for the petitioner.

Frank A. Surine, Esq., for the respondent.

Proceeding are for the redetermination of a deficiency of $2,021.29 in income tax for 1929. The issue is whether any amount in excess of one-half of the profits realized from a marginal stock account is taxable to the petitioner.

FINDINGS OF FACT.

The petitioner is a resident of Glenellyn, Illinois. In 1899 he married and has lived with his wife continuously since that time. At or about the time of their marriage the petitioner and his wife agreed that each would have an equal interest in the income of the other, and ever since then they have maintained joint checking accounts, subject to the withdrawal of funds on deposit by either. The joint bank account maintained in 1929 was opened in 1923 in an Illinois bank in the name of Walter E. Dunham and Belle S. Dunham. All of the income of each, with some minor exceptions,

was deposited to the credit of the account. Most of the money deposited in the account represented salary of the petitioner. During 1929 each depositor drew against the account without consulting the other.

During the latter part of 1928 the petitioner and his wife agreed to use funds in their joint account for marginal tradings in stock for their equal benefit. Thereafter, in accordance with this agreement, the petitioner opened a marginal stock trading account in his name with Laidlaw and Company, New York City. The money deposited with the broker at the time the account was opened and other deposits made with it during 1929 were withdrawn from the joint bank account by the petitioner by agreement with his wife. Gains realized from the sale of stock purchased with the funds so deposited were credited to the stock account.

The petitioner and his wife discussed and agreed upon every purchase made under the stock account. The purchasing and selling orders to the broker were given by the petitioner.

The gain realized in 1929 from sales of stock in the stock account aggregated $23,884.75.

The petitioner and his wife filed separate returns for 1929. In their returns each reported one-half of the profit realized from the sale of stock in the marginal stock account. In his return the petitioner claimed as a deduction the sum of $551.66 as interest. Most of the amount represents interest charged by the broker on the stock account. In his audit of the returns, the respondent treated all of the gains derived from the stock account as income of the petitioner.

OPINION.

ARUNDELL: The joint checking account of petitioner and his wife was opened in 1923, and maintained throughout 1929, pursuant to an understanding of many years that each would have an equal interest in the income of the other. The Illinois courts hold that deposits made in a joint bank account by one of the payees under the circumstances present here constitutes a gift to the other, and that the rights of the parties in the account are equal. Illinois Trust & Savings Bank v. Van Vlack, 310 Ill. 185; 141 N. E. 546; Reder v. Reder, 312 Ill. 209; 143 N. E. 418. The title of the payees in such an account has been held to be a vested interest. Burns v. Nolette, 83 N. H. 489; 144 Atl. 848.

It was from this account, in which each had an equal interest, that the petitioner and his wife decided to withdraw funds to open and maintain a marginal stock-trading account. They agreed upon not only the initial deposit made with the broker, but the several others made during 1929 from funds withdrawn from the account. The

agreement of the wife was obtained for all purchase orders issued. to the broker.

The uncontradicted testimony of the petitioner and his wife is that before entering into the stock-dealing venture they agreed that the benefits therefrom would be shared equally. Under this agreement, the wife was entitled to one-half of the profit from sales of stock held in the account. The fact that the stock account was in petitioner's name is not important. The gains realized from sales of stock credited to the stock account were held in trust for the joint owner. Hewlings Mumper, 13 B. T. A. 977.

The respondent erred in taxing the petitioner on more than onehalf of the profit of $23,884.75 realized in 1929 from the sale of stock in the account. Carl W. Gillette, 18 B. T. A. 434; First National Bank of Duluth, 13 B. T. A. 1096; Francis Krull, 10 B. T. A. 1096.

The case of Stanley Pedder, 20 B. T. A. 11, affirmed in 60 Fed. (2d) 866, relied upon by the respondent, is clearly distinguishable. There was no proof in that case, as there is here, that the wife was to have a one-half interest in the property purchased from funds withdrawn from the joint bank account.

Decision will be entered under Rule 50.

FORREST RICHARDSON AND MORSE PALMER, EXECUTORS OF THE ESTATE OF EMMA R. MORSE, Deceased, PETITIONERS, V. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Docket No. 44652. Promulgated April 6, 1933.

Edgar M. Morsman, Esq., for the petitioners.
H. D. Thomas, Esq., for the respondent.

This proceeding arises under the Revenue Act of 1926 and is for the redetermination of a deficiency in estate tax in the amount of $952.72. The allegations of error upon which the parties joined issue are: (1) The inclusion in the decedent's gross estate of 249 shares of the capital stock of Alberni Mills & Timber Company, Ltd., at a value of $49,130.04 and 562 shares of the capital stock of Port Neville Timber Company, Ltd., at a value of $50,097.50; (2) the inclusion in the decedent's gross estate of the amount of $69.578.06, representing the value at the date of decedent's death of certain property which the decedent transferred under a trust deed after the enactment of the Revenue Act of 1926 but within two years prior to her death.