estate, as a general deposit, upon which it should pay interest at rates to be agreed upon from time to time between it and the other two trustees. The trustees delivered all of the corporation's assets to Thompson, Ross & Company, under the terms of the sale contract of March 8, 1927, and received the balance of the purchase price, which, except for the sum of $96,729 still retained, they disbursed according to the terms of the trust instrument during 1927 and 1928.

At the time of the organization in 1925, petitioner expended the sum of $46,979.25 as an organization expense, which sum it capitalized. It now claims that this sum was lost to it in 1929, when, as it alleges, it forfeited its corporate franchise through failure to pay the State corporation tax.

OPINION.

LANSDON: The petitioner argues that it ceased to exist as a body corporate in 1929, in virtue of its failure to pay the state corporation tax, which omission, under the state laws, subjected its charter to forfeiture. It introduced no evidence at the hearing to establish either that its corporation tax for 1929 was not paid, or, if not, that a forfeiture of its charter rights was invoked by the state of its creation. In the absence of any evidence to support this contention, we sustain the act of the respondent in denying the loss claimed for 1929.

Petitioner contends that the conveyance in trust of its assets on May 14, 1927, amounted, in effect, to a distribution of them "in kind" to its stockholders, who thereafter sold them through the trustees. The respondent's basic contention respecting the other tax items here disputed is that the transfer of the corporation's assets to the trustees in 1927, in the circumstances, did not change its taxable status as owner of the profits from their sale, under its contract with Thompson, Ross & Company, or the earnings of the converted assets, pending their distribution to the stockholders.

The record does not support any theory of a sale made by the trustees, or that they acquired any rights in the trust corpus which they could have sold other than in accordance with the directions of the trust instrument, which they were bound to obey. It does show, however, that the corporation made a sale of its assets to Thompson, Ross & Company on March 8, 1927, and received a binding payment of $50,000 in "earnest money." This was not an option contract, as contended for by the petitioner, but an executed sale which gave the purchaser vested property rights in the assets. Morgan v. Forbes, 236 Mass. 480; 128 N. E. 792; O'Brien v. Boland, 166 Mass. 481; 44 N. E. 602; Howe v. Hayward, 108 Mass. 54; Hunt v. Weir, 100 Ind. 501. The purchaser's contingent option to rescind

did not postpone the vesting of its rights in the property. Monarch Portland Cement Co. v. Washburn, 89 Kan. 874; 133 Pac. 156. That right of election expired March 20, 1927; and after that date the contract of sale was without a condition to either party. All conditions being removed, the assets being in a deliverable condition, the property in them passed to the buyer. Sec. 8394 (Rule 1) Mason's Minn. Stats. (Conditional Sales Acts); American Sugar Refining Co. v. Newnan Grocery Co., 284 Fed. 835; Rhynas v. Keck, 179 Ia. 422; 161 N. W. 486; Olin Co. v. Lambach, 35 Idaho 767; 209 Pac. 277. That the stockholders intended this sale to stand is shown by their action at their meeting of May 10, 1927, when, by resolution, they directed as follows:

BE IT FURTHER RESOLVED that the proper officers of this corporation be and they hereby are authorized to carry out and perform, or cause to be carried out and performed, all of the obligations of this corporation under and pursuant to said contract of March 8th, 1927.

The board of directors entrusted that duty to the trustees, who accepted the trust and complied with the mandate. In so doing the trustees acted for and in behalf of the corporation. Taylor Oil & Gas Co., 15 B. T. A. 609; James Duggan, 18 B. T. A. 608; and Fred A. Hellebush, 24 B. T. A. 660.

The cases cited in petitioner's brief are not applicable to the facts here. Several of them show a transfer of corporation assets to a trustee or stockholder, which we recognized as valid to pass title to the transferee, but in none of them was there a closed contract of sale to a third party which had intervened to prevent the passing of title to the trustees, or stockholders. Of the cases cited, the nearest approach to one in point with the situation here considered is found in Fruit Belt Telephone Co., 22 B. T. A. 440, where a prior sale of the corporation's assets had been negotiated but not consummated by its officials. Thereafter, the officials sold the corporation's assets for cash, to one of the stockholders as trustee, who renewed the negotiations and sold them to the Bell Telephone Company. Inasmuch as the property was not otherwise encumbered, this Board sustained that sale. In Iowa Bridge Co. v. Commissioner, 39 Fed. (2d) 777, the issue was controlled by facts in no respect similar to these here considered. In that case the corporation had transferred construction contracts to its president, and the Board held that, to all intents and purposes, they had been completed and the profits on them earned by the corporation before the transfer. Accordingly, the Board held that such profits constituted income to the corporation. The United States Circuit Court of Appeals reversed the decision of the Board for the reason, as stated in its opinion, that the counsel for the Commissioner conceded at the hear

ing that there was no basis for the Board's findings that the profits had been earned before the transfer.

In the case at bar we sustain the sale to Thompson, Ross & Company, as well as the subsequent transfer to the trustees. The first of these, however, passed the property rights in the assets to the purchaser as of March 8, 1927, when the deal was closed and the earnest money paid.

Decision will be entered for the respondent.

JOHN H. HART, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Docket Nos. 52795, 60115. Promulgated January 9, 1933.

Petitioner and his wife, residents of Michigan, disposed of certain real property in that state held by them as an estate by the entirety, the contract of sale merely providing for payment of principal and interest on deferred payments to the vendors, without specifically designating the character of interest taken by them in such payments. Held, that petitioner and his wife held this contract of sale, together with the principal and interest received thereon, as joint tenants, and that of the interest received in each of the taxable years only one-half represented income to petitioner.

J. H. Amick, Esq., for the petitioner.

Edward C. Adams, Esq., for the respondent.

These proceedings, consolidated for hearing and decision, seek redetermination of deficiencies of $516.39 and $294.43 for the calendar years 1928 and 1929, respectively. Petitioner assigns as error the action of respondent in including in petitioner's gross income the total amount represented by certain interest payments made in these years to petitioner and his wife.

FINDINGS OF FACT.

The facts, stipulated by the parties, are that prior to the calendar year 1928 petitioner and his wife, Elfleda B. Hart, were the owners, as tenants by the entirety, of certain real property in the City of Detroit, Michigan.

In the year 1928 petitioner and his wife sold this property under a so-called "land contract," the purchaser making a down payment in cash. This contract provided for the payment of the balance of the purchase price in installments over a term of years and for yearly payment of interest on such deferred payments to petitioner

and his wife, but did not specify the character of interest taken by them in such payments. Interest payments under this contract were received during the years 1928 and 1929 in the amounts of $4,350 and $8,250, respectively.

The petitioner included in his tax returns for the years 1928 and 1929 one-half of the above amounts, respectively, and the other onehalf was reported as income by petitioner's wife in her returns for those years. Petitioner and his wife were at all times during the years here in question residents of the State of Michigan.

In determining the deficiencies here involved, respondent included in petitioner's gross income for each of the taxable years the total interest paid in such year on the land contract described above.

OPINION.

LEECH: Estates by the entirety exist only in real property under the common law, and such estates are recognized in Michigan, the common law being in effect where not in conflict with the constitution or laws of the state. Morrill v. Morrill, 138 Mich. 112; 101 N. W. 209. The execution of the land contract by petitioner and his wife converted their estate from real property into personal property. Bowen v. Lansing, 129 Mich. 117; 88 N. W. 384; Detroit Trust Co. v. Baker, 230 Mich. 551; 203 N. W. 154; Mollie Shaffran, 18 B. T. A. 91. Respondent contends that under the law of Michigan an estate by the entirety in petitioner and his wife was created by statute, under the conditions existing here, in the personal property represented by the contract of sale, and that the interest payments on deferred installments of the purchase price, representing income from such property, being subject under the common law rule to the unrestricted dominion of the husband, are taxable to him alone. In support of this contention respondent cites section 1 of Act 126 of the Michigan Legislature, approved April 30, 1925, as follows:

SEC. 1. In all cases where a husband and wife shall sell land held as a tenancy by the entirety and accept in part payment for the purchase price the note or other obligation of said purchaser payable to said husband and wife, secured by a mortgage on said land payable to husband and wife, the said debt together with all interest thereon, unless otherwise expressly stated in said mortgage, after the death of either shall be payable to the survivor, and the title to said mortgage shall vest in the survivor, and in case a contract for sale of property owned by husband and wife as tenants by the entirety is entered into by them as vendors, the same provisions herein applying to the rights of the survivor in mortgages as above set forth, shall apply to the survivor of the contract.

Respondent cites Battjes Fuel & Building Material Co. v. Milanowski, 236 Mich. 622; 211 N. W. 27, construing the quoted act as sustaining his position.

Regardless of this argument, the soundness of which may, at least, be questioned, in view of the doubtful effect of the cited case, we believe the present issue is decided by Act 212 of Public Acts of Michigan, 1927, approved May 20, 1927, which provides:

All bonds, certificates of stock, mortgages, promissory notes, debentures, or other evidence of indebtedness hereafter made payable to persons who are husband and wife, or made payable to them as endorsees or assignees, or otherwise, shall be held by such husband and wife in joint tenancy unless otherwise therein expressly provided, in the same manner and subject to the same restrictions, consequences and conditions as are incident to the ownership of real estate held jointly by husband and wife under the laws of this State, with full right of ownership by survivorship in case of the death of either.

This act was passed subsequent to Act 126 relied upon by respondent and prior to the execution of the land contract under which the payments here in question were made. We have found no case construing this statute. However, the present contract did not create a particular estate in petitioner and his wife in the specified consideration. Nothing was expressly provided therein describing the character of estate taken by petitioner and his wife in the contract or the payments thereunder, except that the payments were to be made to petitioner and wife jointly. The "land contract" was an "evidence of indebtedness," upon which collection could have been enforced. Fitzhugh v. Maxwell, 34 Mich. 138; Walker v. Casgrain, 101 Mich. 604; 60 N. W. 291. We conclude that the instrument is clearly one of the character to which Act 212 refers and the interest of petitioner and his wife therein must be held to be that of joint tenants.

It follows that only one-half of the interest payments received in each of the taxable years in question should have been included in the gross income of petitioner. Frederick J. Haynes, 7 B. T. A. 465.

Judgment will be entered under Rule 50.

CHARLES R. HOLDEN, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Docket Nos. 55486, 62198. Promulgated January 9, 1933.

The petitioner leased for a period of 100 years a residential apartment in a building owned by the lessor corporation, which corporation maintained and operated the building. As a part of the consideration for the demise and lease of said apartment petitioner agreed to and did pay his proportionate part of the annual interest and taxes on the apartment building, apportioned among the lessees on the basis of stock ownership in the corporation.