Court of Claims.
*873 *874 Howe P. Cochran, of Washington, D. C., per se.
H. S. Fessenden, of Washington, D. C., and Samuel O. Clark, Jr., Asst. Atty. Gen. (Robert N. Anderson and Fred K. Dyar, both of Washington, D. C., on the brief), for defendant.
WHALEY, Chief Justice, and LITTLETON, WHITAKER, JONES, and MADDEN, Judges.
LITTLETON, Judge.
Plaintiff sues to recover an overpayment of individual income tax for 1934, on the ground that he was entitled to a deduction in that year which was not shown on his return, of $10,000 as a loss sustained as a result of certain stock for which he had paid, that amount becoming worthless in 1934. The evidence shows and it is admitted that plaintiff paid $10,000 for the stock in question and that this stock did become worthless in 1934 (finding 7).
Defendant first contends that the court is without jurisdiction of the case, because the refund claim filed in time on March 14, 1938 (finding 2), did not specifically claim this stock loss and the language or grounds of the claim were not sufficient to cover it, and that it has not been shown that the amendment of the claim mailed at New York on March 15, 1938 (finding 2), was received within the statutory period for filing a claim for 1934. It is insisted by the defendant that the claim filed March 14 was not susceptible of amendment after March 15, and that the attempted amendment, although adequate as a claim, came too late to be effective.
We think the claim as amended for refund was sufficient and that the court has jurisdiction. The claim of March 14 was defective in that it did not set forth in the ground stated the nature of the losses sustained and not claimed on the return, which is shown to have been "in addition" to the losses "through embezzlement, fraud, and false pretenses; and for fees not paid;" nor did this claim set forth the facts relied on to support the claim. However, a broad statutory ground was stated for "losses not claimed." The claim also stated that the *875 books were in process of audit and that "I will furnish the exact data when the audit is completed." Plaintiff had in his records various data concerning the W. B. Moses & Sons, Inc., stock. In these circumstances we think the claim was properly susceptible of amendment in the way and to the extent which plaintiff did amend it by the verified statement of the specific loss and the pertinent facts relative thereto. United States v. Factors & Finance Co., 288 U.S. 89, 53 S. Ct. 287, 77 L. Ed. 633; United States v. Memphis Cotton Oil Co., 288 U.S. 62, 53 S. Ct. 278, 77 L. Ed. 619. See also, Angelus Milling Co. v. Commissioner, 325 U.S. 293, 65 S. Ct. 1162. The Commissioner of Internal Revenue made no objection to the claim as amended, but had an investigation and audit made of the grounds and facts alleged which showed that the claim that the stock became worthless in 1934 was correct. No new ground for refund was stated in plaintiff's amendment; the informal or imperfect statutory ground of "losses not claimed," stated in the timely claim, was perfected and made specific and certain by the amendment, which, if it was permissible, is admitted to have been otherwise sufficient. We are of opinion that in the circumstances the amendment was permissible even if it was received after the 15th. For this reason the case of United States v. Andrews, Executrix, 302 U.S. 517, 58 S. Ct. 315, 82 L. Ed. 398, is not in point. In that case a new ground was stated in an amendment which ground had not been in any way included in the claim timely filed. In view of our conclusion it is not necessary to discuss the matter of whether the amendment actually reached the Commissioner or the collector on March 15, although it would seem that it probably was so received.
With reference to the claimed deduction of $10,000 on account of the 100 shares of stock of W. B. Moses & Sons, Inc., becoming worthless in 1934, we are of opinion on the facts and under the terms of the trust of 1925 and the provisions of sec. 166 (2), Revenue Act of 1934, 26 U.S. C.A. Int.Rev.Code, § 166(2), that plaintiff is entitled to a deduction of one-half, or $5,000, of this loss from his individual income for 1934. The W. B. Moses stock and all other property constituting the corpus of the trust created in 1925 were theretofore acquired by and were the property of plaintiff. Plaintiff and his wife were designated as the grantors in the trust agreement with the National Savings & Trust Co., as trustee (finding 4). The wife contributed no property or funds to the trust. The grantors were equal beneficiaries of the income of the trust, since they had not by joint action designated any other beneficiary. The trust was revocable upon joint written notice by the grantors, otherwise it was to be irrevocable. The trust instrument provided that in the event of revocation the trustee would convey the entire trust estate to the grantors equally.
Upon creation of the trust, although legal title was in the trustee, plaintiff's wife became a beneficiary of one-half of the income and a beneficial owner of one-half of the property of the trust, and plaintiff had only a one-half beneficial interest. Sec. 166, Revenue Act of 1934, provides as follows:
"Where at any time the power to revest in the grantor title to any part of the corpus of the trust is vested
"(1) in the grantor, either alone or in conjunction with any person not having a substantial adverse interest in the disposition of such part of the corpus or the income therefrom, or
"(2) in any person not having a substantial adverse interest in the disposition of such part of the corpus or the income therefrom, then the income of such part of the trust shall be included in computing the net income of the grantor."
Under the rule stated and applied in the cases of Crossett v. United States, 30 F. Supp. 802, 90 Ct. Cl. 212, 220-222, plaintiff's wife, being an equal beneficiary and having an equal interest in the corpus, did not have a substantial adverse interest against revocation of the trust. See Heller v. Commissioner of Internal Revenue, 41 B.T.A. 1020, and Buhl v. Commissioner of Internal Revenue, 45 B.T.A. 274, 277, 278. Plaintiff says that since he owned and contributed to the trust all the trust property he should be allowed a deduction for the entire loss of $10,000. But he was not the beneficial owner of the 100 shares of stock in 1934, he only had a one-half beneficial interest therein, and his return for 1934 was not a joint return of himself and wife.
The trust was a revocable trust, and plaintiff and his wife as equal beneficiaries and equal distributees of the corpus in event of revocation were taxable on one-half of the income and, likewise, entitled to a deduction of one-half of the loss in question. Welch v. Bradley et al., 1 Cir., 130 F.2d 109, 143 A.L.R. 1108.
*876 Judgment will be entered in favor of plaintiff upon the filing of a stipulation showing the amount with interest due him in accordance with the findings and this opinion from the appropriate dates of payments stated in finding 1.
It is so ordered.
WHALEY, Chief Justice, and WHITAKER, Judge, concur.
MADDEN and JONES, Judges, took no part in the decision of this case.
