2 T.C. 840">*840 This proceeding involves a deficiency in income tax for the calender year 1940 in the sum of $ 11,558.85. The principal question to be determined is whether certain securities which passed to petitioner under circumstances hereinafter set forth constituted income to her in 1940 as compensation for past services, or a gift or bequest excludable from income under section 22 (b) (3) of the Internal Revenue Code. In the event that the securities1943 U.S. Tax Ct. LEXIS 46">*47 are found to constitute income, then two further issues arise, namely, (1) is petitioner entitled to deduct attorney's fees and court costs in the respective amounts of $ 16,074 and $ 290.95 expended during 1940 in connection with litigation involving her right to such securities, and (2) should the securities be valued as of the date of the death of her employer or the date of the contract of settlement with adverse claimants of such securities.

The return for the period here involved was filed with the collector of internal revenue for the second district of Texas in Dallas.

The case was submitted on oral testimony and certain exhibits, from which we find as follows:

FINDINGS OF FACT

Petitioner, Mildred E. McDonald, also known as Ethel M. McDonald, is and at all times here pertinent has been a nurse registered in California. In July 1933 she was employed as a special nurse by Charles L. Roy, then a patient in the Redlands Hospital. She attended him for two months at the hospital and continued in his employ at his residence in the Casa Loma Hotel, Redlands, California, until January 1934. For her services she was paid the regular rate for special nursing of $ 6 per day during 1943 U.S. Tax Ct. LEXIS 46">*48 the period in which Mr. Roy was confined at the hospital. Her salary at the Roy 2 T.C. 840">*841 residence was $ 75 per month plus board and room. At that time regular hospital nurses were employed at $ 85 per month plus board and room. Petitioner was reemployed by Roy for a term beginning in April 1934 and ending in October of the same year. She was again reemployed in April 1935 and continued to serve Roy until his death on January 22, 1940. In 1935 and thereafter petitioner received $ 50 monthly in addition to her board and room. The hospital at San Bernardino was, in 1935, paying its nurses $ 60 a month and room and board. Beginning in 1935 petitioner also assisted in the operation of the Casa Loma Hotel, of which Roy was manager and owner.

In 1933 Charles L. Roy was the husband of Ruth Sutton Roy. He and Mrs. Roy were the joint owners of the Casa Loma Hotel and realty in the State of Washington. Each also owned sundry securities. Mrs. Roy in 1934 sued her husband for separate maintenance. The bill was dismissed later in the same year, at which time the Roys entered into a property settlement whereby Roy became entitled to full ownership of the Casa Loma Hotel and its furniture1943 U.S. Tax Ct. LEXIS 46">*49 and fixtures.

In July 1935 Mrs. Roy brought a suit in California seeking a divorce, the setting aside of the aforementioned property settlement, and an accounting. She prevailed on all counts. The resulting judgment, docketed November 8, 1937, included a money judgment against Charles L. Roy in the sum of $ 114,710.32, which was later reduced to $ 67,809 by the District Court of Appeals.

Pursuant to execution taken on the California judgment, the Casa Loma Hotel and all personal property used in its connection were levied upon and sold at sheriff's sales held in January and February 1938. This property, which had cost the Roys $ 150,000, was bid in by Mrs. Roy at $ 6,200. During the following year Mrs. Roy obtained a default judgment against Roy in Washington on a suit based upon the California judgment and thereupon caused a levy to be made upon all Roy's Washington real estate, which she bid in at sheriff's sales for $ 43,000. The several bids were credited upon the judgments.

While the California action was pending and during the course of the hearings thereon Charles L. Roy continued to reside in and operate the Casa Loma Hotel. On September 24, 1937, Roy and petitioner 1943 U.S. Tax Ct. LEXIS 46">*50 left California together and from then until some time in 1939 they had no permanent residence. With petitioner acting as his nurse, dietitian, secretary, and driver, Roy toured the country, spending the summers in the North and winters in the South. Time was spent at health resorts and clinics and with his relatives in Michigan and Canada. In 1939 Roy and petitioner established residence in Dallas, Texas, under 2 T.C. 840">*842 the assumed names of John and Louise Brown. Neither party had either relatives or acquaintances in Dallas. They continued to reside there until Roy's death.

In the course of the travels Roy drove his car but once, and this resulted in an accident in which petitioner was injured. In connection with a claim made by petitioner Roy made a statement to his insurer. Included therein was the following:

* * * Miss McDonald acts and has acted as a general assistant and dietician for me.

I have stomach ulcers and when Miss McDonald and I travel she prepares my food for me. When stopping any place we get adjoining rooms with a connecting kitchenette so she can prepare my food, etc. Among other things she types my letters, helps me drive my car and generally assists 1943 U.S. Tax Ct. LEXIS 46">*51 me in watching over my physical welfare.

I pay her a regular wage of $ 50.00 a month out of which she pays her own expenses. I reimburse her these board and room expenses. I did not have these traveling expenses when she worked for me in California as she stayed at the hotel part of the time and at home in Rialto, Calif. with her mother, part of the time.

* * * *

In November 1936 petitioner, as Ethel M. McDonald, opened a brokerage account in Los Angeles with E. A. Pierce & Co. Numerous security purchases were made between November 17, 1936, and March 11, 1937, all certificates being issued in the name of "Ethel M. McDonald." Roy invariably furnished the money and gave all orders to buy securities directly to the brokers or through petitioner. The cost of the securities so purchased exceeded $ 39,000. Roy explained to petitioner that the account was to be opened in her name in order that the property purchased could not be traced to him and attached through a judgment in Mrs. Roy's suit. In 1939, upon Roy's instructions, these stock certificates were exchanged for new certificates issued in the name of "Mildred E. McDonald." Roy caused other securities which had stood in his 1943 U.S. Tax Ct. LEXIS 46">*52 own name to be surrendered and reissued in the name of "Mildred E. McDonald" in the early part of 1938.

Dividends and interest from all stocks and bonds registered in the name of Mildred E. McDonald or Ethel M. McDonald were received by petitioner and placed in her bank account. From this account petitioner took her $ 50 per month salary and expenses for room, board, and traveling. The balance was used to defray Roy's living and medical expenses. Petitioner reported income from dividends, but none from salary, in tax returns filed in 1937, 1938, and 1939.

While residing in Dallas certain security transactions were made through Fenner & Bean. Proceeds from sales were used to purchase drafts payable to either petitioner or Roy. At his death there were six of such drafts outstanding, three payable to each. Roy had endorsed his drafts to petitioner and she had endorsed one of the drafts in which she was payee to him.

2 T.C. 840">*843 Upon the date of Roy's death all such bonds and stock certificates remaining unsold, together with the drafts, were in a joint safe deposit box located in the National Bank of Commerce of Dallas, where they had been placed by petitioner. Both petitioner and1943 U.S. Tax Ct. LEXIS 46">*53 Roy had had access to this box, which had been rented in August 1939 in the name of Louise and John Brown. Both had in fact entered it. Previously the securities had been kept in a satchel which the two carried about with them and later in a joint safe deposit box in another Dallas bank. In addition to the bonds, stock certificates, and drafts, the box contained Roy's holographic will and codicil and a group of 26 separate assignments, all but one of which were executed by petitioner under the name of "Mildred E. McDonald." Eleven were dated April 23, 1938, and the balance were undated. They purported to assign to Charles L. Roy each bond and stock certificate standing in petitioner's name by virtue of the above mentioned transactions and transfers. Petitioner had executed the assignments at Roy's request to enable him to return the securities to his name in the event of petitioner's prior death.

The holographic will and codicil were enclosed in a sealed envelope which had been turned over to petitioner by Roy and placed in the safe deposit box by the former. Petitioner had read neither the will nor the codicil prior to Roy's death. The will was dated December 18, 1935. In1943 U.S. Tax Ct. LEXIS 46">*54 1935 Roy frequently stated to petitioner that he was going to see that she received something through his will and later he told her that he had remembered her in his will. The codicil was dated March 30, 1939. At the time it was drawn Roy told petitioner that he wanted her to have all securities and money that were left after his death if she survived him and that he was making a will to this effect. The will and codicil are literally in words and figures as follows:

Last Will and Testament

Redlands, California, December 18, 1935.

I, Charles L. Roy, do hereby declare that I am now of sound mind and memory and am making this my last will and testament for the purpose of disposing of my property, in the event of my death, in the way that I wish such property to go when I pass away.

I am intentionally omitting making any provision herein for my wife, Ruth Sutton Roy for the reason that she has her own separate property and I feel that whatever I have should be disposed of as herein set out. In appreciation of the loyal services and care rendered me by Miss Ethel M. McDonald I give and bequeath to her the sum of $ 15,000.00 Fifteen thousand dollars and all of automobiles, guns, fishing1943 U.S. Tax Ct. LEXIS 46">*55 tackle, books and jewelry.

I declare that I have only two children, Charles L. Roy, Jr., and Louise Roy Busingin both of whom are over the age of twenty one years, and I give, devise and bequeath to said children in the proportions hereinafter stated, all of the rest and remainder of my property and estate wheresoever the same may be situated. 2 T.C. 840">*844 To Charles I give a undivided one third interest in and to all of said property; and to Louise, I give a undivided two thirds interest. All of the property which I now possess and which I am now disposing of by this will is my separate property and estate, and my wife, Ruth Sutton Roy, has no title or interest therein, and no part or portion of such property is community property.

I nominate and appoint Security First National Bank of Los Angeles, California and Miss Ethel M. McDonald as executors of this my last will and testament, they to serve without bond and to have power to sell, mortgage, hypothecate and dispose of such property without notice and without an order of the court either at private or public sale, in such a manner as shall be in their opinion for the best interests of my estate.

All other wills or codicils heretofore1943 U.S. Tax Ct. LEXIS 46">*56 made by me are hereby revoked and this will express my final wishes concerning the disposition of my property. I hereby declare that this will is written, dated and signed by me and is all in my own handwriting.

Charles L. Roy

Redlands, California.

December eighteenth (18th) nineteen hundred thirty five (1935).

CODICIL

Dallas, Texas, March 30th, 1939.

I, Charles L. Roy do hereby declare that I am now of sound mind and memory and am making this codicil which I attach to my last will and testament made and dated December 18th 1935, to alter the distribution of my property and real estate and also to eliminate the Security First National Bank of Los Angeles, California, as executor my estate. I am writing this codicil for the purpose of disposing of my property in the event of my death, in the way that I wish such property to go when I pass away.

I declare that I have only two children, Charles L. Roy Jr., and Ruth Louise Roy Busingin both of whom are over the age of twenty one years, and I give, devise and bequeath to said children in the proportions hereinafter stated, all of my real estate located in the State of Washington, U. S. A. To Charles I give Five dollars and a undivided1943 U.S. Tax Ct. LEXIS 46">*57 one half interest in and to all of said real estate located in the State of Washington and to Louise I give five dollars and a undivided one half interest in and to all of said real estate located in the State of Washington. About September 24th 1937 I deeded and assigned the [sic] Casa Loma Hotel with all furnishings, located in RedlandsCalifornia to my daughter Ruth Louise Roy Busingin. She to receive the said real estate after my death.

I direct the payment of all my funeral expenses not to exceed $ 1500.00. I request that there be an autopsy performed on my body before my interment. I wish to be buried in the Lucien Roy Family lot near Imlay CityMichigan where my mother and two sisters have preceeded [sic] me.

In appreciation of the many years of loyal service and faithful care rendered me by Miss Ethel M. McDonald registered nurse, I give and bequeath all of the rest, residue and remainder of my property. Miss McDonald has cheered, comforted and encouraged me through sickness, sorrows, disappointments and discouragements. She has brought me much happiness in my old age. I am sure that she has prolonged the years of my life with her cheerful, professional and 1943 U.S. Tax Ct. LEXIS 46">*58 sympathetic care.

I nominate and appoint Miss Ethel M. McDonald as sole executrix of this my last will. She to serve without bond and to have power to sell, mortgage, hypothecate and dispose of such property without notice and without an order of the 2 T.C. 840">*845 court either at private or public sale in such manner as shall be in her opinion for the best interests of my estate.

If either of my children contest and attempt to break, change or void the terms set forth by me in this my last will and Codicil it is my wish that they will receive only the $ 5.00 each and no more. I then give, devise and bequeath to Miss Lucille Roy and Miss Ethel M. McDonald in the proportions hereinafter stated, all of my real estate located in the state of Washington. To my cousin, Lucille Roy of Lobrevois, Quebec, Canada, I give an undivided one half interest in and to all of said real estate located in the State of Washington. To Miss Ethel McDonald, registered nurse, I given an undivided one half interest in and to all of said real estate located in the State of Washington.

I hereby declare that this Codicil is written, dated and signed by me and is all in my own handwriting.

Charles L. Roy.

March1943 U.S. Tax Ct. LEXIS 46">*59 thirtieth, Nineteen Hundred thirty nine.

Dallas, Texas, March 30th, 1939.

Charles L. Roy died in Dallas, Texas, on January 22, 1940, and shortly thereafter an application to probate his will and codicil was made in behalf of petitioner as executrix. Thereupon Roy's son and daughter, Charles L. Roy, Jr., and Ruth Louise Roy Busingin, filed a contest to the probate of the will and codicil on the grounds of lack of testamentary capacity and undue influence. Pursuant to their application, J. G. Shoemaker was appointed temporary administrator of the estate of Charles L. Roy, deceased, pending the termination of the litigation connected with the probate of the will and codicil. J. G. Shoemaker and petitioner both made demand upon the National Bank of Commerce for the contents of the safe deposit box, whereupon the bank filed a stakeholder's suit in the District Court of Dallas County interpleading all parties in interest. Petitioner and Shoemaker each filed cross actions and answers in this proceeding. Petitioner's unverified pleadings were signed by her attorney. It was therein alleged, in short, that petitioner was the owner of the stocks, bonds, and drafts by virtue of the aforementioned1943 U.S. Tax Ct. LEXIS 46">*60 transactions and transfers.

Issue was joined in the cross-action between petitioner and Shoemaker and the cause came on for hearing in April 1940. Petitioner testified on her own behalf, was subject to cross-examination and was, further, called by Shoemaker as his witness. Upon cross-examination and as Shoemaker's witness petitioner, in substance, gave the following testimony:

That the stocks transferred to her in 1938 were paid to her for services; that the stocks purchased through E. A. Pierce & Co. at Los Angeles from November 1936 to March 1937 were paid to her; that until November 1936 she was paid a salary by the Casa Loma Hotel, but not by Roy; that $ 30,000 was paid to her in 1936 and 1937 by Roy according to an agreement that she would take care of him for the rest of his life; that it was also agreed that he would pay her more as time went on as it was convenient for him to pay and would 2 T.C. 840">*846 pay her what he had in personal property if she took care of him the rest of his life and paid his expenses; that she should purchase the stocks with the money; that this agreement was not in writing; that this agreement was made in April or May 1935 in California, when she was1943 U.S. Tax Ct. LEXIS 46">*61 reemployed by Roy; that a draft purchased with her money was made payable to Charles L. Roy so he would have the money if she died first; that the stock was assigned to him so he would have something to live on if she died first, since she would not then have fulfilled her agreement; and that the will was drawn six or seven months after the agreement under which Roy was to give her all his personal property.

In the same cause petitioner's mother was called as a witness in petitioner's behalf. On direct examination she testified, in substance, as follows:

That she was told by Roy when she visited petitioner in Dallas: "Don't worry any more about your little girl, she has been well paid for her services."; and that before leaving California Roy, in stating that petitioner had promised to work for him as long as he lived, said, "You will never be sorry your daughter worked for me, because I have already paid her a good sum and I will pay her more."

In this suit the court ruled in petitioner's favor and an appeal was taken by Shoemaker.

Immediately after the completion of the stakeholder's trial, Mrs. Roy filed a suit against petitioner to enjoin her from taking possession of the securities1943 U.S. Tax Ct. LEXIS 46">*62 and for a judgment that the transfers and transactions above referred to be held void as to her as being in fraud of her rights as creditor. A temporary restraining order was granted, but subsequently the suit was dismissed upon certain technical pleas filed in petitioner's behalf. Mrs. Roy's attorney then gave notice of appeal.

In July 1940 negotiations were commenced with a view to compromising the controversies evidenced by the several lawsuits. Pending final settlement, petitioner's attorney held the contents of the safe deposit box in trust for all parties. The agreement reached was incorporated in a contract executed on November 28, 1940, by Mrs. Roy, first party; Ruth Busingin, her husband, and Charles L. Roy, Jr., second parties; J. G. Shoemaker, third party; and petitioner, fourth party. The contract recited facts pertaining to the several lawsuits and provided for the release of the Roy family claims against the estate assets within the jurisdiction of the Probate Court of Dallas, Texas, and the dismissal of all actions, including the will contest. It was also agreed:

2. * * *

(c) That the fourth party shall be and is entitled to any and all rights which she has under1943 U.S. Tax Ct. LEXIS 46">*63 and by virtue of the last will and testament and codicil thereto of the said Charles L. Roy, deceased.

2 T.C. 840">*847 Petitioner, on her part, paid Mrs. Roy $ 5,000 and J. G. Shoemaker $ 1,500. Thereupon, Mrs. Roy's suit was restored to the docket and dismissed with prejudice and the will contest was dismissed by Roy's children. The interpleader suit had previously been reversed by agreement and dismissed by the trial court.

The will and codicil of Charles L. Roy were admitted to probate and letters testamentary were granted to petitioner as executrix of the estate. She filed an inventory, which failed to include the above mentioned stocks, bonds, and drafts. The estate was appraised at $ 448.75 and consisted mostly of cash. In January 1941 an estate tax return was filed in which these stocks, bonds, and drafts were listed as "transfers during decedent's life" under schedule G and valued, as of the date of Roy's death, at $ 48,810.17. The net estate plus the specific exemption was given as $ 40,939.27. It is this amount which respondent added to petitioner's income for the year 1940. The value of the securities had decreased by $ 2,910.11 by November 28, 1940, the date of the contract1943 U.S. Tax Ct. LEXIS 46">*64 of settlement.

Petitioner in 1940 paid to her attorney, as a contingent fee in connection with all the litigation in Texas, the sum of $ 16,074. In connection with the settlement she paid $ 290.95 as court costs.

OPINION.

The primary issue here presented for determination involves the propriety of including the value of certain property as part of petitioner's gross income for the year 1940. In that year petitioner became unconditionally entitled to some stocks, bonds, and money following the death of Charles L. Roy, such property having a net value as of the death date of $ 40,939.27. Petitioner contends that the property was received by her through gift or bequest, and, hence, is to be excluded from gross income under the provisions of section 22 (b) (3) of the Internal Revenue Code. Respondent, on the other hand, takes the position that such property was transferred to petitioner in fulfillment of an oral agreement in 1935 between petitioner and Charles L. Roy that she should have the property in return for her services in caring for Roy as long as he lived. Consequently, respondent asserts, the property so transferred is taxable as compensation for services. We can not agree1943 U.S. Tax Ct. LEXIS 46">*65 that respondent's premise demands the result he claims.

Section 22 (a) of the Internal Revenue Code defines gross income as including gains, profits, and income derived from salaries, wages, or compensation for personal services. No controversy arises regarding the construction or inclusiveness of this provision. The crux of the problem, as we see it, is whether the within transfers to petitioner are exempt from taxation by reason of the express provisions 2 T.C. 840">*848 of section 22 (b) (3) of the Internal Revenue Code, which reads as follows:

SEC. 22. GROSS INCOME.

* * * *

(b) Exclusions from Gross Income. -- The following items shall not be included in gross income and shall be exempt from taxation under this chapter:

* * * *

(3) Gifts, Bequests, and Devises. -- The value of property acquired by gift, bequest, devise, or inheritance (but the income from such property shall be included in gross income).

Our first inquiry concerns the meaning of the word "bequest." In the case of United States v. Merriam, 263 U.S. 179">263 U.S. 179, the Supreme Court had before it the question of whether or not a bequest to executors in lieu of all compensation and commissions1943 U.S. Tax Ct. LEXIS 46">*66 was exempt from taxation. While disclaiming an intent to decide whether the definition of "bequest" as used in the statutory provision of a prior revenue act analogous to section 22 (b) (3) included an amount expressly left as compensation for service actually performed, the Court did state as follows:

* * * The word "bequest" is commonly defined as a gift of personal property by will; but it is not necessarily confined to a gratuity. Thus, it was held in Orton v. Orton, 3 Keyes (N. Y.) 486, that a bequest of personal property, though made in lieu of dower, was, nevertheless, a legacy, the court saying: "Every bequest of personal property is a legacy, including as well those made in lieu of dower, and in satisfaction of an indebtedness, as those which are wholly gratuities. The circumstance whether gratuitous or not, does not enter into consideration in the definition. . . . And when it is said that a legacy is a gift of chattels, the word is not limited in its meaning to a gratuity, but has the more extended signification; the primary one given by Worcester in his dictionary, 'a thing given, either as a gratuity or as a recompense.'"

And 1943 U.S. Tax Ct. LEXIS 46">*67 further:

The word "bequest" having the judicially settled meaning which we have stated, we must presume it was used in that sense by Congress. Kepner v. United States, 195 U.S. 100">195 U.S. 100, 195 U.S. 100">124; The Abbotsford, 98 U.S. 440">98 U.S. 440, 98 U.S. 440">444.

On behalf of the Government it is urged that taxation is a practical matter and concerns itself with the substance of the thing upon which the tax is imposed rather than with legal forms or expressions. But in statutes levying taxes the literal meaning of the words employed is most important, for such statutes are not to be extended by implication beyond the clear import of the language used. If the words are doubtful, the doubt must be resolved against the Government and in favor of the taxpayer. * * *

In that case the bequest was held to be exempt from taxation.

Here Charles L. Roy died leaving a will and codicil which were admitted to probate in Dallas County, Texas. The codicil contained a provision which reads as follows:

In appreciation of the many years of loyal service and faithful care rendered me by Miss Ethel M. McDonald registered nurse, I give and bequeath all of the 2 T.C. 840">*849 rest, 1943 U.S. Tax Ct. LEXIS 46">*68 residue and remainder of my property. Miss McDonald has cheered, comforted and encouraged me through sickness, sorrows, disappointments and discouragements. She has brought me much happiness in my old age. I am sure that she has prolonged the years of my life with her cheerful, professional and sympathetic care.

This is the pertinent clause of the two instruments in so far as the property in question could be affected. As in the case of the clause under consideration in the Merriam case, the property bequeathed is not expressly left as compensation for service actually performed. True, the testament states that the bequest is made "In appreciation of the many years of loyal service and faithful care * * *," but this is not to be confused with the payment of a consideration in exchange for such service and care. In Bogardus v. Commissioner, 302 U.S. 34">302 U.S. 34, which case involved the distinction between a gift and additional compensation for services, the Supreme Court said:

Some stress is laid on the recital to the effect that the bounty is bestowed in recognition of past loyal services. But this recital amounts to nothing more than the acknowledgement1943 U.S. Tax Ct. LEXIS 46">*69 of an historic fact as a reason for making the gifts. A gift is none the less a gift because inspired by gratitude for the past faithful service of the recipient. * * *

We think the above words are equally applicable to a bequest. A bequest is none the less a bequest because inspired by gratitude for past faithful services and there certainly can be no question of decedent's gratitude in this case, in view of his effusive expressions in petitioner's regard. The clause in question clearly falls within the definition of a bequest repeated with approval in the Merriam case.

It next becomes necessary to ascertain if the property which the respondent seeks to tax did in fact pass to petitioner under decedent's will and codicil. Since the will and codicil were actually admitted to probate and the estate administered, the property did so pass unless decedent had disposed of it prior to his death or unless it can be said to have been acquired pursuant to the alleged oral agreement. Surely, the circumstance that it was not included in the estate inventory would not be decisive of the actualities of the transfer and would not remove from the estate property actually owned by the 1943 U.S. Tax Ct. LEXIS 46">*70 decedent at his death.

Both parties placed particular emphasis on alternate theories which are grounded on the assumption that title to the property in question passed from Charles L. Roy to petitioner at the former's death under the terms of an oral agreement between him and petitioner in 1935. Of course, the parties are at odds as to the legal effect of the asserted transfers. Petitioner urges under this alternative contention that the property became hers by virtue of a gift inter vivos conditioned upon her surviving Roy and upon its existence in the original or 2 T.C. 840">*850 a substituted form at that time. Respondent argues that the property passed to petitioner at Roy's death in payment of his obligation under the terms of the alleged oral contract. If either of these contentions can be sustained the property could not also pass by bequest.

Respondent relies principally upon testimony, admitted here without objection, previously given by petitioner and her mother at a trial in the District Court of Dallas County, Texas. Presumably this testimony was offered as embracing quasi-admissions, attributable to petitioner, contradictory to her testimony in the instant proceeding. 1943 U.S. Tax Ct. LEXIS 46">*71 An analysis of petitioner's prior testimony, however, discloses that, rather than comprising a relation of facts from which the Court might draw conclusions of law, it consists largely of legal conclusions themselves. The questions of what constitutes a payment and what constitutes an agreement are peculiarly ones of law. In arriving at a decision on these questions we are not concluded by testimony of the petitioner in a prior and different proceeding which allegedly or in fact is contradictory to her testimony here. Such previous testimony to the extent, if any, that it contradicts her testimony as to material facts here is to be considered only in determining whether in the instant proceeding petitioner testified truthfully. In view of our decision that such testimony in the prior proceeding was largely a statement of petitioner's conclusions as to the legal effect of the transaction between her and decedent, and also in view of all evidence here adduced, we are unable to find that it materially discredits her testimony in the instant proceeding. Furthermore, the testimony of petitioner's mother given in the Dallas trial warrants little weight. The circumstances under which1943 U.S. Tax Ct. LEXIS 46">*72 Roy made the alleged statements to which she there testified, as well as the fact that the statements are subject to more than one interpretation, prevent us from attaching special significance to them.

Petitioner's theory rests on the fact that the property was actually placed in her name. It proceeds upon the premise that by reason of this circumstance petitioner thereby became the owner of the property. However, the name in which securities are registered is simply an evidentiary factor in ascertaining ownership. Stock is frequently held in the name of a nominee, in which instance the law raises an implied trust whereby the nominal owner is merely a trustee holding a bare legal title. Richards v. Robin, 162 N. Y. S. 12; Gray v. Graham (Conn.), 89 Ttl. 262.

The acts of the parties taken as a whole, together with the circumstances surrounding the transactions, compel us to conclude that neither theory under discussion is sustained. Moreover, both theories must fall for the very same reason, to wit, the fact that there was no 2 T.C. 840">*851 absolute transfer of the property from Charles L. Roy to petitioner. "A gift is the voluntary, gratuitous, 1943 U.S. Tax Ct. LEXIS 46">*73 and absolute transfer of property from one person to another, while a payment is the transfer of property absolutely in the performance of an obligation." (Italics supplied.) American Jurisprudence -- Payment, § 3.

Whether an apparent change in ownership is one in fact depends, to a large extent, upon the intent of the party from whom the title is claimed to have passed. Thus, among the requirements necessary to constitute a valid gift inter vivos is a clear and unmistakable intention upon the part of the donor to make it. Edson v. Lucas, 40 Fed. (2d) 398; Augustus E. Staley, 41 B. T. A. 752. And a payment does not occur unless the money or property passing from the debtor to the creditor is for the purpose of extinguishing the debt. Bailey v. Commissioner, 103 Fed. (2d) 448; Moses v. United States, 28 Fed. Supp. 817. The conduct of the parties, their acts considered in and of themselves as well as in relation to the happening of other events, and all the circumstances surrounding the purported transfers refute the existence of absolute1943 U.S. Tax Ct. LEXIS 46">*74 transfers during Charles L. Roy's life or his intention to make a gift or payment to petitioner at any time prior to his death. For example, the alleged contract is said to have been made in 1935, yet no move was made to transfer the personal property to petitioner until the latter part of 1936, and petitioner in the meantime made no request that such be done. After the stocks and bonds were placed in petitioner's name, Roy continued to exercise complete and exclusive dominion and control over their disposition, causing some to be sold from time to time and the proceeds reinvested or turned into bank drafts; he at all times had physical access to them; he made full use of the income from the investments less the amounts taken therefrom by petitioner as her current salary plus reimbursement for her living and traveling expenses; and he drew a codicil to his will leaving all his personal estate save $ 10 to petitioner, in spite of the fact that he was possessed of virtually nothing which had not previously been the subject of a transfer to petitioner's name, and, seemingly, had no expectation of acquiring additional properties in his own name. On petitioner's part, she executed separate1943 U.S. Tax Ct. LEXIS 46">*75 assignments of the securities to Charles L. Roy at his behest, which instruments were placed with the securities themselves; and at no time did she make an attempt to act in relation to the property except upon Roy's direction.

Moreover, that there was present in Charles L. Roy's mind a specific purpose in causing his property to be held in petitioner's name, entirely apart from gift or payment, is amply established by the record. It is clear beyond question that his activities in connection with his property from the latter part of 1936 until his death were motivated by a passionate desire on his part to place what remained of his worldly 2 T.C. 840">*852 possessions beyond the reach of his wife. To this end he converted his cash into securities registered in the name of Ethel M. McDonald; subsequently caused them to be held in the name of Mildred E. McDonald, this, obviously, being calculated to further impede the discovery of his assets since petitioner was unknown to Mrs. Roy by that name; transferred the nominal ownership of his remaining securities to petitioner; removed them from California where his wife's action was pending and in which state judgment against him was thereafter1943 U.S. Tax Ct. LEXIS 46">*76 obtained; retained them in his physical possession; sought legal advice on how he might even more adequately remove them from the possibility of seizure under legal process; and purchased bank drafts payable or endorsed to petitioner, but which were not presented for payment, with practically all the cash he later acquired.

The facts and circumstances recited above impel us to conclude that the transfers and transactions in question did not constitute either a gift inter vivos or payment to petitioner. Admittedly, it is not only possible but probable that Roy desired petitioner to have what remained of his personal property after his death and that petitioner expected as much. This is, in fact, what actually occurred. But it did not and could not come to pass as a result of a gift made contingent upon petitioner surviving Roy. Such a gift would be ineffective. Moore v. Layton (Md.), 127 A. 756; Gray v. Greer (Ky.), 70 S. W. (2d) 683; Barlow v. Halley, 121 N. Y. S. 708. Gifts reserving title in and enjoyment of the subject property to donor during his lifetime are testamentary1943 U.S. Tax Ct. LEXIS 46">*77 in character and void. In re Humphrey's Estate, 181 N. Y. S. 169.

Did petitioner acquire the property pursuant to the settlement agreement of November 28, 1940, rather than as legatee under Charles L. Roy's will and codicil? It is clear that she did not. As concerns economic benefit to petitioner, the express terms of the agreement provided only that she "shall be and is entitled to any and all rights which she has under and by virtue of the last will and testament and codicil thereto of the said Charles L. Roy, deceased." Petitioner received nothing under the settlement except the privilege of enjoying her rights relieved of the claims of other parties. She simply retained her position as legatee, taking the property as an acquisition in the devolution of Roy's estate. In this respect the effect of the settlement was merely to reduce the value of her bequest by the amount she agreed to pay the other parties to the contract in consideration of their covenants. It did not change its character as a bequest. See Charlotte Keller, 41 B. T. A. 478; Lyeth v. Hoey, 305 U.S. 188">305 U.S. 188.

We hold1943 U.S. Tax Ct. LEXIS 46">*78 that petitioner received the property in question as a bequest within the meaning of section 22 (b) (3) of the Internal Revenue Code and that respondent erred in including its value in petitioner's gross 2 T.C. 840">*853 income for the year 1940. The cases of Hilda Kay, 45 B. T. A. 98, and Cole L. Blease, 16 B. T. A. 972, which respondent contends should lead us to an opposite conclusion, are not in point. In neither was the recipient of the money, which we held in each case as taxable income, a legatee.

The above conclusion renders it unnecessary to decide the further question regarding the deductibility of attorney fees and court costs and the date of valuation of the securities.

Decision of no deficiency will be entered.