Ruble v. C.I.R., 011443 FEDTAX, 109689

• Opinion Judge: Murdock, Judge:
• Party Name: CLEO V. RUBLE, Petitioner. v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
• Case Date: January 14, 1943
• Court: U.S. Tax Court

1 T.C.M. (CCH) 404 (1943)

CLEO V. RUBLE, Petitioner.

v.

COMMISSIONER OF INTERNAL REVENUE, Respondent.

No. 109689

United States Tax Court

January 14, 1943

Dividend held not constructively received in prior year.-

Official Tax Court Syllabus

Taxpayer and George L. Belden deposited stock each of them and their wives owned and insurance policies on each others life in trust. The survivor was to receive the stock and the named beneficiaries the insurance proceeds. Belden died in 1939 and his wife challenged the validity of the agreement. A dividend was declared payable December 29, 1939 and that due on shares in Belden's name was credited to a suspense account. The court awarded all stock to the taxpayer in 1940 and the dividend held in suspense was credited to him. His returns were filed on the cash basis. Held, that the dividend constituted taxable income in 1940 and was not constructively received in 1939.- Ed.

MEMORANDUM OPINION

Murdock, Judge:

The Commissioner determined a deficiency in the petitioner's income tax for the calendar year 1940 in the amount of $14,827.26. The deficiency resulted from the Commissioner's determination that dividends in the amount of $27,500 were income in 1940 rather than in 1939. The propriety of the inclusion of the dividends in 1940 income is the only issue. The facts have been stipulated.

The petitioner is an individual. His income tax return for 1940 was filed with the collector for the district of Missouri.

The petitioner in and prior to 1939 was the owner of 1 share of the capital stock of the Dealers Transport Company. His wife, Nita M. Ruble, owned 17 shares. George L. Belden and his wife, Gertrude A. Belden, owned the other 22 shares. Prior to the death of Belden in 1939, the directors of the company were Belden, the petitioner and the petitioner's wife. Belden was president and treasurer, the petitioner was vice president, and Mrs. Belden was secretary.

The four stockholders of the Dealers Transport Company deposited all of their stock with a trustee in 1936. This was done pursuant to the terms of a written agreement which provided in part that:

Upon the death of either of said George L. Belden or Cleo V. Ruble, the Trustee

(3) shall deliver all the stock then held by it to the survivor of them. ***

Belden purchased insurance on the life of the petitioner in the amount of $54,000, and the petitioner purchased insurance on Belden's life in the amount of $66,000. These sums represented the values, respectively, of the shares owned by the Rubles and by the Beldens. The insurance policies were deposited with the trustee who held the stock. The written agreement among the stockholders provided with respect to the policies that:

Upon the death of either of said George L. Belden or Cleo V. Ruble, the trustee shall deliver the policies then held by it on the life of the deceased to the beneficiaries named therein. ***

George L. Belden died on May 9, 1939, at which time the stock of Dealers Transport Company had a fair market value in excess of $3,000 per share. Belden, in making his will, had taken no cognizance of the 1936 contract, and a...