Silver v. COMMISSIONER OF INTERNAL REVENUE
| Decision Date | 06 August 1940 |
| Docket Number | Docket No. 100186. |
| Parties | MAX SILVER, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Board of Tax Appeals |
Harry Friedman, Esq., and Joseph A. Bonchi, Esq., for the petitioner.
Charles P. Reilly, Esq., and John M. Kennedy, Esq., for the respondent.
This is a proceeding to redetermine a deficiency in income tax of $14,737.16 for the calendar year 1937. The issues are, (1) whether petitioner is taxable in respect of the entire prize received on a winning ticket in the Irish Sweepstakes, (2) whether he is wholly exempt from tax on the ground the ticket was acquired by gift, and (3) whether he may deduct the expenses of a trip to Ireland to collect the prize.
FINDINGS OF FACT.
Petitioner and his wife conducted a bakery in Springfield, Massachusetts, having leased the premises from one Edward Carey, a retired policeman. They had frequently asked Carey, who was an old friend, to get them a ticket in the Irish Sweepstakes. In the latter part of 1936, Carey sent his sister-in-law in Ireland some money and directed her to buy some tickets on the Sweepstake races to be run in March 1937. The tickets, by Carey's direction, were bought in the name of Max Silver, the petitioner. In January 1937 Carey visited petitioner and his wife, Pauline L. Silver, in their home and threw on the table at which they were sitting twelve tickets on the forthcoming Sweepstakes, stating that he was giving the tickets to both of them. He refused to take any money for the tickets and never received any. Both petitioner and Mrs. Silver understood that the tickets were being given to both of them. Carey paid approximately $25 for the twelve tickets.
Thereafter Mrs. Silver put the tickets in the safe in their house. She sold some of them to friends. The stubs of the tickets were kept in Ireland in petitioner's name.
One of the tickets given to petitioner and his wife and which they had retained won a prize of $73,298.43. Petitioner went to Ireland to collect the money and in so doing incurred traveling and other expenses of $1,360. Wishing to conceal their good fortune from friends and relatives in Springfield, petitioner had the prize money converted into two drafts, one for $4,300 drawn on the Guaranty Trust Co. of New York, and one for $68,998.43 (American money) on the Bank of Nova Scotia of Toronto, Canada. He brought these drafts back with him and, with the consent of Mrs. Silver, eventually deposited them in his own name in the Guaranty Trust Co. in New York.
The following sums out of the prize money were used to buy securities for Mrs. Silver:
Japanese bonds __________________________________________ $11,140.79
Japanese bonds __________________________________________ 8,336.00
Miscellaneous stocks ____________________________________ 3,038.71
Standard Acceptance Corp. stock _________________________ 3,200.00
___________
Total _____________________________________________ 25,715.50
The Japanese bonds were bearer bonds and did not have Mrs. Silver's name on them. She kept them in the safe at their house, and later put them in a safety deposit box in the Springfield National Bank, which box was held by her jointly with her husband. She clipped the interest coupons herself and gave them to petitioner that he might use them to pay part of the premiums on new policies of insurance taken out for her sole benefit after receipt of the prize money. The Standard Acceptance Corporation stock, though bought for her, was in petitioner's name, since the charter of the corporation did not permit it to have additional stockholders. Petitioner, but not his wife, was already a stockholder. Dividends on her stock were also used to defray the premiums on the new insurance policies, in order that these might not be a drain on the bakery business. All the remaining stock, thus purchased, was in her name.
Petitioner deposited the dividends and interest on Mrs. Silver's securities in his own account and drew on this account to pay the insurance premiums.
In addition to being used to buy securities for Mrs. Silver, the prize money was also applied to her benefit as follows:
Federal income taxes and other items _____________________ $6,000.00
State income taxes _______________________________________ 1,147.63
Son's confirmation party _________________________________ 1,300.00
The total of the above amounts spent by and for Mrs. Silver is $34,163.13. In addition, petitioner gave or allowed her to spend smaller sums of undisclosed amount. Every check drawn in paying out the prize money for the benefit of Mrs. Silver was signed by petitioner.
Mrs. Silver sold some of the Japanese bonds and kept the proceeds. She retained all her stock. She never required an exact accounting...
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