Realty Co., to secure the release of the tracts transferred to Jemison, Leary, and their wives, paid $11,000 from the proceeds of sale allocated to the retirement of bonds for the purpose of securing that release, and that that $11,000 was by the agreement with the trust company substantially 50 per cent of the value of the property so released. On that basis the property delivered to the four individuals in liquidation was of the value of approximately $22,000, or $5,500 each. By the agreement between the parties and the Birmingham Realty Co. it further appears that 20 per cent of certain amounts set forth in that agreement, aggregating as to such 20 per cent $9,546, was to be retained from the selling prices of the lots there set forth by the vendor parties, and also that $9,485.28 was required to be paid to the vendors on account of expenditures theretofore made by the Forest Park Realty Co., making a total of $19,031.28 apparently received by them in excess of the amounts paid directly to them by the Birmingham Realty Co. Offsetting this total of $19,031.28 there was paid approximately $1,800 to acquire a lot required by the Birmingham Realty Co. to enable it to replat the property and provided for in article 8 of the contract above referred to. This represents a total net amount of $17,231.28 received by the four individuals in connection with the transfer and not shown on the record to have been in the actual consideration paid for the property sold. It is of record that Jemison and Leary and their wives received $71,501.31 each, or $143,002.62, in respect to each interest in actual cash from the Birmingham Realty Co., plus real property of a value of $22,000, divided into four parts. It appears, therefore, that the four individuals received between them $286,005.24, plus $17,231.28, plus $22,000, or a total of $325,236.52, out of which they may have deducted some "out-of-pocket " disbursements for attorneys, etc., in connection with the sale, which the Commissioner, by treating the transaction as one made by the Forest Park Realty Co., has allowed as deductions to that company. Upon the record we find that the net amount received by the individuals for the purpose of measuring the gain derived from the transaction was, as to all four individuals, not less than $308,005.24, and not more than $325,236.52, the latter figure to be adjusted as to any amounts heretofore allowed by the Commissioner in connection with the determination of the income of the Forest Park Realty Co. and transferred to the individuals under this decision. In the event, also, that any portion of the above amount of $17,231.28 was in fact not received by the individuals, adjustment therefor should be made in the decision under Rule 50 herein. In the absence of such adjustment the total basis for the computation of gain shall be $325,236.52, minus $41,000, divided as hereinafter set forth.

The next and last question is whether the above amounts received by the Jemison and Leary interests are divisible into four parts or into two; that is, whether there shall be attributed to Jemison and to Leary each one-half of the amount above set forth, or whether there shall be attributed to each of them only one-fourth thereof. In other words, the question is whether the gifts of 621 shares of stock by each of the parties to their respective wives on August 26 were valid and operated to defeat a taxable profit as to one-half of the amounts above set forth.

The Commissioner appears not to have questioned the fact of the gift or that the wives have since retained the proceeds of the sale above outlined. He says, however, that the gift was in substance a gift of the proceeds of the sale, and not a gift of the stock. This contention overlooks two facts; first, that at the time of the gift there had been no sale, and second, that the thing given was stock and the thing sold was real estate. The wives received the stock on August 26. On September 22 they exchanged that stock for real estate, and on that day they sold the greater part of the real estate. Certainly, if title to the stock passed on August 26, there can be no question that it was the wives who received and sold a portion of the interest in the real property. Here again the transaction was either fraudulent or it was real. If it was a fiction and a subterfuge, and if the wives were not the recipients of the gifts alleged, the returns of Jemison and Leary were false and fraudulent, and the penalty as well as the tax should be imposed upon them. If the gifts were real and valid, and were made at the time and in the manner the parties claim they were, then the stock from that time on was the property of the wives, and the subsequent transactions were the transactions of the wives and not of the husbands.

We may well look with suspicion upon transactions of this kind, and hold, as we have held, that where the circumstances at the time and subsequent transactions indicate that the gift or sale between husband and wife was a mere subterfuge to avoid a tax, the transaction is invalid. Appeal of P. B. Fouke, 2 B. T. A. 219. But we can not disregard the separate legal existence of husband and wife as individuals, or their separate rights to hold property and to make separate income-tax returns under both the general law and the Revenue Acts. So long as avoidance is permitted in this matter we can not hold that the mere resort to it is a fraud, nor can we reverse the chronology of the transaction itself and hold, as the Commissioner contends, that a gift of stock is a gift of the proceeds of the sale of real estate owned by the company, the stock in which was the subject matter of the gift.

Inasmuch as the value of the stock of the Forest Park Realty Co. on August 26 was reflected substantially by the existing offer to purchase its property for $485,000, and upon the dissolution of the corporation its assets were distributed in kind, we are unable to find as a fact that the 622 shares given to the wives on that date had a value substantially different from one-fourth of the $325,236.52 above set forth. Hence we are unable to find as to those shares that any taxable profit exists.

It follows from the above that Jemison and Leary each realized a gain in 1919 from the foregoing transactions of the difference between one-fourth of $325,236.52, the cash and other valuable assets received by them as a result of the dissolution of the Forest Park Realty Co. and the sale of its property, and one-fourth of $41,000, the value of the property turned in to that company for stock. Their tax, therefore, should be computed upon this basis, including in the net income of each at least one-fourth of $308,005.24 and not exceeding $325,236.52, as above set forth. In the absence of agreement between the parties the tax will be computed on a gain of $71,059.13 each, as to Jemison and Leary.

APPEAL OF FIRST NATIONAL BANK OF ST. LOUIS.

Docket No. 2927. Submitted October 5, 1925. Decided February 17, 1926.

Attorney's fees and sums paid for services in transferring assets in connection with the merger of several banks held not to be deductible as ordinary and necessary expenses.

Rhodes E. Cave, Esq., for the taxpayer.

A. H. Fast, Esq., for the Commissioner.

Before STERNHAGEN, LANSDON, and ARUNDELL.

This is an appeal from the determination of a deficiency in income taxes for the period from July 7, 1919, to December 31, 1919, inclusive, in the amount of $7,280.56. In its petition the taxpayer charges error on the part of the Commissioner in disallowing, as deductible expenses, $23,191.76 alleged to have been paid for adding machines, $16,100 alleged to have been paid for a lease of certain property, and $30,000 said to have been paid in connection with the merging of several banks with the taxpayer. At the hearing of the appeal counsel for the taxpayer stated that he was satisfied with the Commissioner's adjustment of items 1 and 2 and desired the Board simply to pass on the third question.

FINDINGS OF FACT.

The taxpayer is a national bank, located in St. Louis, Mo. It originated by the consolidation in 1919 of the old Third National Bank, the Mechanics American National Bank, and the St. Louis Union National Bank. Incident to the consolidation of the aforementioned banks, the sum of $30,000 was spent by the taxpayer and charged on its books to expense. This amount was thereafter deducted in its income-tax returns for the period under consideration. Of this amount $16,500 represented attorney's fees and $13,500 represented sums paid to employees on account of overtime work required in transferring the assets of the three banks to the one.

DECISION.

The determination of the Commissioner is approved.

OPINION.

ARUNDELL: Section 234 (a) (1) of the Revenue Act of 1918 provides that in computing net income there shall be allowed as deductions all of the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business. It is desired here to deduct, under this provision, the amounts expended in connection with the consolidation of the several banks mentioned in the findings of fact. Generally speaking, items to be deductible under this subdivision of the section must be those ordinary and usual expenditures incurred in the conduct of a going business. The fact that they may be unusual in amount or seldom recur can not deprive them of their inherent character as expense items. On the other hand, amounts expended for assets that are to continue in use in the business over several years are usually to be classified as capital items, and the sum paid therefor is recovered over the life of the asset, if it be of an exhaustible character. The transaction which called forth the expenditures here in question was presumably one which resulted in increasing and maintaining the earning power of the taxpayer, and thus throughout its corporate life the taxpayer will enjoy the fruits of these expenditures.

Some accounting authorities have urged as a matter of sound and conservative accounting that organization expenses, which are substantially similar to the items here in question, should be written off over a term of from 2 to 10 years, for the reason that such expenses, if capitalized, are represented by no salable assets. Much may be said for such a course as a sound business measure. However, as we have heretofore had occasion to remark, the income-tax

laws are not always in accord with accounting practice. Appeal of Consolidated Asphalt Co., 1 B. T. A. 79. We can not escape the conclusion that the expenses in question are not those ordinary and necessary expenses permitted by the statute to be deducted. Appeal of F. Tinker & Sons Co., 1 B. T. A. 799. It must follow that the determination of the Commissioner is approved.

APPEAL OF CHARLES B. SHELTON, ET AL., EXECUTORS, ESTATE OF LUTHER Z. ROSSER.

Docket No. 2161.

Submitted July 14, 1925. Decided February 17, 1926.

Taxes which are a lien against the estate of a person at the date of his decease in 1923 are "claims against the estate" within the meaning of section 403 (a) (1) of the Revenue Act of 1921.

Charles B. Shelton, Esq., for the taxpayer.

R. E. Copes, Esq., for the Commissioner.

Before JAMES, LITTLETON, SMITH, and TRUSSELL.

This is an appeal from the determination of a deficiency in estate tax in the amount of $2,773.80. The issues in the appeal are whether certain local property taxes, in the amount of $6,877.39 paid to the City of Atlanta and $4,494.48 paid to the State of Georgia, were a claim against the estate of the decedent at the time of his death and deductible in determining the value of the estate at the time of the decedent's death; and whether a certain bequest of a law library valued at $4,800 and given in lieu of executors' commissions was properly deductible in determining the value of the net estate.

FINDINGS OF FACT.

Luther Z. Rosser died March 13, 1923, a resident of Atlanta, Ga. The executors made a return for Federal estate taxes, and the value of the gross estate has been agreed between the executors and the Commissioner. The executors deducted from the value of the gross estate taxes paid to the City of Atlanta in the amount of $6,877.39 and taxes paid to the State of Georgia in the amount of $4,494.48, a total of $11,371.87. These taxes were assessed upon the basis of returns made by the executors to the taxing authorities of Georgia of the value of the real and personal property which belonged to the decedent on January 1, 1923, as to State and county taxes, and on January 31, 1923, as to taxes to the City of Atlanta.

The decedent died before his return of real and personal property for taxation in Atlanta and in the State of Georgia had been made