The opinion of the court was delivered by: BARD
The plaintiff has instituted this action to recover $3,661.15, together with interest thereon from October 15, 1938, which amount was the tax on a profit of $12,979.07 realized on the sale of certain securities during the year 1935. The defendant included this amount in the plaintiff's taxable income for that year. It is the plaintiff's contention that this was unwarranted, that no profit accrued to him, because he held the securities in trust for his son, Earl J. Van Sciver.
The parties have agreed that the sole question is whether the defendant wrongfully included the $12,979.07 in the plaintiff's taxable income, and that, in the event such was wrongful, the plaintiff is entitled to judgment in the sum of $3,661.15, together with legal interest thereon from October 15, 1938.
Upon the bases of the stipulation of counsel and evidence adduced at trial, I make the following special findings of fact:
1. The plaintiff is a citizen of the United States and was a resident of Philadelphia, Pennsylvania, for the year 1935.
2. The defendant was during the time in question and still is Collector of Internal Revenue for the First District of Pennsylvania.
3. The plaintiff's son, Earl J. Van Sciver, had a loan at the Provident Trust Company, in the City of Philadelphia, secured by certain collateral which, prior to November, 1933, had become insufficient, and plaintiff loaned to his son certain securities to meet marginal requirements.
4. On or about November 1, 1933, the son's account again became under-margined and the Provident Trust Company notified him that additional collateral was required, but no additional collateral was presented.
5. The plaintiff bought in the securities when they were sold by the Provident Trust Company on November 1, 1933, to satisfy the account.
6. The plaintiff went to Arizona for his health shortly thereafter, without telling the accountant who kept account of his financial affairs of any change in his affairs.
7. On September 26, 1934, an entry was made by the accountant, after a conversation with the plaintiff, that the bonds were to be held or sold for Earl J. Van Sciver, any profit or loss was to be charged to him, interest on the bonds was to be retained by George D. Van Sciver as interest on the money invested, and the bonds were to be transferred to a separate Earl J. Van Sciver bond account. It was entered as the Earl J. Van Sciver bond account.
8. The son was accorded the right to manage the securities while they were in the plaintiff's control.
9. The plaintiff's son did manage the account, buying and selling into and out of it.
10. The plaintiff filed a fiduciary return for the tax year 1934, showing the profit on the account ...