We will next consider petitioner's fifth assignment of error, which is as follows:

5. That $25,970.21, being 1⁄44th of the sum of $103,880.86 collected by J. H. Tippett for oil and gas leases on mineral classified lands and credited to the Laura Tippett Estate, as ordinary income, was funds belonging to the State of Texas and not taxable to J. H. Tippett, as such fiduciary, unless the Supreme Court of Texas overrules the decision (on that point) of Green v. Robison, 8 S. W. (2) 655.

During 1927 petitioner sold a number of leases on mineral classified lands, viz., lands in which the State of Texas reserved the minerals. These sales were made under what was known as the Relinquishment Act, under which the landowner was constituted the agent of the state to dispose of these mineral rights. The amount received as bonuses from the sale of these leases has been stated in our findings of fact.

In an extended opinion in the case of Green v. Robison, 8 S. W. (2d) 655; 117 Tex. 533, the Supreme Court of Texas, in passing upon the constitutionality of and construing the Relinquishment Act said:

We think the act, as it says in article 5367, creates the owner of the soil the state's agent for the purposes mentioned therein. For the accomplishment of those purposes, said agent is authorized, "to sell or lease

the oil and gas upon such terms and conditions as such owner may deem best, subject only to the provisions" of the act. There is no vesting of title or interest in the oil and gas in the owner of the soil. No rights pass to any one until a sale or lease is effected according to the terms of the act. What is sold, the consideration therefor, the provisions inuring to the benefit of the owner of the soil, what are the proceeds of the sale, and their application, must all be determined from the act.

We interpret the act to fix a minimum price of 10 cents per acre per annum and the value of one-sixteenth of the gross production free of cost to the state, for which the state is willing to sell the oil and gas, and the agent is authorized to secure the highest price obtainable for the benefit of the fund to which the land belongs; like amounts received by the state to be paid by the purchaser to the owner of the soil. If a bonus is paid, if a larger royalty or other amounts are contracted for, the state and the owner of the soil receive equally in like amounts.

Subsequent to the sale of the leases of the mineral classified lands involved in this proceeding, the State of Texas instituted an action against J. H. Tippett, individually, and as community survivor of his deceased wife, and the Empire Gas and Fuel Company, lessee, to recover one-half of $16,800 cash bonus and one-half of $1 per acre rental remaining after deducting 10 cents per acre paid the State. The trial court rendered judgment of $8,592, as prayed for, which

on appeal to the Court of Civil Appeals of Texas, at Austin, was affirmed upon the authority of Green v. Robison, supra, and Empire Gas & Fuel Co. v. State, 21 S. W. (2d) 376. Petitioner has appealed the decision of the Court of Civil Appeals to the Supreme Court of Texas, and, so far as we have been advised, no final decision by the Supreme Court of Texas has yet been rendered on the appeal.

The last session of the Texas Legislature passed an act for the relief of land holders who had purchased mineral classified land from the State of Texas and were affected by the decision of the Supreme Court of Texas in Green v. Robison, supra. This act was approved by the Governor on March 13, 1931, and sections 3 and 8 thereof seem clearly to cover petitioner's situation.

In view of the act of the Texas Legislature just cited, and of the fact that there is no evidence to show that petitioner has ever paid over to the State of Texas any of the sums received as bonuses from the sale of mineral classified lands, except the 10 cents per acre called for in the General Leasing Act, and that the evidence does not show that petitioner has ever been sued for an accounting by the State of Texas, except in the one suit of State of Texas v. Empire Gas & Fuel Co. and J. H. Tippett, already referred to, and that he is contesting his liability in said suit, it is not believed that any of the sums received as bonuses for these mineral classified lands should be excluded from petitioner's gross income. As to these items, petitioner's books were kept on the cash receipts and disbursements basis and the items of income were properly returnable in the years when received. Our decision on this issue is for respondent. Cf. Ford v. Commissioner, 51 Fed. (2d) 206; Board v. Commissioner, 51 Fed. (2d) 73.

Petitioner's sixth assignment of error is as follows:

6. That petitioner is entitled to additional depletion on the sum of $1,690.83 reported on Exhibit 2 as income from the sale of oil from producing wells.

The fiduciary return for 1927 on Form 1011 shows that the only item of oil royalties from producing oil wells was $1,690.83, and from this the full depletion allowance of 271⁄2 per cent, amounting to $464.98, was deducted and this deduction respondent has allowed. Petitioner is not entitled to any further deduction on this account.

Decision will be entered under Rule 50.

ELSIE A. DREXLER, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Docket Nos. 31772, 41818. Promulgated January 7, 1932.

1. Income from property of a revocable trust held taxable to the grantor under section 219 (g) of the Revenue Act of 1926, notwithstanding the fact that such income was distributable to charitable organizations.

2. Certain residence property owned by petitioner was used by relatives during the taxable years without payment of rent therefor. Held, that the respondent correctly disallowed deductions for repairs, insurance and depreciation in respect of such property. Marcel E. Cerf, Esq., Henry Robinson, Esq., and Myrtile Cerf, C. P. A., for the petitioner.

F. R. Shearer, Esq., for the respondent.

The respondent has asserted deficiencies in income taxes for 1924, 1925 and 1926, in the respective amounts of $2,298.14, $1,758.80 and $1,341.47. The issues raised are: (1) Whether income from property of a revocable trust which was distributable to charitable organizations is taxable to petitioner under section 219 (g) of the Revenue Act of 1926; and (2) whether the petitioner is entitled to deductions for depreciation, repairs and insurance on residence property owned by her which was used by certain of her relatives without payment of rent therefor.

FINDINGS OF FACT.

The petitioner is an individual residing in San Francisco, California. On April 1, 1920, she executed a trust instrument whereby she conveyed certain lands located in San Joaquin County, California, in trust for the following purposes:

To establish, build, improve, equip, operate, maintain, aid and endow public charitable (including educational) institutions, agencies and activities; but exclusively for the purposes of aiding them in their public charitable (including educational) work:

The instrument gave the trustees power to dispose of the income. as they might elect, so long as it was for charitable uses. The petitioner was one of the trustees. In the trust conveyance she reserved the right, during her life, to fill any vacancy in the trustees. She was active, at all times, in the actual distribution of the income. The last paragraph of the trust instrument provides, in part, as follows: The said party of the first part hereby expressly reserves the right and power to revoke, at any time during her life, the conveyance and all of the Trusts evidenced by this indenture, and upon such revocation the said Trusts shall forthwith cease, and the title to all of said property and estate-whether it be that herein specifically described or any subsequently acquired-shall vest in and all of it shall belong to the said party of the first part, free from any trusts or claims whatsoever.

128445°-33- -11

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The net income from the trust for each of the taxable years was distributed to the Hospital and School for Convalescent Children, an incorporated charitable institution located at Palo Alto, California, which had been built largely with funds borrowed on the trust property. Though not specifically named in the trust instrument, the trust was created primarily for the purpose of providing funds for that institution. For the respective taxable years the net income of the trust was $19,179.33, $19,000 and $12,218.16, none of which was reported by the petitioner on her income-tax returns. The respondent has included the amounts in her gross income and has allowed deductions for charitable contributions under section 214 (a) (10) of the Revenue Act of 1926, limited, however, to 15 per cent of petitioner's net income.

Some time prior to the taxable years petitioner built a residence in San Francisco, which was used without payment of rent by an aunt of petitioner's husband. She purchased another residence in San Francisco, which was used without payment of rent by petitioner's brother and sister. On her income-tax return for 1926 petitioner deducted $900 for depreciation, $500 for taxes paid, $712 for repairs, and $91.13 for insurance on such residence property. She reported, as income received from such property, the amount of $120 collected from an insurance company on account of a small fire. The respondent increased petitioner's net income by $2,083.18, which represents the total of the deductions less the $120 income reported.

In 1926 the petitioner paid State and county taxes in the amount of $400.90 on the above properties, which amount the respondent concedes to be a proper deduction.

OPINION.

LANSDON: The petitioner contends that the trust here involved is a charitable organization and that it is exempt from tax under section 231 of the Revenue Act of 1926. The respondent has determined that it is taxable under section 219. Clearly the petitioner does not come within the provisions of section 231. The law there refers to an organization which is engaged in carrying on a charitable function. A revocable trust is taxable under section 219, which provides in subsection (g) as follows:

Where the grantor of a trust has, at any time during the taxable year, either alone or in conjunction with any person not a beneficiary of the trust, the power to revest in himself title to any part of the corpus of the trust, then the income of such part of the trust for such taxable year shall be included in computing the net income of the grantor.

Under the above provisions of the act, which contain no limitation, the petitioner is taxable on the income from the trust property, regardless of the nature of the trust. Cf. Corliss v. Bowers, 281 U. S.

376; Elida B. Langley, 24 B. T. A. 1156; Grace Whitney Hoff, 20 B. T. A. 86; Irenee Du Pont, 20 B. T. A. 482; Alfred F. Pillsbury, 19 B. T. A. 1229.

We think it is clear that the two residence properties acquired by petitioner for the use and occupancy of her relatives were not used in carrying on a business or held for income-producing purposes and that she is entitled to no deduction for expenses incurred for maintaining such properties. The respondent now concedes that $400.90 paid as taxes on petitioner's residential property should be allowed as a deduction.

Decision will be entered under Rule 50.

THE GREGG COMPANY, LTD., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Docket Nos. 4648, 9923. Promulgated January 7, 1932.

A meeting of the petitioner's board of directors was held, at which three of the five members were present. The other two were not notified of the meeting prior thereto. The declaration of a dividend at the above meeting served to reduce surplus for invested capital purposes.

Richard E. Dwight, Esq., for the petitioner.

Harold Allen, Esq., for the respondent.

The Commissioner determined deficiencies of $55,212.78 and $13,018.15 in the petitioner's income and profits taxes for the years. 1918 and 1919, respectively. Certain errors assigned by the petitioner, including the denial of special assessment, and an affirmative allegation by the respondent regarding the petitioner's invested capital for each year, were waived by the parties. The only remain ing assignment of error is that the Commissioner erred in reducing the petitioner's invested capital by $880,017.77, the amount of a dividend alleged to have been illegally declared. The cases were

consolidated.

FINDINGS OF FACT.

The parties filed a stipulation as follows:

The taxpayer is a corporation organized under the laws of the State of New York and is engaged in the manufacture, sale, and exportation of cars and railroad equipment, having its principal office and place of business at Hackensack, New Jersey.

The authorized capital stock of the company during the calendar years 1918 and 1919 was $300,000, all of which was and is issued and outstanding.

The officers of the taxpayer are: William C. Gregg, President; Louis D. Gregg, Treasurer; Otis T. Gregg, Secretary;