The opinion
GARRECHT, Circuit Judge
(dissenting).
As I dissent from the opinion and judgment of the court in this ease I deem it not improper to state my reasons therefor.
The fact or the amount of petitioner’s loss is not in dispute. She claims that this loss resulted from the operation of a trade or business regularly carried on by her, and that she thereby sustained a “net loss” for the year 1922, within the meaning of section 204 of the Revenue Act of 1921, which she was entitled to carry forward as a deduction in computing her net income for the year -1923.
It is stipulated tliat, if there was a “net loss” for 1922, within the meaning of the above section of the Revenue Act, the amount thereof is $236,736.82.
The facts are not in dispute. The Board arrived at the ultimate conclusion that petitioner- was not engaged in trade or business as contemplated by the statute, and that the claimed loss sustained by the petitioner was not a “net loss” within the meaning of the act.
The question here is: Does the statute, 1 when properly applied to the admitted facts, sustain the conclusion arrived at by the Board?
The line of distinction between one who invests in corporations and another whose dealings in corporations may be said to be his trade or business is one which has not been clearly indicated by the decisions. When an activity ceases to he isolated and assumes a continuity and importance that indicates an activity regularly engaged in must necessarily depend upon the facts of each particular case.
Petitioner and her deceased former husband, J. P. Strickland, from 1889 until May, 1921, resided in Texas and together accumulated a fortune of about a million dollars, which, under the community property law of Texas, belonged to both in equal shares. Although under the community property statutes of Texas, the agency and powers of the spouses are different from those of a partnership; the husband by law being constituted the manager and having powers beyond the control of the wife; in other respects the marital community ownership is essentially a partnership.
“No effort is made to vest a greater portion of these joint acquisitions in one spouse than in the other. The wife’s, in point of ownership, are in every respect the equal of those of her husband. They are identical; in short they own the estate in common.” *287 Speer’s Law of Marital Rights in Texas, p. 373, par. 298.
The courts of Texas frequently speak of the community as a marital partnership, and, in. some instances, have applied to the community the rules of commercial partnership.
In the case of Hopkins v. Bacon, 282 U. S. 122 , 51 S. Ct. 62, 63 , 75 L. Ed. 249 , where the Supreme Court was considering the Constitution and laws of Texas, in connection with the Revenue Act of 1926, that court said: “The statutes contain sweeping provisions as to what shall he included in community property. They provide that each spouse shall have testamentary power over his or her respective interest in the community property. In the event of failure to exercise such testamentary power they provide that the property shall go in the first instance to the descendants of the deceased spouse. They provide, as is usual in States having the community system, that the husband shall have power of management and control such that he may deal with community property very much as if it were his own. In spite of this, however, it is settled that in Texas the wife has a present vested interest in such property. Arnold v. Leonard, 114 Tex. 535 , 273 S. W. 799 . Her interest is said to be equal to the husband’s. Wright v. Hays, 10 Tex. 130 , 60 Am. Dec. 200 . It is held that the spouses’ rights of property in the effects of the community are perfectly equivalent to each other. Arnold v. Leonard, supra. These expressions as to the wife’s interest are confirmed by the authorities holding that if the husband, as agent of the community, acts in fraud of the wife’s rights, she is not without remedy in the courts. Stramler v. Coe, 15 Tex. 211 ; Martin v. Moran, 11 Tex. Civ. App. 509 , 32 S. W. 904 ; Watson v. Harris, 61 Tex. Civ. App. 263 ; 130 S. W. 237 ; Davis v. Davis (Tex. Civ. App.) 186 S. W. 775 .”
Later, in the concluding paragraph of the same decision the court furl,her said: “It remains only to say that the interest of a wife in community property in Texas is properly characterized as a present vested interest, equal and equivalent to that of her husband.”
Since petitioner was the sole beneficiary named in Strickland’s will, and because they had no children, she was also his sole heir under the intestacy laws of Texas, she thus became the solo owner of all the community enterprises theretofore conducted by her deceased husband. The opinion of the Board of Tax Appeals in this ease specifically so found.
The Board in its opinion admitted that, had Strickland lived and continued the enterprises in which he was engaged, as to him any loss in this Hidalgo Land Syndicate venture would have come under the “net loss” provisions of section 204 of the Act of 1921,. But the Board denied such relief to his surviving wife principally perhaps because of the Board’s erroneous conclusion that up to the death of her husband, petitioner was “engaged in no business at all.” This view completely ignores the community property laws obtaining in the state of Texas.
When J. F. Strickland invested the community funds, of which he owned one-half and petitioner the other half, in the Hidalgo Syndicate, he was acting as the statutory agent of the marital community. See Hopkins v. Bacon, supra. Moreover, these funds which Strickland, the agent, was engaging “in the business of promoting and financing corporations,” were the property of the community in which petitioner had an equal interest, and it follows that during his lifetime she was engaged in business with respect to the Hidalgo Syndicate to the same extent as her husband.
Furthermore, the undisputed facts compel the conclusion that after her husband’s death petitioner continued the business enterprises theretofore conducted by him for the community, and the findings of fact of the Board aro to this effect: “So far as the record shows no proceedings were had in the Probate Court and upon her husband’s death, petitioner took charge of the property owned by herself and husband as community property and dealt with it as her own. Upon Mr. Strickland’s death, petitioner indicated her intention of carrying on her husband’s various activities as nearly as she could. She selected as her aides her brother-in-law, Jack Beall, and her brother, Burr Martin, both of whom had been closely associated with her husband during his lifetime. She executed powers of attorney to these two men to aet for and in her stead in the transaction of business matters. She caused her brother, Burr Martin, to be elected as one of the Board of Managers of the Hidalgo Land Securities Syndicate, to fill the vacancy occasioned by the death of her husband, to represent her interests. She consulted with her brother and with her brother-in-law, Jack Beall, who had been elected to office in Mr. Strickland’s place in some of the other corporations in which he was largely interested, and with C. L. Cox, who had been Mr. Strickland’s secretary, in respect to various business matters, including those connected with the Hidalgo Syndicate, almost daily through 1921 and 1922. Petitioner did not establish any office for the transaction of busi *288 ness but consulted her advisers at her place of residence. She signed an agreement to meet calls for further capital in the Hidalgo Syndicate and did meet several calls during 1921 and early part of 1923, for substantial amounts, not only on the subscriptions originally signed by Mr. Strickland, but on those signed by other subscribers and underwritten by Mr. Strickland. The amounts paid by her in 1921 and 1922 for her own aeebunt and the account of other subscribers, aggregated between $90,000 and $100,000.”
The same conclusion appears in the Board’s opinion:
“The petitioner, after the death of her husband, took charge of the property which had been accumulated by herself and husband during his lifetime and which he had managed prior to his death, and undertook the management of same. Since her husband’s death she has continued corporations in which she and her husband were investors at the time of his death and buying interests in other corporations. Petitioner has kept a regular set of books since her husband’s death, in which these transactions have been recorded.
“The record shows that on several occasions prior to her husband’s death, petitioner visited the Hidalgo Syndicate property and after her husband’s death was in regular conference with her advisers in regard to its affairs. * * * ”
That the activities of petitioner continued through the years and constituted a business or trade regularly carried on is further indicated in the Board’s opinion by the following statement: “The evidence shows that after the death of J. P. Strickland and in the intervening years between the date of his death and the hearing of this proceeding, petitioner bought and sold a considerable number of stock and bonds of corporations and other securities — not much during the first two or three years after Mr. Strickland’s death, but more later as time went on.”
The Board would have permitted Strickland to make this reduction had he lived. It it difficult to see that' the event of his death, under the facts as found, changed the petitioner’s status so as to deprive her of the same advantage.
It is conceded that Washburn v. Commissioner (C. C. A. 8) 51 F.(2d) 949 , and Averill v. Commissioner, 20 B. T. A. 1196, support petitioner’s contention here, but it is argued by respondent that these eases in effect have been overruled in Dalton v. Bowers, 287 U. S. 404 , 53 S. Ct. 205, 206 , 77 L. Ed. 389 , and Burnet v. Clark, 287 U. S. 410 , 53 S. Ct. 207, 208 , 77 L. Ed. 397 .
In the Dalton Case, the court held the loss claimed was sustained by the corporation and not by Dalton, and found that it was an investment loss which did not occur in the operation of the trade or business regularly carried on by Dalton, and, further, that “this taxpayer did not regard the business losses of the Dalton Manufacturing Company as his loss.” In the Clark Case, the court held that “the losses resulting from the sale of the Bowers Company stock in 1921 and 1922 constituted losses arising from occasional or isolated transactions and not from the operation of a business regularly carried on.” These two cases were considered by this court in Wallace v. Commissioner, 62 F.(2d) 826 , and the distinction here made indicated.
The facts in these cases are readily distinguishable from those in the ease at bar. Furthermore, no reference is made to the Washburn Case in either of the opinions, and we do not regard it as having been overruled.
It has been repeatedly held that section 204, being a relief provision, should be construed liberally in favor of the taxpayer. See Burnet v. Marston, 61 App. D. C. 91, 57 F.(2d) 611, 612 , and eases cited.
In the ease at bar, the Board’s findings show that J. P. Strickland, for the community of which petitioner was a part, was carrying on a business comprising various enterprises and ventures of which the Hidalgo Syndicate was one; that upon his death, petitioner, even without the usual formality of a proceeding in probate, assumed the management and control of all the property and affairs of the community and regularly continued to carry on the business theretofore conducted b'y her deceased husband. Having in mind, and giving effect to the community property laws of Texas, and construing and applying the Revenue Act here involved, to the undisputed primary facts found by the Board of Tax Appeals, I conclude that the loss, which it is admitted was sustained by petitioner, resulted from a trade or business regularly carried on by her.
It follows therefore that the loss sustained by petitioner was a “net loss” within the meaning of the statute, entitling her to the deductions claimed, and the order of the Board of Tax Appeals should be set aside.
Tlie Revenue Act of 1921 provides, as follows:
“Sec. 204. (a) That as used in this section the term ‘net loss’ means only net losses resulting from the operation of any trade or business regularly carried on by the taxpayer (including losses sustained from the sale or other disposition of real estate, machinery, and other capital assets, used in the conduct of such trade or business); and when so resulting means the excess of the deductions allowed by section 214 or 234. * * *
“Sec. 214. (a) That in computing net income there shall be allowed as deductions: * * *
“(4) Losses sustained during the taxable year and not compensated for by insurance or otherwise, if incurred in trade or business;
“(5) Losses sustained during the taxable year and not compensated for by insurance or otherwise, if incurred in any transaction entered into for profit, though not connected with the trade or business. * * *” 42 Stat. 231 , 239.