Kirschenmann

Taxpayers are husband and wife. In 1944, the taxable year here in question, and prior thereto, the husband was engaged in farming operations in Kern County, California. Part of the land used in this operation was a quarter sec *70 tion leased from one Margaret P. Osborne, under lease dated September 19, 1940. The lease was for five years, commencing November 1, 1941, at a total rental of $4550. Of this amount $700 was payable each year for the first two years and $1050 each remaining year. During the life of the lease, on August 25, 1943, taxpayers agreed with the lessor-owner to purchase the property for a down payment, of $8000 and a like amount each year for three years thereafter.

On January 9, 1944, without valuable consideration, taxpayers conveyed their interest in the property to their minor daughter. Prior to this transaction they had discussed with their attorney the incident tax consequences. On February 7, 1944, Edward Kirschenmann, a brother of taxpayer, Henry Kirschenmann, was legally appointed guardian of the daughter’s estate. Two weeks later the guardian leased the property back to taxpayers for a five year term, commencing July . 1944. The lease was a share-crop…

(concurring).

The majority opinion is correct and sound. However, clarification may assist.

The statute provides that there should be allowed as deductions “rentals or other payments required to be made as a condition to the continued use or possession, for purposes of the trade or business, of property to which the taxpayer has not taken or is not taking title or in which he has no equity.” Section 23(a) (1) (A), Internal Revenue Code. Unless taxpayers here had made a transfer of their entire equity, no deduction would be allowable under this section. The deed to their daughter did not convey the fee because they did not own the fee. After the transfer of some interest to their daughter, taxpayers, not their daughter or her guardian, were bound to pay the balance of the purchase price and were still the owners of an equity in the parcel until this was paid. If there had been a default, they would have been the defendants, since they were in possession and were the vendees. After the purchase price had been paid in full, title to the parcel was taken in .taxpayers’ names.

Taxpayers are not entitled to the deduction claimed here, since they have failed to show that the payments…