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This section contains the nature of the case and procedural background.

The taxpayer (P) wanted to trade in the stock market. Upon learning that it was possible for him to trade in trust on behalf of family members, he orally declared a trust of stock, to be traded for the benefit of his wife, mother, and children. P agreed to personally assume any losses resulting from trading the stock and to distribute any profits equally among his wife, mother, and two children. Thereafter, P purchased the stock and began trading it. At the end of the year, the profits allocated to P's family members were credited to them on P's books, but they did not receive any cash. The Board of Tax Appeals held that all the profits were taxable to P, and assessed a deficiency. P appealed.

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