Golsen rule, we should be sensitive to pronouncements from that circuit, inasmuch as this case would be appealable to that circuit. In Brooke v. United States, supra, the taxpayer gave the property upon which he conducted his medical practice outright to his minor children. He was then appointed as the guardian of the children and leased the property to himself at a reasonable rent. The Ninth Circuit upheld his deduction for the rentals paid. The court said, "The fundamental issue presented involves the sufficiency of the property interest transferred." Brooke v. United States, supra at 1157.5 It concluded that the transfer was absolute. That being the case, the court easily distinguished it from the two cases urged by the Commissioner as controlling, Helvering v. Clifford, and Van Zandt v. Commissioner, supra, both of which involved reversion trusts. On the basis of the facts and the holding, one would think that the Ninth Circuit had embraced the principle that the absence of a reversion to the grantor suffices to validate the sufficiency of the property interest transferred, even in the absence of an independent trustee. However, the precedential value of the case, for that proposition, is weakened by a latter portion of the opinion. In a sentence that is pointedly noncommital concerning the necessity of an independent trustee, the court refers to that supposed requirement: "Many decisions pivot on the issue of the independence of the trustee." Brooke v. United States, supra at 1157. Having recognized that the presence of an independent trustee is often perceived as crucial, the court develops some independence for the grantor/guardian in Brooke, citing Montana's extensive court supervision over guardianships. The dissent in Brooke points out that the majority's opinion "adds further inconsistency to an area of tax law that is already fraught with too much semantical confusion." Brooke v. United States, supra at 1159 (Ely, J., dissenting).

In 1973, the Tax Court faced this issue again in Mathews v. Commissioner, 61 T.C. 12 (1973), which involved a Clifford -type trust with a reversionary interest to the grantor and with an independent trustee. The grantor then leased back the transferred property at a reasonable rent. The Court allowed his sought rental deduction. As discussed above, it was in Mathews

'Judge Wilbur's dissent conveniently overlooks this critical statement of the fundamental issue in Brooke v. United States, supra, in his analysis thereof.

v. Commissioner, supra, that the four tests which we are examining were synthesized and stated. I have alluded to and examined the second, third, and fourth tests (as numbered in Lerner v. Commissioner, 71 T.C. 290 (1978)) and have found that they all have their origin in the statutory language of section 162(a)(3). I further hinted that the statutory origin of the first requirement is not so clear. The first prong of the Mathews test states that "The grantor must not retain substantially the same control over the property that he had before he made the gift." Mathews v. Commissioner, supra at 18. The Court cited Penn v. Commissioner, supra, as the precedent for that statement. However, I previously noted that Penn clarified the fact that all of the Clifford, Johnson, and Armston considerations were relevant only in determining whether the taxpayer had a disqualifying equity in the rented property under section 162(a)(3). Thus, this first prong of the Mathews test should not be considered as an independent test, but rather as a factor to be considered under the fourth prong of the Mathews test, i.e., whether the grantor has a disqualifying equity in the rented property within the meaning of section 162(a)(3). That this assessment of the function of this first prong of the Mathews test is correct is evidenced by the fact that this portion of the test has often been cited as the prong requiring an independent trustee. Mathews v. Commissioner, supra at 18; Lerner v. Commissioner, supra at 302. As with the independent trustee requirement to which it has been equated, the requirement of a substantial change in the grantor's control over the property is relevant only in the search for a disqualifying equity.

Returning to the holding in Mathews, we can see that the existence of an independent trustee provided sufficient distinction from the Clifford doctrine and sufficient substance to the transfer to enable the Court there to uphold the bona fides of the gift transfer. As we have seen, once that is accomplished, the rental deductions will invariably be allowed, absent an unreasonable rental figure.

The Court in Mathews did not mention the possibility that the location of the reversion/remainder interest in the property might provide another ground upon which to distinguish the fact situation there in issue from the Clifford case or provide another proof of the bona fides of the transfer. One might think that this possible argument was neglected because Mathews involved a

reversionary, Clifford trust, thereby mooting the argument. However, on May 23 of the last taxable year in issue in Mathews, the taxpayers/grantors/lessees, who were calendar year taxpayers, transferred their reversionary interests to an irrevocable trust for the benefit of their children. Since the Government did not challenge the deductibility of the rentals paid after the relinquishment of the reversion, the Court discreetly avoided mentioning the possible significance of this transfer in its opinion. On appeal, the Fifth Circuit (which reversed the Tax Court based on the Van Zandt v. Commissioner, supra, requirement that the gift have a business purpose) pointed out the possible significance of the location of the reversion. Mathews v. Commissioner, 520 F.2d 323, 324 n. 6 (5th Cir. 1975). The court, in the same footnote, distinguished its holding in Mathews from the holding in Brooke v. United States, supra, on the basis of the location of the reversionary interest and pointed out that the Government did not challenge the arrangement in Mathews after relinquishment of the reversion.

Other than Butler v. Commissioner, 65 T.C. 327 (1975), in which the rental deduction was denied solely because the Golsen rule required our adherence to the business-purpose test of the Fifth Circuit, and Perry v. United States, 520 F.2d 235 (4th Cir. 1975), revg. 376 F. Supp. 15 (E.D. N.C. 1974), cert. denied 423 U.S. 1052 (1976), in which the Fourth Circuit seems to have adopted the same test, there were no significant post-Mathews cases in the gift-leaseback area until our 1978 decision in Lerner v. Commissioner, 71 T.C. 290 (1978).

In Lerner v. Commissioner, supra, the gift transfer was made to a reversionary Clifford trust with an independent trustee. The transaction was slightly different from the normal gift-leaseback transaction in that the lessee was the grantor's wholly owned professional corporation, instead of the grantor himself. In granting the corporation the deduction, we there emphasized that the statutory language of section 162(a)(3) is the sole standard by which to judge the availability of the rental deduction. The significance of a grantor's irrevocable relinquishment of the reversion/remainder interest in the property was again not before the Court in Lerner v. Commissioner, supra. Turning to the facts before us, I see a gift-leaseback transaction that resembles Skemp, Brown, and Brooke, more than it does Van Zandt, Mathews, or Lerner, because the reversionary

interest in the case before us has been irrevocably transferred away from the grantor/lessee, Dr. May. The Clifford doctrine, which was never intended to deal with gift-leaseback questions in the first place, is clearly inapplicable here because it applies only to reversionary trusts. Furthermore, the transfer of the reversionary interest supplies adequate substance to the transfer. The Fifth Circuit, in Mathews v. Commissioner, supra, graphically described the need for substance in tax transactions:

In deciding the federal questions of income tax law, we must examine transactions with substance rather than form in mind. If we stood at the top of the world and looked down on this transaction-ignoring the flyspeck of legal title under state law-we would see the same state of affairs the day after the trust was created that we saw the day before. [Mathews v. Commissioner, 520 F.2d 323, 325 (5th Cir. 1975).]

Where a grantor transfers ownership of property for a limited time to a non-independent trustee, thereby retaining perpetual control and eventual ownership of the property, the transfer is without substance, and he has retained a disqualifying equity in the property. However, where the existence of an independent trustee removes the property from the grantor's perpetual control, or where the transfer of a reversion removes the property from his eventual ownership, the transfer of the property has substance, and the gift has effectively placed the "real" ownership into a "new, independent owner." Penn v. Commissioner, supra at 154. Since, in the latter situation, the grantor will not be deemed to be the owner of the property transferred, he will not own, either legally or constructively, a disqualifying equity in the property. If the ensuing lease has a business purpose, and the rentals agreed to thereunder are "required," such rentals should be deductible under the plain language of section 162(a)(3).7

Realistically, such a situation, where the trustee controls property which he will eventually own outright, approaches a merger of estates. Restrained only by the beneficial income interests of beneficiaries who are usually his minor children, such a trustee has the power and, especially, has the motive to deal with the property in such a way as to benefit the remainderman, himself, at the expense of the income beneficiaries. He would have an increased motivation to reclassify income as corpus, where he was so empowered to do so, and thereby benefit himself upon the trust's termination.

"As an aside, I would note that Judge Simpson's conclusion that the trust did not own the trust property until Sept. 20, 1973, simply is not supported by the controlling law or the evidence. The crux of Judge Simpson's dissent on this matter is that, in order to effectuate a present transfer of property in California, the property must be transferred in a writing

However, it is at this point that the analytical error undergirding the majority and dissenting opinions surfaces. The majority takes this first prong of the Mathews test, elevates it to an independent test (though it has relevance only in the search for a disqualifying equity), equates it with a need for an independent trustee, and then finds that the trustee is independent. Although the majority's subsequent statements concerning the need for independent trustees in this factual context casts welcome doubt on the way in which this prong of the Mathews test has been utilized, I cannot ignore the fact that the majority's finding regarding the independence of the trustees implies that such a finding was necessary. Similarly, the dissenters deem the independence of the trustees to be an absolute prerequisite to the allowance of the rental deduction here sought. Both positions

executed by the transferor which evidences an intent to transfer the property (Cal. Civ. Code Ann. sec. 1091 (West 1954)), but that the declaration of trust, which petitioners contend meets those requirements, evidences no such intent. Respondent contends, and Judge Simpson agrees, that the following language from the trust declaration is evidence that it was not the instrument by which petitioners intended to transfer their title to the trust property to the cotrustees: "The Trustors have delivered to Trustees, without any consideration on their part, all their right, title and interest in and to the [trust] property."

The contention is that, by using the phrase "have delivered" in their trust declaration, petitioners displayed their belief that a document other than the trust declaration had been used to transfer the property to the cotrustees; therefor, argues respondent, petitioners could not have intended that the trust declaration be the conveyancing instrument. However, such verbal nitpicking will not prevent an instrument which shows a clear intent to presently convey an interest in property from doing so. Keogh v. Noble, 136 Cal. 153, 68 P. 579 (Cal. 1902); Del Giorgio v. Powers, 27 Cal. App. 2d 668, 81 P.2d 1006 (1938). The trust instrument before us clearly evidences the petitioners' intention to convey, on Jan. 15, 1971, all of their right, title, and interest in the property transferred, such intention being shown by the following provisions in the trust instrument:

"Section 2.2 By this instrument Trustors, and each of them, relinquish, absolutely and forever, all their possession of, or enjoyment of, or right to income from, the trust property.

"Section 2.4 Trustors, and each of them, expressly renounce for themselves, and for their states, any and all interest, either vested or contingent, including any reversionary interests or possibility of reverter, in the income or corpus of the Trusts."

Judge Simpson's citation of two "contract for sale" cases (In re Goetz's Estate, 13 Cal. App. 198, 109 P. 145 (1910), and Roberts v. Abbott, 48 Cal. App. 779, 192 P. 345 (1920)) in support of his position is hardly persuasive. Contracts for sale are, by definition, promises to convey at a future date. Such instruments are hardly analogous to a trust instrument which contains such clear indications of intent to make a present conveyance as does the one before us. Of course, most importantly, it is clear that the question of intent is a question of fact (Follmer v. Rohrer, 158 Cal. 755, 112 P. 544 (Cal. 1910); Kelly v. Bank of America National Trust & Savings Assn., 112 Cal. App. 2d 388, 246 P.2d 92 (1952)), and the holding of the majority on this issue necessarily constitutes a finding of fact that the requisite intent was evidenced in the trust declaration. I defer to and accept that finding and, therefore, believe that the property was transferred in toto to the trust prior to 1973.