Federal Commissioner of Taxation v Clarke (1927) 40 CLR 227

The taxpayer, Clarke, was assessed for federal income tax in respect of profits arising from dealings in shares in companies.
Profits were received by or on behalf of various members of Clarke’s family.
The Commissioner of Taxation disallowed the objection, and Clarke appealed to the Supreme Court of Victoria.
Some of the shares in question had been registered in the names of members of the family, and other shares in the names of persons who were not members of the family, while some members of the family had no shares registered in their names.
In cases where shares were registered in the names of persons other than Clarke, the scrip certificates were accompanied by a blank transfer form signed by the person in whose name the scrip was issued, and the scrip remained in Clarke’s custody until the shares were sold by him.
Evidence was given that the profits on the sales of some shares were distributed by Clarke among the members of his family, but there was no evidence that any specific scrip had been treated as the property of any particular member of the family.
The Supreme Court allowed Clarke’s objection, and the Commissioner appealed to the High Court.

Clarke had failed to show that the shares in question belonged to the members of his family or any of them:
- there was a mere voluntary promise by the taxpayer; Clarke did not do all in his power to perfect the transfer of shares and equity will not order the gift be completed;
- equity would not treat that imperfect gift as if it were a declaration of trust; and
- the subject of the promise—the specific shares intended to be given— was neither identified nor identifiable.
The subject matter of the trust must be certain — it must be clear what the property is upon which the trust is to operate.

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