Source: http://supreme.justia.com/cases/federal/us/309/331/case.html
Timestamp: 2013-12-12 14:40:57
Document Index: 29166669

Matched Legal Cases: ['§ 22', '§ 22', '§ 22', '§ 22', '§ 22', '§ 166', '§ 22']

Helvering v. Clifford - 309 U.S. 331 (1940) :: Justia US Supreme Court Center
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Helvering v. Clifford - 309 U.S. 331 (1940)
Case	U.S. Supreme CourtHelvering v. Clifford, 309 U.S. 331 (1940)Helvering v. CliffordNo. 383Argued February 5, 1940Decided February 26, 1940309 U.S. 331CERTIORARI TO THE CIRCUIT COURT OF APPEALS
1. A husband who declared himself trustee of certain securities for the term of five years, to pay to his wife the income accruing during that period, but retained in himself the right to accumulate income, and, with insignificant exceptions, the complete control over the principal fund -- its conversion, investment, reinvestment, etc. -- and the reversion of the Corpus at the end of the term, may properly be found by the federal taxing authorities to be owner of the fund, within the intent of § 22(a) of the Revenue Act of 1934, notwithstanding the trust, and taxable on the trust income as part of his personal income. P. 309 U. S. 335.
Where the benefits directly or indirectly retained blend so imperceptibly with the normal concepts of full ownership, it cannot be said that the triers of fact committed reversible error when they found that the husband was the owner of the corpus for the purposes of § 22(a). P. 309 U. S. 336.
2. The broad language of § 22(a) of the Revenue Act of 1934 indicates the purpose of Congress to use the full measure of its taxing power within the definable categories specified therein. P. 309 U. S. 337.
3. Whether the creator of a trust may still be treated under § 22(a) as the owner of the corpus is not determined by technicalities of the law of trusts and conveyances, but must depend on analysis of the terms of the trust and on all the circumstances attendant on its creation and operation. P. 309 U. S. 334.
Where the grantor is the trustee, and the beneficiaries members of his family group, special scrutiny is necessary, lest what is in reality but one economic unit be increased to two or more by devices which, though valid under state law, are not conclusive under § 22(a) of the Revenue Act. P. 309 U. S. 335.
4. The fact that Congress made specific provision in § 166 of the Revenue Act of 1934 for revocable trusts, but failed to adopt a Treasury recommendation that similar specific treatment should be given income from short term trusts, did not subtract the latter from § 22(a). P. 309 U. S. 337.
105 F.2d 586 reversed. Page 309 U. S. 332
Certiorari, 308 U.S. 542, to review a judgment which reversed a decision of the Board of Tax Appeals (38 B.T.A. 1532) sustaining a deficiency assessment.
In 1934, respondent declared himself trustee of certain securities which he owned. All net income from the trust was to be held for the "exclusive benefit" of respondent's wife. The trust was for a term of five years, except that it would terminate earlier on the death of either respondent or his wife. On termination of the trust the entire corpus was to go to respondent, while all "accrued or undistributed net income" and "any proceeds from the investment of such net income" was to be treated as property owned absolutely by the wife. During the continuance of the trust, respondent was to pay over to his wife the whole or such part of the net income as he, in his "absolute discretion," might determine. And, during that period, he had full power (a) to exercise all voting powers incident to the trusteed shares of stock; (b) to "sell, exchange, mortgage, or pledge" any of the securities under the declaration of trust,
"whether as part of the corpus or principal thereof or as investments or proceeds and any income therefrom, upon such terms and for such consideration"
as respondent, in his "absolute discretion, may deem fitting;" (c) to invest "any cash or money in the trust estate or any income therefrom" by loans, secured or unsecured, by deposits in Page 309 U. S. 333 banks, or by purchase of securities or other personal property "without restriction" because of their "speculative character" or "rate of return" or any "laws pertaining to the investment of trust funds;" (d) to collect all income; (e) to compromise, etc., any claims held by him as trustee; (f) to hold any property in the trust estate in the names of "other persons or in my own name as an individual" except as otherwise provided. Extraordinary cash dividends, stock dividends, proceeds from the sale of unexercised subscription rights, or any enhancement, realized or not, in the value of the securities were to be treated as principal, not income. An exculpatory clause purported to protect him from all losses except those occasioned by his "own willful and deliberate" breach of duties as trustee. And finally, it was provided that neither the principal nor any future or accrued income should be liable for the debts of the wife, and that the wife could not transfer, encumber, or anticipate any interest in the trust or any income therefrom prior to actual payment thereof to her.
It was stipulated that, while the "tax effects" of this trust were considered by respondent, they were not the "sole consideration" involved in his decision to set it up, as, by this and other gifts, he intended to give "security and economic independence" to his wife and children. It was also stipulated that respondent's wife had substantial income of her own from other sources; that there was no restriction on her use of the trust income, all of which income was placed in her personal checking account, intermingled with her other funds, and expended by her on herself, her children, and relatives; that the trust was not designed to relieve respondent from liability for family or household expenses, and that, after execution of the trust, he paid large sums from h