Court Opinion

ID: 9638243
Source: CourtListenerOpinion
Date Created: 2023-08-22 15:38:40.365912+00
Date Added: 2024-06-11T18:10:05.147183
License: Public Domain

WOODROUGH, Circuit Judge
(dissenting).
The peculiar facts of this case seem to me to sustain the tax. The federal law requires income tax to be paid notwithstanding the income is given away in charity, and neither State laws nor mere devices of taxpayers can override the will of Congress. That will must be carried out by the federal courts without respect to persons. Here the taxpayer and her husband, acting with one mind in complete marital unity, had long been in the habit of giving away more than the fifteen percent of her income which is exempted from tax. The selection of the objects of her bounty and ap*433portionment of the money were the joint concern and interest of the wife and husband, effected by mutual trust and confidence and exemplary marital harmony abiding for years. The taxpayer intended to continue to make the same use of her income money but to try to save the tax imposed by the government. Though she transferred her anticipated income to her husband as trustee, and in form empowered him to give it away in charity at his discretion, and accounts were kept purporting to show that he executed the trust in accord with its terms, the undisputed evidence is clear that in the tax years in question, following the transfer, the family of husband and wife continued to give away the money exactly as before the trust was devised. Though the money was distributed to some fifty odd recipients in different amounts, no single instance was pointed out where the husband made the gift on his individual determination opposed to his wife’s. On the contrary, they “conferred” and the decisions were mutual. Before the trust transfer she exercised her rights of ownership by giving in conference and concert with her husband, and afterwards she had identically the same enjoyment of the income.
If a taxpayer makes a trust transfer upon effective secret understanding that it is a sham not to be acted on, an assertion of tax benefit under it is obviously a fraud on the government. Here there need be no talk of fraud because .there was no secrecy of understanding. But the sham character of the transfer here appears manifest in the open husband and wife relationship of the parties before the world, the nature of the transaction and comparison of their philanthropic activities before and after the trust transfer. The wife’s agreement to substitute entirely the husband’s judgment for her own in matters as personal to her as her customary habitual gifts to the poor was exactly analogous to the promise to obey in the wedding ceremony.
Most trusts create interests in other designated parties besides the trustor and trustee. But this one did not, and the wife knew and, as shown by .the events, rightly counted on the fact that it would not make any difference in the substance of affairs how the Reverend Mr. Earle V. Pierce was designated. He would still be her husband and no mere designation of him would affect family decision. Looking at the realities, when the giving or withholding of a donation to a suppliant for some of the wife’s money came up in this family, any one knows that what the trust document said about the husband’s powers would be the last thing in the world to figure in the outcome.
The Minnesota law legalizing trusts to indefinite charities and empowering the Attorney General to prevent failure of such trusts seems .to me irrelevant. It was no part of the intent of this sham trust that it should fail for want of application of the funds. On the contrary, the taxpayer’s fixed intention to keep on, with her husband’s help, giving away her income to charity is beyond all doubt. She enjoyed' her substantial ownership of her income in that way, and under the law she ought to pay a tax to her government in respect to it.