Court Opinion

ID: 4496823
Source: CourtListenerOpinion
Date Created: 2020-01-23 18:15:05.710766+00
Date Added: 2024-06-11T08:00:15.970177
License: Public Domain

Opper,
dissenting: In the majority opinion the underlying questions of fact are treated as though found in favor of respondent. The opinion assumes that the trust instrument carried out the grantor’s desire for “his wife to have income with which to take care of herself and also himself at such times [as he was unable to care for himself] and he wanted her at other times to have a small independent income.” Although the wife did not in fact use the income for the family living expenses, she did use it “to buy her own clothes” and “for spending money.” Whether or not the terms of the trust instrument itself and their requirement that the income be “used and applied upon their family and joint living expenses, and provide in full for her [the wife’s] own bills and expenses and for her own care, maintenance and support” would be reformed in an action brought by the wife is at least doubtful. Robinson v. Korns, 250 Mo. 663; 157 S. W. 790; Parker v. Vanhoozer, 142 Mo. 621; 44 S. W. 728; Southern Surety Co. v. United States Cast Iron Pipe & Foundry Co., 13 Fed. (2d) 833. In any event payment for the wife’s necessary personal expenses and for her clothes were obligations of the husband and when incurred were debts of his which he could be required to pay. See Johnson v. Briscoe, 104 Mo. App. 493; 79 S. W. 498. The use of the proceeds of a fund of this size by the wife, under her admitted obligation, for the discharge of her personal expenses and for the purchase of her clothing in a case like this where the income of the husband was approximately $25,000 a year can not, it seems to me, be said to be unreasonable as a matter of law. At least the burden must have been upon the petitioner to show that the decedent’s obligation to provide funds for his wife’s use in those respects was less than the income provided by the trust. See Commissioner v. Grosvenor, 85 Fed. (2d) 2. No such burden has been sustained. For all the foregoing reasons and because the majority opinion proceeds upon that assumption, it seems to me this case must be regarded as presenting the same question as to estate tax that was *1242passed upon under the income tax provisions in Douglas v. Willcuts, 296 U. S. 1, and similar cases.
The problem under the language of section 803 (a) of the Revenue Act of 19321 is therefore to determine whose income it was that the trust fund provided. This is the same question as was before the Supreme Court in Douglas v. Willcuts, supra. The Court said there (pp. 9, 10):
* ⅜ * We have held that income was received by a taxpayer, when, pursuant to a contract, a debt or other obligation was discharged by another for his benefit. The transaction was regarded as being the same in substance as if the money had been paid to the taxpayer and he had transmitted it to his creditor. * * * The erteation of a trust by the taxpayer as the channel for the application of the income to the discharge of his obligation leaves the nature of the transaction unaltered. ⅜ ⅜ ⅜ In the present case, the net income of the trust fund, which was paid to the wife under the decree [providing for the wife’s maintenance], stands substantially on the same footing as though he had received the income personally and had been required by the decree to make the payment directly.
* * * we ⅛⅛ no warrant for a construction which would preclude the laying of the tax against the one who through the discharge of his obligation enjoys the benefit of the income as though he had personally received it.
* * * in contemplation of law the income remains in substance that of the grantor. * * * [Emphasis added.]
It can not, I tbink, be doubted that if the settlor of a trust were to provide that his trustees should use the income to pay his bills instead of distributing the cash to him he would be held to have “retained * * * the * * * enjoyment of or the right to the income from, the property”, within the meaning of section 302. Hero the only difference is that the wife was constituted an intervening agency for attaining the same result. This does not require a different conclusion. See Commissioner v. Crosvenor, supra. In fact upon her omission, the trust instrument provided for the direct payment by the trustees of those obligations of the settlor which it was contemplated it would in the first instance be the duty of the wife to discharge. The precise language is:
If at any time the said Virginia George Donnelly shall not use said monthly income of $417.00 to pay her own bills and expenses and to care for her own support, maintenance and care and in and about their joint living expenses, then the trustees may pay out and apply and use said monthly income of *1243$417.00 to pay and discharge and take care of her maintenance, care and support and apply any excess to their joint living expenses * * *.
To bold in the face of that language that the settlor did not retain the enjoyment of and the right to the income from the property seems to me to deprive the provisions of the statute of all meaning and practical effect.
It is said in the majority opinion that the legislative history of the section shows that it was designed “to preclude the possibility of estate tax avoidance through trusts where the grantor reserved the income to himself for life” and that “the instant proceeding does not present the kind of a trust that the amendments to section 302 (c) were intended to catch.” But the very situation thus described appears to be present here. True, there is no evidence of any intention on the part of the decedent to avoid estate taxes. But it has been repeatedly stated that the mere desire to escape taxation is not material in determining whether or not a. particular transaction is subject to tax. See Gregory v. Helvering, 293 U. S. 465, and cases there cited. And certainly the effect, if not the intent, will have been accomplished. The $100,000 which the Avife received from the trust fund at decedent’s death would have been a part of decedent’s estate and taxable as such had it not been for the creation of the trust. It seems clear that the land of trust now before us could be used as a vehicle of avoiding estate taxes. Prevention of this is the very motivation recognized in the majority opinion, for the passage of the amendments to section 302.
The language quoted in the majority opinion from the report of the Ways and Means Committee seems to me to indicate that the provisions of section 302 should apply to such a situation as this, rather than otherwise. For the purpose is said to be “to render taxable a transfer under which the decedent reserved the income for his life.” What the decedent did here was tantamount to such a reservation. The income was reserved to him as much as though he himself had received it. Douglas v. Willcuts, supra. The report says further: “the insertion of the words ‘the right to the income’ in place of the words ‘the income’ is designed to reach a case where decedent had the right to the income though he did not actually receive it.” This language is peculiarly apt to describe the provisions of the present instrument under which, even though decedent may have failed to insist upon it, he could have compelled the trustees to use the income for his own living expenses and to discharge the obligations placed upon him by law to pay those of his wife. I think the principle of Douglas v. Willcuts, supra, is applicable to this proceeding and am obliged to note my dissent from the conclusion reached by the majority.
Tyson and Disney agree with this dissent.

 SEC. 803. EUTURE INTERESTS.
(a) Section 302 (c) of the Revenue Act of 1926, as amended by the Joint Resolution of March 3, 1931, is amended to read as follows :
“(c) To the extent of any interest therein of which the decedent * * * has at any time made a transfer, by trust or otherwise, under which he has retained for his life or for any period not ascertainable without reference to his death or for any period which does not in fact end before his death (1) the possession or enjoyment of, or the right to the income from, the property, or (2) the right, either alone or in conjunction with any person, to designate the persons who shall possess or enjoy the property or the income therefrom; except in case of a bona fide sale for an adequate and full consideration in money or money’s worth. * * *”