Court Opinion

ID: 6855808
Source: CourtListenerOpinion
Date Created: 2022-07-23 20:42:00.188668+00
Date Added: 2024-06-11T16:05:09.369477
License: Public Domain

GRONER, Associate Justice
(dissenting).
I am unable to agree, and I shall state the reasons of my dissent briefly.
The question at issue is controlled by the provisions of section 219 of the Revenue Act of 1921 (42 Stat. 246). Subdivision (d) of that section imposes a tax on the net income of each beneficiary of an estate or trust received in the taxable year “whieh, pursuant to the instrument or order governing the distribution, is distributable to such beneficiary, whether distributed or not. * * * ”
Fairly construed, I think it cannot be doubted that the true test of liability depends upon whether the income is distributable. If it is, it is taxable whether received or not. If it is not, it would seem to me to follow that it is nontaxable, even though received, as, for instance by mistake. If I have correctly stated the rule, then it follows that in this case the decision would turn on the question whether the income sought to be taxed was properly distributable to the taxpayer.
In Whitcomb v. Blair, referred to in the opinion of the court, there was agreement between both parties that the taxpayer was entitled to the sums received and taxed, and on that basis we held the taxpayer was “in fact and in law” entitled to receive the income whieh was taxed. After our decision, two of the remaindermen filed timely objections to the trustee’s account. The superior court of California having jurisdiction of the trust, all parties in interest being then before the court, entered a decree charging the beneficiaries, including taxpayer, in the amount of $622,000 on the ground that that amount, representing depreciation for the years 1913 to 1927, had been unlawfully paid to them by the trustee, and also directing the trustee to withhold annually thereafter for depreciation a reasonable and proper amount from the income of the trust property. One of the beneficiaries paid in cash his share of the amount required to be returned to the trustee, but the others, including taxpayer, gave the trustee their notes bearing interest and payable at the termination of the trust. The acceptance of the notes was apparently with the consent of the remaindermen.
The case, therefore, is one in whieh a state court having jurisdiction of the estate and of the parties has decreed that the taxpayer was not entitled to certain portions of the income received by her over a period of years, including the year involved here, and that the sum so improperly received should be returned to the trustee, and the court’s order has been obeyed. If, therefore, the statute taxes only the income properly received, and if the final decree of the state court is in accordance with the California law, as I think it is, and is therefore conclusive and binding, as it seems to me it is (Keith v. Johnson, 271 U. S. 1-8, 46 S. Ct. 415, 70 L. Ed. 795), it would follow necessarily that the *809final decree of that court forecloses the question.
In this aspect there remains only the question whether the decree of the state court was obtained in a eollusive suit. There is nothing in the record to sustain a contention of that sort.
I think, therefore, the decision of the Board of Tax Appeals should be affirmed.