Court Opinion

ID: 9418784
Source: CourtListenerOpinion
Date Created: 2023-08-02 22:39:20.737194+00
Date Added: 2024-06-11T17:22:10.206117
License: Public Domain

Mr. Justice Sutherland,
dissenting.
Mr. Justice Van Devanter, Mr. Justice McRetnolds, Mr. Justice Butler and I think otherwise.
The powers of taxation are broad, but the distinction between taxation and confiscation must still be observed. So long as the Fifth Amendment remains unrepealed and is permitted to control, Congress may not tax the property of A as the property of B, or the income of A as the income of B.
The facts here show that Wells created certain irrevocable trusts. He retained no vestige of title to, interest in, or control over, the property transferred to the trustee. The result was a present, executed, outright gift, which could then have been taxed to the settlor. Burnet v. Guggenheim, 288 U.S. 280. That the property which was the subject of the gift could never thereafter, without a change of title, be taxed to the settlor is, of course, too plain for argument^ To establish the contention that the income from such property, the application of which for the benefit of others had been irrevocably fixed, is nevertheless the income of the settlor and may lawfully be taxed as his property, requires something more tangible than a .purpose to perform a social duty, or the recognition of a moral claim as distinguished from a legal obligation, which, we think, is not supplied by an assumption of his desire thereby to secure his own peace of mind and happiness or relieve himself from further concern in the matter. If the trusts in question had irrevocably devoted the income *684to charitable purposes, to the cause of scientific research, or to the promotion of the spread of religion among the heathen, and the statute had authorized its taxation, probably no thoughtful person would have insisted that the relation of the settlor to the benefaction was such as constitutionally to justify the tax against him. And yet in each of these supposed cases it would not be hard to find a purpose to discharge a social duty, or unreasonable to assume the desire of the settlor thereby to enjoy the mental comfort which is supposed to follow the voluntary performance of righteous deeds.
If there be any difference between the cases supposed and the present one, it is a difference without real substance. In each the motive of the taxpayer is immaterial. The material question is, what has he done? — not, why has he done it? — however pertinent the latter query might be in a different case. Obviously, as it seems to us, the* distinction to be observed is between the devotion of income to payments which the settlor is bound to make, and to those which he is free to make or not make, as he may see fit. In the former case the payments have the substantial elements of income to the settlor. In the latter, whatever may be said of the moral influence which induced the settlor to direct the payments, they are income of the- trustee for the benefit of others than the settlor.
It is not accurate, we think, to say that these trusts involve the continuing exercise by the settlor of a power to direct the application of the income along predetermined channels. The exertion of power on the part of the settlor to direct such application begins and ends with the creation of the irrevocable trusts. Thereafter, the power is to be exercised automatically by the trustee under a grant which neither he nor the settlor can recall or abridge. The income, of course, is taxable, but to the trustee, not to the settlor. The well reasoned opinion of *685the court below, which fully sustains respondent’s contention here, renders it unnecessary to discuss the matter at greater length. We think that opinion should be sustained. It finds ample support in Hoeper v. Tax Commission, 284 U.S. 206, 215; Heiner v. Donnan, 285 U.S. 312, 326; and other decisions of this court.