Court Opinion

ID: 4497937
Source: CourtListenerOpinion
Date Created: 2020-01-23 18:15:41.2554+00
Date Added: 2024-06-11T14:54:15.592676
License: Public Domain

OppeR,
dissenting: I feel obliged to question the soundness of the majority opinion in its second phase — that which deals with the taxation as gifts of the periodic payments of income.
Section SOI (c) of the Revenue Act of 19321 describes certain circumstances under which a transfer of principal is excluded from the category of taxable gifts; prescribes the change in that situation which will render the transfer taxable; and concludes:
* * * and any payment of the income therefrom to a beneficiary other than the donor shall be considered to he a transfer by the donor of such income by gift.
We know that a reservation of the right to change beneficiaries prevents a gift of principal from being sufficiently complete to invoke the tax, Hesslein v. Hoey, 91 Fed. (2d) 954, (C. C. A. 2d Cir.), certiorari denied, 302 U. S. 156; and that only the renunciation of that right by inter vivos action or at death is considered definitive, Estate of Sanford v. Commissioner, 308 U. S. 39; see Burnet v. Guggenheim, *430288 U. S. 280; Reinecke v. Northern Trust Co., 278 U. S. 339. In fact, that is the majority view in this case. Why then is no correlative principle applicable to the intervening payments of income so that these become complete and taxable as gifts only when they actually inure to the benefit of a specific grantee ?
It matters little whether the principle of the cases cited is that complete control over the designation of beneficiaries is equivalent to that power to “revest in the donor” as to which the statute is articulate; or whether such control is so fundamentally opposed to the concept of a gift that as a matter of general law the tax would be inapplicable to such arrangements even in the absence of any express exception in the statute. Cf. Burnet v. Guggenheim, supra. Under either hypothesis, it is clear that the rule of expressio v/nius is not to apply strictly to the exemptions specified in 501 (c). The donor need not be a potential beneficiary of the principal in order to defer the tax until a definite grantee is ascertainable. Why need he be of the income?
I can not read the applicable authorities except as establishing that the gift tax provisions are suspended until it can be determined whether the grantor is an “Injun giver.” He might have been such here as to the payments of income, no less than with respect to the corpus, until each completed transfer put it beyond his power of recall. Are we to say that, before this, the beneficiary’s ownership of future income was more secure than her equitable interest in the principal?
The majority’s conclusion is stated to derive in some degree from the assumed proposition that the grantor was not taxable on the trust income. It is thought this renders it anomalous to treat as a gift from him that which he never received. But it seems to me by no means clear that the grantor must be regarded as immune from taxation on income of this nature, for the reasons stated in the dissenting opinion in Ellsworth B. Buck, 41 B. T. A. 99, particularly the last paragraph thereof. And certainly if one’s dominion over these fruits be sufficiently real it is of little moment whether they pass physically through his hands. Lucas v. Earl, 281 U. S. 111; Douglas v. Willcuts, 296 U. S. 1; Saenger, Inc. v. Commissioner, 84 Fed. (2d) 23 (C. C. A., 5th Cir.); certiorari denied, 299 U. S. 577.
Smith and HaeroN agree with this dissent.

 (c) The tax shall not apply to a transfer of property in trust where the power to revest in the donor title to such property is vested in the donor, either alone or in conjunction with any person not having a substantial adverse interest in the disposition of such property or the income therefrom, but the relinquishment or termination of such power (other than by the donor’s death) shall be considered to be a transfer by the donor by gift of the property subject to such power, and any payment of the income therefrom to a beneficiary other than the donor shall be considered to be a transfer by the donor of such income by gift.