Court Opinion

ID: 9418546
Source: CourtListenerOpinion
Date Created: 2023-08-02 22:30:47.869744+00
Date Added: 2024-06-11T16:49:39.973240
License: Public Domain

Mr. Justice Holmes
delivered the opinion of the Court.
This is a suit to recover taxes and perialties exacted by the Collector under the Income. Tax Act of October 3, 1913, e. 16, Section II, A. subdivisions 1 and 2; B. D. and *166E. 38 Stat. 114, 166, et seq. The Collector demurred to the complaint. The demurrer was overruled and judgment given.for the plaintiff by the District Court, 275 Fed. 643, and the Circuit Court of Appeals, 295 Fed. 84. A writ of certiorari was granted by this Court. 264 U. S. 579.
The question is whether the sums received by the plaintiff under the will of Anthony N. Brady in 1913, 1914 and 1915, were, income and taxed. The will, admitted to probate August 12, 1913, left the residue of the estate in trust to be divided into six equal parts, the income of one part to be applied so far as, deemed proper by the trustees to the education and support of the testator’s granddaughter, Marcia Ann Gavit, the balance to be divided into two equal parts and one of them to be paid to the testatpr’s son-in-law, the plaintiff, in equal quarter-yearly payments during his life. But on the granddaughter’s reaching the age of twenty-one or dying the fund went over,-so that, the granddaughter then being six years old, it is said, the plaintiff’s interest could not exceed fifteen years. The Courts below held that the payments received were property acquired by bequest, were not income and wére not subject to tax.
The statute in Section II, A, subdivision 1, provides that there shall be levied a tax “ upon the entire net income arising or accruing from all sources in the preceding calendar year to every citizen of the United States.” If these payments properly may be called income by the common understanding of that word and the statute has failed to hit them it has missed so much of the general purpose that it expresses at the start. Congress intended to use its power to the full extent. Eisner v. Macomber, 252 U. S. 189, 203. By B. the net income is to include ‘gains or profits and income derived from any source whatever, including the income from but not the value of property acquired by gift, bequest, devise ór descent.’ *167By D. trustees are to make ‘ return of the net income >f the person for whom they act, subject to this tax,' and by E. trustees and others having the control or payment of fixed or determinable gains, &c., of another person who are required to render a return on behalf of another are ‘authorized to withhold enough to pay the normal tax.’ The language quoted leaves no doubt in our minds that if a fund were given to trustees for A for life with remainder over, the income received by the trustees and paid over to A would be income of A under the statute. It seems to us hardly less clear that even if there were a specific provision that A should have no interest in the corpus, the payments would be income none the less, within the meaning of the statute and the Constitution, and by popular speech. In the first case it is true that the bequest. might be said to be of the corpus for life, in the second it might be said to be of the income. But we think that the provision of the act that exempts bequests assümes the gift of a corpus and contrasts it with the income arising from it, but was not intended to exempt income properly so-called simply because of a severance between it and the principal fund. No such conclusion can be drawn from Eisner v. Macomber, 252 U. S. 189, 206, 207. The money was income in the hands of the trustees and we know of nothing in the law that prevented its being paid and received as income by the donee.
The Courts below went on the ground that the gift to the plaintiff was a bequest and carried no interest in the corpus of the.fund. We do not regard those considerations as conclusive, as we have said, but if it were material a gift of the income of a fund ordinarily is treated by equity as creating an interest in the fund. Apart from technicalities we can perceive no distinction relevant to the question before us between a gift of the fund for life and a gift of the income from it. The fund is ap*168propriated to the production of.the same result which-' ever form the gift takes. ’ Neither are we troubled by the question where to draw the line. That is the question in pretty much everything worth arguing in the law. Hudson County Water Co. v. McCarter, 209 U. S. 349, 355. Day and night, youth and age are only types. But the distinction between the cases put of a gift from the corpus of the estate payable in instalments and the present seems to us not hard to draw, assuming that the gift supposed would not be income. This is a gift from the income of a very large fund, as income. It seems to us immaterial that the same amounts might receive a different color from their source. We are of opinion that quarterly payments, which it was hoped would last for fifteen years, from the income of an estate intended for the plaintiff’s child, must be regarded as income within the meaning of the Constitution and the law. It is said that the tax laws should be construed favorably for the taxpayers. But that is not a reason for creating a doubt or for exaggerating one when it is no greater than we can bring ourselves to feel in this case.

Judgment reversed.