Court Opinion

ID: 9653678
Source: CourtListenerOpinion
Date Created: 2023-08-23 17:51:41.008371+00
Date Added: 2024-06-11T18:13:00.661917
License: Public Domain

McCORD, Circuit Judge
(dissenting).
I have no quarrel with my learned brothers as to the principles of law applicable to this case. I just cannot bring myself to agree with their holding that petitioner, through the medium of the ten year inter vivos trust for the benefit of his relatives, has parted with a substantial interest in the trust corpus which precludes the application of the rule announced in Harrison v. Schaffner, 312 U.S. 579, 61 S.Ct. 759, 85 L.Ed. 1055. I do not view the transfer in question as a substantial disposition of the trust property, but consider it a mere anticipatory assignment of future income, taxable to the donor. Helvering v. Horst, 311 U.S. 112, 61 S.Ct. 144, 85 L.Ed. 75, 131 A.L.R. 655; Blair v. Commissioner, 300 U.S. 5, 57 S.Ct. 330, 81 L.Ed. 465; Harrison v. Schaffner, 312 U.S. 579, 61 S.Ct. 759, 85 L.Ed. 1055. The majority opinion limits too strictly the principles enunciated in the Blair and Schaffner cases. The Schaffner and similar cases clearly established that one is taxable upon income which he assigns, when he nevertheless retains a substantial interest in the income-producing property. Although the Blair case defines the right of a life beneficiary to receive income from the trust corpus as an equitable interest in the trust estate, it merely holds that where the donor transfers and irrevocably releases his full future interest in all or part of the trust income, he has thereby conveyed and assigned such equitable interest in the trust property. It does not hold that when the donor transfers substantially less than all of his future interest in the income assigned, he should not be taxed on the income therefrom. Here, petitioner did not assign all of his future interest in the testamentary trust income to the inter vivos trust, but retained his right to receive it again after a ten year period, or before ten years, in the event of the trustee’s death during that time. The record clearly reveals, and the Tax Court found, that petitioner was a man of considerable financial means, and that at the time of the transfer he wanted to make a “gift” of the trust income to the other less fortunate members of his family in a manner that would prevent him from being liable for income tax on the income assigned. Instead of retaining the income from the testamentary trust himself, and making outright gifts to them from it, with no strings attached, he chose-the ingenious device of the ten year inter vivos trust, with federal income tax consequences in mind. Under such circumstances, I do not think we should view the present transfer as a substantial disposition of the trust property, merely because the transfer was presumably irrevocable for a-ten year period. Harrison v. Schaffner, 312 U.S. 579, 61 S.Ct. 759, 85 L.Ed. 1055.
I am well aware that it is not the function of courts, by judicial fiat, to attempt enactment of remedial tax legislation. I am further aware that every taxpayer has a constitutional privilege to minimize his tax liability through lawful tax avoidance. Nevertheless, I have never favored decisions which encourage loopholes in our tax laws and enable taxpayers, through the medium of ten year inter vivos trusts or otherwise, to transfer excess income and *206thereby retreat to lower tax brackets during prosperous and high tax years, and later to retrieve that same source of income in lean years, when income taxes are usually much lower.
I respectfully dissent.