Court Opinion

ID: 4497133
Source: CourtListenerOpinion
Date Created: 2020-01-23 18:15:16.443988+00
Date Added: 2024-06-11T15:04:04.448858
License: Public Domain

Black,
dissenting: When negotiable coupons attached to coupon bonds are detached it seems to me they become separate and distinct *762property from the bonds and are subject to be sold separately or to be the subject of a completed gift, inter vivos. If a gift of such detached coupons is made by the owner prior to their maturity there would be no realization of income thereby to the donor. Cf. Rebekah. C. Schoomaker, 39 B. T. A. 496. There would likewise be no income to the donee by reason of the gift itself. See section 22 (b) (3) of the Revenue Act of 1934, which reads:
(b) Exclusions from Gross Income. — The following items shall not be included in gross income and shall be exempt from taxation under this title:
* * * * * * *
(3) Guts, bequests, and devices. — The value of property acquired by gift, bequest, devise, or inheritance (but the income from such property shall be included in gross income).
However, when the coupons matured in the hands of the donee and he collected them the amount collected was income to him as interest. See section 22 (a) of the Revenue Act of 1934. The entire amount collected, even if it be not proper to call all of it interest, would be income to the donee, if the coupons had no cost basis to the donor, as indeed in most cases they would not have unless the donor purchased the bonds with some accrued but unmatured interest coupons attached. The donee has the same basis of cost as the donor. See section 113 (a) (2) of the Revenue Act of 1934.
The findings of fact in the majority opinion show that in each of the taxable years Robert P. K. Horst, the donee of the unmatured coupons, collected the interest due thereon when it matured and returned the entire amount for taxation in the year the interest was collected. This, I think, was proper because the coupons had no cost basis to the donor and hence none to the donee.
I think the court was right in holding in Rosenwald v. Commissioner, 33 Fed. (2d) 423, that Rosenwald’s delivery to a charitable fund of negotiable Third Liberty Loan bond coupons before their maturity constituted a completed gift and the interest thereafter collected by the charitable fund from such bond coupons was not income to the donor. The evidence upon which the court based its decision in the Rosenwald case as to the Liberty bond coupons is stated in the court’s opinion as follows: “There is evidence that petitioner clipped and delivered to the fund, before their maturity, interest coupons from Third Liberty Loan Bonds.”
The facts in the instant case seem clearly to bring it within the rule announced by the court in the Rosenwald case. I, therefore, respectfully dissent from the majority opinion.
Leech and Disney agree with this dissent.