Court Opinion

ID: 4484829
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:17:00.564271+00
Date Added: 2024-06-11T14:54:05.179482
License: Public Domain

Arundell, J., dissenting: As in Blair v. Commissioner, 300 U. S. 5, the petitioner here was a life beneficiary of a testamentary trust. That gave him an equitable interest in the corpus. See also Irwin v. Gavit, 268 U. S. 161. His equitable interest in the corpus, in the absence oí a valid restraint upon alienation, was assignable in whole or in part. Here, as in Blair, the petitioner assigned a part of his interest to others, though here, through the medium of a second trust; and a state court has held the assignment valid. (Indeed, if it had been otherwise, the petitioner’s interest would have been forfeited according to the express terms of his father’s will, and then there could be no basis whatever for taxing the income to him.) In such a case, as distinguished from the assignment of compensation for services, past, present, or future, Blair holds that the taxation of income is predicated upon ownership of the property; hence the tax falls on the assignee. Thus it would seem that, in the absence of a change in the rule, the analogy of the instant case to Blair is so close that the result logically should be the same. We know, however, that the impact of Helvering v. Clifford, 309 U. S. 331, has forced a modification of the rule with respect to the taxation of income from property; in short, if the disposition of the property is not substantial, the income will be taxed as if no disposition at all had been made. It is therefore necessary to evaluate the present case with that principle in mind, for it can not be doubted that the intervening Clifford decision very largely influenced the result in Harrison v. Schaffner, 312 U. S. 579. The rationale of both cases is much the same. Schaffner holds that the “gift by a beneficiary of a trust of some part of the income derived from the trust property for the period of a day, a month, or a year involves no such substantial disposition of the trust property” as to allow the donor to escape the tax. Tested in the light of the Clifford principle, can it fairly be said that the petitioner has not made a substantial disposition of his interest in the trust property ? Unlike Clifford, petitioner did not make himself the trustee, but chose an independent trustee. Neither did he retain any powers or control over the property. He was a bachelor and was in no way obligated to support the beneficiaries of the trust — his adult brothers and sisters and their children. Nor did he and the beneficiaries comprise either an intimate family group or one economic unit. Finally, it is clear that the mere nonmaterial satisfaction of making gifts to his brothers and sisters is not alone sufficient to require taxing the income to him. Helvering v. Stuart, 317 U. S. 154. It is obvious that the only Clifford factor present in this case is the “short duration of trust” — there five years, here ten. But I know of no case where, that being the only factor present, any court has held the income of a ten-year trust taxable to the grantor. The respondent has cited none. On the other hand, the Second Circuit held exactly the contrary in Commissioner v. Jonas, 122 Fed. (2d) 160. The conclusion of the majority that this case is controlled by Schaffner extends the scope of that case beyond anything I think the Supreme Court there decided or intended, and it makes of Blair practically a nullity. I respectfully dissent. Van Fos8an, Black, and Leech, </</., agree with this dissent.