Court Opinion

ID: 4479688
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:13:48.642812+00
Date Added: 2024-06-11T08:49:12.181055
License: Public Domain

OPINION. Tuener, Judge: Respondent contends that the trust income is taxable to petitioner under the provisions of section 22 (a) of the Internal Revenue Code, as that section has been construed by the Supreme Court in Helvering v. Clifford, 309 U. S. 331. For the purposes here, the petitioner apparently has treated the income of the trust as allocable to his four daughters in equal shares and has raised issue only with respect to the income which under the trust instrument might have been distributed to each daughter after her eighteenth birthday, the total amount here in issue being $6,398.10. He contends that the Clifford case is not applicable. He raises no issue with respect to the remainder of the income. The petitioner takes the position that his trust is clearly distinguishable from that in the Clifford case as follows: (1) The trust is for a period of fifteen years; (2) petitioner is to receive none of the benefits of the corpus or income; (3) at the termination of the fifteen-year period, all of the undistributed* trust property, corpus and income, must be distributed to the beneficiaries; and (4) he has received no economic benefit from either the corpus or income of the trust. The fact that the trust here is a fifteen-year trust, while the trust in the Clifford case was for only five years, does not of itself make the rule of the Clifford case inapplicable, the test being whether the rights of the petitioner in and to the trust corpus and the income therefrom are such as to constitute the income his income within the meaning of section 22 (a), supra. Verne Marshall, 1 T. C. 442; Frederick B. Rentschler, 1 T. C. 814; and Commissioner v. Buck, 120 Fed. (2d) 775. In the instant case, it is true that there was only a possibility of a reverter, and that possibility was rather remote. The petitioner did have the power, however, to distribute the income or withhold it, as he saw fit; and for the purposes of the trust the income not distributed became principal. He could invade principal for the purpose of educating and maintaining his children, or for the purpose of defraying the expense of any illness, emergency, or other extreme misfortune. He testified that his purpose in creating the trust was to remove the property from the hazards of the oil well drilling business in which he was engaged, and yet by the terms of the instrument he retained for himself so long as he should be trustee, and for his wife if she should succeed him, the power and right to use the property in oil well drilling ventures, or in any other venture in which he or anyone else might be engaged. And in that connection, it is noted that any successor trustee other than his wife had no such power. Taking into account the relationship of the parties and the fact that the petitioner did not put the use of corpus and the income therefrom beyond his reach, the only practical result of the grant to trust, if the claim here should be allowable, would be to effect a division of the income of the petitioner for income tax purposes. Borrowing from the language of the Supreme Court in the Clifford case, we find it “hard to imagine that * * * [petitioner] felt himself the poorer after this trust had been executed or, if he did, that it had any rational foundation in fact.” We accordingly conclude that the income of the trust was the income of the petitioner within the meaning of section 22 (a), supra. Helvering v. Clifford, supra. See also Louis Stockstrom, 3 T. C. 255. Reviewed by the Court. Decision will be entered for the respondent.