Court Opinion

ID: 6905012
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:58:57.091532+00
Date Added: 2024-06-11T16:06:18.738736
License: Public Domain

CLARK, Circuit Judge
(dissenting in part).
I disagree with so much of the opinion and decision as reverses the Tax Court’s finding of lack of intent sufficient to support the gift to the taxpayer’s wife. Upon the record, and having in mind the burden upon the taxpayer to show the necessary donative intent, this finding seems to me amply supported and we are not entitled to overturn it as a matter of law. As pointed out, neither the taxpayer nor his wife actually testified; conceding that the excuses for their absence were sufficient, nevertheless the record remains barren of anything but the most formal (and largely secret) document of assignment. Since their testimony can now be taken, I would, at the very least, return the case for a fuller trial.
My suggestion that the document was largely secret has reference to the outward circumstances so far as they appear, and not necessarily to the parties’ intent, as to which we have so little evidence. For the document was a transaction between husband and wife, prepared by their attorney for the sole and specific purpose of reduc-ing the husband’s taxes; and it was transmitted only to his agent and without any other showing of real control of the wife over her alleged property. What we really need to know is whether Mrs. Wodehouse was intended to control the disposition of her half of the property, including its use in the foreign or movie or radio trade, against any plan or demand of her husband, and whether she was prepared to assert such a right against her husband’s wishes or desires. The evidence that the Wodehouses were a “very united couple” and that their monies were normally kept in a joint account under the taxpayer’s control certainly supports the Tax Court’s finding that Mrs. Wodehouse could not, and was never intended to, have any independent rights over the royalties involved here.
“The power to dispose of income is the equivalent of ownership of it,” Helvering v. Horst, 311 U.S. 112, 118, 61 S.Ct 144, 147, 85 L.Ed. 75, 131 A.L.R. 655; and my brothers concede, as in the light of Helvering v. Eubank, 311 U.S. 122, 61 S.Ct. 149, 85 L.Ed. 81, they must, that if Wodehouse had given his wife a half-interest in the royalties after he had sold the novel, the income would be taxable to him. To let him escape taxation because the assignment was made before, rather than after, the assured sale of the novel seems to me to rely on the kind of nice distinction which the Supreme Court has often told us is not to be permitted to inhibit the taxing power.
Our decision seems to me to provide a very easy way around taxes from property, over which in the eyes of the world the taxpayer retains full control. The ordinary rules of burden of proof of intent and delivery in the making of a gift afford a protection against this consequence, which ought not to be relaxed by a trier of fact, much less set aside as error of law on review. I would affirm in full.