Court Opinion

ID: 4498051
Source: CourtListenerOpinion
Date Created: 2020-01-23 18:15:44.654578+00
Date Added: 2024-06-11T15:04:05.718002
License: Public Domain

Meelott,
dissenting: In Adolph Bernard Spreckels, 37 B. T. A. 709, during the minority of the children, including the petitioner then before us, “their respective shares of said net income * * * [were to] be accumulated” and, as each child attained his majority, he was to receive “his or her proper share of the accumulated net income.” The court, in reversing the Board (Spreckels v. Commissioner, 101 Fed. (2d) 721), pointed out that, under section 162 (b), trust income dealt with therein “falls within two distinct and mutually exclusive categories: (1) Income accumulated for future distribution under the terms of the will or trust and (a) income which is to be distributed currently.” Holding that the income involved “belonged to the first category, not the second,” it correctly concluded that the income was taxable to the trust and not to the petitioner.
Under the trust instruments in the instant proceeding the trustees were required to pay out of the net income of the trusts “so much as may be necessary for the support, maintenance and education” of the cestui que trust. This clause, it seems to me, vested in the fiduciary a discretion as to the amount which might be paid over to the beneficiary. That the trustees so considered it is evident from their treatment of the income; for it was not until petitioner had reached his majority that the income was placed in the surplus account and on the same day it was paid over to him. It is ap*1049parent, therefore, that until the very moment of distribution the trustees had the discretion either to pay the income over to petitioner or to accumulate it. If so, then under section 162 (c) the amount “which is properly paid or credited during such year to ⅜ * * [the] beneficiary” should be included in computing his net income and be “allowed as an additional deduction in computing the net income of the * * ⅜ trust.” Cf. State Savings Loan & Trust Co., Trustee, 25 B. T. A. 228; affd., 63 Fed. (2d) 482.
Being of the opinion that the instant proceeding is distinguishable upon its facts from the Sprockets case and that the majority err in holding section 162 (c) to be inapplicable, I respectfully note my dissent.