Court Opinion

ID: 9644379
Source: CourtListenerOpinion
Date Created: 2023-08-22 20:54:39.599613+00
Date Added: 2024-06-11T12:47:48.749557
License: Public Domain

WALLER, Circuit Judge
(dissenting).
It seems to me that a father could make a partial sale and gift to his child with the understanding that the sale price could be paid out of the revenue from the property given' and sold without it being said that he “retained the incorile” from the property, when the record shows that he did not retain it but conveyed it to the trustee who was required to collect the income and pay a portion as consideration for the sale and gift. For instance, a man might own real estate of the value of $10,000.00, against which there was an indebtedness of $1,000.00, which real estate he desired his son to have. I see no reason why he could not lawfully say to his son: “I will convey this property to you provided you pay the $1,000.00 indebtedness out of the first rents you receive from the property.” The fact that the seller-donor of the property knew that the property was rented and would produce income sufficient to pay the indebtedness would not make him liable for the income therefrom merely because a debt was to be paid out of it especially when the income is devoted to the use and benefit of the cestui que trust in paying an indebtedness against his property.
In the case here under consideration the right to collect the income from the stock was not retained in the seller-donor but it was to be collected by the trustee and used to pay the $30,000.00 which was a part of the consideration for the gift and sale. The $30,000.00 which the trustee collected from the income of the trust estate was used for the purpose of clearing the indebtedness against the property of the cestuis que trust, and since the income was applied to the benefit of the cestuis que trust he should be charged with the tax thereon, and the seller-settlor should only be charged with the sum of $30,000.00 received in the disposition of a capital asset.
Entertaining these views, I respectfully dissent from the holding of the majority.