Court Opinion

ID: 4471217
Source: CourtListenerOpinion
Date Created: 2020-01-09 22:05:16.615771+00
Date Added: 2024-06-11T15:03:14.805300
License: Public Domain

Disney, J., dissenting: I am unable to agree with the majority. The taxability of income is here involved. An intrafamily arrangement was entered into, which purported to be a trust so that the income would be that of such trust. The corpus consisted only of corporate stock and the income consisted only of dividends. The stock continued in the name of the petitioner, the alleged trustor, on the books of the corporations, and she continued to receive the dividends thereon. It is true that upon receipt thereof she immediately endorsed them over to her husband, the alleged trustee. This is seen, however, to have been voluntary on her part, and, in my opinion, in such a situation no real trust was formed and the income which the purported trustor continued to receive in the form of dividends should be taxed to her. If she had used the dividends, instead of paying them over to her husband, we would, under the majority opinion here, be compelled to hold, it seems to me, that she had merely received a nontaxable gift from the trust and the income was taxable to the trust— all because of an intrafamily arrangement which, in fact, left the income in the same recipient as before. The result is the same here, for the original recipient of the income continues to receive it and to have command over it, even though she does of her own volition pay it to her husband. The arrangement made appears to me to lack the tang of reality, and to change taxability from an individual to a trust should require a real and effective trust, and not merely the framework thereof. In the face of the fact that the petitioner continued to receive her dividends as before, I discern, in the circumstances, the strongest of which is the fact that she paid the income over to her husband, no such trust as in my opinion the law contemplates as prerequisite to a change of income from one entity to the other, but only a rather obvious and unjustified loophole under the majority view. I therefore respectfully dissent. Smith and Oppek, JJ., agree with this dissent.