Court Opinion

ID: 4472066
Source: CourtListenerOpinion
Date Created: 2020-01-13 23:16:08.97953+00
Date Added: 2024-06-11T14:53:49.011698
License: Public Domain

Black, /., dissenting: The majority opinion sustains the Commissioner in taxing to petitioner in each of the taxable years $8,000 of income save for an arbitrary allocation of $100 which the majority opinion, under the doctrine of the Cohan case, allocates to Ellen Muir, which petitioner did not receive and had no right to receive. I know of no law which either requires or countenances such a result and, therefore, I dissent. In each of the taxable years there was paid to Ellen Margaret Muir, mother of petitioner, by the Bibb Manufacturing Co. of Macon, Georgia, the sum of $8,000 in dividends on stock owned by the Francis Muir trust. These dividends were paid to Mrs. Muir pursuant to an order to the corporation signed by Ellen. Margaret Muir and William Edward Muir, as trustees under the will of Francis Muir, deceased, within the exercise of their lawful powers. At the time this order was signed in 1932, the other trustee was dead. This order contains, among others, the following provisions: * * * so that from and after this date you pay to her out of such dividends the sum of Two Thousand Dollars ($2,000.00) per quarter each year; and we hereby agree that her receipts for such Two Thousand Dollars ($2,000.00) per quarter shall be good and sufficient discharges to you for such portions of the dividends in respect to the said shares which are payable to us as trustees. Respondent makes no point that the $8,000 paid in each of the taxable years to Mrs. Muir was not the substantial equivalent of the annuity provided by the will at the rate of exchange which prevailed in each of the taxable years. Both parties seem to agree on that fact. No issue is raised as to it. In each of the taxable years Ellen Margaret Muir returned this $8,000 for taxation and paid taxes on it. What more does the law require ? Section 212' of the Revenue Act of 1936 and similar provisions in later revenue acts define the gross income of a nonresident alien. This section contains the following provision: (a) Genebal Rule. — In the ease of a nonresident alien individual gross income includes only the gross income from sources within the United States. The applicable regulation is printed in the margin.1 It seems clear that petitioner, who was a nonresident alien, has complied fully with the foregoing provisions of the statute and the applicable regulation. According to the facts which have been stipulated, the only income which he had from sources within the United States during the taxable years was from dividends on some stock which he individually owned in the Bibb Manufacturing Co. and from dividends of the same manufacturing company which he received as one of the beneficiaries of the testamentary trust. But, notwithstanding the stipulated facts show that petitioner has returned and paid tax on all this income which he received, the majority opinion holds that some kind of an allocation must be made to him of income which he did not receive and which he had no right to receive. The majority opinion does this upon the authority of certain cited cases which, in my opinion, have no application to the facts of the instant case. These cases deal with the allocation of taxable income and tax exempt income between the beneficiaries of a domestic trust and other related subjects. The trust in the instant case was a nonresident alien trust which had no exempt income from sources in the United States and claims none. All of its income from sources within the United States was taxable and, as I have already emphasized, the beneficiaries who were entitled to receive it have returned it all for taxation in the proportions that they received it and have paid taxes thereon. The cases cited in the majority opinion do not deal at all with the question of whether the source of a nonresident alien trust beneficiary’s income from “sources within the United States” is different from that which the undisputed facts show to be the actual source. Under the law as it exists by reason of the provisions of section 162 of the code, the testamentary trust was but a conduit for the distribution of the taxable dividends of the Bibb Manufacturing Co. to the two beneficiaries of the trust — $8,000 to Mrs. Muir and the remainder to petitioner. Bence v. United, States, 18 Fed. Supp. 848. Under the doctrine of the Bence case, Mrs. Muir was clearly taxable on the $8,000 dividends which she received. If she was taxable on it, it requires no argument that petitioner is not taxable on the same income. Under section 212, to which I have already made reference, petitioner would only have to return as part of his gross income “from sources within the United States” the portion of the dividends which he received. He has done that, and, because the majority opinion requires him to do more, I respectfully dissent. Tyson and Johnson, JJ., agree with this dissent.