Commissioner of Internal Revenue v. Converse, 234
| Decision Date | 13 August 1947 |
| Docket Number | Docket 20498.,No. 234,234 |
| Parties | COMMISSIONER OF INTERNAL REVENUE v. CONVERSE. |
| Court | U.S. Court of Appeals — Second Circuit |
Sewall Key, Acting Asst. Atty. Gen., and Helen Carloss and Austin Hoyt, Sp. Assts. to Atty. Gen., for petitioner.
Norris Darrell, of New York City (Sullivan & Cromwell, Stoddard M. Stevens, John F. Dooling, Jr., Bruce A. Hecker and Matthew J. Kust, all of New York City, of counsel), for respondent.
Before CHASE, CLARK, and FRANK, Circuit Judges.
This petition raises questions as to the taxability, as a gift, of a payment made in 1941 by a divorced husband to his former wife to satisfy a judgment entered in the suit in which the wife obtained an absolute divorce. The petitioner assessed a gift tax upon the full amount of the payment. By reason of adjustments which this made necessary in the gift taxes of the respondent for prior years, deficiencies in his gift taxes for 1941 and 1942 were determined. The Tax Court expunged both deficiencies and the Commissioner has petitioned for review of that decision. He now concedes that the portion of the payment which satisfied and discharged the wife's right to be supported by her husband during his life was not taxable, being content to have applied thereto tax ruling E.T. 19, issued in August 1946, to the effect that transfers of property made pursuant to an agreement incident to a divorce or legal separation are to be treated as made for an adequate and full consideration to the extent that they are made in satisfaction of the right to support.
The position of the Commissioner may be stated as follows. Except for so much of the payment as was made to discharge this right to support, the payment was a transfer taxable as a gift under the provisions of Secs. 1000 and 1002 of the Internal Revenue Code, 26 U.S.C.A. Int. Rev.Code, §§ 1000, 1002 because the only consideration the transferror received for making it was the release of his wife's marital rights. These were neither an adequate and full consideration in money or money's worth which Sec. 1002 makes a condition precedent to the exclusion of the gift tax on transfers; nor any consideration whatever which may be recognized in the light of Commissioner v. Wemyss, 324 U.S. 303, 65 S.Ct. 652, 89 L.Ed. 958, 156 A.L.R. 1022; Merrill v. Fahs, 324 U.S. 308, 65 S.Ct. 655, 89 L.Ed. 963; and Commissioner v. Bristol, 1 Cir., 121 F.2d 129. The petitioner, therefore, is seeking a reversal and remand for the purpose of having the value of the support rights determined and the remainder of the payment taxed as a gift.
The majority in the Tax Court distinguished the above cases on the ground that a postnuptial, instead of an antenuptial agreement was involved, and followed that court's former decision in Jones v. Commissioner, 1 T.C. 1207. Three judges dissented.
This is what happened to bring about the payment. The respondent and his wife had marital difficulties which led to their execution of a separation agreement on March 17, 1941 by the terms of which he provided for a minor child and promised to pay her $1,250.00 each month during her life in consideration for her release of her marital rights in accordance with the following clause in the contract:
.
Soon thereafter the wife brought a suit for divorce in the courts of Nevada and alleged in her complaint that she and her husband had already agreed to a settlement of their property rights. The respondent appeared in that suit by his attorneys and answered denying that the agreement made was fair and just and alleging that a single payment would be for the best...
To continue reading
Request your trial
-
United Shoe Workers of America, AFL-CIO v. Bedell
...States v. Stewart, supra note 93 (two statutes enacted in close proximity by the same Congress in the same session); Commissioner v. Converse, 163 F.2d 131 (2d Cir. 1947) (gift tax and estate tax statutes); A. P. W. Paper Co. v. FTC, 149 F.2d 424 (2d Cir. 1945), aff'd, 328 U.S. 193, 66 S.Ct......
-
O'Nan v. Comm'r of Internal Revenue (In re Estate of O'Nan), Docket No. 5803-64.
...1207 (1943), and hold that no taxable gift was made. On appeal the Court of Appeals for the Second Circuit affirmed, Commissioner v. cOnverse, 163 F.2d 131 (C.A. 2, 1947), making the following observations and analysis: That judgment then became enforceable and was a debt respondent owed. H......
-
Harris v. Commissioner of Internal Revenue
...would be correct in case the property settlement was litigated in the divorce action. That was what happened in Commissioner Internal Revenue v. Converse, 2 Cir., 163 F.2d 131, where the divorce court decreed a lump-sum award in lieu of monthly payments provided by the separation agreement.......
-
Rosenthal v. Commissioner of Internal Revenue
...Treas. Reg. 108, § 86.8, satisfies the statutory requirement of a consideration to support the tax exemption. See also C. I. R. v. Converse, 2 Cir., 163 F.2d 131, 174 A.L. R. The rationale of both the Harris and Converse decisions rests basically on the divorce court's power, if not duty, t......
-
Legal and Tax Status of Persons in Connecticut Civil Unions and Other Unmarried Cohabitants
...in 2006, under § 2503(b). 220 § 2503(e). 221 § 2516. 222 See Harris v. Commissioner, 340 U.S. 106 (1950), and Commissioner v. Converse, 163 F.2d 131 (2d Cir. 1947). Gratuitous transfers and gift splitting While married couples (if the donee spouse is a U.S. citizen) can make unlimited tax-f......
-
Recent developments in estate planning.
...Buck, 563 F. Supp. 3d 8 (D. Conn. 2021). (15.) Merrill v. Fahs, 324 U.S. 308 (1945); Estate of Sanford, 308 U.S. 39 (1939); Converse, 163 F.2d 131 (2d Cir. 1947). (16.) Shepherd, 115 T.C. 376 (2000). (17.) CCA 202152018, released Dec. 20, 2021. (18.) As defined in Sec. 170(f)(11)(E). (19.) ......