Helvering v. Wood
| Decision Date | 26 February 1940 |
| Docket Number | No. 384,384 |
| Citation | 84 L.Ed. 796,60 S.Ct. 551,309 U.S. 344 |
| Parties | HELVERING, Com'r of Internal Revenue, v. WOOD |
| Court | U.S. Supreme Court |
Robert H. Jackson, Atty. Gen., and Warner W. Gardner, of Washington, D.C., for petitioner.
Messrs. George M. Wolfson, of New York City, and Dean G. Acheson, of Washington, D.C., for respondent.
This case, like Helvering v. Clifford, 309 U.S. 331, 60 S.Ct. 554, 84 L.Ed. —-, is here on certiorari, the problems in the two cases being the same in certain essential respects. In April 1931 respondent, who owned twenty-five shares of stock of Book-of-the-Month Club, Inc., made himself trustee of those shares under an agreement which was to expire in three years1 or earlier on the death of either him or his wife. By the trust he was to 'hold, invest, and reinvest' the shares, to 'collect the net income therefrom' and to pay it to his wife. He had the power to 'retain' the stock or to 'sell' it or 'any part thereof' at such 'time and on such terms' as he should 'deem proper'.2 It was provided that his power of investment or reinvestment of 'any of the property or moneys held in trust' was not to be restricted by any law governing investments by trustees. He was also given power to 'fix and determine' the value of the property for all purposes of the trust and to determine 'whether any property or money received or held in trust shall be treated as capital or income, and the mode in which any expense incidental to the execution of the trust is to be borne as between capital and income,' with the proviso, however, that stock dividends and subscription rights should be treated as principal. He was prohibited from receiving any commissions with respect to principal or income; and an exculpatory clause purported to protect him against any loss except that occasioned by his wilful misconduct. He had the power to appoint a substitute trustee.3 On termination of the trust 'all property then held in trust' was to go to him. The trust contained no power of revocation nor any power to revest in the grantor at any time, prior to the date of termination, title to any part of the corpus.
During 1934 respondent paid over to his wife $8,750, which was the entire income from the trust for that year. She included it in her income tax return. The Commissioner, being of the opinion that the income was taxable to respondent, determined a deficiency in his 1934 return. Respondent appealed to the Board of Tax Appeals which held that petitioner was in error, 37 B.T.A. 1065. The Circuit Court of Appeals affirmed, 2 Cir., 104 F.2d 1013, on the authority of United States v. First National Bank of Birmingham, 5 Cir., 74 F.2d 360.
Petitioner maintains that the trust income is taxable to respondent either under § 166 or § 22(a) of the Revenue Act of 1934, 48 Stat. 680, 686, 729, 26 U.S.C.A. Int.Rev.Code, § 166, and 26 U.S.C.A.Int.Rev.Acts, page 669 or both.
By § 166 the income from a trust is taxable to the grantor where 'at any time the power to revest in the grantor title to any part of the corpus of the trust is vested' in him or in any person 'not having a substantial adverse interest in the disposition of such part of the corpus or the income therefrom.'4 Petitioner has not undertaken to establish that under New York law, which governs this trust, respondent had the power to revoke it prior to the end of the term. But in his contention that the trust here involved is covered by § 166, petitioner points out that there is no practical difference between a revocable trust and one certain to be terminated soon. And he argues that it would not be sensible to impute to Congress a purpose to impose the tax when the grantor has an executory power to revest title in himself but to withhold the tax when the grantor, by provisions in the trust deed, has already exercised that power.
Our difficulty lies not in an inability to see the similarity of those situations but in being able to say that Congress treated them the same under § 166. A power to revest or revoke may in economic fact be the equivalent of a reversion. But at least in the law of estates they are by no means synonymous. For, generally speaking, the power to revest or to revoke an existing estate is discretionary with the donor; a reversion is the residue left in the grantor on determination of a particular estate. See Tiffany, Real Property (2nd ed.) § 129 et seq., § 316 et seq. Congress seems to have drawn § 166 with that distinction in mind, for mere reversions are not specifically mentioned. Whether as a matter of policy such nice distinctions should be perpetuated in a tax law by selecting one type of trust but not the other for special treatment is not for us. We have only the responsibility of carrying out the Congressional mandate. And where Congress has drawn a distinction, however nice, it is not proper for us to obliterate it. That seems to us to be the case here. Whether wisely or not, Congress confined § 166 to trusts where there was a 'power to revest'. The problem of interpretation under § 166 is therefore quite different from that under § 22(a). The former is narrowly confined to a special class; the latter by broad, sweeping language is all inclusive. Helvering v. Clifford, supra. Accordingly, the wide range for definition and specification under the latter is lacking under § 166. And so far as § 166 is concerned no apparent or lurking ambiguity requires or permits us to divine a broader purpose than that expressed. The legis- lative history corroborates this conclusion. When the 1934 Act was before the House Committee, the Treasury recommended that income from short term trusts and from revocable trusts should be taxable to the creator.5 The Congress adopted the latter6 by an appropriate amendment to § 166; but it did not select the former for special treatment. When such clear choice of ideas has been made in the drafting of a specific provision of the law, its language must be taken at its face value. Sec. 166 is therefore not applicable to this trust since respondent is given no power to recall the corpus. He or his estate gets it at the end of the term, on the death of his wife, or on his own death—whichever is the earliest.
For a wholly different reason, petitioner's argument based on § 22(a) must fail. The Board of Tax Appeals purported to place its decision solely on § 166 and § 167 of...
To continue reading
Request your trial
-
City of Erlanger v. Berkemeyer, 11656.
...District Judge made no ruling with respect thereto. The present appeal does not present the question to us. Helvering v. Wood, 309 U.S. 344, 348, 349, 60 S.Ct. 551, 84 L.Ed. 796; De Waters v. Macklin Co., 6 Cir., 167 F.2d 694, However, the necessary valid delivery is established in another ......
-
Doll v. Commissioner of Internal Revenue
...U.S. 154, 169, 63 S.Ct. 140, 87 L.Ed. 154; Helvering v. Bruun, 309 U.S. 461, 468, 60 S.Ct. 631, 84 L.Ed. 864; Helvering v. Wood, 309 U.S. 344, 347, 60 S.Ct. 551, 84 L.Ed. 796; Douglas v. Willcuts, 296 U.S. 1, 9, 56 S.Ct. 59, 80 L.Ed. 3, 101 A.L.R. 391; Irwin v. Gavit, 268 U.S. 161, 166, 45 ......
-
United States v. Aluminum Co. of America
...trivial to the last degree and appears to be raised for the first time in this appeal. We refuse to consider it. Helvering v. Wood, 309 U.S. 344, 60 S.Ct. 551, 84 L.Ed. 796. Finally, the plaintiff charges that in 1929 ‘Alcoa’ and Aluminum Industries- one of the original three sublicensees o......
-
Gaylord v. Commissioner of Internal Revenue
... ... See also Cox v. Com'r, 10 Cir., 110 F.2d 934, certiorari denied, 311 U.S. 667, 61 S.Ct. 26, 85 L.Ed. 428; Rollins v. Helvering, 8 Cir., 92 F.2d 390, certiorari denied 302 U.S. 763, 58 S.Ct. 409, 410, 82 L.Ed. 592, 593; White v. Higgins, 1 Cir., 116 F.2d 312. See also ... United States, 312 U.S. 405, 61 S.Ct. 656, 85 L.Ed. 917; Marshal v. Pletz, 317 U.S. 383, 390, 63 S.Ct. 284, 87 L.Ed. 348. Cf. Helvering v. Wood, 309 U.S. 344, 347, 348, 60 S.Ct. 807, 84 L.Ed. 993, waiver below ... Judgment of the Tax Court is affirmed ... ...