Alsop v. Commissioner of Internal Revenue

• Decision Date: 10 September 1937
• Docket Number: No. 6259.,6259.
• Citation: 92 F.2d 148
• Parties: ALSOP v. COMMISSIONER OF INTERNAL REVENUE.
• Court: U.S. Court of Appeals — Third Circuit

92 F.2d 148 (1937)

ALSOP v. COMMISSIONER OF INTERNAL REVENUE.^*

No. 6259.

Circuit Court of Appeals, Third Circuit.

September 10, 1937.

R. T. M. McCready, of Pittsburgh, Pa., for petitioner.

James W. Morris, Asst. Atty. Gen., and Sewall Key, Norman D. Keller, and S. Dee Hanson, Sp. Assts. to Atty. Gen., for respondent.

Before BUFFINGTON, DAVIS, and BIGGS, Circuit Judges.

DAVIS, Circuit Judge.

This is an appeal from an order of the Board of Tax Appeals redetermining deficiencies of $2,291.39 and $386.44 in the petitioner's income tax returns for the years 1930 and 1931, respectively.

The question in issue is whether or not the petitioner is required to pay taxes on the income received by his divorced wife, who is remarried to another man, from a trust created by him "in lieu of alimony."

Eula J. Alsop, the petitioner's wife, brought suit for absolute divorce with alimony in the Tribunal of First Instance of the Department of the Seine, Paris, France. The court announced its intention to grant the divorce, but before entering the decree said it would give the parties an opportunity to enter into an agreement "in lieu of alimony and with respect to the care and custody of their children." They entered into an agreement wherein it was provided that his wife was to have the care, maintenance, upbringing, education, and custody of their two minor daughters with the right in him to visit and have them with him occasionally together with the duty to pay "doctors, surgeons and dentists * * * and * * * boarding school and college fees and expenses"; that the petitioner was to convey certain real estate to three trustees in an irrevocable trust to pay $12,000 per year to his wife during her lifetime for her personal use and $3,000 additional per year for the maintenance of the children, so long as they remained in her custody; that when each child arrived at majority, or married, her portion of the $3,000 was to be paid directly to her; that all the income from the trust over and above the $15,000 was to be paid to the petitioner, who was to make up any deficiencies in the income up to $15,000. The trust provided that after the death of his wife the children were to be paid the entire $15,000 per year; that the property composing the trust would revert to him if he was predeceased by his wife and by his children without leaving issue.

An absolute divorce was thereupon granted in 1925 and, at some unspecified date, between that time and 1930, petitioner's former wife married a Mr. Neilson, who is still living with her. She has been paid $15,000 per year every year since the execution of the agreement.

The Commissioner determined that the petitioner was liable for the income so paid to his former wife and assessed $2,291.30 and $386.44 in additional taxes for the years 1930 and 1931, respectively. The petitioner appealed to the Board of Tax Appeals, which affirmed the decision of the Commissioner. The petitioner thereupon appealed to this court.

The Board relied mainly upon the case of Douglas v. Willcuts, 296 U.S. 1, 56 S. Ct. 59, 62, 80 L.Ed. 3, 101 A.L.R. 391, in which the court said that: "Amounts paid to a divorced wife under a decree for alimony are not regarded as income of the wife but as paid in discharge of the general obligation to support, which is made specific by the decree. Gould v. Gould, 245 U.S. 151, 153, 38 S.Ct. 53, 62 L.Ed. 211; Audubon v. Shufeldt, 181 U.S. 575, 577, 21 S.Ct. 735, 45 L.Ed. 1009." It further said that payments made to a divorced wife through a trust created by the husband in lieu of alimony, where the decree of divorce incorporated the terms of the trust, were taxable to him. Even where the decree of divorce makes no mention of alimony, whatever a husband is taxable for the income derived from a trust created by him for the support of his divorced wife. Helvering v. Coxey, 297 U.S. 694, 56 S.Ct. 498, 80 L. Ed. 986, reversing (C.C.A.) 79 F.(2d) 661; Albert C. Whitaker v. Com'r, 33 B.T.A. 865.

These decisions rest upon the ground that the payments to the wife are in discharge of the obligation of the husband to support her.

Though it is generally stated that the remarriage of the wife does not automatically release the former husband from the duty of supporting her (19 C.J. 625), her remarriage is almost universally held to be sufficient grounds for an order suspending or abrogating further payments of alimony upon application therefor by the former husband. Heston v. Odlin, 125 Wash. 477, 216 P. 845; Cole v. Cole, 142 Ill. 19, 31 N.E. 109, 19 L.R.A. 811, 34 Am.St.Rep. 56; Morgan v. Morgan, 211 Ala. 7, 99 So. 185; Emerson v. Emerson, 120 Md. 584, 87 A. 1033; Hartigan v. Hartigan, 145 Minn. 27, 176 N.W. 180; Olney v. Watts, 43 Ohio St. 499, 3 N.E. 354; Southworth v. Treadwell, 168 Mass. 511, 47 N.E. 93; Erwin v. Erwin, 179 Ark. 192, 14 S.W.(2d) 1100; Holt v. Holt, 1868 L.R. 1 Prob. & Div. (Eng.) 610; Krauss v. Krauss, 127 App.Div. 740, 111 N.Y.S. 788.

In many jurisdictions the duty to pay alimony ceases on the remarriage of the divorced wife. Tremper v. Tremper, 39 Cal.App. 62, 177 P. 868; Carlton v. Carlton, 87 Fla. 460, 100 So. 745; Evans v. Evans, 229 Ky. 21, 16 S.W.(2d) 485; Morgan v. Lowman, 80 Ill.App. 557. See, also, 2 Schouler on Marr., Div., Sep. and Dom. Rel. (6th Ed.) § 1834. In some jurisdictions the burden rests...