Altmaier v. Commissioner of Internal Revenue
| Decision Date | 17 December 1940 |
| Docket Number | No. 8367.,8367. |
| Citation | 116 F.2d 162 |
| Parties | ALTMAIER v. COMMISSIONER OF INTERNAL REVENUE. |
| Court | U.S. Court of Appeals — Sixth Circuit |
Robert C. Dunn, of Toledo, Ohio (John J. Kendrick, of Toledo, Ohio, and Richard V. Willcox, of Columbus, Ohio, on the brief), for petitioner.
Edward H. Hammond, Sp. Asst. to Atty. Gen. (Samuel O. Clark, Jr., Asst. Atty. Gen., and Sewall Key and Edward H. Hammond, Sp. Assts. to Atty. Gen., on the brief), for respondent.
Before HICKS, ARANT, and MARTIN, Circuit Judges.
The petitioner, Oscar C. Altmaier, by three trust instruments, all executed February 18, 1932, constituted his wife Trustee of a total number of 3,600 shares of the common stock of a corporation. The documents were identical, except that the three minor children of the petitioner and his wife were each respectively named as co-beneficiary with the wife in one of the three separate trust indentures. Shortly after the trusts became operative, the City National Bank of Columbus, Ohio, was appointed, pursuant to power reserved by the petitioner, co-trustee with Mrs. Altmaier.
Each of the three agreements provided, inter alia, that, subject to the rights reserved to the settlor and his wife, the trustee should hold, manage and control the trust estate under the granted rights and powers. Provision was made that the net income of the trust estate should be accumulated, invested and added to the principal during the remainder of settlor's life, or until his wife's death should she predecease him.
Each trust indenture directed the trustee to pay, beginning at the death of the settlor, the entire net income to the wife for the remainder of her life; unless, prior to her death, the trust fund should be exhausted as a result of permitted encroachments upon the principal.
The trustee was directed to pay, beginning at the death of the wife, the entire net income to the settlor for the remainder of his life. Upon the death of the surviving husband or wife, the trustee had the imposed duty of distribution to settlor's named child, or to the latter's next of kin, in compliance with the elaborate provisions of the trust agreement.
The requirement was incorporated that, during the life of the settlor, the trustee, upon the joint order of the settlor and his wife, should be beholden to provide, by hypothecation, mortgage, or transfer of any portion of the trust estate, collateral security for the indebtedness of the husband and wife, or their designees.
It was provided further that, during his lifetime and legal competency, the settlor should direct in writing the purchase and sale of all investments in the trust, and that he reserved in himself the power to vote the shares of stock comprising the trust estate. It was stipulated, also, that while he lived, all stock dividends should be treated as principal.
During his lifetime or until he should be judicially declared legally incompetent, the settlor and his wife were given the right, jointly, by instrument in writing directed to the trustee, to alter, amend, revoke, or terminate the trust agreement, or to withdraw any property at any time comprising a portion of the trust estate. Furthermore, it was expressly provided that if the settlor should survive his wife, he could, by instrument in writing directed to and accepted by the trustee, exercise singly the same powers of alteration or termination.
The trust indenture provided further that "the trustee may resign or be discharged by the settlor during the lifetime of the settlor upon thirty (30) days written notice by either party to the other," etc.
The Board of Tax Appeals upheld the Commissioner of Internal Revenue in assessing, under Section 167 of the Revenue Act of 1932, 26 U.S.C.A. Int.Rev.Code, § 167, income tax deficiencies for 1932 and 1933 against petitioner, resultant from the inclusion by the Commissioner of dividends and interest from the trust property in petitioner's gross income for the years mentioned. The Board cited its earlier decision in Frost v. Commissioner, 38 B.T.A. 1402, in support of its ruling.
Both the Commissioner and the Board of Tax Appeals based the taxability of the petitioner squarely upon Section 167 of the Revenue Act of 1932, Chapter 209, 47 Stat. 169, which provides:
This section of the Revenue Act plainly embraces the facts of the instant case. Here the trust instrument specifically directs that (1) the net income of the estate shall be accumulated, invested and added to the principal while the settlor lives or until his wife dies, should she predecease him, (2) in which latter event, he shall receive the entire net income for the rest of his life, or in the alternative (3) may sweep clean the entire original and accumulated trust estate by the exercise of his reserved power to terminate and take all.
Reasonable statutory construction demonstrates that the dependency of his right to corral the accumulated income of the trust upon his survivorship of his wife is immaterial. Under the arrangements of the trust agreement, the income of the trust "may be * * * accumulated for future distribution to the grantor." The express language of the statute covers the situation exposed by analysis of the indenture. See Kaplan v. Commissioner, 1 Cir., 66 F.2d 401, 402 in which the court, construing a similar section of the Revenue Act of 1924, said: "We think the statute means that if under any circumstances or contingencies any part of the accumulated income might inure to the benefit of the grantor, such portion of the income is...
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