Blair v. Commissioner of Internal Revenue
| Citation | 18 BTA 69 |
| Decision Date | 09 November 1929 |
| Docket Number | Docket No. 25684. |
| Parties | EDWARD T. BLAIR, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Board of Tax Appeals |
Calvin F. Selfridge, Esq., and J. F. Dammann, Jr., Esq., for the petitioner.
J. Arthur Adams, Esq., for the respondent.
The Commissioner determined a deficiency of $8,773.73 in income tax for 1923. Petitioner admits the correctness of $2,922.80 thereof, but claims that respondent erred relative to the balance of $5,850.93 by including in his income $21,000, which was not income received by or chargeable to him, but was income of a trust estate created by his father and which had been assigned by petitioner to his three children. Said sum of $21,000 was received by the children and tax paid by them.
FINDINGS OF FACT.
The petitioner is a resident of Chicago, Ill. His father, William Blair, was also a resident of Chicago. The latter died May 10, 1899, leaving a last will and testament wherein he provided, among other things, substantially as follows: He created a trust estate naming Chauncey J. Blair and Edward T. Blair, the petitioner, as trustees, by the terms of which the wife of the testator was to receive one-half of the net income of the trust estate, during her life, and the petitioner was to receive the other half; and after the death of the wife of the testator the petitioner was to receive the whole of the net income of the trust for and during the term of his natural life.
The will of William Blair was duly established, admitted to probate and put to record. "Clause Fourteenth," which creates the trust above mentioned, is as follows:
To my nephew Chauncey J. Blair and my son Edward Tyler Blair, of Chicago, I give, devise and bequeath all the rest and residue of my real estate situated in the State of Illinois, including the brick store building standing on the east half of the west half of lot seven (7) in block nineteen (19) in the original town of Chicago, leased by me of the estate of the late John High, deceased, and including also my said homestead above described subject to the life estate therein of my said wife as herein given to her and also all shares of stock in the Merchants National Bank of Chicago and all shares of stock or bonds which I may own at the time of my decease of any municipal corporation or incorporated company, To have and to hold the same to them and to the survivor of them and to their successors, and to the heirs executors and administrators of such survivor and successor, but in trust however to and for the following uses and purposes namely: in trust to hold, manage control, improve and lease the same, at their discretion, and the same to keep well insured and in good and tenantable repair and condition and the same to rebuild in case of damage or destruction by fire or otherwise, and the income from said trust fund and estate to use expend account for and pay as follows to-wit:
A. To pay all the taxes, assessments and premiums for insurance thereon, all the costs and expenses of the necessary repairs upon the said real estate; all the cost and expense of the necessary additions to and alterations and improvements in any of the buildings upon said real estate; all the cost and expense of re-building and repairing any building destroyed or damaged by fire or other casualty and also any and all other costs and expenses necessarily incident to the care, management protection and preservation of said trust estate; all of the above to be done and performed by the trustees of said fund and estate as they, in their discretion and judgment shall deem for the best interest thereof and of those interested therein.
B. To pay to my said wife, as the same shall from time to time be received, one equal half part of all the net income which shall arise or accrue from the said trust fund and estate for and during the full term of her natural life.
C. To pay to my said son, as the same shall from time to time be received the other equal half part of all the net income which shall arise or accrue from the said trust fund and estate for and during the full term of his natural life.
D. At and after the decease of my said wife to pay my said son the whole of said net income for and during the full term of his natural life.
Other paragraphs of "Clause Fourteenth" relate to the disposition of the trust after the death of petitioner and in various other contingencies none of which are involved here.
The wife of the testator died March 13, 1923, and thereupon, according to the terms of the will, petitioner became entitled to the entire income during life of the trust created under "Clause Fourteenth" of the will of William Blair.
"Clause Twenty" of William Blair's will is as follows:
I do hereby declare and direct that the income from said trust fund and estate which is herein ordered to be, from time to time as the same shall be received, paid to my said wife and to my said son and to his said wife and to their children and descendants of children in the cases aforesaid shall be paid to them directly upon their separate order and receipt therefor, for their sole and separate use respectively, and that the same shall not be nor be made nor held in any manner nor by any proceedings whether in law or equity while yet in the hands of said trustees liable for or subject to the payment of any of the debts or obligations of either of the persons entitled to the same as above herein set forth.
On April 2, 1923, the petitioner assigned and transferred to his daughter, Lucy Blair Linn, for her life, an interest amounting to $6,000 for the remainder of the calendar year 1923, and $9,000 in each calendar year thereafter in the net income which petitioner was entitled to receive during his life from the Trustees under the said will of William Blair. This assignment was in the words and figures as follows:
THIS INDENTURE Made and entered into this 2nd day of April A. D. 1923, by and between EDWARD T. BLAIR of the City of Chicago, County of Cook and State of Illinois, party of the first part, and LUCY BLAIR LINN, of the said City of Chicago, party of the second part, WITNESSETH:
That the said party of the first part, in consideration of love and affection and One Dollar ($1) in hand paid by the party of the second part, the receipt whereof is hereby acknowledged, does hereby sell, assign, transfer and set over unto said party of the second part an interest amounting to Six Thousand Dollars ($6,000) for the remainder of the current calendar year, and Nine Thousand Dollars ($9,000) in each calendar year thereafter in the net income which the said party of the first part now is, or may hereafter be, entitled to receive during his life from the Trustees under the Will of William Blair, Deceased, late of the said City of Chicago; and the said party of the first part hereby authorizes and empowers said party of the second part, either in her own name or in the name of the said party of the first part, to receive and receipt to the Trustees under the Will of William Blair, deceased, for Six Thousand Dollars ($6,000) for the remainder of the current calendar year and for Nine Thousand Dollars ($9,000) in each year thereafter of the income and moneys which shall at any time become payable to said party of the first part under or by virtue of the terms and provisions of the said Will of William Blair, Deceased.
All payments hereunder shall be made in person to said party of the second part and not upon any written or verbal order nor upon any assignment, nor upon any transfer by operation of law, and shall cease upon the death of either party hereto.
IN WITNESS WHEREOF the parties hereto have set their hands and seals the day and year first above written.
On the same date, April 2, 1923, the petitioner notified the then trustees under the said will of William Blair in writing of said assignment to Lucy Blair Linn and the said trustees in writing accepted said assignment. This notice and acceptance are in the words and figures as follows:
To EDWARD TYLER BLAIR and WILLIAM McCORMICK BLAIR, as Trustees under the Last Will and Testament of William Blair, Deceased.
You are hereby notified that I have this day assigned, transferred and set over to my daughter, LUCY BLAIR LINN, an interest amounting to Six Thousand Dollars ($6,000.00) for the remainder of the current calendar year, and Nine Thousand Dollars ($9,000.00) in each calendar year thereafter in the net income which may become due and...
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