Douglas v. Willcuts, No. 1

CourtUnited States Supreme Court
Writing for the CourtHUGHES
Citation56 S.Ct. 59,296 U.S. 1,101 A.L.R. 391,80 L.Ed. 3
Docket NumberNo. 1
Decision Date11 November 1935
PartiesDOUGLAS v. WILLCUTS, Collector of Internal Revenue

296 U.S. 1
56 S.Ct. 59
80 L.Ed. 3
DOUGLAS

v.

WILLCUTS, Collector of Internal Revenue.

No. 1.
Argued Oct. 14, 1935.
Decided Nov. 11, 1935.

[Syllabus from pages 1-2 intentionally omitted]

Page 2

Messrs. Leland W. Scott and Clark R. Fletcher, both of Minneapolis, Minn., for petitioner.

The Attorney General and Mr. Frank J. Wideman, Asst. Atty. Gen., for respondent.

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Mr. Chief Justice HUGHES, delivered the opinion of the Court.

On September 12, 1923, petitioner, Edward B. Douglas, entered into an agreement with his wife and the Minneapolis Trust Company, by which he transferred securities in trust for his wife's benefit. Out of the income of the trust estate the trustee was to pay Mrs. Douglas annually the sum of $15,000, up to November 6, 1927, and thereafter $21,000. Deficiencies were to be made up in a prescribed manner. Excess income (in case the principal was not impaired) was to be paid to petitioner. On the death of his wife, he was to receive the property free of the trust. Petitioner reserved the right to designate securities for investment, subject, however, to the approval of the trustee acting in that respect on behalf of Mrs. Douglas.

The parties stipulated that the provisions for Mrs. Douglas were 'in lieu of, and in full settlement of alimony, and of any and all dower rights or statutory interests in the estate' of her husband, and 'in lieu of any and all claims for separate maintenance and allowance for her support.'

Three days later, Mrs. Douglas obtained a decree of absolute divorce in a district court of the state of Minnesota. The decree provided: 'It is further adjudged and decreed that the defendant provide and create the trust fund as set out in that certain agreement between said parties and the Minneapolis Trust Company as trustee now on file with said trustee, and that the plaintiff have the provision therein made in lieu of all other alimony or interest in the property or estate of the defendant and that neither party have any costs or disbursements herein.'

The question in this case relates to the net income of the trust which was distributed to Mrs. Douglas in the

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years 1927 and 1928. The Commissioner of Internal Revenue determined that these amounts were income to the petitioner. Taxes assessed accordingly were paid by petitioner under protest, claim for refund was disallowed, and this suit was brought to recover the amount paid. Judgment for petitioner was reversed by the Circuit Court of Appeals. 73 F. (2d) 130. We granted certiorari (295 U.S. 722, 55 S.Ct. 642, 79 L.Ed. 1675, April 8, 1935) in view of an asserted conflict with the decision of the Circuit Court of Appeals of the Seventh Circuit in the case of Schweitzer v. Commissioner of Internal Revenue, 75 F.(2d) 702, 705, 706.

Petitioner contends that the agreement created an irrevocable trust; that under the Revenue Acts petitioner and Mrs. Douglas were separate taxpayers; and that, having accepted the benefits of the trust, she was taxable upon the income she received as beneficiary. Revenue Act 1926, § 219, 26 USCA §§ 161—167 notes; Revenue Act 1928, §§ 161, 162, 167, 26 USCA §§ 161, 162, 167 note; Helvering v. Butterworth, 290 U.S. 365, 369, 370, 54 S.Ct. 221, 78 L.Ed. 365. The Circuit Court of Appeals decided that the income was taxable to the petitioner, since it went to the discharge of his legal obligation; that is, the income was devoted to payments which petitioner was bound to make under the decree of the Minnesota court. 73 F.(2d) 130, page 133.

The authority of the district court is defined by statute. Mason's Minnesota Statutes 1927, §§ 8601—8604. The court is empowered upon divorce for any cause, except that of the wife's adultery, to decree to the wife 'such part of the personal and real estate of the husband, not exceeding in value one-third thereof, as it deems just and reasonable, having regard to the ability of the husband, the character and situation of the parties, and all other circumstances of the case.' The court may also decree 'such alimony out of the estate, earnings, and income of the husband as it may deem just and reasonable,' but 'the aggregate award and allowance made to the wife from the estate of the husband' is not to 'exceed in

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present value one-third of the personal estate, earnings, and income of the husband, and one-third in value of his real estate.' Id., § 8602. The court 'may appoint trustees, whenever it is deemed expedient, to receive any money ordered to be paid to the wife, upon trust to invest the same, and pay over the income for the support of the wife, or of the wife and minor children of the parties, or any of them, in such manner as the court shall direct, or to pay over to the wife the principal sum in such proportions and at such times as the court shall order.' Id., § 8601. After a decree 'for alimony, or other allowance for the wife and children,' or 'for the appointment of trustees to receive and hold any property for the use of the wife or children,' the court may from time to time 'revise and alter' the decree, with respect to the amount 'of such alimony or allowance' and also with respect to 'the appropriation and payment of the principal and income of the property so held in trust, and may make any order respecting any of the said matters which it might have made in the original action.' Id., § 8603. 1

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The Supreme Court of the State has decided that the district court in exercising this authority is not precluded by stipulations and agreements of the parties, entered into pending the action (but not void by reason of having been made to facilitate the decree of divorce), from making such provision for the wife as the court may deem appropriate. Such stipulations or agreements do not control the court. The court may adopt or reject them as it deems best in the light of the situation of the parties. When such agreements are approved, and in effect are embodied in the decree, they do not detract from the authority of the court to alter or revise its decree and the provisions made for the wife's benefit. In Warren v.

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Warren, 116 Minn. 458, pages 459, 460, 133 N.W. 1009, the court said:

'It appears that the original judgment for alimony was based upon a stipulation of the parties, entered into...

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327 practice notes
  • Helvering v. Stuart, Nos. 49 and 48
    • United States
    • United States Supreme Court
    • November 16, 1942
    ...of a legal obligation? Assuming that such a change would result in a distribution to the grantor under Section 167 and Douglas v. Willcuts, 296 U.S. 1, 56 S.Ct. 59, 80 L.Ed. 3, 101 A.L.R. 391, the ruling of the Court of Appeals on Illinois law forbids such a distribution from these trusts. ......
  • Title Ins. Co. of Minnesota v. State Bd. of Equalization, No. A045664
    • United States
    • California Court of Appeals
    • June 24, 1991
    ...the same in substance as if the money had been paid to the taxpayer and he had transmitted it to his creditor." (Douglas v. Willcuts (1935) 296 U.S. 1, 9, 56 S.Ct. 59, 62, 80 L.Ed. 3; accord Burnet v. Wells (1933) 289 U.S. 670, 677, 53 S.Ct. 761, 763, 77 L.Ed. 1439; Falkoff v. C.I.R. (7th C......
  • Herbert v. Riddell, No. 13096.
    • United States
    • United States District Courts. 9th Circuit. United States District Court (Southern District of California)
    • February 28, 1952
    ...cases cited in Notes 5 and 6. 45 Internal Revenue Code, Secs. 22(k) and 23(u), 26 U.S.C.A. §§ 22(k), 23(u). 46 Douglas v. Willcuts, 1935, 296 U.S. 1, 8, 56 S.Ct. 59, 80 L.Ed. 3; Helvering v. Fitch, 1940, 309 U.S. 149, 151, 60 S. Ct. 427, 84 L.Ed. 47 The legislative history indicates this pu......
  • Doll v. Commissioner of Internal Revenue, No. 12773.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (8th Circuit)
    • May 11, 1945
    ...74 L.Ed. 916) or benefits to him (Helvering v. Horst, 311 U.S. 112, 119, 61 S.Ct. 144, 85 L.Ed. 75, 131 A.L.R. 655; Douglas v. Willcuts, 296 U.S. 1, 9, 56 S.Ct. 59, 80 L.Ed. 3, 101 A.L.R. 391). Where the income is from labor, a test is who "earned" the income (Helvering v. Horst, 311 U.S. 1......
  • Request a trial to view additional results
326 cases
  • Helvering v. Stuart, Nos. 49 and 48
    • United States
    • United States Supreme Court
    • November 16, 1942
    ...of a legal obligation? Assuming that such a change would result in a distribution to the grantor under Section 167 and Douglas v. Willcuts, 296 U.S. 1, 56 S.Ct. 59, 80 L.Ed. 3, 101 A.L.R. 391, the ruling of the Court of Appeals on Illinois law forbids such a distribution from these trusts. ......
  • Title Ins. Co. of Minnesota v. State Bd. of Equalization, No. A045664
    • United States
    • California Court of Appeals
    • June 24, 1991
    ...the same in substance as if the money had been paid to the taxpayer and he had transmitted it to his creditor." (Douglas v. Willcuts (1935) 296 U.S. 1, 9, 56 S.Ct. 59, 62, 80 L.Ed. 3; accord Burnet v. Wells (1933) 289 U.S. 670, 677, 53 S.Ct. 761, 763, 77 L.Ed. 1439; Falkoff v. C.I.R. (7th C......
  • Herbert v. Riddell, No. 13096.
    • United States
    • United States District Courts. 9th Circuit. United States District Court (Southern District of California)
    • February 28, 1952
    ...cases cited in Notes 5 and 6. 45 Internal Revenue Code, Secs. 22(k) and 23(u), 26 U.S.C.A. §§ 22(k), 23(u). 46 Douglas v. Willcuts, 1935, 296 U.S. 1, 8, 56 S.Ct. 59, 80 L.Ed. 3; Helvering v. Fitch, 1940, 309 U.S. 149, 151, 60 S. Ct. 427, 84 L.Ed. 47 The legislative history indicates this pu......
  • Doll v. Commissioner of Internal Revenue, No. 12773.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (8th Circuit)
    • May 11, 1945
    ...74 L.Ed. 916) or benefits to him (Helvering v. Horst, 311 U.S. 112, 119, 61 S.Ct. 144, 85 L.Ed. 75, 131 A.L.R. 655; Douglas v. Willcuts, 296 U.S. 1, 9, 56 S.Ct. 59, 80 L.Ed. 3, 101 A.L.R. 391). Where the income is from labor, a test is who "earned" the income (Helvering v. Horst, 311 U.S. 1......
  • Request a trial to view additional results

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