Du Pont v. Commissioner of Internal Revenue
| Decision Date | 29 May 1933 |
| Docket Number | No. 791,791 |
| Citation | 53 S.Ct. 766,289 U.S. 685,77 L.Ed. 1447 |
| Parties | DU PONT v. COMMISSIONER OF INTERNAL REVENUE |
| Court | U.S. Supreme Court |
Mr. James S. Y. Ivins, of Washington, D.C., for petitioner.
[Argument of Counsel from pages 685-687 intentionally omitted] The Attorney General andMr. Erwin N. Griswold, of Washington, D.C., for respondent.
This case, like Burnet, Commissioner, v. Wells, 289 U.S. 670, 53 S.Ct. 761, 77 L.Ed. —-, decided today, requires us to determine whether section 219(h) of the Revenue Acts of 1924 and 1926 (26 USCA § 960 note) is consistent with the Fifth Amendment in its application to trusts for the payment of premiums on policies of insurance.
On September 18, 1923, the petitioner, Du Pont, created nine trusts for the benefit of his wife and children, transferring to the trustee thereby two policies of insurance on his life, and shares of stock in a corporation, the income to be used to keep the policies in force. The trusts were to last for three years, during which term they were to be irrevocable. At the end of the term, they might be extended for a like period at the option of the settlor, and successively thereafter. Two such notices were given, with the result that in 1924, 1925, and 1926, the taxable years involved in this proceeding, the trusts were still in being.
The deeds make provision for the disposition of the policies and separate provision for the disposition of the shares.
As to the policies, the provision is that, if the trusts shall be terminated before the petitioner's death, all interest in the policies shall vest in certain named beneficiaries. The petitioner is not one of these, nor has he any power to change them. If the petitioner shall die while the trusts are still in force, the trustee is to collect the insurance, and to hold the proceeds in trust for the use of the beneficiaries named in the agreements.
As to the shares of stock, the provision is that, if the trusts shall be terminated before the petitioner's death, the shares and any income not paid out shall be transferred to the petitioner. If, however, he shall die while the trusts are still in force, the shares are to be divided among the children or their issue.
The Commissioner of Internal Revenue, following the command of section 219(h) of the applicable statutes (Revenue Acts of 1924 and 1926, chapter 234, 43 Stat. 253, 26 U.S. Code, § 960 (26 USCA § 960 note), chapter 27, 44 Stat. 9, 26 U.S. Code App. § 960 (26 USCA § 960 note)), made a deficiency assessment by adding to the taxpayer's income the amount expended by the trustee in the preservation of the policies. The Board of Tax Appeals sustained the assessment (20 B.T.A. 482), and the Court of Appeals for the Third Circuit affirmed. 63 F.(2d) 44. A writ of certiorari was granted by this court. 289 U.S. 715, 53 S.Ct. 528, 77 L.Ed. —-.
The case is ruled by our judgment in Burnet, Commissioner, v. Wells, 289 U.S. 670, 53 S.Ct. 761, 77 L.Ed. —-, upholding the validity of the contested statute. If the income of such a trust may be taxed to the grantor,...
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