Harrison v. Schaffner

Decision Date31 March 1941
Docket NumberNo. 437,437
Citation312 U.S. 579,61 S.Ct. 759,85 L.Ed. 1055
PartiesHARRISON, Collector of Internal Revenue, v. SCHAFFNER
CourtU.S. Supreme Court

Messrs. Robert H. Jackson, Atty. Gen., and Arnold Raum, of Washington, D.C., for petitioner.

Mr. Herbert A. Friedlich, of Chicago, Ill., for respondent.

Mr. Justice STONE delivered the opinion of the Court.

In December, 1929, respondent, the life beneficiary of a testamentary trust, 'assigned' to certain of her children specified amounts in dollars from the income of the trust for the year following the assignment. She made a like assignment to her children and a son-in-law in November, 1930. The question for decision is whether, under the applicable 1928 Revenue Act, 45 Stat. 791, 26 U.S.C.A. Int.Rev.Acts, page 351 et seq., the assigned income, which was paid by the trustees to the several assignees, is taxable as such to the assignor or to the assignees.

The Commissioner ruled that the income was that of the life beneficiary and assessed a deficiency against her for the calendar years 1930 and 1931, which she paid. In the present suit to recover the tax paid as illegally exacted the District Court below gave judgment for the taxpayer, which the Court of Appeals affirmed. 7 Cir., 113 F.2d 449. We granted certiorari November 12, 1940, 311 U.S. 638, 61 S.Ct. 134, 85 L.Ed. —-, to resolve an alleged conflict in principle of the decision below with those in Lucas v. Earl, 281 U.S. 111, 50 S.Ct. 241, 74 L.Ed. 731; Burnet v. Leininger, 285 U.S. 136, 52 S.Ct. 345, 76 L.Ed. 665, and Helvering v. Clifford, 309 U.S. 331, 60 S.Ct. 554, 84 L.Ed. 788.

Since granting certiorari we have held, following the reasoning of Lucas v. Earl, supra, that one who is entitled to receive at a future date, interest or compensation for services and who makes a gift of it by an anticipatory assignment, realizes taxable income quite as much as if he had collected the income and paid it over to the object of his bounty. Helvering v. Horst, 311 U.S. 112, 61 S.Ct. 144, 85 L.Ed. 75, 131 A.L.R. 655; Helvering v. Eubank, 311 U.S. 122, 61 S.Ct. 149, 85 L.Ed. 81. Decision in these cases was rested on the principle that the power to dispose of income is the equivalent of ownership of it and that the exercise of the power to procure its payment to another, whether to pay a debt or to make a gift, is within the reach of the statute taxing income 'derived from any source whatever'. In the light of our opinions in these cases the narrow question presented by this record is whether it makes any difference in the application of the taxing statute that the gift is accomplished by the anticipatory assignment of trust income rather than of interest, dividends, rents and the like which are payable to the donor.

Respondent, recognizing that the practical consequences of a gift by assignment, in advance, of a year's income from the trust, are, so far as the use and enjoyment of the income are concerned, no different from those of the gift by assignment of interest or wages, rests his case on technical distinctions affecting the conveyanc- ing of equitable interests. It is said that since by the assignment of trust income the assignee acquires an equitable right to an accounting by the trustee which, for many purposes, is treated by courts of equity as a present equitable estate in the trust property, it follows that each assignee in the present case is a donee of an interest in the trust property for the term of a year and is thus the recipient of income from his own property which is taxable to him rather than to the donor. See Blair v. Commissioner, 300 U.S. 5, 57 S.Ct. 330, 81 L.Ed. 465.

We lay to one side the argument which the Government could have made that the assignments were no more than an attempt to charge the specified payments upon the whole income which could pass no present interest in the trust property. See Scott on Trusts, §§ 10.1, 10.6, 29, 30. For we think that the operation of the statutes taxing income is not dependent upon such 'attenuated subtleties', but rather on the import and reasonable construction of the taxing act. Lucas v. Earl, supra, 281 U.S. page 114, 50 S.Ct. page 241, 74 L.Ed. 731.

Section 22(a) of the 1928 Revenue Act provides, "Gross income' includes gains, profits, and income derived from * * * interest, rent, dividends, securities, or the transaction of any business carried on for gain or profit, or gains or profits and income derived from any source whatever'. By §§ 161(a) and 162(b) the tax is laid upon the income 'of any kind of property held in trust', and income of a trust for the taxable year which is to be distributed to the beneficiaries is to be taxed to them 'whether distributed to them or not'. In construing these and like provisions in other revenue acts we have uniformly held that they are not so much concerned with the refinements of title as with the actual command over the income which is taxed and the actual benefit for which the tax is paid. See Corliss v. Bowers 281...

To continue reading

Request your trial
290 cases
  • Helvering v. Stuart
    • United States
    • United States Supreme Court
    • 16 Noviembre 1942
    ...of income from property of which the donor remains the owner, for all substantial and practical purposes.' Harrison v. Schaffner, 312 U.S. 579, 583, 61 S.Ct. 759, 762, 85 L.Ed. 1055. In the John Stuart trusts the trustees, in their discretion, were to distribute income to the named benefici......
  • Spiegel Estate v. Commissioner of Internal Revenue
    • United States
    • United States Supreme Court
    • 17 Enero 1949
    ...the possession and enjoyment provision of § 811(c) cannot be applied to the trust corpus. Cf. Court's opinion in Harrison v. Schaffner, 312 U.S. 579, 61 S.Ct. 759, 85 L.Ed. 1055, written by Chief Justice 3 Helvering v. Stuart, 317 U.S. 154, 162—165, 63 S.Ct. 140, 144—146, 87 L.Ed. 154; cf. ......
  • 31 318 Commissioner of Internal Revenue v. First Security Bank of Utah 8212 305
    • United States
    • United States Supreme Court
    • 21 Marzo 1972
    ...income would have been received by the taxpayer had he not arranged for it to be paid to another. In Harrison v. Schaffner, 312 U.S. 579, 582, 61 S.Ct. 759, 761, 85 L.Ed. 1055 (1941), we '(O)ne vested with the right to receive income (does) not escape the tax by any kind of anticipatory arr......
  • Hudlow v. Commissioner
    • United States
    • United States Tax Court
    • 30 Agosto 1971
    ...tax purposes. Commissioner v. P. G. Lake, Inc. 58-1 USTC ¶ 9428, 356 U. S. 260, 267 (1958); Harrison v. Schaffner 41-1 USTC ¶ 9355, 312 U. S. 579 (1941); Helvering v. Horst 40-2 USTC ¶ 9787, 311 U. S. 112 (1940); Helvering v. Clifford 40-1 USTC ¶ 9265, 309 U. S. 331 (1940); Burnet v. Leinin......
  • Request a trial to view additional results
1 books & journal articles
  • Assignment of Income Doctrine
    • United States
    • James Publishing Practical Law Books Divorce Taxation Content
    • 30 Abril 2022
    ...in each case to reach a proper determination on that issue 9 . 1 Assigning of income before it becomes due. 2 Harrison v. Schaffner , 312 U.S. 579, 580, 61 S.Ct. 759, 760-61, 85 L.Ed. 1055 (1941). 3 Lucas v. Earl , 281 U.S. 111, 115, 50 S.Ct. 241, 74 L.Ed. 731 (1930). 4 Meisner v. U.S. , 13......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT