Helvering v. Hormel, No. 11565.

CourtUnited States Courts of Appeals. United States Court of Appeals (8th Circuit)
Writing for the CourtSANBORN, THOMAS, and VAN VALKENBURGH, Circuit
Citation111 F.2d 1
PartiesHELVERING, Commissioner of Internal Revenue, v. HORMEL.
Docket NumberNo. 11565.
Decision Date25 April 1940

111 F.2d 1 (1940)

HELVERING, Commissioner of Internal Revenue,
v.
HORMEL.

No. 11565.

Circuit Court of Appeals, Eighth Circuit.

April 25, 1940.


111 F.2d 2

L. W. Post, Sp. Asst. to Atty. Gen. (Samuel O. Clark, Jr., Asst. Atty. Gen., and Sewall Key, Sp. Asst. to Atty. Gen., on the brief), for petitioner.

R. C. Alderson, of Austin, Minn. (S. D. Catherwood and Catherwood, Hughes & Alderson, all of Austin, Minn., on the brief), for respondent.

Before SANBORN, THOMAS, and VAN VALKENBURGH, Circuit Judges.

SANBORN, Circuit Judge.

This is a petition to review a decision of the Board of Tax Appeals (39 B.T.A. 244) determining that there were no deficiencies in income taxes of the respondent for the years 1934 and 1935.

Respondent, a resident of Minnesota (hereinafter referred to as the taxpayer), on July 16, 1934, created three irrevocable short-term trusts for the benefit of his three minor sons. To himself and another, as trustees of each of the trusts, he conveyed shares of stock of Geo A. Hormel & Co., of which he was an officer. Each trust instrument recited that the trust was created for the benefit of the taxpayer and the benefit of the taxpayer's wife as guardian of the son named therein. The income of each trust up to $2,000 a year was to be paid to the wife as such guardian "for the use and benefit of" her ward, and the income, if any, in excess of $2,000 a year was to be paid to the taxpayer. Each trust was to terminate at the end of three years or upon the earlier death of either the taxpayer or the son named in the trust instrument. Upon the termination of the trusts, the corpus was to belong to the taxpayer or, in case of his death, to his heirs or the persons named in his will. The trustees had authority to appoint proxies to vote the stock held in trust. The trustees were not liable to the guardian, or to the sons, for loss except in case of wilful violation of duty. No title to the trust estates or to prospective dividends therefrom vested in the guardian, nor were the estates or such dividends subject to her debts or those of her wards. The guardian and her wards were prohibited from selling, encumbering or disposing of any interest in the trust estates or any dividends therefrom prior to the actual receipt of the trust income to which they were entitled from the trustees. In case of sale by the trustees of the stock held in trust and the substitution of other securities therefor, the income therefrom was to be trust income.

In each of the years 1934 and 1935 the taxpayer's personal income exceeded one hundred thousand dollars. In his returns for those years he took credit in his exemptions for his three dependent sons, the beneficiaries of the three trusts. He did not include in his gross income for those years the trust income of the three trusts which was paid to the guardian of the three sons under the terms of the trust instruments. Such income was reported in the returns of the beneficiaries. The Commissioner, however, included all of the income of these trusts in the taxpayer's gross income and assessed a deficiency accordingly. In his deficiency letter, the

111 F.2d 3
Commissioner based his action upon § 166 of the Revenue Act of 1934, 48 Stat. 680, 729, 26 U.S.C.A. Int.Rev.Code, § 166.1

The taxpayer appealed to the Board of Tax Appeals. In the proceedings before the Board, the Commissioner relied upon § 166 and § 167 of the Revenue Act of 1934 26 U.S.C.A. Int.Rev.Code, §§ 166, 167.2 The Board decided that neither of these sections was applicable. A minority of the Board members were of the opinion that under § 167 the trust income paid to the guardian of the taxpayer's sons was taxable to the taxpayer because it could have been used for relieving him of his obligation to support his children (Douglas v. Willcuts, 296 U.S. 1, 56 S.Ct. 59, 80 L. Ed. 3, 101 A.L.R. 391) and because the wife had "no interest adverse to petitioner in the distribution of the income from the children's trusts." The Board entered its order on March 28, 1939, determining that there were no deficiencies in income taxes for the years in question.

In his petition for review of the decision of the Board, the Commissioner assigned as error: (1) the ruling of the Board that the entire income of the three trusts was not taxable to the taxpayer; (2) the failure of the Board to rule that such trust income was taxable to him under either § 166 or § 167. The record and briefs were filed in this Court prior to January 1, 1940. In his brief, the Commissioner, under "Specifications of Error to be Urged", stated:

"The Board of Tax Appeals erred:

"1. In holding that the trust income here involved was not includable in the taxpayer's gross income for the years 1934 and 1935.

"2. In not holding that this income was taxable under Sections 166 and/or 167 of the Revenue Act of 1934.

"3. In entering its order of no deficiencies in income tax for the years 1934 and 1935 and in not entering an order that there are deficiencies in the amounts of tax attributable to the trust income here involved."

Under "Points and Authorities", the Commissioner's brief states:

"1. The grantor did not give up sufficient interest in the trust income to avoid taxation under Sections 167 and/or 22(a) of the Revenue Act of 1934, 26 U.S.C.A. Int.Rev.Acts, page 669.3

"2. The grantor did not give up sufficient interest in the trust corpus to avoid taxation on income therefrom under Sections 166 and/or 22(a) of the Revenue Act of 1934.

"3. The grantor retained sufficient interest in the income and corpus of the trusts to justify taxing him under Sections 167,

111 F.2d 4
166 and 22(a), considered together and read as a whole."

The taxpayer, in his answering brief, under "Points and Authorities", stated:

"1. Grantor gave up sufficient interest in the trust income to avoid taxation under Sections 167 and/or 22(a) of the Revenue Act of 1934.

"2. The grantor gave up sufficient interest in the trust corpus to avoid taxation on income therefrom under Sections 166 and/or 22(a) of the Revenue Act of 1934.

"3. Grantor did not retain sufficient interest in the income and the corpus of the trust to justify taxing him under Sections 166, 167 and 22(a), considered together and read as a whole."

Under point 2 the taxpayer cites the case of Clifford v. Helvering, 8 Cir., 105 F.2d 586, which involved a short-term family trust similar to those here in suit. This Court held in that case that the income from the trust there considered was not taxable to the grantor. Certiorari was granted in that case by the Supreme Court of the United States, and the case was pending in that court at the time briefs in the case at bar were filed in this Court. On February 26, 1940, the Supreme Court filed its decision (Helvering v. Clifford, 60 S.Ct. 554, 84 L.Ed. ___) reversing this Court and holding that the income from the family trust created by Clifford was sufficiently his income to be taxable to him under § 22(a). On the same day the Supreme Court decided Helvering v. Wood, 60 S.Ct. 551, 84 L.Ed. ___, in which the Circuit Court of Appeals of the Second Circuit had held (104...

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23 practice notes
  • Janko v. United States, No. 16330.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (8th Circuit)
    • 16 Agosto 1960
    ...56 S.Ct. 391, 80 L.Ed. 555; Hormel v. Helvering, 312 U. S. 552, 557, 61 S.Ct. 719, 85 L.Ed. 1037, affirming Helvering v. Hormel, 8 Cir., 111 F.2d 1; Ayers v. United States, 8 Cir., 58 F.2d 607, 609; United States v. 353 Cases, 8 Cir., 247 F.2d 473, 477; See Wiborg v. United States, 163 U.S.......
  • White v. Higgins, No. 3613.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (1st Circuit)
    • 12 Diciembre 1940
    ...not presented to the lower court or considered by it. Whether or not this proposition is universally true (cf. Helvering v. Hormel, 8 Cir., 111 F.2d 1, certiorari granted, October 14, 1940, 61 S.Ct. 35, 85 L.Ed. ___), it has no application here, for in the cases at bar the contention that a......
  • Stanley v. United States, No. 12969.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (6th Circuit)
    • 22 Mayo 1957
    ...cases that questions of law not presented to or passed upon by the trial court will be reviewed in this court. Helvering v. Hormel, 8 Cir., 111 F.2d 1, affirmed 312 U.S. 552, 61 S.Ct. 719, 85 L.Ed. 1037; Duignan v. United States, 274 U.S. 195, 200, 47 S.Ct. 566, 71 L.Ed. 996; Trapp v. Metro......
  • Helvering v. Rubinstein, No. 11992.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (8th Circuit)
    • 22 Enero 1942
    ...he clearly owes (Hormel v. Helvering, supra, 312 U.S. page 560, 61 S.Ct. 719, 85 L.Ed. 1037). See and compare, Helvering v. Hormel, 8 Cir., 111 F.2d 1; Trapp v. Metropolitan Life Ins. Co., 8 Cir., 70 F.2d 976, affirmed on rehearing, 8 Cir., 72 F.2d 374, certiorari denied, 293 U.S. 596, 55 S......
  • Request a trial to view additional results
23 cases
  • Janko v. United States, No. 16330.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (8th Circuit)
    • 16 Agosto 1960
    ...56 S.Ct. 391, 80 L.Ed. 555; Hormel v. Helvering, 312 U. S. 552, 557, 61 S.Ct. 719, 85 L.Ed. 1037, affirming Helvering v. Hormel, 8 Cir., 111 F.2d 1; Ayers v. United States, 8 Cir., 58 F.2d 607, 609; United States v. 353 Cases, 8 Cir., 247 F.2d 473, 477; See Wiborg v. United States, 163 U.S.......
  • White v. Higgins, No. 3613.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (1st Circuit)
    • 12 Diciembre 1940
    ...not presented to the lower court or considered by it. Whether or not this proposition is universally true (cf. Helvering v. Hormel, 8 Cir., 111 F.2d 1, certiorari granted, October 14, 1940, 61 S.Ct. 35, 85 L.Ed. ___), it has no application here, for in the cases at bar the contention that a......
  • Stanley v. United States, No. 12969.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (6th Circuit)
    • 22 Mayo 1957
    ...cases that questions of law not presented to or passed upon by the trial court will be reviewed in this court. Helvering v. Hormel, 8 Cir., 111 F.2d 1, affirmed 312 U.S. 552, 61 S.Ct. 719, 85 L.Ed. 1037; Duignan v. United States, 274 U.S. 195, 200, 47 S.Ct. 566, 71 L.Ed. 996; Trapp v. Metro......
  • Helvering v. Rubinstein, No. 11992.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (8th Circuit)
    • 22 Enero 1942
    ...he clearly owes (Hormel v. Helvering, supra, 312 U.S. page 560, 61 S.Ct. 719, 85 L.Ed. 1037). See and compare, Helvering v. Hormel, 8 Cir., 111 F.2d 1; Trapp v. Metropolitan Life Ins. Co., 8 Cir., 70 F.2d 976, affirmed on rehearing, 8 Cir., 72 F.2d 374, certiorari denied, 293 U.S. 596, 55 S......
  • Request a trial to view additional results

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