Irwin v. Gavit

Decision Date10 December 1923
Docket Number70.
PartiesIRWIN, Collector of Internal Revenue, v. GAVIT. [1]
CourtU.S. Court of Appeals — Second Circuit

Oliver D. Burden, U.S. Atty., of Syracuse, N.Y., for plaintiff in error.

Neile F. Towner, of Albany, N.Y., for defendant in error.

Before ROGERS, MANTON, and MAYER, Circuit Judges.

MANTON Circuit Judge.

The complaint sets forth in separate causes of action claims for taxes and penalties assessed and paid under the 1913, 1914 and 1915 income tax laws. The total amount is $21,602.16. Judgment was demanded for this amount, with interest and costs. The plaintiff in error demurred on the ground that the complaint failed to state facts sufficient to constitute a cause of action. This demurrer was overruled, and judgment entered as demanded in the complaint.

One Anthony N. Brady died, leaving a will which provided, among other things, as follows:

'All the rest, residue and remainder of the real and personal property of which I may die, seized and possessed, I direct my executors and trustees to divide into six equal parts and I give, devise and bequeath the same as follows:
'One part, to my executors and trustees, in trust, nevertheless, for the following uses and purposes, to wit: To collect and receive the rents, income and profits thereof and after paying all necessary expenses to dispose of the net rents, income and profits thereof as follows: I direct my executors and trustees to apply so much of said net rents, income and profits as they, in the exercise of their absolute discretion, shall deem proper for the maintenance, education and support during her minority, of my granddaughter, Marcia Ann Gavit, and I direct my executors and trustees in fixing the amount of said allowance to consider the station in life of my said granddaughter, my desire being that she shall be amply and liberally provided for in every way. All income to be applied to the maintenance, education and support of my said granddaughter and may be either so applied by my executors and trustees directly, or may in their discretion be paid by them to the guardian of the person of said minor, and the receipt of such guardian shall be full and complete discharge to them for all moneys so paid by them to such guardian. The balance of said net rents, income and profits shall be divided into two equal parts: One of the said parts shall be paid to my son-in-law, Erastus Palmer Gavit, in equal quarter yearly payments during his life. The other moiety shall be accumulated for the benefit of my said granddaughter. Upon the death of my said granddaughter before she attains her majority, whether her father be then living, or not, I give, devise and bequeath the capital of said trust estate to her issue in equal shares, per stirpes, and if she leaves no issue, whether her father be then living or not, I give, devise and bequeath said capital to my issue, share and share alike, per stirpes. When my granddaughter attains the age of twenty-one years, whether her father be then living, or not, and whether she then has living issue, or not, I direct that said trust shall cease, and I give, devise and bequeath the capital of said trust estate to my said granddaughter, her heirs and assigns forever.'

Under this provision of the will, the defendant in error was entitled to share in the balance of the net rents, income, and profits which was to be divided into two equal parts, one of the said parts to be paid to the defendant in error in equal quarter yearly payments during his life. The plaintiff in error treated the moneys so received during his years 1913, 1914, and 1915 as income under the Income Tax Law, whereas the claim of the defendant in error is that it was a legacy, and hence not taxable. The Act of October 3, 1913 (38 Stat. 114-116), which is applicable, is as follows:

'A. Subdivision 1. That there shall be levied, assessed, collected and paid annually upon the entire net income arising or accruing from all sources in the preceding calendar year to every citizen of the United States, whether residing at home or abroad, and to every person residing in the United States, though not a citizen thereof, a tax of 1 per centum per annum upon such income, except as hereinafter provided; and a like tax shall be assessed, levied, collected, and paid annually upon the entire net income from all property owned and of every business, trade, or profession carried on in the United States by persons residing elsewhere.
'Subdivision 2. In addition to the income tax provided under this section (herein referred to as the normal income tax) there shall be levied, assessed, and collected upon the net income of every individual an additional income tax (herein referred to as the additional tax) of 1 per centum per annum upon the amount by which the total net income exceeds $20,000 and does not exceed $50,000, and 2 per centum per annum upon the amount by which the total net income exceeds $50,000 and does not exceed $75,000, 3 per centum per annum upon the amount by which the total net income exceeds $75,000 and does not exceed $100,000, 4 per centum per annum upon the amount by which the total net income exceeds $100,000 and does not exceed $250,000, 5 per centum per annum upon the amount by which the total net income exceeds $250,000 and does not exceed $500,000, and 6 per centum per annum upon the amount by which the total net income exceeds $500,000. All the provisions of this section relating to individuals who are to be chargeable with the normal income tax, so far as they are applicable and are not inconsistent with this subdivision of paragraph A, shall apply to the levy, assessment, and collection of the additional tax imposed under this section.
'Every person subject to this additional tax shall, for the purpose of its assessment and collection, make a personal return of his total net income from all sources, corporate or otherwise, for the preceding calendar year, under rules and regulations to be prescribed by the Commissioner of Internal Revenue and approved by the Secretary of the Treasury. * * *
'B. That, subject only to such exemptions and deductions as are hereinafter allowed, the net income of a taxable person shall include gains, profits, and income derived from salaries, wages, or compensation for personal service of whatever kind and in whatever form paid, or from professions, vocations, businesses, trade, commerce, or sales, or dealings in property, whether real or personal, growing out of the ownership or use of or interest in real or personal property, also from interest, rents, dividends, securities, or the transaction of any lawful business carried on for gain or profit, or gains or profits and income derived from any source whatever, including the income from but not the value of property acquired by gift, bequest, devise or descent.'

Under the provisions of this will, the defendant in error received a certain portion of the increase of the estate of the testator for a definite period; that is, until the testator's granddaughter, Marcia Ann Gavit, who was the daughter of the defendant in error, attained the age of 21 years, at which time the entire one-sixth part of the trust estate bequeathed under this portion of the will was given to her absolutely. The gift to the defendant in error was further limited by the life of his daughter, for the will provided that, if she died prior to attaining the age of 21, defendant in error was to receive no further sums whatsoever under the will, and the entire trust estate went to the issue of his daughter, if any; otherwise, to the issue of the testator.

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3 cases
  • Douglas v. Edwards
    • United States
    • U.S. Court of Appeals — Second Circuit
    • April 7, 1924
    ...747, 26 A.L.R. 1454; Monroe Cider, Vinegar & Fruit Co. v. Riordan (C.C.A.) 280 F. 624; Irwin v. Gavit (2d Circuit, C.C.A., decided Dec. 10, 1923) 295 F. 84. of this principle, the parties each seek comfort in the Revenue Act of 1918. Defendant urges that the omission in the Revenue Act of 1......
  • United States v. Carpenter, 1315.
    • United States
    • U.S. Court of Appeals — Tenth Circuit
    • July 11, 1936
    ...to change the statute in all the particulars touching which we find a material change in the language of the act." See, also, Irwin v. Gavit (C.C.A.) 295 F. 84, 88; United States v. Field, 255 U. S. 257, 265, 41 S.Ct. 256, 65 L.Ed. 617, 18 A.L.R. 1461; Brewster v. Gage, 280 U.S. 327, 337, 5......
  • Irwin v. Gavit
    • United States
    • U.S. Supreme Court
    • April 27, 1925
    ...The demurrer was overruled and judgment given for the plaintiff by the District Court (275 F. 643), and the Circuit Court of Appeals (295 F. 84). A writ of certiorari was granted by this Court. 264 U. S. 579, 44 S. Ct. 453, 68 L. Ed. The question is whether the sums received by the plaintif......

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