Lederer v. Stockton
| Citation | 43 S.Ct. 5,67 L.Ed. 99,260 U.S. 3 |
| Decision Date | 16 October 1922 |
| Docket Number | No. 16,16 |
| Parties | LEDERER, Collector of Internal Revenue for First District of Pennsylvania, v. STOCKTON |
| Court | United States Supreme Court |
Mr. Assistant Attorney General Ottinger, for petitioner.
[Argument of Counsel from pages 4-6 intentionally omitted] Mr. Maurice Bower Saul, of Philadelphia, Pa., for respondent.
The question in this case is whether the Income Tax Law of September 8, 1916 (39 Stat. 756), as amended by the Act of October 3, 1917 (40 Stat. 300), requires the Contributors to the Pennsylvania Hospital, a corporation of Pennsylvania, created for charitable uses and purposes, no part of whose net income is for the benefit of any private stockholder or individual, to pay a tax on the income of a residuary estate devised to it by the will of Alexander J. Derbyshire in 1879 and inuring to its benefit under the following circumstances: The devise was subject to the payment of certain annuities. All of the annuitants are dead save one. The Supreme Court of that state decided that the income could not be paid outright to the Hospital until the death of all the annuitants, and until then must remain in control of the trustee appointed under the will. Derbyshire's Estate, 239 Pa. 389, 86 Atl. 878. The trustee transferred the whole residuary fund as a loan for 15 years to the Hospital, and secured himself by mortgage on property of the Hospital. Under the terms of the loan and mortgage, the Hospital only pays interest enough to satisfy the administrative charges and the annuity. It uses the remainder of the income from the fund for its expenses. It is thus actually receiving the full benefit of the income of $15,000 from the residuary fund, reduced only by the annuity of $800.
Section 2b of the Income Tax Law of 1916, supra (Comp. St. § 6336b), is as follows:
'Income received by estates of deceased persons during the period of administration or settlement of the estate, shall be subject to the normal and additional tax and taxed to their estates, and also such income of estates or any kind of property held in trust, including such income accumulated in trust for the benefit of unborn or unascertained persons, or persons with contingent interests, and income held for future distribution under the terms of the will or trust shall be likewise taxed, the tax in each instance, except when the income is returned for the purpose of the tax by the beneficiary, to be assessed to the...
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