O'Malley-Keyes v. Eaton

• Citation: 24 F.2d 436
• Decision Date: 21 January 1928
• Docket Number: No. 3121.,3121.
• Court: U.S. District Court — District of Connecticut
• Parties: O'MALLEY-KEYES v. EATON, Collector of Internal Revenue.

24 F.2d 436 (1928)

O'MALLEY-KEYES v. EATON, Collector of Internal Revenue.

No. 3121.

District Court, D. Connecticut.

January 21, 1928.

J. Dwight Dana and Arnon D. Thomas, both of New Haven, Conn., for plaintiff.

C. M. Charest, W. E. Davis, and J. D. Wilson, all of Washington, D. C., and John Buckley, U. S. Atty., and George H. Cohen, Asst. U. S. Atty., both of Hartford, Conn., for defendant.

THOMAS, District Judge.

The plaintiff brings this action to recover certain additional income taxes assessed against her for the year 1921. The defendant filed a motion to dismiss and a demurrer, and the allegations of the motion and demurrer are identical, and, in effect, assert that the complaint fails to state a cause of action.

The plaintiff is one of the beneficiaries of a trust created under the will of her great-grandfather. Under the terms of the will the trustee is required, semiannually, to pay to her a certain percentage of the income and profits of the trust estate. While the percentage is fixed, the income receivable thereunder varies with the amount of the total income of the trust. On February 1, 1921, the plaintiff executed an instrument, the material parts of which are as follows:

"That said Jane Byrnes O'Malley-Keyes, party of the first part, in consideration of the sum of one dollar, lawful money of the United States, to her in hand paid by said Empire Trust Company, party of the second part, at or before the ensealing and delivery of these presents, the receipt whereof is hereby acknowledged, has sold, assigned, transferred, and set over, and by these presents does hereby sell, assign, transfer, and set over unto said Empire Trust Company, party of the second part, all of her right, title, and interest in and to all moneys, funds, income, property, and choses in action to which she now is or hereafter may be entitled from the estate of the aforesaid Matthew Byrnes, deceased, or under or out of the trust created by and existing under the aforesaid last will and testament of said Matthew Byrnes, deceased, or pursuant to or by virtue of said last will and testament. To have and to hold the same unto said Empire Trust Company, its successor or successors; but in trust, nevertheless, for the following uses and purposes, and upon the terms, conditions, and covenants hereinafter recited, and pursuant to the terms, conditions, covenants, agreements, and limitations hereinafter set forth and no others. * * *

"III. This agreement and assignment shall be irrevocable by the donor."

Under the terms of this instrument, none of the assigned income is payable to the plaintiff. All of it is payable to her husband, in trust for the benefit of their children.

The trustee, under this instrument, made a return for the year 1921 and paid the tax due thereon, estimated on the basis of the income received under the will. The Internal Revenue Bureau has, however, declined to recognize the assignment in trust, but takes the position that the income derived under the will is income of the plaintiff. Accordingly it has assessed taxes against her on the basis that these sums constituted part of her total income.

The demurrer to the complaint is predicated on the suggestion that the instrument in question does not operate as an assignment in præsenti. I am unable to see the force of the contention. It is true that the sums payable under the will are not liquidated, but that fact does not prevent them from being assigned. The corpus of the estate, out of which they issue, has a present tangible existence. The obligation to pay a fixed proportion of the income derived therefrom is enforceable. These conditions furnish an adequate basis for effecting the alienation of the plaintiff's interest in præsenti.

Nor is it of any importance, on this aspect of the matter,...