Marshall v. United States
Decision Date | 18 January 1939 |
Docket Number | No. 7301—J.,7301—J. |
Citation | 26 F. Supp. 580 |
Court | U.S. District Court — Southern District of California |
Parties | MARSHALL v. UNITED STATES. |
Wm. J. McNichols, of Los Angeles, Cal., for plaintiff.
Ben Harrison, U. S. Atty., E. H. Mitchell, Asst. U. S. Atty., and Eugene Harpole, Sp. Atty. for Treasury Department, all of Los Angeles, Cal.
Plaintiff sues to recover an amount of $16,076.36, together with interest, on account of an alleged overassessment of income tax for the calendar year ending December 31, 1928. The dispute between the taxpayer and the United States arose because of the Government's claim that plaintiff had realized a larger profit by reason of the sale of real property during the year 1928 than the amount returned by her.
In the month of June, 1928, plaintiff made a sale of real property for a total consideration of $219,000, receiving on account of the purchase price the sum of $25,000. Conveyance was made and promissory note and mortgage was taken back by the plaintiff from the vendee for the balance of the purchase price, the note being payable ten years after date with interest semiannually. In her income tax return for the year 1928 the sale was reported as on the installment basis and accounted for the $25,000 initial payment received. On the 10th of October, 1928, plaintiff transferred the note and mortgage to a Los Angeles bank to be held by it under the terms and provisions of an express declaration of trust executed by the plaintiff. The trustee, by the terms of the trust instrument, was given complete control of the trust property, the income derived being provided to be paid in installments to the plaintiff trustor for the term of her natural life. At her death such income was to be distributed to the two sons of the trustor during the terms of their natural lives in equal shares. Other particular provisions as to the application of the income subsequent to the death of the trustor need not be stated. The trust instrument contained the provision that the trust "is hereby declared to be irrevocable either as to the whole or any part thereof * * *."
The prime question involved is as to whether under the applicable statutes, where the vendor of real property makes transfer in trust of security first reported as payable on the installment basis, income tax on the total amount of profit represented by the value of such security, immediately becomes due. That was the theory upon which the revenue officers acted. A pertinent quotation may here properly be made from the case of Nuckolls v. U. S., 10 Cir., 76 F.2d 357, 359, where the court said:
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Legg v. Comm'r of Internal Revenue
...instant case the yet unrealized gain must immediately be recognized. In support of this conclusion we note that in Marshall v. United States, 26 F.Supp. 580 (S.D. Cal. 1939), the taxpayer transferred an installment sales obligation to an irrevocable trust, income to benefit the taxpayer. Th......
- Wheat v. Ford Motor Co., 2267.