Spies v. United States, 14040.
| Citation | 180 F.2d 336 |
| Decision Date | 23 February 1950 |
| Docket Number | No. 14040.,14040. |
| Parties | SPIES et al. v. UNITED STATES. |
| Court | United States Courts of Appeals. United States Court of Appeals (8th Circuit) |
Denis M. Kelleher, Fort Dodge, Iowa, and Edward D. Kelly, Algona, Iowa, for appellants.
Harry Marselli, Sp. Asst. to Atty. Gen. (Theron Lamar Caudle, Asst. Atty. Gen., Ellis N. Slack, Lee A. Jackson and Irving I. Axelrad, Sp. Assts. to Atty. Gen., Tobias E. Diamond, U. S. Atty., and Wm. B. Danforth, Asst. U. S. Atty., Sioux City, Iowa, on the brief), for appellee.
Before SANBORN, JOHNSEN, and RIDDICK, Circuit Judges.
This appeal from a judgment dismissing the plaintiffs' action for refunds of income taxes for the years 1941 and 1943 presents two questions:
(1) Whether $6,000 of the net income of a trust, known as the "Bond Trust," created December 20, 1934, by Jacob A. Spies, who died in 1938, was taxable to his widow, Anna Spies, in each of the years in suit, under § 162(b), Title 26 U.S.C.A.,1 as income "which is to be distributed currently"; the instrument creating the trust providing:
"If said Trust Reserve Fund shall not then amount to Ten Thousand Dollars ($10,000.00), the net income from the trust estate, after providing for payment of income to Settlor's said wife, shall be further accumulated until said Ten Thousand Dollar ($10,000.00) fund is so accumulated, and any excess net income shall be paid, in convenient installments to Settlor's children, Elizabeth Amelia Spies, Charles Jacob Spies and Adolph Alfred Spies, in equal shares, so long as they shall live."; and Anna Spies having had no other income during the years here involved, and the net annual income of the trust estate having exceeded $6,000 in those years.
(2) Whether the net annual income in excess of $6,000 of the "Bond Trust" and the entire net income of a second trust, referred to as the "Estate Trust," created by the will of Jacob A. Spies and the codicils thereto, all of which income his three surviving children, Elizabeth Spies Hossack, Charles Jacob Spies, and Adolph Alfred Spies, as the trustees of the two trusts, had the power to distribute in equal shares to themselves as beneficiaries, was taxable to them as individuals, for the years in suit, under § 22(a), Title 26 U.S.C.A.2
The District Court answered both questions in the affirmative in an opinion which adequately states the pertinent facts, the issues involved, and the applicable law. 84 F.Supp. 769. Nothing would be gained by a repetitious or redundant elaboration of that opinion.
We think the District Court's conclusion that the widow of the settlor was entitled to receive $6,000 each year from the net income of the "Bond Trust," and that such income was taxable to her under § 162(b), Title 26 U.S.C.A., is clearly correct.
The second question is more doubtful, due largely to the construction which the District Court of Palo Alto County, Iowa, has, in proceedings initiated by plaintiffs, given to the instruments creating the two trusts. Under that construction, the trusts are valid spendthrift trusts; the trustees are under no obligation to distribute to themselves as beneficiaries net income of the trusts (in excess of the $6,000 payable to Anna Spies), and may, in their discretion, either distribute such available net income of the trusts or accumulate it. The United States District Court was of the view that, from a practical standpoint, the power of the three children as trustees to divide such available trust income...
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