Stoddard v. Eaton

• Decision Date: 08 October 1927
• Docket Number: No. 3035.,3035.
• Citation: 22 F.2d 184
• Court: U.S. District Court — District of Connecticut
• Parties: STODDARD v. EATON, Collector of Internal Revenue.

22 F.2d 184 (1927)

STODDARD v. EATON, Collector of Internal Revenue.

No. 3035.

District Court, D. Connecticut.

October 8, 1927.

Henry Stoddard, of New Haven, Conn., pro se.

Frederick W. Dewart, Sp. Atty., Bureau of Internal Revenue, 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.

This is an action brought by the plaintiff to recover from the defendant certain additional income taxes assessed against the plaintiff in connection with his income tax returns for the years 1919, 1920, and 1921. The plaintiff paid these taxes under protest, and, his claim for refund having been rejected, he brings this action to recover the amounts paid. The additional taxes so assessed by the department and paid by the plaintiff were as follows: For the year 1919, $598.85; for 1920, $843.16, and for 1921, $2,488.47, plus interest in the amount of $502.10, making a total of $4,432.58.

The question involved is whether the plaintiff is entitled to deduct from his gross income claimed losses on the sale of securities which were held by trustees under the particular trust instrument given by the plaintiff, wherein, as it will appear, he was both donor and beneficiary.

The plaintiff is an individual and a resident of Connecticut. For a number of years it has been the custom of the plaintiff and his wife, both of whom are of advanced age, to spend the winter of each year in the South.

On December 21, 1916, the plaintiff voluntarily, for his personal convenience and purposes, and without consideration, executed, and Clifford I. Stoddard, son of the plaintiff, and the Union & New Haven Trust Company, accepted, the trust created by the following instrument:

"I, Henry Stoddard, of the town of Woodbridge, state of Connecticut, do hereby give, grant, sell, assign, transfer and convey unto my son, Clifford I. Stoddard, of said Woodbridge, as trustee, and unto the Union & New Haven Trust Company, a corporation organized under the laws of the state of Connecticut and located in said New Haven, as cotrustee, with my son, Clifford, the several items of property noted in the schedule or schedules of property hereto annexed, marked Exhibit A, and made part hereof. The said trustees are to take, hold and dispose of said property upon the trust and subject to the conditions stated in this instrument. Said trustees shall have power to invest or reinvest any part of the principal of the trust fund, to change investments, and for that purpose to sell, convey, pledge and mortgage said trust fund at discretion to hold the same during my life, collect the income and to pay over to my wife, Amelia E. Stoddard, annually three thousand dollars ($3,000), to be paid in equal quarterly installments, on or about the 16th days of January, April, July and October in each year, and at such times to pay over the balance of said net income to me during the full term of my life. At my death the said trustees are to pay over and deliver to the trustees named in my will all the trust fund, principal, and income, to be held by such trustees named in my will upon the trusts and as a part of the trust fund created, established and provided for in my will.

"I hereby reserve the right to withdraw from said trust fund any and each item of property, and add thereto at my discretion, and I also reserve the right to terminate this trust, either in whole or in part, at my discretion, and in case of the exercise of such reserved right of withdrawal of any item of property, or of terminating this trust, in whole or in part, then and in such event, the trust shall terminate and the property shall be thereupon returned to me."

Subsequent to the execution of this instrument, the following securities, which are referred to in the instrument as being listed in Exhibit A, were delivered to the Union & New Haven Trust Company and placed in a safe deposit box: 500 shares, Brooklyn Rapid Transit Company. 100 shares, Scranton Electric Company, preferred. 100 shares, Mackay Company, preferred. 400 shares, Interborough Consolidated Corporation, preferred. 300 shares, American Telephone & Telegraph Company. 300 shares, General Electric Company. 161 shares, Associated Dry Goods Corporation, first preferred. 80 shares, Associated Dry Goods Corporation, second preferred. $13,000 par value, New York, New Haven & Hartford Railroad Company's debenture, due March 1, 1947, Nos. 1028 to 1031, both inclusive, 1045, 1712 to 1717, both inclusive, 1937 and 1938.

The stock certificates representing part of the securities were transferred to Clifford I. Stoddard and the Union & New Haven Trust Company, trustees under the deed of Henry Stoddard.

Subsequently, Henry Stoddard, Amelia E. Stoddard, his wife, Clifford I. Stoddard, his son, and the Union & New Haven Trust Company, executed the following instrument:

"Memorandum agreement, made this 28th day of October, 1918, by Amelia E. Stoddard and Henry Stoddard, husband and wife, with Clifford I. Stoddard and Union and New Haven Trust Company, trustees, witnesseth:

"That the said Amelia E. Stoddard has and does assign to said trustees the securities mentioned in the schedule annexed hereto, in trust, however, to collect and pay over the income and account for the principal as is herein stated. The trustees are to collect the income and add the same to the income received by said trustees from the Henry Stoddard Trust. The net joint income so received is to be paid over by said trustees to said Henry and Amelia E. Stoddard, one-half to each at the times and in the manner mentioned in the Henry Stoddard Trust. Said Amelia E. Stoddard may add to said trust or withdraw therefrom any securities at her pleasure and this trust terminates upon her death, and in such case, the trustees will turn over the trust property to her executors and administrators. Said Henry Stoddard agrees to the equal division of said joint net income and becomes a party hereto for that purpose."

From time to time, after the execution of the instrument in 1916, the plaintiff directed the sale...