Vondermuhll v. Helvering, 6246.
| Decision Date | 14 January 1935 |
| Docket Number | No. 6246.,6246. |
| Parties | VONDERMUHLL v. HELVERING, Commissioner of Internal Revenue. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Robert B. Cumming, of New York City, for petitioner.
Frank J. Wideman, Asst. Atty. Gen., and Sewall Key, Robert H. Jackson, Frank A. Surine, Norman D. Keller, and Louise Foster, all of Washington, D. C., for respondent.
Before MARTIN, Chief Justice, and ROBB, VAN ORSDEL, HITZ, and GRONER, Associate Justices.
This appeal presents for review a decision of the Board of Tax Appeals sustaining the Commissioner of Internal Revenue in a determination of a deficiency in the petitioner's individual income tax for the year 1926.
The petitioner is a citizen of Switzerland, living in Basle, and the widow of Alfred Vondermuhll, a member of the firm of William Iselin & Co., who died in 1920, leaving her 60 per centum of his large estate situated in the United States.
She conveyed that interest to her two sons, both citizens of the United States and resident therein. The sons, in turn, conveyed the property to themselves as trustees upon certain trusts, their deeds reciting that the conveyance to them by their mother was made "upon the condition and understanding that there shall be paid to the said Anna Vondermuhll-Hoffman during her life the net income derived from said monies and that all of said monies be on deposit with said William Iselin & Company of New York at 6% per annum interest, with power, however, to make changes in the investment of said monies." In addition to powers of deposit, sale, resale, and investment, the trustees, or the survivor, had power of filling a vacancy in the office of trustee, while upon the death of Mme. Vondermuhll-Hoffman the property is to pass to her sons if living, or to their appointees by will, or to the persons entitled thereto under the laws of New York in the absence of a will.
Under this arrangement, by 1926 the trust fund in varying portions had been deposited with or loaned to William Iselin & Co., A. Iselin & Co., and Arthur J. Rosenthal & Co., of New York.
These houses are described as factors, brokers, and investment bankers, engaged in many commercial and financial activities, all being copartnerships and all partners therein being citizens and residents of the United States.
These houses paid to the trustees during the years 1924, 1925, and 1926 income amounting respectively to $27,000, $27,000, and $37,000, in round figures, upon which the deficiencies in question were determined.
No part of these receipts was included in the income tax returns of either the trustees or the beneficiary, on the theory that they consist of interest paid by American bankers to an alien depositor neither residing nor doing business within the United States, and therefore exempt from tax under a provision of the Revenue Act of 1926 which governs the question.
Subdivision (a) (1) (A) of section 217 of that act (26 USCA § 958 (a) (1) (A) excepts from the gross income of a nonresident alien "interest on deposits with persons...
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