White v. Rose

• Decision Date: 31 October 1934
• Docket Number: No. 7128.,7128.
• Citation: 73 F.2d 236
• Parties: WHITE et al. v. ROSE, Collector of Internal Revenue.
• Court: U.S. Court of Appeals — Fifth Circuit

73 F.2d 236 (1934)

WHITE et al. v. ROSE, Collector of Internal Revenue.

No. 7128.

Circuit Court of Appeals, Fifth Circuit.

October 31, 1934.

Houston White and Edwin Pearce, both of Atlanta, Ga., for appellants.

Lawrence S. Camp, U. S. Atty., and M. Neil Andrews, Asst. U. S. Atty., both of Atlanta, Ga., Wm. B. Waldo, Sp. Asst. to Atty. Gen., and Frank J. Wideman, Asst. Atty. Gen., for appellee.

Before BRYAN, SIBLEY, and WALKER, Circuit Judges.

SIBLEY, Circuit Judge.

Houston White, R. P. McLarty, and C. L. Emerson, as trustees, made a fiduciary income tax return for the year 1928, claiming as an additional deduction under section 162 of the Revenue Act of 1928 (26 USCA § 2162) about $8,000 paid during the year to Mrs. W. Woods White as a beneficiary under their trust. The deduction was disallowed, and additional taxes were assessed against the trustees which they paid, and refund being refused, they sued the collector in the District Court, where a verdict was directed against them, and they appeal from the ensuing judgment. The theory of the additional tax is that Mrs. White purchased her rights in the trust, and that they are in effect an annuity, and that she in consequence is a creditor of the trust rather than a beneficiary. The trustees contend that while she is a purchaser, her interest is that of a beneficiary, and payments to her are allowable as deductions to the trustees; she herself owing tax as for income received by her. They rely on Helvering v. Butterworth, 290 U. S. 365, 54 S. Ct. 221, 78 L. Ed. 365, decided since the trial below, and the collector relies on Helvering v. Pardee, 290 U. S. 365, 54 S. Ct. 221, 78 L. Ed. 365, the companion case. The trust here involved was created after the death of W. Woods White intestate by Mrs. White, his widow, and his six children. They inherited from him under the Georgia statutes interests in common in all his property. They joined in a deed whereby all the property was conveyed in fee to trustees in trust to manage the same, collect the income, pay all taxes and other expenses including a compensation to themselves, and at least quarterly to pay over to Mrs. White during her life the net income remaining after paying such expenses; but if at any time the trustees think the net income is greater than necessary for her maintenance and support according to her station in life they to have power and discretion to pay the excess to the children, share and share alike, or to use it to increase the corpus; and at Mrs. White's death to pay over the corpus and all accrued income to the children or their descendants per stirpes, share and share alike. There was provision for advancements to the children or their families in case of need. Among other powers the trustees were authorized "to apportion all extra dividends and gain from sale of unproductive real estate and other receipts * * * between income and principal as to them seems fair and just, and any such apportionment made in good faith shall be final. * * * They may in general use their discretion in determining the question as to what receipts and what payments are income and principal, which discretion exercised in good faith shall be final." Mrs. White...