Amory v. Commissioner
This text of 5 T.C.M. 579 (Amory v. Commissioner) is published on Counsel Stack Legal Research, covering United States Tax Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.
Opinion
Memorandum Opinion
OPPER, Judge: By this proceeding petitioner seeks a redetermination of deficiencies in income tax for the years 1940 and 1941 in the amounts of $4,888.07 and $5,874.89, respectively.
The sole issue is whether the unexpended, accumulated income of two trusts for the benefit of petitioner's minor children is taxable to petitioner, grantor and co-trustee*160 of the trusts, under
All of the facts have been stipulated. They are hereby found accordingly and can be summarized as follows:
Petitioner is a resident of Virginia, with an office in New York, New York. His income tax returns for the years involved were filed with the collector of internal revenue for the second district of New York.
By trust instrument, dated April 22, 1932, petitioner created two trusts, one for each of his two minor children - Amory Sibley Carhart, Jr., born on December 25, 1919, and Marion Carhart, born on January 24, 1925. Petitioner and his wife Isadora Bliss Carhart, were the trustees.
The trustees were to divide the corpus, designated in the instrument as the "Trust Estate," which consisted of stocks and bonds of various utilities, railroads, and industries, into two equal shares, one for the benefit of each child; to collect the income and apply so much of it during the lifetime of petitioner's wife, or until earlier termination of the trusts, to the maintenance, support, and education of each child as the trustees in their discretion deemed necessary and proper until such child should*161 attain the age of 21 years. The balance of the income, if any, was to be accumulated and was to be paid over to such child upon the attainment of 21 years of age.
Each of the trusts was to terminate upon any of the following contingencies: Petitioner's death, his wife's death, the death of the child before reaching 21 years of age, the child's attainment of 21 years of age.
Upon termination, the trustees were directed to pay over to petitioner the corpus of the particular trust. If, however, termination were due to petitioner's death, payment was to be made to the appointees under his will, in default of which to his surviving children in equal shares.
The following powers were granted the trustees:
1. To sell at public or private sale, to exchange or otherwise to dispose of all or part of the corpus, upon such terms and conditions as seemed proper to them;
2. To borrow money for certain enumerated purposes and "for any other purpose whatsoever which they in the exercise of their uncontrolled discretion shall deem necessary or desirable * * * it being the Grantor's intention to give the Trustees a general power to borrow money for any purpose whenever they shall deem it advisable*162 for the best interests of the Trust Estate so to do"; and in order to secure payment to pledge or mortgage any property of the trust estate.
3. To distribute and divide the trust estate in cash or in kind, to execute proper instruments and to take other necessary steps to accomplish this purpose.
4. To improve, alter or rebuilt any building or erect new buildings on the trust real estate, to join with others in doing so, and to employ competent persons to manage the real estate;
5. To lease any real property in the trust estate and to assign such leases.
6. To retain temporarily or permanently any real estate belonging to the trust estate without being under any obligation to dispose of it, to invest or reinvest in securities of any kind without restriction, saving to the trustees "all the power * * * which the Grantor now has with respect thereto" to convert personalty into realty and vice versa.
7. To exercise in person or by proxy all voting privileges upon stocks held by them, to unite with other owners in any plan of renegotiation, merger or consolidation "and generally to exercise with respect to such securities all the rights, powers and privileges which they might*163 exercise if they were possessed of such securities in their own right."
8. To invest in bonds at a premium without providing a sinking fund out of income to absorb such premium for the benefit of the remaindermen; to treat cash dividends as income, to divide between life tenants and remaindermen any stock dividends, to hold any securities in the names of nominees.
9. To settle claims of the trust estates without liability for any loss to the trust estate unless occasioned through their gross negligence or wilful malfeasance, and not to be liable for any act done in good faith.
The income of each of the trusts consisted of dividends and interest from the securities constituting the original corpus of the trusts and from securities purchased and received by the trustees.
The net taxable income from each of the trusts for the years involved is as follows:
| Amory S. Carhart, Jr., Trust | 1940 | |
| Ordinary income | $9,406.19 | |
| Capital gain | 188.72 | |
| Total income | $9,594.91 | |
| Marion Carhart Trust | 1940 | 1941 |
| Ordinary income | $9,021.62 |