Douglass v. Commissioner

VIRGINIA V. DOUGLASS, EXECUTRIX, ESTATE OF HOWARD W. DOUGLASS, AND ELVIRA P. DOUGLASS, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Douglass v. Commissioner

Dockets Nos. 27622, 29003.

United States Board of Tax Appeals

15 B.T.A. 1414; 1929 BTA LEXIS 2672;

April 12, 1929, Promulgated

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">*2672 Respondent's application of surtax rates approved in the absence of evidence showing when the amounts so taxed were received and where it is not shown that his action is erroneous under the statute.

S. Leo Ruslander, Esq., for the petitioners.

T. M. Mather, Esq., for the respondent.

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SIEFKIN

">*1414 These are proceedings, duly consolidated for hearing and decision, for the redetermination of deficiencies of $246.16 for the year 1924 in Docket No. 27622, and $519.75 and $140.38 for the years 1924 and 1925, respectively, in Docket No. 29003. The errors alleged are that the respondent in each year taxed a portion of the income of the petitioners at surtax rates of the prior year.

FINDINGS OF FACT.

The petitioner, Virginia V. Douglass, is a resident of McKeesport, Pa., and is the widow of and executrix of the estate of Howard W. Douglass, deceased. The petitioner, Elvira P. Douglass, is a resident and citizen of Pennsylvania.

Howard W. Douglass, deceased, was, in his lifetime, beneficiary of the trust estate of Elisha P. Douglass, deceased. Said trust was created March 12, 1922, and consistently made its fiduciary returns of income upon">*2673 the basis of a fiscal year ending February 28 of each year. For the fiscal year ended February 28, 1924, Howard W. ">*1415 Douglass received from the estate of Elisha P. Douglass income consisting of dividends in the sum of $7,000.

The petitioner, Elvira P. Douglass, was and is a beneficiary of a trust estate known as the "Trust for Elvira P. Douglass," which was created March 12, 1922, and which files its fiduciary returns of income upon the basis of a fiscal year ending February 28 of each year. Petitioner files her tax returns upon a calendar year basis. The petitioner, Elvira P. Douglass, received from said trust estate during its fiscal year ended February 29, 1924, income consisting of dividends in the amount of $34,000. She also received from said trust estate during its fiscal year ended February 28, 1925, income consisting of dividends in the amount of $35,500.

In arriving at the three deficiencies in question in this proceeding, the respondent treated ten-twelfths of the $7,000 received by Howard W. Douglass as taxable at the 1923 surtax rates and two-twelfths at the 1924 surtax rates. Similarly, he treated ten-twelfths of the $34,000 and $35,500 received">*2674 by Elvira P. Douglass as taxable at 1923 and 1924 surtax rates, respectively, and treated the remaining two-twelfths as taxable at 1924 and 1925 surtax rates, repectively.

OPINION.

SIEFKIN: Section 219(e) of the Revenue Act of 1924 provides that the beneficiary of a trust must include, in computing his net income, "the income of the estate or trust for its taxable year ending within his taxable year."

The argument of the petitioners is that the beneficiary of a trust has no constructive receipt of the income of the trust until it is paid to him. In this respect they say the former position of the respondent making an analogy between beneficiaries of a trust and members of a partnership is erroneous, and they point out that recently a ruling of the respondent has admitted that no such analogy exists. See General Counsel's Memorandum 5735, appearing in Internal Revenue Bulletin of February 11, 1929.

That admission, however, does not help the petitioners' cause upon the facts before us. The facts alleged in the petitions are merely that the petitioners "for the fiscal year ended February 28, 1924, * * * received from said estate [or trust] income * * *." Upon the facts">*2675 alleged and admitted we are unable to say what portions of the amounts received were received in 1923, 1924, or 1925. If we are not to indulge in the analogy of the trust to the partnership but must, under the statute, examine into the actual time of payment to the beneficiaries, we are left with no evidence as to such time of payment which would lead us to say that the respondent's action was ">*1416 erroneous. The extent to which the statute goes is merely that the amount of the income from the estate or trust for its taxable year ending within his taxable year, shall be included. Counsel on both sides concede that there is no statutory provision prescribing the rate of surtax on such amount. The respondent has presumably assumed that it accrued or was paid ratably over the period. We have no evidence to show that he was wrong.

Judgment will be entered for the respondent.