CitationHelvering v. Horst, 311 U.S. 112, 61 S. Ct. 144, 85 L. Ed. 75, 1940 U.S. LEXIS 1228, 40-2 U.S. Tax Cas. (CCH) P9787, 24 A.F.T.R. (P-H) 1055, 24 A.F.T.R. (P-H) 1058, 1940-1 C.B. 172, 131 A.L.R. 655, 1940 P.H. P62,028 (U.S. Nov. 25, 1940)
Brief Fact Summary. Respondent owned negotiable bonds. In 1934 and 1935 he detached interest coupons from them and gave them to his son.
Synopsis of Rule of Law. The power to dispose of income is the equivalent of ownership of it.
Respondent, the owner of negotiable bonds, detached from them negotiable interest coupons before their due date and gave them to his son. His son collected them at maturity in the same year. The Commissioner ruled that the interest payments were taxable to Respondent. The Board of Tax Appeals sustained the tax and the Court of Appeals reversed.
Issue. Whether the gift of interest coupons detached from the bonds is the realization of income taxable to the donor?
Held. Justice Stone issued the opinion for the Supreme Court in reversing the Court of Appeals and holding that the income should be Respondents.
Dissent. Points of Law - for Law School Success
The taxpayer has equally enjoyed the fruits of his labor or investment and obtained the satisfaction of his desires whether he collects and uses the income to procure those satisfactions, or whether he disposes of his right to collect it as the means of procuring them. View Full Point of Law
Justice Reynolds issued a dissenting opinion joined by the Chief Justice and Justice Roberts, but it is omitted from the text. Discussion.
The Supreme Court found that Respondent enjoyed the economic benefits of the income as though he was transferring earnings. He should not be able to avoid including these amounts as income by converting it to a gift for his son. Similarly, a donor who retains control of trust property is taxable on the income.