Brief Fact Summary. Respondent created a trust for the benefit of his wife and family. He maintained control of the corpus of the trust but did not claim it as income on his return.
Synopsis of Rule of Law. Gross income includes all gains, profits, and income derived from whatever source including interest income arising from ownership of property.
Where the benefits directly or indirectly retained blend so imperceptibly with the normal concepts of full ownership, it can not be said that the triers of fact committed reversible error when they found that the husband was the owner of the corpus for the purposes of § 22 (a). P. 336.View Full Point of Law
Issue. Should the corpus of the trust established by Respondent still be treated as his for income tax purposes?
Held. Justice Douglas issued the opinion for the Supreme Court of the United States in reversing the Circuit Court of Appeals and holding that the trust income was attributable to Respondent.
Dissent. Justice Roberts, joined by Justice McReynolds, issued a dissenting opinion arguing that the Court’s ruling was legislating from the bench.
Discussion. The Supreme Court noted that Respondent continued to own the corpus of the trust after it was created, that the trust was short in duration, and he retained control. The Court found that allowing the Respondent to avoid income taxes on the corpus of the trust while he continued to maintain full control was an attempt to avoid taxes.