Helvering v. Horst/Separate McReynolds

The separate opinion of Mr. Justice McREYNOLDS.

The facts were stipulated. In the opinion of the court below (107 F.2d 907), the issues are thus adequately stated: 'The petitioner owned a number of coupon bonds. The coupons represented the interest on the bonds and were payable to bearer. In 1934 he detached unmatured coupons of face value of $25,182.50 and transferred them by manual delivery to his son as a gift. The coupons matured later on in the same year, and the son collected the face amount, $25,182.50, as his own property. There was a similar transaction in 1935. The petitioner kept his books on a cash basis. He did not include any part of the moneys collected on the coupons in his income tax returns for these two years. The son included them in his returns. The Commissioner added the moneys collected on the coupons to the petitioner's taxable income and determined a tax deficiency for each year. The Board of Tax Appeals, three members dissenting, sustained the Commissioner, holding that the amounts collected on the coupons were taxable as income to the petitioner.' The decision of the Board of Tax Appeals was reversed and properly so, I think.

The unmatured coupons given to the son were independent negotiable instruments, complete in themselves. Through the gift they became at once the absolute property of the donee, free from the donor's control and in no way dependent upon ownership of the bonds. No question of actual fraud or purpose to defraud the revenue is presented.

Neither Lucas v. Earl, 281 U.S. 111, 50 S.Ct. 241, 74 L.Ed. 731, nor Burnet v. Leininger, 285 U.S. 136, 52 S.Ct. 345, 76 L.Ed. 665, support petitioner's view. Blair v. Commissioner, 300 U.S. 5, 11, 12, 57 S.Ct. 330, 332, 333, 81 L.Ed. 465, shows that neither involved an unrestricted completed transfer of property.

Helvering v. Clifford, 309 U.S. 331, 335, 336, 60 S.Ct. 554, 556, 557, 84 L.Ed. 788, decided after the opinion below, is much relied upon by petitioner, but involved facts very different from those now before us. There no separate thing was absolutely transferred and put beyond possible control by the transferor. The court affirmed that Clifford, both conveyor and trustee, 'retained the substance of full enjoyment of all the rights which previously he had in the property.' 'In substance his control over the corpus was in all essential respects the same after the trust was created, as before.' 'With that control in his hands he would keep direct command over all that he needed to remain in substantially the same financial situation as before.'

The general principles approved in Blair v. Commissioner, 300 U.S. 5, 57 S.Ct. 330, 81 L.Ed. 465, are applicable and controlling. The challenged judgment should be affirmed.

The CHIEF JUSTICE and Mr. Justice ROBERTS concur in this opinion.