Morrill v. United States case brief

Morrill v. United States case brief

228 F. Supp. 734 (D. Me. 1964)

CASE SYNOPSIS: Plaintiff taxpayers initiated a tax refund action against defendant government, alleging that trust income applied to the payment of the tuition and room charges for the taxpayers' four minor children was not taxable as income under I.R.C. § 677.

FACTS: The taxpayers established four short-term trusts for the benefit of their four minor children. The trusts provided that during the minority of the children, the trustee could use trust income for payment of room, tuition, books, and travel to and from any private college or school. The children attended private schools and colleges. The taxpayers requested that the trustee pay from the trusts the room and tuition charges on the bill. The taxpayers submitted a joint income tax return and did not include any of the income of the four children's trusts. The government determined a deficiency, claiming that the trust income that had been applied in payment of the children's tuition and room charges was taxable under § 677. The taxpayers initiated a refund action.

ANALYSIS:

In entering judgment for the government, the court found that the trust income was used to satisfy the taxpayers' legal obligations so that it was taxable as income. The court held that the trust income was used to defray expenses that the taxpayers were legally liable. The taxpayers expressly assumed the responsibility to pay for the expenses and obligated themselves to pay the children's bills.

CONCLUSION: The court entered judgment in favor of the government.

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