Monday, November 11, 2013

Brainard v. Commissioner case brief

Brainard v. Commissioner case brief summary
91 F.2d 880 (1937)

Petitioner taxpayer sought review of a decision from the United States Board of Tax Appeals, which held that his income derived from stock trading was taxable as a part of his gross income for 1928, and decided that there was a deficiency.


In 1927, the taxpayer declared a trust of his stock trading during 1928 for the benefit of his family upon certain terms and conditions. During 1928, the taxpayer carried on the trading operation and determined his compensation at $ 10,000, which he reported on his income tax return for that year. The profits remaining were then divided in equal shares among his family members, the amounts were reported in their respective tax returns. The question presented on review was whether the taxpayer created a valid trust, the income of which was taxable to the beneficiaries under § 162 of the Revenue Act of 1928, 26 U.S.C.S. § 162.


  • The court affirmed, concluding that the taxpayer's profits were not impressed with a trust when they first came into existence because the taxpayer only made a gratuitous declaration to his family. 
  • The board found that the trust first attached when the taxpayer credited them to the beneficiaries on his books. 
  • This act, the court found constituted the taxpayer's first expression of intention to become a trustee of the fund. 
  • Prior to that time, the declaration could not have been enforced because there was no consideration.


The decision of the board, which held that the taxpayer's income derived from stock trading was taxable as a part of his gross income, was affirmed.

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