Monday, April 29, 2013

Helvering v. Clifford case brief

Helvering v. Clifford case brief
309 U.S. 331, 60 S. Ct. 554, 84 L. Ed. 788, 1940 U.S.

CASE SYNOPSIS: The appellate tax board held that appellee taxpayer's gross income was deficient because he failed to include trust income that was paid to his wife. The United States Court of Appeals for the Eighth Circuit reversed the decision. The tax commissioner sought review.

FACTS: A taxpayer created a short term trust, paid a federal gift tax on the transfer, and paid the trust's income to the taxpayer's wife. The appellate tax board assessed a deficiency against the taxpayer, and the appellate court reversed. On further review, the United States Supreme Court found that the taxpayer was the owner of the trust for purposes of § 22 (a) of the Revenue Act of 1934, 48 Stat. 680.

The Court held that the taxpayer's trust created a temporary re-allocation of income within an intimate family group.

The Court found that because the income remained in the family and the taxpayer retained control over the trust, he was completely assured that the trust would not substantially change his economic position. The Court found that the taxpayer wrongly omitted the trust income from his tax returns, even though his wife included the income on her return.

CONCLUSION: The Court reversed the appellate court's judgment and affirmed the tax board's judgment.
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