1934 BTA LEXIS 1008 | B.T.A. | 1934
Lead Opinion
OPINION.
The Commissioner determined a deficiency of $4,580.88 in income tax for the year 1930. In the determination of this deficiency he added to the income reported on the taxpayer’s return $23,333.34 representing income received as a result of a compromise settlement of a proceeding to contest the will of Matthew O’Doherty. This action of the Commissioner is the only error assigned. The facts of record have been stipulated.
The petitioner ig an individual, residing at Louisville, Kentucky. He was a grandnephew of Matthew O’Doherty. The latter died testate on or about November 30, 1928, while residing in Louisville, Jefferson County, Kentucky. His last will and codicils thereto were duly probated in the Jefferson County Court on December 10, 1928. That will and its codicils provided for a number of specific bequests and provided that the residue of the estate should go one third to the widow of the decedent, Kathleen O’Doherty, one third to the Roman Catholic Bishop of Louisville, and one third to the Home for the Aged of the Little Sisters of the Poor and the Sisters of the Good Shepherd. Certain heirs of the testator were not satisfied with the property received by them under the will and instituted legal proceedings in the Common Pleas Branch, Jefferson Circuit Court, to contest the order of the Jefferson County Court probating the will, in an effort to set aside the will and have the property distributed under the Kentucky laws of descent and distribution as in the case
The petitioner contends that the $23,333.34 was received by him as an inheritance from the estate of Matthew O’Doherty, deceased, and for this reason should be excluded from his “gross income under the provisions of section 22 (b) (3) of the Revenue Act of 1928. He also contends that any tax on the receipt of this amount by him would be unconstitutional. Section 22 (b) (3) is as follows:
(b) Basolusions from gross income. — Tbe following items shall not be included in gross income and shall be exempt from taxation under this title:
* * * * * * *
(3) Gifts, bequests, and devises. — The value of property acquired by gift, bequest, devise, or inheritance (but the income from such property shall be included in gross income).
The petitioner did not receive the amount in question under the decedent’s will and, consequently, it was not property acquired by bequest or devise. Furthermore, he did hot receive it as an inheritance from his granduncle. The latter disposed of all of his property
However, the petitioner further contends that this payment was not income to him within the meaning of the term “ incomes ” as used in the Sixteenth Amendment to the Constitution of the United States and, therefore, to tax the receipt of it as if it were income would be unconstitutional. He relies upon the definition of income quoted by the Court in the case of Eisner v. Macomber, 252 U. S. 189, as follows: “ Income may be defined as the gain derived from capital, from labor, or from both combined.” The item in controversy would seem to fall within this definition rather than without. The petitioner apparently had some rights which he asserted or permitted to be asserted on his behalf. Then he gave up these rights in exchange for $23,333.34. The rights cost him nothing and had a basis of zero for gain or loss. Thus, from the assertion and disposition of his rights he derived a gain of $23,333.34. This was a gain derived from capital, from labor, or from both combined. It was income in the ordinary sense of the word and Congress had the power to tax it.
Decision will be entered for the respondent.