Lead Opinion
OPINION.
1. — In the deficiency notices the “explanation” is that the income received by the petitioner from the Francis V. duPont trusts in excess of the amount expended for the maintenance of the children is taxable to her. So much of the trust income as was expended for the children is admitted by the Commissioner not to be within this petitioner’s income, and is therefore not in controversy. The amount for each year is shown in the schedule of the findings.
The trusts were established- in 1931 in contemplation of divorce. The 1933 income of the second trust had been determined by the Commissioner to be taxable to the husband, but the Board of Tax Appeals, in a proper proceeding brought by Francis V. duPont, Docket No. 86754, held that, since the divorce decree of the Nevada court freed him from all obligation for support of the wife, the trust income was not properly taxable to the husband. Cf. Helvering v. Fuller,
The petitioner is to be regarded as the ordinary beneficiary of a distributable income trust, the income of which is fro tanto taxable to her. Revenue Act of 1932. sec. 162 (b). Such part, however, as is or may be used for the support of the husband’s minor children and •therefore serves to fulfill his parental duty is taxable to him by “the rule of attribution laid down in Douglas v. Willcuts.” Helvering v. Stuart, supra. The taxpayer here can avoid the deficiency only to the extent that she proves the amount which is not attributable to her' but to the discharge of the father’s obligation to the children. The evidence shows a schedule of the amounts actually used in each year for the support of the children and of the amounts used for expenses of the general household. The amounts of household expenses are not identified, either specifically or by allocation, as to the portion assignable to the children. It has not been established or attempted to be established (cf. Ingraham v. Commissioner. 119 Fed. (2d) 223) how much .of the annual amounts of household expenses is in fact in discharge of the father’s obligation; hence, on the evidence, no amount of the household expenses may be excluded from petitioner’s income, however reasonable it might be to suppose that part of the household cost is in support of the children.
This Court is not adjudicating a guardian’s account. This is a controversy involving the personal income tax of this petitioner, and the Commissioner’s determination of deficiency as to her is, in this proceeding, presumed to be correct. In this posture of the case, this Court does not determine definitively the husband’s tax liability or his marital liability or his relation to the income of the trust; nor does it determine what part of the trust income is allotted to the petitioner and what part to the children. Cf. Shaw v. Bryant,
The assurance in the 1936 agreement, in compromise of the later dispute, that the income from the trust would not be less than $25,000 a year or that duPont would make up the difference, does not serve to make the income from the trust any less her taxable income. It was not like the guaranty in Helvering v. Leonard,
On the principal issue, this Court holds that petitioner’s taxable income of the respective years includes the trust income, except the amounts for the support of the children, which are attributable not to her but to their father. These excepted amounts are:
1933-$3, 634. 83 1937_$4, 382.16
1935- 3, 905. 07 1938_ 4, 348. 52
1936-- 4,170. 28 1939_ 4, 048. 71
2. — The petitioner contends that the 1933 deficiency is beyond the statute of limitations and is not saved by section 820. Revenue Act of 1938 (sec. 3801. Internal Revenue Code). As to Francis V. duPont, petitioner is, and was in 1933, a “related taxpayer” (sec. 820 (a) (3)), since he was the grantor and she was a beneficiary of the trust. Cf. Eleanor B. Burton, supra. The income of the trust which is taxable to petitioner was erroneously omitted from her gross income and therefore, she being a related taxpayer, her income is properly to be adjusted as the result of the Board’s determination requiring the exclusion of the trust income from duPont’s gross income (sec. 820 (b) (3)). The decision in duPont’s case became final (sec. 820 (a) (1) (B)) on October 10,1940, which was the last date on which a petition in court for review could have been filed; and the one year for the “adjustment” assessment (sec. 820 (c)) would have expired on October 9, 1941. The notice of deficiency was mailed September 9.1941. and was therefore in time. The deficiency for 1933 is not beyond the statute of limitations and may be assessed.
3. — The petitioner contends that the deficiencies for 1935 and 1936 were barred by the three-year limitation period of section 275 (a). In this, she is incorrect. From her returns for those years, which were filed on March 15 of the succeeding years, she omitted an amount which was more than 25 percent of the amount shown as gross income. The five-year period of section 275 (c) was therefore applicable. Estate of C. P. Hale,
Decision will be entered under Rule 50.