120 F.2d 228 | 2d Cir. | 1941
Lead Opinion
The petitioner, a resident of the City of New York, is the divorced wife of William G. Pearce, who is also a resident of . New York City. In 1913, while they were still married but were not living together and were childless, the husband created a trust to provide for the separate support of his wife for life to the extent of payments to her of $350 monthly and to be in lieu of all her dower or other rights in any property owned by him or by them together and in discharge of all her claims upon him for support and maintenance. By a supplemental trust agreement made in 1916, the monthly payments were increased to $500 and the husband was given the option to terminate the trust and all the claims of the beneficiary wife upon it or upon him by purchasing and delivering to the wife an annuity contract under which one of several designated insurance companies agreed to pay to the wife the sum of $500 monthly during her life. Within a few days after the making of this supplemental
Thereafter, and on May 1, 1917, the husband purchased and delivered to his former wife an annuity in one of the insurance companies mentioned in the supplemental agreement payable to her in the amount of $500 each month so long as she lived. He paid a lump sum for the annuity and was entitled to no return of premium or payment of any kind upon her death or at any other time. Payments have been made by the insurance company and received by the wife regularly ever since in accordance with the terms of the annuity contract.
Neither the husband nor the wife included such payments made to her in the years 1935 and 1936 in their income tax returns. The Commissioner included such payments in the gross income of each for those years and notified each of the deficiency so created. Both appealed to the Board for redetermination and the two appeals were heard together. The Commissioner conceded at the hearing before the Board that the deficiency determined in the income of the former husband was erroneous and insisted that that in the income of the former wife was correct. The Board redetermined the deficiencies in accord with the position of the Commissioner and the former wife brought this petition to review the redetermination of the deficiency in her income.
The petitioner bases her contention upon what is called the general rule that payments to a divorced wile which discharge a continuing obligation of her former husband to provide for her support are to be included in his taxable income. Douglas v. Willcuts, 296 U.S. 1, 56 S.Ct 59, 80 L.Ed. 3, 101 A.L.R. 391. And further that the continuing obligation of the husband is to be treated as existing after the divorce decree because of the presumed power, until the contrary is clearly shown, of the divorce court to alter or amend the decree to charge the husband with the support of his former wife whether or not the decree as originally granted included provisions for alimony or property settlements. In support of this part of the petitioner’s argument reliance is put upon Helvering v. Fitch, 309 U.S. 149, 60 S.Ct. 427, 84 L.Ed. 665 and Helvering v. Leonard, 310 U.S. 80, 60 S.Ct. 780, 84 L.Ed. 1087.
These principles are, of course, decisive where they are applicable and decision here must depend upon how they apply to a situation where the deficiency as redetermined has resulted not from an inclusion of payments made to the divorced wife in the gross income of the former husband but because they have been put into that of the divorced wife who actually did receive them. The ordinary rule that gross income includes income “derived from any source whatever” (Sec. 22(a) of the Revenue Act of 1934, 26 U.S.C.A. Int.Rev. Acts, page 669, is also a general one and to be given effect unless an exception excludes it. Moreover, the determination of the Commissioner is presumptively correct and the burden to show error rests upon the petitioner. Welch v. Helvering, 290 U.S. 111, 54 S.Ct. 8, 78 L.Ed. 212; Wickwire v. Reinecke, 275 U.S. 101, 48 S.Ct. 43, 72 L.Ed. 184.
The commissioner having determined the deficiency by including the payment in the gross income of the recipient and the Board having upheld the Commissiouer, the petitioner now cannot relieve herself from the resulting taxation unless she can show that the decision under review was erroneous. Although she might show error by submitting clear and convincing proof that the payments she received did discharge a continuing obligation of her husband to provide for her support even after the decree of divorce so as to make the rule of Douglas v. Will-cuts, supra, applicable in accordance with the decisions in Helvering v. Fitch and Helvering v. Leonard, both supra, she, being faced with the burden of overcoming an adverse decision of the Board, cannot prevail merely by showing that such an obligation upon the husband might have existed under Texas law. She was bound to show with such clarity that it did that the failure of the Board to recognize it and give it effect was error.
In this respect all that does appear, however, is doubt and uncertainty. There seems to be no statutory provision in Texas for decreeing alimony or support and maintenance as such to a divorced wife.
Affirmed.
L. HAND, Circuit Judge, dissents with opinion.
Dissenting Opinion
(dissenting).
We all agree that the law of Texas is uncertain as to whether the taxpayer’s husband discharged himself of his marital liability by the settlement at bar. Therefore, if the taxpayer in order to escape had to show that the settlement did not discharge her husband, the Board was right; she did not do so. But the uncertainty of the law of Texas is obviously a separate issue from the actual law of Texas. Since she did show that it was uncertain, she therefore succeeded if that was the only relevant issue. As I read Helvering v. Fitch, 309 U.S. 149, 60 S.Ct. 427, 84 L.Ed. 665, and Helvering v. Leonard, 310 U.S. 80, 60 S.Ct. 780, 84 L.Ed. 1087, the husband is liable in these cases not only when the settlement does not discharge his marital liability, but when the law of his domicil leaves it uncertain whether the settlement has done so. For these reasons I think that the Board was wrong.
