United States Supreme Court Cases & Opinions

U.S. Supreme Court

Helvering v. Leonard, 310 U.S. 80 (1940)

Helvering v. Leonard

No. 426

Argued March 26, 1940

Decided April 22, 1940

310 U.S. 80

Syllabus

A separation agreement providing for the support of a wife embraced a trust agreement whereby the husband contributed to the corpus securities and cash, including corporate bonds the payment of the principal and interest of which he guaranteed. The trust could be amended by the husband and wife jointly, and the husband retained a limited power of substitution in respect of certain bank stock which was part of the corpus. Otherwise the trust was irrevocable, and the husband retained no right to either the corpus or the income. A specified amount of the trust income was to be paid to each of three children; the remainder to the wife, and, upon her death, the corpus was to be held for the children. The separation agreement also obligated the husband to pay to the wife annually a certain additional sum for the support of herself and the children, subject to reduction upon application to a court of competent jurisdiction. The arrangement was approved by a decree of divorce in New York.

Held:

1. The portion of the trust income which was received from the guaranteed bonds was taxable income of the husband, under the Revenue Act of 1928. P. 310 U. S. 84.

By the husband's guarantee of payment of the principal and interest of the bonds, a personal obligation, though contingent, continued to exist pro tanto, and the rule of Douglas v. Willcuts, 296 U. S. 1, is applicable.

2. Other trust income also was taxable to the husband for the reason that he did not sustain the burden of showing by clear and convincing proof that the New York court lacked power after the divorce to add to his personal obligations in any eventuality. Helvering v. Fitch, 309 U. S. 149. P. 310 U. S. 85.

105 F.2d 900 reversed.

Certiorari, 309 U.S. 644, to review a judgment reversing a decision of the Board of Tax Appeals, 36 B.T.A. 563, assessing a deficiency in income tax.

Page 310 U. S. 81