1. Taxation is not so much concerned with the refinements of
title as it is with actual command over the property taxed, the
actual benefit for which the tax is paid. P. 281 U. S.
2. The income that is subject to a man's unfettered command and
that he is free to enjoy at his own option may be taxed to him as
his income, whether he sees fit to enjoy it or not. P. 281 U. S.
3. Under § 219, (g), (h), of the Revenue Act of 1924, the income
from a fund that has been transferred to trustees, in trust to lay
the income to the donor's wife for life with remainder over to
their children, is to be included in computing his net income if he
has reserved the power to alter or abolish the trust at will, and
this applies to income actually paid over to the wife in the tax
year. P. 281 U. S.
34 F.2d 656 affirmed.
Certiorari, 280 U. S. 543
review a judgment of the circuit court of appeals which affirmed
the district court, 30 F.2d 135, in dismissing an action to recover
money paid as income taxes.
Page 281 U. S. 377
MR. JUSTICE HOLMES delivered the opinion of the Court.
This is a suit to recover the amount of an income tax paid by
the plaintiff, the petitioner, under the Revenue Act of 1924, June
2, 1924, c. 234, § 219(g)(h), 43 Stat. 253, 277 (U.S.C. Tit. 26, §
960). The complaint was dismissed by the district court, 30 F.2d
135, and the judgment was affirmed by the circuit court of appeals,
34 F.2d 656. A writ of certiorari was granted by this Court.
The question raised by the petitioner is whether the above
section of the Revenue Act can be applied constitutionally to him
upon the following facts. In 1922, he transferred the fund from
which arose the income in respect of which the petitioner was taxed
to trustees, in trust to pay the income to his wife for life with
remainder over to their children. By the instrument creating the
trust, the petition reserved power
"to modify or alter in any manner, or revoke in whole or in
part, this indenture and the trusts then existing, and the estates
and interests in property hereby created,"
etc. It is not necessary to quote more words, because there can
be no doubt that the petitioner fully reserved the power at any
moment to abolish or change the trust at his will. The statute
referred to provides that,
"where the grantor of a trust has at any time during the taxable
year, . . . the power to revest in himself title to any part of the
corpus of the trust, then the income of such part of the trust for
such taxable year shall be included in computing the net income of
Section 219(g) with other similar provisions as to income in §
219(h). There can be no doubt either that the statute purports to
tax the plaintiff in this case. But the net income for 1924 was
paid over to the petitioner's wife, and the petitioner's argument
is that, however it might have been in different circumstances,
Page 281 U. S. 378
the income never was his, and he cannot be taxed for it. The
legal estate was in the trustee and the equitable interest in the
But taxation is not so much concerned with the refinements of
Title as it is with actual command over the property taxed -- the
actual benefit for which the tax is paid. If a man directed his
bank to pay over income as received to a servant or friend, until
further orders, no one would doubt that he could be taxed upon the
amounts so paid. It is answered that, in that case, he would have a
title, whereas here he did not. But, from the point of view of
taxation, there would be no difference. The title would merely mean
a right to stop the payment before it took place. The same right
existed here, although it is not called a title, but is called a
power. The acquisition by the wife of the income became complete
only when the plaintiff failed to exercise the power that he
reserved. Saltonstall v. Saltonstall, 276 U.
, 276 U. S. 271
Chase National Bank v. United States, 278 U.
; Reinecke v. Northern Trust Co.,
278 U. S. 339
Still speaking with reference to taxation, if a man disposes of a
fund in such a way that another is allowed to enjoy the income
which it is in the power of the first to appropriate, it does not
matter whether the permission is given by assent or by failure to
express dissent. The income that is subject to a man's unfettered
command and that he is free to enjoy at his own opinion may be
taxed to him as his income whether he sees fit to enjoy it or not.
We consider the case too clear to need help from the local law of
New York or from arguments based on the power of Congress to
prevent escape from taxes or surtaxes by devices that easily might
be applied to that end.
The CHIEF JISTICE took no part in this case.