Douglas v. Willcuts

296 U.S. 1 (1935)

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Douglas v. Willcuts

United States Supreme Court
296 U.S. 1 (1935)

Facts

Edward B. Douglas (Douglas) (plaintiff) obtained a divorce from his wife, Mrs. Douglas, in 1923. In connection with the divorce, Douglas created and funded an irrevocable trust consisting of certain securities for Mrs. Douglas’s benefit. The trustee was instructed to pay income to Mrs. Douglas in an annual sum of $15,000 through 1927 and $21,000 thereafter. Douglas retained the right to choose securities for investment, and the securities would revert to him upon Mrs. Douglas’s death. The parties agreed that the trust was in lieu of, and in settlement of any claim to, alimony for Mrs. Douglas. The commissioner of internal revenue determined that the income generated by the trust in 1927 and 1928 was income to Douglas, and Douglas paid the assessed tax under protest. Douglas filed a refund claim, and it was disallowed. Douglas filed suit to recover the taxes paid, arguing that an irrevocable trust is not alimony and Mrs. Douglas should be the party liable for taxes due on the income as a separate taxpayer. The appellate court held that Douglas was liable for taxes due on the income.

Rule of Law

Issue

Holding and Reasoning (Hughes, C.J.)

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