Morrill v. United States

George B. Morrill Jr. (plaintiff) established four trusts for the benefit of his four minor children. A corporate trustee directed each trust, and the income of the trust was to accumulate until the child reached 21, at which time it would be distributed to said child. Each trust agreement provided that the trustee could use trust income to pay for room, tuition, books, and travel to or from any private school, college, or other educational institution. During the years 1959 through 1961, the Morrill children attended Vassar, Connecticut College, Brown University, the Holderness School, and the Waynflete School. Morrill signed contracts agreeing that he was responsible for payment of tuition, room, board, and other expenses from Vassar and Connecticut College. However, Morrill had no written agreement or contract with the other three schools. Each school would send a bill to Morrill, who wrote a personal check covering all amounts other than room and tuition. Morrill would send that personal check to the trustee of the relevant trust and request that the trustee pay the room and tuition fees from the trust. The trustee would then send a check for the requested amount to the school with the check from Morrill. Morrill and his wife did not include any of the income from the trusts on their federal income tax returns for 1959 through 1961. After an audit, the government (defendant) found deficiencies in the amounts of $1,736.75, $2,344.50, and $3,064.63 for those years. The government argued that the trust income had been paid to satisfy Morrill’s legal obligations and thus should be taxable as income to him. Morrill and his wife paid the amounts sought and filed this suit for a refund. Morrill argued that he was, at most, secondarily liable to guarantee payment of the school bills in question and that the payments by the trustee extinguished Morrill’s liability.