Wyche v. United States

Mr. Wyche (plaintiff) had three minor children and set up trusts for the benefit of all the children, with Mrs. Wyche acting as trustee over all three trusts. The trusts were structured so that annually, the trustee was obligated to pay trust income directly to the minor child or deposit it in a bank account for the minor child, buy securities in the name of the minor child, or pay for the education of the minor child. The minor children typically attended a tuition-based private school and also took music or dancing lessons. Funds from the trusts were used to pay for that education and those lessons. The issue was whether those payments should be taxed to Mr. Wyche as income. Prior revenue rulings had established that trust income used to satisfy a legal obligation to maintain or support a minor child was taxable to the person so obligated. However, local law would determine the nature of that obligation. Mr. Wyche argued that while the state of South Carolina, under the necessaries doctrine, imposed a duty to provide the necessary expenses of life for his children, he was not under an obligation to send them to a private school or to provide music and dancing lessons and that, accordingly, he should not be taxed on those payments. The government (defendant) submitted that Mr. Wyche did have such an obligation; that otherwise, he was under an implied obligation to pay those amounts; and that, as they were paid from trust income, they were taxable to him. Mr. Wyche paid the amounts due and sued for a refund.