Irwin v. Gavit

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Irwin v. Gavit

Supreme Court of the United States

Argued April 15, 1925
Decided April 27, 1925


Full case name:	Irwin, Former Collector of Internal Revenue, v. Gavit

Citations:	268 U.S. 161; 45 S. Ct. 475; 69 L. Ed. 897; 1925 U.S. LEXIS 557; 1 U.S. Tax Cas. (CCH) P132A; 5 A.F.T.R. (P-H) 5380; 1925-1 C.B. 123; 1925 P.H. P8032

Prior history:	U.S. Dist Ct. N.D.N.Y. found for plaintiff, 275 F. 643; U.S. Ct. App. for the 2nd cir. affirmed, 295 F. 84

Holding

The income paid from a trust or estate is taxable, even where the bequest of the entire corpus of the trust would be considered a gift.

Court membership

Chief Justice: William Howard Taft
Associate Justices: Oliver Wendell Holmes, Jr., Willis Van Devanter, James Clark McReynolds, Louis Brandeis, George Sutherland, Pierce Butler, Edward Terry Sanford, Harlan Fiske Stone

Case opinions

Majority by: Holmes
Joined by: Taft, Stone, Van Devanter, McReynolds, Brandeis, Sanford
Dissent by: Sutherland
Joined by: Butler

Laws applied

Internal Revenue Code

Irwin v. Gavit, 268 U.S. 161 (1925)^[1], was a case in which the Supreme Court of the United States held that the income from property held in trust was taxable income under United States tax law.

1 Facts and procedural history
2 Majority opinion
3 Dissent
4 References

[edit] Facts and procedural history

The plaintiff in this case was the administrator of the will of Anthony N. Brady. Brady's will had left his estate to be divided into six parts. The income of one of those parts was to go to the education and support of Brady's granddaughter, Marcia Ann Gavit, and the remaining five-sixths would be divided in half, one part of which to be paid Brady's son-in-law (who was the administrator of the estate and the named plaintiff in this matter). Marcia Ann Gavit was only six years old at the time of the suit, when she reached the age of twenty-one (or died), the fund would go over, so that the plaintiff's interest in the funds held in trust for Marcia would not exceed fifteen years maximum. The plaintiff sued the Commissioner of Internal Revenue in the United States District Court for the Northern District of New York for a refund of the tax paid. The district court found for the plaintiff, and the United States Court of Appeals for the Second Circuit affirmed.

[edit] Majority opinion

The Internal Revenue Code at the time provided that while the gains, profits and income "derived from any source whatsoever" was taxable, the value of property acquired by gift or bequest was not to be included in taxable income, and that trustees could be required to account for and withhold certain amounts for the payment of tax. Justice Holmes reasoned that the statute as then written required that the income received by trustees and paid to the remainderman be considered taxable income. Holmes held that although the receipt of the estate funds would be considered a non-taxable bequest, the receipt of income from those funds in installments is taxable.

[edit] Dissent

Justice Sutherland dissented, rejecting Holmes' distinction between the income from the trust and the trust itself, and suggesting that the majority stretched the meaning of the statute too far. He wrote that money is itself property, and therefore the money paid to Marcia Ann Gavit should also be considered part of the bequest:

"The corpus of the estate was not the legacy which respondent received, but merely the source which gave rise to it. The money here sought to be taxed was not the fruits of a legacy; it was the legacy itself."

268 U.S. 161 at 169.