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BURNET V. WELLS, 289 U. S. 670 (1933)

U.S. Supreme Court

Burnet v. Wells, 289 U.S. 670 (1933)

Burnet v. Wells

No. 792

Argued May 10, 1933

Decided May 29, 1933

289 U.S. 670


1. Under § 219(h) of the Revenue Acts of 1924 and 1926, where an irrevocable trust is established to pay for insurance on the settlor's life, collect the policy upon his death, and hold or apply the proceeds, under the trust, for the benefit of his dependents, income of the trust fund used by the trustee in paying the premiums is taxable to the settlor as part of his own income. P. 289 U. S. 675.

2. This tax is constitutional as applied to income accruing since the enactment of the legislation from trusts created earlier. Pp. 289 U. S. 677, 289 U. S. 682.

3. Refinements of title are without controlling force in determining whether a statute arbitrarily attributes to one person a taxable interest in the income of another. The question is not whether the concept of ownership reflected in the statute squares with common law traditions, but rather whether that concept could reasonably be adopted because of privilege enjoyed or benefit derived by the taxpayer, some regard being had also to administrative convenience and the practical necessities of an efficient taxing system. P. 289 U. S. 678.

4. To overcome this statute, the taxpayer must show that, in attributing to him the ownership of the income of the trusts, or something fairly to be dealt with as equivalent to ownership, the lawmakers have done a wholly arbitrary thing, have found equivalence where there was none nor anything approaching it, and laid a burden unrelated to privilege or benefit. P. 289 U. S. 679.

Page 289 U. S. 671

5. Income permanently applied by the act of the taxpayer to the maintenance of contracts of insurance made in his name for the support of his dependents is income used for his benefit in such a sense and to such a degree that there is nothing arbitrary or tyrannical in taxing it as his. P. 289 U. S. 679.

63 F.2d 425 reversed.

Certiorari to review the reversal, in part, of a ruling of the Board of Tax Appeals, 19 B.T.A. 1213, upholding certain assessments of income.

Page 289 U. S. 672

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