# Nicolai v. Commissioner > United States Board of Tax Appeals · October 9, 1940 · 42 B.T.A. 899 URL: https://www.frixlaw.com/law-library/cases/4498249 ## Case - **Full name:** HARRY T. NICOLAI, v. COMMISSIONER OF INTERNAL REVENUE - **Court:** United States Board of Tax Appeals - **Decided:** October 9, 1940 - **Citations:** 42 B.T.A. 899; 1940 BTA LEXIS 935 - **Precedential status:** Published - **Opinion:** Dissent by Disney - **Judges:** Qppek, Fossan, Disney, Smith - **Cited by:** 5 later opinions in the Frix Law Library ## Citator (automated) - No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases. - Full citator and citing cases: https://www.frixlaw.com/law-library/cases/4498249 ## Opinion text Disney, dissenting: In my opinion, the husband, in entering into the agreement with his wife, placed upon himself a contingent obligation such as to render him taxable upon the income involved, under the thought of Helvering v. Leonard, 310 U. S. 80 . In the Leonard case the husband agreed that “on notice of any fault in the payment of any interest on or principal of them [the bonds placed in trust]”, he would substitute cash or securities equal to the principal and cash sufficient to cover interest. Herein he agreed that he would remain the owner of a majority of the stock of the corporation, the *914 stock of which he placed in trust, and would cause it to declare dividends immediately “out of available net earnings” sufficient to make the payments to the wife. Obviously, he did retain an obligation; equally obviously, it was contingent upon the fact of “available net earnings” determined by the corporation. Yet, if he had received notice, as in the Leonard case from the wife, that the corporation, though having available net earnings, had failed to declare and pay dividends sufficient to pay her the amount agreed upon, their agreement would have compelled him, if in fact the necessary dividends had not been declared from available net earnings, to make good to the wife the default, to the extent of such net earnings. It is entirely conceivable that through neglect or intent he might have failed to cause the corporation to pay the necessary dividends. For example, the corporation might have used its “available net earnings” to accumulate funds, or might have paid them out on redeeming preferred stock, when it was not necessary so to do, thus leaving itself unable to pay dividends sufficient to meet the payments to the wife. If this contingency occurred, either through the neglect or intent of the husband, or because he had not, in compliance with his agreement, retained such control over the corporation as to be able to compel it to carry out the terms of his agreement, obviously the wife would have recourse against him to the extent of the “available net earnings”, and the amounts payable, for the simple reason that he had violated his agreement. Such liability on his part is, in my opinion, a good example of the continuing obligation mentioned in the Leonard case. The petitioner had the burden of showing himself freed therefrom. Helvering v. Fitch, 309 U. S. 149 . I do not think that such showing was made by the petitioner. I, therefore, respectfully dissent. Qppek agrees with this dissent. --- Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/4498249. Public record. Not legal advice.