The opinion
Black,
dissenting: The majority opinion begins by stating:
We can not distinguish this case in principle from Commissioner v. Buck (C. C. A., 2d Cir.), 120 Fed (2d) 775, which applies to its own facts the theory of Helvering v. Clifford, 309 U. S. 331 , and concludes that the taxpayer there was subject to tax on the income of a trust he had created. We think the same result must follow here.
If I could agree that the facts in the instant case are not distinguishable in principle from those present in the Buck case, I would concur in the majority opinion, but it seems to me that the facts in the instant case are clearly distinguishable from those present in the Buck case. In the Buck case the grantor of the trust reserved to himself very large powers of control over the trust income and corpus. Those powers were enumerated by the court as follows:
In 1932 Ellsworth B. Buck, respondent here, conveyed 10,000 shares of William Wrigley, Jr. Company stock to a bank, as trustee, to pay the income to his wife for life and, on her death, to pay the income and ultimately the principal to his children or their descendants. He retained a power “to alter or amend in any respect whatsoever” the provisions relating to the distribution of the income or principal, except that this power could not be exercised so as to revoke the trust, revest title to the principal in him, or direct that the income be paid to him, accumulated for him, or applied to the payment of insurance premiums on his life. In the event that a beneficiary predeceased him, the share held for that beneficiary was to return to Buck. He also retained the powers to remove the trustees, and to direct the trustee how to exercise its powers to retain or dispose of the corpus and to invest or reinvest the proceeds of a sale, and reserved the right to vote any stock or to direct the trustee how to vote it.
In the instant case Howard Phipps, the grantor of the trust, reserved no such powers of control over the income or the corpus of the trust as are enumerated in the above paragraph as being reserved by grantor Buck. In fact, he reserved no powers of control over the trust income or corpus to himself. He was not even a trustee in the taxable year. In 1934, upon advice of his counsel, he resigned as one of the trustees.
*369 The majority opinion recognizes that Howard Phipps, as grantor of the trust, reserved no power of control to himself over the trust income or corpus, but the opinion says in effect that broad powers of management and control were conferred upon the trustees which made them comparable to the powers retained by the grantor in the Buck case; that one of the trustees was the Bessemer Trust Co.; that it was the alter ego of petitioner; hence, the instant case is brought within the ambit of the Buck case. This is a line of reasoning in which I am unable to concur.
The Bessemer Trust Co. was no makeshift corporation created merely to serve the wishes and purposes of petitioner. It was, and is, evidently a very substantial business corporation. It was incorporated under the laws of the State of New Jersey in 1907. According to the findings of fact which are made the basis of the majority opinion, it handles the financial matters of the Phipps family and acts as trustee for trusts created by them. It maintains an investment department which employs the services of various investment counsel firms to recommend changes in investments. It subscribes to other investment services and makes investigations to determine the desirability of securities. Under such circumstances it seems to me that it was the perfectly natural and normal thing for petitioner to make it the corporate trustee for the irrevocable trust which he created in 1932 for the benefit of his wife and daughter. It had ample facilities for experienced management. I see no warrant for our assuming that the Bessemer Trust Co. will act in the administration of its trust in any other manner than a normal and correct trustee would act in discharging fiduciary duties. Assuming that it will so act, and certainly the facts do not show that it has done otherwise down to the present time, then I do not see how it can be said that the instant case is controlled by Commissioner v. Buck, 120 Fed. (2d) 775, and Helvering v. Clifford, 309 U. S. 331 . The cases, in my judgment, are altogether different. It seems to me that the powers granted to the trustees (Bessemer Trust Co. and Harriet Phipps) in the taxable year before us were normal to a discretionary trust — such a trust as is taxable under section 161 (a) (4) of the Bevenue Act of 1934. The discretionary powers granted to the trustees are enumerated in the findings of fact and need not be repeated here. It seems to me that by no stretch of logic can these discretionary powers to be exercised by the trustees in their fiduciary capacities be compared to the powers which the grantor of the trusts reserved in the Buck and Clifford cases.
I think the facts of the instant case bring it within the ambit of Commissioner v. Branch, 114 Fed. (2d) 985, in which the court, among other things, said:
* * * Where the grantor has stripped himself of all command over the income for an indefinite period, and in all probability, under the terms of the *370 trust instrument, will never regain beneficial ownership of the corpus, there seems to be no statutory basis for treating the income as that of the grantor under Section 22 (a) merely because he has made himself trustee with broad power in that capacity to manage the trust estate. * * *
In the instant case the trust is to last until the death of the last survivor of petitioner’s wife, Harriet Phipps, and petitioner’s daughter, Anne Phipps. Thus to use the language of the court in the Branch case, petitioner “has stripped himself of all command over the income for an indefinite period, and in all probability, under the terms of the trust instrument, will never regain beneficial ownership of the corpus.” This being the case, there seems to be no reason to tax petitioner with the income under section 22 (a). There are appropriate provisions of the statute which tax the undistributed income to the trust as a separate taxable entity, see section 161 (a) (4), Revenue Act of 1934, and tax the distributed income to the wife, the beneficiary who received it, see section 162 (c) of the same act. These statutes seem to have been complied with in the taxable year which we have before us. In my judgment, the law requires no more.
The Board followed Commissioner v. Branch, supra, in Frederick Ayer, 45 B. T. A. 146, in which, among other things, we said:
* * * It should be remembered that tbe trusts involved in the instant case were not short term trusts, as in the Clifford case, but were for the life of the beneficiary named in the respective trusts. The corpus and accumulated income were not to revert to the grantor except upon a remote contingency. Under these circumstances, we do not think Helvering v. Clifford, supra, is controlling.
Cf. Jones, Collector v. Norris, 122 Fed. (2d) 6.
For reasons I have stated above I do not believe that the facts of the instant case bring it within the rule of the Buck and Clifford cases. I, therefore, respectfully dissent from the majority opinion.
Muedock, AeuNdell, Leeoh, and TtsoN agree with this dissent.