In affirming the tax board's holding that a 95% beneficiary of nominee trust was entitled to deduct losses on beneficiary’s personal return, the court stated that "the taxpayer, as 95% beneficiary of the [trust], was in ‘complete’ or ‘practical’ control of the trust property, funds and income involved. The board therefore concluded, as matter of law, that 'the extreme degree of control exercised by beneficiaries in this case is clearly inami-cable (sic) with the concept of and vitiates the creation of a trust for purposes of taxation.’ It followed that the losses of the [trust] were available as deductions on the taxpayer's personal tax returns.”
How later courts described this case
- In affirming the tax board's holding that a 95% beneficiary of nominee trust was entitled to deduct losses on beneficiary’s personal return, the court stated that "the taxpayer, as 95% beneficiary of the [trust], was in ‘complete’ or ‘practical’ control of the trust property, funds and income involved. The board therefore concluded, as matter of law, that 'the extreme degree of control exercised by beneficiaries in this case is clearly inami-cable (sic) with the concept of and vitiates the creation of a trust for purposes of taxation.’ It followed that the losses of the [trust] were available as deductions on the taxpayer's personal tax returns.”
- "extreme degree of control exercised by beneficiaries ... vitiates the creation of a trust for purposes of [state income] taxation"
- taxpayer not entitled to tax benefits of trust where he “was the sole settlor, sole trustee, and sole beneficiary— an identity of interests fundamentally incompatible with the recognition of a trust as a separate entity”
- taxpayer not entitled to tax *17 benefits of trust where he “was the sole settlor, sole trustee, and sole beneficiary— an identity of interests fundamentally incompatible with the recognition of a trust as a separate entity”
Written by the judges who cited it.
The opinion
Braucher, J.
(dissenting). I find G. L. c. 62, § 4, as appearing in St. 1971, c. 555, § 5, clear on its face, and the taxpayer’s interpretation seems to me to be a perverse misreading. Under § 4 (a) interest, dividends, and capital gains were taxed at 9 % if “included in the income subject to taxation.” The taxpayer received such income, and it was so included. Other income, taxable at 5% under § 4 (b), was also included in “income subject to taxation,” but the net balance of other income was negative. Most of the taxpayers of the Commonwealth understood the principle and paid their taxes accordingly, and I cannot join in a special windfall to an ingenious taxpayer who claims not to understand *203 negative or minus numbers. I also disagree with the court’s disregard of trusts deliberately set up by the taxpayer to enable him to claim that there was or was not a trust, whichever might be to his advantage.