Helvering v. Clifford - 309 U.S. 331, 60 S. Ct. 554 (1940)

Rule:

Section 22 (a) of the Revenue Act of 1934, 48 Stat. 680, includes among "gross income" all gains, profits, and income derived from professions, vocations, trades, businesses, commerce, or sales, or dealings in property, whether real or personal, growing out of the ownership or use of or interest in such property; also from interest, rent, dividends, securities, or the transaction of any business carried on for gain or profit, or gains or profits and income derived from any source whatever. The broad sweep of this language indicates the purpose of Congress to use the full measure of its taxing power within those definable categories.

Facts:

A taxpayer created a short term trust, paid a federal gift tax on the transfer, and paid the trust's income to the taxpayer's wife. The appellate tax board assessed a deficiency against the taxpayer, and the appellate court reversed. 

Issue:

Did the appellate tax board err in finding that the taxpayer's gross income was deficient because he failed to include trust income that was paid to his wife?

Answer:

No.

Conclusion:

The United States Supreme Court found that the taxpayer was the owner of the trust for purposes of § 22 (a) of the Revenue Act of 1934, 48 Stat. 680. The Court held that the taxpayer's trust created a temporary re-allocation of income within an intimate family group. The Court found that because the income remained in the family and the taxpayer retained control over the trust, he was completely assured that the trust would not substantially change his economic position. The Court found that the taxpayer wrongly omitted the trust income from his tax returns, even though his wife included the income on her return.