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GRAHAM v. MILLER

October 8, 1942

GRAHAM et al.
v.
MILLER, Collector of Internal Revenue



The opinion of the court was delivered by: GIBSON

The court, after hearing and consideration, makes the following Findings of Fact and Conclusions of Law:

Findings of Fact

 The court finds the facts as set forth in a stipulation offered in evidence by the parties herein, and marked filed April 28, 1942, now referred to and made part hereof.

 Conclusions of Law

 I. Under the terms of the trust created by will of Nettie McKee Graham, the income of the trust for the year 1940 was not currently distributable to the beneficiaries thereof in 1940, but was distributable on January 1, 1941.

 II. The trustees under the will of Nettie McKee Graham, in computing the income of the trust estate for the calendar year 1940, were not entitled to a deduction from the taxable income of the trust of amounts thereof distributable to the beneficiaries thereof on January 1, 1941.

 III. The beneficiaries of the trust created by will of Nettie McKee Graham had not a vested, but a contingent, interest in the income of the trust estate for the year 1940 prior to January 1, 1941.

 IV. The trustees of the estate created by will of Nettie McKee Graham were taxable upon the total net income of such estate in the year 1940.

 V. Judgment should be entered in favor of the defendant.

 Discussion

 The plaintiffs, trustees under the will of Nettie McKee Graham, have brought the instant action to recover a deficiency tax assessed against them for the year 1940. The wording of the will, so far as it is material here, is as follows:

 "Until the said trust shall cease, such person or persons as would be entitled on the first day of each successive year to my estate were it then to pass under the intestate laws of Pennsylvania, shall be entitled to the net income arising from my Principal Trust Estate during the preceding year, in such shares, respectively, as they would severally take in my estate were it to then pass under the intestate laws."

 The plaintiff trustees, prior to 1940, had claimed and been allowed as a tax deduction for the preceding year, under Section 162(b) of the Revenue Code, 26 U.S.C.A. Int.Rev.Code § 162(b) the amounts payable to beneficiaries on January first of the succeeding year. The Commissioner held that such payments had not been currently distributed to beneficiaries in 1940, and were not ...


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