The opinion of the court was delivered by: MCVICAR
After hearing, the Court makes the following findings of fact and conclusions of law:
1. This is an action for the recovery of federal income taxes and interest thereon and arises under the Internal Revenue Laws of the United States.
2. At all times mentioned in the complaint plaintiff was, and now is, a citizen of the United States and a resident within the State and Western District of Pennsylvania.
3. At the time of the collections complained of, and continuously since January 1, 1943, the defendant, Stanley Granger, has been and now is, the duly appointed, qualified and acting Collector of Internal Revenue for the Twenty-third Collection District of Pennsylvania.
4. That for the calendar years 1938, 1939 and 1940, the plaintiff filed his federal income tax returns, reflecting income taxes due thereon for the said years as follows: for 1938, $ 8,752.92; for 1939, $ 23,592.44; and for 1940, $ 51,531.85. Plaintiff paid said taxes to the United States and they are not in controversy in this action.
5. On audit and review of plaintiff's said income tax returns for 1938, 1939 and 1940, the Commissioner of Internal Revenue assessed additional income taxes against the plaintiff as follows: for 1938, $ 1,261.35; for 1939, $ 4,799.47; and for 1940, $ 18,682.09. The details of said additional assessments appear on Exhibit 'A' attached to and forming a part of Exhibit 'A-1' which is attached to and forms a part of the complaint.
6. After notice and demand from the defendant as Collector of Internal Revenue, the plaintiff on January 9, 1943, paid to the said defendant Collector the said alleged deficiencies in income tax for said years, plus interest thereon, as follows: for 1938, tax $ 1,261.35 and interest $ 282.89, or a total of $ 1,544.24; for 1939, tax $ 4,799.47 and interest $ 788.42, or a total of $ 5,587.89; and for 1940, tax $ 18,682.09 and interest $ 1,948.05, or a total of $ 20,630.14.
7. Thereafter, on August 5, 1943, plaintiff filed a claim for the refund to him of said collected sums with interest thereon according to law. A copy of the claim for 1940 is attached to the complaint. The claims for 1938 and 1939 were the same as for 1940, with appropriate changes for year and amount.
8. In June, 1943, the Commissioner of Internal Revenue allowed a portion of plaintiff's claim for refund for 1940 in the amount of $ 554.93 (relating to the allowance of expenses of the trustee of the trust hereinafter mentioned, and its commission), which amount, together with interest thereon in the amount of $ 57.86 was repaid to the plaintiff. No part of the said refund related to the question of the taxability of the said trust income in general to any particular person.
10. No part of the additional taxes and interest above mentioned has been rebated, refunded or credited to plaintiff except as stated in paragraph 8, above. The balance of the said collections result from the inclusion by the Commissioner of Internal Revenue in the income of the plaintiff, of the income of a revocable trust made by plaintiff's wife, Mrs. Clara T. Rockwell, of which the Union Trust Company of Pittsburgh is trustee, except amounts due to minor miscellaneous adjustments appearing on the 'notice of deficiency' in Exhibit 'A' of the Complaint.
11. Prior to August 6, 1929, plaintiff made a gift to his wife, Clara T. Rockwell, of Ten -- $ 1,000 Central States Electric Corp. 5% Convertible Debenture bonds and One Hundred -- $ 1,000 Pittsburgh Coal Company Sinking Fund Debenture bonds; and also gave and assigned to her all his right, title and interest in certain life insurance policies on plaintiff's life, which policies total $ 500,000. This gift was made unconditionally and without any restriction or limitation of any kind, and was made for the purpose of vesting absolute title in plaintiff's wife of the bonds and life insurance given.
12. On August 6, 1929, the plaintiff's wife, Clara T. Rockwell, entered into a written trust agreement, by the terms of which the Union Trust Company of Pittsburgh became the trustee and the said Clara T. Rockwell transferred said Central States Electric Corporation and Pittsburgh Coal Company bonds to said trustee, and also assigned to it all her right, title and interest in said insurance policies and changed the beneficiary of said policies from herself to the trustee. She delivered said bonds to the trustee and assigned to it the insurance policies aforesaid. Under the trust agreement the trustee was to receive the income, was first to pay the premiums on said policies of insurance and the expenses of the trust, ...