Weil v. Commissioner of Internal Revenue

L. HAND, Chief Judge

(dissenting).

The “constructive receipt” of income is a creation of the Treasury, aimed at preventing taxpayers from selecting the year in which it will be most to their advantage to include in their gross income such items as those here at bar. It is a just corollary of such a doctrine that it shall be applied in favor of taxpayers as well as against them; and we all agree that Ross v. Commissioner,1 was right in so holding. Therefore our decision ought not to be different from what it would be, had the taxpayers had no losses in 1932, and had been assessed in that year for the receipt of the sums in question. So far as concerns their commissions, I cannot believe that they could have resisted such an assessment. The surrogate had allowed these to them upon an accounting ; and they were administration expenses of the estate. Although there appears to be little authority-on the question in New York, such as there is indicates that they are a claim prior to debts,2 and of course prior to legacies. I agree with my brothers that the law still preserves the fictitious “persona” of the executor, and that it was necessary for these taxpayers, as executors, to draw cheques to their own order as individuals; but that did not give them the privilege of manipulating the date of the receipt at their pleasure; indeed, we have just held the contrary in a situation far stronger for the taxpayer.3

Therefore, as soon as they were in funds sufficient to pay the commissions, I think that they “received” them and would have become assessable upon them.' I should indeed agree that, if the exercise of their power to take the money involved a possible breach of their fiduciary duty as executors, the power alone would not constitute a “constructive receipt.” But of that there was no possibility, if I am right that the commissions had been definitely allowed, and were prior to all other claims. True, it might develop that so to reduce the cash of the estate might later hamper the conduct of the business; and on that account they might have preferred not to press their rights. But they were under no duty not to press them, any more than they were under a duty to contribute to the business out of their personal resources in any other *810way. Had they urged such a defense against an assessment, the Commissioner could properly have answered that they must be just before they were generous; and must pay their taxes before they created a reserve in favor of creditors or legatees.

The other part of the claims was for interest upon past advances, made by the taxpayers to the estate. These also the surrogate had állowed by decree upon the accounting, in which it must have appeared that there were assets enough to pay all claims in full. It is of course conceivable that the assets had so shrunk that all the debts so allowed could not be paid in full; and it is also possible that after the accounting debts had been incurred in the conduct of the business which had a similar priority. The Tax Court’s refusal to accept the testimony as conclusive against these possibilities seems to me to stretch its prerogative very nearly to the breaking point; but, as my views are not in any case to prevail, I do not feel myself charged with the duty of deciding whether that refusal was “clearly erroneous.” However, if it be further argued that these supposi-titious expenses of administration also put in doubt whether the commissions remained unconditionally payable, I answer that there must be an end to imaginary obstacles thrown in the path of a taxpayer under the guise of compelling him to prove his case.

1 Cíe., 169 F.2d 483.

Halsey v. Van Amringe, 6 Paige, N. Y., 12, 16; In re Bates’ Estate, 167 Misc. 641, 654, 4 N.Y.S.2d 444.

Aramo-Stiftung v. Commissioner, 2 Cir., 172 F.2d 896.