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shall include gains, profits, and income derived from salaries, wages, or compensation for personal service of whatever kind and in whatever form paid, or from professions, vocations, business, trade, commerce, or sales, or dealings in property, whether real or personal, growing out of the ownership or use of or interest in real or personal property, also from interest, rent, dividends, securities, or the transaction of any lawful business carried on for gain or profit, or gains or profits and income derived from any source whatever, including the income from but not the value of property acquired by gift, bequest, devise, or descent.

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In the interpretation of statutes levying taxes it is the established rule not to extend their provisions, by implication, beyond the clear import of the language used, or to enlarge their operations so as to embrace matters not specifically pointed out. In case of doubt they are construed most strongly against the government, and in favor of the citizen. United States v. Wigglesworth, 2 Story 369, Fed. Cas. No. 16,690; American Net & Twine Co. v. Worthington, 141 U. S. 468, 474, 12 Sup. Ct. 55, 35 L. ed. 821; Benziger v. United States, 192 U. S. 38, 55, 24 Sup. Ct. 189, 48 L. ed. 331.

As appears from the above quotations, the net income upon which subdivision 1 directs that an annual tax shall be assessed, levied, collected and paid is defined in division B. The use of the word itself in the definition of "income" causes some obscurity, but we are unable to assert that alimony paid to a divorced wife under a decree of court falls fairly within any of the terms employed.

In Audubon v. Shufeldt, 181 U. S. 575, 577, 578, 21 Sup. Ct. 735, 736, 45 L. ed. 1009, we said:

"Alimony does not arise from any business transaction, but from the relation of marriage. It is not founded on a contract, express or implied, but on the natural and legal duty of the husband to support the wife. The general obligation to support is made specific by the decree of the court of appropriate jurisdiction. . Permanent alimony is regarded rather as a portion of the husband's estate to which the wife is equitably entitled, than as strictly a debt; alimony from time to time

may be regarded as a portion of his current income or earn

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The net income of the divorced husband subject to taxation was not decreased by payment of alimony under the court's order; and, on the other hand, the sum received by the wife on account thereof cannot be regarded as income arising or accruing to her within the enactment.

The judgment of the court below is affirmed.28

IRWIN v. GAVIT

(Supreme Court of the United States, 1925. 268 U. S. 161, 45 Sup. Ct. 475, 5 Am. Fed. Tax R. 5380.)

69 L. ed.

Mr. Justice HOLMES delivered the opinion of the Court. This is a suit to recover taxes and penalties exacted by the Collector under the Income Tax Act of October 3, 1913, c. 16, Section II, A, subdivisions 1 and 2; B, D, and E, 38 Stat. 114, 166 et seq. The Collector demurred to the complaint. The demurrer was overruled and judgment given for the plaintiff by the District Court, 275 Fed. 643, and the Circuit Court of Appeals, 295 Fed. 84. A writ of certiorari was granted by this Court, 264 U. S. 579.

The question is whether the sums received by the plaintiff under the will of Anthony N. Brady in 1913, 1914, and 1915, were income and taxed. The will, admitted to probate August 12, 1913, left the residue of the estate in trust to be divided into six equal parts, the income of one part to be applied so far as deemed proper by the trustees to the education and support of the testator's granddaughter, Marcia Ann Gavit, the balance to be divided into two equal parts and one of them to be paid to the testator's son-in-law, the plaintiff, in equal quarter yearly payments during his life. But on the granddaughter's reaching the age of twenty-one or dying the fund went over, so that, the granddaughter then being six years. old, it is said, the plaintiff's interest could not exceed fifteen

28 Suppose A, to compromise a claim for damages for breach of promise, agrees to pay B $100 a month for life. Is this taxable income to B? See Roswell Magill, Income Tax Liability of Annuities, (1924) 33 Yale L. Jour. 229, 243.

Suppose H enters into a separation agreement with W, one of the terms of which is that H shall transfer $200,000 to T in trust to pay the income to W. Is the income so paid taxable to W? See O. D. 1092; 5 Cum. Bull. 190.

years. The Courts below held that the payments received were property acquired by bequest, were not income and were not subject to tax.

The statute in Section II, A, subdivision 1, provides that there shall be levied a tax "upon the entire net income arising or accruing from all sources in the preceding calendar year to every citizen of the United States." If these payments properly may be called income by the common understanding of that word and the statute has failed to hit them it has missed so much of the general purpose that it expresses at the start. Congress intended to use its power to the full exEisner v. Macomber, 252 U. S. 189, 203, 3 Am. Fed. Tax R. 3020. By B, the net income is to include "gains or profits and income derived from any source whatever, including the income from but not the value of property acquired by gift, bequest, devise or descent." By D, trustees are to make "return of the net income of the person for whom they act, subject to this tax," and by D trustees and others having the control or payment of fixed or determinable gains, etc., of another person who are required to render a return on behalf of another are "authorized to withhold enough to pay the normal tax." The language quoted leaves no doubt in our minds that if a fund were given to trustees for A for life with remainder over, the income received by the trustees and paid over to A would be income of A under the statute. It seems to us hardly less clear that even if there were a specific provision that A should have no interest in the corpus, the payments would be income none the less, within the meaning of the statute and the Constitution, and by popular speech. In the first case it is true that the bequest might be said to be of the corpus for life, in the second it might be said to be of the income. But we think that the provision of the act that exempts bequests assumes the gift of a corpus and contrasts it with the income arising from it, but was not intended to exempt income properly so-called simply because of a severance between it and the principal fund. No such conclusion can be drawn from Eisner v. Macomber, 252 U. S. 189, 206, 207. The money was income in the hands of the trustees and we know of nothing in the law that prevented its being paid and received as income by the donee.

The Courts below went on the ground that the gift to the

plaintiff was a bequest and carried no interest in the corpus of the fund. We do not regard those considerations as conclusive, as we have said, but if it were material a gift of the income of a fund ordinarily is treated by equity as creating an interest in the fund. Apart from technicalities we can perceive no distinction relevant to the question before us between a gift of the fund for life and a gift of the income from it. The fund is appropriated to the production of the same result whichever form the gift takes. Neither are we troubled by the question where to draw the line. That is the question in pretty much everything worth arguing in the law. Hudson County Water Company v. McCartney, 209 U. S. 349, 355. Day and night, youth and age are only types. But the distinction between the cases put of a gift from the corpus of the estate payable in installments and the present seems to us not hard to draw, assuming that the gift supposed would not be income. This is a gift from the income of a very large fund as income. It seems to us immaterial that the same amounts might receive a different color from their source. We are of opinion that quarterly payments, which it was hoped would last for fifteen years, from the income of an estate intended for the plaintiff's child, must be regarded as income within the meaning of the Constitution and the law. It is said that the tax laws should be construed

favorable for the taxpayers. But that is not a reason for creating a doubt or for exaggerating one when it is no greater than we can bring ourselves to feel in this case.

Judgment reversed.

Mr. Justice SUTHERLAND, dissenting.

By the plain terms of the Revenue Act of 1913, the value of property acquired by gift, bequest, devise, or descent is not to be included in net income. Only the income derived from such property is subject to the tax. The question, as it seems to me, is really a very simple one. Money, of course, is property. The money here sought to be taxed as income was paid to respondent under the express provisions of a will. It was a gift by will-a bequest, United States v. Merriam, 263 U. S. 179, 184. It, therefore, fell within the precise letter of the statute; and, under well settled principles, judicial inquiry may go no further. The taxpayer is entitled to the

rigor of the law. There is no latitude in a taxing statuteyou must adhere to the very words. United States v. Merriam, supra, pp. 187-188.

The property which respondent acquired being a bequest, there is no occasion to ask whether, before being handed over to him, it had been carved from the original corpus of, or from subsequent additions to, the estate. The corpus of the estate was not the legacy which respondent received, but merely the source which gave rise to it. The money here sought to be taxed was not the fruits of a legacy; it was the legacy itself. Matter of Stanfield, 135 N. Y. 292, 294.

With the utmost respect for the judgment of my brethren. to the contrary, the opinion just rendered, I think without warrant, searches the field of argument and inference for a meaning which should be found only in the strict letter of the statute.

Mr. Justice BUTLER concurs in this dissent.29

FREY v. WOODWORTH

450 347

(District Court of the United States, 1924. 2 Fed. (2nd) 725, 5 Am. Fed. Tax R. 5182.)

SIMONS, District Judge. Suit at law brought by Jacob Frey, an employee of the Detroit street railway department, the municipally owned and operated street railway system of the city of Detroit, plaintiff, against Fred L. Woodworth, United States collector of internal revenue for the First District of Michigan, defendant, to recover income tax paid under protest for the calendar year 1923. The case was submitted upon an agreed statement of facts. The issues involved are: (1) Whether the income of the plaintiff derived as salary from the department of street railways of the city of Detroit is specifically and expressly exempted by the provisions of the Revenue Act of 1921. (2) Whether the operation of a street railway by a municipality is an exercise of a governmental function, exempting the employees of such street railway from the payment of income taxes on their salaries, due to the restraints

29 For a discussion of the problems involved in related cases, see John M. Maguire, Capitalization of Periodical Payments by Gift, (1920) 34 Harvard L. Rev. 20; Roswell Magill, The Income Tax Liability of Annuities and Similar Periodical Payments, (1924) 33 Yale L. Jour. 229,

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