William O. Douglas

“ To hold that a different result necessarily obtains where the transfer is made or the trust is created as part of a property settlement attendant on a divorce would be to hold that for purposes of the federal income tax the marital obligation of the husband to support his wife cannot be discharged. But whether or not it can be depends on state law. For other purposes, local law determines the status of the parties and their property after a decree dissolving the matrimonial bonds. ”

“ Though the divorce decree extinguishes the husband's pre-existing duty to support the wife, and though no provision of the trust agreement places such obligation on him, that agreement may nevertheless leave him with sufficient interest in or control over the trust as to make him the owner of the corpus for purposes of the federal income tax. ”

“ The reason given to support such a conclusion is that the liability of the settlor for taxes on trust income is based on the possibility that the settlor may be called upon for additional sums in the future. If the obligation continues, the tax liability continues. If the obligation is ended, the tax liability is ended. ”

“ Two trusts, both irrevocable, in words precisely the same, drawn for the purpose of providing maintenance for former wife, recognized or approved by divorce decrees identical in form, are to have different tax results upon the settlor. If income taxes are predominantly important, prospective divorce § must locate in the states where the finality of the settlement is clearly established. ”

“ The same provision appears in § 24 (a) (1) of the 1932 Act, 47 Stat. 169. 26 U.S.C.A. Int.Rev.Code § 24 (a) (1) .↑ Treasury Reg. 74, Arts. 83, 281, promulgated under the 1928 Act. The same provisions appear in Treasury Reg. 77, Arts. ”