Irwin V. Gavit - Majority Opinion

Majority Opinion

"e 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 Code provision excluding gifts and 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...."

The Internal Revenue Code at the time provided that while the gains, profits and income "derived from any source whatsoever" was taxable, the value of property acquired by gift or bequest was not to be included in taxable income, and that trustees could be required to account for and withhold certain amounts for the payment of tax.

Justice Holmes, writing for the majority, reasoned that the statute as then written required that the income received by trustees and paid to the remainderman be considered taxable income. Holmes held that although the receipt of the estate funds would be considered a non-taxable bequest, the receipt of income from those funds in installments is taxable.