The bixby liquidating trust
California Trust Company, (1949,) 33 Cal.2d 495, 202 P.2d 1018, which was subsequent to the time this case was submitted to us. 279, the majority of the court are of the view that the opinion of the Tax Court, including the supplemental opinion which appears in the footnote hereto, was right, and that the decisions should be affirmed for all the reasons therein stated. The principal ground for respondent's motion is that Bixby v. App.] (1948), 190 P.2d 321, cited and relied upon in our report, was reversed by the Supreme Court of California in Bixby v.The draftsman drives forward on a broad smooth path to the objective of absolute control of the property by the eight members of this family group.It is signed by the eight as individuals who transfer the stock, as transferors, and again by the same eight individuals as a group as transferees holding the stock in joint tenancy. Whether the taxpayers who are the grantors, trustees and principal beneficiaries of the family trust involved here are subject to tax under Section 22(a) of the Revenue Act of 1938 and of the Internal Revenue Code on taxable stock dividends which were received by the trust in the taxable years and were added by the trustees to the corpus of the trust. If no spouse and no issue survived the trustor then gave the trust income to the living heirs of the trustor until the termination of the trust. The opinion of the Tax Court, as originally promulgated, is reported at 12 T. The order denying that motion was accompanied by a memorandum which appears in the margin.1 "1. In the event the spouse predeceased the trustor, the trust income was given to a particular class of persons, the issue. And with equal clarity the California Supreme Court stated the following limitation or exception to the general rule: `On the other hand, if remainder interests were created in plaintiff's [Bixby] heirs, they were also beneficiaries, and the court could not terminate the trust without their consent.' [Emphasis supplied].
This primary instrument and relationship then concededly was for a legitimate business purpose.
Of course, the Commissioner must concede that it is not improper to effect a tax saving if the regulations and the law are followed.5 There is no evidence that there is any fraudulent purpose on the part of any party to the agreement.
However, it is not essential to find an intent to defraud the government by allocation of property or income.
Thereupon, they set aside their former decision, rationalized an explanation of the latest utterance of the highest court of California and smugly restored their former order. Even if it were valid, the question of whether the relationship was used to hold income for future distribution under § 167 was cardinal.
The Tax Court should never have spoken upon a highly debatable question of local law. The holdings of the California courts could only have been properly used by the Tax Court to bolster up their decision (1) if this particular instrument itself had been submitted by petitioners to the local courts and had been specifically upheld. Or (2) if, by well established doctrine, the particular relationship had been passed upon and become a matter of established law, such as a partnership or a marital community.