## Facts

- Schaffner was the life beneficiary of a testamentary trust.
- In December 1929, she assigned to certain children specified dollar amounts from the trust’s income for the following year.
- In November 1930, she made a similar assignment to her children and a son-in-law of specified dollar amounts from the trust’s income for the following year.
- Trustees paid the designated amounts directly to the assignees pursuant to the assignments.
- The Commissioner treated the assigned amounts as taxable to Schaffner and assessed deficiencies for 1930 and 1931, which she paid.
- Schaffner sued for a refund, claiming the assigned income was taxable to the recipients rather than to her.

## Issues

1. Whether, under the Revenue Act of 1928, trust income assigned in advance by a life beneficiary for a limited period and paid directly to assignees is taxable to the assignor or to the assignees.
2. Whether such assignments should be treated as transfers of a property interest in the trust (shifting tax liability) or as anticipatory assignments of income (leaving tax liability with the assignor).

## Decision

- The Supreme Court reversed the judgment for the taxpayer.
- The Court held the amounts assigned and paid to the children and son-in-law were taxable to Schaffner, the life beneficiary and assignor.
- The Court applied the anticipatory assignment of income doctrine and rejected the argument that the assignments transferred a sufficient property interest to shift tax liability.
- The Court distinguished situations involving a genuine transfer of part of a life estate in a trust from a short-term direction to pay specified income amounts to others.

## Legal Principles

- The power to dispose of income is the equivalent of ownership; exercising that power to direct payment to another does not shift the incidence of taxation.
- An anticipatory assignment of income, even if structured as a gift and paid directly to the donee, generally leaves the income taxable to the person who controls the right to receive it.
- A limited assignment of specified dollar amounts of trust income for a future period is treated as an anticipatory assignment of income, not a transfer of a substantial property interest in the trust.
- Under the Revenue Act of 1928, broad provisions defining gross income and governing trust income taxation reach income the taxpayer controls and redirects to others.

## Conclusion

The Court held that a life beneficiary who assigns specified amounts of next year’s trust income to family members remains taxable on that income because the assignments are anticipatory dispositions of income rather than transfers of a substantial property interest in the trust.


Harrison v. Schaffner, 312 U.S. 579 (1941)