1951 U.S. Tax Ct. LEXIS 154">*154
Alimony -- Nonresident Alien --
16 T.C. 1398">*1398 OPINION.
Respondent, under
All the facts have been stipulated and are so found.
Albert R. Gallatin Welsh and 1951 U.S. Tax Ct. LEXIS 154">*156 Gabrielle B. Welsh were married on October 25, 1933, in Paris, France. No children were born of this marriage.
On May 16, 1938, they entered into a separation agreement and in the same year were divorced by an adjudication of the District Court 16 T.C. 1398">*1399 of Zurich, Switzerland. The separation agreement, while providing that it should in no wise be affected by divorce, nevertheless provided that Albert should pay Gabrielle $ 400 per month until her death or remarriage. The decree of divorce did not refer to the agreement, but did require Albert to pay Gabrielle in advance for her support the sum of $ 400 per month until her remarriage. Gabrielle never remarried.
Albert subsequently remarried. He died December 1, 1944, a resident of Delaware County, Pennsylvania. At all times he was a citizen of the United States. His second wife, Helene, and two sons of his second marriage survived.
Albert left a last will and testament dated November 18, 1940, which was duly admitted to probate in Delaware County, Pennsylvania, and of which Girard Trust Company and Charles N. Welsh, Jr., are executors.
By deed of trust dated March 19, 1935, Albert created a trust of which Girard Trust Company1951 U.S. Tax Ct. LEXIS 154">*157 (the petitioner here) and Charles N. Welsh, Jr., (hereinafter called trustees) were and still are cotrustees. Gabrielle was not a beneficiary of the trust.
In his will Albert exercised a power of appointment which he had reserved over the trust estate and by virtue thereof he directed the trustees to pay one-half of the income of the trust estate to Helene and the remainder of the income to his children.
Albert's net estate, exclusive of property held in the trust, amounted to $ 1,471.29 after paying claims other than Gabrielle's. Gabrielle instituted proceedings in the Orphans' Court of Philadelphia County, Pennsylvania, which had jurisdiction of the trust, to subject the corpus of the trust to her claim as a creditor of the estate for payment of the $ 400 per month pursuant to the separation agreement and divorce decree. By supplemental adjudication dated October 1, 1947, the Court awarded Gabrielle from the principal of the trust the total amount of all unpaid monthly sums accruing from Albert's death and payments of $ 400 per month to be paid thereafter pursuant to the separation agreement and divorce decree.
Since Albert's death the trustees have paid the trust income regularly1951 U.S. Tax Ct. LEXIS 154">*158 each year, including 1948, to the beneficiaries named in the appointment under his will. Such income for 1948 was reported for Federal income tax purposes by the beneficiaries. Albert's estate had no income in 1948.
Pursuant to the adjudication of the Orphans' Court of Philadelphia County, referred to heretofore, petitioner in the year 1948 set aside the sum of $ 18,000 from the principal of the trust to satisfy payments at the rate of $ 400 a month due to Gabrielle subsequent to Albert's death. Of that amount petitioner paid Gabrielle $ 12,600 in 1948, 16 T.C. 1398">*1400 after March 6, 1948, and it retained the balance of $ 5,400 to cover liability, if any, for withholding tax at the rate of 30 per cent of such sum of $ 18,000.
Gabrielle was at all times referred to and at the time of the hearing, a nonresident alien of the United States and a citizen of France. She was not at any time during 1948 engaged in trade or business within the United States.
This case involves the primary question, whether
To answer this question we must first consider whether the payments would1951 U.S. Tax Ct. LEXIS 154">*159 be income to Gabrielle. Under
1951 U.S. Tax Ct. LEXIS 154">*161 Petitioner argues, however, that because the decree of the Orphans' Court made the payments a charge on the corpus of the trust rather 16 T.C. 1398">*1401 than trust income, the payments are not to be treated as income. We do not agree. Under
Nor do we agree with petitioner's argument that
This brings us then to petitioner's contention that even if
* * * interest (except interest on deposits with persons carrying on the banking business paid to persons not engaged in business in the United States), dividends, rent, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable1951 U.S. Tax Ct. LEXIS 154">*163 annual or periodical gains, profits, and income (but only to the extent that any of the above items constitutes gross income from sources within the United States) * * *
As we understand it, petitioner's point is that
Do the payments to Gabrielle fall within the broad classification subject to withholding under
1.
* * * *
(k) Alimony, Etc., Income. -- In the case of a wife who is divorced or legally separated from her husband under a decree of divorce or of separate maintenance, periodic payments (whether or not made at regular intervals) received subsequent to such decree in discharge of, or attributable to property transferred (in trust or otherwise) in discharge of, a legal obligation which, because of the marital or family relationship, is imposed upon or incurred by such husband under such decree or under a written instrument incident to such divorce or separation shall be includible in the gross income of such wife, and such amounts received as are attributable to property so transferred shall not be includible in the gross income of such husband. * * * (In cases where such periodic payments are attributable to property of an estate or property held in trust, see