PULSIFER V. COMMSSIONER
64 T.C. 245 (1975)



PROCEDURAL POSTURE: Respondent Commissioner of Internal Revenue (commissioner) determined a tax deficiency in the amounts owed by petitioners, three minors. The three minors sought review of the determination.


FACTS: Pulsifers are two brothers and one sister (P) and all are minor children. Mr. Pulsifer, their father, acquired an Irish Sweepstakes ticket in his name and the names if his children. They got a telegram that their ticket would be represented by Saratoga Skiddy who would run in the Lincolnshire Handicap. Saratoga placed second and won $48,000. When Mr. Pulsifer applied for the winnings but he was told that 3/4ths would not be released to him because the ticket stub reflected three minor children. He was told that the monies withheld would be placed with the court for the benefit of the children and released with interest when they were 21 or until application was made on their behalf to the court. Mr. Pulsifer filed for a request of the release of the funds. Both parties agree that the prize money is income to P. There was a question as to what year it was to be included under. P contends that neither constructive receipt nor the economic benefit doctrines apply and all that they had in 1969 was a nonassignable chose in action. D argues that the economic benefit doctrine applies and
that the monies should be taxed in 1969.

ISSUE: Does the economic benefit doctrine apply if the taxpayer has an absolute irrevocable right to the funds whether or not they are assignable?

RULE OF LAW: The economic benefit doctrine applies if the taxpayer has an absolute irrevocable right to the funds whether or not they are assignable.

ANALYSIS: In 1969, the three minors were partial winners, along with their father, of an Irish sweepstake. Pursuant to Irish law, the minors' winnings were to be held in trust until the three minors reached 21 or until an application on their behalf was made by an appropriate party to the Irish court for release of the funds. The court affirmed the commissioner's determination that the minors' winnings were taxable as income in 1969. The three minors had had an absolute, nonforfeitable right to their winnings on deposit with the Irish court. The money had been irrevocably set aside for their sole benefit. All that was needed to receive the money was for their legal representative to apply for the funds, which he forthwith did.