Helvering v. Horst

Holding

A donor who detaches and gifts interest coupons from bonds he retains is taxable on the interest when paid to the donee; the donor's exercise of dominion to direct payment to another realizes the income.

Facts

Horst owned negotiable bonds and clipped the interest coupons shortly before they matured, giving them to his son. The son collected the interest when due. The Commissioner taxed Horst rather than the son on the coupon interest.

Reasoning

Justice Stone explained that the power to dispose of income is the equivalent of ownership of it. Horst's act of giving the coupons let him realize the economic benefit of the interest by enriching his son and was therefore taxable to him. Realization can occur through exercise of control even without receipt of cash.