Stifel v. Commissioner

17 T.C. 647, 1951 U.S. Tax Ct. LEXIS 60

• Court: United States Tax Court
• Decided: October 10, 1951
• Docket: Docket No. 30204
• Status: Published

Opinions

OPINION.

Murdock, Judge:

The petitioner testified that he wanted to transfer some money to his three children to handle and do with as they saw fit so that they would have some idea of what could be accomplished by the proper investment and utilization of money. He was speaking of children 4, 7, and 11. His attorney advised him that a guardian would have to be appointed to accomplish that purpose and the attorney recommended that he “create a trust for each of the children, and that the money be given to them outright.” That testimony adds little or nothing to the stipulated facts.

To the extent that the income and principal was to be disbursed or retained within the discretion of the trustee, the transfers were of future interests under the decided cases. United States v. Pelzer, 312 U. S. 399; Ryerson v. United States, 312 U. S. 405; Fondren v. Commissioner, 324 U. S. 18; Commissioner v. Disston, 325 U. S. 442; John W. Kieckhefer, 15 T. C. 111, reversed for other reasons 189 F. 2d 118. The question for decision is whether the transfers were of present interests by reason of the provision that the beneficiary in each case “shall have the right (which may be exercised during her minority by her general guardian, if any, or by any special guardian appointed for such purpose * * *) at any time to terminate this trust either in whole or in part, and during minority to demand payment of all or any part of any unexpended income” and receive the income or principal or both. No guardian has ever been appointed for any of the children. The petitioner had more than ample funds to support his children and none of the trust income or principal has been disbursed by the trustee. The petitioner not only knew there was no guardian in existence or in contemplation, but also that there was no present reason for or likelihood of the exercise of any right to terminate the trust or demand income as it might later accumulate. He must have anticipated that there would necessarily be a substantial lapse of time before any occasion to terminate the trust or to demand the accumulated income would arise. His real intent as shown by the instrument and the surrounding circumstances controls.

It seems only reasonable to conclude that the children were not intended to have the right to immediate use, possession, or enjoyment of the income or principal, but were to have those rights only upon the happening of some change in existing circumstances such as a reversal in the petitioner’s finances or the children attaining an age at which they could make some independent personal use of money. The exclusion of section 1000 (b) (3) does not apply because the transfer was of a future interest only. The case is not distinguishable in principle from the Supreme Court cases above cited and, if the reversal in the Kieclchefer case is in point, then, with all due respect, we decline to follow it.

Reviewed by the Court.

Decision will he entered for the respondent.