Braun v. Commissioner
United States Tax Court
T.C. Memo 1984-285, 48 T.C.M. (CCH) 210 (1984)
Dr. Frederick Braun (plaintiff) and his wife set up a pair of trusts, each for the benefit of three of their children. Braun, his wife, and a friend were the trustees. Each trust called for distribution of the net income to its beneficiaries. Income from the trusts was used to fund college tuition, room, and board for the children who had reached age 18. Other trust income was used to fund private high school for two beneficiaries, one of whom later turned 18 and had his share of the income applied to college, and the other of whom was under 18 for the period in question and thus remained in high school. If trust income was applied for support or maintenance of a beneficiary whom the grantor was obligated to support, then it was taxable income to the grantor. Obligation was determined under state law. Braun contended that he had no obligation to pay college tuition, room, and board for his adult children or to pay for private school tuition for his minor child. The government (defendant) disagreed, arguing that the trust income should be taxable to Braun. In a prior case that had sought to provide clarity to findings in regard to the necessaries doctrine, the New Jersey Supreme Court found that education was to be considered flexibly and based upon relevant circumstances.
Rule of Law
Holding and Reasoning (Whitaker, J.)
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