Camp v. Commissioner

In 1932, Frederic Camp (plaintiff) created a trust and named his wife, Alida Camp, as a lifetime beneficiary. After Alida died, the trust would be paid to Frederic’s living descendants. If no living descendants existed, Frederic’s mother would become the trust’s lifetime beneficiary, with the remainder paid at her death to Frederic’s half-brother, his descendants, or Princeton University. Frederic also retained a right to alter, amend, or revoke the trust, but only if his mother or half-brother also agreed. Later in 1932, the first gift tax was enacted. In 1937, Frederic and his half-brother amended the trust to make any future amendments or revocations effective only if Alida and Frederic both consented. At that point, the trust property was worth approximately $520,000, and Alida’s lifetime interest was worth approximately $360,000. In 1946, Frederic and Alida amended the trust to make it irrevocable. The federal government (defendant) determined that Frederic’s trust gift had been completed in 1937 and, therefore, that Frederic owed gift taxes for that year. Frederic petitioned the United States Tax Court for a determination that he owed no gift tax because the transfer was completed when the trust was established, before the gift tax existed. The Tax Court ruled that the entire $520,000 trust gift had been completed in 1937 and that Frederic owed gift taxes for that year. Frederic appealed.