Crisp v. United States

34 Fed. Cl. 112, 95-2 U.S.T.C. ¶ 50,493 (1995)

From our private database of 46,100+ case briefs, written and edited by humans—never with AI.

Crisp v. United States

United States Tax Court
34 Fed. Cl. 112, 95-2 U.S.T.C. ¶ 50,493 (1995)

JC

Facts

Don W. Crisp (plaintiff) was the trustee of the Caroline Hunt Trust Estate. In 1935, H. L. and Lyda Hunt, the parents of 12-year-old Caroline Hunt, established the trust, which allowed the trustee to make periodic payments to Caroline for life and then to her heirs for 21 years after her death. The trust agreement provided that the trustee could never diminish the trust corpus through distribution to a beneficiary but could pay net profits or net earnings to the beneficiary. For the tax year ending June 30, 1987, the trust distributed $4.5 million to Caroline, and for the shortened tax period ending December 31, 1987, the trust distributed another $1.6 million to Caroline. Accordingly, the trust deducted those amounts from its income, as the trust’s distributable net income (DNI) for each period exceeded the amount paid to Caroline. The trust had included within its DNI all capital gains credited to the trust’s capital account by ZH Associates, a limited partnership in which the trust was a limited partner. ZH Associates existed primarily to buy and sell securities, which was profitable under the volatile merger-and-acquisition-heavy market of the 1980s. The government (defendant) audited the trust’s returns and found that the trustee should not have included the ZH capital gains within DNI, and with those amounts removed from DNI, the estate would be liable for all income tax on the distributions to Caroline by the extent that they exceeded the recalculated DNI, which resulted in nearly $3 million in taxes, penalties, and interest. The trust paid those taxes and filed suit to obtain a refund. The governing law was clear that gains from the sale or exchange of capital assets classified as income and paid to the beneficiary were included in the computation of DNI, while gains classified within the trust corpus were not included in the DNI calculation. The government argued that the capital gains were trust corpus, while the trust argued that they were properly distributed as income to the trust beneficiary.

Rule of Law

Issue

Holding and Reasoning (Andewelt, J.)

What to do next…

  1. Unlock this case brief with a free (no-commitment) trial membership of Quimbee.

    You’ll be in good company: Quimbee is one of the most widely used and trusted sites for law students, serving more than 748,000 law students since 2011. Some law schools—such as Yale, Berkeley, and Northwestern—even subscribe directly to Quimbee for all their law students.

    Unlock this case briefRead our student testimonials
  2. Learn more about Quimbee’s unique (and proven) approach to achieving great grades at law school.

    Quimbee is a company hell-bent on one thing: helping you get an “A” in every course you take in law school, so you can graduate at the top of your class and get a high-paying law job. We’re not just a study aid for law students; we’re the study aid for law students.

    Learn about our approachRead more about Quimbee

Here's why 748,000 law students have relied on our case briefs:

  • Written by law professors and practitioners, not other law students. 46,100 briefs, keyed to 987 casebooks. Top-notch customer support.
  • The right amount of information, includes the facts, issues, rule of law, holding and reasoning, and any concurrences and dissents.
  • Access in your classes, works on your mobile and tablet. Massive library of related video lessons and high quality multiple-choice questions.
  • Easy to use, uniform format for every case brief. Written in plain English, not in legalese. Our briefs summarize and simplify; they don’t just repeat the court’s language.

Access this case brief for FREE

With a 7-day free trial membership
Here's why 748,000 law students have relied on our case briefs:
  • Reliable - written by law professors and practitioners, not other law students
  • The right length and amount of information - includes the facts, issue, rule of law, holding and reasoning, and any concurrences and dissents
  • Access in your class - works on your mobile and tablet
  • 46,100 briefs - keyed to 987 casebooks
  • Uniform format for every case brief
  • Written in plain English - not in legalese and not just repeating the court's language
  • Massive library of related video lessons - and practice questions
  • Top-notch customer support

Access this case brief for FREE

With a 7-day free trial membership