Estate of Hilton W. Goodwyn

[Editor’s Note: This case can also be found under the title “Goodwyn v. Commissioner.”] Hilton W. Goodwyn Sr. (plaintiff) practiced law for most of his adult life, was a real estate broker, and began acquiring various properties during these careers. Goodwyn started transferring properties to various trusts that were overseen by various trustees, including Goodwyn, his brother, his wife, and his brother-in-law. Over time, these trustees were replaced by independent trustees, including, for instance, the law librarian for the Virginia Supreme Court. From the outset of the trusts until shortly before Goodwyn’s death in 1962, Goodwyn exercised control over the management and investment activities of the trusts and made decisions regarding the purchase and sale of property, transfer of property between the trusts, and any distributions of income to trust beneficiaries. Goodwyn kept the business books for all of the trusts but did not keep separate books, and therefore, some of the beneficiaries were not aware of the trusts until the beneficiaries began receiving money. Fiduciaries were advised to come and sign relevant tax returns, which was done without question. After Goodwyn’s death, questions arose regarding whether he was to be construed as owning any trust assets. Just as Goodwyn’s actual control of the trusts was not contested, neither was the fact that he did not reserve any right or power in any of the trusts. Goodwyn did not formally have the power to control beneficial enjoyment of the trust property.