Estate of Regester v. Commissioner
United States Tax Court
83 T.C. 1 (1984)
Ruth Regester was the beneficiary of a testamentary trust. That trust was required to pay its net income to Ruth at least quarter-annually. The trustee of Ruth’s trust also had the discretion to distribute principal from the trust for Ruth’s benefit if she needed it to supplement her income or to address emergency situations. The trust also required that the trustee make distributions to Ruth’s son, Charles, or his descendants, upon Ruth’s written direction, during her lifetime. Finally, the trust said that upon Ruth’s death, any remaining trust assets would be distributed among Charles and his descendants, as directed by Ruth. Before Ruth ever received any of the income or principal from the trust, she executed an instrument directing that all of the principal of the trust should be delivered to Charles. The lifetime income that Ruth could have received was never reported on her gift-tax returns or, after her death in 1977, her estate-tax return. The Internal Revenue Service (IRS) (defendant), citing § 25.2514-1(b)(b) of the Gift Tax Regulations, determined that the lifetime income that Ruth was entitled to should have been treated as a taxable gift when it was transferred to Charles. Ruth’s estate petitioned the United States Tax Court on the theory that the transfer was not a taxable gift.
Rule of Law
Holding and Reasoning (Cohen, J.)
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