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Estate of Thacher v. Commissioner

20 T.C. 474 (1953)

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Estate of Thacher v. Commissioner

United States Tax Court

20 T.C. 474 (1953)

Facts

Frank Thacher transferred property into an irrevocable inter vivos trust and gave his wife a lifetime interest in the property’s income that would end if (1) the couple divorced or separated or (2) the wife remarried after Thacher’s death. If either condition occurred, the trust’s property would revert to Thacher if he were alive or to his estate (plaintiff) if he were deceased. After Thacher died, the commissioner of Internal Revenue (commissioner) (defendant) determined that, under 26 U.S.C. § 2037, the property that Thacher had transferred into the trust was still part of his gross estate. It was undisputed that Thacher had retained a reversionary interest in the trust property that was valued at more than 5 percent of the trust property’s value. In addition, the commissioner argued that Thacher’s wife had to survive Thacher to get a full, unconditional ownership interest in the trust property’s income because, while Thacher was alive, the reversion could be triggered by the couple separating or divorcing. Thacher’s estate petitioned the United States Tax Court for a determination that the property was not part of the gross estate. The estate argued that the property had been fully transferred while Thacher was alive because the wife became entitled to full possession and enjoyment of the trust property’s income immediately after the transfer and because Thacher did not have the authority to revoke the wife’s interest.

Rule of Law

Issue

Holding and Reasoning (Bruce, J.)

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