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Estate of Towle v. Commissioner

54 T.C. 368 (1970)

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Estate of Towle v. Commissioner

United States Tax Court
54 T.C. 368 (1970)

Facts

In his will, Charles McNear left his residuary estate to First National Bank of Chicago (First National) in trust. McNear’s daughter, Janice Towle, was the income beneficiary and his grandson, Charles Towle, and Charles Towle’s descendants were the beneficiaries in remainder. The trust held life-insurance contracts on McNear that granted Janice the right to withdraw a fixed amount of money each year from the contracts’ principal. The contracts also granted Janice the right, with the consent of First National, to withdraw at any time the entire remaining principal. Under the terms of the trust, any remaining principal under the contracts upon Janice’s death would flow back to the trust for the benefit of the beneficiaries in remainder. There was a substantial remaining principal balance when Janice died. The executor of Janice’s estate (plaintiff) did not include a power of appointment over the proceeds of the insurance contracts in her gross estate. The Internal Revenue Service (defendant) determined that Janice had a general power of appointment over the proceeds and that such power of appointment was includable in her gross estate. The executor filed a petition in the United States Tax Court.

Rule of Law

Issue

Holding and Reasoning (Tannenwald, J.)

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Estate, Trust, and Gift Taxation

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