Estelle Morris Trusts
United States Tax Court
51 T.C. 20 (1968)

- Written by Joe Cox, JD
Facts
[Editor’s Note: This case can also be found under the title Morris Trusts v. Commissioner of Internal Revenue.] In 1953, E.S. Morris and his wife, Etty Morris, executed ten separate written declarations of trust, purporting to create 20 separate trusts. Each declaration of trust established a separate trust, with B.R. Morris (the son of E.S. and Etty) and Estelle Morris (wife of B.R.) as beneficiaries. Each trust was irrevocable, was to accumulate trust income for the life of the beneficiaries, and, on their death, was to distribute principal and income to trusts for the beneficiaries’ surviving issue. The declaration of each trust indicated that it established two equal trusts for B.R. and Estelle and that each trust was not to be comingled, but a pair of trusts could be comanaged, with the stipulation that the principal and income would ultimately be evenly divided again. The trusts were separately funded by amounts from $500 to $1,875, drawn on the bank account of E.S. and Etty. Loans ranging from $1,500 to $5,625 were made to each trust by E.S. Ten separate bank accounts were opened in the name of E.S. Morris, trustee, and funds were deposited. Each of the declarations was treated as two trusts, one for B.R. and one for Estelle. Each trustee filed 20 separate income tax returns annually, reporting income for each trust, and the trusts had separate financial statements prepared by accountants. The government ultimately issued a notice of deficiency, finding that the ten B.R. Morris Trusts constituted one trust for federal income-tax purposes, and the ten Estelle Morris Trusts also functioned as one trust. The government later argued that the 20 trusts were, in fact, one single trust. The Morrises argued that the trusts were 20 separate trusts, disputed that tax avoidance was the motive for the trusts, and argued that even if tax avoidance were the goal, that goal was not relevant to the taxation of the trusts.
Rule of Law
Issue
Holding and Reasoning (Featherston, J.)
Dissent (Raum, J.)
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