Hays’s Estate v. Commissioner
United States Court of Appeals for the Fifth Circuit
181 F.2d 169 (1950)
- Written by Daniel Clark, JD
Facts
Ms. Hays transferred farm property to a trust for the benefit of her children. At the time it was transferred, the property was encumbered by mortgage liens, and the mortgage was secured by the property. After the transfer, the trust became primarily liable for the mortgage, and the trust document instructed the trustee to make the mortgage payments out of the income generated by the property. If the trust failed to make payments, the creditor could foreclose on the property. After the transfer, Hays could face liability for the mortgage only in the remote event that the trust failed to make payments and a deficiency remained after the creditor foreclosed on the property. Hays died while the trust was still in existence and making payments on the mortgage. The tax court determined that the transferred property must be included in Hays’s gross estate. Hays’s estate (plaintiff) appealed.
Rule of Law
Issue
Holding and Reasoning (Holmes, J.)
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