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Holtz’s Estate v. Commissioner

United States Tax Court
38 T.C. 37 (1962)


Facts

On June 12, 1953, Leon Holtz created a trust and funded it with property valued at $384,117. Under the terms of the trust, Leon would receive the income for life and as much principal as the sole trustee, a bank, decided was appropriate for Leon’s “welfare, comfort and support,” or for “hospitalization or other emergency needs.” If Leon’s wife survived him, she would receive the trust income for life and principal as needed under the same terms. The trust would terminate upon the surviving spouse’s death. In 1955, Leon transferred an additional $50,000 to the trust. Leon did not reserve the right to amend or revoke the trust, either in himself or another person. The Commissioner of Internal Revenue (defendant) determined that Leon’s transfers to the trust in 1953 and 1955 were taxable gift transfers and computed tax based on the actuarial value of Leon’s life estate in the trust. Leon’s estate commenced an action in the United States Tax Court. At a hearing, evidence of a conversation between Leon and a trust officer at the trustee bank demonstrated that Leon had been concerned about having access to all of the trust assets if necessary and that the trust officer agreed to be “liberal” in paying principal out of the trust. Leon’s estate (plaintiff) asserted that the transfers were not taxable because they were not completed gifts.

Rule of Law

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Issue

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Holding and Reasoning (Drennan, J.)

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  • A "yes" or "no" answer to the question framed in the issue section;
  • A summary of the majority or plurality opinion, using the CREAC method; and
  • The procedural disposition (e.g. reversed and remanded, affirmed, etc.).

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