Merrill v. Fahs
United States Supreme Court
324 U.S. 308 (1945)
Charles Merrill (plaintiff) and Kinta Desmare entered into a prenuptial agreement. Under the agreement, Merrill agreed to set up a $300,000 trust for Desmare after the marriage and to add provisions to his will creating additional trusts for Desmare and any children they might have. In exchange, Desmare agreed to give up most of her state-law rights to Merrill’s other property that she would otherwise acquire once she was Merrill’s wife. After the marriage, Merrill created the $300,000 trust as promised. The collector of Internal Revenue (defendant) assessed a gift tax on the $300,000 that Merrill transferred into the trust. Merrill paid the tax and then sued in federal district court to have the tax payment refunded. The district court ruled that the transfer was not a gift. On appeal, the Fifth Circuit reversed the district court, finding that that transfer was a gift. The United States Supreme Court agreed to review the matter, along with the companion case of Commissioner v. Wemyss, which involved a transfer of property in exchange for a promise to get married.
Rule of Law
Holding and Reasoning (Frankfurter, J.)
Dissent (Reed, J.)
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