Seligson v. Commissioner

Stuart Seligson (plaintiff) was estranged from his father, Charles. Nevertheless, Charles left a trust after his death that directed that the entire net income of the trust be paid quarterly or more frequently to Stuart, with the trustees able to invade the corpus if needed for Stuart’s support, maintenance, and health. On Stuart’s death, any remaining principal of the trust was to pass under the residuary clause of Charles’s will, divided between his daughter, her heirs, and other family members. For the fiscal year 1986, the trust reported $9,453 in interest and $1,542 in dividends as distributable to Stuart. Stuart did not wish to receive the money and did not take it. In 1987, Stuart was sent a letter on behalf of the trust indicating that $111,504.63 was distributable to him, and asking Stuart to advise if he would accept distribution. Stuart did not respond and did not receive any money. He also did not disclaim, renounce, or assign his rights under the trust. Stuart Seligson did not report the $10,995 from 1986 as income. The Commissioner of Internal Revenue (the commissioner) (defendant) found a deficiency in his tax return of $4,550. Stuart then filed suit. Stuart argued that the trust in question was a complex trust and not a simple trust, and he indicated other cases in which income was required to be accumulated and later distributed and thus was not taxed in the year it was earned. The government argued that it was a simple trust, i.e., the trustee was required to distribute all of its income, the trust had no provisions for charitable donation, and the trust made no distributions not from current income. Under such a trust, the income was taxable to the beneficiary.