W. Clarke Swanson, Jr., 1950 Trust

[Editor’s Note: This case can also be found under the title “Swanson v. Commissioner.”] Swanco Trust Company (plaintiff) brought a suit in regard to the W. Clarke Swanson, Jr., 1950 trust. In December 1950, Caroline Swanson transferred stock to W. Clarke Swanson as trustee to begin trusts for W. Clarke Swanson Jr., Gerock H. Swanson, and Carol Ann Swanson. The stock was valued at $3,000 for each trust at that time. W. Clarke later transferred stock that he owned to the three trusts, worth slightly over $30,000 for each trust. W. Clarke contributed 91 percent of the value of each trust. The trusts were codified in 1955, with W. Clarke serving as trustee of each irrevocable trust. Each trust indicated that the trusts were subject to amendment or interpretation by the trust maker, but that such amendment could not vest any right to property, income, or corpus in the maker himself. In fact, W. Clarke subsequently issued a pair of interpretations in regard to the trustee’s right to dispense money, one allowing the trustee full discretion on whether payments were to be made during minority or majority of the beneficiary and one giving the trustee authority to borrow money for the trusts. In between, W. Clarke resigned as trustee and executed an amendment appointing a successor trustee. At issue in this matter is the ownership of the respective trusts. The Internal Revenue Code provided that a grantor must be construed as the owner of any part of a trust in which that person has the beneficial enjoyment of the corpus or income of the trust, subject to the powers allowed by the trust instrument. Although W. Clarke was prohibited from giving himself any property or money from the trust, he did maintain the power to amend the trusts. The issue then was whether his control over the trusts equated to ownership, and if so, how much of the trusts did he own?