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Home > Journals > Michigan Law Review > MLR > Volume 40 > Issue 7 (1942)

 

Abstract

Testator devised the residue of his estate in trust to pay the income to his wife for life and on her death to distribute the corpus to the children of the testator. The trustee bought ten-year bonds of the United· States Government known as United States Savings Bonds. The bonds did not bear interest payable at stated intervals, but were sold at a price sufficiently below their maturity value to yield a return equal to 2.9 per cent per annum, compounded semi-annually, it the bonds were held for the full ten years. The holder of such bonds may present them for redemption by the United States at any time after they have been outstanding sixty days. Redemption is made in accordance with a schedule which, after the first year, provides an increased redemption price every six months which is sufficiently in excess of the original purchase price to yield to the holder a return of 1.33 per cent to 2.84 per cent per annum, depending upon how early in the ten-year period the bonds are redeemed. The trustee proposed to pay the life tenant, from available cash belonging to the corpus, the amount of each six months' increment in redemption value according to the schedule set out in the bond. The remainderman contended that since the bonds were purchased on a discount basis any increment in value belonged to the corpus, or that if the increment was income, it was not distributable income until it came into the possession of the trustee when the bonds were redeemed. Held, the increment on the bonds is distributable income. In re Wehner's Will, 238 Wis. 557, 300 N. W. 241 (1941).

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