In 1928, decedent established a trust giving his wife the income for her life, with a remainder to his three children. Decedent, as co-trustee, retained power to pay portions of the corpus to his wife and to change the trust on his approval of a written request by his wife. When the estate challenged the commissioner's assessment of a tax deficiency, the Tax Court, relying on the power to invade the principal, included the trust corpus in the gross estate under section 811(d)(2) of the I.R.C., no reduction being allowed for the wife's life estate since no method of evaluating it was offered. On appeal to the circuit court of appeals, it was originally decided that the value of the life estate should be excluded on proof of its value by appropriate probability tables. Later, on rehearing, held, the opinion of the Tax Court affirmed. The entire trust was taxable because of the retention of the power to amend. Had the right to invade the corpus, viewed by the court as a power to terminate, been the only power retained, the value of the wife's life estate would have been properly excluded. Du Charme's Estate v. Commissioner of Internal Revenue, (C.C.A. 6th, 1948) 169 F. (2d) 76.
C. C. Grunewald S.Ed.,
TAXATION-FEDERAL ESTATE TAX-INCLUSION IN GROSS ESTATE OF TRANSFER BY WHICH SETTLOR RETAINED POWER TO TERMINATE,
Mich. L. Rev.
Available at: https://repository.law.umich.edu/mlr/vol47/iss3/24