Susan L. Bay - Page 5

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          O'Neill v. Commissioner, 994 F.2d 302 (6th Cir. 1993), revg. 98             
          T.C. 227 (1992), and pointing out the fiduciary obligations                 
          imposed upon the trustees, petitioner contends that the expenses            
          would not have been incurred if the property were not held by the           
          trust.  Under petitioner's theory of the case, because pursuant             
          to section 67(e) the expenses are taken into account in computing           
          adjusted gross income, the provisions of section 67(a) are not              
          applicable.                                                                 
               We turn our attention first to the status of the trust for             
          Federal income tax purposes.  In petitioner's brief, as a general           
          criticism of respondent's position, and with reference to the               
          trust restrictions on the distribution of corpus, petitioner                
          states:  "[respondent] fails to note that in the instant case               
          although the form of * * * [the trust] is that of a grantor's               
          trust, in substance it is similar to an irrevocable trust or                
          mutual fund."  According to petitioner, we should consider the              
          trust as other than a grantor trust.  Petitioner's reliance upon            
          section 67(e) and O'Neill v. Commissioner, supra, is consistent             
          with treating the trust as other than a grantor trust.  However,            
          such treatment is inconsistent with the stipulation of facts, in            
          which petitioner agreed not only that the trust "is a grantor               
          trust", but further, in apparent reliance upon section 671, that            
          "each item of income and expense [of the trust] is reported                 
          individually by the grantor".  Considering the trust as other               





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