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be placed in a trust from which she was to receive the income
annually, the principal to be distributed to her when she
attained the age of 30. The unexecuted will made no specific
bequests to the decedent, but provided that 25 percent of the
residue of the father's estate was to be placed in trust from
which she was to receive the income for life. The principal of
the trust was never to be distributed to the decedent.
The issue in Estate of Vease was whether the decedent's
income interest in two trusts6 resulted from a transfer of
property by the decedent during her lifetime, as the Commissioner
argued, or whether the trusts resulted from the transfer of
assets by the decedent's father's estate, due to the decedent's
standing as an heir, as the estate argued.
The Tax Court held that the decedent received her life
estate in the trusts by reason of her standing as an heir,
relying on Lyeth. The Court of Appeals for the Ninth Circuit
disagreed, finding that Lyeth did not control:
One who has standing as an heir by intestacy, or as a
beneficiary under a previous will, may make such
standing the basis for a challenge of the will as a
whole, or a claim with regard to some provision
thereof. Property received from the estate in
settlement of a bona fide challenge or claim of this
kind, in whatever amount and however conditioned as to
disbursement or otherwise, may properly be said to be
received by reason of such standing. Lyeth v. Hoey and
6 Litigation subsequent to the father's death established two
trusts rather than the single trust contemplated by either of the
wills.
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