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Commissioner v. Stearns, 65 F.2d 371, 373 (2d Cir. 1933). In
essence, the Code is designed to impose tax on the owner of trust
income, and a present right to receive income is equivalent to
current ownership of such income. See Freuler v. Helvering, 291
U.S. 35, 42 (1934).
Respondent contends that petitioner had a present right to
receive income. Petitioner contends he had no such right.
Respondent relies on a line of cases which hold that income is
taxable to the current income beneficiary even though the trustee
withheld distributions to such beneficiary during the course of
State legal proceedings. See United States v. Higginson, 238
F.2d 439 (1st Cir. 1956); Estate of Bruchmann v. Commissioner, 53
T.C. 403 (1969); DeBrabant v. Commissioner, 34 B.T.A. 951 (1936),
affd. 90 F.2d 433 (2d Cir. 1937). In each of these cases,
however, the trustee exercised discretion and was not required to
accumulate trust income.
Because of the State Court order, petitioner did not have a
present right to receive income distributions in 1994. See Blair
v. Commissioner, 300 U.S. 5 (1937)(holding that State law
determines the right of the beneficiary to trust income). The
State Court order represented petitioner’s rights under Virginia
law. See Young v. Commissioner, 110 T.C. 297, 300 (1998)(stating
that Federal authorities must give “proper regard” to relevant
State court rulings, quoting Commissioner v. Estate of Bosch, 387
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