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children. He funded the trust with shares of three closely held
corporations but retained the right to vote the shares and to
veto any sale or transfer of the stock. Id. at 126-127. As a
result, Mr. Byrum at his death continued to have the right to
vote not less than 71 percent of the common stock in each of the
three corporations. Id. at 128-129. The three corporations were
involved in lithography-related businesses and had a substantial
number of minority shareholders unrelated to Mr. Byrum. Id. at
130 & n.2, 142 & n.20. (The Supreme Court noted that 11 of 12, 5
of 8, and 11 of 14 stockholders, respectively, in the three
corporations appeared to be unrelated to Mr. Byrum. Id. at 142
n.20.) The trust instrument specified that there be, and
Mr. Byrum named, an independent corporate trustee. Id. at 126.
The trustee was authorized in its “absolute and sole discretion”
to pay income and principal to or for the benefit of the
beneficiaries. Id. at 127.
The Commissioner argued that, by retaining voting control
over the corporations, Mr. Byrum was in a position to select the
corporate directors and thereby to control corporate dividend
policy. Id. at 131-132. According to the Commissioner, the
scenario in dispute gave Mr. Byrum the ability to regulate the
flow of income to the trust, which ability was characterized as
tantamount to a grantor-trustee’s power to accumulate trust
income for remaindermen or to distribute to present
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