Federal Income Taxation ofTrusts and Estates

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Carolina Academic PressLaw Casebook Series

Advisory Board

❦

Gary J. Simson, ChairmanDean, Case Western Reserve University School of Law

Raj BhalaUniversity of Kansas School of Law

John C. Coffee, Jr.Columbia University Law School

Randall CoyneUniversity of Oklahoma College of Law

Paul FinkelmanAlbany Law School

Robert M. JarvisShepard Broad Law Center

Nova Southeastern University

Vincent R. JohnsonSt. Mary’s University School of Law

Michael A. OlivasUniversity of Houston Law Center

Kenneth L. PortWilliam Mitchell College of Law

H. Jefferson PowellDuke University School of Law

Michael P. ScharfCase Western Reserve University School of Law

Peter M. ShaneMichael E. Moritz College of Law

The Ohio State University

Emily L. SherwinCornell Law School

John F. Sutton, Jr.Emeritus, University of Texas School of Law

David B. WexlerJohn E. Rogers College of Law, University of Arizona

University of Puerto Rico School of Law

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Federal Income Taxation ofTrusts and Estates

Cases, Problems, and Materials

Third Edition

Mark L. AscherJoseph D. Jamail Centennial Chair in Law

University of Texas School of Law

Robert T. DanforthAssociate Dean for Academic Affairs and Professor of Law

Washington and Lee University School of Law

Carolina Academic PressDurham, North Carolina

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Copyright © 2008Mark L. AscherRobert T. DanforthAll Rights Reserved

ISBN: 978-1-59460-564-2LCCN: 2008928532

Carolina Academic Press700 Kent StreetDurham, North Carolina 27701Telephone (919) 489-7486Fax (919) 493-5668www.cap-press.com

Printed in the United States of America

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To Kerry and

Johanna and Laura

To Lee-Anne, Dinah,Emmeline, and Robert Evan

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Contents

Table of Internal Revenue Code Sections xiii

Table of Treasury Regulations xix

Table of Cases xxiii

Table of Revenue Rulings xxxv

Table of Revenue Procedures xxxvii

Table of Private Letter Rulings xxxix

Preface xli

Introduction xliii

Chapter 1 · Entities Subject to Income Taxation under Subchapter J 3A. Is an Entity Subject to Taxation? 3

Revenue Ruling 68-47 3Illustrative Material 4Revenue Ruling 76-486 5Illustrative Material 7United States v. De Bonchamps 10Illustrative Material 18

B. How Is an Entity Taxed? 20Morrissey v. Commissioner 20Illustrative Material 24

Chapter 2 · The Entity as Taxpayer: Basic Principles of Income Taxation under Subchapter J 27

A. Gross Income 28B. Deductions 30

1. Interest 312. Taxes 32

Revenue Ruling 61-86 32Illustrative Material 32

3. Expenses Incurred in the Production of Income 33a. In General 33Trust of Bingham v. Commissioner 33Illustrative Material 36Alfred I. duPont Testamentary Trust v. Commissioner 37Illustrative Material 40Knight v. Commissioner 40Illustrative Material 46b. Disallowance of Expenses Attributable to Production

of Tax-Exempt Income 47

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Manufacturers Hanover Trust Co. v. United States 47Illustrative Material 57Tucker v. Commissioner 60Illustrative Material 62Revenue Ruling 77-355 62Illustrative Material 64Whittemore v. United States 64Illustrative Material 70Fabens v. Commissioner 70Illustrative Material 73Problem 73

4. Deduction for Personal Exemption 745. Income for Charity 74

Hartwick College v. United States 77Illustrative Material 84

6. Depreciation and Depletion 86Hay v. United States 87Dusek v. Commissioner 92Revenue Ruling 90-82 94Lamkin v. United States 97Illustrative Material 99

7. Expenses Deducted for Estate Tax Purposes 101Estate of Orville F. Yetter 101Illustrative Material 102Problem 103

8. Passive Activity Rules 103Mattie K. Carter Trust v. United States 103Illustrative Material 107

Chapter 3 · The Entity as Conduit: Allocating the Tax between the Entityand Its Beneficiaries 109

A. “Income” or “Bequest”? 1091. The Problem 109

Irwin v. Gavit 1092. The Solution 111

Harkness v. United States 111Illustrative Material 121

B. Distributable Net Income 123Baker v. Commissioner 123Schaefer v. Commissioner 130Crisp v. United States 131Revenue Ruling 68-392 140Illustrative Material 141Technical Advice Memorandum 8728001 (1986) 142Private Letter Ruling 8429005 (1984) 145Illustrative Material 148Revenue Ruling 61-20 148Problems 149References 150

C. Distributions to Beneficiaries 150

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Brigham v. United States 150Illustrative Material 152Alfred I. duPont Testamentary Trust 152Illustrative Material 156

D. Simple Trusts 159Seligson v. Commissioner 159Illustrative Material 161Estate of Mildred Bruchmann 163Revenue Ruling 85-116 169Illustrative Material 171Revenue Ruling 74-257 175Illustrative Material 176Problems 176

E. Complex Trusts 1781. In General 178

Revenue Ruling 67-117 179Illustrative Material 180

2. The Separate Share Rule 182Revenue Ruling 74-299 182Illustrative Material 184Private Letter Ruling 200618003 (2006) 184Illustrative Material 186Problems 186

F. Estates 1881. In General 188

Bohan v. United States 188Illustrative Material 190Estate of Johnson v. Commissioner 193Illustrative Material 196

2. Exclusion of Particular Distributions 196Revenue Ruling 57-214 196Revenue Ruling 68-49 197Illustrative Material 198Mott v. United States 198Illustrative Material 204

3. Trapping Distributions 205Van Buren v. Commissioner 205Technical Advice Memorandum 8501011 (1984) 211Illustrative Material 213

4. Termination 214a. How Long Do Estates Last? 214Peter J. Maresca Trust v. Commissioner 215Illustrative Material 218b. Excess Deductions 221Alan Nemser 221Revenue Ruling 57-31 223O’Bryan v. Commissioner 224Illustrative Material 229

G. Realization of Gain upon Distribution of Property in Kind 230

CONTENTS ix

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1. By the Entity 230a. Mandatory 230Kenan v. Commissioner 230Illustrative Material 233Revenue Ruling 67-74 234Illustrative Material 234Revenue Ruling 66-207 235Illustrative Material 236Revenue Ruling 82-4 236Illustrative Material 238Revenue Ruling 60-87 238Reference 240b. Elective 240General Explanation of the Revenue Provisions of the

Deficit Reduction Act of 1984 240Illustrative Material 241Problems 242

2. By the Beneficiary 242Revenue Ruling 69-486 242Illustrative Material 243

Chapter 4 · The Entity Ignored 245A. Assignment of Income 245

Lucas v. Earl 245Illustrative Material 246Blair v. Commissioner 247Helvering v. Horst 250Illustrative Material 253Harrison v. Schaffner 254Illustrative Material 256

B. Grantor Trusts: Income Taxation under Subpart E 2571. Grantor as Owner 257

a. Judicial Origins 257Helvering v. Clifford 257b. The Code 261Problems 266W. Clarke Swanson, Jr., 1950 Trust 267Illustrative Material 268Estate of Hilton W. Goodwyn 269Illustrative Material 273Problems 274Benson v. Commissioner 275Illustrative Material 280Rothstein v. United States 282Illustrative Material 291Problems 292Revenue Ruling 62-148 292Illustrative Material 293Problems 294Duffy v. United States 295

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Illustrative Material 299Revenue Ruling 58-242 300Illustrative Material 301Problems 302Victor W. Krause 302Illustrative Material 307Morrill v. United States 309Wyche v. United States 311Illustrative Material 315Problems 317

2. Others as Owners 317a. Judicial Origins 317Mallinckrodt v. Nunan 317b. The Code 322Revenue Ruling 67-241 322Private Letter Ruling 8545076 (1985) 323Private Letter Ruling 200022035 (2000) 324Illustrative Material 326Revenue Ruling 81-6 326Illustrative Material 327Problems 328

3. The Consequences of Grantor Trust Status 329a. Attribution of Income, Deductions, and Credits 329Revenue Ruling 69-70 329Illustrative Material 329Glenn E. Edgar 330Illustrative Material 332Problems 334b. Collateral Consequences of Grantor Trust Status 334Estate of O’Connor 335Illustrative Material 345

Chapter 5 · Manipulation of Entities: The Availability of Artificial Taxpayers under Subchapter J 347

A. The Proliferation of Entities 347Estelle Morris Trusts 347Illustrative Material 356Edward L. Stephenson Trust v. Commissioner 359Illustrative Material 369

B. “Family Trusts” 370Schulz v. Commissioner 370Illustrative Material 376

C. Sales between Related Taxpayers 378Joseph E. Widener Trust v. Commissioner 378Illustrative Material 383Scully v. United States 384

Chapter 6 · Income in Respect of a Decedent 391A. Inclusion in Recipient’s Gross Income 391

1. Investment Income 391

CONTENTS xi

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a. Rent 391Estate of Davison v. United States 391Revenue Ruling 64-289 397Illustrative Material 399b. Interest 399Revenue Ruling 58-435 399Apkin v. Commissioner 402Illustrative Material 404c. Dividends 405d. Annuities 405Revenue Ruling 2005-30 405Problem 407

2. Sales Proceeds 407Trust Company of Georgia v. Ross 407Trust Company of Georgia v. Ross 415Keck v. Commissioner 416Illustrative Material 419Estate of Harry B. Sidles 419Illustrative Material 426Revenue Ruling 78-32 426Illustrative Material 427Estate of Peterson v. Commissioner 428

3. Compensation for Personal Services 434Edward D. Rollert Residuary Trust v. Commissioner 434Illustrative Material 440

4. Miscellaneous Deferred Receipts 443Sun First National Bank v. United States 443Illustrative Material 452Revenue Ruling 60-227 454Illustrative Material 456

B. Deductions in Respect of a Decedent 458Revenue Ruling 58-69 458Illustrative Material 459Revenue Ruling 76-498 459

C. Deduction of Estate Tax 462Revenue Ruling 67-242 462Illustrative Material 465Thomas M. Chastain 465Illustrative Material 469Estate of Kincaid v. Commissioner 469Illustrative Material 472Estate of Cherry v. United States 473Illustrative Material 476

Appendix 477

Index 495

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xiii

1: 161(a): 401(e): 3, 7, 28, 146, 214, 218,

3691(g): 51(h): 23056: 36558(b): 36558(c): 36561: 110, 157, 255, 272, 396,

398, 421, 440, 45661(a): 28, 40, 109, 245, 402,

447–448, 45661(a)(3): 5761(a)(4): 31, 5761(a)(5): 2961(a)(6): 2961(a)(7): 5761(a)(12): 29, 30861(a)(13): 13062: 16, 47662(a): 4062(a)(5): 1663(d): 4067: 41, 46, 33367(a): 33, 4167(b): 33, 4167(b)(7): 47667(c): 3367(e): 33, 41–42, 44, 33367(e)(1): 41–4671: 15772: 183–184, 405–40672(a): 40572(b): 40572(c): 405

72(d): 40572(e): 405–40672(s): 405, 407101: 342101(a): 342–343101(a)(1): 343101(a)(2): 345101(a)(2)(B): 342–343, 345101(b): 432101(b)(1): 432102: 109–110, 114, 198, 201,

432102(a): 109, 111, 117, 122, 199,

201102(b): 109, 111, 122102(b)(1): 199102(b)(2): 122, 199, 201103: 33, 57, 64–65105: 441–442106: 441116: 126, 129121: 427121(d)(11): 427151: 40, 74162: 35, 378, 459162(d): 114163: 30–31, 162, 459163(a): 31163(d): 31163(d)(3)(A): 31163(h): 31163(h)(2)(B): 31163(h)(2)(D): 31163(h)(2)(E): 31163(h)(2)(F): 31163(h)(3): 31

Table of Internal Revenue Code Sections

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163(k): 31164: 32, 459164(a): 32–33165: 386–387, 389–390, 459165(a): 388165(c): 30165(c)(1): 30165(c)(2): 30165(c)(3): 30166(f): 459167: 16167(d): 16, 86–87, 93, 95,

97–98, 100, 126, 331170: 332170(a): 74170(b): 75170(c): 75, 77172: 331, 459212: 32–33, 39, 41, 47–51,

54, 58–60, 64, 66–68,70, 74, 153–154, 176,459–461

212(1): 38, 66–69212(2): 38, 66–69212(3): 34, 67221: 31261: 49262: 39263: 48–50263(a): 47265: 32, 51, 54–55, 57–58,

63, 66–67, 69, 72265(a)(1): 32–33, 47, 55, 63,

66–68, 71265(a)(2): 31267: 241, 381–383, 388267(a)(1): 378, 386267(b): 378, 388267(b)(2): 382267(b)(4): 384267(b)(5): 381, 384, 386–387267(b)(6): 381, 384, 387267(b)(7): 381267(b)(13): 241, 383267(c): 378267(d): 378269: 351275(a)(1): 32301(c)(2): 64

302(c): 351306: 351306(b)(4): 351337: 408, 417, 419–420355(a)(1)(D)(ii): 351357(b): 351367: 352401(a): 182402(b): 183–184451(a): 447453: 146, 282, 287, 289,

446–447, 449, 452–453453(b): 287453B: 334453B(a): 453453B(f): 453454: 403–404454(a): 399–400, 403454(c): 400468B: 9, 269469: 106–107469(a): 103, 105469(a)(2): 105469(a)(2)(A): 106469(c)(1): 103, 105469(h): 105469(h)(1): 103, 106482: 351501(a): 183501(c)(3): 242–243532: 351611: 16, 86–88, 91, 459611(a): 92611(b): 17, 86, 100611(b)(3): 87–89, 126641: 5–7, 15–16, 52, 101,

110, 125, 131, 154, 164,175–176, 208, 255, 357,450

641(a): 3, 9, 13–15, 20–21, 28,146, 199, 318, 347, 349,361

641(a)(1): 8, 19–20641(a)(3): 29641(b): 13, 27–28, 30, 32, 34,

63, 143, 148, 212, 318,330, 347, 349, 361

642: 52, 130, 149, 154, 208

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642(b): 58, 74, 175, 225–226,228–229, 347, 365, 369

642(b)(2)(C)(ii): 74642(c): 63, 74, 77–79, 81–82,

85, 133, 140, 143, 146,153, 170, 178, 200,202–204, 216, 224–229,332, 337–338, 340

642(c)(1): 74–75, 84, 209–210642(c)(2): 74–75, 81, 84642(c)(2)(B): 225642(d): 148, 221642(e): 86, 95, 100, 331642(g): 81, 101–103, 461–462642(h): 126, 149, 221, 223–224,

226, 228–229642(h)(1): 126642(h)(2): 65, 72–73, 126,

221–226, 228–229642(i): 7, 156643: 61, 125, 141, 154, 208,

332, 344643(a): 47, 52, 58, 62, 64, 72,

123, 125, 130–131, 133,143, 146, 148–149, 151,154, 170, 179, 183, 185,208, 361

643(a)(1): 58643(a)(2): 58643(a)(3): 58, 61–64, 72, 127, 132,

136, 140, 142–143,145–146, 170

643(a)(5): 58, 61643(b): 47, 52, 58, 95–97, 123,

159, 170, 208, 212–213643(c): 3, 7, 150–151, 158643(e): 198, 240–243, 369643(e)(3): 237643(f): 347, 356, 369–370644: 182, 220, 332–333644(a): 131:645: 74–75, 173645(a): 131, 219–220651: 6–7, 27, 39, 52, 56,

58–59, 62–63, 125, 133,153–154, 159–162,164–166, 169, 171,175–176, 178–179, 206,208, 255, 331, 361

651(a): 52, 57–58, 63, 150,160–162, 177, 208, 212,234

651(a)(1): 276651(b): 53, 58–59, 177, 207,

212652: 6–7, 39, 59–62, 153,

159, 161–162, 170–171,176, 178–179, 207, 209,211, 255, 361

652(a): 52–53, 59, 160–162,165, 177, 208, 213, 234

652(b): 53, 55, 59, 61–63, 129,156, 177, 208, 210

652(c): 172–174, 207, 332661: 6–7, 27, 39, 103, 111,

125–126, 131, 133, 151,153–155, 157–158, 161,178, 188, 190, 197–198,200–201, 203, 206, 227,235, 237, 317–318, 331,337, 339–341, 344, 361,373, 458

661(a): 72, 126, 132, 144, 150,183, 185, 189–190,196–198, 203–204, 211,235, 237, 241, 337,340–341

661(a)(1): 179–180, 187, 190–191,201

661(a)(2): 147–148, 179–181,187–188, 190–192,194–195, 198–199,201–204, 322–323, 337

661(b): 72661(c): 126662: 6–7, 39, 111, 125–128,

151, 153–155, 157–158,161, 178, 182, 188, 190,197–198, 200–201, 203,206, 227–229, 235, 237,241–242, 317–318, 337,361

662(a): 114, 116–118, 121, 125,127, 148, 180, 183–185,195–196, 203–204, 211,228, 235, 239

662(a)(1): 180, 190, 227

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xvi TABLE OF INTERNAL REVENUE CODE SECTIONS

662(a)(2): 151, 179–180, 188–190,192, 200–201, 208, 227,322–323

662(a)(2)(B): 113–114, 117–121662(b): 116, 128, 130, 156, 180,

206, 227662(c): 31, 173–174, 181, 220,

332663: 111, 122, 125, 152, 190,

197, 200, 227663(a): 178, 196, 237, 239663(a)(1): 114, 181, 197, 201–202,

236663(a)(2): 202663(a)(3): 190, 202663(b): 178, 203663(b)(1): 144663(b)(2): 181663(c): 121, 152, 182–186664: 192665: 61, 201, 367665(b): 362, 370665(c): 370666: 201, 372666(a): 362667: 201, 372667(b): 364667(c): 367668: 201, 368668(b): 364669: 201671: 245, 261, 271–273, 277,

282, 286–292, 300,304–305, 310, 323, 325,329–330, 332–334,338–339, 341, 343–344,446, 451, 460

672: 261–262, 272, 277, 298672(a): 262, 298672(c): 271, 278672(e): 266673: 256, 261, 263–266, 277,

286, 297, 299, 301, 332,334–335

673(a): 263–265, 285, 300673(b): 265673(c): 265674: 261, 267–268, 272–275,

277, 281, 286, 342–343

674(a): 272–274, 329674(b)(4): 274674(c): 271–272675: 261, 275, 277, 281–282,

285, 324675(1): 278, 284675(2): 278–279675(3): 277–281, 283–289, 291675(4): 278676: 251, 259–261, 277–278,

280, 292–293, 320676(a): 292–294677: 251, 260–261, 277, 294,

297–299, 301, 304–309,314, 320, 324–325, 330,332, 335, 446–447, 451,460

677(a): 269, 288, 294–298, 302,304, 307–311, 313,315–316, 324, 448

677(a)(1): 278, 294–295, 330,450–451

677(a)(2): 293, 296–297, 299–301677(a)(3): 302677(b): 264, 278, 302, 309, 313,

315–317, 324678: 11–12, 261, 277, 322,

324, 328, 338–339, 344678(a): 324, 325, 327678(a)(1): 322, 325, 327, 339678(a)(2): 325–326678(b): 327678(c): 327679: 277682: 157682(a): 157682(b): 157691: 392, 394, 403–405, 407,

411–412, 415, 418–419,421–424, 427, 429,431–434, 437, 440, 444,453, 461, 467–469,471–476

691(a): 146–147, 391, 406, 424,426–427, 432, 436, 444,454–455, 462, 465–467,473

691(a)(1): 400–402, 405, 411, 419,428–431, 449, 463–464

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691(a)(1)(B): 449691(a)(2): 453691(a)(3): 411–412691(a)(4): 447, 449, 452–453691(a)(5): 453691(b): 30, 458–463, 466691(b)(1)(A): 458691(c): 392, 402, 444–445, 449,

452, 455, 462–469, 476691(c)(1): 401–402, 406691(c)(1)(A): 470, 474691(c)(2)(B): 467691(c)(2)(C): 467–470, 472691(d): 471691(e): 442701: 135702: 135702(a): 330706(a): 174736: 442736(a)(1): 442736(b)(2)(A): 442753: 442852: 142872(a): 173951(a): 1741001: 231, 2431001(b): 4471001(c): 4471002: 2431012: 231, 2341014: 140, 231, 432, 4531014(a): 391, 406, 429, 431–432,

434, 450, 4541014(b)(6): 453–4541014(b)(9): 406, 4501014(c): 198, 391, 406, 429, 431,

453–4541015(a): 2891022: 2301040: 2301221: 2301222: 2301311: 571398: 91399: 91551: 3512036: 444–445, 4622036(a): 273

2036(a)(2): 272–2732042: 3432052: 463, 466, 4712053: 102, 461–4622053(a): 101, 4592053(a)(2): 461–4622053(a)(3): 4612053(b): 4622054: 101–102, 4612055: 832055(c): 822055(e)(2)(B): 2342056: 472–4732056(a): 4692056(c): 4702502: 3042513: 3032513(d): 3042518: 1746012(a)(4): 333, 3386012(b)(4): 136163: 316166: 316214(a): 1276324(b): 3046501: 4616901: 4177422: 797422(a): 79–807520: 2667701(a): 77701(a)(3): 20–217701(a)(6): 3, 137701(c): 1517805 3617805(a) 361

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xix

1.1-1(b): 1731.61-4: 3961.67-1: 331.67-2T(b)(1): 3331.102-1: 1111.102-1(d): 2011.165-1(b): 3881.167(h)-1: 861.167(h)-1(b): 86–87, 931.167(h)-1(b)(2): 95, 971.212-1: 33, 661.212-1 (a)(1)(i): 671.212-1(a)(1)(ii): 671.212-1(a)(1)(iii): 671.212-1(b): 721.212-1(e): 661.212-1(i): 47, 491.212-1(k): 47, 491.213-1(g)(1): 4571.263(a)-2(c): 49, 601.265-1: 471.265-1(a)(2): 661.265-1(c): 51, 54–55, 61, 63,

71–731.267(a)-1(c): 378, 381, 3881.446-1(c)(1)(ii): 1671.446-1(c)(2)(i): 4571.451-1(a): 1671.454-1(c)(1)(i) : 4041.468B-1: 2691.468B-2: 2691.469-1T(b): 1031.469-1T(b)(2): 1071.469-5T: 1051.611-1(c)(4): 89–90, 92, 991.641(a)-0(c): 347, 359, 3681.641(a)-0(c)(3): 3651.641(a)-1: 28

1.641 (a)-2: 31.641(b): 721.641(b)-1: 301.641(b)-2: 281.641(b)-3: 2141.641(b)-3(a): 216, 218

1.641(b)-3(b): 2181.642(b)-1: 741.642(c)-1: 741.642(c)-1(a)(1): 751.642(c)-2(a): 741.642(c)-2(d): 861.642(c)-3(a): 741.642(c)-3(b): 741.642(d)-1: 2211.642(e)-1: 861.642(g)-1: 101-1021.642(g)-2: 101, 103, 4611.642(h)-2: 2211.642(h)-2(a): 2291.642(h)-3: 2211.642(h)-3(a): 2221.642(h)-4: 2211.643(a): 1331.643(a)-0: 123, 132, 175, 2121.643(a)-1: 123, 1751.643(a)-2: 123, 1751.643(a)-3: 127, 133–134, 141,

148, 1751.643(a)-3(a): 123, 140, 143–1461.643(a)-3(a)(1): 134, 136, 147,

170–1711.643(a)-3(a)(2): 1471.643(a)-3(a)(3): 1471.643(a)-3(b): 1231.643(a)-3(b)(1): 142, 148, 1711.643(a)-3(d): 141, 147, 171

Table of Treasury Regulations

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xx TABLE OF TREASURY REGULATIONS

1.643(a)-3(e): 123, 1481.643(a)-4: 123, 1751.643(a)-5: 123, 1751.643(a)-6: 143, 1751.642(a)-7: 1751.643(b)-1: 95–96, 123, 1591.643(b)-2: 1231.643(c)-1: 150, 158, 3441.643(d)-2: 1231.645-1(e)(2): 1731.645-1(e)(2)(i): 75, 2201.645-1(e)(2)(ii): 2201.645-1(e)(2)(ii)(A): 741.645-1(e)(3)(i): 75, 173, 2201.651(a)-1: 153, 160–161, 174,

205, 2081.651(a)-2: 166, 2121.651(a)-2(a): 160–1611.651(a)-2(c): 1611.641(a)-2(d): 2301.651(b)-1: 1781.652(a)-1: 2081.652(a)-2: 2081.652(b)-1: 128, 2081.652(b)-2: 208–2091.652(b)-2(b): 2101.652(b)-3: 73, 128–129, 207, 2111.652(b)-3(a): 129, 1761.652(b)-3(b): 61, 63, 72, 129, 1761.652(b)-3(c): 1761.652(c)-2: 1731.652(c)-3: 1741.652(c)-4: 54–55, 591.652(c)-4(f): 1781.661(a)-1: 153, 1781.661(a)-2(a): 178, 1831.661(a)-2(b): 1781.661(a)-2(c): 1781.661(a)-2(d): 1781.661(a)-2(e): 158, 178, 196-1971.661(a)-2(f): 230, 235–236, 238,

240-2411.661(a)-2(f)(1): 2371.661(a)-2(f)(3): 2411.661(b)-1: 1781.661(c)-1: 126, 1781.661(c)-2: 1261.662(a)-1: 125, 1781.662(a)-2: 178

1.662(a)-2(a): 2271.662(a)-2(c): 1581.662(a)-3: 121, 127, 1781.662(a)-3(a): 2271.662(a)-3(b): 127, 1581.662(a)-3(b)(6): 1521.662(a)-4: 1161.662(b)-1: 128, 178, 2061.662(c)-1: 178, 1811.662(c)-2: 1781.662(c)-3: 178, 2061.662(c)-4: 128-129, 1781.662(c)-4(e): 1301.662(c)-4(g): 1301.663(a)-1: 1961.663(a)-1(b)(1): 202, 230, 235–237,

239–2401.663(a)-2: 196, 202, 204, 337, 3401.663(a)-3: 1961.663(c)-1: 1821.663(c)-1(a): 1831.663(c)-2: 1821.663(c)-2(a): 1861.663(c)-2(b)(1): 1861.663(c)-2(c): 1861.663(c)-3: 1821.663(c)-4: 1821.663(c)-4(a): 1521.663(c)-5: 31, 152, 1821.671-1: 2611.671-1(a): 4481.671-1(c): 245, 262, 2771.671-2: 3291.671-2(a): 4461.671-2(b): 2771.671-2(c): 332-3331.671-2(d): 3221.671-2(e): 2691.671-3: 277, 329, 3411.671-3(a): 325-326, 4461.671-3(a)(1): 330, 3321.671-3(a)(2): 3301.671-3(b)(2): 2781.671-3(b)(3): 3441.671-3(c): 3301.671-4: 323, 329, 3381.671-4(a): 3331.671-4(b): 3331.671-4(h)(2): 333

00 ascher 3e cx3 7/7/08 12:51 PM Page xx

1.672(a)-1: 262, 2981.672(a)-1(a): 2621.672(b)-1: 2621.672(c)-1: 2621.673(a)-1(b): 265, 3001.674(a)-1(a): 2681.675-1: 2751.676(a)-1: 2921.677(a)-1: 2941.677(a)-1(c): 3051.677(a)-1(d): 302, 305, 3101.677(a)-1(e): 2981.677(a)-1(f): 2981.677(a)-1(g): 298, 3301.677(b)-1: 3021.678(a)-1: 322, 3241.678(b)-1: 3221.678(c)-1: 3221.691(a)-1: 391, 415, 4291.691(a)-1(b): 418, 424, 426, 429,

436, 454, 4571.691(a)-1(b)(3): 422, 427, 4591.691(a)-1(d): 427, 4411.691(a)-2: 391, 416, 4291.691(a)-2(b): 418, 425, 429–430,

4431.691(a)-3: 391, 4291.691(a)-4: 3911.691(b)-1: 4581.691(b)-1(a): 4601.691(c)-1: 462-4631.691(c)-1(a)(2): 463, 468–472, 4751.691(c)-1(b): 4651.691(c)-2: 402, 4621.691(d)-1(e): 468, 470–4721.1001-2(c): 3451.1014-4(a)(3): 14020.2031-7(d)(6): 26620.2031-7(d)(7): 26620.2031-10(f): 26520.2053-1(c): 46220.2053-8: 461–4621.6012-3: 4, 81.6012-3(a)(4): 350301.6402-2(a)(1): 80301.6402-2(e): 80301.7701: 7301.7701-2: 21301.7701-2(a): 20

301.7701-2(a)(1): 24301.7701-2(a)(2): 24301.7701-2(a)(3): 25301.7701-4: 21301.7701-4(a): 3, 5-6, 8, 13, 20, 25,

339, 342301.7701-4(b): 3, 20301.7701-6(b): 3

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xxiii

A. Magnano Co. v. Hamilton, 118Abbot v. Welch, 29Adams v. Prather, 10Agatstein, Sylvan, 142Ahmanson Foundation v. United States,

82Alabama-Georgia Syrup Co., 191All, Hansberry v., 440Allen v. Commissioner, 25Allen, Lewis G., Family Trust v. United

States, 377Alston v. Commissioner, 216Aluminum Castings Co. v. Routzahn, 251Amabile v. Commissioner, 295, 332American Automobile Ass’n v. United

States, 353American National Bank & Trust Co. v.

United States, 190Amory, Harvard College v., 45Anastasio, Joseph, 4Anderson, Estate of, v. Commissioner,

443Anderson v. Wilson, 29Anesthesia Service Medical Group Inc.

Employee Protective Trust v. Commis-sioner, 25, 308

Anglim, Hale v., 166Apkin v. Commissioner, 402–404Arcadia Plumbing Trust v. Commissioner,

25Armstrong, Estate of, v. Commissioner,

216–217Armstrong, Estate of J.P., 219Arrigo, Newburgh v., 315Arrott v. Heiner, 29Arrow Fastener Co. v. Commissioner, 361Atlantic Veneer Corp. v. Commissioner,

403Attorney-General, Partington v., 18

Aviall Services, Inc., Cooper Industries,Inc. v., 44

Baker v. Commissioner, 123–130Baldwin v. United States, 172Balis v. Commissioner, 317, 376Balkwill, George W., 331Ballard v. Commissioner, 269, 274, 281,

440Bank of America National Trust & Sav-

ings Ass’n v. Commissioner, 77Bank of America National Trust & Sav-

ings Ass’n, United States v., 205, 208,340

Bankhead, Emelil, Estate of, 30Barker, Peter B., 262Barnett’s Will, In re, 461Barnhill v. Commissioner, 29Bartholomew v. Northampton Nat’l

Bank, 284Basch, Fred, Estate of, 399, 441Basye, United States v., 247Bausch’s Estate v. Commissioner, 396,

440Bay v. Commissioner, 333Bedell, Estate of Harry M. Sr., Trust v.

Commissioner, 25Bedford, F.T., 165Benedict, United States v., 83Bennett v. Commissioner, 274, 280Benson v. Commissioner, 275–280Bergan v. Commissioner, 155Berger, Estate of v. Commissioner, 76,

219Bernard v. United States, 412, 415, 440Bibby, C.O., 264Bickmeyer, Estate of, v. Commissioner,

426

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Bingham, Trust of, v. Commissioner,33–36, 38, 233, 460

Bingler v. Johnson, 361Bishop v. Commissioner, 29Black v. Lockhart, 442Blair v. Commissioner, 247–249, 252, 255,

258, 373Blair v. Linn, 248Blake’s Will, In re, 80Bliss, Helvering v., 83Bloomfield, Norris, 9Blumenthal, Helvering v., 310Bluestein, Estate of, 85Boeshore, Estate of, v. Commissioner,

361Bohan v. United States, 188–190Boise Cascade Corp. v. United States, 261Booth Trust, Tom R., 356Bosch, Estate of, Commissioner v., 190,

448Boston Elevated Railway Co., 167Bowen, Martin Raymond, 191Bowers, Corliss v., 11, 248, 250, 252, 255,

320–321Bowers v. Kerbaugh-Empire Co., 251Bowers v. Lumpkin, 49Bowers, Potter v., 86Bowers, Shanley v., 249Bowers v. Slocum, 76Bowers, Taft v., 117Boyce v. United States, 354Braden, Senior v., 249Braun v. Commissioner, 273, 315Breault, Estate of, In re, 386Brewster v. Gage, 232Bridges, Stinson v., 310Brigham v. United States, 150–152Brittain v. Commissioner, 376Brooke v. United States, 314Brown v. Commissioner, 49, 219Brown v. Fletcher, 249Brown, Sam S., 29Brown v. United States, 218, 328Brown, United States v., 269Brownstone v. United States, 85Bruchmann, Mildred, Estate of, 163–169,Bruner, Peter Anthony, Estate of, 191Bryan, Mary Z., Estate of, 219Bryant, Edith M., 220

Buck, Commissioner v., 268Buckmaster v. Commissioner 377Buckmaster v. United States, 190Buehner, Paul, 281Buelow v. Commissioner, 376Bunn, Willcuts v., 68Bunney v. Commissioner, 443Burk-Waggoner Oil Ass’n v. Hopkins, 22Burnet v. Coronado Oil & Gas Co., 165Burnet v. Guggenheim, 248, 252Burnet v. Harmel, 233Burnet v. Houston, 350, 389Burnet v. Leininger, 248, 250, 252, 254,

259Burnet, North American Oil Consoli-

dated v., 11, 189Burnet, Stearns v., 194Burnet v. Wells, 11, 248, 250–251Burnett v. Commissioner, 393Burrow Trust, Mary E., 36, 176Buttorff, United States v., 377Byrum, United States v., 272

Cahill v. Commissioner, 293Calvin v. United States, 126Cameron v. Commissioner, 158Campbell v. Campbell, 313Caratan v. Commissioner, 216Carol, Sue, 97Carr, Florence E., Estate of, 442Carson v. Commissioner, 219, 273Carson v. United States, 158, 440Carter, Estate of, v. Commissioner, 440Carter Trust, Mattie K. v. United States,

103–107Cartwright, Estate of, v. Commissioner,

442Casco Bank & Trust Co. v. United States,

205, 208, 340Central Hanover Bank & Trust Co., Chase

National Bank of City of New York v.,462

Chandler v. Commissioner, 155Chapman, Robert F., 165Chase National Bank of City of New York

v. Central Hanover Bank & Trust Co.,462

Chase National Bank v. Commissioner,262, 306

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Chastain, Thomas M., 465–470, 474Cheek v. Commissioner, 376Chemical Bank, Schaffner v., 205Cherry, Estate of, v. United States,

473–476Chick v. Commissioner, 191, 216, 219Citizens & Southern Nat. Bank, Commis-

sioner v., 86Claiborne v. United States, 427, 436Clark, Commissioner v., 44Clark Trust, William A., 7Cleary, Robert E., 174Clifford, Helvering v., 11, 251, 254–261,

271, 296, 304, 319, 321–322, 355, 373,447

Coe, Will of, In re, 213Cohen, Estate of, 29Cold Metal Process Co., 167Coleman v. Commissioner, 443Coleman-Gilbert Associates v. Commis-

sioner, 20Collins v. United States, 440, 453Comer, William L., Family Equity Trust v.

United States, 377Commercial Bank at Winter Park v.

United States, 356, 358Commissioner v. ____________. See tax-

payer’s name.Connecticut National Bank v. United

States, 192Cooke, United States v., 13, 17Coolidge v. Long, 120Cooper Industries, Inc. v. Aviall Services,

Inc., 44Corliss v. Bowers, 11, 248, 250, 252, 255,

320–321Corning, Warren H., 268, 302Coronado Oil & Gas Co., Burnet v.Correll, United States v., 361Coxey, Helvering v., 248, 310Craig, George L., 29Craig v. United States, 220Crane v. Commissioner, 263Crawford’s Will, In re, 80Crestar Bank v. Internal Revenue Service,

75Crisp v. United States, 131–139Crooks v. Harrelson, 18

Crown Cork International Corp. v. Com-missioner, 381, 383, 390

Crown, Rebecca K., Income CharitableFund v. Commissioner, 85, 204

Culbertson, Commissioner v., 246, 354Cummings v. United States, 158, 191, 340

Daniels, Wrenn v., 217Davidson v. United States, 156Davis, Arthur W., Estate of, 440Davis, Estate of v. United States, 399Davis, Kenneth W., Estate of, 308Davison, Estate of, v. United States,

391–397, 412, 415, 421, 425, 445, 473de Amodio v. Commissioner, 294–295Dean, Commissioner v., 161, 203Dean, Estate of, v. Commissioner, 198De Bonchamps, United States v., 10–18,

328DeBrabant v. Commissioner, 162, 170DeBrabant, Mary Clark, 165Deputy v. DuPont, 39Deutsch v. Commissioner, 151, 158DeVilbiss v. United States, 179di Borgo, Valerie Norrie Pozzo, 69Dick H. McKenzie Family Estate v. Com-

missioner, 377Dickinson, John L. Testamentary Trust,

356Diedrich v. Commissioner, 308Dixon v. Commissioner, 92Dixon v. United States, 457Dominion Nat. Bank, Hale v., 356Dominion Trust Company v. United

States, 196, 218–219Don Gastineau Equity Trust v. United

States, 377Donnan, Heiner v., 120Dorsey, Stephen H., 425, 456Douglas v. Willcuts, 248, 251, 310DuPont, Deputy v., 39Duffy v. United States, 295–299Dula, Robert A., Estate of, 165Dunbaugh v. Commissioner, 172Dupont v. Commissioner, 259duPont, Deputy, Administratrix v., 45duPont Testamentary Trust, Alfred I.,

37–40, 152–156

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duPont Testamentary Trust, Alfred I., v.Commissioner 340

Durbin Paper Stock Co. v. Commissioner,361

Durey, Meeker v., 39Dusek v. Commissioner, 92–94

Earl, Lucas v., 245–246, 248, 250, 252,254–255, 259, 272, 321, 372

Eaton, Suisman v., 231–232, 235, 237Edgar, Glenn E., 330–331Edwards, James E. Family Trust v. United

States, 377Edwards, James F., 122Edwards v. Slocum, 82Eisner v. Macomber, 110, 117Ellis, United States v., 395, 412, 415, 442Elm Street Realty Trust v. Commissioner,

26Emanuelson v. United States, 84England, Skellenger v., 18Enright, Estate of, Helvering v., 393, 404,

411Estate Preservation Services, United States

v., 377Eubank, Helvering v., 253–255Eustis v. Commissioner, 161Ewing, Sherman, 233

Fabens v. Commissioner, 70–73Faber v. United States, 260Falkoff v. Commissioner, 374Farkas v. Commissioner, 256Farmers’ Loan & Trust Co., Pollock v.,

117Farrier v. Commissioner, 216Fawcus Machine Co. v. United States, 91Fear v. Commissioner, 158Feldmeier v. Superior Court, 165, 167Fender v. Fender, 313Fender v. United States, 381, 389Fennerty Testamentary Trust, Mary E.,

181Ferguson v. Commissioner, 256Ferguson v. Forstman, 14, 168Fernandez v. Wiener, 118Fidelity Union Trust Co. v. Kelly, 356Field, Commissioner v., 249Field, United States v., 18

Findlay v. Commissioner, 440, 442, 470Fintzelberg, Luscomb v., 10First National Bank, Fojtik v., 106First National Bank of Mobile v. Com-

missioner, 85First National Bank of Richmond v. Hol-

land, 217First Trust & Savings Bank, Smietanka v.,

14, 17Fitch, Helvering v., 310Fitzpatrick, McHarg v., 349, 357Flacco v. Commissioner, 253, 265Fleenor v. Hensley, 271Fleming v. Commissioner, 90Fletcher, Brown v., 249Fletcher Trust Co. v. Commissioner, 304Fojtik v. First National Bank, 106Folckemer, United States v., 31, 156Forstman, Ferguson v., 14, 168Fort Worth National Bank v. United

States, 3564100 North High Limited, In re, 9Foster, L.B., 302Fox v. Commissioner, 372Frane, Estate of, v. Commissioner, 453Frank Trust, Cecilia K., 181Frank Trust, W. K. v. Commissioner, 75Frederich v. Commissioner, 218Freuler v. Helvering, 92, 162, 167, 173Freund, Estate of, v. Commissioner, 82Fuller, Mortimer B., Estate of, 39, 156Furman, Irvine K., 261, 354, 376Furstenberg v. Commissioner, 182

Gage, Brewster v., 232Garvey v. Commissioner, 264Gastineau, Don, Equity Trust v. United

States, 377Gavin, Estate of v. United States, 399Gavit, Irwin v., 109–111, 122, 199, 249,

256Geary, Mary DeF. Harrison, 168Geftman v. Commissioner, 158, 182General Investors Co. v. Commissioner,

14General Motors Corp., Hainline v., 439General Motors Corp., Parrish v., 439Genesee Merchants Bank & Trust Co. v.

United States, 84

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Getty v. Commissioner, 122Gildersleeve’s Estate, In re, 72Gilman, Charles, Estate of, 272Glenshaw Glass Company, Commissioner

v., 14Goff, In re, 9Goforth v. Commissioner, 14–15Goldsby v. Commissioner, 84Goodwyn, Hilton W., Estate of, 269–273Gordon, Helvering v., 322Gordon v. Keene, 310Gould v. Gould, 18Government of the Virgin Islands, Hop-

per v., 192Grace’s Estate,, 80Grace, Estate of, United States v., 299Graham v. Miller, 161Grant v. Commissioner, 174–175Gray v. United States, 4Gregory v. Helvering, 356, 381Grey v. Commissioner, 92Griffiths v. Commissioner, 355Grill v. United States, 412, 445, 456Grimm v. Commissioner, 29Grosvenor, Commissioner v., 260Guaranty Trust Co. of New York, 29Guggenheim, Burnet v., 248, 252

Hainline v. General Motors Corp., 439Hale v. Anglim, 166Hale v. Dominion Nat. Bank, 356Halliday v. United States, 430, 436, 439,

442Hamill, Estate of, In re, 382Hamilton, A. Magnano Co. v., 118Hansberry v. All, 440Hanson v. Commissioner, 376Hardy v. Mayhew, 18Hargis, J.F., Estate of, 219Harkness v. United States, 111–121, 208,

340Harmel, Burnet v., 233Harrelson, Crooks v., 18Harris v. United States, 194Harrison, James Max, Estate of, 162Harrison v. Northern Trust Co., 82Harrison, Sarah Helen, 306Harrison v. Schaffner, 254–256, 272, 321,

373

Hart v. Commissioner, 14Harte v. United States, 122Hartwick College v. United States, 77–84Harvard College v. Amory, 45Hassett, Jones v., 31Hassett, Saltonstall v., 172Hawaiian Trust Company v. Kanne, 12,

256Hawley, King v., 12, 15Hay v. United States, 87–92, 104, 181Hayward v. Hayward, 155Healy v. Commissioner, 189Hedges, Ralph E., 168, 219Heiner, Arrott v., 29Heiner v. Donnan, 120Heininger, Commissioner v., 34–36Heintz v. Commissioner, 293Held v. Commissioner, 393Helfrich’s Estate v. Commissioner, 350Helvering v. __________. See taxpayer’s

name.Henderson’s Estate v. Commissioner, 29Hensley, Fleenor v., 271Herbert, Charlotte Leviton, 220Herberts, Curtis A., 268Herbst, Cynthia K., 69Hess v. Commissioner, 440Hickman v. Commissioner, 383Higgins v. Commissioner, 68Higgins v. Smith, 382–383, 389Higginson, United States v., 162, 165, 170Hill v. Estate of Richards, 213Hill, Jr., Horace Greeley, 166–167Hillman v. Commissioner, 376Hirschman v. United States, 18Hoeper v. Tax Commission, 248Hoey, Lyeth v., 130Holdeen v. Commissioner, 279, 281Holland, First National Bank of Rich-

mond v., 217Holloway, Will of, In re, 212–214Holloway’s Estate, In re, 212–214Holman v. United States, 376Holt v. United States, 263, 454Hopkins, Burk-Waggoner Oil Ass’n v., 22Hopper v. Government of the Virgin

Islands, 192Hormel v. Helvering, 255–256, 431

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Horst, Helvering v., 11, 250–255, 272,373, 404

Horvat v. Commissioner, 370Horwitz’s Estate v. Commissioner, 442Houston, Burnet v., 350, 389Howard v. United States, 25Hudson County Water Co. v. McCarter,

110Hudspeth v. United States, 422Humphrey v. Commissioner, 296, 298Humphrey v. United States, 298Hunt Trust, Samuel P. v. United States, 76Huntington National Bank v. Commis-

sioner, 356

Igoe, Alma, 196Igoe, Andrew J., Estate of, 191, 196Igoe v. Commissioner, 194INDOPCO, Inc. v. Commissioner, 45Industrial Aggregate Co. v. United States,

49Interlochen Co. v. Commissioner, 350Internal Revenue Service, Crestar Bank v.,

75Interstate Transit Lines v. Commissioner,

45Investment Research Associates, Ltd. v.

Commissioner, 269, 274, 281Irish v. Commissioner, 12Irving Trust Co. v. United States, 82Irwin v. Gavit, 109–111, 122, 199, 249,

256Izrastzoff v. Commissioner, 157

James, United States v., 122, 157, 340Jamison, William H., 69Jenn v. United States, 308Jergens v. Commissioner, 12Johnson, Bingler v., 361Johnson v. Commissioner, 262, 308, 373Johnson v. United States, 454Johnson, Estate of, v. Commissioner,

193–195, 219Jones v. Hassett, 31Jones’ Will, In re, 80Jones v. Whittington, 28Joplin, In re, 9

Kanne, Hawaiian Trust Company v., 12,256

Kanter, Estate of v. Commissioner, 269,274, 281

Kaufmann v. United States, 67Keck, George W., 424Keck v. Commissioner, 416–419, 422,

424–425, 427, 429–430, 436, 439, 445Keefover v. Commissioner, 376Keene, Gordon v., 310Keitel, Estate of, v. Commissioner, 102Keith, David, 306Kelly, Fidelity Union Trust Co. v., 356Kenan v. Commissioner, 230–233, 235Kerbaugh-Empire Co., Bowers v., 251Khalaf v. Khalaf, 316Kincaid, Estate of, v. Commissioner,

469–472, 475King v. Hawley, 12, 15Kinsey v. Commissioner, 422Kirby, In re, 9Kirby Lumber Co., United States v., 232,

251Kitch v. Commissioner, 157, 229, 457Knetsch v. United States, 350Knight v. Commissioner, 40–46Koffman v. United States, 219, 328Kohtz Family Trust, 349Kooyers v. Commissioner, 377Kornhauser v. United States, 34–36Koshland v. Helvering, 361Krakowski v. Commissioner, 457Krall, United States v., 377Krause, Adolph K., 299Krause, Victor W., 302–307Kushner v. Commissioner, 274

Lacomble v. United States, 440LaFargue v. Commissioner, 288Laflin v. Commissioner, 92Laganas v. Commissioner, 268Lambert Tree Trust Estate, 93, 100Lamkin v. United States, 97–99Landsberger, United States v. 377Lane v. United States, 191Langford Investment Co. v. Commis-

sioner, 356Langley v. Commissioner, 260Latendresse v. Commissioner, 442

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Laughlin v. Commissioner, 372Laughlin’s Estate v. Commissioner, 157Legg, A.W., , 335Leighton v. Nash, 310Leininger, Burnet v., 248, 250, 252, 254,

259Lemle v. United States, 121, 123Letts v. Commissioner, 166, 175Levin v. Commissioner, 91Levin v. United States, 404, 412Levy, Lou, 168Lewis v. Commissioner, 49, 68Lewis, United States v., 189Lewis v. White, 260Linde, Commissioner v., 395–396, 412,

415, 421, 424–425, 430, 434Lindley v. United States, 181Linn, Blair v., 248Little, Estate of, v. Commissioner, 90Lockhart, Black v., 442Lonergan Trust, Thomas, 154, 202Long, Coolidge v., 120Looman v. Rockingham National Bank,

217Love Charitable Foundation, John Allan,

v. United States, 85Lowenstein, Estate of, 85Lowry, St. Marks Episcopal Church v., 91Loyd v. United States, 49, 51Lucas v. Earl, 245–246, 248, 250, 252,

254–255, 259, 272, 321, 372Luehrmann, Estate of, v. Commissioner,

83Luman v. Commissioner, 376Lumpkin, Bowers v., 49Lund v. Commissioner, 376Lundry v. Commissioner, 376Luscomb v. Fintzelberg, 10Lyeth v. Hoey, 130Lynchburg Trust & Savings Bank v. Com-

missioner, 181, 356

Machat, Estate of, 440MacManus v. Commissioner, 356Macomber, Eisner v., 110, 117Madorin v. Commissioner, 345Magnano Co., A., v. Hamilton, 118Mahler v. Commissioner, 122Mairs v. Reynolds, 314

Makransky, Commissioner v., 294, 300Makransky, Harry, 172Malat v. Riddell, 416Malcolm, United States v., 246Malcom, Thalia W., 165Malley, Woolley v., 28, 191Mallinckrodt, Edward, Jr., 69, 72Mallinckrodt v. Nunan 11–12, 304,

317–322Manufacturers Hanover Trust Co. v.

United States, 47–57, 61, 63, 69, 72,115, 176, 192, 200

Maresca Trust, Peter J., v. Commissioner,215–218

Maring v. Commissioner, 124Markle, Jr., George B., 331Markosian v. Commissioner, 376Marquis v. United States, 84Marx, Leonard, 221Mau v. United States, 281Mayhew, Hardy v., 18McCarter, Hudson County Water Co. v.,

110McCauley v. United States, 219McClung, Hu L., 84McCoy, Lawrence R., Estate of, 158, 340McDonald, Commissioner v., 68McDonald v. Commissioner, 35McDonald Trust, D.G., 306McGinley v. Commissioner, 356McGinnis v. Commissioner, 254, 264, 274McHarg v. Fitzpatrick, 349, 356McIlvaine, Commissioner v., 349McIlvaine, Helvering v., 356McKenzie v. Commissioner, 376McKenzie, Dick H., Family Estate v.

Commissioner, 377McRitchie, Lee, 8, 15McWilliams v. Commissioner, 387Meek v. Commissioner, 269, 384Meeker v. Durey, 7Meissner, George N., 69Mellon, William L., 181Mellon Bank, N.A. v. United States, 42,

44Mellott v. United States, 149, 331Mercer, Myrtle, 18Merchants’ Funds Ass’n, Appeal of, 136

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Merchants’ Loan & Trust Co. v. Patterson,249

Merriam, United States v., 18Merrill, United States v., 29Mesker v. United States, 327Metairie Cemetery Association, 156Middleton v. United States, 84Midland Mutual Life Insurance Co.,

Helvering v., 258Miller, A. T., 219Miller, Emerson R., 274Miller, Graham v., 161Miller Trust, Carl T., v. Commissioner, 29Miller Trust, Prudence, 4Miller v. Commissioner, 376, 388Miller v. United States, 440Minor v. Commissioner, 4Moline Properties v. Commissioner, 354Moody Trust, Robert L., 358Moore, Genevieve F., 302Moore v. Commissioner, 126Moreell v. United States, 40, 159Morgan, Annette S., Estate of, 306–307Morgan v. Commissioner, 130Morrill v. United States, 309–311, 315Morris Trusts, Estelle, 347–356, 359–360,

362Morrissey v. Commissioner, 14, 20–24Mott v. United States, 154, 198–204, 340Muhich v. Commissioner, 376Muller v. United States, 453Musser’s Estate, In re, 45Myers v. Commissioner, 172Myra, John E., Estate of, 76

Napolitano, Estate of, v. Commissioner,428

Nash, Leighton v., 310Nat Harrison Associates, Inc., 467National City Bank, United States v., 19Neave, Charles F., 222Neely v. United States, 376Nemser, Alan, 221–223Netcher, Commissioner v., 89–90, 94Neuman, Simon S., 219Newburgh v. Arrigo, 315Newbury v. United States, 90, 92, 94New Colonial Ice Co. v. Helvering, 124,

126

New York Trust Co., Helvering v., 471Nichols v. United States, 393Nilssen, Estate of, v. United States, 422,

440Nissen, Estate of, 98, 100Nissen, In re, 98North American Oil Consolidated v. Bur-

net, 11, 189Northern Pac. Ry. Co. v. United States,

389Northern Trust Co., Harrison v., 82Northampton Nat’l Bank, Bartholomew

v., 284Nunan, Mallinckrodt v., 11–12, 304,

317–322

Oakes, Alden B., 354O’Bryan v. Commissioner, 125–127,

224–229O’Connor, Estate of, 335–344O’Connor, Estate of, v. Commissioner, 8,

70, 85, 192, 204O’Daniel’s Estate v. Commissioner, 395,

412, 415, 422, 424, 440O’Donnell v. Commissioner, 378Old Colony Trust Co. v. Commissioner,

75, 85, 248, 250–251Old Virginia Brick Co. v. Commissioner,

216–217O’Neil, Estate of, In re, 195O’Neill, William J., Jr., Irrevocable Trust

v. Commissioner, 42Owens, Commissioner v., 14, 168

Pardee, Marvin L., Estate of, 350Parker v. Commissioner, 268Parrish v. General Motors Corp., 439Partington v. Attorney-General, 18Patsey v. United States, 281Patterson, Merchants’ Loan & Trust Co. v.Patton v. United States, 219Paxton, Estate of, v. Commissioner, 262Paxton, Floyd G., 262Pearson, Commissioner v., 172Penn Mutual Life Insurance Co., Willcox

v., 246Perry v. United States, 396Peterson, Edwin M., , 219

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Peterson, Estate of, v. Commissioner,428–434, 436, 438

Petschek, Estate of, v. Commissioner, 173Pfaff v. Commissioner, 404Pfluger v. Commissioner, 378Pickard v. Commissioner, 338Pierce Estates, Inc. v. Commissioner, 217Plant, Commissioner v., 39, 155Plant, H.B., 159Plunkett v. Commissioner, 171Poe v. Seaborn, 246, 248Pollock v. Farmers’ Loan & Trust Co., 117Polt v. Commissioner, 165, 170Poorbaugh v. United States, 457Potter v. Bowers, 86Pozzo di Borgo, Valerie Norrie, 69Prather, Adams v., 10Preston v. Commissioner, 376Proctor v. White, 192Pullen v. United States, 204

Quick’s Trust v. Commissioner, 442

Ramos v. Commissioner, 51Rand Trust, Frank C., 356, 358Ratfield, United States v., 377Redding v. Commissioner, 374Reid, Daniel G., Estate of, 157Reynolds, Mairs v., 314Richards, Estate of, Hill v., 213Richardson v. Commissioner, 12Richardson v. United States, 9, 399Riddell, Malat v., 416Riegelman v. Commissioner, 395, 412,

415, 442Riggs National Bank v. United States, 204Rixey’s Ex’rs v. Commonwealth, 218Robbins, United States v., 246Roberts v. Commissioner, 289Robinson v. United States, 19Rockingham National Bank, Looman v.,

217Rockland Oil Co., 76Roe, Mabel C., 405Rollert Residuary Trust, Edward D., v.

Commissioner, 198, 419, 434–440Rolston’s Estate, In re, 462Rosenthal v. Rosenthal, 316

Ross, Trust Co. of Georgia v., 407–416,418, 421, 423–424, 426, 429, 434, 436,445

Roth, Matter of, 460Rothstein v. United States, 282–290, 345Routzahn, Aluminum Castings Co. v.,

251Rubin v. Commissioner, 372Rudkin Testamentary Trust v. Commis-

sioner, 41Ruoff v. Commissioner, 49Rusoff, Irving I., 332Russell, Stella Porter, 219

Safety Tube Corp. v. Commissioner, 49St. Joe Paper Co., United States v., 49St. Marks Episcopal Church v. Lowry, 91Sakovits v. Sakovits, 316Saltonstall, Commissioner v., 90Saltonstall v. Hassett, 172Samoset Associates, In re, 9Sampson v. Commissioner, 376Samuel v. Commissioner, 295San Diego Trust & Savings Bank v. United

States, 356, 359Sargent, Agness, v. United States, 149Saunders v. Saunders, 310Schaefer v. Commissioner, 130, 158Schaefer, Matter of Trust, Estate of, 130Schaffner v. Chemical Bank, 205Schaffner, Harrison v., 254–256, 272, 321,

373Schall v. United States, 359Scheft, William, 332Scheft v. Commissioner, 127Schilder v. United States, 9Schimberg v. United States, 173Schlesinger v. Wisconsin, 120Schmidt Liberty Irrevocable Trust v.

United States, 377Schulz v. Commissioner, 370–376Schwan v. United States, 31, 37, 157Schweitzer, Helvering v., 248, 310Scott v. United States, 42Scully v. United States, 384–390Seaborn, Poe v., 246, 248Security-First National Bank v. United

States, 19Seligson v. Commissioner, 159–161

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Sence v. United States, 354Senior v. Braden, 249Shanley v. Bowers, 249Shea v. Commissioner, 15Sheaffer, Craig R., Estate of, 305–306Sid W. Richardson Foundation v. United

StatesSidles, Harry B., Estate of, 419–425, 430,

433, 445, 471Skellenger v. England, 18Sletteland, Greggar P., 30, 223, 340, 459Slocum, Bowers v., 76Slocum, Edwards v., 82Smietanka v. First Trust & Savings Bank,

14, 17Smith, Fred W., 350Smith, Higgins v., 382–383, 389Smith, United States v., 377Smith v. United States, 12Smith v. Westover, 119Smith’s Estate v. Commissioner 28, 166,

191Smither v. United States, 12, 18Smither, United States v., 12Smythe, Estate of, 11Snively v. Commissioner, 381SoRelle v. Commissioner, 396South Texas Lumber Co., Commissioner

v., 91, 202, 340, 361Spero, Trust of, v. Commissioner, 51Spies v. United States, 12Springer v. United States, 335Staley, Sr., Estate of, A.E., 305Stanley v. Commissioner, 453State Savings Loan & Trust Co. v. Com-

missioner, 349, 356Stearns v. Burnet, 194Stearns, Commissioner v., 190, 194Steck, In re, 9Steingold v. Commissioner, 172Stephenson Trust, Edward L., v. Commis-

sioner, 359–368Sternberger, Estate of, Commissioner v.,

82–83Stevens, Estate of, v. Commissioner, 4Stevens v. Commissioner, 60Stewart v. Commissioner, 219Stinson v. Bridges, 310Stokes, Helvering v., 248, 310

Stone v. Commissioner, 316Straight Trust, M.T., v. Commissioner,

356Street, Estate of, v. Commissioner, 102Stuart, Helvering v., 310, 322Studebaker, George M., 331Stussy v. Commissioner, 332Suisman v. Eaton, 231–232, 235, 237Sun First National Bank v. United States,

345, 443–452, 473Superior Court, Feldmeier v., 165, 167Swanson v. Commissioner, 342–343Swanson, W. Clark, Jr., 1950 Trust,

267–268Swayze v. Commissioner, 376Swoboda v. United States, 221

Taft v. Bowers, 117Tax Commission, Hoeper v., 248Taylor, Williams v., 42Temple v. Commissioner, 247Terriberry v. United States, 343Thompson Estate, 382Thompson, Estate of, v. Commissioner,

82Thompson v. Commissioner, 262Thompson v. United States, 265, 274Tibbits, William B.J., 317Totten, In re, 293Tower, Commissioner v., 354–355Transport Mfg. & Equipment Co. of

Delaware v. Commissioner, 381Treat v. White, 18Trust Co. of Georgia v. Ross, 407–416, 418,

421, 423–424, 426, 429, 434, 436, 445Trust No. 3 v. Commissioner, 327Tucker v. Commissioner, 60–63, 72, 129,

210Tucker, Marcia Brady, 176Turner, Richard H., 306Ungar, George, 350Union Trust Co. of Butler v. Commis-

sioner, 356United California Bank v. United States,

473United States Trust Co. v. Commissioner,

348, 356United States Trust Co. v. Internal Rev-

enue Service, 204

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United States v. __________. See tax-payer’s name.

Upton v. Commissioner, 89–90, 92, 94

Van Buren v. Commissioner, 129, 205–211Vercio v. Commissioner, 376Virgin Islands, Government of the, Hop-

per v., 192Vnuk v. Commissioner, 373, 376Vogel Fertilizer Co., United States v., 361Vreeland, George W., 331

Walet, Eugene H., Jr., 39Walker, John, Trust of, 85Wanamaker, John, Trustees Common

Stock, Commissioner v., 155Wanamaker Trust, Rodman, 155Washington, State of, v. Commissioner,

361Water Resource Control v. Commissioner,

25, 263Weber v. Commissioner, 29Weil, Elsie, Estate of, 69Weil, Joseph, 302Weil v. United States, 13–14, 19Weir Foundation, Ernest and Mary Hay-

ward, v. United States, 85, 338Welch, Abbot v., 29Welch v. Helvering, 160Welch, Wellman v., 76Wellman v. Welch, 76Wells, Burnet v., 11, 248, 250–251Wenz v. Commissioner, 376Wesenberg v. Commissioner, 277, 373,

376West v. United States, 18Westover, Smith v., 119Westphal, Mary C., 229Westvaco Corp. v. United States, 389White, Lewis v., 260White, Proctor v., 192White, Treat v., 18Whitehead, J.B., Estate of, 86Whitehouse v. Commissioner, 25, 263Whitfield v. Commissioner, 191Whittemore v. United States, 64–69, 73Whittington, Jones v., 28Wichita Terminal Elevator Co., 125Wickwire v. United States, 382

Widener v. Commissioner, 388, 390Widener Trust, Joseph E., v. Commissioner,

378–383Wiener, Fernandez v., 118Wiles, Jack, 308Willcox v. Penn Mutual Life Insurance

Co., 246Willcuts v. Bunn, 68Willcuts, Douglas v., 248, 251, 310Williams v. Taylor, 42Williams v. United States, 9, 85Wilshire Oil Co., Helvering v., 92Wilson, Anderson v., 29Winmill, Helvering v., 366Wisconsin, Schlesinger v., 120W.K. Frank Trust v. CommissionerWood, Helvering v., 259Woodhall v. Commissioner, 442Woodward, Bessie A., Estate of, 29Woolley v. Malley, 28, 191Wrenn v. Daniels, 217Wright v. Commissioner, 442Wright, Estate of, v. United States, 82, 84Wyche v. United States, 311–315Wylie v. United States, 219Wyly v. Commissioner, 383Wysong v. Commissioner, 274

Yetter, Orville A., Estate of, 101–102

Zand v. Commissioner, 291Zmuda v. Commissioner, 376

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xxxv

54-143: 400–40155-2: 25355-34: 26555-38: 25655-92: 8555-117: 23355-229: 44155–278: 400-40155-356: 40155-410: 30855-463: 45655-469: 455-655: 40355-726: 2956-222: 381, 38356-270: 238-24056-449: 10256-484: 4, 31356-496: 39656-601: 26557-8: 29357-31: 223–22457-133: 29, 7657-214: 196–197, 34457-363: 29857-390: 33257-544: 454–456, 46557-554: 39557-564: 30758-19: 26358-65: 458-69: 45858-190: 758-242: 300–30158-337: 253–25458-435: 399–40258-436: 397, 399

58-567: 26559-15: 8459-30: 759-32: 10359-64: 44159-99: 2059-162: 44259-346: 17359-357: 459-375: 2960-68: 44760-87: 238–24060-227: 395, 422, 454–45660-370: 256, 33261-20: 148–14961-86: 3261-102: 1961-211: 10061-223: 26462-147: 162, 168, 17062-148: 292–29363-27: 72–7364-62: 17564-101: 15864-104: 403–40464-240: 30864-253: 7664-289: 397–39964-308: 40564-314: 158, 24165-217: 44066-160: 23666-161: 293, 30166-170: 26366-207: 235–23766-259: 7566-278: 100

Table of Revenue Rulings

Revenue Rulings that have been reproduced are in italics.

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66-313: 30166-348: 45666-367: 7667-70: 33567-74: 23467-117: 179–18067-167: 33567-241: 322–323, 32567-242: 462–465, 468, 470–47267-268: 32767-304: 103, 15768-47: 3–468-48: 9, 15468-49: 197–19868-145: 40468-195: 198, 44268-392: 140–142, 144–145, 14768-440: 7668-506: 45368-666: 2968-667: 75, 202, 20469-70: 32969-300: 969-402: 46269-432: 24169-450: 34469-486: 242–24370-361: 10270-467: 40470-567: 971-50: 38171-119: 871-167: 28, 15871-180: 22071-285: 7571-335: 189–19071-422: 459, 46171-423: 459, 46171-507: 44272-295: 23672-387: 972-396: 19073-94: 973-95: 7673-251: 26573-322: 31, 15673-327: 44073-366: 8073-397: 220

73-565: 63–6473-584: 34474-94: 31774-175: 45974-178: 3074-257: 175–17674-299: 182–18474-410: 7674-530: 10074-613: 334, 344, 44875-61: 5, 2975-68: 16275-79: 44175-124: 15875-257: 175–176, 37675-258: 37675-267: 30175-278: 33375-307: 33376-23: 21976-100: 334, 448, 45376-486: 5–776-498: 345, 459–46276-530: 33477-260: 877-355: 62–6477-402: 345, 44877-439: 38177-466: 7378-24: 75, 18178-32: 426–42778-203: 47678-292: 45779-84: 44879-223: 274, 301, 33279-335: 40679-340: 40480-165: 6481-6: 326–32781-98: 253, 33581-287: 10282-1: 42782-4: 236–23882-95: 30882-196: 44183-25: 26883-75: 234, 30884-14: 29985-13: 291, 345

xxxvi TABLE OF REVENUE RULINGS

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TABLE OF REVENUE RULINGS xxxvii

85-116: 169–17186-32: 26586-72: 45386-82: 28186-105: 236, 24187-61: 34487-97: 15690-82: 94–9790-55: 332–33395-71: 4042003-123: 75, 2042004-5: 852005-30: 405–4072006-19: 3782007-13: 343, 3452007-48: 184

Table of Revenue Procedures

2008-3: 86, 219

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Table of Private Letter Rulings

Private letter rulings that have been reproduced are in italics.

7737025: 3837809057: 2058341005: 1588429005: 145-1488501011: 211-2148506005: 1928545076: 323-3248728001: 142-145, 1488738007: 175, 2048810006: 86, 192, 2049023012: 4279031022: 1079043068: 4579147022: 1969326043: 4569535026: 2919547004: 269549023: 4569552039: 2699625020: 2439811036: 1429811037: 1429831005: 2699840025: 86200004030: 198200142011: 86200222035: 324-326200226031: 219200228019: 343200316008: 465, 473200334030: 243200618003: 184-186200636086: 343200733023: 107200744001: 428

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xli

Preface

This book began as a set of course materials prepared by Professor Ascher when he firstwent into teaching in 1982. Now in its third edition, the book has a new co-author, alongwith new cases, problems, and other materials; the essential approach of the book, however,remains the same. Over the years the book has profited from comments and criticisms ofnumerous classes taught by the authors at the University of Arizona, the University of Miami,the University of Missouri, New York University, the University of Texas, and Washingtonand Lee University, as well as from the suggestions of our faculty colleagues at other schools.To all those who have contributed to the success of this book, we extend our warmest thanks.

But publication of this book is not solely for the relatively few instructors who presentlyteach classes on subchapter J. The earth-shattering changes in the federal wealth transfer taxes(particularly with respect to the unified credit) that began with the Tax Reform Act of 1976and blossomed in the Economic Recovery Tax Act of 1981 have as a central feature a con-gressional intention to make those taxes applicable to fewer and fewer taxpayers. Twenty yearslater the Economic Growth and Tax Relief Reconciliation Act of 2001 implemented a phased-in increase of the estate tax exclusion to $3,500,000, followed by a repeal of the tax with re-spect to estates of decedents dying after December 31, 2009 (although, under EGTRRA,the tax is reinstated as of January 1, 2011). As of the date of publication of this edition,permanent repeal of the estate tax seems unlikely; more likely is a permanent increase ofthe exclusion to $3,500,000 or more. But whatever action Congress ultimately takes, it isapparent that the estate tax will continue to apply to a decreasing number of estates.

Yet the federal income tax rolls merrily along. We all know that the income tax appliesto trusts and estates. Still, almost all of us — even the I.R.S. — have frequently underes-timated the importance of income tax considerations in both our practices and our teach-ing. Section 1(e) of the Code subjects trusts and estates to an onerously compressed rateschedule; one therefore ignores at one’s peril such topics as the distribution deductionand the grantor trust rules — mechanisms designed to shift tax liability from an estate ortrust to individuals, who are typically taxed at lower rates. Teachers in the wealth trans-fer area thus face a challenge. They can continue to focus exclusively on the decreasinglyrelevant taxes on gratuitous transfers, or they broaden their teaching packages to includethe subjects of this course.

This course is not easy to teach. However, we really do believe that this book takes stu-dent and teacher alike firmly enough in hand that any teacher reasonably well-groundedin the basics of federal income taxation can successfully survive a first run through the course.A teacher’s manual is available from the publisher. For those who wish to do additionalreading, we recommend the following:

B. Abbin, Income Taxation of Fiduciaries and Beneficiaries (2007).

J. Blattmachr, A. Michaelson & L. Boyle, Income Taxation of Estates and Trusts (15thed. 2007).

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xlii PREFACExlii PREFACE

M. Ferguson, J. Freeland & M. Ascher, Federal Income Taxation of Estates, Trusts, andBeneficiaries (3d ed. 1998, supplemented annually).

H. Zaritsky, N. Lane & R. Danforth, Federal Income Taxation of Estates and Trusts (3ded. 2001, supplemented semi-annually).

J. Peschel & E. Spurgeon, Federal Taxation of Trusts, Grantors and Beneficiaries (3d ed.1997, supplemented annually).

We also recommend an article that nicely attempts to summarize subchapter J: Sherman,All You Really Need to Know About Subchapter J You Learned from This Article, 63 Mo. L.Rev. 1 (1998).

Unless otherwise indicated, all section references are to the Internal Revenue Code. Ina deliberate effort to force students to deal directly with the Code, we have deleted fromthe reproduced materials almost all quotations of Code provisions. Students must, there-fore, possess and be willing frequently to refer to a current version of the Code. Referencesto obsolete Code provisions are, unfortunately, unavoidable, but we have tried hard to iden-tify such references for the reader. We have tried to indicate all omissions, except footnotes,in reproduced materials. The remaining footnotes retain their original numbering. TheUniform Principal and Income Act (1997), our standard authority for questions of statelaw, appears as an appendix.

Mark L. AscherAustin, Texas

Robert T. DanforthLexington, Virginia

May 2008

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Introduction

This book examines federal income taxation of trusts and estates. It does not deal withfederal estate and gift taxation. The federal estate and gift taxes are excise taxes on thetransfer of property at death or by gift. They are imposed by chapter 11 (sections 2001to 2210) and chapter 12 (sections 2501 to 2524) of subtitle B (“Estate and Gift Taxes”) ofthe Internal Revenue Code. The estate and gift taxes have little to do with how the in-come of trusts and estates is taxed. They are taxes on gratuitous transfers of property,not on income generated by that property.

Trusts and estates pay income taxes much as the rest of us do. Each year we add up whatwe take in, subtract out various exclusions and deductions, and pay a percentage of theremainder to the federal government. The basic system for taxing the income of trusts andestates is the same as that for taxing the income of individuals. Section 641(b) makes thisvery clear: “The taxable income of an estate or trust shall be computed in the same man-ner as in the case of an individual, except as otherwise provided in this part.” Thus, every-thing the student (may have) learned in the basic course on individual income taxation,which generally deals almost exclusively with chapter 1 (sections 1 to 1400T) of subtitleA (“Income Taxes”) of the Internal Revenue Code, is potentially relevant.

This book is not, however, a review of the basic course on individual income taxation(although it is possible to view chapter 2 that way). More than anything else, it is an ex-amination of the ways in which the income taxation of trusts and estates differs from thatof individuals. Section 641(b) acknowledges these differences when it refers to “this part.”That reference is to part I (“Estates, Trusts, and Beneficiaries”), which consists of sec-tions 641 to 685. Part I, along with the two sections (691 and 692) of part II (“Incomein Respect of Decedents”), make up subchapter J (“Estates, Trusts, Beneficiaries, andDecedents”). Thus, subchapter J is the primary focus of this book. Like it or not, an al-ternative title for the book would have been “Subchapter J of Chapter 1 of Subtitle A ofthe Internal Revenue Code.”

Individuals bear the full tax consequences of their income. Thus, they are pure taxpayers.Partnerships and S corporations, on the other hand, generally pay no taxes on their in-come; the Code shifts their income to the partners or shareholders for taxation. Part-nerships and S corporations, then, are pure conduits. Subchapter J blends these two,distinct modes of taxation into a unique system for taxing the income of trusts and es-tates. Such entities are, simultaneously, both taxpayers and conduits. They are taxpayersinsofar as section 641(b) treats them as individuals. But part I of subchapter J allowstrusts and estates a deduction for distributions to beneficiaries. This is the mechanismby which such entities also serve as conduits.

There is another major wrinkle. Subchapter J directs that some trusts, because of in-terests or powers retained by their grantors, are not treated as taxpayers at all. Their itemsof income, deductions, and credit are attributed directly to their grantors. These trustsare commonly referred to as “grantor trusts.”

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This book very deliberately follows the organization of subchapter J. Thus, one, fairlyaccurate, way of visualizing the book is:

Chapter 1 Section 641(a)Chapter 2 Sections 641(b), 642Chapter 3 Sections 643, 651–663Chapter 4 Sections 671–678Chapter 6 Section 691

Strong pedagogical and thematic concerns are, however, also present in the book’s orga-nization. Chapter 1 asks the logically first question, “Which entities are subject to incometaxation under subchapter J?” Chapter 2 examines the entity as taxpayer, i.e., how the fa-miliar principles of basic income taxation apply to entities. Chapter 3 then examines theentity as conduit, i.e., how the distribution deduction works to shift some of the incometaxation of entities to their beneficiaries. Chapter 4 inquires into when the entity is to beignored, either under assignment-of-income principles or the grantor trust rules. Chap-ter 5 provides the student with an opportunity to reconsider the complete picture in thecontext of manipulative and, arguably, abusive use of entities. Chapter 6, which dealswith income and deductions in respect of decedents, mars the organization of the book,just as it does that of subchapter J, but contains obviously important material that fitsbetter in this course than in any other.

The provisions of subchapter J are the core of this book. Its overwhelming first priorityis understanding of those provisions and how they work. Likely criticisms are the book’sdetail and attention to mechanics. But, clearly, such is stuff tax lawyers are made of. Thosewho wish to pursue tax policy more thoroughly than the book at first seems to must startsomewhere. This book can be that springboard. Even the most unabashed would-be tech-nical expert ought to be willing to pause over the concept of “distributable net income”after reading Irwin v. Gavit alongside Harkness (ch. 3, sec. A). Three series of cases, farlonger than the would-be technical expert needs, are not included just to acquaint stu-dents with the anguish of the common law or even with the interaction of judicial andlegislative lawmaking. These series are included primarily to force the student to ask tough“why” questions. (In tax law “why” questions are especially tough for many students (andteachers) to ask because they often have only “because” for an answer.) The Manufactur-ers Hanover Trust Co.-Tucker-Whittemore-Fabens series (ch.2, sec. B(3)(b)) ought to stim-ulate questions about why entities are not taxed exactly as individuals are. It also oughtto focus attention on why distributable net income occupies the role it does in subchap-ter J. The Trust Company of Georgia-Keck-Sidles-Peterson series (ch. 6, sec. A(2)) shouldforce analysis of whether there is a need for a concept similar to “income in respect of adecedent” and whether the current concept either fills that need or is worth the candle.Moreover, it should prompt students to question the soundness of section 1014. EstelleMorris and Stephenson (ch. 5, sec. A) have survived the Tax Reform Act of 1984 not onlyto illustrate the potential operation and flaws of section 643(f), but also to necessitateanalysis of whether there remains a need for section 643(f) after the Tax Reform Act of1986. Most importantly, however, Estelle Morris and Stephenson should force each studentto ask the central policy question of a course on the income taxation of trusts and es-tates: Should trusts and estates have separate income tax existences?

We offer the following suggestions for coming to terms with these challenging mate-rials:

1. Your starting point should always be the words of the Internal Revenue Code.

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2. Use the Treasury Regulations as your primary tool for understanding the Code.3. Use the cases, the rulings, the Illustrative Material, and the problems strictly as

tools to understand the Code and regulations.4. Ask whether the regulations, cases, etc. fairly and accurately interpret the Code.5. Ask whether the Code makes sense and, if not, whether there is a better alternative.

INTRODUCTION xlvINTRODUCTION xlv

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