## Facts

- In 1917, Murry Guggenheim created two New Jersey trusts for his son and daughter, each to run for ten years.
- Trust income was partly distributed to the beneficiary and partly accumulated; at the ten-year end, principal and accumulated income were to pass to the beneficiary (or specified alternates if the beneficiary died).
- Guggenheim initially retained broad control over the trust property, including an unrestricted power to modify, alter, or revoke the trusts (except as to income already received or accrued).
- In 1921, Guggenheim transferred investment and administrative powers to others, but retained the revocation power.
- The Revenue Act of 1924 imposed a federal gift tax on transfers by gift made directly or indirectly.
- In 1925, Guggenheim executed amendments eliminating and surrendering his power to modify, alter, or revoke.
- At the time of the 1925 surrender, the trust corpus was valued at nearly $13 million; the Commissioner assessed a gift tax of $2,465,681 (subject to a minor computational correction).
- A 1924 Treasury regulation stated that creating a trust while retaining a power to revest title in the corpus does not constitute a gift.

## Issues

1. Whether a transfer in trust with a retained unrestricted power of revocation constitutes a taxable “transfer by gift” under the Revenue Act of 1924 while the power exists.
2. Whether surrendering the reserved power of revocation in 1925 is the taxable event that completes the gift and triggers gift tax liability.

## Decision

- The Supreme Court reversed the Second Circuit and sustained gift tax liability based on the 1925 surrender of the revocation power.
- A revocable trust is not a completed gift for gift-tax purposes while the settlor retains an unrestricted power to revoke.
- The taxable transfer occurred in 1925, when Guggenheim relinquished the revocation power and the beneficiaries’ interests became beyond recall.

## Legal Principles

- A “transfer by gift” for federal gift-tax purposes requires a completed gift; a gift is not consummated until it is put beyond recall.
- Retention of an unrestricted power to revoke prevents completion of a gift because the settlor can reclaim the property and the economic benefits have not definitively shifted.
- For transfer taxes, the relevant inquiry emphasizes changes in economic benefits rather than technical shifts in title alone.
- Statutory interpretation of taxing provisions considers administrability and consistent treatment across taxpayers; ambiguity is not resolved mechanically but with attention to consequences.
- Contemporaneous administrative interpretation may be considered where consistent with the statute; a retained power to revest title supports treating the transfer as incomplete until the power is surrendered.

## Conclusion

The Court held that Guggenheim’s 1917 trusts were not taxable gifts while he retained an unrestricted power of revocation, and that the gift tax attached in 1925 when he surrendered that power, completing the transfers by making them irrevocable.


Burnet v. Guggenheim, 288 U.S. 280 (1933)