## Facts

- In 1932, Frederic E. Camp created an inter vivos trust before enactment of the federal gift tax.
- Camp’s wife, Alida, was the lifetime income beneficiary; remainder interests were set for Camp’s descendants and, if none, other specified beneficiaries.
- Camp retained a power to alter, amend, or revoke the trust, initially exercisable only jointly with his mother or half-brother.
- In 1937, Camp and his half-brother amended the trust so that any future amendment or revocation required joint action by Camp and his wife; the corpus was then about $520,000, and the wife’s life estate about $360,000.
- In 1946, Camp and his wife amended the trust to make it irrevocable, eliminating all remaining powers to alter or revoke.
- The Commissioner determined that a taxable, completed gift occurred in 1937, producing a gift tax deficiency for 1937 and, due to cumulative gift computations, a related deficiency for 1943.
- The Tax Court agreed, finding no completed gift in 1932 and a completed gift of the entire corpus in 1937.

## Issues

1. Whether the 1932 trust transfer was a completed gift before the gift tax became effective, given the donor’s retained power to alter, amend, or revoke jointly with another person.
2. If the gift was not complete in 1932, whether the 1937 amendment completed a gift of the entire trust corpus or only the wife’s life income interest, with other interests completing later when the trust became irrevocable.

## Decision

- The court of appeals vacated the Tax Court’s decision and remanded for further proceedings.
- The court rejected the taxpayer’s claim that a completed gift of the entire corpus occurred in 1932.
- The court also rejected the Tax Court’s conclusion that the entire corpus became a completed gift in 1937.
- The court held that, at most, the wife’s life income interest became a completed gift in 1937 because revocation thereafter required consent of a person with a substantial adverse interest.
- The court indicated the remaining interests were not completed until 1946, when all powers to alter, amend, or revoke were surrendered and the trust became irrevocable.

## Legal Principles

- A transfer in trust is not a completed gift for gift-tax purposes while the donor retains a power to revest the property in himself.
- A retained power exercisable jointly with a person lacking a substantial adverse interest is treated as effectively retained by the donor and prevents completion of the gift.
- When a retained power can be exercised only with a person who has a substantial adverse interest (such as a life income beneficiary whose interest would be destroyed by revocation), the gift of that adverse party’s interest may be complete even if other interests are not.
- In a trust with multiple beneficial interests (life estate, remainders, contingencies), different interests may become completed gifts at different times depending on when each is placed beyond the donor’s power to recall.

## Conclusion

The First Circuit held that the 1937 amendment completed only a taxable gift of the wife’s life income interest because her consent was required to revoke and she had a substantial adverse interest; the remainder and contingent interests were not completed until 1946 when the trust became irrevocable, requiring recalculation of the asserted gift-tax deficiencies.


Camp v. Commissioner, 195 F.2d 999 (1st Cir. 1952)