## Facts

- Hugh M. Beugler created two inter vivos trusts naming Irving Trust Company as trustee, including a trust executed in 1927 that became effective in 1928 after specified divorce-related conditions were satisfied.
- Under the first trust, the trustee paid Beugler’s former wife $150 per month from income for life; remaining income was payable to Beugler during his life.
- On Beugler’s death, the trustee was to set aside enough principal to produce the former wife’s monthly payment; surplus income was payable to Beugler’s issue per stirpes.
- After the former wife’s interest, the trust principal was to pass at Beugler’s death to his issue per stirpes, or, failing issue, to those who would take under New York intestacy rules.
- Beugler reserved no express power to revoke, amend, or reclaim trust corpus.
- The trustee held an absolute discretionary power to distribute principal to Beugler during his lifetime, but no principal was ever paid to him.
- After Beugler died in 1939, the Commissioner determined that the corpora of both trusts were includible in Beugler’s gross estate under former I.R.C. § 811(c).
- The Tax Court held the trust property was not includible; the Commissioner sought review.

## Issues

1. Whether trust corpus is includible in a decedent’s gross estate under former I.R.C. § 811(c) as a transfer intended to take effect in possession or enjoyment at or after death when the decedent retained no legally enforceable right to corpus.
2. Whether a trustee’s absolute discretionary power to invade principal for the settlor constitutes a retained reversionary interest or “string” sufficient for estate tax inclusion.

## Decision

- The Second Circuit affirmed the Tax Court.
- The court held the corpora of the two inter vivos trusts were not includible in Beugler’s gross estate under § 811(c).
- The court distinguished Supreme Court “string” cases involving true reversionary interests, reasoning that Beugler held no legally enforceable right of enjoyment or possession in the principal.

## Legal Principles

- For estate tax inclusion under former I.R.C. § 811(c), the decedent must retain a legally enforceable right or interest causing possession or enjoyment to depend on death; a mere possibility of benefit dependent on another’s discretion is insufficient.
- A trustee’s unfettered discretion to distribute principal to the settlor, without any power in the settlor to compel distributions, does not create a taxable reversionary interest in the settlor.
- Completed inter vivos transfers lacking a retained power to revoke, amend, or reclaim corpus are not treated as testamentary substitutes solely because enjoyment by others shifts at the settlor’s death under fixed trust terms.

## Conclusion

The Second Circuit rejected estate tax inclusion where the settlor retained no enforceable control over trust principal and could benefit only if an independent trustee chose, in absolute discretion, to invade corpus for him; such discretionary authority in the trustee did not amount to a retained interest within former I.R.C. § 811(c).


Comm’r v. Irving Tr. Co., 147 F.2d 946 (2d Cir. 1945)