## Facts

- Jack F. Chrysler, a New York resident, died November 7, 1958; his executors filed a federal estate tax return.
- The Commissioner asserted an estate tax deficiency, largely by including various lifetime transfers in the gross estate; stipulations narrowed the dispute to three inclusion questions.
- Chrysler had created two irrevocable trusts (one for each child), funded with $115,000 each; three trustees (not including Chrysler) were directed to pay net income to the child, and during minority to apply income for the child’s maintenance, education, and support.
- By Chrysler’s death, the trusts had increased in value and were listed as Items 2 and 3 in the deficiency determination.
- The estate contended the trusts were completed transfers: Chrysler retained no right to income, no beneficial interest, and no power to alter, amend, or revoke.
- The Commissioner argued that trust income could discharge Chrysler’s child-support obligations and thus reflected retained “enjoyment” or a right to designate enjoyment under I.R.C. § 2036(a).
- Separate disputed transfers (Items 7 and 8) involved (i) jointly held property and (ii) arrangements in which Chrysler allegedly retained interests or powers affecting beneficial enjoyment.

## Issues

1. Whether the values of the two irrevocable children’s trusts (Items 2 and 3) were includible in the gross estate under I.R.C. § 2036(a) as transfers with retained possession/enjoyment, a right to income, or a right to designate who shall enjoy the property or income.
2. Whether specified portions of Items 7 and 8 were includible under I.R.C. § 2040 as jointly held property to the extent Chrysler furnished consideration.
3. Whether other specified portions of Items 7 and 8 were includible under I.R.C. §§ 2036(a) and 2038(a)(1) as transfers where Chrysler retained interests, a right to designate enjoyment, or a power to alter, amend, revoke, or terminate.

## Decision

- The Tax Court held Items 2 and 3 were not includible under § 2036(a) because Chrysler retained no qualifying possession/enjoyment, income right, or designation power.
- The court held specified portions of Items 7 and 8 were includible under § 2040 to the extent Chrysler furnished the consideration for jointly held property.
- The court held specified portions of Items 7 and 8 were includible under §§ 2036(a) and 2038(a)(1) where Chrysler retained powers or interests sufficient to affect beneficial enjoyment.
- The exact tax consequences were to be finalized in recomputation proceedings.

## Legal Principles

- Under § 2036(a), transferred property is includible in a decedent’s gross estate if the decedent retained for life (or a comparable period) possession or enjoyment, the right to income, or the right to designate who will possess or enjoy the property or its income.
- A discretionary trustee power to apply trust income for minor children’s maintenance and support does not, without a retained right or control by the settlor, establish a § 2036(a) retained interest merely because it may relieve the settlor’s support obligation.
- Independence of trustees and absence of any enforceable right in the settlor to receive income or control beneficial enjoyment weigh against inclusion under § 2036(a)(2).
- Under § 2040, jointly held property is included in the gross estate except to the extent the surviving joint owner proves contribution of consideration in money or money’s worth.
- Under § 2038(a)(1), transferred property is includible if, at death, enjoyment remains subject to change through a retained power to alter, amend, revoke, or terminate (alone or with another).

## Conclusion

The Tax Court excluded the children’s irrevocable trusts from the gross estate because the decedent retained no income right, enjoyment, or control under § 2036(a), but it included portions of other transfers attributable to the decedent’s contributions to joint property under § 2040 and to retained powers or interests under §§ 2036(a) and 2038(a)(1), with amounts to be resolved in recomputation.


Estate of Chrysler v. Commissioner, 44 T.C. 55 (1965)