## Facts

- In 1953, Leon Holtz created an irrevocable trust with a bank as sole trustee and transferred property worth about $384,117 to the trust.
- In 1955, Holtz made an additional $50,000 cash transfer to the same trust.
- Holtz retained the right to all trust income for life.
- The trustee had discretion to distribute as much principal as it thought desirable for Holtz’s welfare, comfort, and support, including hospitalization and emergency needs.
- If Holtz’s wife survived him, she would receive income for life, and the trustee had parallel discretion to invade principal for her benefit under the same type of standard.
- On the death of the survivor of Holtz and his wife, the trust would terminate and the remaining principal would be distributed to the survivor’s estate.
- Holtz did not retain an express power to revoke or amend the trust.
- At trial, evidence indicated Holtz expected to be able to access the trust assets if needed and the trustee indicated it would be “liberal” in distributing principal for his needs.
- The Commissioner treated the transfers as completed gifts of the remainder interest (after valuing Holtz’s retained life estate) and assessed gift tax accordingly.
- Holtz’s estate petitioned the Tax Court, contending the transfers were not completed gifts because the trustee could distribute the entire corpus to Holtz during his life.

## Issues

1. Whether Holtz’s 1953 and 1955 transfers to the trust were completed gifts for federal gift tax purposes when the trustee could distribute any or all principal for Holtz’s welfare, comfort, and support and related needs.
2. Whether the trustee’s discretion, guided by an objective support-type standard, left Holtz with sufficient dominion and control over the corpus to make any remainder transfer indeterminate at the time of transfer.

## Decision

- The Tax Court held the transfers of corpus were not completed gifts for gift tax purposes.
- Because the trustee could distribute the entire corpus to Holtz during his lifetime, it was possible no one else would receive any part of the trust property.
- The court rejected the Commissioner’s treatment of the transfers as completed gifts of a remainder interest subject to gift tax.

## Legal Principles

- A transfer is a completed gift for gift tax purposes only when the donor has relinquished sufficient dominion and control to make the transfer final as to the interest purportedly given.
- When trust terms allow the trustee to apply all principal for the settlor’s benefit under a support-type standard, the settlor may not have made a definitive present transfer of any remainder interest.
- If the corpus may be fully consumed for the settlor’s benefit, any purported remainder may be too contingent and indeterminate to constitute a completed taxable gift at the time of transfer.

## Conclusion

The Tax Court concluded that Holtz’s transfers to the trust were incomplete gifts because the trustee’s discretionary power to invade principal for Holtz’s support-related needs made it possible for the entire corpus to be distributed to him during life, leaving no ascertainable completed transfer of a remainder interest for gift tax purposes.


Holtz’s Est. v. Comm’r, 38 T.C. 37 (1962)