## Facts

- Walter J. Hill created an irrevocable inter vivos trust in 1919 for the benefit of his wife, infant daughter, and the daughter’s issue; the trust ended on the death of the survivor of wife and daughter.
- The trust required fixed income payments to the wife and daughter (and, if the daughter predeceased the wife, to the daughter’s issue), and prohibited income accumulation.
- Any excess net income beyond the fixed payments was payable to Hill or his estate; Hill received over $228,000 in such excess income from 1919–1943, and the estate continued receiving excess income after Hill’s death.
- The trust also provided for potential returns of principal to Hill or his estate: after the death of the wife or daughter, trustees could return portions of corpus they deemed unnecessary for ongoing administration.
- A further reversion provided that if the daughter survived the wife but later died without surviving issue, the entire corpus would revert to Hill or his estate.
- Hill died in 1944, survived by his wife (56), daughter (35), and a granddaughter under five; the trust corpus was valued at $786,569.60 at death.
- The Commissioner included and valued three interests in Hill’s gross estate: (1) the right to excess income during the trust term, (2) a contingent right to returned corpus upon the death of wife or daughter, and (3) a remote reversion if the daughter later died without issue.
- The Commissioner valued Hill’s combined interests at about $432,250.41; the Tax Court sustained inclusion but reduced the valuation to $372,270.41.
- The estate sought review, arguing the interests were too speculative to be valued and therefore should not be included in the gross estate.

## Issues

1. Whether Hill’s rights in the trust (excess income, contingent corpus return, and remote reversion) were “interests” in property owned at death and includible in the gross estate under I.R.C. § 811(a).
2. Whether the contingent and discretionary features of those rights made them legally incapable of actuarial valuation for estate-tax inclusion.

## Decision

- The Second Circuit affirmed the Tax Court.
- The court held that each of the three trust rights was a property interest held by Hill at death within the scope of I.R.C. § 811(a).
- The court rejected the estate’s claim that uncertainty and contingencies barred valuation; actuarial techniques could be used to value the interests.
- The court upheld inclusion and left undisturbed the Tax Court’s reduced valuation of $372,270.41.

## Legal Principles

- I.R.C. § 811(a) requires inclusion in the gross estate of the value at death of all property to the extent of the decedent’s interest at death.
- A property interest is not excluded from the gross estate merely because payment, enjoyment, or amount depends on contingencies or probabilities.
- Reliance on mortality tables and actuarial assumptions to value future or contingent interests is permissible for estate-tax valuation.
- Trustee discretion affecting whether and how much corpus may revert does not, by itself, eliminate the existence of a taxable interest; it may affect the discount applied in valuation.
- Even a highly remote reversionary interest may be included if it has a computable, non-zero actuarial value.

## Conclusion

The court held that a decedent’s contingent rights in an inter vivos trust—including rights dependent on future income, mortality, trustee discretion, and remote reversionary events—are includible in the gross estate under I.R.C. § 811(a) when they constitute legally cognizable interests capable of actuarial valuation.


In re Hill's Estate (Bodine v. Commissioner of Internal Revenue), 193 F.2d 724 (2d Cir. 1952)