## Facts

- Morris Lober created three substantially identical trusts in 1924 and 1929, one for each child, naming himself as trustee.
- As trustee, Lober had broad authority to invest, reinvest, and accumulate income until each beneficiary reached age 21, when accumulated income was payable; he could retain principal until age 25.
- The trust instruments stated they were irrevocable; it was assumed the beneficiaries had vested interests under state law.
- Lober retained the power, exercisable at any time, to distribute all or any part of the principal to the beneficiaries, thereby reducing or ending the trust as to the distributed property.
- Lober died in 1942; the trust property exceeded $125,000 in value.
- The Commissioner included the trust property in Lober’s gross estate under Internal Revenue Code of 1939 § 811(d)(2), which covers transfers where enjoyment is subject at death to change through a power to “alter, amend, or revoke.”
- The estate paid the tax and sought a refund; the Court of Claims ruled for the United States, and the Supreme Court granted review.

## Issues

1. Whether trust property is includable in a decedent’s gross estate under I.R.C. § 811(d)(2) when the decedent retained a unilateral power to distribute principal to beneficiaries at any time and thereby terminate the trusts, despite the trusts being labeled irrevocable and the beneficiaries’ interests being vested under state law.

## Decision

- The Supreme Court affirmed the judgment for the United States.
- The Court held the trust property was includable in Lober’s gross estate under § 811(d)(2).
- A retained power to distribute principal at will, effectively terminating the trust, is equivalent to a power to “alter, amend, or revoke” for purposes of § 811(d)(2).
- The trusts’ stated irrevocability and the assumed vested nature of the beneficiaries’ interests did not preclude inclusion.

## Legal Principles

- Under I.R.C. § 811(d)(2) (1939 Code), transferred property is included in the gross estate if, at death, the enjoyment of the property is subject to change through the decedent’s retained power to alter, amend, or revoke.
- A power to terminate a trust by accelerating or distributing principal to beneficiaries constitutes a power to alter, amend, or revoke within the statute’s meaning.
- Federal estate tax inclusion turns on the decedent’s retained power affecting enjoyment at death, not on state-law labels such as “irrevocable” or “vested interest.”

## Conclusion

Because Lober retained, until death, an unrestricted power to distribute trust principal and end the trust relationship as to that property, the beneficiaries’ enjoyment remained subject to change at death, requiring inclusion of the trust assets in his gross estate under § 811(d)(2).


Lober v. United States, 346 U.S. 335 (1953)