## Facts

- In 1936, a daughter and her mother created separate inter vivos trusts as part of coordinated family planning intended to keep the daughter’s wealth within the family.
- The daughter transferred about $680,000 to a trust, retained a life income interest, provided successive life income interests for her mother and stepfather if she died first, and gave the remainder to her issue at age 21, with alternative testamentary distribution by the last surviving life tenant if there were no issue.
- The mother transferred about $193,000 to a trust, retained a life income interest for herself and her husband, provided a later life income interest for the daughter, and gave the remainder to the daughter’s issue.
- The parties treated the creation of the secondary life estates as taxable gifts and paid gift tax on those interests.
- The dispute concerned whether the trusts’ remainder interests were also taxable gifts under the federal gift tax provisions of the Revenue Act of 1932.

## Issues

1. Whether the trusts’ remainder interests were completed taxable gifts even though, when the trusts were created, there were no existing eligible remaindermen (the daughter’s issue).
2. Whether the remainder transfers were excluded from gift tax because they were supported by “full consideration in money or money’s worth” or were made “in the ordinary course of business.”
3. Whether any retained reversionary interests were deductible in valuing the taxable gifts when the reversionary interests could not be valued by recognized actuarial methods.

## Decision

- The Supreme Court affirmed the judgment sustaining the Commissioner’s imposition of gift tax on the remainder interests.
- The remainder interests constituted taxable gifts under the Revenue Act of 1932.
- The absence of presently existing eligible remaindermen at the time of transfer did not prevent the remainder transfers from being taxable gifts.
- The transfers were not supported by “full consideration in money or money’s worth” and were not made “in the ordinary course of business.”
- The grantors’ reversionary interests were not deductible in computing gift tax where their value was not ascertainable by recognized actuarial methods.

## Legal Principles

- Federal gift tax applies to completed transfers of economic value, including remainders following retained life estates.
- A gift of a future interest may be complete and taxable even if the ultimate takers are a class whose members are not yet in existence when the transfer is made.
- Coordinated intra-family arrangements are not exempt from gift tax absent full and adequate consideration in money or money’s worth and an arm’s-length, ordinary-course business character.
- Retained reversionary interests reduce the taxable value of a gift only if the reversion can be valued using recognized actuarial methods; speculative or unmeasurable reversions are not deductible.

## Conclusion

The Court held that creating trust remainders for a donor’s future issue constituted taxable gifts notwithstanding the lack of existing remaindermen, rejected claimed consideration and business-transaction exclusions, and refused to discount the gift by reversionary interests too uncertain to value actuarially.


Robinette v. Helvering, 318 U.S. 184 (1943)