## Facts

- Edward D. Rollert, an executive vice-president of General Motors (GM), died on November 27, 1969.
- GM maintained an executive bonus program administered by a Bonus and Salary Committee; bonuses above $2,000 were commonly structured as multi-year installment payments.
- Although the Committee retained formal discretion, Rollert had received a bonus in every year he was eligible, consistent with GM’s general practice for executive vice-presidents.
- On March 2, 1970, about three months after Rollert’s death, the Committee awarded a 1969 bonus to him consisting of 1,786 shares of GM stock and $285,763 in cash.
- At Rollert’s death, he had no legally enforceable right to the 1969 bonus; the award was not fixed or vested at that time.
- Because the bonus exceeded $2,000, the cash component was scheduled for payment in annual installments beginning in 1973, paid by GM to the trustee as designated beneficiary.
- Rollert had established a revocable trust; under his will, the residuary estate poured over to the trust, and the right to receive the post-mortem bonus was transferred from the estate to the trust.
- The IRS determined income tax deficiencies for 1973–1975, treating the installments as “income in respect of a decedent” (IRD) under I.R.C. § 691.
- The trust argued that the transfer/distribution of the bonus rights should be treated under I.R.C. §§ 661–662 so the trust would not be taxed on the later installment receipts.
- The Tax Court ruled for the Commissioner, and the trust appealed.

## Issues

1. Whether the post-mortem 1969 GM bonus constituted IRD under I.R.C. § 691 even though Rollert lacked a legally enforceable right to the bonus at death.
2. Whether I.R.C. §§ 661–662 could be used to treat the transfer/distribution of the bonus rights in a manner that altered or displaced § 691’s IRD treatment of later receipts.

## Decision

- The Sixth Circuit affirmed the Tax Court.
- The post-mortem bonus payments were IRD under I.R.C. § 691.
- Sections 661 and 662 did not override § 691 or permit recharacterization of the IRD through trust distribution mechanics.
- The deficiencies for 1973–1975 were upheld.

## Legal Principles

- For I.R.C. § 691, “income in respect of a decedent” does not require that the decedent hold a legally enforceable right to payment at death; it is sufficient that the decedent had a substantial certainty of receiving the income absent death.
- Compensation closely tied to the decedent’s lifetime services, but received by successors after death, may be taxed as IRD to prevent omission of such earnings from income taxation.
- I.R.C. § 691, as the more specific provision governing IRD, controls over the more general trust distribution provisions in I.R.C. §§ 661–662.
- An IRD item retains its character as IRD in the hands of an estate, trust, or beneficiary; assignment or distribution of the right to receive it does not convert it into non-IRD.

## Conclusion

The court held that Rollert’s post-mortem GM bonus was taxable as IRD when the installments were received, despite the absence of an enforceable right at death, and that the trust could not use §§ 661–662 to change § 691’s required tax treatment.


Rollert Residuary Trust v. Commissioner, 752 F.2d 1128 (6th Cir. 1985)