## Facts

- Stuart A. Seligson was the sole income beneficiary of a testamentary trust created under the will of his father, Charles Seligson, who died in 1975.
- Stuart was estranged from his father and, for personal reasons, did not want to receive income from the trust.
- The trust terms provided that, during Stuart’s lifetime, the trustees “shall pay to him, or apply for his benefit, the entire net income” in quarterly or more frequent installments as convenient to the trustees.
- The trustees also had discretionary authority to distribute principal for Stuart’s support, maintenance, and health, and to help him maintain his accustomed standard of living, even if principal distributions could terminate the trust.
- On Stuart’s death, any remaining principal and any undistributed income would pass under the residuary clause of Charles’s will to other family members (including Charles’s daughter and others).
- The trust had a fiscal year ending October 31 and was administered by a New York City law firm.
- For the trust’s fiscal year ending October 31, 1986, the trust reported interest of $9,453 and dividends of $1,542 (total $10,995) as income distributable to Stuart for that year.
- Stuart received trust tax information, including a Schedule K-1 reflecting the distributable income, as well as an annual accounting.
- Stuart did not request distributions and received no distributions of income or principal from the trust in 1986.
- In March 1987, a representative of the trust wrote Stuart stating that the trust had income on hand of $111,504.63 that was distributable to him and asked whether he would accept distribution; Stuart did not respond and received no payment.
- Stuart did not disclaim, renounce, or assign his rights in the trust.
- Stuart did not report the $10,995 of trust interest and dividends on his 1986 federal income tax return.
- The Commissioner determined a 1986 income tax deficiency of $4,550 and additions to tax for negligence under I.R.C. § 6653(a)(1)(A) ($228) and § 6653(a)(1)(B) (50% of the interest attributable to the negligence-related portion of the deficiency).

## Issues

1. Whether the trust was a “simple trust” for 1986 such that, under I.R.C. §§ 651–652, Stuart had to include in gross income the $9,453 of interest and $1,542 of dividends required to be distributed currently, even though he did not accept any distributions.
2. Whether Stuart was liable for additions to tax under I.R.C. § 6653(a)(1)(A) and (B) for negligence or intentional disregard of rules or regulations based on his failure to report the trust income.

## Decision

- The Tax Court held the testamentary trust was a simple trust for the 1986 tax year because the governing instrument required distribution of all net income currently to Stuart, the trust had no charitable contribution provision, and no non-income distributions were made in that year.
- The court held Stuart had to include $10,995 (interest and dividends) in his 1986 gross income under I.R.C. § 652(a) because it was income required to be distributed currently, “whether distributed or not.”
- The court rejected Stuart’s reliance on cases involving required accumulation of income for later distribution, distinguishing them because this trust required current distribution of all income to the named beneficiary.
- The court noted that any mistaken classification of the trust on its fiduciary return as “complex” did not control the federal tax result.
- The court sustained the Commissioner’s determination of the deficiency and upheld the additions to tax under I.R.C. § 6653(a)(1)(A) and (B).

## Legal Principles

- A trust is treated as a “simple trust” for a taxable year if it is required to distribute all income currently, does not provide for charitable payments from income, and does not make distributions other than from current income for that year. Classification depends on the trust instrument and the year’s distributions and requirements.
- Under I.R.C. § 652(a), a beneficiary of a trust described in I.R.C. § 651 must include in gross income the amount of income required to be distributed currently, regardless of actual receipt.
- A beneficiary’s refusal to accept trust distributions does not prevent taxation of income required to be distributed currently when the beneficiary retains enforceable rights to that income and has not made a valid disclaimer, renunciation, or assignment.
- The Commissioner’s deficiency determination is presumed correct, and the taxpayer bears the burden to show error.
- Additions to tax for negligence under I.R.C. § 6653(a)(1)(A) and (B) may apply when a taxpayer fails to report income shown on information provided to the taxpayer (such as a Schedule K-1) without sufficient justification.

## Conclusion

In *Seligson v. Commissioner*, the Tax Court held that a testamentary trust requiring payment of all net income currently to its sole beneficiary was a simple trust for 1986, so the beneficiary had to report the trust’s interest and dividend income for that year even though he declined to accept distributions, and the court upheld negligence additions for omitting that income from his return.


Seligson v. Commissioner, 63 T.C.M. (CCH) 3101 (1992)