## Facts

- Milliken C. Byrum owned controlling interests in three closely held corporations.
- Byrum created an irrevocable trust for the benefit of his children (and, if they died before termination, their surviving children).
- Byrum transferred shares of stock in the three corporations to the trust.
- Byrum retained (1) the right to vote the transferred shares, (2) a veto over the corporate trustee’s transfer of any trust-held stock, and (3) the power to remove the trustee and appoint another corporate trustee.
- Byrum’s retained voting rights, combined with shares he still owned, gave him majority voting power in each corporation.
- After Byrum’s death, the Commissioner of Internal Revenue included the trust-held shares in the gross estate under I.R.C. § 2036(a), asserting Byrum’s retained powers effectively allowed him to control dividend policy and obtain economic benefit during life.

## Issues

1. Whether Byrum’s retained voting control, veto over trustee stock transfers, and power to replace the trustee constituted a retained “right ... to designate” who would enjoy trust income under I.R.C. § 2036(a)(2).
2. Whether Byrum’s continued corporate voting control constituted retained “possession or enjoyment of, or the right to the income from,” the transferred stock under I.R.C. § 2036(a)(1).

## Decision

- The Supreme Court affirmed judgment for the estate.
- The Court held Byrum did not retain a “right” within § 2036(a)(2) to designate who would enjoy trust income.
- The Court held Byrum did not retain “possession or enjoyment” of, or a right to income from, the transferred stock within § 2036(a)(1).
- The transferred shares were not includable in Byrum’s gross estate under § 2036(a).

## Legal Principles

- For § 2036(a)(2), inclusion requires a retained, legally enforceable power over who will possess or enjoy the property or its income; indirect influence through corporate voting control and related management powers is insufficient without a dispositive power over beneficial enjoyment.
- A controlling shareholder’s ability to affect dividends is constrained by corporate fiduciary duties, director obligations, minority-shareholder protections, and business considerations; such constraints can defeat treating voting control as a retained right to determine trust income enjoyment.
- For § 2036(a)(1), speculative or indirect economic advantages tied to continued corporate roles do not constitute retained “enjoyment” when the decedent irrevocably transferred title and the legal right to trust income.

## Conclusion

The Court declined to treat retained voting control and associated management rights over closely held corporate stock, without a direct retained power over trust distributions or beneficial interests, as a retained right to designate income enjoyment or a retained enjoyment of the transferred property for purposes of estate tax inclusion under I.R.C. § 2036(a).


United States v. Byrum, 408 U.S. 125 (1972)