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39 B.T.A. 910

Barbour v. Commissioner

United States Board of Tax Appeals · decided 1939-05-19

A trust terminates at a fixed time or upon the death either of the grantor or beneficiary prior to such time. Held: the trust is irrevocable within the meaning of section 166 of the Revenue Act of 1934; held, further, that section 167:a):3) of the Revenue Act of 1934 does not apply where beneficiary pays premium on a policy of insurance, owned by beneficiary, on life of grantor, out of distributed income of trust, there being no restriction on the…

Cited by 7 later decisions — most recently March 1946

Relies on Pillsbury v. Commissioner · Washington v. Commissioner

Good law ✅— No negative treatment on recordhow we know

Decided 1939-05-19

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¶1Muedooic and Oppee,

¶2concurring: No part of the “income of a trust” was “applied to the payment of premiums.” The trust income was paid to the wife and became hers, she applied her own funds to the payment of the premium even though it was money from the trust. Congress never intended to tax such an amount to the grantor. In George Washington, Sr., 36 B. T. A. 74, 81, we said:

There was no provision of this trust, nor was there any agreement, that any of the income of the trust should be used to pay premiums on life insurance covering the life of petitioner. Cf. Burnet v. Wells, supra. It is immaterial that Lina may have used some of the income from the trust to pay a part of the premiums.

¶3The irrelevant and conceivably perilous ground adopted by the majority could thus have been avoided. Any distinction in the ap*916plication of section 167 (a) (3) between policies taken out by tbe grantor and policies taken out by others on the grantor’s life is fallacious. Policies issued, for example, in the name of the trustees, for the protection of beneficiaries of the trust, the objects of the grantor’s concern, if paid for out of the trust income, would appear to be as clearly within the express terms and obvious intent of section 167 (a) (3) as those of the grantor himself. In Alfred F. Pillsbury, 19 B. T. A. 1229, some of the policies were issued, after the trust was established, “in favor of a trustee.” The trustee was the beneficiary and had all rights of ownership including surrender and loan privileges and all option benefits under the policy. We rejected the argument that the grantor, having no rights or benefits, was not chargeable with income of the trust applied to payment of the premiums, and held that such income was nevertheless taxable to him.

¶4It is to be assumed that the majority opinion does not purport to lay down a contrary principle. Nevertheless, its language is so broad in this respect that we are unable to concur in the opinion as written.

Sternhagen, Leech, and Arnold agree with the above.
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