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THE RECENT CASE of Lober v. United States' appears finally to have resolved the much debated question of whether a power reserved to the settlor of a pre-1936 trust to affect merely the time or manner of enjoyment of the trust property is a taxable power under § 8I i(d) of the Internal Revenue Code.2 The settlor, prior to 1936, had created an irrevocable trust for the benefit of each of his three children, pursuant to the terms of which, he, as trustee, was to pay over or accumulate the income, in his discretion, until the beneficiaries reached twenty-one years of age, after which time he was required to pay over all accumulated ihcome.3 When the beneficiaries reached twenty-five years of age, they were to receive the principal, although the decedent reserved to himself power to pay over all or a part of the principal, in his discretion, at any time before then. Although the indentures made no provision for the contingency of death of the beneficiaries prior to termination of the trusts, the Court assumed that, in such event, the beneficial interests thereunder would vest in their respective estates under New York law. At the death of the settlor prior to termination of the trusts, the Commissioner of Internal Revenue included the value of the trust property in his gross estate, which determination was upheld by the Court of Claims.4 The Supreme Court granted certiorari,5 and held, through Mr. Justice Black (Mr. Justice Douglas and Mr. Justice Jackson dissenting without opinion) that the decedent had retained such control over the trusts as to bring them within his gross estate under § 811(d) (2) for the purposes of the federal estate tax.

Federal Estate Tax: Pre-1936 Reserved Power to Affect the Time or Manner of Enjoyment