Morrill v. United States

Brief Fact Summary. Petitioner established a trust for his four minor children. The income was used to pay a portion of the children’s tuition to universities they attended. Petitioner had the discretion over the trust to direct these payments.

Synopsis of Rule of Law. The grantor of a trust may be treated as the owner of any portion of the trust when the grantor has discretion to distribute to the grantor or the grantor’s spouse.

Facts. George Morrill, Petitioner, established four short-term trusts for each of his four minor children in 1959. The income from the trust would be available to the children after attaining the age of 21. After the trusts are in existence for 10 years, the corpus was to be returned to Petitioner. The trustee could use the income for payment of room, tuition, books, and travel for college or institutions of learning. Petitioner instructed the trustee to pay portions of the expenses for his children for attending several universities. The Commissioner determined that the amounts paid out of the trust for the college tuition was taxable as income to Petitioner because the payments were satisfying his legal obligations to pay the universities.

Issue. Are the amounts paid out of the trust to the universities taxable as income to Petitioner?

Held. District Judge Gignoux issued the opinion for the United States District Court in affirming the lower court and holding that the amounts paid to the universities from the trust is taxable as income to Petitioner.

Discussion. Income out of a trust used to satisfy the legal obligations of the grantor of the trust taxable income to grantor. It is the same as if the money had been paid directly to the grantor. Petitioner was legally liable to the universities for the tuition of his children.