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.
The transaction was regarded as being the same in substance as if the money had been paid to the taxpayer and he had transmitted it to his creditor.View Full Point of Law
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.