Schalk Chemical Company, a Corporation, Gerald I. Farman, Hazel I. Farman, John Carver Baker and Patricia Baker v. Commissioner of Internal Revenue

This is a petition to review a decision of the Tax Court of the United States sustaining the Commissioner's determination of deficiencies in income tax of Schalk Chemical Co., a California corporation, and Hazel I. Farman and Patricia Baker, two of its stockholders. The three cases were consolidated in the Tax Court for the purpose of trial. The opinion is reported in 32 T.C. 879 (1969).

On his death in 1928, Horace O. Smith, Sr., left surviving his widow, Hazel I. Smith (now Farman), three minor children, Evelyn Smith (now Marlow), Horace O. Smith, Jr., and Patricia Smith (now Baker), and his mother, Charlotte E. Wood. Part of his estate consisted of 100,000 shares of stock, comprising all the issued and outstanding stock of Schalk, a manufacturer of paint products, paint brush cleaners and sundry home repair items. During the course of the probate proceedings, a dispute arose among Smith’s legatees and heirs over the provisions of his will, and as the upshot of that matter the shares and certain other estate property were placed in a spendthrift trust for a term of twenty years commencing December 29, 1930. The trust agreement designated three persons to act successively as…