Commissioner of Internal Revenue v. Estate of Elizabeth W. Vease, Deceased, James L. Vease

The Commissioner of Internal Revenue asserted an estate tax deficiency of $374,243.55 against the estate of Elizabeth W. Vease. The Tax Court redetermined the deficiency to be $539.83. The Commissioner has petitioned this court to review the Tax Court’s decision. The findings of fact and opinion of the Tax Court are reported in 35 T.C. 1184 . We have jurisdiction under section 7482 of the Internal Revenue Code of 1954.

During her life the decedent, hereinafter referred to as Elizabeth, had the right to net income from two trusts. She also had a testamentary power to provide her surviving husband with an annuity from these trusts, such annuity not to exceed one-half their net income in any given year. In addition she had a testamentary power to appoint which of her children should receive the remainder, and in what proportions and upon what terms, trusts and conditions.

In assessing a deficiency against the estate, the Commissioner determined that these trusts had resulted from a transfer of property made by Elizabeth during her lifetime. He further determined that since Elizabeth had retained a life interest in the property, or had retained a reversionary interest in it, or…