Richard H. Black, Deceased, Phyllis M. Black, Personal Representative v. Commissioner of Internal Revenue

Petitioner Phyllis Black, personal representative of the estate of Richard Black, appeals from a judgment of the United States Tax Court finding an estate tax deficiency of $39,666.00. The issue is whether the entire value of assets formerly held in joint tenancy by the decedent and his spouse, less the contribution of the surviving spouse, should be included in the gross estate under I.R.C. § 2040, even though the assets were transferred shortly before the decedent’s death into a revocable trust that modified the surviving spouse’s right of survivorship. We hold that the creation of the trust severed the joint tenancy and placed the surviving spouse’s share of the trust assets beyond the reach of section 2040. To that extent we reverse the Tax Court judgment.

The Blacks lived in Sun City, Arizona at all times relevant to this action. Among their assets they held a number of securities as joint tenants.

On June 10, 1977, Mr. and Mrs. Black created the Black Revocable Trust. The trust agreement named the Blacks as trustees. Under the agreement, the trust corpus consisted of “all property listed in Schedule A, Husband’s Separate Property and Schedule B, Wife’s Separate Property,…