Theodore B. Livernois Trust of May 2, 1958 v. C.I.R., 052969 FEDTAX, 574-66

Docket Nº:574-66, 576-66.
Opinion Judge:FAY, Judge:
Party Name:THEODORE B. LIVERNOIS TRUST OF MAY 2, 1958, THEODORE B. LIVERNOIS, JR., AND ALBERT L. GRIGSBY, JR., TRUSTEES v. COMMISSIONER OF INTERNAL REVENUE, Respondent ALMA G. LIVERNOIS, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Attorney:Jerry d. Luptak and Basil M. Briggs, for the petitioners. Joseph F. Dillon, for the respondent.
Case Date:May 29, 1969
Court:United States Tax Court
 
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28 T.C.M. (CCH) 583 (1969)

T.C. Memo. 1969-111

THEODORE B. LIVERNOIS TRUST OF MAY 2, 1958, THEODORE B. LIVERNOIS, JR., AND ALBERT L. GRIGSBY, JR., TRUSTEES

v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

ALMA G. LIVERNOIS, Petitioner

v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Nos. 574-66, 576-66.

United States Tax Court.

May 29, 1969

Jerry d. Luptak and Basil M. Briggs, for the petitioners.

Joseph F. Dillon, for the respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

FAY, Judge:

Respondent determined deficiencies in the Federal income tax of petitioners as follows:

Docket No. Petitioner Year Amount

574-66 Theodore B. Livernois

Trust of May 2, 1958 1959 $17,828.95

1960 55,593.37

1961 23,345.17

1962 9,898.34

1963 22,568.74

576-66 Alma G. Livernois 1959 16,983.94

1960 45,595.30

1961 17,731.59

1962 7,845.69

1963 21,433.20

Various adjustments raised in the notices of deficiency have been conceded by the petitioners. The issues for determination are (1) whether certain corporate payments to the Theodore B. Livernois Trust of May 2, 1958, constituted taxable dividend income, (2) what is the taxable income of the Theodore B. Livernois Trust of May 2, 1958, during the years in issue, and (3) what are the tax consequences to Alma G. Livernois as a beneficiary of the Theodore B. Livernois Trust of May 2, 1958, during the years in issue. FINDINGS OF FACT Some of the facts have been stipulated. The stipulation of facts, together with the exhibits attached thereto, is incorporated herein by this reference. Theodore B. Livernois, Sr. (hereinafter referred to as Theodore Sr.) was the settlor of the Theodore B. Livernois Trust of May 2, 1958 (hereinafter referred to as the Trust). During the years in issue, the trustees of the Trust were Theodore B. Livernois, Jr. (hereinafter referred to as Theodore Jr.) and Albert L. Grigsby, Jr. (hereinafter referred to as Albert), a son-in-law of Theodore Sr. The Trust's Federal income tax returns for the taxable years 1959 through 1963 were filed with the district director of internal revenue, Detroit, Michigan. The legal residence of the Trust on the date the petition herein was filed was Detroit. Alma G. Livernois (hereinafter referred to as Alma) had her legal residence at Birmingham, Michigan, at the time the petition herein was filed. Alma's Federal income tax returns for the taxable years 1959 through 1963 were filed with the district director of internal revenue, Detroit, Michigan. Theodore Sr. created the Trust on May 2, 1958. The instrument creating the Trust (hereinafter referred to as the Trust Agreement) is here quoted in its entirety, except for signatures and an acknowledgment:

TRUST AGREEMENT This agreement made this 2nd day of May, 1958, by and between Theodore B. Livernois (Theodore Sr.) of the city of Lexington, Michigan, hereinafter designated as ‘ Grantor’, and Theodore B. Livernois, Sr., Theodore B. Livernois, Jr., Edward G. DeGree and Albert L. Grigsby, hereinafter called ‘ Trustees', WITNESSETH: WHEREAS, Grantor is the present owner of certain property, schedule whereof is attached hereto identifying such property, and desires to make provision for the maintenance, investment and the ultimate transfer of such property to certain beneficiaries;

NOW, THEREFORE, in consideration of the premises Grantor does hereby assign, transfer, grant and pay over all of said property and interests in property set forth upon the annexed schedule to Theodore B. Livernois, Sr., Theodore B. Livernois, Jr., Edward G. DeGree and Albert L. Grigsby in trust for the purposes hereinafter specified. The scheduled property together with such other property as Grantor may from time to time transfer to the Trustees shall constitute trust funds which shall be administered as follows: 1. 1 The Trustees shall pay to Theodore B. Livernois, Sr., during his lifetime the entire net income from the trust property together with any or all of the principal thereof he may from time to time request or desire. 1. 2 Upon the death of Theodore B. Livernois, Sr., the surviving Trustees shall pay the expenses of his last illness, funeral and burial, his debts and all taxes which shall be occasioned by any property transferred by reason of his death, and shall then continue the property in trust for the use and benefit of Grantor's wife, Alma Livernois, if she survives Grantor; 1. 3 If Grantor's wife, Alma Livernois, survives the Grantor then the surviving Trustees shall pay to her the entire net income from the trust property and estate in convenient installments. If in the opinion of the Trustees, the income herein provided together with receipts from other sources, shall not be sufficient suitably to support and maintain Grantor's wife, or in case of any emergency, such as illness, accident or other extraordinary distress, then the Trustees shall, if they deem it advisable so to do, use and expend such part of the principal of the trust as may be necessary to make up such deficiency or to meet such emergency; 1. 4 Upon the death of Grantor's wife, Alma Livernois, the trust property shall be divided into three (3) equal shares: one for the use and benefit of Grantor's son Theodore B. Livernois, Jr.; one for the use and benefit of Grantor's daughter Nannette Jean Livernois; and, one for the use and benefit of Grantor's daughter Noel Glenn Livernois; 2. Each of said trusts shall be administered as follows: 2. 1 The surviving Trustees shall pay to each said beneficiary the entire net income from his or her trust property and estate until such beneficiary attains the age of forty-five (45) years. In the event of illness, accident or any emergency befalling said beneficiary, the Trustees in their uncontrolled discretion may use such part of the principal of said beneficiary's trust property as may be necessary in their judgment to alleviate the situation; 2. 2 As and when each beneficiary attains the age of forty-five (45) the surviving Trustees shall assign, transfer, convey and pay over to him or her the entire balance of his or her trust property free and discharged from the trust hereof; 2. 3 In the event such beneficiary shall die after the commencement of his or her trust but before he or she shall have received his or her entire share thereof, the remainder of the trust property shall be continued in trust for such beneficiary's issue, if any taking by right of representation and the trust for such beneficiary's issue shall be administered as follows:

(a) The Trustees shall use and expend such part of the trust property as may be needed for the support, maintenance and education of said issue during their minority; (b) As and when each child, comprising the issue of such deceased child of Grantor, shall attain the age of twenty-one (21) years he or she shall receive outright his or her entire share of the trust property taking by right of representation;

2. 4 In the event any beneficiary, child of Grantor, shall die after the commencement of his or her trust but before receiving his or her entire share thereof, leaving no issue surviving him or her, the balance of his or her trust property and estate shall be added to and become a part of the trusts established for such child's brother, sisters, or sister and brother, and such property shall be governed by the terms of the trust or trusts to which it is transferred. If any beneficiary of the trust or trusts to which such property is transferred has already attained the age of forty-five (45) years, then the aforesaid property shall be transferred outright to such beneficiary rather than to be transferred to any trust. 2. 5 In the event of any child of Grantor predeceasing Grantor leaving issue surviving him or her, the property which would have been placed in trust for such child if living, shall be placed in trust for the issue of such child and shall be administered in accordance with the provisions of paragraph 2.3, (a) and (b);

TRUST POWERS

3. 1 Grantor confers upon Theodore B. Livernois Sr., Trustee, full and complete power and authority during his lifetime, to take possession of all of the trust property, register and record titles thereof solely in his name as Trustee, or at his option in the name of a nominee, to manage the same, to collect all income thereon, to invest and reinvest the trust property, to sell, lease, hypothecate or dispose of any property upon such terms as he in his uncontrolled discretion may see fit, and to execute and deliver any and all instruments of assignment, sale, lease, conveyance and hypothecation which may be necessary in the premises, and, in general, and without limitation, to do and perform any and all acts as Trustee with respect to the trust property, to the exclusion of any participation whatsoever of anyone else, in the same manner as he could have done immediately prior to the execution of this instrument. 3. 2 After the death of Theodore B. Livernois Sr., Trustee, the surviving Trustees shall have power to manage the trusts, to invest and reinvest the trust property and to sell, lease, assign, transfer, hypothecate and dispose of the trust property, or any part thereof, in any manner which they in their discretion may deem to be to the best interests of the respective beneficiaries, and in the meantime to collect all income...

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