Morgan v. Commissioner, 309 U.S. 78 (1940)

Morgan v. Commissioner

No. 210

Argued January 4, 5, 1940
Decided January 29, 1940
309 U.S. 78

CERTIORARI TO THE CIRCUIT COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Syllabus

A decedent in Wisconsin exercised a power of appointment over property held in trusts created under the law of that State. The trusts empowered the trustees to withhold from any beneficiary property which, in their judgment, would be dissipated. or be improvidently handled, and gave directions for disposition, in such event, of what was withheld.

Held:

1. That the power exercised was a "general power of appointment" within § 302(f) of the Revenue Act of 1926, whatever its characterization -- whether "general" or "special" -- by the Wisconsin law. P. 80.

State law creates legal interests and rights. The federal Revenue Acts designate what interests or rights, so created, shall be taxed.

2. The term "general power of appointment," as used in the federal Revenue Acts, applies where the donee may appoint to any person he chooses, including his own estate or his creditors. P. 81.

This accords with common acceptation and with administrative construction approved by Congressional reenactments of the provisions construed.

3. Assuming that the trustees could withhold the appointed property from an appointee, the power must still be held general. The important consideration is the breadth of the control in the donee of the power, whatever the nature or extent of the appointee’s interest. P. 82.

103 F.2d 636 affirmed.

Certiorari, 308 U.S. 534, to review an affirmance by the court below of a decision of the Board of Tax Appeals (36 B.T.A. 588), approving a deficiency assessment.