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Tax 2 Case Digest: Morgan v. Commissioner

Morgan v. Commissioner

Laws Applicable:

Lessons Applicable: general power of appointment

  • Morgan is the executor of Elizabeth S. Morgan, who was the donee of 2 powers of appointment over property held in 2 trusts created by her father by will and by deed.  The property remaining in the trustees' hands for Elizabeth S. Morgan was given, at her death, to the appointee or appointees named in her will, with gifts over in case she failed to appoint. Under both trusts, if in the judgment of the trustees, property going to any beneficiary would be dissipated for any reason, or improvidently handled, the trustees were to withhold any part of such property, with directions for disposition, in such event, of what was withheld. The decedent appointed in favor of her husband.
  • The Commissioner ruled that the value of the appointed property should be included in the gross estate, and determined a tax deficiency. The Board of Tax Appeals approved his action. The Circuit Court of Appeals affirmed the Board's decision.

ISSUE: W/N it was the trust had a general power of appointment

HELD: YES. Judgment affirmed.
  • general power of appointment - donee may appoint to anyone, including his own estate or his creditors, thus having as full dominion over the property as if he owned it
  • special power of appointment - donee may appoint only amongst a restricted or designated class of persons other than himself.
  • The important consideration is the breadth of the control the decedent could exercise over the property, whatever the nature or extent of the appointee's interest.
o    inasmuch as the trustees had an unfettered discretion to withhold principal or income from any beneficiary, they could exercise their discretion as respects any appointee of the decedent