TAXATION -- TAXING INCOME FROM SHORT-TERM FAMILY TRUST TO SETTLOR

In 1931 a settlor executed a deed of trust and transferred securities to the trustees, who were also the settlor's lawyers. The trustees were to pay the income to the settlor's wife, children and mother-in-law. The duration of the trust was six years and sixteen days, but it was provided that the trust would terminate before that time if the settlor or his wife died. At the termination of the trust the corpus was to be returned to the settlor.

The settlor reserved no power to remove the trustees or to modify or revoke the trust or to control the management of the trust property. The commissioner of internal revenue sought to tax the income of the trust for the years 1934 and 1935 as income of the settlor although the trust was not created to satisfy any legal obligations of the settlor. Held, the net income of the trust is taxable to the settlor under section 22(a) of the Revenue Act of 1934. Commissioner of Internal Revenue v. Barbour, (C. C. A. 2d, 1941) 122 F. (2d) 165.