The bixby liquidating trust
Whether the taxpayers who are the grantors, trustees and principal beneficiaries of the family trust involved here are subject to tax under Section 22(a) of the Revenue Act of 1938 and of the Internal Revenue Code on taxable stock dividends which were received by the trust in the taxable years and were added by the trustees to the corpus of the trust. If no spouse and no issue survived the trustor then gave the trust income to the living heirs of the trustor until the termination of the trust.
As the trustors could not vest the unrestricted use, possession and control of the corpus in their heirs-at-law at death, their appointees, whether heirs-at-law or others, would be in no better position under California law. III of the trust instrument vest at death such an interest in the corpus as heirs generally take under California law. IV fixes the termination of the trust upon the death of the last survivor of 21 named individuals. Corpus could not pass at death to the heirs-at-law generally as the Supreme Court of California in the Bixby case said would be necessary to give trustors such rights of control as would make them in effect owners of the corpus. "Nor could the trustors under the power of appointment reserved to them in Art. Should an attempt be made under the power of appointment to appoint corpus to heirs generally at death, the possession and control thereof would be held in abeyance until the death of the last survivor of the 21 named individuals.Otherwise, a manifest injustice might be accomplished.Executed long before the events here in controversy, the instrument in question was drawn with great care and meticulousness.