Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 55-34

1955-1 C.B. 226

Sec. 61

Caution:Amplified by Rev. Rul. 56-601

IRS Headnote

Income of a trust is taxable to the grantor under section 39.22(a)-21(c) of Regulations 118, where the grantor has a reversionary interest in the corpus which will revert to his estate at his death, if his life expectancy, according to appropriate United States life and actuarial tables, is less than 10 years or 15 years, whichever is applicable.

Full Text

Rev. Rul. 55-34

Advice has been requested with respect to the significance of the grantor's life expectancy in determining the taxability of trust income where the grantor has retained a reversionary interest in the corpus or income.

Under the provisions of section 39.22(a)-21(c) of Regulations 118, income of a trust is taxable to the grantor where the grantor has a reversionary interest in the corpus or income therefrom which will or may reasonably be expected to take effect in possession or enjoyment either (i) within 10 years commencing with the date of the transfer, or (ii) within 15 years commencing with the date of the transfer if the income is or may be payable to a beneficiary other than a donee described in section 23(o) of the Internal Revenue Code of 1939 and if any one or more of certain powers of administration over the trust corpus or income are exercisable solely by the grantor or spouse, or both. The above section also provides that where the grantor's reversionary interest is to take effect in possession or enjoyment by reason of some event other than the expiration of a specific term of years, the trust income is nevertheless attributable to him if such event is the practical equivalent of the expiration of a period less than 10 or 15 years as the case may be.

Accordingly, it is held that where the grantor has a life expectancy based on appropriate United States life and actuarial tables of less than 10 or 15 years, whichever is applicable, and he establishes a trust with the corpus reverting to his estate at his death, the income therefrom is taxable to the grantor since the specific event provided in the trust instrument, that is, the life expectancy of the grantor, is the practical equivalent of the expiration of a period of less than 10 or 15 years