Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 55-38

1955-1 C.B. 389

Sec. 641

Full Text

Rev. Rul. 55-38

Where the lifetime income beneficiary of a testamentary trust from time to time gives his written consent, pursuant to the terms of the will, to pay a certain portion of the trust income to another individual, the amounts so paid will be taxable as income to the beneficiary inasmuch as he, in point of substance, has parted with no substantial interest in property other than the specified payments of income. See Harrison v. Sarah H. Schaffner , 312 U.S. 579, Ct. D. 1503, C.B. 1941-1, 321. However, in the case of an irrevocable assignment, valid under local law, of trust income for a period of not less than 10 years, such income will be taxable to the assignee, provided the facts are not such as would subject the lifetime income beneficiary (the assignor) to the tax on the income under the principles of section 39.22(a)-21 of Regulations 118, section 167 of the Internal Revenue Code of 1939, Edward B. Douglas v. Willcuts , 296 U.S. 1, Ct. D. 1041, C.B. XIV-2, 250 (1936), or I.T. 4007, C.B. 1950-1, 11. In such a case the position of the assignor is analagous to that of the grantor of a trust. Under such circumstances, because of the period and character of the assignment, the lifetime income beneficiary will be considered to have made a disposition of a substantial interest in the trust property. See Edward T. Blair v. Commissioner , 300 U.S. 5, Ct. D. 1205, C.B. 1937-1, 175