Brainard v. Commissioner
United States Court of Appeals for the Seventh Circuit
91 F.2d 880 (1937)
In 1927, Brainard orally declared he would hold in trust, for his wife, children, and mother, any profits he might earn trading stock in 1928, while keeping all trading losses as his own personal responsibility. After earning profits in 1928, he took a $10,000 trustee's fee for himself and distributed the rest to the beneficiaries, who reported their shares as their own income; Brainard reported only the trustee's fee on his own taxes. The dispute was whether the trust existed as of the 1927 declaration (making the 1928 profits properly the beneficiaries' income) or only came into being once the profits actually existed in 1928 (making them Brainard's own taxable income).
Whether an oral declaration of trust creates a valid trust when the trust property consists of future profits that do not yet exist at the time of the declaration.