Helvering v. Clifford

Clifford (plaintiff) created a five-year trust of securities naming his wife as beneficiary, but paid her income entirely at his discretion, retained full control over the securities, and could use the corpus and income as he wished. He stated the purpose was to give his wife security, not to evade taxes. In 1934 he paid all trust income to his wife, who reported it, but the Commissioner (defendant) determined the income remained taxable to Clifford.

Whether the grantor of a trust who enjoys the benefits of full ownership over the trust corpus is taxable on the income the trust generates.