Thursday April 25, 2024

Rev. Rul. 72-243

GiftLaw Note:

Rev. Rul. 72-243, 1972-1 C.B. 233

January, 1972

The Revenue Service will follow the holding in Beulah Eaton McAllister that the life tenant's sale of her entire interest in a testamentary trust to the remainderman is a sale of a capital asset.

The Internal Revenue Service will follow the decision of the United States Court of Appeals for the Second Circuit in the case of Beulah Eaton McAllister v. Commissioner, 157 F.2d 235 (1946), certiorari denied, 330 U.S. 826 (1946), which held that the proceeds received by the life tenant of a testamentary trust in consideration for the transfer of her entire interest in the trust to the remainderman, are to be treated as an amount realized from the sale or exchange of a capital asset under section 1222 of the Internal Revenue Code of 1954.

With respect to such sales made on or before October 9, 1969, the selling life tenant's basis attributable to his life interst at the time of the sale is determined pursuant to the rules provided in section 1.1014-5 of the Income Tax Regulations (or the corresponding provision of prior regulations) in effect on the date of the sale.
With respect to such sales made after October 9, 1969, the life tenant's basis attributable to his life interest at the time of the sale is considered to be zero, pursuant to section 1001(e) of the Internal Revenue Code of 1954 as added by the Tax Reform Act of 1969. See section 1.1001-1(f) of the regulations.