Manufacturers Hanover Trust Co. v. Commissioner

WATERMAN, Circuit Judge:

The sole issue presented by this petition to review a decision of the Tax Court in favor of taxpayer, a trust, is whether a deduction claimed for the portion of the amortized cost of a purchased life estate which is allocable to income received from tax exempt interest is disallowed by § 265(1) of the Internal Revenue Code.

The basic facts may be briefly summarized. In 1958, Clarence Dillon assigned 72% of his life estate and contingent remainder in a Trust created by him in May 1932 to another trust created in June 1932 by his daughter, Anne Dillon. In consideration…