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What is Irwin v. Gavit?

Irwin v. Gavit

It was a controversial case that came before the United States Supreme Court in 1925 concerning the taxability, under US tax law, of a divided interest in a bequest. The case is still often cited today.

Where have you heard about Irwin v. Gavit?

It often appears in law school casebooks because of its central finding that a bequest of income from property held in trust is taxable, even where the bequest of the entire corpus of the trust would be excluded as a gift.

What you need to know about Irwin v. Gavit.

Under Anthony Brady's will, a sixth of his estate would be held in trust for his granddaughter until she turned 21. During this period, her father would receive some of the income on this principal. The Collector viewed these payments as income, because they constituted the income on principal. Plaintiff argued they were exempt under §102(a) as property acquired by bequest.

Justice Holmes, for the majority, held that although the receipt of the estate funds would be considered a non-taxable bequest, the receipt of income from those funds in instalments was taxable.

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