CLINTON AND his wife were separated pending a divorce. Joel, a bank trust officer, suggested Clinton put his assets in trust with the bank to insulate them from his wife`s divorce claims.
Shortly thereafter Clinton transferred $50,000 to his father who, as grantor, created the trust at the bank for Clinton`s benefit. From time to time, Clinton directed the bank to (1) buy a house where he resided and (2)
purchase and sell various stocks with the remaining trust assets.
The IRS tried to assess a gift tax on the $50,000 of assets transferred to the trust. But Clinton proved to the court`s satisfaction that no gift occurred since he maintained such a high degree of control over the trust assets. Therefore, he owed only an income tax on the trust`s earnings (Warner, T.C. Memo, 1984-582).
