Rev. Rul. 70-567

A State court ordered proceeds from a wrongful death action to be placed in escrow with a bank until the court determined the proper distribution according to law. While on deposit the escrowed funds were held in the name of the escrowee and the funds earned interest. The escrowee had none of the ordinary duties of a trustee or fiduciary to administer the funds and could not disburse the funds without a further court order.

Held, the escrowee is not required to file a fiduciary income tax return and report the interest as income subject to taxation under section 641(a) of the Internal Revenue Code of 1954.

Held further, the interest accumulated is taxable to the distributees for the taxable year in which they are determined to be entitled to receive the escrowed funds.