Rev. Rul. 57-436

Advice has been requested whether the personal services of a co-trustee of an inter vivos trust constitute `an employment' within the meaning of section 1301(b) of the Internal Revenue Code of 1954 and whether, upon the termination of the trust and judicial approval of the proceedings, he will be entitled to compute and pay Federal income tax on the compensation received for his services as provided by section 1301(a) of the Code.

The taxpayer was a co-trustee of a revocable trust established by an indenture which provided for the payment of the net income therefrom to the grantor for life and, upon her death, the termination of the trust and the distribution of its assets. The taxpayer served continuously as a trustee until the trust was terminated at the death of the grantor, a period of 20 years. The State court entered a decree settling the trustee's account covering the entire term of the trust and ordered the payment of commissions with respect to the receipt and distribution of both trust corpus and trust income and otherwise to the taxpayer. Such amount was paid to him in a single lump sum immediately following the entry of the decree.

Section 1301(a) of the Code provides that section 1301 applies to an individual or partnership that engages in `an employment' as defined in section 1301(b). It restricts the applicability of the section to such employment as covers a period of 36 months or more from the beginning to the completion thereof and the compensation for which, received or accrued in the taxable year of the individual or partnership, is not less than 80 percent of the total compensation from such employment.

Section 1301(b) of the code provides as follows:

DEFINITION OF AN EMPLOYMENT.-For the purpose of this section, the term `an employment' means an arrangement or series of arrangements for the performance of personal services by an individual or partnership to effect a particular result, regardless of the number of sources from which compensation therefor is obtained.

As a co-trustee of a trust, the taxpayer was engaged in an arrangement for the performance of personal services to effect a particular result, namely, to effectuate the purposes of the trust in accordance with the terms thereof. He was therefore engaged in an employment within the meaning of section 1301(b) of the Code. He has met the requirements of section 1301(a) in that his employment covered a period of more than 36 months and his compensation in the taxable year was not less than 80 percent of the total compensation from the employment. He is thus entitled to compute and pay income tax on such compensation as provided by section 1301(a) of the Code.

Accordingly, it is held that a trustee of an inter vivos trust, who performed personal services for such trust during its life, was engaged in an employment within the meaning of section 1301(b) of the Code. Such trustee, having met the requirements of section 1301(a) of the Code, is entitled to compute and pay Federal income tax on the compensation received for such services in the manner provided therein.