No. The court decided the government couldn't tax the money. Mr. Tully couldn't change the death benefit plan by himself because his business partner owned the other half of the company and could say no. The government argued that Mr. Tully still had 'power' because he could change the payment amount by quitting his job or divorcing his wife. The court said these ideas were 'ridiculous' and 'absurd.' For a 'power' to count for tax purposes, it has to be a real, practical ability to change things, not a far-fetched, 'what-if' scenario. Since Mr. Tully didn't have any real control, the money wasn't his to be taxed when he died.

No, the money shouldn't be included in the estate for tax purposes. Tully had arranged for this money to be paid to his wife and didn't keep any control over it that would allow him to change or stop the payment. He also didn't have any legal claim to the money when he died, which means it shouldn't be taxed as part of his estate.

No, the death benefits are not includable in the decedent's gross estate. The court reasoned that while Tully did make a transfer of a future interest to his wife when he entered into the employment contract, he did not retain any power to 'alter, amend, revoke, or terminate' that transfer under § 2038(a)(1). The government's arguments that Tully retained power were based on speculation. His 50% stock ownership did not give him control, as the other 50% owner could block any changes. The power to persuade his partner to alter the contract is not a legally cognizable power. Furthermore, the possibilities that Tully could alter the benefit by changing his salary, quitting his job, or divorcing his wife were too remote, speculative, and de minimis to rise to the level of a § 2038(a)(1) power, which must be 'demonstrable, real, apparent and evident.' Similarly, these speculative abilities did not constitute a retained 'interest' under § 2033, which requires a stronger degree of control than § 2038 and is not a 'catch-all' provision for estate tax.

No. The death benefits are not includable in Tully’s gross estate. Tully transferred his interests in the benefits before his death without retaining any significant powers to alter, amend, revoke, or terminate the transfer. Furthermore, he did not possess any 'interest' in the benefits at the time of his death that would necessitate inclusion under section 2033. The contract specifics and lack of control over the company negate any implied powers that could affect the benefits' disposition.

Estate of Tully v. United States

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