dissenting: The gift tax was the primary obligation of the settlor. Had the income of the trust been used directly to pay the gift tax, such payment would have been taxable income to the settlor. Craig B. Sheaffer, 37 T.C. 99. Here the trustees took a roundabout method. They first borrowed money with which they paid the gift tax and then repaid the loan from trust income. It seems to me that the substance of the transactions is the same in both cases, i.e., the liability of the settlor is discharged by income from the trust. In either case the settlor should be taxed on the trust income. Clifton B. Russell, 5 T.C. 974.
TURNER and Naum, JJ., agree with this dissent.