Rev. Rul. 58-2

An individual taxpayer established a personal trust over which he had power of revocation. The corpus of the trust was composed of Series E United States savings bonds which the taxpayer (grantor) had held for various numbers of years as the sole owner. It is assumed for the purposes of this ruling that the transfer of the bonds to the trust, concerning which there are some restrictions, was in conformity with the regulations governing savings bonds. The interest on the bonds had accumulated in the form of increment in value, none of which was reported in the taxpayer's individual income tax return in past years under the option available to owners of such bonds under section 454(a) of the Internal Revenue Code of 1954. Section 454(c) provides, in pertinent part, that the increase in redemption value in excess of the amount paid for a Series E bond shall be includible in gross income in the taxable year in which the obligation is finally redeemed or in the taxable year of final maturity, whichever is earlier. Under the provisions of section 676 of the Code, the taxpayer (grantor) is considered as the owner of the bonds. Held, since the taxpayer did not realize the benefit of the interest (increment in value) at the time of the transfer to the trust, he is not required to include in his Federal income tax return the amount thereof that had accumulated to the date of transfer. See, generally, I.T. 3011, C.B. XV-2, 132 (1936), and I.T. 3097, C.B. 1937-2, 219. Compare Revenue Ruling 55-278, C.B. 1955-1, 471.