Petition for Review from the United States Board of Tax Appeals.
Before DAVIS and THOMPSON, Circuit Judges, and DICKINSON, District Judge.
This is an appeal from an order of the Board of Tax Appeals in which the Board determined that the petitioners, as executors of the estate of James Newbegin Jarvie, deceased, were liable for a deficiency in the estate tax of $22,193.37.
The facts of this case are not disputed. James N. Jarvie entered into certain written agreements in which he promised to give to the International Committee of the Young Men's Christian Associations $1,000,000 for the erection of a building in Jerusalem to be used by the Young Men's Christian Association of that place.
Before he died, on June 21, 1929, he had paid $372,689.77 of his pledge, leaving a balance of $627,310,23 unpaid. This balance was admitted to be a legal obligation of the estate and was paid on February 4, 1930, by the executors, who are the petitioners here.
The executors did not include the $627,310.23 in the gross estate in their tax return for 1930 on the ground that it was exempt from taxation under section 303 (a) (1) or (3) of the Revenue Act of 1926, 44 Stat. 72 (26 U.S.C.A. § 412 note), which, inter alia, provides:
"For the purpose of the tax the value of the net estate shall be determined --
"(a) * * * by deducting from the value of the gross estate --
"(1) * * * claims against the estate, * * * to the extent that such claims * * * were, incurred or contracted bona fide and for an adequate and full consideration in money or money's worth. * * *
"(3) The amount of all bequests, legacies, devises, or transfers, to or for the use of * * * any corporation organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes."
The Commissioner disallowed the deduction and determined a deficiency of $22,193.37.
The Board of Tax Appeals, with five members dissenting, in its order of redetermination sustained the Commissioner.
The petitioners contend that this obligation was either a claim against the estate under section 303 (a) (1) or a transfer within the meaning of the statute under section 303 (a) (3). The Commissioner contends that it was not a deductible claim for the reason that it was not incurred or contracted "for adequate and full consideration in money or money's worth" and that it was not a "transfer" within ...