sole beneficiary here involved is decedent's widow. Upon her death, as noted, the remainder of the corpus, after payment of certain legacies, was to go to charities. Thus the trust created by decedent was for both a private and charitable purpose.
In the federal estate tax return filed on March 12, 1962, plaintiff claimed a charitable deduction in the amount of $88,229.96, representing what plaintiff had actuarially determined to be the present value of the corpus of the trust bequeathed to charity. In support of its right to make this deduction from the gross value of the estate, plaintiff contends that decedent's will sets up an ascertainable standard for invasion of the trust corpus by the trustees; that such invasion is properly limited to enable the private beneficiary to maintain the same standard of living she enjoyed during her husband's lifetime; and that the investment provisions of paragraph "Twelfth" of the will do not make the amount of the charitable remainder unascertainable.
The claimed charitable deduction was disallowed in toto. Defendant contends that decedent's will fails to provide an ascertainable standard for invasion of the trust corpus; that the authority given to the trustees, in their absolute and uncontrolled discretion, to pay over to any beneficiary any amount out of corpus, fails to provide any standard whatsoever which might restrict their invasion of corpus; and that the language of the will providing for invasion of corpus for the benefit of any beneficiary, does not provide an objective standard governing the extent of possible invasion.
Disallowance of the claimed charitable deduction resulted in increasing the tax liability of the estate from $153.24 to $18,380.16. Pursuant to demand therefor, plaintiff paid $19,400.00 to cover the recomputed tax and filed a timely claim for a refund of the $19,400.00 or such greater sum as might be legally refundable. Refund was denied, and the action in this Court followed.
The Internal Revenue Code of 1954, insofar as is here pertinent, 26 U.S.C.A. § 2055(a)(2), provides that for the purposes of the tax imposed by section 2001 of the Code, the value of the taxable estate shall be determined by deducting from the value of the gross estate, the amount of all bequests, legacies, devises or transfers made to or for the use of qualified charitable corporations. And section 20.2055-2 of the applicable treasury regulations, 26 CFR § 20.2055-2, provides that if a trust is created for both a charitable and a private purpose, a "deduction may be taken of the value of the charitable beneficial interest only insofar as that interest is presently ascertainable, and hence severable from the noncharitable interest."
The law is clear that there can be no deduction for a charitable bequest unless the will itself states an ascertainable standard governing the power to invade corpus so that the extent of possible invasion may be reasonably and accurately measured as of the date of testator's death. Extrinsic evidence cannot supply an ascertainable standard if none appears on the face of the will. Ithaca Trust Co. v. United States, 279 U.S. 151, 73 L. Ed. 647, 49 S. Ct. 291 (1929); Merchants National Bank of Boston v. Commissioner of Internal Revenue, 320 U.S. 256, 88 L. Ed. 35, 64 S. Ct. 108 (1943); Henslee v. Union Planters National Bank & Trust Co., 335 U.S. 595, 93 L. Ed. 259, 69 S. Ct. 290 (1949); Zentmayer's Estate v. C.I.R., 336 F.2d 488 (3 Cir. 1964); Seubert v. Shaughnessy, 233 F.2d 134 (2 Cir. 1956).
In Ithaca Trust, the testator bequeathed the residue of his estate to his wife for life, with power to invade corpus for any sum "that may be necessary to suitably maintain her in as much comfort as she now enjoys." After the wife's death, there were bequests in trust for charities. The question posed for decision was whether the provision for maintenance of the wife made the charitable bequests so uncertain as to defeat the deductibility of the amount of those gifts from the gross estate in order to ascertain the estate tax. The Court answered this question in the negative, and held that if the will provides for invasion of corpus only to the extent necessary to maintain a beneficiary according to an accustomed manner of living, an ascertainable standard is established, and the value of the charitable bequest may be deducted for estate tax purposes.
In Merchants Bank and in Henslee, the claimed charitable deductions were disallowed because of the absence of an ascertainable standard governing the invasion of corpus. Of particular significance is the language used in Merchants Bank, where the Court stated that for a charitable deduction to be allowed, the law requires
"that a highly reliable appraisal of the amount the charity will receive be available, and made, at the death of the testator. Rough guesses, approximations, or even the relatively accurate valuations on which the market place might be willing to act are not sufficient. Only where the conditions on which the extent of invasion of the corpus depends are fixed by reference to some readily ascertainable and reliably predictable facts do the amount which will be diverted from the charity and the present value of the bequest become adequately measurable. And, in these cases, the taxpayer has the burden of establishing that the amounts which will either be spent by the private beneficiary or reach the charity are thus accurately calculable."