The opinion of the court was delivered by: WHIPPLE
This suit is presently before the court on cross motions for summary judgment. The action was brought for the refund of federal estate taxes paid in the amount of $23,532.88 plus statutory interest. Jurisdiction is predicated on 28 U.S.C. § 1346 (a) (1).
Many of the facts involved in this litigation have been stipulated and can be set forth as follows:
Ralph D. Waterman died testate on March 28, 1962 and Letters Testamentary were issued to his widow, Blanche G. Waterman. On July 15, 1966 the plaintiff was appointed executor, succeeding Blanche G. Waterman. Pursuant to the decedent's will the residue of his estate was left in trust. The plaintiff and Blanche G. Waterman were named co-trustees, with the plaintiff now being the sole surviving trustee, and being unrelated to any beneficiaries of the trust. The dispositive provisions of the trust require the net income to be paid to Blanche G. Waterman for her life and upon her death to be paid to Isabella G. Robbins, decedent's sister-in-law for her life, who at the time of decedent's death were 70 and 73 years of age respectively. Upon the death of the survivor of the two life tenants, the remainder of the trust property is to be distributed as follows: $101,000. to nine named individuals, if then living; (2) $85,000. to eight named charitable institutions; and (3) the balance of the trust, including lapsed legacies under (1) above, to three charitable institutions, namely, Massachusetts Institute of Technology (50%), Cottey College of Nevada, Missouri (30%) and the First Presbyterian Church of Perth Amboy, New Jersey (20%). The charitable institutions referred to in (2) and (3) above are all organizations described in section 2055 (a) of the Internal Revenue Code of 1954, gifts and bequests to which qualify for the estate tax charitable deduction. The value of the residue of decedent's estate was $229,000. If all of the individual beneficiaries had survived the two life tenants, (four of them entitled to $66,000. have already died) $101,000. would have been used for such bequests, leaving a balance of $128,000. to satisfy the specific charitable bequests of $85,000., with the balance remaining for the ultimate charitable residuary bequests. The value at the time of decedent's death of the interest passing to the charitable organizations, which is the amount claimed by the plaintiff as a charitable deduction and the amount disallowed by the Commissioner, was $87,804.09.
In order to understand why the Commissioner disallowed the charitable deduction, reference must first be made to section 2055 of the Internal Revenue Code of 1954 (§ 2055) and the corresponding Treasury Regulations on Estate Tax § 20.2055 (§ 20.2055). Section 2055 provides in pertinent part as follows:
"For purposes of the tax imposed by section 2001, 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 (including the interest which falls into any such bequest, legacy, devise, or transfer as a result of an irrevocable disclaimer of a bequest, legacy, devise, transfer, or power, if the disclaimer is made before the date prescribed for the filing of the estate tax return) --
(2) [To] or for the use of any corporation organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, including the encouragement of art and the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private stockholder or individual, and no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation."
The corresponding sections of the estate tax regulations clarify the above provisions. See Treasury Regulations on Estate Tax § 20.2055-2 (a) and (b).
Summarily, § 2055 provides for the deduction from a decedent's gross estate of the value of any bequest to or for the use of a charitable organization. Section 20.2055 interprets the above section to allow a deduction from a decedent's estate of the value of a charitable remainder interest if it is "presently ascertainable" at the time of the decedent's death and the possibility that the charity will not take it is "so remote as to be negligible."
It has been stipulated that the provisions governing the trust give the trustees no power to invade the corpus of the trust for the benefit of the life beneficiaries. From this the plaintiff contends that the trust instrument provides that only income can be distributed to the life beneficiaries and that, except for the specific bequests, the principal should go to charity. On the other hand, the Commissioner has asserted that the existence of certain discretionary administrative powers given to the trustees make the value of the interest passing to the charitable organizations presently unascertainable within the meaning of § 20.2055 and thus, not deductible.
The powers which the defendant refers to are contained in the Thirteenth and Fourteenth Articles of the trust instrument. These provisions state:
(a) The Trustees shall have the care, custody, and possession of the trust property and ...