1933 BTA LEXIS 1132 | B.T.A. | 1933
Lead Opinion
At the outset petitioners assert this Board is concluded in its interpretation of decedent’s will by the judgment of the probate court of St. Louis, where it was probated. We do not agree.
It may be conceded that “ the right to succeed to the property of the decedent depends upon and is regulated by state law (Knowlton v. Moore, 178 U.S. 41, 57, and it is obvious that a judicial construction determines not only legally but practically the extent and character of the interests taken by the legatees.” Utterheart v. United States, 240 U.S. 598, cited by petitioners.
The so-called estate tax, by virtue of which this disputed deficiency arises, is not a succession tax, but an excise on the transfer of the decedent’s estate at his death. The rights of the parties hereto are determined entirely by the will of decedent. They accrued finally when the will became effective, the date decedent died, December 18, 1929. Knowlton v. Moore, supra: Y.M.C.A. v. Davis, 247 U.S.
Petitioners claim a deducton of an asserted gift to an admittedly charitable corporation from decedent’s gross estate in arriving at the statutory net estate subject to Federal estate tax.
The statute, the benefit of which is asserted, defines such deductible gifts and limits the means to effect them.
The petitioner’s novel position is that the amount of the controverted gift is deductible because it was effectively made to the con-cededly charitable corporation by decedent’s will by the granting therein of a discretionary special power of appointment and its later exercise. The power is said to be special because of the asserted inferential limitation on its use for charities.
The burden of the argument is that such a power of appointment as is said to be present here, although invalid as raising a trust, is here effective because the donees of this discretionary power are in existence, and may make those things certain which are not made so by the will, citing the maxim "id certum est guod cerium reddi potest T They misconceive the philosophy and therefore the effect of the statute, the protection of which they seek.
It is this altruistic philosophy, clearly effected by the statute, that not only contemplates and justifies the exclusion, from this deductible class, of gifts effected by the exercise of a discretionary power of appointment, but properly grounds and harmonizes the interpretative judicial superstructure erected thereon. This basic rationale is consistent with and practically disposes of the authorities cited by petitioners.
Undoubtedly Congress by the particular provision under discussion intended to favor gifts for charitable objects, but, as was aptly stated by Chief Justice Taft in Y.M.C.A. v. Davis, supra, it “ was
Thus, in logically applying this formula, the element of absolute certainty was emphasized not only in the mechanics the testator was permitted to use, but by the adding of the word “ exclusively ” this same condition precedent of certainty was applied to the testator’s intention to limit the gift to the secured class. The sine qua non of de-ductibility is that the gift should pass by the will, not within the discretion of anybody, but certainly and absolutely to one or more of the described corporations or through trustees, for the named purposes. St. Louis Union Trust Co. et al., Executors, 21 B.T.A. 1201; reversed in part on other grounds by the United States Circuit Court of Appeals, 8th Circuit, St. Louis Union Trust Co. v. Burnet, 59 Fed. (2d) 922; Beekman's Estate, 232 N.Y. 363; 134 N.E. 183; John Markle et al., Executors, 28 B.T.A. 201. The actual transfer of the gift to the hospital by the executors was, at most, only indicative of the interpretation the executors placed upon the instrument. Cf. Ithaca Trust Co. v. United Spates, supra; St. Louis Union Trust Co. v. Burnet, supra; John Markle et al., Executors, supra.
When must this condition of certainty occur?
The deficiency here arises from a Federal estate tax act, which has its own criteria, irrespective of local law, Weiss v. Wiener, 279 U.S. 333, and is an excise on the transfer from decedent of rights extinguished by his death. It is imposed at death and before the beneficiary receives the gift. So, continuing the logical development of judicial interpretation of this controlling statutory provision, every fact must have been known or ascertainable then, at the imposition of the tax, to bring the gift within the protection of the questioned section. Knowlton v. Moore, supra; Y.M.C.A. v. Davis, supra; New York Trust Co. v. Eisner, supra; Ithaca Trust Co. v. United States, supra; Edwards v. Slocum, supra. Cf. Hadley v. Forsee, supra. It is immediately apparent that the exercise of a discretionary testamentary power of appointment could not satisfy this requisite.
In fact, if it were otherwise, the incongruous but logical result would be that gifts provided for by such discretionary powers would be deductible whether or not completed by the exercise of the power.
But, assuming the correctness of petitioner’s theory, in the abstract, is it applicable here? Does the present will contain a valid power of appointment? This turns upon the construction of the will before us. The intention of the testator is a cardinal rule in the construction of the will. Smith v. Bell, 6 Pet. 68; Gibson v. Gibson, 239 Mo. 490; 144 S.W. 710; R.S. 1909, sec. 583. That intention must be ascertained from the will as a whole, giving effect to all words therein in their ordinary sense, unless the testator manifested an intention otherwise. Travers v. Reinhardt, 205 U.S. 423; Lane v. Vick, 3 How. 464; Hardenbergh v. Ray, 151 U.S. 112; Gibson v. Gibson, supra.
Petitioners offer certain extrinsic testimony which appears in the stipulation of record. The objection of respondent to its admission is sustained and an exception noted to petitioner. Proper extrinsic evidence is admissible to remove certain ambiguities in a will. Gilmer v. Stone, 120 U.S. 586; Coulam v. Doull, 133 U.S. 216; Patch v. White, 117 U.S. 210; Wilkins v. Allen, 18 How. 385; cf. McCoy v. Bradbury (Mo., 1921), 235 S.W. 1047; Bond v. Riley, 296 S.W. 401, but never to control the construction of the will, Barber v. Pittsburgh Ft. W. & C. R. Co., 167 U.S. 83, which must speak for itself in disclosing the intention of the testator. Mackie v. Storey, 93 U.S. 589.
The tendered extrinsic testimony of oral declarations of the testator as to his intentions is not admissible because, in our opinion, the present will is unambiguous. The offered testimony does not establish extrinsic facts, to resolve an ambiguity as was present in the cited cases, but is tendered for the purpose of showing the testator’s intention as to the disposition of his estate to be other than that expressed in his will. Cf. Barber v. Pittsburgh Ft. W. & C. R. Co., supra; Mackie v. Storey, supra.
Petitioners center their arguments upon the construction to be placed upon paragraph 3 of the will and practically ignore the rest of the instrument. The will as a whole shows clearly that the testator’s primary intention was to provide amply for his wife and two sons .to the full extent of his estate if that were necessary under
The testator’s intention as expressed in the third paragraph of the will is clear and unquestionably consistent with his primary intention to devise and bequeath his entire estate to his wife and two sons.
The fourth paragraph of the will gives the entire estate, absolutely, not only to the two sons claiming to be donees of the power of appointment, but to the testator’s widow, as well, who are the first takers. Petitioner then emphasized his intention to make his gift to these three loved ones absolute and practically foreclosed petitioner’s argument here, by categorical denial of any charitable gift in the will. In passing upon the character and extent of the estate created by will, the court in Gibson v. Gibson, supra, said: “ In what we have above expressed we do not wish to be understood as holding that what would otherwise be a fee in the first taker can be cut down to a less estate by ambiguous words, or words not as clear and strong as those in the devise to the first taker.” Cf. Schneider v. Kloepple, 270 Mo. 389; 193 S.W. 834, following the Gibson case. We find no inference or expression in the instrument limiting this fee estate. A fee estate is absolute and therefore a power of appointment attached thereto is without effect. The absolute estate of the widow and two children stands undisturbed. Cf. Gibson v. Gibson, supra; Leser v. Burnet, 46 Fed. (2d) 756; Schouler on Wills, 6th ed., vol. 2, sec. 1247.
In effect, the will here merely expresses a wish that the sons in their sole discretion donate, as their own, any amount they deem best in accordance with the testator’s wishes theretofore expressed in regard to charities. The sons were at liberty, subject to the acquiescence of their mother, to donate the entire net estate, or, if they chose, to make no donations, with the result that they and their mother would retain for themselves the entire net estate.
The action of respondent in disallowing the disputed deduction is sustained.
Reviewed by the Board.
Judgment will be entered under Rule 50.
[Revenue Act 1926.] Sec. 303. For the purpose of the tax the value of the net estate shall be determined—
-S * * * * * a*
(a) In the case of a resident, by deducting from the value of the gross estate—
(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, * * * or to a trustee or trustees * * * to be used * * * exclusively for * * * [such purposes].
Federal Estate Tam Acts:
1916 — See. 202. No provision.
1917 — See. 900. Merely increased the rates.
1918 — Sec. 402. Value of gross estate includes (d) to the extent of any interest subject at decedent’s death to any change through the exercise of a power, (e) extent of any property passing under general power of appointment exercised by decedent (1) by will, or (2) by deed executed in contemplation of or intended to take effect at or after death.
1921 — Sec. 402 (e). Same.
1924. — Sec. 302 (f). Same.
1926 — See. 302 (f). Same.
1928 — Makes no amendment of sec. 302 of 1926 Act.
1932 — Makes no amendment of sec. 302 of 1926 Act.