1942 BTA LEXIS 883 | B.T.A. | 1942
Lead Opinion
OPINION.
The Commissioner determined a deficiency in estate tax of decedent’s estate in the sum of $956.09. The first issue is whether or not furniture, clothing, and an automobile set off to decedent’s widow in accordance with a New York statute is includible in decedent’s gross estate. The second issue is whether or not respondent correctly computed the amount of a deduction for a charitable bequest.
Most of the facts were stipulated and are hereby adopted as a part of our findings. Of the stipulated facts we set forth herein only such facts as are material to our discussion of the issues. Additional facts were adduced from evidence presented at the hearing.
Leonard S. Waldman, hereinafter referred to as decedent, died April 4,1937, leaving a last will and testament which provided, after several specific bequests, that “all the rest, residue and remainder” of decedent’s estate should be placed in trust for his wife, Eleanor Elsie Waldman, until her death or remarriage. The will further provided:
It is my will, and I hereby direct, that the devise and bequests herein made and given to my said wife, and the trusts created for her benefit, shall be free from any and all legacy, transfer, inheritance, estate or succession taxes, State or Federal; and that all taxes, which may be payable in respect to said devise and bequests to my said wife, and to the estate given in trust for her benefit, shall be paid by my Executor out of my residuary estate, and that my residuary estate be charged with the payment thereof.
The will provided that at the death or remarriage of decedent’s wife “all the rest, residue and remainder” of the estate should be placed in trust for the Albany Jewish Community Center, a charitable institution. At the time of decedent’s death his widow’s age was 53 years, 7 months, and 6 days. The will was duly admitted to probate and letters testamentary were duly granted on April 26, 1937.
The estate tax return for the estate of Leonard S. Waldman was filed with the collector of internal revenue for the fourteenth district of New York, at Albany, New York.
Pursuant to waiver of restriction on assessment and collection, a deficiency of $488.36 was assessed against decedent’s estate and was paid on September 6, 1939. This amount is a part of the deficiency under consideration in the present proceeding.
The first issue is whether or not the personal property set off to decedent’s widow, in accordance with state statute, constitutes a part of decedent’s gross estate. We think that there is no doubt that the amounts in question were a part of the gross estate of decedent as defined by section 302 (a) of the Revenue Act of 1926, as amended. Estate of Louis M. Faber, 40 B. T. A. 1070.
Nor are the items proper deductions from gross estate. Section 303 (a) (1) (E) of the Revenue Act of 1926, as amended by section 805 of the Revenue Act of 1932 and section 403 (a) of the Revenue Act of 1934, provides that there may be deducted from the value of the gross estate amounts “reasonably required and actually expended for the support during the settlement of the estate of those dependent upon the decedent * * *.” Petitioner contends that although the New York statutes provide for no such payments for support, the amounts set apart to decedent’s widow constitute payments in lieu of payments for support and should be deductible from the estate. We do not agree. It is difficult to comprehend that furniture, an automobile, and $25 of clothing might be “amounts reasonably required and actually expended for the support” of a widow. Respondent is sustained on this issue.
The second issue concerns the computation of the deduction from decedent’s gross estate "of the charitable devise made by decedent to the Albany Jewish Community Center. Petitioner contends that respondent erred in his application of section 303 (a) (3) of the Revenue Act of 1926, as amended by section 807 of the Revenue Act of 1932,
Decedent directed that the devise and bequests to his wife be free from burden of estate and inheritance taxes and that all taxes be paid out of his residuary estate. We interpret this to mean that the executor should pay the taxes out of what was left after debts, expenses, and specific bequests were paid. It seems apparent this could be accomplished only by payment of the taxes from that which formed the corpus of the trust for decedent’s widow and would later form the corpus of the trust for charity. In any event, the testamentary directions of decedent bring into play the provision of section 303 (a) (3), as amended, requiring the deduction for the amount of the charitable devise to be reduced by the amount of estate or inheritance taxes payable from such devise.
Eespondent contends that the proper method of computing the deduction is to value the charitable devise based upon a life interest in the widow aged 54 years and subtract from that amount the amount of the taxes payable. This approach, however, overlooks the fact that the taxes are actually payable from the residue which forms both the corpus of the trust for the widow and later the corpus of the trust for the charity. It must be apparent that the present case of a life estate imposed upon the amount which will eventually go to the charity differs from a case where there are specific devises or bequests not carved out of the estate as a whole.
We are of the opinion that the intent of Congress may be carried out only by adopting petitioner’s view of this matter. We believe that the result reached is equitable and note no case or administrative ruling which would indicate the advisability of a contrary view. The residue which makes up the corpus of the trusts should be reduced by the amount of the taxes payable and then the value of the charitable devise as of the date of death of decedent should be computed. Petitioner is sustained on this point.
We now come to the actuarial problem of computation of the value of the charitable devise as of the date of death of decedent. Petitioner contends that the value of the devise should be determined by first valuing the life estate and then subtracting that value from the value of the total residuum at the date of death, the remainder being the value of the devise to charity. Inasmuch as the problem here is to compute the value as of the date of decedent’s death of the remainder to charity, we think it clear that the proper method, which was employed by respondent, is to compute the value of the charitable devise subject to the life estate. We have previously approved this treatment of the problem. William Nelson Cromwell et al., Executors, 24 B. T. A. 461; cf. Henry R. Ickelheimer et al., Executors, 14 B. T. A. 1317. Thus respondent was correct in employing a conversion factor of .52757, which under respondent’s tables represents the present value of one dollar due at the end of the year of death of a person aged 54 years.
Decision will he entered u/nder Rule 50.
Sec. 303. For the purpose of the tax the value of the net estate shall be determined—
(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 * * * charitable * * * purposes * * *. If the tax imposed by section 301, or any estate, succession, legacy, or inheritance taxes, are, either by the terms of the will, by the law of the Juris