Source: https://case-law.vlex.com/vid/348-u-s-187-606541450
Timestamp: 2020-03-28 23:54:59
Document Index: 631594145

Matched Legal Cases: ['§ 812', '§ 81', '§ 812', '§ 81', '§ 81', '§ 81', '§ 81', '§ 81', '§ 81', '§ 81', '§ 812', '§ 81']

348 U.S. 187 (1955), 24, Commissioner v. Estate of Sternberger - Federal Cases - Case Law - VLEX 606541450
348 U.S. 187 (1955), 24, Commissioner v. Estate of Sternberger
Docket Nº: No. 24
Citation: 348 U.S. 187, 75 S.Ct. 229, 99 L.Ed. 246
Party Name: Commissioner v. Estate of Sternberger
Case Date: January 10, 1955
348 U.S. 187 (1955)
75 S.Ct. 229, 99 L.Ed. 246
Estate of Sternberger
Argued October 19-20, 1954
In determining a net estate for federal estate tax purposes, a deduction may not be made under § 812(d) of the Internal Revenue Code on account of a charitable bequest that is to take effect only if decedent's childless 27-year-old daughter dies without descendants surviving her and her mother. Humes v. United States, 276 U.S. 487. Pp. 187-200.
(a) Section 81.44 of Treasury Regulations 105 does not authorize the deduction here claimed, and § 81.46 prohibits it. Pp. 190-199.
The issue here is whether, in determining a net estate for federal estate [75 S.Ct. 230] tax purposes, a deduction may be made on account of a charitable bequest that is to take effect
Louis Sternberger died testate June 25, 1947. His federal estate tax return discloses a gross estate of $2,406,541.71 and, for the additional estate tax, a net estate of $2,064.346.55. It includes assets owned by him at his death and others held by the Chase National Bank, respondent herein, under a revocable trust created by him. As the revocable trust makes provisions for charity that are, for our purposes, identical with those in the will, this opinion applies to both dispositions.
At decedent's death, his wife and daughter survived him. His wife was then 62, and his daughter 27. The latter married in 1942, was divorced in 1944, had not remarried and had not had a child.
In the estate tax return, decedent's executor, respondent herein, deducted $179,154.19 from the gross estate as the present value of the conditional bequest to charity of one-half of the residue. Respondent claimed no deduction for the more remote charitable bequest of the other half of the residue. The Commissioner of Internal Revenue disallowed the deduction and determined a tax
deficiency on that ground. The Tax Court reversed the Commissioner. 18 T.C. 836. The Court of Appeals for the Second Circuit affirmed the Tax Court, 207 F.2d 600, on the authority of Meierhof v. Higgins, 129 F.2d 1002. To resolve the resulting conflict with the Court of Appeals for the First Circuit in Newton Trust Co. v. Commissioner, 160 F.2d 175, we granted certiorari, 347 U.S. 932.
The controlling provisions of the Revenue Code are in substantially the same terms as when they were first enacted in 1919,2 and are as follows:
For the purpose of the tax, the value of the net estate shall be determined . . . by deducting from the value of the gross estate --
(d) TRANSFERS FOR PUBLIC, CHARITABLE, AND RELIGIOUS USES. -- 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 concedes that the corporations named in the will qualify as charitable corporations under the statute. There is no doubt, therefore, that, if the bequest to them had been immediate and unconditional, its value would be deductible. The question before us is what, if any, charitable deduction may be made despite (1) the deferment of the effective date of the charitable bequest until the deaths of both decedent's wife and daughter and (2) the conditioning of the bequest upon a lack of descendants of decedent's daughter surviving
at that time. We find the answer in the Treasury Regulations, which are of longstanding and strengthened by reenactments of I.R.C., § 812(d), since their promulgation.3
§ 81.44 Transfers for public, charitable, religious, etc., uses. . . .
(d) If a trust is created for both a charitable and a private purpose, deduction may be taken of the
value of the beneficial interest in favor of the former only insofar as such interest is presently ascertainable, and hence severable from the interest in favor of the private use. § 81.10 indicates the principles to be applied in the computation of the present worth of deferred uses, but such computation will not be made by the Commissioner on behalf of the executor. Thus, if money or property is placed in trust to pay the income to an individual during his life, or for a term of years, and then to pay or deliver the principal to the charitable corporation, or to apply it to a charitable purpose, the present value of the remainder is deductible. To determine the present value of such remainder, use the appropriate factor in column 3 of Table A or B of § 81.10. If the present worth of a remainder bequeathed for a charitable use is dependent upon the termination of more than one life, or in any other manner rendering inapplicable Table A or B of § 81.10, the claim for the deduction must be supported by a full statement, in duplicate, of the computation of the present worth made, in accordance with the principle set forth in § 81.10, by one skilled in actuarial computations.
(Emphasis supplied.) 26 C.F.R.
The very explicitness of the above provisions emphasizes their restriction to "the computation of the present worth" of assured bequests such as are the subject of each of the illustrations and cross references in the section.
The statute restricts charitable deductions to bequests to corporations "organized and operated exclusively for . . . charitable . . . purposes."5 (Emphasis supplied.) Likewise, the above section of the regulations requires that the deductible value of "the beneficial interest in favor of" the designated charitable purpose be "severable from the interest in favor of the private use." There is no suggestion in the statute or in § 81.44 of a deduction of funds other than those later to be used exclusively for charitable purposes.
Here, also, the regulations in their earliest form, in 1919, were unequivocally restrictive.6 It was only after court
decisions had demonstrated the need for doing so7 that the restrictions were restated so as expressly to permit deductions of bequests assured in fact, but conditional in form.
§ 81.46 Conditional bequests. (a) If as of the date of decedent's death the transfer to charity is dependent upon the performance of some act or the happening of a precedent event in order that it might become effective, no deduction is allowable unless the possibility that charity will not take is so remote as to be negligible. If an estate or interest has passed to or is vested in charity at the time of decedent's death and such right or interest would be defeated by the performance of some act or the happening of some event which appeared to have been highly improbable at the time of decedent's death, the deduction is allowable.
(b) If the legatee, devisee, donee, or trustee is empowered to divert the property or fund, in whole [75 S.Ct. 233] or in part, to a use or purpose which would have rendered it, to the extent that it is subject to such power, not deductible had it been directly so bequeathed, devised, or given by the decedent, deduction will be limited to that portion, if any, of the property or fund which is exempt from an exercise of such power.
Sections 81.44 and 81.46 fully implement § 812(d) of the code. In their early forms, they were obviously mutually
exclusive and easily reconcilable. The predecessor of § 81.46 confined charitable deductions to outright unconditional bequests to charity. It expressly excluded deductions for charitable bequests that were subject to conditions, either precedent or subsequent. While it encouraged assured bequests to...