Court Opinion

ID: 4632391
Source: CourtListenerOpinion
Date Created: 2020-11-21 03:11:42.129871+00
Date Added: 2024-06-11T07:57:53.186758
License: Public Domain

APPEAL OF ESTATE OF MINNIE L. JACKSON.Jackson v. CommissionerDocket No. 4219.United States Board of Tax Appeals3 B.T.A. 832; 1926 BTA LEXIS 2563; February 17, 1926, Decided Submitted November 20, 1925.  *2563  A charitable bequest of a specific sum payable in annual installments is not an annuity.  The gross amount thereof is deductible from the gross estate in determining the value of the net estate subject to the estate tax.  Bynum E. Hinton, Esq., for the taxpayer.  John F. Greaney, Esq., for the Commissioner.  MORRIS*833  Before MARQUETTE, MORRIS, GREEN, and LOVE.  This is an appeal from the determination of a deficiency in estate tax of $291.25, arising from the reduction of the amount of certain charitable bequests by the Pennsylvania inheritance tax and the reduction of the remainder to its present worth in determining the amount deductible from the gross estate.  FINDINGS OF FACT.  1.  Minnie L. Jackson died testate November 25, 1923, and at the time of her death was a resident of Pittsburgh, Pa.  Among the bequests in her will were four to admittedly educational and religious corporations within the purview of section 403 of the Revenue Act of 1921, as follows: Item 5.  I give and vequeath to Simpson College at Indianola, Iowa, the sum of Seven Thousand Five Hundred ($7,500.00) Dollars, to be paid by my Executor, hereinafter named, *2564  in three annual installments.  Item 6.  I give and bequeath to Ohio Weslyan University of Delaware, Ohio, the sum of Seven Thousand Five Hundred ($7,500.00) Dollars, to be paid by my Executor, hereinafter named, in three annual installments.  * * * Item 8.  I give and bequeath to the Women's Foreign Missionary Society, the General Women's Society of the Methodist Episcopal Church, Fifteen Thousand ($15,000.00) Dollars, to be paid by my Executor, hereinafter named, in three annual installments.  Item 9.  I give and bequeath to the Women's Home Missionary Society, the General Women's Society of the Methodist Episcopal Church, Fifteen Thousand ($15,000.00) Dollars, to be paid by my Executor, hereinafter named, in three annual installments.  By a codicil these amounts were reduced to $5,000, $5,000, $10,000, and $10,000, respectively, making an aggregate of $30,000.  2.  The Commissioner reduced the amount of the bequests by 10 per cent, on account of the Pennsylvania inheritance tax paid thereon, computed the present worth of the remainder under a 4 per cent annuity table, and thus determined the deductible value of the four legacies at $24,975.79.  DECISION.  The deficiency*2565  determined by the Commissioner is disallowed.  OPINION.  MORRIS: The bequests in question are admittedly charitable within the meaning of section 403(a)(3) of the Revenue Act of 1921.  The sole issue is whether the aggregate amount is deductible or *834  whether it should first be reduced by the amount of the inheritance tax of the Commonwealth of Pennsylvania and the value of the remainder computed by a certain annuity formula before deduction from the gross estate.  We have already held that the amount of the deduction for charitable bequests should not be reduced by the Pennsylvania inheritance tax.  . The only question is, therefore, whether the gross amount of the bequest or whether the present worth computed by an annuity formula should be deducted from the gross estate of the decedent.  The Commissioner contends that, since the amounts of the bequests were payable in three annual installments, they constitute annuities, and only the value thereof as of the date of the testatrix' death is deductible from the gross estate.  The pertinent parts of section 403 of the Revenue Act of 1921 are as follows: Sec. *2566  403.  That 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, * * * for the use of any corporation organized and operated exclusively for religious, * * * or educational purposes, * * * no part of the net earnings of which inures to the benefit of any private stockholder or individual, or to a trustee or trustees exclusively for such religious, * * * or educational purposes.  To our minds neither the unambiguous wording of the bequests nor the language of the statute warrants the strained and complicated construction placed upon them by the Commissioner.  The bequests simply read: I give and bequeath to * * * the sum of * * * to be paid by my Executor, hereinafter named, in three annual installments.  This simple language has none of the earmarks of an annuity, nor does it constitute the ordinary legal conception of an annuity.  Ruling Case Law defines an annuity as follows: The term annuity has been variously defined, but the definitions, although differing in form, are substantially alike in meaning.  In general terms, it is a*2567 yearly payment of a certain sum of money granted to another in fee for life or for years, and charging the person of the grantor only.  2 R.C.L. 2.  So, also, are annuities distinguished from legacies payable in installments: While by the terms of a devise the bequest of a certain amount may be made payable in stated installments at definite periods in the future, the postponement of the payment is presumed to be for the benefit of the legatee, and the bequest vests immediately upon the death of the testator. 2 R.C.L. 4.  (Italics ours.) In the bequests at issue there is nothing to indicate that the testatrix had in mind primarily "yearly payments of a certain sum of *835  money," but, on the contrary, she clearly expressed her intention of bequeathing a definite gross amount to certain charities, the manner of payment being merely incidental.  We are of the opinion that, under the language of the bequests and the provisions of the statute pertaining thereto, the gross amount of the bequests vested immediately upon the death of the testatrix and is deductible from the gross estate.