Court Opinion

ID: 8874864
Source: CourtListenerOpinion
Date Created: 2022-11-26 18:50:26.695278+00
Date Added: 2024-06-11T17:06:17.954007
License: Public Domain

WILLIAM F. SMITH, Circuit Judge
(concurring).
I am in full agreement with the majority opinion. However, I am prompted to express my personal views as to the inapplicability of the state court decision in the present controversy.
The testamentary trust here in question was excludable from the gross estate of the testator only if it met the requirements of § 812(d) of the Internal Revenue Code of 1939, as amended, 26 U.S. C.A. 812(d) 1939, which provides in pertinent part as follows:
“For the purpose of the tax the value of the net estate shall be determined, in the case of a citizen or resident of the United States by deducting from the value of the gross estate—
“ * * *
“(d) * * * The amount of all bequests, legacies, devises, or transfers * * * to a trustee or trustees, * * *, but only if such contributions or gifts are be used by such trustee or trustees, * * *, exclusively for religious, charitable, scientific, literary, or educational purposes. * * *.” (Emphasis supplied.)
What constitutes a trust “exclusively for charitable purposes,” within the meaning of the statute, is a question of federal law which should be determined without reference to the local' decision.
The will of Jacques Wolf was before the Superior Court of New Jersey, Chancery Division, in an action for construction brought by the executors, the appellants. Therein the court held that under State law the testamentary trust was “charitable” and not subject to the rule against perpetuities. But see Leeds v. Harrison, 9 N.J. 202, 87 A.2d 713, 720 (Sup.Ct.1952); Wilber v. Owens, 2 N.J. 167, 65 A.2d 843, 846 (Sup.Ct.1949). The decision of the Superior Court may not be regarded as conclusive as to the deductibility of the testamentary trust from the gross estate of the testator.
It is now firmly established that in matters of federal taxation, state law may control only when the federal revenue act, “by express language or necessary implication makes its operation dependent upon state law.” Lyeth v. Hoey, 305 U.S. 188, 194, 59 S.Ct. 155, 158, 83 L.Ed. 119 (1938). Accord, Estate of Putnam v. Comm’r., 324 U.S. 393, 65 S.Ct. 811, 89 L.Ed. 1023 (1945); United States v. Pel-zer, 312 U.S. 399, 402, 403, 61 S.Ct. 659, 85 L.Ed. 913 (1941) and cases hereinafter cited. Where property rights and legal interests therein are governed by *274and adjudicated under state law, the adjudication is conclusive as to the nature and extent of those rights and interests; the tax liability to which those rights and interests may be subject is then governed by federal law. Helvering v. Stuart, 317 U.S. 154, 161, 162, 63 S.Ct. 140, 87 L.Ed. 154 (1942); Morgan v. Commissioner, 309 U.S. 78, 80, 81, 60 S.Ct. 424, 84 L.Ed. 585 (1940); Blair v. Commissioner, 300 U.S. 5, 57 S.Ct. 330, 81 L.Ed. 465 (1937). This rule has been followed in several eases decided by this Court, Darlington’s Estate v. C.I.R., 302 F.2d 639 (1962); Beecher v. United States, 280 F.2d 202 (1960); Babcock’s Estate v. Commissioner of Internal Rev., 234 F.2d 837, 841 (1956); Gallagher v. Smith, 223 F.2d 218, 222, 223 (1955), but the case now before us and the cited cases have nothing in common either in law or in fact.
We are here concerned with a revenue provision nationwide in its application. Thereunder a testamentary trust is deductible from the testator’s estate for tax purposes if it is “exclusively for charitable purposes.” There is nothing in the statute to indicate that it was the Congressional intent to make deducti-bility dependent on local definitions, which vary widely from state to state. It is my opinion that the revenue provision contains its own criterion which must be given a uniform construction if the estate tax laws are to be fairly and equitably applied. See United States v. Pelzer; Lyeth v. Hoey, supra; Burnet v. Harmel, 287 U.S. 103, 110, 53 S.Ct. 74, 77 L.Ed. 199 (1932). Anything but a uniform construction would disrupt the national scheme of taxation.
It seems unnecessary to recite the terms of the trust except to note that its primary purpose was to provide monthly pensions to employees and former employees of Jacques Wolf & Co., in which the testator was the principal stockholder. The pensions were payable to those who qualified on the basis of age, years of service, etc., and regardless of need. Although an employees’ pension plan may be incidentally and remotely beneficial to the community, it may not be regarded as “exclusively for charitable purposes,” the statutory criterion of deductibility. See Restatement of the Law, Trusts 2d, § 375, Comment g; Duffy v. Birmingham, 190 F.2d 738, 740 (8th Cir. 1951); Underwriters Laboratories v. Com’r. of Int. Rev., 135 F.2d 371, 373 (7th Cir. 1943), cert. den. 320 U.S. 756, 64 S.Ct. 63, 88 L.Ed. 450. An employees’ pension plan is of direct economic benefit only to those who qualify under its terms.
The dissenting opinion of Chief Judge Kalodner rests solely on Gallagher v. Smith, supra. This case is distinguishable on its facts from the one now before us and the rule therein announced has no application here. In that case the question involved the taxability of a legal interest governed by and adjudicated under local law. Paragraph 4, supra.
Chief Judge BIGGS and Circuit Judges HASTIE and FREEDMAN, who concur in the majority opinion, also concur in this opinion.