Court Opinion

ID: 9639961
Source: CourtListenerOpinion
Date Created: 2023-08-22 16:53:40.080857+00
Date Added: 2024-06-11T08:15:06.372566
License: Public Domain

MAGRUDER, Circuit Judge
(concurring).
In my opinion the case at bar could be decided in favor of the taxpayer on a perfectly logical application — or perhaps extension — of the principle laid down in Ithaca Trust Co. v. United States, 279 U.S. 151, 49 S.Ct. 291, 73 L.Ed. 647.
In that case, the testator did not provide an indefeasible remainder to charity upon the death of the life tenant; there was a possibility that the corpus might be invaded for the use of the life tenant to the extent that the income of the estate should prove insufficient to maintain the life tenant in her existing scale of living. It appeared that at the time of the testator’s death this income “was more than sufficient to maintain the widow as required”. At the death of the testator the life tenant was then 61 years of age, and if she had lived 15 or 20 years more a shrinkage in the yield during that period might have necessitated an invasion of the principal. As a matter of fact she died within a few months, even before the time for computing and returning the estate tax. But the court held that the value of the gift over to charity must be determined as of the date of the testator’s death, and that this is calculated by deducting from the value of the corpus ultimately going to charity the value of the wife’s life estate estimated by the mortality tables. This method of computation leaves out of account the contingency that the principal might be invaded for the use of the life tenant, a contingency which a prospective purchaser of the charitable corporation’s future interest would hardly ignore. Cf. United States v. Provident Trust Co., 291 U.S. 272, 286, 54 S.Ct. 389, 78 L.Ed. 793. Apparently the Supreme Court considered that the contingency should be left out of account because as a practical matter the chances of its happening were negligible. It said (279 U.S. at page 154, 49 S.Ct. at page 291, 73 L.Ed. 647) : “There was no uncertainty appreciably greater than the general uncertainty that attends human affairs.” Whether the contingency is negligible might depend upon a variety of factors, e. g., the margin of safety by which the present income exceeds the widow’s maintenance needs, the age and state of health of the widow, the nature of the trust property out of which the income is to be raised, the honesty and competence of the trustees. It may well be argued that the calculation of the estate tax ought not to depend upon a weighing of such variable factors.
In the case before us there is also a contingency provided in the will under which the principal may be invaded for the use of the life tenant. Theoretically the contingency is broader and the chance of its occurrence less capable of estimation than in the Ithaca Trust case, because it depends upon the life tenant’s desires as well as her needs. But practically speaking, upon the facts in the present record as compared with the facts in the Ithaca Trust case, the •charitable remaindermen are at least as well assured — perhaps somewhat better assured — of receiving the corpus intact upon the death of the life tenant. Here the life tenant is “an old-fashioned New England lady” who has always lived very simply, who at the death of the testator was 93 years old and bedridden, whose income, as found by the court below, is “greatly in excess” of her needs, who has provided in her will for the same two charities which were the objects of her husband’s bounty. She might, conceivably, blossom out with a desire to buy a yacht or a lavish country estate, but this possibility would hardly cause grave concern to the remaindermen.
But though the charities here may be well assured as a practical matter of receiving the whole of the corpus upon the death of the life tenant, I agree with the argument of the Government that “Cases of this type must be governed by the existence of the power rather than the likelihood of its use, as shown by the extrinsic *235circumstances, varying, of course, m each particular case". The testator can save estate taxes by giving an indefeasible remainder to charity upon death of the life tenant. But if he chooses to make the gift over contingent upon the non-exercise by the life tenant of such a broad power as here conferred, it does not seem unfair to deny the deduction. The Ithaca Trust case must be considered as going to the very verge of the law, and in the absence of further guidance from the Supreme Court we ought not to extend the doctrine of that case, however logical and appealing the extension might be under the particular facts. See Pennsylvania Co. for Insurances, etc. v. Brown, D.C., 6 F.Supp. 582, affirmed per curiam, 3 Cir., 70 F.2d 269.