Bridgeport-City Trust Co. v. Commissioner

*1184OPINION.

Leech:

The question in this case is whether the petitioner, surviving trustee of the testamentary trust established by the will of I. DeVer Warner, is entitled to deduct that portion of the income of the trust which was distributed to Eva Follett' Warner, widow of testator, under the provisions of the will.

The provisions of the Revenue Acts of 1924 and 1926 here applicable are contained in section 219 and are identical. They are quoted in the margin.1

*1185Petitioner contends that under the will here involved the gift to the widow by item fifth of the will was a gift of income to be derived from a particular fund, which fund was earmarked for that purpose, composed of securities named by the will and codicils, and that the provision in item ninth is a separate, secondary, and subordinate gift and a bequest of capital intended to be effective only in case the income from the fund in any year is less than $50,000. Irwin v. Gavit, 268 U. S. 161; Heiner v. Beatty, 17 Fed. (2d) 743; affd., 276 U. S. 598, on authority of Irwin v. Gavit; and Helvering v. Butterworth, 290 U. S. 365, are cited as most closely resembling this case and as supporting petitioner’s contention.

Kespondent contends that under the terms of the trust established by the testator for the widow, the latter was an ordinary legatee since the payment of $50,000 per annum to her was to be made at all events and was not dependent upon income, citing Helvering v. Pardee, 290 U. S. 370.

We agree with respondent. The disposition of our single inquiry is obviously controlled by the intent of the testator. This is to be ascertained here, not from item fifth, item ninth, or any other separate provision of the decedent’s will, but from that will construed as one entirety. Travers v. Reinhardt, 205 U. S. 423; Hardenbergh v. Ray, 161 U. S. 112. Items of the will, other than the fifth and ninth, provide a home for decedent’s widow, ample provision for his children, by the bequest to them of the residue of his large estate, and, in addition thereto, bequeath, share and share alike, the income, as such, if the trust estate should have income in excess of the amount of payments to be made to decedent’s widow. The ninth item describes the bequest to the widow as an annuity. Both the fifth and ninth items deal entirely with the same trust estate and, together, declare the testator’s intention that his widow shall be paid a specified “ sum and amount ” annually “ at all events ” as a charge upon the whole trust estate, regardless of whether the latter had income or not. Clearly, an annuity of $50,000 to the widow, payable at all events, was thus intended and granted. Helvering v. Pardee, supra; Burnet v. Whitehouse, 283 U. S. 148.

Neither the fact that the widow elected to accept the provisions of the will, by virtue of which the disputed payments were made, in Jieu of her statutory rights, nor the present adventitious circumstance of actual payment, wholly from income, during the pending tax years, affects that conclusion. Helvering v. Pardee, supra.2 Nor does the fact that the present trust corpus did not include all of the testator’s estate, change its character as corpus here, and so, does not disturb that result. Burnet v. Whitehouse, supra; Boston Safe Deposit & *1186Trust Co. v. Commissioner, 66 Fed. (2d) 179; certiorari denied, 290 U. S. 700; Warner v. Commissioner, 66 Fed. (2d) 403; certiorari denied, 290 U. S. 688.

We conclude that the widow was the legatee of an annuity, a charge upon the whole trust estate, both income and corpus; that the payments in question to her were made by the trustee, not as a payment of income, as such, but in discharge of that legacy, and, accordingly, upon the authority of the Pardee and Whitehouse cases, supra, were not deductible from the gross income of the trust estate in computing its taxable income.

Eeviewed by the Board.

Decision toill be entered pursuant to Rule 60.

Sec. 21Í). (a) The tax imposed by Parts I and II of this title shall apply to the income of estates or of any kind of property held in trust, including — ■

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(2) Income which is to he distributed currently by the fiduciary to the beneficiaries, * * *
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(b) Except as otherwise provided in subdivisions (g) and (h), the tax shall be computed upon the net income of the estate or trust, and shall be paid by the fiduciary. The net income of the estate or trust shall be computed in the same manner and on the same basis as provided in section 212, except that—
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(2) There shall be allowed as an additional deduction in computing the net income of the estate or trust the amount of the income of the estate or trust for its taxable year which is to be distributed currently by the fiduciary to the beneficiaries, * * * but the amount so allowed as a deduction shall be inoluded in computing the net income of the beneficiaries whether distributed to them or not. ♦ * *

The dissenting opinion of Chief Justice Hughes expresses the contrary view on the latter point, which is answered in the majority opinion.