*2952 The will of the decedent provided that the income from certain property and specific amounts of money should be paid to the widow of the decedent during her lifetime and that at her death such property and specific amounts of money should be paid over to designated corporations, organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes. In determining the amount of the deduction for such bequests the respondent reduced the value claimed by the petitioners by the value of the life estate as computed from mortality tables. Held that the determination of the respondent is not shown to be erroneous in result.
*1317 This is a proceeding for the redetermination of a deficiency in estate taxes under the Revenue Act of 1921, in the amount of $6,656.09.
It is alleged that the respondent erred in determining the net estate subject to tax in failing to deduct from the gross estate the amount of $175,000 bequeathed by the will to six charitable institutions and corporations*2953 in the State of New York, and $7,859.59, the value of porcelains bequeathed to the Louvre Museum, Paris, France.
*1318 FINDINGS OF FACT.
The petitioners are the executors of the estate of Alfred S. Heidelbach, deceased, who died on February 1, 1922, leaving a last will and testament and codicil thereto which were duly admitted to probate in the Surrogate's Court, New York County, New York, on March 22, 1922.
The will provided, so far as material here, as follows:
SIXTH: I give, devise and bequeath all the rest, residue and remainder of my estate, real and personal and mixed and wheresoever situated, including any property over which I may have any power of appointment or disposition whatsoever, to HENRY R. ICKELHEIMER, CHARLES EINSIEDLER and EDMOND E. WISE, all of the Borough of Manhattan, City, County and State of New York, in trust nevertheless, for the following uses and purposes, to hold, invest, reinvest, and keep the same invested; to collect the rents, issues and profits thereof and to pay over the net income therefrom to my beloved wife JULIE HEIDELBACH during the term of her natural life and upon her death to pay over:
(A) To the persons hereinafter named, *2954 the sums set opposite their respective names, which sums I give and bequeath to such persons respectively:
(Here the will sets out fourteen paragraphs of specific bequests of money to individuals, followed by bequests of $5,000 each to five institutions of the City of New York, under sub-paragraph B, and $150,000 for the endowment of a hospital ward under sub-paragraph C.)
In the event that my residuary estate shall not be sufficient to pay in full all legacies bequeathed in this, the Sixth paragraph of my Will, I direct that the bequest marked Number "1" in Sub-division "(A)", to my niece, Emma B. Bonn, be first paid in full, and that the other legacies in Sub-divisions "(A)", "(B)" and "(C)" of the Sixth paragraph, be abated proportionately.
(D) If there be any sums remaining, I desire that the same may be distributed at the discretion of the majority of my said trustees, in such amounts and in such proportions and at such times as they see fit, amongst any needy relatives or amongst such charitable, educational or eleemosynary institutions as they may select, and I request, without however making the same binding upon them, that a part thereof be given to the United States*2955 Mortgage & Trust Company, to be held by or for the Community Trust of New York, and at the discretion of its Distributing Committee, to be devoted to the care or education of children in the City of New York, and to be known as the "Alfred and Julie Heidelbach Fund."
* * *
In a codicil to his will dated February 1, 1921, Alfred S. Heidelbach provided as follows:
I, the undersigned, ALFRED S. HEIDELBACH, declare the following to be a codicil to my Last Will and Testament in the French holographic form and language, dated July eighth 1920. By my said Will, I bequeath my collection of porcelains to the UNION CENTRALE DESARTS DECORATIFS, Palais de Marsan, Louvre, Paris. on condition that said collection shall bear the name of "Donation Alfred et Julie Heidelbach."
By this codicil, I revoke said bequest and in lieu and place thereof, I declare as follows:
I bequeath my collection of porcelains to my wife Julie Heidelbach, nee Picard, for her use and enjoyment during her life time, exempting her from *1319 giving security or making any inventory, and I bequeath the remainder of said collection to the Union Centrale des Arts Decoratifs, Palais de Marsan, Louvre, Paris, *2956 on condition that said collection shall bear the name of "Donation Alfred et Julie Heidelbach."
Pursuant to the provisions of the Revenue Act of 1921, the executors duly filed a return for Federal estate taxes in the estate of Alfred S. Heidelbach, deceased, and listed as deductions in Schedule K, the amount of the bequests to charitable institutions as follows:
| Hebrew Benevolent & Orphan Asylum, New York, N.Y | $5,000.00 |
| Institution for Improved Instruction of Deaf Mutes, New York, N.Y | 5,000.00 |
| Children's Charitable Union, New York, N.Y | 5,000.00 |
| Sanitarium for Poor Children, New York, N.Y | 5,000.00 |
| Lenox Hill Hospital, New York, N.Y | 5,000.00 |
| Mt. Sinai Hospital, New York, N.Y | 150,000.00 |
| Bequest of porcelains to the Louvre Museum, Paris, France, 94,850 (Rate of exchange Feb. 1, 1922, 8.31) | 7,859.59 |
| Total | 182,859.59 |
In the audit of the return dated March 29, 1925, the Commissioner disallowed the sum of $182,859.59, deductions for charitable bequests as set forth in Schedule K, in the return filed by the executors, and allowed as a deduction for charitable bequests pursuant to paragraph "Sixth" of the last will and testament, and the codicil thereto, only*2957 the sum of $116,298.71. The Commissioner held that as the widow was to receive a life estate in the respective amounts and specific property bequeathed to charities, the amount of deduction for bequests to charities should be only the value of the remainder interest at the time of the death of the decedent according to the mortality tables, to wit, the sum of $116,298.71.
OPINION.
SIEFKIN: The question to be decided is whether the respondent erred in failing to allow as a deduction from the gross estate of the decedent the full amount of $182,859.59 claimed by the petitioners as bequests to corporations organized and operated exclusively for religious, charitable, scientific, literary or educational purposes. This includes specific bequests of money totaling $175,000 and a bequest of certain porcelains valued by petitioner at $7,859.59. The respondent has reduced the amount of the deduction to $116,298.71 by deducting from $182,859.59 the value of the life estate of the widow based upon mortality tables.
Section 403(a)(3) of the Revenue Act of 1921 provides:
That for the purpose of the tax the value of the net estate shall be determined -
(a) In the case of a resident, *2958 by deducting from the value of the gross estate -
* * *
(3) *1320 The amount of all bequests, legacies, devises, or transfers, except bona fide sales for a fair consideration in money or money's worth, in contemplation of, or intended to take effect in possession or enjoyment at or after the decedent's death, to or for the use of the United States, any State, Territory, any political subdivision thereof, or the District of Columbia, for exclusively public purposes, or to or for the use of any corporation organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, including the encouragement of art and the prevention of cruelty to children or animals, 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, charitable, scientific, literary, or educational purposes. This deduction shall be made in case of the estate of all decedents who have died since December 31, 1917.
The petitioners contend that, where a decedent bequeaths definite fixed sums of money to charitable and public institutions, the payment of which is merely*2959 postponed until after the termination of the life of a beneficiary entitled to the income of the funds during her life, there should be allowed as a deduction the full amount of the sum so bequeathed, without any reduction on account of the value of the intervening life estate.
Section 40 of chapter 52 of the New York Laws of 1909 provides:
A future estate is either vested or contingent. It is vested when there is a person in being, who would have an immediate right to the possession of the property, on the determination of all the intermediate or precedent estates. It is contingent while the person to whom or the event on which it is limited to take effect remains uncertain.
Section 11 of chapter 45 of the New York Laws of 1909 provides, with some qualifications, that limitations of future or contingent interests in personal property are subject to the same rules prescribed in relation to future estates in real property.
It is apparent that the corporations took vested remainders at the time of the death of the decedent. The value of such remainders is properly deductible from the gross estate. *2960 Mercantile Trust Co., Executor,13 B.T.A. 85">13 B.T.A. 85.
The estate tax is a tax upon the passing of the estate of the decedent and the value of the estate must be determined as of the time of the death of the decedent. The corporations did not receive the absolute ownership of the property in question, but were entitled to the corpus only after the expiration of the life estate of the widow. In such a case it is proper to value the remainder by reducing the amount to be received by an amount representing the delayed receipt of the bequest by the charities. See Dugan v. Miles,292 Fed. 131; United States v.. Farr's Executor,196 Fed.996; and Simpson v. United States,252 U.S. 547">252 U.S. 547.
Whether the remainder going to the charities is to be valued by reducing the present value to future value, which we regard as *1321 preferable to the method used by the respondent, it is certain that the deduction for bequests to charities must be less than the amount of the money at the date of the decedent's death. We are not able to say that the amount allowed by the respondent is erroneous.
Reviewed by the Board.
Judgment will*2961 be entered for the respondent.