*3283 In considering a deduction under section 403(a)(3), Revenue Act of 1921, where by will a remainder is left to a municipality after the death of a daughter without issue, it will be assumed that issue may at any time be born to the daughter to defeat the charitable remainder.
*275 This proceeding involves a deficiency of $30,419.89 in estate tax. The petitioners assert that the respondent erred in placing too high a value on certain shares of stock included in the gross estate, and in not allowing the deduction of the alleged value of a remainder interest bequeathed to a political subdivision of a State, to be used for public purposes.
FINDINGS OF FACT.
The petitioners are the executors of the will of Norton Eugene Hollis, of Craigville, Mass., who died October 12, 1923.
By his will and codicils thereto the decedent left all his property in trust for the following uses and purposes (portions not pertinent to this proceeding have been omitted):
FIRST: - To pay from the income to the Selectmen of the Town of Braintree, the sum of five*3284 hundred (500.00) dollars per year to be expended upon the Parks and Playgrounds in the Town of Braintree, the expenditure thereof to be approved by my trustees, and said sum to be paid annually so long as my son, E. Stanwood Hollis or my daughter, Lucia E. Farrington shall survive, or in case they should die leaving issue, then until the expiration of the trusts hereinafter set forth for the benefit of my son and my daughter and their issue.
SECOND: - To pay over to my son, E. Stanwood Hollis and my daughter, Lucia E. Farrington, the remaining net income of said trust fund during their natural lives, share and share alike, annually, in quarterly payments, or more frequently if my trustees deem it expedient, and at the death of either leaving no child or children, to pay to the survivor the remaining net income annually, in quarterly payments, or more frequently, if my said trustees deem it expedient, during the natural life of said survivor, and at the death of the last survivor of my son and daughter, neither leaving issue, then
To pay over out of the principal to the Town of Braintree the sum of ten thousand (10,000) dollars referred to in the SEVENTH CLAUSE of this will upon*3285 the Trust therein created, and the sum of one hundred thousand (100,000) dollars referred to in the FIFTH CLAUSE of this will, upon the Trust therein created, together with the legacies given in the THIRD and FOURTH CLAUSES of this will, provided the same have not heretofore been paid or lapsed, and thereafter to pay over the entire principal remaining in their hands to the Town of Braintree upon the Trusts set forth in the EIGHTH CLAUSE of said will.
Should my said son and daughter die, either or both leaving issue, then
1st. To pay over out of the principal to the Town of Braintree the sum of ten thousand (10,000) dollars referred to in the SEVENTH CLAUSE of this will upon the TRUST therein created, and also the sum of one hundred thousand ($100,00) dollars referred to in the FIFTH CLAUSE of this will upon the TRUST therein created, and also the legacies given in the THIRD and FOURTH CLAUSES of this will.
2nd. To divide the remaining principal in their hands as Trustees into two (2) equal parts and to pay over the net income therefrom as follows: -
(a) To any child or children of my son, E. Stanwood Hollis, the net income of one of said equal parts, share and share alike, *3286 and as each or any of said *276 children arrive at the age of thirty (30) years, then to pay over to such child or children of said E. Stanwood Hollis, his or her proportionate share of the principal, discharged of all trusts.
In the event that any child of my said son, E. Stanwood Hollis shall die before reaching the age of thirty (30) years, leaving no issue, then to pay over the income previously paid such deceased child of said E. Stanwood Hollis to the surviving child or children of said E. Stanwood Hollis, until they arrive at the age of thirty (30) years, and as each child arrives at the age of thirty (30) years, then to pay over to such child so arriving, its proportionate part of the principal previously held for the benefit of such deceased child, the issue of any deceased child to take its parent's share by right of representation, and at the death of the last survivor of such child or children of my son, E. Stanwood Hollis, none having reached the age of thirty (30) years, and none leaving issue, then to pay over to the Town of Braintree the principal sum previously held for the benefit of the children of said E. Stanwood Hollis, upon the trusts set forth in the*3287 EIGHTH CLAUSE of my will.
(b) To any child or children of my daughter, Lucia E. Farrington, the net income of the other one-half of said equal parts, share and share alike, and as each or any of said children arrive at the age of thirty (30) years, then to pay over to such child or children of my daughter, Lucia E. Farrington, his or her proportionate share of the principal, discharged of all trusts.
In the event that any child of my said daughter, Lucia E. Farrington, shall die before reaching the age of thirty (30) years, leaving no issue, then to pay over the income previously paid to such deceased child of said Lucia E. Farrington to the surviving child or children of said Lucia E. Farrington, until they arrive at the age of thirty (30) years, and as each child arrives at the age of thirty (30) years, then to pay over to such child so arriving, its proportionate part of the principal previously held for the benefit of such deceased child, the issue of any deceased child to take its parent's share by right of representation, and at the death of the last survivor of such child or children of my daughter, Lucia E. Farrington, none having reached the age of thirty (30) years, *3288 and none leaving issue, then to pay over to the Town of Braintree the principal sum previously held for the benefit of the children of said Lucia E. Farrington, upon the trusts set forth in the EIGHTH CLAUSE of my will.
In no event is any child by adoption to receive any benefit under this will.
THIRD: - In case my said daughter shall die, leaving no issue I direct that there shall be paid to her husband George E. Farrington, the sum of five thousand (5,000.00) dollars. FOURTH: - In case my said son, E. Stanwood Hollis, shall die leaving no issue, I direct that there shall be paid to his wife, Etta I. Hollis, the sum of five thousand (5,000.00) dollars.
FIFTH: - At the death of the last survivor of my said son and daughter, whether leaving issue or not, I direct that my Trustees shall pay over to the Town of Braintree aforesaid the sum of one hundred thousand ($100,000) dollars to be forever kept separate and apart by said town and to be known as the "N. E. HOLLIS PARK AND PLAY-GROUND FUND" the income thereof to be expended on the parks and play-grounds of the Town of Braintree and for the upkeep and care of the Fountain, now located in Storrs Square, so called, in said Braintree, *3289 and I direct that said Town of Braintree shall invest said fund so as to yield not less than three and 1/2 (3 1/2) per cent per annum on the total amount of said fund, and shall expend said income of said fund each and every year for the benefit of parks and play-grounds in said Town of Braintree, and for the unkeep and care of said Fountain.
*277 SIXTH: - In the event that my son and daughter should die one leaving issue and the other not leaving issue, I direct that my trustees shall pay over to the said Town of Braintree one-half (1/2) of the residue of my estate remaining (after the payment required for the legacies hereinbefore set forth and after the payment necessary for the establishment of the "N. E. HOLLIS PARK AND PLAY-GROUND FUND" hereinafter mentioned) to be used by said town for the purposes hereinafter set forth; the other one-half (1/2) of the residue to be held by said trustees, the income thereof to be paid to the child or children of my deceased child, until such child of my deceased child shall arrive at the age of thirty (30) years, then to pay over to such child his or her proportionate share of said one-half (1/2) of the residue free from all trusts. *3290 And if such child or all of such children of my deceased child shall be deceased leaving issue before the youngest of such children shall attain the age of thirty (30) years, then to pay over to such issue then living said one-half (1/2) of the residue by right of representation, free and discharged of all trusts.
SEVENTH: - At the death of the last survivor of my son and daughter, leaving no issue, then to pay over to the said Town of Braintree the sum of ten thousand (10,000) dollars to be called the "LUCIA E. HOLLIS AND E. STANWOOD HOLLIS FUND," the income thereof to be spent every year in the purchase of books for the Public Library in the Town of Braintree. The same to be forever kept separate and apart, and also,
EIGHTH: - To pay over to said Town of Braintree all the rest and residue of my estate of whatever nature then remaining in their hands to be called the "ANNIE STCRRS HOLLIS AND NORTON EUGENE HOLLIS SCHOOL FUND" the same to be forever kept separate and apart and the income thereof to be expended by said town for the benefit of the Public Schools of the Town of Braintree, and I direct that said Town of Braintree shall invest said fund so as to yield not less than*3291 three and 1/2 (3 1/2) per cent per annum on the total amount of said fund, and shall expend said income of said fund each and every year for the benefit of the Public Schools in the Town of Braintree.
The testator was survived by his daughter, Lucia E. Farrington, and his son, E. Stanwood Hollis.
Lucia E. Farrington was born May 27, 1871, and at the date of her father's death was over 52 years of age. She was married to George E. Farrington, August 30, 1894, and they have always lived together as husband and wife. No children had been born to her. Her menopause occurred approximately 6 years prior to the testator's death.
Included in the gross estate of the decedent were 96 shares of the common stock of the George E. Skinner Co. of Boston, the value of which at the date of death was $34,560.
OPINION.
STERNHAGEN: The first of the two issues is whether the respondent erred in his valuation of the decedent's 96 shares of common stock of the George E. Skinner Co. at $360 a share. Upon this question of fact we are of opinion that the evidence does not establish a lower value.
*278 The petitioner relies largely on the value indicated by the balance sheets taken*3292 from the corporate books of account as of September 29, 1923, and November 3, 1923, without analysis. There is also evidence that in 1925 it lost its favorable location in Faneuil Hall, Boston, and that the principal stockholder, who was principally responsible for the conduct and success of the business, had some difficulty in selling the business. The business was sold in 1926. These conditions were neither present nor contemplated in 1923 when the testator died and the value of his stock would not, so far as the evidence shows, have reflected them. At that time the business was in good condition and its earnings had steadily increased from $17,000 in 1920 to $33,000 in 1923. The respondent's valuation is sustained.
The petitioner's second point is that it is entitled under section 403(a)(3), Revenue Act of 1921, to a deduction of the value at the time of death of an interest bequeathed to the town of Braintree. The interest arises from the provision of the will to the effect that if the daughter should die without issue the property in which she has a life estate shall go to the town. By deposition of physicians it was testified without objection that at the time of decedent's*3293 death the daughter had no children and would have none. Thus, it is urged that the bequest to the town was substantial and hence deductible from the gross estate in determining the taxable net estate. Respondent's position is simply that the law presumes conclusively, irrespective of the views of the witnesses, that children may be born to the daughter.
We have examined the many decisions, both English and American, cited by counsel for both parties, and in our opinion they support the respondent's view. In the United States the question has generally arisen in cases where it has been sought to vest in a remainderman title or possession of property during the life of the intermediate tenant. The courts have refused to recognize the possibility that no further issue would be born to claim the remainder. This rule has become uniform and well established. It has been founded on the practical necessity for maintaining the title to property free from confusion and also upon social considerations. The cases cited by petitioner to indicate that the rule is not universal do not in our opinion affect the general doctrine. The intendment of the revenue act is to be read in the light*3294 of the well recognized rule rather than of the minor exception, and we see no reason to assume that Congress intended to ignore the rule in order to allow a deduction for the contingent interest of a municipality or charity. The testator intended the bequest to be contingent and the deduction of the revenue act goes no further.
*279 There is no dispute as to valuation. If there were, it would be necessary to consider whether the contingency is so remote as to have little or no effect upon the value of the remainder, as in First National Bank of Birmingham, Exr. Patterson v. Snead, 24 Fed.(2d) 186, or, on the other hand, whether the contingency is such as to make the remainder of only remote speculative value, as in Humes v.United States,48 Sup.Ct. 347; 276 U.S. 487">276 U.S. 487. But the presumption of the law has the effect of saying that the town may at any time by the appearance of issue be deprived of its interest, and it can not be consistently said that the interest may be valued as if it were only to await the death of the life tenant.
Judgment will be entered for the respondent.