1930 BTA LEXIS 1856">*1856 The decedent left certain property in trust to pay the income thereof to his widow for life, and with power in the trustee to invade the principal if necessary for the comfort and support of the widow, and thereafter to pay the remainder to certain admitted charities. Held that the possibility of the principal being invaded was so remote that the stipulated present worth of the gifts to charities had there been no such provision in the trust agreement may be deducted from the gross estate as the amount of the gifts to charity.
21 B.T.A. 394">*394 The Commissioner determined a deficiency in estate tax of $7,114.89. The only issue is whether or not the Commissioner erred in failing to allow a deduction to represent the value of certain gifts to charities.
FINDINGS OF FACT.
The petitioners are the executors of the estate of Charles Pfaff. The decedent died on July 23, 1925, a resident of Boston, Mass.
On July 19, 1921, Charles Pfaff created a trust of which the Boston Safe Deposit & Trust Co. was named trustee. At later dates he altered this1930 BTA LEXIS 1856">*1857 trust and added to the trust property. The income was to be paid to him during his life and after his death to his wife, Cornelia H. Pfaff, for her life. The trust agreement at the time of his death provided in part as follows:
(2) * * * If in the opinion of the Trustee for the time being hereunder said net income [the entire net income from the trust property] shall be insufficient for her comfort and support, such Trustee may pay from time to time to her or for her benefit such sums out of the principal of the trust property as such Trustee may deem necessary for her comfort and support. If for any reason said Cornelia H. Pfaff shall desire to have paid to her or for her benefit any sum or sums out of the principal of the trust property and shall in writing request the Trustee for the time being hereunder to pay to her or for her benefit any sum or sums not exceeding in the aggregate One Hundred Thousand Dollars ($100,000) out of the principal of the trust fund, such Trustee shall pay to her, or for her benefit out of the principal of the trust fund such sum or sums not in excess, in the aggregate, of One Hundred Thousand Dollars ($100,000) which she shall request.
The1930 BTA LEXIS 1856">*1858 trust agreement contained other provisions which need not be set forth here in detail but which gave certain remainders after life estates to admitted charities.
21 B.T.A. 394">*395 The parties have stipulated that the value of the trust property at the date of the decedent's death was $475,539.76 and "that the amount which would be deductible for charitable, public, and similar bequests if the Trust Indenture had contained no provision authorizing the trustee to pay to Cornelia H. Pfaff 'such sums out of the principal of the trust property as such trustee may deem necessary for her comfort and support' is $176,229.14 which is the sum the petitioners contend should be deducted."
The value of the gross estate as determined by the Commissioner was $574,094.23.
The income from the trust property for the years shown was as follows:
| 1922 | $18,565.74 |
| 1923 | 21,579.58 |
| 1924 | 29,444.52 |
| 1925 | 29,864.09 |
| 1926 | $28,992.93 |
| 1927 | 34,268.85 |
| 1928 | 24,562.67 |
The decedent had been a brewer but retired from business in 1922. He and his wife had no children. They were people who lived simply. The income from the trust was their principal means of support for several years prior1930 BTA LEXIS 1856">*1859 to the death of the decedent and had proven ample for this purpose. Cornelia H. Pfaff was 55 years of age at the time her husband died. She then had some income from her separate property. Her manner of living was much the same after her husband's death as it had been before. The income from the trust was more than ample for her needs. From the income which she received after her husband's death she gave away at least $3,000 annually and still had excess income which she added to her substantial principal. She expended for her own use and pleasure $14,460 and $15,403.17 in 1927 and 1928, respectively. She never withdrew any of the $100,000 provided in the trust instrument except $12,000 to compensate the Trust Co. for settling the decedent's estate.
The petitioners deducted $171,105.29 in the estate-tax return representing the value of the charitable gifts. The Commissioner disallowed this deduction, claiming that the right to invade the principal for the benefit of the life beneficiary rendered the value of the charitable gifts unascertainable.
OPINION.
MURDOCK: The petitioners concede that inasmuch as the wife was given the right to withdraw $100,000 out of the principal1930 BTA LEXIS 1856">*1860 of the trust fund, this $100,000 must be deducted in computing the value of the gifts to charity. But they contend that the stipulated amount of $176,229.14 should be deducted as the value of the gifts to charity, because the contingency that the trustees might be required to invade the principal for the comfort and support of the widow is so remote 21 B.T.A. 394">*396 that it should not be considered to defeat or even reduce the gifts to charity. In support of this contention they first point out that under Massachusetts law the discretionary power of a trustee under such circumstances may be exercised only as sound judgment may indicate in the light of all attendant conditions, with due regard for the rights of those whose interests are injuriously affected by its exercise. ; ; ; ; . Inasmuch as the decedent and his wife had both been living on the income from the trust property for several years prior to his decease, it is only reasonable to believe that after the decedent's death his1930 BTA LEXIS 1856">*1861 widow would be able to live on the income from that same trust property. Furthermore, she had some independent property of her own which was substantial in amount, and which gave her considerable additional income. Under all the circumstances of the case, there was at the time of the decedent's death, only a remote possibility that in the discretion of the trustees it would be necessary to invade the principal beyond the $100,000 above mentioned for the comfort and support of the widow. This conclusion is supported by the opinion testimony of one of the officers of the Trust Co., and subsequent events show that his opinion was correct.
There are a number of cases in which the principles herein involved have been fully discussed and which make further comment in this case unnecessary. These cases fully support the petitioners' contention. See ; ; ; 1930 BTA LEXIS 1856">*1862 ; ; affd., ; ; . Cf. .
Judgment will be entered for the petitioners under Rule 50.