*1963 The testator, by will, provided inter alia for annuities of $300 a year, during the life of his three daughters, for every grandchild of his who might be born after his death. A minimum deductible value for a remainder left to charity determined, where it appears that grandchildren can be born with incredible rapidity and in improbable numbers without impairing this value.
*1159 The Commissioner determined a deficiency in estate tax of $30,758.24. The petitioners allege that he erred in determining the net estate through failing to deduct from the value of the gross estate the amount of certain bequests, legacies and devises to or for the use of certain corporations "organized and operated exclusively for religious, charitable, scientific, literary or educational purposes," to wit, the amount of $363,775.19, passing by the residuary clause ("Sixty Item") of the will of the decedent. Some facts were admitted while others were contained in a lengthy stipulation.
FINDINGS OF FACT.
The petitioners are the duly appointed and qualified executors*1964 of Herbert A. Wilder, late of Newton, Mass., who died on October 12, 1923. The petitioner Kent is a resident of Newton. The other petitioner is a Massachusetts corporation with its principal place of business in Boston.
The value of the gross estate of the decedent at the date of his death for the purpose of Federal estate tax was $1,235,609.49.
*1160 The decedent left a will and codicils which were duly proved by the proper probate court. He was survived by the following children and grandchildren only:
| Children: | Age at decedent's death |
| Constance Perley Wilder, unmarried | 50 |
| Margaret Guild Wilder, unmarried | 44 |
| Mary Clement Kent (wife of Everett E. Kent) | 46 |
| Grandchildren (children of Mary C. Kent): | Born |
| Francis Wilder Kent | Aug. 7, 1909 |
| Rachel G. Kent | Apr. 1, 1912 |
| Virginia Kent | Sept. 26, 1918 |
The Commissioner allowed certain deductions from the gross estate for debts, administration expenses, funeral expenses, charitable, public, and similar bequests, and the $50,000 specific exemption, in the total amount of $248,907, as to which there is now no dispute between the parties hereto.
The parties are in accord as to the*1965 amount of the specific bequests and legacies made by the will, the total value of which, including life estates in the real property at Newton and Lebanon, was $57,800.07.
Annuities to be paid from trust funds of the residuary estate were as follows:
| Amount per year | Factor | Presen worth as of Oct. 12, 1923 | |
| To three children | |||
| Constance Perley Wilder | $6,000 | 0.48191 | $79,127.89 |
| Margaret Guild Wilder | 6,000 | .41852 | 88,809.44 |
| Mary Clement Kent | 7,000 | .43886 | 99,986.73 |
| 19,000 | 267,924.06 | ||
| To others | |||
| Everett E. Kent | 2,400 | 30,966.92 | |
| Frederick P. Campbell | 5,000 | 47,720.93 | |
| Mary Gertrude Campbell | 1,200 | 10,015.42 | |
| Esther Wilder Stewart and her 3 daughters | 1,200 | 20,699.84 | |
| Mary W. Thayer, issue and others | 840 | 7,010.93 | |
| Helen Guild Brick | 1,300 | 22,555.63 | |
| William H. Lee (died Dec. 28, 1924) | 900 | 11,308.21 | |
| Abby G. Rudd | 100 | 340.72 | |
| Harriet W. May | 900 | 8,897.36 | |
| Mary C. Hastings | 400 | 4,434.01 | |
| Pew rent for daughters and families (in perpetuity) | 260 | 6,500.00 | |
| Total | 14,500 | 170,449.97 | |
| Direction for employment of Edward A. Smith | 3,600 | 19,562.40 | |
| To 3 grandchildren living at decedent's death until they reach 21 or until the death of last survivor of 3 daughters, $300 each. Total | 900 | 6,526.91 |
*1966 The proper factor for determining the value on October 12, 1923, of a remainder after the bequests and annuities made to cease upon the death of the decedent's last surviving daughter is .318592, while that for determining a similar value for a remainder after the joint lives of the two older daughters is .33711.
*1161 The average of total annual expenditures to pay and keep down all taxes, assessments, insurance, repairs and improvements, charges, or expenses of any kind upon or connected with all or any of the real estate of the testators in Newton and Lebanon was $1,771.56 in Newton and $2,066.27 in Lebanon, a total of $3,837.83.
All of the institutions among which the residue of the decedent's estate was to be finally divided were organized and operated exclusively for religious, charitable, scientific, literary or educational purposes, no part of the net earnings of which inures to the benefit of any private stockholder or individual within the purview of section 403(a)(3) of the Revenue Act of 1921.
The will of the decedent provided that the daughters Constance and Margaret, as long as either lived, should have the Newton property free from all charges for taxes, *1967 insurance, improvements or repairs. After the death of the survivor, this property was to go into the residuary estate under the "Sixth Item." In the same way the will provided that the Lebanon property should go to the decedent's three daughters until the death of the survivor, and then pass into the residuary estate.
The "Sixth Item" was in part as follows:
I give, bequeath and devise to any trustees hereinafter named, their survivors, survivor, successors or successor, but IN TRUST NEVERTHELESS, all the rest, residue and remainder of my property and estate, personal or real, wherever found or situated, including the reversions or remainders established or contemplated in the foregoing items of this my will, and any income or benefits which may result to my estate from any transactions I may effect in my lifetime, the same to be invested and held by said trustees in safe and suitable securities and properties, save as hereinafter provided, and from the income and so much of the principal of the trust fund as may be needed or required from time to time,
(a) to pay and keep down all taxes, assessments, insurance, repairs and improvement charges or expenses of any kind, upon*1968 or connected with all or any of my real estate in said Newton and Lebanon, or any other real estate acquired by any daughter in substitution therefor, so long as any of my daughters may occupy, use, rent or have any interest in the same;
(b) to pay all charges, taxes and expenses upon or connected with the trust or trust property, so long as the trust continues. * * *
(c) to pay annuities, or total net sums in every year, to the persons and in the instalments next below named, or stated, giving to each person named so long as he or she may live, save as hereinafter qualified, respectively, a total annual amount as follows, to wit: -
* * *
(d) to each of my grandchildren, whether born before or after my death, I give an annuity or total net sum of Three hundred dollars annually, until each such grandchild shall attain the age of twenty-one years, the same to be deposited in Savings Banks, in the successive years, and each grandchild to be allowed to withdraw the income upon such deposits for his or her benefit respectively, in each year after the said age of twenty-one years is attained, but the principal not to be withdrawn by the respective grandchild until the age of twenty-eight*1969 years be reached.
* * *
*1162 I direct that out of the trust fund created by this item of my will, any portion of a total of twenty-five thousand dollars may be used in the successive years, from time to time, by my trustees, to amplify any of the benefits provided for my daughters or their families, under this item of my will, in cases of sickness or physical distresses of any of them; such awards from such twenty-five thousand dollar fund, however, to be only in cases of such sickness or necessitous circumstance as in the discretion and judgment of my trustees would constitute special occasion for the enhanced assistance; this sickness benefit fund to be applicable to my children and grandchildren as well as to the other family annuitants mentioned in this connection.
If there be any insufficiency or shortage of funds, wherewith to meet all the provisions of my will, I direct that the legacies, annuities and other benefits in favor of my daughters, shall be met and paid in full, without any deductions, in any event, the same to have priority over any other benefits in the event of any such deficiency.
(e) if at the death of my first daughter who shall decease, it*1970 shall appear to my then surviving trustees or trustee, or to the trustees at such times acting under this my will, that there is a sufficient trust fund or estate abundantly to pay and supply all the annuities provided for in this item of my will, then said trustees or trustee, at the death of such first daughter to decease, may pay over to the final or ultimate residuary beneficiaries of my estate, later mentioned in this item of my will, one-third of the then existing trust fund; and upon the death of my daughter who shall be the second to decease, said trustees or trustee, if assured of the sufficiency of my estate, may pay over to said ultimate beneficiaries, another equal portion of the then remaining trust fund, that is to say, substantially one-half of such trust estate as may be in the hands of the trustees or trustee at the death of such second decedent.
(f) at the death of my last surviving daughter, all the annuities given or established by this my will, shall terminate and cease, notwithstanding any language, terms or provisions hereinabove connected with any particular annuity; all and every annuity provision hereinbefore made or stated, being subject and subordinated*1971 to this limitation, so that after the death of my last surviving daughter, the distribution and settlement of the entire trust may be in a short time accomplished.
(g) after the death of my last surviving daughter, I give, bequeath and devise all the trust funds and estate then remaining or existing, to the final beneficiaries hereinbelow named, in the shares or proportions below stated, to be theirs absolutely and in fee. I authorize my then surviving or acting trustees or trustee, to convert into money such portion of the then existing trust estate as they or he may deem expedient, or to pay over and distribute either in money or securities to the said final beneficiaries as at the time may be found expedient and judicious. Such final beneficiaries being the following, to wit: -
[Here various institutions and organizations are named and the number of sixtieths each is to receive is stated. There is also a provision for the payment of pew rent up to $260 annually for the daughters and their families.]
Up to February 28, 1930, the only children who had been born to any of the daughters of the decedent were the three who were born during his lifetime. The married daughter*1972 had been injured in the birth of her last child and as a result, at the date of the testator's death, she had the beginning of a condition which necessitated an hysterectomy several years later.
*1163 The value on October 12, 1923, of the bequests to charity here in controversy was at least $345,000.
OPINION.
MURDOCK: The sole question presented in this case is the amount, if any, which should be deducted in determining the net estate under section 403(a)(3) of the Revenue Act of 1921 to represent the value of the residuary estate which is left to certain charitable organizations. There is no dispute as to the character of the organizations and institutions named as residuary legatees. The provisions of the will do not create a situation where the birth of one child causes a gift over and thereby defeats the gift to charity. Cf. . The respondent contends that the number of grandchildren who may be born can not be determined, the expenses to be paid can not be determined, the corpus of the residue may be invaded, $25,000 may be used in certain cases of necessity and, therefore, it is impossible*1973 to determine the present value of the amount, if any, which the charitable organizations will receive. He allows no deduction in this connection.
The probable necessary expenditures in connection with the Newton and Lebanon properties are determined accurately enough from the evidence of similar expenditures made in the past and ample allowance is made therefor in the computation suggested by the petitioner. Cf. . The possibility that the corpus might be invaded is too remote to require discussion. The only uncertainty which might defeat the petitioners' claims is that of the number of after-born grandchildren.
The petitioners claim that the whole question is one of valuation, because in any event the charities will receive something. They first point out that a fund havinc a value of $140,000 on October 12, 1923, would go to the charities after adequately allowing for all payments mentioned in the will, including annuities to forty grandchildren born immediately after the testator died. It is, they say, ridiculous to assume that forty grandchildren would ever be born to the three daughters, but they point out that if*1974 forty were not born at once, even more than forty could be born over a period of time without reducing the value of the $140,000 gift to charities. The computation by which they support this contention is based on figures and facts in evidence and makes a strong appeal to reason. It is set forth in the following paragraph.
The petitioners start with $968,702.49, the net estate subject to tax as determined by the Commissioner, which was the gross estate *1164 less debts, administration expenses, funeral expenses, cash bequests to charities, bequests to charity of the remainder of the realty in Newton and Lebanon, the fund necessary to produce annuities given to a church, and also the statutory exemption of $50,000. In this way the gross estate was reduced by $248,907. They then deduct the stipulated value of specific bequests, the stipulated value of annuities to the three daughters, the stipulated value of annuities to others, including pew rent, the stipulated value of a fund to provide a salary for an individual, the stipulated value of annuities to the three living grandchildren, and the stipulated amount of the sickness fund given by paragraph (d) of the "Sixth Item" *1975 of the will. The amount thus deducted they claim will pay all amounts necessary in carrying out all provisions of the will except paying the necessary expenditures for the Newton and Lebanon houses and the annuities which would have to be paid to the grandchildren born after the death of the testator. To meet these two latter requirements of the will, a fund of $439,439.08 would be left. The annual income of such a fund at 4 per cent would amount to $17,577.56. From past experience they determine that the annual amount necessary to meet the requirements of the will in connection with the Newton and Lebanon houses would not exceed $4,000. The remaining income would be sufficient to provide annuities for forty-five grandchildren, even if all of the forty-five grandchildren could by any possibility be born in the year of the death of the testator. If during the first year the full number of forty-five grandchildren were not born, the number of grandchildren who could be provided for by this fund would materially increase in each year thereafter. The remainder value of the fund of $439,439.08 after the lives of the three daughters, computed by use of the stipulated factor, would*1976 give a then present value to this remainder of $140,001.77. This remainder is the fund which would be used exclusively for charitable and educational purposes under the "Sixth Item."
There is a legal presumption that so long as a woman lives she may always give birth to a child. Cf. . But this exceptional case is materially different from those cases, at least in the effect which the birth of one child has upon the charitable bequest. Of course a child might have been born to any of the three, and if we had to determine just how many might possibly have been born, our problem would be too difficult for human judgment and knowledge. But if we can determine that in all reasonable probability not more than a certain number would be born, the petitioners, on whom rests the burden of proof and on whom we must bear heavily, would be entitled to a minimum deduction. Cf. . There are facts before us from which we may determine, with reasonable certainty, at least a minimum deductible value for*1977 the bequests to charity. "There is no uncertainty [in determining such value] appreciably greater than the general uncertainty that attends human affairs." . There is no presumption that these women will be prolific, and the facts indicate the contrary. Therefore, a finding that the bequest to charity had no substantial value because of the remote possibility that the three daughters might bear children so fast that nothing would be left would be arbitrary and unwarranted under the circumstances of this case. Cf. . No undue use of the actuarial art is involved. In fact the respondent has agreed to all of the numerical factors used and they are only used to compute the value of remainders after life estates.
It may be argued that the determination of the value of these charitable bequests is a mere guess about something which can not be determined from any known data, and is, therefore, contrary to the rule laid down by the Supreme Court in *1978 But in our opinion a different rule should apply in a case such as this, where before we could determine that the bequest to charity had no value, we would have to accept the possibility that these particular women might, within one year after their father's death, give birth to a total of more than half a hundred children or that they might give birth to a total of more than three score children during their lives. Such a possibility is shocking to the intelligence. Common sense and good judgment urge its rejection because it is too remote and unlikely. In rejecting this possibility we are not going contrary to any rule required by practical necessity or social conditions as, for example, the rule of law which required our decision in the Farrington case.
The petitioners having made their first point that at least they are entitled to deduct some value, next contend that they are entitled to deduct the value on October 12, 1923, of the amount which in all reasonable probability the charities would ultimately receive. They offered the testimony of the family physician who had attended the three daughters and was familiar*1979 with the physical condition of each before and during 1923. He said that the oldest daughter remained alone much of her time and was not at all likely to marry. In his opinion the birth of a child after October 12, 1923, to either of the two older daughters was extremely improbable. Two of the daughters were unmarried at that time. Unmarried women of their respective ages would not be likely to have a great many children. The married daughter had had three children. Her youngest child was *1166 five years old when the testator died. The condition of this daughter in 1923 was such, due to an injury from the birth of her last child, that the birth of another child was extremely unlikely in the opinion of the physician. No more children had been born to any of the daughters up to February 28, 1930.
They, therefore, say that although it was not reasonable to suppose that five children would be born to the three daughters after October 12, 1923, they accept this number as a safe maximum. From the fund of $439,439.08, which remained after the previous deductions, and from which provision would have to be made for the upkeep of the two properties and for after-born grandchildren, *1980 they deduct the present worth of a fund which during the lives of the three daughters would, at 4 per cent, produce income of $4,000 a year, a more than ample amount to take care of the Newton and Lebanon properties. They then deduct the present worth of the fund necessary to pay an annuity of $300 to each of five grandchildren born after the death of the testator, and in this way they determine that $345,745.48 would be the present worth of the fund which must necessarily under these circumstances go to the charities. Throughout this computation, except in two instances, the petitioners have given away the benefit of every doubt and have proceeded by the use of methods and figures which keep the value of the bequest to charity at a safe minimum. In deducting the $50,000 exemption before they began their computation, they have denied themselves unnecessarily. We see no reason why this amount should be deducted inasmuch as there is certainly going to be no duplication of exemptions. Furthermore, it is not necessary to suppose, as they do, that all the after-born grandchildren would be born immediately upon the death of the testator. One instance in which the petitioners have not*1981 allowed a sufficient margin is in their assumption that five grandchildren would be a safe maximum, and, second, they have not allowed anything for expenses of administration of the trust. But these deficiencies in their computation are more than made up by generous allowances in other ways, some of which we have mentioned. The possibility that these three women would give birth to sufficient children after October 12, 1923, to reduce the value of the bequests to charity below the amount now claimed by the petitioner is so remote that it need not be given consideration in the decision of this case. Grandchildren could be born with incredible rapidity and in improbable numbers without impairing this value. We hold that the petitioners are entitled to deduct $345,000 in addition to the deductions already allowed by the Commissioner.
Judgment will be entered under Rule 50.