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Keywords

plaintifftrustwilltax law
plaintiffappealtrustwillappellant

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Blodget v. Delaney, 201 F.2d 589, 53-1 USTC P 10,887, 43 A.F.T.R. 198

Facts

The plaintiffs are the executors and trustees of a Massachusetts resident who died in 1946. The testator's will established a trust for his sister, providing for her comfort and welfare during her lifetime, with the remainder going to charitable organizations upon her death. At the time of the testator's death, the sister was almost blind and her future needs were predictable, leading to the question of whether the charitable gifts could be valued definitively for tax deduction purposes.

In Article Seventh of his will the testator left the residue of his estate to his trustees in trust ‘to pay over the net income therefrom to my said sister, Sarah L. Guild, if she survives me, quarterly or oftener in the discretion of said Trustees for and during the period of her natural life, and also to pay from the principal any amount in their discretion for her comfort and welfare.’

Issue

Whether the value of certain charitable gifts in remainder could be definitely ascertained as of the date of the testator's death, allowing the estate to claim a deduction under Sec. 812(d) of the Internal Revenue Code.

The questions presented is whether on the facts alleged in the complaint it must be ruled as a matter of law that the value of certain charitable gifts in remainder could not be definitely ascertained as of the date of a testator's death, so that in consequence his estate cannot be allowed a deduction therefor under Sec. 812(d) of the Internal Revenue Code.

Rule

For a charitable deduction to be allowed under estate tax laws, the amounts that will eventually be received by the charities must be capable of reliable appraisal at the time of the testator's death.

For a deduction to be allowed ‘Congress and the Treasury require that a highly reliable appraisal of the amount the charity will receive be available, and made, at the death of the testator.'

Analysis

The court analyzed the language of the will and the circumstances surrounding the life beneficiary's needs. It concluded that the testator's instructions to the trustees regarding the invasion of principal for the sister's comfort and welfare provided a sufficiently definite standard to ascertain the value of the charitable remainder. This was contrasted with previous cases where the language allowed for broader discretion, making valuation uncertain.

On the whole, however, we are of the view that it falls within the rule of the Ithaca Trust Co. case rather than within the rule of the Merchants National Bank and Nehslee case.

Conclusion

The court vacated the judgment of the District Court and remanded the case for further proceedings, allowing the estate to claim the charitable deduction.

The judgment of the District Court is vacated and set aside and the case is remanded to that Court for further consistent proceedings; the appellants recover costs on appeal.

Who won?

The plaintiffs (executors and trustees) prevailed because the court found that the value of the charitable gifts could be determined with sufficient definiteness, allowing for a tax deduction.

The plaintiffs herein contended below, and they contend here, that the language used by the testator, read with the limitations which Massachusetts law would put upon it, establish for the trustees a ‘standard * * * fixed in fact and capable of being stated in definite terms of money’.

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