Simonson v. Comm'r of Internal Revenue (In re Estate of Simonson)

• Decision Date: 10 January 1973
• Docket Number: Docket No. 941-69.
• Citation: 59 T.C. 535
• Parties: ESTATE OF ABRAHAM SIMONSON, DECEASED, NATHANIEL SIMONSON AND ERNEST C. GEIGER, PETITIONERS V. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT
• Court: U.S. Tax Court

59 T.C. 535

ESTATE OF ABRAHAM SIMONSON, DECEASED, NATHANIEL SIMONSON AND ERNEST C. GEIGER, PETITIONERS V. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT

Docket No. 941-69.

United States Tax Court

Filed January 10, 1973.

Ernest C. Geiger, for the petitioners.

Stephen M. Miller and Ronald Wagenheim, for the respondent.

Decedent in his will, established a trust, income payable to his son for life, remainder to a named charity. The trustees were given discretionary powers over the income and principal of the trust. Held, the discretionary powers did not constitute a power of indirect invasion of corpus and therefore the charitable remainder is deductible under sec. 2055, I.R.C. 1954.

STERRETT, Judge:

Respondent determined a deficiency in the Federal estate tax of the Estate of Abraham Simonson in the amount of $399,045.98.

Due to concessions the sole issue remaining for adjudication is whether the value of a trust's remainder interest payable to a charitable beneficiary was subject to ascertainability at the time of the decedent's death. Such a decision will lead us to a conclusion relative to the estate's right to a charitable deduction within the purview of section 2055, I.R.C. 1954. ¹

FINDINGS OF FACT

Some of the facts have been stipulated and are so found. The stipulation of facts, together with the exhibits attached thereto, are incorporated herein by this reference.

Decedent, Abraham Simonson, died on September 14, 1964. Petitioner Nathaniel Simonson is the surviving executor of the estate of the decedent. Ernest C. Geiger was an executor of the estate of David Geiger and had duly qualified as such on October 16, 1964. He died on May 12, 1968. The Federal estate tax return was timely filed on December 13, 1965, with the district director of internal revenue, New York, N.Y.

On December 27, 1963, the decedent executed a last will and testament which provided in part for the creation of two trusts, a marital trust for the decedent's wife, Henrietta Simonson, and a second trust income payable to decedent's son Nathaniel Simonson (hereinafter referred to as Nathaniel) during his lifetime and upon his death corpus to be distributed to various charitable organizations. The will provides in pertinent part as follows:

EIGHTH: All the rest, residue and remainder of my estate, of whatever nature or description and wherever situate, including any lapsed legacies, I give, devise and bequeath to my trustees hereinafter named, IN TRUST, NEVERTHELESS, for the purposes and upon the terms and conditions hereinafter set forth:

A. If my beloved son, NATHANIEL SIMONSON, also known as NAT SIMONSON, shall survive me, I direct my trustees to hold, invest and reinvest my residuary estate, hereinafter called the ‘Fund’, collect the income and profits therefrom and during the natural lifetime of my said son to pay to him the net income therefrom in semi-annual or more frequent installments as my trustees may determine.

B. Upon the death of my son, NATHANIEL SIMONSON, or in the event my said son does not survive me, then upon my death, I direct my trustees to divide, pay over and distribute this fund or the then remainder thereof, together with any and all accumulated and undistributed income therefrom, in equal shares, to no more than four or five charitable organizations as hereinafter defined. Among them shall be included Brandeis University, Waltham, Massachusetts, Albert Einstein College of Medicine of Yeshiva University, Bronx, New York and University Settlement Society of New York, at Eldridge and Forsythe Streets, in the Borough of Manhattan, City of New York. Each such gift shall be designated as a memorial to my family and shall bear and perpetuate the Simonson name and shall be used by such organization for general charitable purposes or for such special or limited purpose within the authorized area of activity of such charitable organization as my trustees may specify. I authorize my trustees to subject any such gift to a charitable organization to any lawful terms, conditions and restrictions which they in their absolute and uncontrolled discretion shall deem necessary, appropriate or desirable. Without intending hereby to limit or restrict the discretion of my trustees, I request that in selecting additional charitable institutions for receipt of a share of my estate, my trustees give special consideration to organizations whose work is in the fields of education, medical research, the care of underprivileged children, aid to the blind and hospitals for chronic diseases.

The words ‘charitable organizations' as hereinabove used shall be deemed to mean organizations, corporations, associations, funds, foundations and institutions organized exclusively for religious, charitable, educational and/or scientific purposes which are tax exempt and gifts to which may be deducted in determining my taxable estate under the then applicable provisions of the Internal Revenue Code and New York tax law.

I authorize my trustees during any reasonable period while they may be considering and deciding upon additional charitable organizations to which distribution is to be made in accordance with the foregoing, to invest and reinvest such fund and to collect and accumulate the income and profits therefrom. The net income and profits accumulated during any such period shall be divided, paid over and distributed to the charitable organizations together with the principal from which derived.

NINTH: A. I authorize my executors and trustees to retain for such period of time, during his lifetime, as my son NATHANIEL in his absolute and uncontrolled discretion shall deem appropriate and advisable in view of all the circumstances my two thousand one hundred sixty six and two-thirds (2166 2/3) shares of stock in the Fashion Center Building Corp. and my two (2) shares of stock in the Fashion Center Service Corporation. In the event that it shall be determined to sell such shares of stock during the life of my son, NATHANIEL, I direct my trustees to afford first opportunity to acquire such shares of stock to the respective issuing corporations, and to the extent such offer is not accepted by the corporations concerned, to the persons who then own shares of stock in the respective corporations. It is my desire, if the same can be achieved without unreasonable disadvantage to my estate or the trusts directed to be established hereunder, of which fact my trustees shall be the absolute judges, that the disposition of my shares of stock in these corporations shall not disturb the ownership and control of said corporations during the lifetime of my said son, NATHANIEL, without his consent, and I direct my executors and trustees to be mindful of this fact in negotiating the price to be paid for such shares of stock and the terms of payment.

B. I authorize my executors and trustees in their absolute discretion and judgment to extend for such period as they deem advisable and appropriate in all the circumstances the time during which the surviving partners of Cohen, Simonson & Co. shall be required to pay out the amount due my estate for my interest in said partnership. I also authorize my executors and trustees, if they in their absolute and uncontrolled discretion shall deem it advisable, to permit all or part of the amount due my estate with respect to my interest in Cohen, Simonson & Co. to be retained by any successor partnership thereto (but only during the lifetime of my son, NATHANIEL SIMONSON, and only while he is, and continues to be, a general partner of any such successor partnership) for such period of time and upon such terms and conditions as my executors and trustees in their absolute and uncontrolled discretion shall deem appropriate.

TENTH: I direct that all inheritance, estate, transfer, succession and death taxes or duties (including interest thereon) imposed by any jurisdiction whatsoever by reason of my death, upon or in relation to any property includable in my estate for the purpose of any such taxes or duties, whether such property passes under the provisions of this Will or outside the provisions of this Will, shall be paid out of my residuary estate as a charge of administration and shall not be apportioned to any beneficiary hereunder nor to any person receiving such property.

TWELFTH: I hereby give and grant to my executors and trustees herein named and their successors, the following powers and authority which may be exercised by them at any time and from time to time, as they shall, in their absolute discretion, deem advisable:

A. To hold and retain all or any part of my estate or any trust created hereby, in the form in which the same may be at the time of my decease, or at the time of the receipt thereof by my said trustees from my executors, as long as they may deem advisable.

B. To invest and reinvest any funds in my estate or any trust created hereby in any property, real or personal, of any kind or nature, including, without limitation, stocks, whether common, preferred or otherwise, listed on the New York Stock Exchange or the American Stock Exchange, without being limited or restricted to investments prescribed or authorized for executors or trustees by the laws of New York or any other state.

C. To sell, exchange, partition or otherwise dispose of any property, real or personal (except property specifically bequeathed) of which I may die seized or possessed, or which may at any time form a part of my estate or any trust created hereby, at public or private sale, for such purposes and upon such terms, in such manner and at such prices, as they may determine.

D. To mortgage any property, real or personal, of which I may die seized or possessed, or which may at any time form a part of my estate or any trust created hereby, in such amount and on such terms as they may deem advisable; to lease any such property, for such term or terms, and upon such conditions and rentals, and in such manner, as they...