United States v. FOURTH NAT. BANK IN WICHITA, KAN.

• Decision Date: 11 April 1936
• Docket Number: No. 1327.,1327.
• Citation: 83 F.2d 85
• Parties: UNITED STATES v. FOURTH NAT. BANK IN WICHITA, KAN.
• Court: U.S. Court of Appeals — Tenth Circuit

83 F.2d 85 (1936)

UNITED STATES v. FOURTH NAT. BANK IN WICHITA, KAN.^*

No. 1327.

Circuit Court of Appeals, Tenth Circuit.

April 11, 1936.

Lester L. Gibson, of Washington, D. C. (Frank J. Wideman, Asst. Atty. Gen., Sewall Key and Norman D. Keller, Sp. Assts. to Atty. Gen., and Summerfield S. Alexander, U. S. Atty., and R. T. McCluggage, Asst. U. S. Atty., both of Topeka, Kan., on the brief), for the United States.

Harvey C. Osborne, of Wichita, Kan. (Charles G. Yankey, John G. Sears, Jr., and Verne M. Laing, all of Wichita, Kan., on the brief), for appellee.

Before PHILLIPS and McDERMOTT, Circuit Judges, and KENNEDY, District Judge.

KENNEDY, District Judge.

The appellee as plaintiff sued to recover certain taxes alleged to have been erroneously collected, and from a portion of the judgment allowing a deduction from an estate for tax purposes, the government appeals.

Prior to the year 1930 one Howard E. Case and his wife executed joint and mutual wills leaving in trust property of which the survivor died seized. Subsequent to the death of the wife and on November 13, 1930, Case executed an instrument of gift to the First Presbyterian Church of Wichita, Kan. It provided, in substance, that he was giving $100,000 toward the creation of a fund for the erection of a community adjunct to the church upon condition that the church should contribute an equal amount, with other stipulations. The instrument is set forth in full in note 1.¹

Case died January 4, 1931. The Commissioner assessed a deficiency in tax upon the $100,000 which had been deducted from his estate for tax purposes by the executor, which tax such executor later paid and brought this suit to recover.

The record reveals nothing in regard to the situation which existed concerning the respect in which the donee had complied with the conditions of the instrument in the matter of securing pledges for its share of the building fund at the time of the death of the donor. After the death of Case certain litigation took place involving the gift in the Kansas courts. The first contest evidently concerned the power and authority of the donor to make the gift in view of the joint wills of Case and his wife, in which it was decided by the Supreme Court of Kansas that Case was capable of making the gift. Fourth National Bank v. Presbyterian Church, 134 Kan. 643, 7 P.(2d) 81. Later a contest arose over the question as to whether or not the time to comply with the conditions of the gift had not expired, and it was determined by the Supreme Court that the time limit under the terms of the gift was suspended by the ensuing litigation. Fourth National Bank v. Presbyterian Church, 138 Kan. 102, 23 P.(2d) 491. It is stipulated in the record that within two months after the trial of the case at bar, the actual building of the community adjunct to the church was commenced and continued to completion within a reasonable time, under the conditions of the $100,000 donation by Case.

The statutes involved are:

26 U.S.C.A. § 411 (44 Stat. 9, 70):

"The value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated, except real property situated outside the United States —

"(a) Decedent's interest. To the extent of the interest therein of the decedent at the time of his death."

And 26 U.S.C.A. § 412 (d) and note:

"For the purpose of the tax the value of the net estate shall be determined in the case of a citizen or resident of the United States by deducting from the value of the gross estate — * * *

"(d) The amount of all bequests, legacies, devises, or transfers, to or for the use of the United States, any State, Territory, any political subdivision thereof, or the District of Columbia, for exclusively public purposes, or to or for the use of any corporation organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes."

The applicable Treasury Regulation is Art. 47 of Regulations 68:

"Conditional Bequests — When the transfer is dependent upon the performance of some act or the happening of some event, in order to become effective, it is necessary that the performance of the act or the occurrence of the event shall have taken place before the deduction can be allowed."

The sole question presented here is whether or not the $100,000 was a part of the Case estate at the time of his death and as such subject to the tax provided by statute. The right of the church to have the benefit of the gift is not questioned.

Conditional gifts or bequests under this taxing statute have frequently been reviewed by the federal courts. Some of those cases are Humes v. United States, 276 U.S. 487, 48 S.Ct. 347, 72 L.Ed. 667; Ithaca Trust Co. v. United States, 279 U.S. 151, 49 S.Ct. 291, 73 L.Ed. 647; United States v. Provident Trust Co., 291 U.S. 272, 54 S.Ct. 389, 78 L.Ed. 793; First National Bank of Birmingham v. Snead (C.C.A.) 24 F.(2d) 186; Farrington v. Commissioner (C.C.A.) 30 F.(2d) 915, 67 A.L.R. 535; Lucas v. Mercantile Trust Co. (C.C.A.) 43 F.(2d) 39; Delaware Trust Co. v. Handy (D.C.) 53 F.(2d) 1042; St. Louis Union Trust Co. v. Burnet (C.C.A.) 59 F.(2d) 922; Mississippi Valley Trust Co. v. Commissioner (C.C.A.) 72 F.(2d) 197; City Bank Farmers' Trust Co. v. United States (C.C.A.) 74 F.(2d) 692; Humphrey v. Millard (C.C.A.) 79 F.(2d) 107.

In the Ithaca Trust Case, supra, it was said that the estate transferred was to be valued as of the time of the death of the testator. There the testator gave the residue of the estate to his wife with authority to use from the principal any sum which might be necessary to maintain her in as much comfort as she then enjoyed, and after her death it was bequeathed in trust for charities. It was held that the value of the bequest to charities at the time of the death of the testator could be reasonably ascertained by the use of mortality tables in conjunction with the amount necessary to reasonably maintain the widow throughout her life, and that the appropriate deduction should be allowed. The Humes Case, supra, concerned a bequest to charities contingent upon the death of a niece without issue before she attained the age of 40, the niece being then living, of the age of 15 years, and unmarried. It was held that the use of mortality tables for the purpose of showing the probability of the woman dying at a given age would die unmarried, and that if married she would die childless, were too speculative and uncertain, and that by such means there was no definite way of determining the value of the contingent bequest, resulting in a disallowance of the deduction for taxation purposes. In United States v. Provident Trust Case, supra, the court observed that the question to be considered was the value of the interest to be saved from the tax. The condition considered was a bequest to charitable institutions contingent upon the death of a daughter without issue, the daughter at the time of testator's death being 50 years of age, in poor health, without children, and having had an operation which from scientific knowledge would prevent her from having children. It was held that the value of the contingent interest was ascertainable because it was possible to say, as a practical matter, that the daughter was incapable of bearing a child after the death of the testator, and the deduction was allowable. The First National Bank of Birmingham Case, supra, involved a situation of a bequest to charitable institutions subject to an allowance for the proper support of the widow out of the corpus in the event the income from the trust estate should not be sufficient for the proper support of the wife, and it was there held that the value of the contingency was reasonably ascertainable, the deduction being allowed. The Farrington Case, supra, concerned a bequest for education purposes contingent upon the death of a daughter without issue, the daughter being at the time of the death of the testator 52 years of age, and it was held by a divided court that the contingency of the daughter dying without issue was of such a speculative and uncertain character that the value could not be reasonably ascertained, the deduction not being allowed. The Mercantile Trust Company Case, supra, concerned a similar bequest to charitable institutions contingent upon the use of a sufficient portion of the corpus to maintain the wife in a manner necessary for her comfort and maintenance during her life, and it was there held that the value of the contingency was ascertainable by reasonable methods of computation and that the deduction should be allowed. The Delaware Trust Company Case, supra, involved a bequest for charitable purposes conditioned upon no lapse in the reduction or discontinuance of a vicar's salary for a period of 50 years, and it was there held that the value of the contingency was not ascertainable by any known standards and the deduction was disallowed. The St. Louis Union Trust Company Case, supra, involved a bequest to a religious organization conditioned upon the contribution by the church within ten years of an amount equal to the net income from certain stocks set aside and placed in trust for its use and benefit. It was held that the value of the contingent interest could not definitely be ascertained and that there should be no deduction. Judge Van Valkenburgh in speaking for the court, 59 F.(2d) 922, at page 925, says: "At the time of the testator's death, it was impossible definitely to determine whether for the extended period named the church would devote the net income from the stock to the precise uses prescribed, or that it would or could secure from its membership annually `an amount equal to at least double the amount of said net income from said preferred stock.'"

The Mississippi Valley Trust Company Case, supra, involved a will expressing the wish that the sons of the...