The opinion of the court was delivered by: HALL
The parties have signed a stipulation and supplemental stipulation of facts which makes it unnecessary to repeat them here, except to advert to the proposition that the facts set forth in Paragraphs 5 and 6 of the stipulation and in Paragraphs 2 and 3 of the supplemental stipulation are immaterial and hence are not considered.
The death of the testator Solomon Selig, having occurred on June 13, 1939, which was less than thirty days after the date of his will on May 23, 1939, the charitable bequests involved here are void under P.L. 141, Title 20, § 195, Purdon's Penn. Stats. The plaintiff's contention that they are not void, but merely voidable, or as they put it, not enforceable, is answered to the contrary by the Circuit Court of this Circuit in Dumont's Estate v. Commissioner of Internal Revenue, 3 Cir., 150 F.2d 691. The agreement of December 16, 1940 (Exhibit E) recognizes by its terms that the bequests are 'invalid and unenforceable.' And while the agreement of August 2, 1943, does not contain that language, it recites the fact of death of the testator within thirty days of the will. And the mere fact that the parties to the agreement recognized the necessity for any agreement is persuasive of their realization that the bequests were void under Pennsylvania Law.
The bequests being void under the Pennsylvania Law, they would not be deductible so far as the Federal Estate Tax is concerned, unless compliance was had with Section 812(d) of the Internal Revenue Code as amended in 1942. Three things are necessary for compliance with that Section: death must have occurred after February 10, 1939; there must be an irrevocable disclaimer; and the irrevocable disclaimer must be made before the date prescribed for the filing of the estate tax return. There was compliance with the first condition in that death occurred on June 13, 1939 (cases hold that this condition is not a necessary prerequisite to exemption on the ground that the 1942 amendment was but a declaration of existing law, Commissioner v. Macaulay's Estate, 2 Cir., 1945; 150 F.2d 847, at page 849).
But there has been no compliance with either of the other prerequisites, in that the agreements upon which the plaintiffs rely are neither 'irrevocable disclaimers,' nor were either of them made 'prior to the date prescribed for the filing of the estate tax return.'
It was conceded at the argument that the estate tax return was due within fifteen months of the date of death. It was filed September 12, 1940, two days prior to the expiration of the fifteen month period. The first agreement upon which plaintiffs rely was made December 16, 1940, more than three months after the time prescribed by the 1942 Amendment; and the second agreement upon which the parties rely was made on August 2, 1943, almost three years after the time prescribed by the 1942 Amendment. Assuming the agreements to be 'irrevocable disclaimers,' they were thus not made in time to comply with the 1942 Amendment.
It is alleged in the complaint that, after the death of decedent and prior to the filing of the return, the parties orally agreed to the things set forth in the agreements of December 16, 1940, and August 2, 1943. This is denied by the answer for lack of information and belief, and is not covered by the stipulation. No evidence on this asserted oral agreement was offered or introduced at the trial. No fact is before the court as to the time of the agreement, the place it was made, the persons present, or what was said. In view of which, and in view of the failure of the defendant to admit or stipulate to such oral agreement, I must and do conclude that no such oral agreement was made within the time required by the 1942 Amendment.
But the agreements do not meet the test of being 'irrevocable disclaimers.' Under the agreements the entire corpus of the trust can be used, or consumed by the widow of the deceased, so that upon her death there would be no remainder from which to pay any of the bequests. The parties to the agreements not only did not disclaim this power to divert or use the entire corpus of the trust, but specifically affirmed it, by reciting in the agreement of August 2, 1943 (Exhibit F), that the widow 'is possessed of a power to consume the assets of this estate in accordance with the terms of decedent's will.' By virtue of this power of consumption there was no certainty under the will that the gifts would ever vest in the charities mentioned, and the agreements did nothing to clarify this uncertainty, but on the contrary affirmed the uncertainty by affirming the power to consume the entire corpus of the estate. It is significant that the total date-of-death value of the bequests was agreed by the parties to this action to be $ 31,908.73 (Par. 4 of Stipulation of Facts), but that in the agreements relied upon by the plaintiffs, no sum is set aside whatsoever to which the parties attempted to make any disclaimer.
The contentions of the plaintiff in respect to the effect of the agreements come within the rule laid down by the Second Circuit in Commissioner v. Macaulay's Estate, 1945, 150 F.2d 847, at pages 848, 851, where the Court said: 'It is well settled that where a third party has a power to divert gifts from charitable to non-charitable objects the gifts are not deductible even though the power of diversion shall never be exercised.'
Dumont's Estate v. Commissioner of Internal Revenue, 3 Cir., 1945, 150 F.2d 691, relied upon by the plaintiffs, is distinguishable on its facts as to this point in that the charitable beneficiary there instituted a contest of the decedent's will on the ground of lack of testamentary capacity. If they had succeeded in their contest, a former will would have been validated under which they would have been validated under which they would have been lawful beneficiaries. The effect of the agreement withdrawing the contest, was actually to give the charitable beneficiary specific sums, and specific income, as well as remainders after life estates. Such is not the case here. Furthermore, under the agreement in the case at abar the charitable beneficiaries receive nothing, and may never receive anything.
Judgment will be for the defendant, who will prepare, serve and submit findings and judgment within five days.
1. Plaintiffs who are residents of the City and County of Philadelphia, Pennsylvania, brought this action as the duly qualified and action executors of the estate of Solomon Selig, deceased, hereinafter called testator. The defendant is the United States of America.
2. By their complaint herein filed, plaintiffs sought to recover from the defendant the sum of $ 5,537.95, with interest, as an alleged overpayment of federal estate tax which was assessed and collected upon the transfer of the net estate of the testator.
3. The question involved is whether the testator's estate is entitled to deductions, under Sec. 812(d) of the Internal Revenue Code, 26 U.S.C.A.Int.Rev.Code, § 812(d), for the amounts representing the date of death values of certain charitable bequests contained in the residuary clause of testator's will, a portion of which bequests were by the terms of the will to be effective after the death of testator's widow, who was a life tenant, and the balance of which bequests were by the terms of the will to be effective after the deaths of three other life tenants.
4. Testator died on June 13, 1939, a resident of philadelphia County, Pennsylvania, having executed his last will and testament on May 23, 1939, less than thirty days before his death. By Pennsylvania statute, 20 P.S. § 195, charitable bequests contained in the will of a testator executed less than thirty days before death ...