UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
decided: August 7, 1968.
ESTATE OF HUGH GORDON MILLER, DECEASED, ALLEN GORDON MILLER, ERWIN SCHROFF AND HELEN T. IVES, PETITIONERS,
COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. COMMISSIONER OF INTERNAL REVENUE, PETITIONER, V. ESTATE OF EDNA ALLEN MILLER, DECEASED, ALLEN GORDON MILLER AND ERWIN SCHROFF, RESPONDENTS
Kalodner and Van Dusen, Circuit Judges, and Wright, District Judge
Author: Van Dusen
Opinion OF THE COURT
VAN DUSEN, Circuit Judge.
These appeals are from two decisions of the Tax Court, Estate of Edna Allen Miller, 48 T.C. 251 (1967), and Estate of Hugh Gordon Miller, 48 T.C. 265 (1967), decided as companion cases June 12, 1967. In both cases, the executors of the decedents' estates (hereinafter "taxpayers," "Hugh," or "Edna") resisted a deficiency determination made by the Internal Revenue Service ("I.R.S.") on the basis of the disallowance of certain charitable deductions claimed under § 2055 of the Internal Revenue Code of 1954 (26 U.S.C. § 2055).*fn1 In No. 16940 the taxpayer (Hugh) appeals from a decision for the Commissioner; in No. 17133 the Commissioner appeals from a decision for the taxpayer (Edna). Since these two appeals involve interpretation of the same section of the Tax Code, § 2055, and since they arise from the same underlying facts, they have been consolidated for argument and decision.
Stipulated facts were filed in both cases and can be summarized for purposes of these appeals as follows:
Edna Miller, wife of Hugh Miller, died February 10, 1960.*fn2 She was survived by Hugh and a son, Allen. In her will, paragraph Seventh (a), she provided that her residuary estate be held in trust; that the trust corpus be divided into two shares, one equal to forty percent. thereof, the other sixty percent.; that the net income of the 40% share was to go to Hugh for his life; and that Hugh had the power to appoint by will the 40% share "to or in favor of his estate * * * or to any person or persons."*fn3 If Hugh died without exercising this power of appointment, the income from the 40% share went to her son, Allen, for life, with the principal at his death going to "The Edna Allen Miller Foundation," a charitable corporation recognized by the I.R.S. as a qualified, exempt organization.*fn4
On December 6, 1960, Hugh executed an affidavit complying with the directions of § 2055(b)(2)(C) of the Code,*fn5 in which he averred that he was 84 years old at Edna's death and that he declared his intent to exercise in his will the power of appointment given in Edna's will by appointing the income of the 40% share to their son, Allen, for life, with the principal (remainder) to the Edna Allen Miller Foundation.*fn6 This affidavit was filed as part of Edna's Federal Estate Tax Return. On August 1, 1962, Hugh died, exercising the power of appointment in his will in the manner specified in his earlier affidavit.*fn7
Edna's estate tax return claimed a marital deduction of $443,567.05*fn8 under § 2056 (the value of the orpus of the "forty per cent share" trust, plus personal effects left to Hugh valued at less than $2000.) and a charitable deduction of $229,761.00 under § 2055, the value of the remainder interest in the trust.
Hugh's estate tax return included in his gross estate the trust assets (valued at $445,883.49) over which he had a general testamentary power of appointment as defined in § 2041, and claimed a charitable deduction of $246,627.08 under § 2055 for the value of the remainder interest Hugh appointed to the charitable foundation.
The Tax Court held that Edna's estate was entitled to both the marital deduction under § 2056 and the charitable deduction under § 2055(b)(2). The Commissioner has appealed that decision (No. 17133). The Tax Court then held that Hugh's estate must include, pursuant to § 2041, the assets received from Edna over which he had a general testamentary power of appointment, but that he was not entitled under § 2055(b) (1) to any deduction for the remainder appointed to charity. The taxpayers have appealed that decision (No. 16940).
The decisions of the Tax Court attempted to decide the proper application of § 2055(b)(2) as related to the taxation of these two estates and as the subsection might affect the proper application of the other subsections of § 2055, and of §§ 2056 and 2041. Neither counsel for the parties nor the courts have been able to discover a prior decision dealing with § 2055(b)(2) or any other decisions sufficiently related to the problem posed to provide authoritative guidance. The two opinions of the Tax Court were thorough, carefully prepared, and attempted to track the difficult path between application of the Tax Code as literally written and application according to Congressional intent.
Briefly summarized, in Edna's estate (48 T.C. 251) the Tax Court found no justification in the Tax Code or Congressional comments for ignoring the literal failure of § 2055(b)(2) to have any stated effect on § 2056 and, consequently, saw no basis for denying a full marital deduction for the value of the trust corpus, as well as an additional charitable deduction for the value of the remainder. In Hugh's estate, however (48 T.C. 265), they rejected a "literal" argument of the taxpayer on the grounds that the "literal" wording of § 2055(b) showed that a taxpayer's choice to proceed under the "special rule" of subsection 2055(b)(2) precluded any application of the "general rule" of subsection 2055(b)(1). Consequently, Hugh's claimed deduction under § 2055 (b)(1) would be denied despite the necessary inclusion of the trust corpus in his gross estate under § 2041.
For the reasons stated below, we think that the courts have no choice in this case other than to apply subsection 2055 (b)(2) literally as it is worded. As the Tax Court so aptly stated, "we are not aware of any authority which would give us the power to rewrite by judicial fiat an unambiguous statute in order to clear up ambiguities in its legislative history," 48 T.C. at 260. Aside from following the plain wording of the 1956 amendments to § 2055(b), no other principle of statutory construction can properly be employed in this case.*fn9 We lack sufficiently reliable information of legislative intent, in addition to the printed statute, to use even the most common of interpretative aids. For instance, the possibly attractive principle that a literal interpretation should not be followed if it leads to absurd results,*fn10 cannot be used to support the Government's contentions in this case, when there is no information from any source showing the purpose of subsection 2055(b)(2), showing its intended interrelationship with the rest of the estate tax sections or showing that it can be analyzed for any of the familiar touchstones of interpretation such as evil remedied, object sought, etc. The line of cases cited by the Commission descending from Charles Ilfeld Co. v. Hernandez, 292 U.S. 62, 68, 54 S. Ct. 596, 78 L. Ed. 1127 (1934), and allegedly supporting the rule of tax interpretation that double deductions are not permitted absent express statutory mandate, is merely a variation on the "avoid absurd results" rule. In addition, this tax "rule" has rarely been applied outside the peculiar income tax*fn11 context of consolidated corporate income tax reporting and attempted double deductions of business losses, and it cannot be regarded as a legitimate canon of estate tax interpretation*fn12 to assist the court in this case.
Applying such a literal interpretation to this case, we agree with the Tax Court in Edna's estate that so many problems are left unsolved and so many solutions are possible for remedying what might be considered the absurd result of the multiple deductions resulting from a literal reading of § 2055(b)(2) that no court should attempt to write what Congress unfortunately omitted*fn13 or invent the perhap more rational system that the Commissioner asks the court to supply.*fn14 And it is equally evident that the cryptic legislative report accompanying passage of the 1956 amendments*fn15 raises even more possible "solutions" to the "absurd result" of literally applying the badly drafted subsection.*fn16 For instance, the single example in the Senate Report of the 80-year-old spouse with a short life expectancy, plus the known favored position of charities throughout our Tax Code, may indicate that Congress fully intended double charitable deductions in its 1956 amendment. A great many other practical and legislatively justifiable tax results come to mind, and the statutory patterns for achieving them. This or any other court should consequently hesitate to select the single appropriate statutory scheme, particularly when such factors as the age requirement suggest that the "loophole" left open may be used by a very few taxpayers before Congress acts to close it if such is the legislative decision.
We disagree, however, with the Tax Court in Hugh's estate that the literal reading of the statute prevents any deduction under subsection 2055(b) (1). Hugh's deduction fell within the plain language as a deductible "bequest" and, as the Tax Court recognized, the trust corpus was fully taxable under § 2041. In order to reach a different result, the Tax Court in effect ignored the fact that § 2055(b)(1) and (b)(2) refer to deductions for two separate decedents,*fn17 and then relied on the phrases "general rule," "special rule," and "for purposes of this section" to impute a Congressional intent to deny any double charitable deduction. While such a statutory interpretation may be said to avoid a possibly "absurd result," we can find no greater support for so deviating from the plain meaning of the statute than was present in Edna's estate and no greater assurance either that Congress did not intend a double deduction or that a double deduction was intended but only in a few specific instances.*fn18
The two decedent's estates referred to in § 2055(b) have no connection except via the bookkeeping provisions of requirement (D), § 6503(e),*fn19 and the fact that the testamentary power of appointment must go to a "spouse." One provides for a "bequest," the other a "transfer" [as the terms are also used in § 2055(a)]. The statute contains no suggestion that the tax assessments on the spouses' estates are to be connected or combined in any way in order to assess the tax consequences for the Miller family. In addition, the case cited by the Tax Court as authority for its crucial statutory construction conclusion applied to the Miller family's attempted use of subsection 2055(b), that a "special" rule used by the family precludes use of a "general" rule, deals with a different type of statutory pattern. Marian Essenfield, 37 T.C. 117, 122-123 (1961), aff'd 311 F.2d 208 (2nd Cir. 1962), is an example of the statutory pattern of a specific versus a general rule,*fn20 and appears inapposite in this case, where both subsections of 2055(b) are quite specific, apparently dealing with narrow situations outside the "general" tax rule of subsection 2055(a).
We cannot agree with the Tax Court that such draftsmanship shows an intent to have preclusive interplay between 2055(b)(1) and (b)(2) whenever a given husband and wife have the requisite powers of appointment, and to the contrary think that the phrase "for purposes of this section" (referring to § 2055, see 48 T.C. at 270), appearing in both 2055(b)(1) and (b)(2), if anything, indicates a different statutory pattern, namely that (b)(2) is in addition to (b)(1) -- an item of special legislation for certain octogenarians. If Congress so clearly had the intent imputed by the Tax Court, they would have used the phrase "for purposes of this subsection" (referring to "powers of appointment") as they did in the last sentence of subsection (a).
Since we find Congressional guidance certainly no greater with respect to Hugh's claimed deduction than Edna's, we think the decision in Hugh's estate should be reversed. The Commissioner's complaint of "triple deduction" should be addressed to Congress, the only body that can adequately resolve the complex questions raised by the Miller family and currently unanswered in the "special legislation" of § 2055(b)(2).
Accordingly, the decision appealed from in No. 17133 (Estate of Edna Allen Miller, 48 T.C. 251) will be affirmed; the decision appealed from in No. 16940 (Estate of Hugh Gordon Miller, 48 T.C. 265) will be reversed, with instructions to enter a decision for the petitioners.