The opinion of the court was delivered by: NEWCOMER
The issue before the Court arises under Section 2055 of the Internal Revenue Code of 1954 and the Regulations relating thereto.
Jurisdiction of the Court arises under Section 1346(a) (1) of Title 28 U. S. C.
The dispute involved herein is submitted to the Court as a case stated and arises out of the following stipulation of facts:
Plaintiffs, Provident National Bank, Madora Ethel Doney, Eleanor D. Bryce and William Leonard Doney, are executors of the last will of Charles F. Leonard, Deceased. Plaintiff, Provident National Bank, is a banking corporation organized under the laws of the United States, with its principal office at 1632 Chestnut Street, Philadelphia, Pennsylvania, 19103, and plaintiffs, Madora Ethel Doney, Eleanor D. Bryce and William Leonard Doney, are citizens of the United States.
Charles F. Leonard died on August 6, 1961, a resident of 648 Manoa Road, Havertown, Delaware County, Pennsylvania, leaving a last will which was duly admitted to probate by the Register of Wills of Delaware County, Pennsylvania, to which jurisdiction in that behalf belonged, and on August 21, 1961 Letters Testamentary were issued by the Register of Wills to plaintiffs, Provident National Bank, Madora Ethel Doney, Eleanor D. Bryce and William Leonard Doney, who duly qualified as executors of the said last will and at the present time continue to act as such.
Dr. Leonard's will, inter alia, disposed of the residue by creating a trust therefor to pay the income to certain life beneficiaries and after the death of the survivor of the life beneficiaries then in trust to pay the net income to Hahnemann Medical College and Hospital of Philadelphia, Pennsylvania, for use in cancer research. If Hahnemann ceased its cancer research facilities then the net income was to be given to Jefferson Medical College Hospital, Philadelphia, Pennsylvania, for the same purpose. If either Hospital ceased their cancer research programs, then the net income was to be paid to such an institution which still carries on cancer research. If a cure for cancer is found then the institution then receiving the net income shall use it for research in other areas of human disease.
In addition, the will set forth certain administrative provisions in which the following were included:
"9. Powers of Executors and Trustees
In addition to powers granted by law, my executors and trustees shall have the following powers exercisable at their discretion without court approval:
. . . (d) Investments : To retain and invest in any form of property without being limited to legal investments, [except]: No investments may be made (1) in a fractional interest in any mortgage, or (2) in any other mortgage except in first mortgages upon small dwelling houses which do not exceed fifty per cent of the conservative appraised value of the mortgaged premises. . . . However, it is not my intent to prohibit investments in mortgage bonds of railroads, public utilities or other industrial corporations secured on their assets.
. . . (f) Principal and Income : To allocate any property received or charge incurred to principal or income or partly to each as my corporate executor or trustee from time to time thinks proper, regardless of whether such allocation follows the usual rules of trust accounting.
. . . (i) Distributions of Principal : To distribute from time to time to or for the benefit of a beneficiary receiving income hereunder such amount of the principal of my residuary estate as my corporate executor or trustee considers advisable for the medical, surgical, x-ray and hospital expenses incurred during the illness of any such beneficiary, charging such payment against the general principal or in such other manner as my corporate executor or trustee thinks fair, provided that the aggregate amount of such payments to all beneficiaries shall not exceed ten per cent of my adjusted gross estate for federal estate tax purposes, as ...