Reargued en banc November 16, 1973. ON APPEAL FROM THE UNITED STATES TAX COURT
Gibbons and Hunter, Circuit Judges, and Muir, District Judge. Seitz, Chief Judge, Van Dusen, Aldisert, Adams, Gibbons, Rosenn, Hunter, Weis and Garth, Circuit Judges.
This is an appeal by taxpayers from a decision of the United States Tax Court holding that they were not entitled to deduct as administration expenses on an estate tax return auctioneers commissions of $490,292.89 paid by the decedent's testamentary trustees to Parke-Bernet Galleries, Inc. in connection with the sale of decedent's "Americana Collection." The tax court's findings of fact and opinion are in T.C. Memo 1971-260. We affirm.
The decedent, a lawyer and a New Jersey resident, died testate on June 12, 1965. His will, admitted to probate in Morris County, New Jersey, named the same persons as executors and testamentary trustees. The named fiduciaries qualified in both capacities, obtaining letters testamentary and letters of trusteeship from the Surrogate of Morris County on June 25, 1965. One of the principal assets of the estate was the decedent's "Americana Collection" of some 4800 books, maps and other historical manuscripts and objects. By Article TWENTY-FIRST of the will decedent bequeathed the "Americana Collection" " . . . . to my trustees hereinafter named in Article TWENTY-SIXTH of this my Last Will and Testament, IN TRUST, NEVERTHELESS, for . . . . [certain] purposes set forth in that article." Paragraph 1 of Article TWENTY-FIRST provided:
"1. I direct my trustees to dispose of . . . . [my Americana Collection] by sale, leaving it to the sole discretion of my trustees whether the sale or sales shall be of all or part or parts thereof and whether the sale or sales shall be entirely or partially at public auction or entirely or partially at private sale. The time of sale or sales of my 'Americana Collection' and the terms of the sale or sales shall be within the sole discretion of my trustees, who shall have no personal liability for the extension of any credit or credits in connection with such sale or sales which may prove unwise or for any other errors in judgment."
In paragraphs 2 and 3 of the same article the decedent directed the trustees to pay cash in the amount of $174,000 to named institutions out of the proceeds of sale of the "Americana Collection". In paragraph 4 decedent directed that if the net proceeds of sale of the "Americana Collection" should exceed $174,000 the first $240,000 of such excess should be paid by the trustees to certain of the named institutions in designated proportions. Paragraph 5 of Article TWENTY-FIRST provided:
"5. In directing that my 'Americana Collection' be sold, I have in mind that some items in the collection have a low market value and that it would be inadvisable to include such items in a public sale. Accordingly, I authorize my trustees to dispose of by gift to any public or institutional library parts of the 'Americana Collection' not in the aggregate exceeding Ten Thousand Dollars ($10,000) in appraised value."
In paragraph 6 of the same article the decedent authorized the trustees to retain four prominent bibliophiles as consultants in the disposition of his book collection and to pay each an honorarium. Paragraph 7 of Article TWENTY-FIRST provided:
"7. It is my wish that the sale of my 'Americana Collection' shall be completed within twenty-one (21) years from the date of my death and I direct that the proceeds from the sale of said 'Americana Collection' be applied by my trustees in the following order:
"(a) To the payment of all expenses and charges incident to carrying out the trust, including the honorarium to be paid to each of the consultants hereinbefore named.
"(b) To the payment of the bequests to the institutions named in Article TWENTY-FIRST, paragraphs 2 and 3 thereof.
"(c) To the payment of the balance of said proceeds, if any, when and as received, in equal shares to my children then living at the time of such receipt, and the issue then living of any deceased child or children of mine, such issue of any deceased child to receive per ...