1948 U.S. Tax Ct. LEXIS 262">*262
Decedent, a resident of California, by her will bequeathed the residue of her estate, consisting of more than one-third of her estate, to charitable organizations. She was survived by her husband and a sister. The husband was named and served as one of the executors. The will was admitted to probate and the estate was administered by the California court having jurisdiction in such matters. The statutes of California provided that, while legacies to charities were valid, they "may not collectively exceed one-third of the testator's estate as against [the testator's] spouse * * * [or] sister * * * ." With the explicit consent of decedent's husband and the tacit consent of her sister, the estate, pursuant to the orders of the California court, was distributed according to the terms of her will.
10 T.C. 318">*318 Respondent has determined herein a deficiency of $ 29,016.86 in estate tax liability. Petitioner alleges that respondent erred in this determination and claims an overpayment because of respondent's failure to allow as deductions certain expenses of administration.
The question presented by the determination of the deficiency and petitioner's principal allegation of error is whether petitioner is entitled, under
10 T.C. 318">*319 The notice of deficiency stated: "It is held that under the provisions of the Probate1948 U.S. Tax Ct. LEXIS 262">*265 Code of California only one-third of this decedent's residuary estate passed to the charities named in her will; that such one-third of the residue amounted to $ 73,618.18; and that the excess thereof, $ 109,673.66, claimed as a deduction in decedent's estate tax return, is not an allowable deduction in computing decedent's net estate for purposes of estate tax thereon.
The questions incident to respondent's failure to allow administration expenses have been settled by stipulation, and effect will be given to this stipulation in proceedings under Rule 50.
FINDINGS OF FACT.
All of the facts are stipulated or admitted in the pleadings and are hereby found accordingly.
Melusina H. Varick, a resident of Santa Barbara, California, died November 24, 1942, leaving a last will dated November 4, 1941, which was duly admitted to probate on December 14, 1942, in Probate Cause No. 34,255, in the Superior Court of the State of California in and for the County of Santa Barbara. Decedent devised to her husband her interest in the family home, together with certain articles of personal property and a legacy of $ 10,000. She bequeathed $ 10,0001948 U.S. Tax Ct. LEXIS 262">*266 to the First National Trust & Savings Bank of Santa Barbara in trust, to pay the net income to her sister, Myra Hopkins Taylor, during her sister's life, the principal of this fund to go at her sister's death into the Varick Memorial Fund, a trust created under the residuary clause. The residue of the estate, in the event that decedent survived for more than six months after the execution of her will, was given to her husband, William R. Varick, and the First National Trust & Savings Bank of Santa Barbara, in trust. The trustees were directed to pay $ 6,000 per year to her husband for his life from either principal or interest, at their discretion, and all income of the trust in excess of that amount. Following his death, the trust estate remaining was to go to three institutions, namely, Dartmouth College, New Hampshire Children's Aid & Protective Society, and Elliott Hospital Associates, Manchester, New Hampshire (Senior Branch, Inc.), all these being institutions of the character described in
On October 13, 1943, William R. Varick filed in the probate cause an instrument executed by him, dated July 30, 1943, wherein he waived and disclaimed1948 U.S. Tax Ct. LEXIS 262">*267 all interest in the decedent's estate not specifically devised to him, specifically disclaiming all interest in the gifts to charitable purposes. At no time prior to decedent's death did William R. Varick, the surviving spouse, execute an instrument in writing, as 10 T.C. 318">*320 provided for by
Decedent's husband did not contest the admission of the will of decedent to probate, nor did he or Myra Hopkins Taylor in any manner oppose any of the decrees or orders entered by the probate court in the probate of the will of decedent.
William R. Varick died November 9, 1945. The $ 10,000 trust for decedent's sister was established under an order for partial distribution dated July 6, 1943.
The Superior Court of the State of California in and for the County of Santa Barbara is the court which, under the law of California, had jurisdiction of the administration and distribution of the estate of Melusina H. Varick, deceased. 1948 U.S. Tax Ct. LEXIS 262">*268 The first and final account, report, and petition for distribution under the will, dated October 27, 1943, contains a paragraph reciting the disclaimer filed by William R. Varick, on the 13th day of October 1943.
On the 8th day of November 1943, the court issued a decree settling first and final account and for distribution under will. The court's decree of distribution distributed the estate in accordance with the provisions of the decedent's will. This decree has never been appealed from or modified and still remains in full force and effect.
At the time of decedent's death, her husband was 72 and her sister was 78 years of age. They were decedent's sole heirs, entitled, in the absence of a valid will, to her estate in equal shares.
OPINION.
The question presented herein is whether all or only a part of amounts of the interests in decedent's residuary estate purportedly bequeathed to the three charitable or educational corporations or associations by decedent's will are deductible from the value of decedent's gross estate pursuant to the provisions of
Respondent has determined that "under the provisions of the Probate Code of California, 1948 U.S. Tax Ct. LEXIS 262">*269 only one-third of this decedent's residuary estate passed to the charities named in her will * * * and that the excess thereof, $ 109,673.66, claimed as a deduction in decedent's estate tax return, is not an allowable deduction in computing decedent's estate for purposes of estate tax thereon." On brief respondent supports this determination by the following argument: The charitable bequest of decedent in excess of one-third of her 10 T.C. 318">*321 estate were void under the provisions of
1948 U.S. Tax Ct. LEXIS 262">*270 It is apparent from this statement of respondent's argument that its validity depends on the correctness of his first proposition, i. e., that the charitable bequests of decedent in excess of one-third of her estate were void under California law. See
We are convinced that the bequests in question were not void under the California statutes, but were merely voidable. Our reasons for this 10 T.C. 318">*322 conclusion may be summarized as follows: First, the restrictions by the California statute on bequests1948 U.S. Tax Ct. LEXIS 262">*271 to charity were not intended as a declaration of public policy as in a mortmain statute, but were intended as a protection of heirs at law.
The charitable bequests of decedent in excess of one-third of her estate were voidable by her heirs. No steps were taken by them to render the bequests invalid, but, on the contrary, 1948 U.S. Tax Ct. LEXIS 262">*273 they gave explicit or tacit consent to the distribution of decedent's estate pursuant to the terms of her will. Therefore, the full amount of the interests bequeathed by decedent to the three charities here involved passed to them from decedent under her will and is deductible from her gross estate. On this issue we decide in favor of petitioner.
Since the stipulation filed herein sets out certain expenses incurred or to be incurred by petitioner which are deductible in determining the amount of estate tax liability,
10 T.C. 318">*323 Disney,
1.