DAY, District Judge.
Plaintiff in its capacity as the surviving executor of the estate of James C. Collins, who died testate on January 21, 1950, domiciled in Providence, Rhode Island, seeks to recover certain federal estate taxes and interest alleged to have been illegally assessed and collected from it as such executor. Plaintiff contends that the amount assessed and paid as federal estate taxes was excessive and illegal to the extent that the Commissioner of Internal Revenue erroneously refused (1) to credit said estate with the amount of succession taxes paid to the Dominion of Canada on property situated in Canada and (2) to allow as a deduction under sec. 812(d) of the Internal Revenue Code of 1939, 26 U.S.C.A. § 812(d) the bequest of the sum of $5,000 made by the last will and testament of the decedent to the Rhode Island Bar Association. In addition, the plaintiff seeks a determination of the deductibility of the additional attorneys' fees and expenses incurred in the prosecution of the claim for the refund of the taxes sought in this section.
By stipulation the parties have agreed that the plaintiff is entitled to a credit for the amount of the succession taxes paid to the Dominion of Canada and to a deduction for said additional attorneys' fees and expenses. The sole issue, therefore, to be decided by me is whether the plaintiff is entitled to a deduction of said sum of $5,000 bequeathed to said Rhode Island Bar Association in computing the federal estate taxes properly payable on the estate of said James C. Collins.
The facts established during the trial are as follows: The testator, James C. Collins, died on January 21, 1950. During his lifetime he had been one of the outstanding members of the Bar of Rhode Island, and very active and keenly interested in the affairs of the Rhode Island Bar Association, serving at various times as a member of several of its committees and later as its president. His last will and testament which was duly admitted to probate contained, among others, the following clause:
The objects of the Rhode Island Bar Association, an unincorporated organization, are set forth in Article II of its Constitution as follows:
At the time of the decedent's death the Association had twenty-seven Standing
While there was testimony that the Association through this committee or its Executive Committee had on occasions publicly expressed the sentiments and opinion of the Association concerning proposed legislation, judicial appointments, and other matters of vital concern to the public, there was no evidence to indicate that a substantial part of the activities of the Association was carrying on propaganda, or otherwise attempting, to influence legislation.
Plaintiff contends that said bequest to the Association was a gift to its members in trust for the limited purposes stated in paragraph Ninth and as such was deductible under said sec. 812(d) as a gift for charitable purposes. On the other hand, the Government contends that it was not deductible under said section because the Association is not an organization devoted to purely religious, charitable, scientific, literary or educational purposes. In its brief it also argues that "the record in this case shows that the Bar Association is engaged, at least to some extent, in carrying on propaganda or otherwise attempting to influence legislation".
The pertinent provisions of the Internal Revenue Code of 1939 are the following:
The first question to be decided by me is the nature of the interest created by paragraph Ninth—whether the bequest was in trust for limited purposes or was it an absolute gift to the Association. This determination must be made by resort to Rhode Island law. In Morgan v. Commissioner, 1940, 309 U.S. 78, at page 80, 60 S.Ct. 424, at page 426, 84 L.Ed. 585, the Supreme Court held:
And in Hassett v. Associated Hospital Service Corporation, 1 Cir., 1942, 125 F.2d 611, at page 616, the Court said:
Under Rhode Island law no particular words are required to create an express trust, if such intention can be fairly found from the language used in the will. The rule is well stated in Wood v. Hartigan, 1937, 59 R.I. 333, at page 337, 195 A. 507, at page 509, in the following language:
In my opinion the language used by the testator in paragraph Ninth manifests a clear intention by him to create an express trust of said bequest of $5,000. It was in my opinion obviously a gift to the members of the Association as trustees to be used and used only for the limited purposes specified in said paragraph. It was not an absolute gift to the Association to be used for its general activities or purposes.
The bequest being in trust, the next inquiry becomes—did it meet the requirements for deduction from the value of the gross estate of the decedent under said section 812(d) as a gift for charitable purposes? In United States v. Proprietors of Social Law Library, 1 Cir., 1939, 102 F.2d 481, at page 483, the Court said:
See also Ould v. Washington Hospital, etc., 1877, 95 U.S. 303, 24 L.Ed. 450, and Perin v. Carey, 1860, 24 How. 465, 16 L. Ed. 701.
In United States v. Proprietors of Social Law Library, supra, the Court in holding the Social Law Library to be an educational institution within sec. 101(6) of the Internal Revenue Act of 1934 and exempt from a capital stock tax, said 102 F.2d at page 484:
In my opinion the bequest under paragraph Ninth may fairly be said to be a gift in trust which tends to the benefit of mankind and is for the public convenience. The proper operation of our judicial system, the safeguarding of personal and property rights, and the maintenance of peaceful, friendly relations within this community will likewise be best served and advanced by members of the Bar who abide by the high ethical standards of their profession and by the punishment of those who fail to do so. The maintenance of these standards is of
The cases cited by and relied upon by the Government, such as Better Business Bureau of Washington, D. C. v. United States, 1945, 326 U.S. 279, 66 S.Ct. 112, 90 L.Ed. 67, Alfred A. Cook, 1934, 30 B.T.A. 292, Colonial Trust Co., 1930, 19 B.T.A. 174, and George O. May, 1925, 1 B.T.A. 1220, are clearly distinguishable and not in point. They were all concerned with whether the donee of an absolute gift was a corporation organized and operated exclusively for scientific or educational purposes. Here the gift was not an absolute gift to the Association for its general purposes and without limitation as to its use; on the contrary, the gift was to the members of the Association, as trustees, to be used exclusively for charitable purposes. Since it was a gift in trust for such purposes, it is immaterial whether the Association is an organization organized and operated exclusively for religious, charitable, scientific, literary or educational purposes. Estate of Elizabeth L. Audenried, 1956, 26 T.C. 120. Cf. Dulles v. Johnson, D.C.N.Y.1957, 155 F.Supp. 275.
The record in this case fails to show that a substantial part of the activities of the Association was carrying on propaganda, or otherwise attempting, to influence legislation. In the absence of such a showing the bequest qualified for deduction under sec. 812(d). Huntington National Bank, 1949, 13 T.C. 760.
In conclusion, I find that said bequest of $5,000 qualified for deduction under sec. 812(d) in computing the net estate of the decedent for federal estate tax purposes and should have been allowed as a deduction.
In accordance with their stipulation the parties will prepare and submit to me within seven days from the date hereof a correct computation of the amount of taxes and interest which the plaintiff is entitled to recover, based upon the terms of said stipulation and my conclusion that said bequest of $5,000 was deductible under said section 812(d) in computing the net estate of said decedent and thereupon judgment shall be entered in favor of the plaintiff in said amount.