Under § 403(a)(3), of the Revenue Act of 1918, which provides
that bequests to charitable corporations may be deducted in
determining the net estate subject to estate tax, a contingent
bequest the value of which cannot be determined from any known
data, but depends on mere speculation, is not deductible. P.
276 U. S.
63 Ct.Cls. 613 affirmed.
Certiorari, 275 U.S. 515, to a judgment of the Court of Claims,
rejecting a claim for refund of part of an estate tax.
Page 276 U. S. 490
MR. JUSTICE BRANDEIS delivered the opinion of the Court.
This action was brought in the Court of Claims by the executors
of Dellora R. Gates to recover $120,508.50, a part of the estate
tax alleged to have been illegally exacted under the Revenue Act of
1918, c. 18, § 403, 40 Stat. 1057,
Page 276 U. S. 491
1098. The basis of the claim is that a sum of $482,034, which
was disallowed in ascertaining the net estate taxable, should have
been deducted from the gross amount of $11,783,072.30 disposed of
by Article Fifty-first of the will. The sum disallowed represents
the alleged present value of certain contingent bequests to
charities made by that article. The question for decision is
whether the alleged present value of such contingent bequests is
deductible under § 403, par. (a), subpar. 3, of the Revenue Act.
The Court of Claims held that the Commissioner of Internal Revenue
was right in refusing to allow the deduction. 63 Ct.Cls. 613. This
Court granted a writ of certiorari. 275 U.S. 515.
The governing provision of the Act is:
"That, for the purpose of the tax, the value of the net estate
shall be determined -- (a) In the case of a resident, by deducting
from the value of the gross estate -- . . . (3) The amount of all
bequests . . . to or for the use of any corporation organized and
operated exclusively for . . . charitable . . . purposes."
Allowance of the deduction was denied pursuant to Treasury
Department Regulations 37, Article 56, which declared:
"Conditional Bequests. -- Where the bequest, legacy, devise, or
gift is dependent upon the performance of some act, or the
happening of some event, in order to become effective, it is
necessary that the performance of the act or the occurrence of the
event shall have taken place before the deduction can be allowed.
Where by the terms of the bequest, devise, or gift it is subject to
be defeated by a subsequent act or event, no deduction will be
Article Fifty-first of the will gives one-half of the residuary
estate to the testatrix's trustees in trust for her niece, Dellora
F. Angell, portions of the principal to be paid to her upon her
attaining the ages of 30 and 35 years, the balance to be paid to
her upon her attaining the age of 40, the income to be paid to her
in the meantime.
Page 276 U. S. 492
In the event that the niece should die without issue before
attaining the age of 40, the amount of the principal not paid to
her was given to charities. The remaining half of the residue was
to be held in trust for the testatrix's brother during his life,
the principal to be disposed of on his death in like manner as the
half first mentioned. The testatrix died in 1918. Dellora F. Angell
was then living, was 15 years old, and was unmarried. The
contention of the executors is that the bequests gave the charities
a present property right in the estate; that the present value of a
property right which is dependent upon some future event may be
determined by the use of standard mortality and experience tables
and by the calculations and testimony of actuaries; that the value
so determined of the contingency that the whole or a part of the
gift would go to charities is at least $482,034; that the deduction
must be taken now, for if the executors should wait until the
contingency happens, and then if the charities receive the
property, claim a refund, the claim for refund would be barred by
the statute of limitations, and that, because it was the purpose of
Congress to encourage bequests for charitable purposes, the act
should be construed so as to allow such a deduction.
The Court of Claims did not find that the present value of the
contingent bequests to the charities can be determined by the
calculations of actuaries based upon experience tables. No basis is
laid in the record for supplementing the findings in this respect.
But the executors urge that we may take judicial notice that such
tables exist, and that, by the use of them, actuaries are able to
determine that, in 1918, the possibility that the residuary gift of
$11,783,072.30, or a part thereof, would ultimately go to the
charities was worth at least $482,034; or, in other words, 4.0909
percent, of the amount of that residue. The figure, $482,034, we
are told, is reached, through the actuarial art, by some
combination and adjustment of the
Page 276 U. S. 493
standard experience table of mortality, long in use (see
Simpson v. United States, 252 U. S. 547
252 U. S.
), with two other tables which are relatively little
known and which do not appear to have ever been used in America in
legal proceedings. One of these is supposed to show what the
probability is that a woman dying at a given age will die
unmarried, the other to show what the probability is that, if she
marries, she will die childless.
If all the facts stated had been embodied in findings, no legal
basis would be laid for the deduction claimed. The volume and
character of the experience upon which the conclusions drawn from
these two tables are based differ from the volume and character of
the experience embodied in standard mortality tables almost as
widely as possibility from certainty. Both of these tables are
based on data contained in volumes of Lodge's Peerage. The first
table, which may be found in the Transactions of the Faculty of
Actuaries in Scotland, Vol. 1, pp. 278, 279, and is called Lees'
Female Peerage Tables, was constructed by M. Mackensie Lees. It
deals with 4,440 lives, of whom 2,010 died during the period of
observation. The second of the tables, which may be found in an
article entitled "On the Probability that a Marriage entered into
by a Man of any Age will be Fruitful," in the Journal of the
Institute of Actuaries of Great Britain, Vol. 27, pp. 212, 213, was
constructed by Dr. Thomas Bond Sprague. It deals with the
experience of 1,522 male members of the Scotch peerage, and
purports to show the probability that a marriage will be childless
both as respects men married as peer or heir apparent and men who
did not marry as peer or heir apparent. In order to apply the
latter table to females, certain assumptions and adjustments are
necessarily made. It was one such data that the petitioners sought
to set a money value on the probability that this Texas girl of 15
will not marry, or, if she does, will die without issue before
Page 276 U. S. 494
age of 30, or 35, or 40. Obviously, the calculation that the
contingent interest of the charities was equal to 4.0909 percent of
the residue was mere speculation bearing the delusive appearance of
One may guess, or gamble on, or even insure against, any future
event. The Solicitor General tells us that Lloyds of London will
insure against having twins. But the fundamental question in the
case at bar is not whether this contingent interest can be insured
against or its value guessed at, but what construction shall be
given to a statute. Did Congress, in providing for the
determination of the net estate taxable, intend that a deduction
should be made for a contingency the actual value of which cannot
be determined from any known data? Neither taxpayer nor revenue
officer, even if equipped with all the aid which the actuarial art
can supply, could do more than guess at the value of this
contingency. It is clear that Congress did not intend that a
deduction should be made for a contingent gift of that character.
Compare Edwards v. Slocum, 264 U. S.
, 264 U. S.