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U.S. Supreme Court

Merchants Nat'l Bank v. Commissioner, 320 U.S. 256 (1943)

Merchants National Bank of Boston v.

Commissioner of Internal Revenue

No. 30

Argued October 19, 1943

Decided November 15, 1943

320 U.S. 256


1. Section 303(a)(3) of the Revenue Act of 1926, which allows deduction for estate tax purposes of amounts bequeathed to or for the use of charities, was validly implemented by Treasury Regulations 80 (1934 ed.), Arts. 44 and 47, which provide that, where a trust is created for both charitable and private purposes, the charitable bequest, to be deductible, must have at the testators death a value "presently ascertainable, and hence severable from the interest in favor of the private use," and further, to the extent that there is a power in a private donee or trustee to divert the property from the charity, "deduction will be limited to that portion, if any, of the property or fund which is exempt from an exercise of such power." P. 320 U. S. 260.

2. Under a trust created by will, the income was to be paid to the testator's widow for life, and, on her death, all but a specified amount of the principal was to go to designated charities. The trustee was authorized, in his discretion, to invade the corpus for the "comfort, support, maintenance, and/or happiness" of the widow, and was directed to exercise that discretion with liberality towards the widow and to consider her "welfare, comfort and happiness prior to claims chanrobles.com-red

Page 320 U. S. 257

of residuary beneficiaries" -- i.e., the charities. In 1937, the trust realized gains from the sale of securities.


(1) A deduction under § 303(a)(3) of the Revenue Act of 1926, for purposes of the federal estate tax, was properly disallowed. P. 320 U. S. 261.

(2) A deduction for federal income tax purposes, under § 162(a) of the Revenue Act of 1936, which permits a deduction of that part of gross income "which pursuant to the terms of the will . . . is during the taxable year . . . permanently set aside" for charitable purposes, was properly disallowed. P. 320 U. S. 263.

132 F.2d 483 affirmed.

Certiorari, 319 U.S. 734, to review the reversal of a decision of the Board of Tax Appeals, 45 B.T.A. 270, which set aside a determination of deficiencies in income and estate taxes.


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