Estate tax charitable deduction fails due to lack of certainty.

Dr. Marine's will left the residue of his estate to two universities in equal shares. The will also gave his personal representatives the discretion to give people they felt had been "helpful to [Marine] during [his] lifetime" up to 1% of the gross probate estate (which totaled $2.6 million) each. The number of people to whom gifts could be made was unlimited.

After Marine's death, the personal representatives chose two individuals to receive gifts totaling $25,000. The estate tax return reported a $2.1 million charitable deduction--the amount of the residuary bequest to the two schools.

The IRS's audit report questioned the charitable deduction. Subsequently, the estate asked a local probate court to approve the two gifts. The probate court did so and ordered no further gifts be made under the provision.

The Tax Court disallowed the charitable deduction. Under applicable case law, to be deductible the amount of a charitable bequest must be fixed and able to be stated as a definite sum of money at the date of death. The Tax Court said the broad discretionary power given the personal representatives made the charitable bequest's value unascertainable at the date of Marine's death.

The court said the charitable deduction would have been allowed if the probate court had terminated the representatives' power to invade the charities' interest before the power was exercised and the estate tax return filed. In such case there would have been a disclaimer of the power under IRC section 2055(a) that would have removed the taint of the power. Also, the court said that if the provision had included a clause limiting the number of individuals who could receive gifts from the estate, it would not have been fatal to the charitable deduction.

The case was appealed.

Result: For the IRS. The Fourth Circuit upheld the Tax Court's decision.

* Marine Est. (4th Cir., 1993), aff'g 97 TC no. 26.