Opinion
Docket No. 62267.
1960-02-12
ESTATE OF MARGARET E. CALLAGHAN, J. JOSEPH CALLAGHAN, EXECUTOR UNDER THE WILL OF MARGARET E. CALLAGHAN, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
John J. Sullivan, Esq., and John J. FitzGerald, Esq., for the petitioner. Manning K. Leiter, Esq., for the respondent.
John J. Sullivan, Esq., and John J. FitzGerald, Esq., for the petitioner. Manning K. Leiter, Esq., for the respondent.
A bequest to a member of an incorporated religious organization who has taken a solemn vow of poverty, held, on the facts, not a deductible bequest or transfer to or for the use of a religious corporation within the meaning of section 812(d), I.R.C. 1939.
Respondent determined a deficiency in estate tax of $24,700.83. The sole issue is whether on the present facts a bequest to decedent's daughter, a Roman Catholic nun who has taken a solemn vow of poverty, is the equivalent of a transfer to or for the use of a religious corporation within the meaning of section 812(d), I.R.C. 1939. Other issues raised by the pleadings have been resolved by stipulation.
FINDINGS OF FACT.
The stipulated facts are found.
Petitioner is the duly appointed executor, under her will executed December 11, 1942, of the estate of Margaret E. Callaghan, a widow, hereafter called decedent, who died on July 17, 1952. Petitioner filed an estate tax return with the director of internal revenue for the district of Massachusetts on October 16, 1953. Decedent was survived by a son, Joseph, the decedent's executor; and three daughters, Teresa M. Callaghan, Margaret Mary Callaghan, a member of the Sisters of the Carmelite Convent, and Rose G. Callaghan, a member of the Sisters of St. Joseph. Decedent's children were all over 21 years of age at the time of her death.
Decedent left a will which she had executed on December 11, 1942. In it she devised the family home to Joseph and Teresa, and her personal effects to Teresa. The residuary clause of the will states:
I give, devise and bequeath all the rest, residue and remainder of my said estate to my children living at the time of my death in equal shares.
Margaret Mary became a member of the Carmelite Convent, a Roman Catholic religious order or institute, on October 15, 1909, and has continuously remained a member of that convent to the present time. The Carmelite Convent is incorporated under the laws of Massachusetts and is a religious corporation within the meaning of sections 101(6)
and 812(d), I.R.C. 1939.
The stipulation erroneously refers to section 101(c). Respondent admits on brief, however, that the Carmelite Convent qualifies under section 101(6).
On April 29, 1911, Margaret Mary made perpetual profession of simple vows of obedience, chastity, and poverty, in accordance with the tule and constitutions of the Carmelite Convent. As hereinafter detailed, she professed solemn vows on January 23, 1952. Section 249 of the document provides:
The professions are to be made according to the respective formula and with the observance of the rite prescribed in the Ceremonial. A written record of each profession signed by the person who received the vows, and by the Religious who made the profession, must be preserved in the archives of the Convent. Moreover, in the case of a solemn profession, the Prioress must communicate the fact to the Parish Priest of the place, where the professed Religious was baptized. (Can. 576.)
Section 251 of the same document provides:
A Nun of simple vows retains the ownership of her own goods, and is capable of acquiring additional property; but whatever she acquires by her own industry, or what is given her in view of the Order, she acquires for the Order. After solemn profession, all the property which the Religious acquires in whatever manner becomes the property of the Convent. (Can. 580, Secs. 1, 2, and 582.)
The Carmelite Convent is a part of the worldwide Carmelite Order. The Carmelite Order is a Roman Catholic religious institute approved as a religious order. A ‘religious order’ is distinguished from a ‘religious congregation’ in that not only simple vows may be taken by its members but solemn vows as well. The canon law, which is the ecclesiastical law governing the Roman Catholic Church, distinguishes between a simple vow of poverty and a solemn vow of poverty.
Having taken a simple vow of poverty, a nun retains the ownership of property acquired before pronouncing the vow and retains the capacity to acquire new property through a gift or bequest, if the gift or bequest is made to the nun in her personal capacity. She disposes of the use of such property during her lifetime and by will after her death. The beneficiary may be any person. What the nun acquires through her earnings after taking a simple vow of poverty belongs to the order. The effect of a solemn vow of poverty under the canon law is to incapacitate the religious to acquire ownership of property by any means whatsoever except for the order. According to the canon law the Carmelite Convent is entitled to the instant residuary bequest to Margaret Mary because she took a solemn vow of poverty. According to the canon law the Carmelite Convent would not be entitled to her bequest if she had remained under a simple vow of poverty.
In 1911, when Margaret Mary professed perpetual simple vows of obedience, chastity, and poverty, members of the Carmelite Convent, along with most other nuns in the United States, were not authorized to take solemn vows. The reasons for this disability were historical. Between 1866 and 1950 there were only 6 convents of nuns in the United States where solemn vows were taken. In 1950, Pope Pius XII promulgated the Apostolic Constitution which provided, in part, that monasteries where previously only simple vows were authorized could apply for authority to administer the solemn vows, and that such steps should be taken unless there were grave reasons to the contrary. On January 9, 1952, the Carmelite Convent received canonical authorization for its members to take solemn vows.
Margaret Mary, pursuant to the canonical authorization and pursuant to the rule and constitutions of the Carmelite Convent, professed on January 23, 1952, solemn vows of obedience, chastity, and poverty, in common with all the nuns of the Carmelite Convent who were then in perpetual vows. A copy of the formula of this solemn profession which is in accordance with the form prescribed in the rule and constitutions of the Carmelite Convent is:
I, Sister * * * , make my solemn profession, * * * and I promise obedience, chastity, and poverty to God, to the Most Blessed Virgin Mary of Mount Carmel, and to you, Rev. Mother Prioress, and to your successors, according to the primitive Rule of the Discalced Carmelities (sic) and our Constitutions, until death.
The canon law considers the profession of perpetual vows as the act whereby the individual is incorporated into the religious institute. By this incorporation the individual assumes rights and obligations to the institute and the institute assumes rights and obligations to the individual. Margaret Mary's incorporation into the Carmelite Convent took place at the time she pronounced her perpetual simple vows in 1911. According to the canon law the mutual rights and obligations of Margaret Mary and the Carmelite Convent were settled at that time. The Carmelite Convent had completely assumed all obligations for the support of Margaret Mary in 1911.
Rose became a member of the Sisters of St. Joseph in 1924. She had taken perpetual simple vows of poverty prior to her mother's death. Members of the Sisters of St. Joseph were not authorized to take solemn vows of poverty.
Decedent was a zealous member of the Roman Catholic faith and she knew that her daughters Margaret Mary and Rose belonged to convents. She believed that any property she left to those daughters would ultimately go to the convents. She was not aware of the distinction between a simple and a solemn vow of poverty.
Decedent sold some real estate in 1946 for $12,000. She gave $2,000 of the proceeds of this sale to the Sisters of St. Joseph for a new alter and a like sum each to the Carmelites, Teresa, and Joseph.
The explanatory paragraph in the statement attached to the notice of deficiency, which was mailed to petitioner in March 1956, states:
It is determined that the amount of $79,366.59 claimed for deduction in Schedule N of the return is not deductible as a transfer for religious uses since the bequests were to the decedent's daughters, Mary Margaret Callaghan and Rose G. Callaghan, rather than bequests to or for the use of the religious orders of which the legatees are members, under Section 812(d) of the Internal Revenue Code of 1939.
The decedent intended to deal equally among her children. She thought of Margaret Mary and Rose as being similarly situated, and that they would be entitled to their shares in her estate if they survived her but that their shares would have to pass to their respective convents because of their vows of poverty. She did not intend to bequeath any property directly to the convents.
The bequest to Margaret Mary was not a bequest, legacy, devise, or other transfer to or for the use of a religious corporation within the meaning of section 812(d), I.R.C. 1939.
On October 16, 1953, petitioner paid the Federal estate tax disclosed on the estate tax return in the amount of $11,564.63. By check dated May 2, 1956, petitioner paid $26,755.97 to the district director of internal revenue as a deposit to stop the interest running on the deficiencies determined by respondent in the instant proceeding.
OPINION.
OPPER, Judge:
The legal issue which might be presented here is one as to which there is no Tax Court authority. It was recognized in Estate of George W. Dichtel, 30 T.C. 1258, but explicitly left undecided.
Petitioner urges that decedent's bequest of a one-fourth interest in her residuary estate, being to her daughter, a member of an incorporated religious order who was under an obligation to turn the bequest over to the order for its own use, was a deductible bequest, legacy, devise, or transfer to or for the use of a charitable corporation within the meaning of section 812(d). Respondent contests the validity of the daughter's alleged obligation, contending that her solemn vows, coming long after her admission to the convent, were not supported by consideration and were accordingly not binding. The conclusion at which we have arrived permits us to assume that consideration, if required,
existed and that the convent had an enforcible right to the property bequeathed to the daughter. See St. Benedict Order v. Steinhauser, 234 U.S. 640.
Petitioner contends that the claimed ‘deduction is not based upon any contractual aspects between Margaret Mary * * * and her Convent * * * , and that ‘Sister Laurentia (Margaret Mary) made no contract * * * whereby she promised to turn over or surrender any property * * * in consideration of some quid pro quo.’ (Petitioner's brief.) Contrast with this the language of St. Benedict Order v. Steinhauser, 234 U.S. 640, 648-649, 651: ‘These (gains) go to the corporation in exchange for the privileges of membership and to further the common purpose to which the members are devoted. * * * He had agreed, by accepting membership under the (Order's) constitution, that his individual earnings and acquisitions, like those of other members, should go into the common fund * * * .’ (Emphasis added.)
As we said in Estate of Annie Sells, 10 T.C. 692, 699:
It is a cardinal principle in the interpretation of wills that they be construed to effectuate the intention of the testator * * *
The statement is also made
that if a general charitable purpose is manifest, within the limits of the testator's language, a broad and liberal construction should be applied to that language and the gift upheld.
See also, Desoe v. Desoe, 304 Mass. 231, 23 N.E.2D 82 (1939).
Petitioner alleges that Margaret Mary, the daughter, was ‘nothing but a conduit, straw, vehicle or nominee for The Carmelite Convent,‘ and that decedent so intended when she made her will. There is certainly nothing in the testatrix's ‘language’ to indicate such an intention and the only external evidence of intent is Joseph's testimony that his mother believed that any gift to Rose or Margaret Mary would pass to their respective religious organizations.
But decedent's intent, as evidenced by her will, was to treat all of her children equally after disposing of certain property which would have been of no benefit to those in religious organizations and her belief that the bequests to Rose and Margaret Mary would pass to their respective religious organizations indicates nothing more to us than that decedent was reconciled to any disposition which leaving property to her children might result in. There is no indication that decedent would have drafted her will in any different form whether or not she was aware that Rose and Margaret Mary were capable of acquiring and retaining bequests in their own behalf, as they in fact both were for many years after decedent executed her will and Rose was when it became effective.
Had decedent intended to make a direct charitable bequest, it would have been a simple matter for her to have made the bequest outright to the religious organizations.
It was, in fact, some 9 years after the will was executed in 1942 that Margaret Mary, on January 23, 1952, undertook the solemn vows, pursuant to canonical authorization dated January 9, 1952. Decedent died only some 6 months later, July 17, 1952.
Decedent apparently recognized this possibility, since she took that course of action several years after executing her will and several years prior to her death when she made gifts of cash to petitioner and Teresa and made identical gifts directly to the religious organizations to which Rose and Margaret Mary belonged.
While Estate of George W. Dichtel, supra, did not foreclose this point, we are reinforced in the present view by the language in which the Tax Court disclaimed decision of the question (p. 1262):
In arriving at this conclusion we do not reach the question as to whether a bequest made to a member of a religious order who was under an obligation, of which the testator had notice, to turn such bequest over to the order for its own use would constitute a deductible charitable transfer within the purview of section 812(d) of the Code. But see Delaney vs. Gardner * * * (Emphasis added.)
These words we take to mean that at least knowledge of the solemn vow must exist when the will is executed. Not only is no such knowledge shown here, but, actually, the fact did not then exist.
To hold otherwise would require that the express terms of a will could be changed first one way then another
from time to time by the acts of a third party undertaken after its execution and without testator's knowledge. It is difficult to see that this could, in the terms of the statute, be even a ‘transfer’ by the ‘decedent’ for the benefit of a charity. And it seems clear that the word ‘transfer’ in section 812(d), as distinguished from ‘bequests, legacies or devises,'
‘When withdrawal or dismissal occurs, permitted only with approval of the Pope, all the property to which the member became entitled during her membership, belongs to the Society; she takes none with her.’ (Petitioner's brief; emphasis added.)
is intended to refer to an inter vivos conveyance which is includible under section 811. See, e.g., section 811(j), last sentence.
SEC. 812. NET ESTATE.For the purpose of the tax the value of the net estate shall be determined, in the case of a citizen or resident of the United States by deducting from the value of the gross estate—(d) TRANSFERS FOR PUBLIC, CHARITABLE, AND RELIGIOUS USES.— The amount of all bequests, legacies, devises, or transfers, to or for the use of * * * any corporation organized and operated exclusively for religious, charitable,scientific, literary, or educational purposes, * * *
Petitioner argues that ‘(t)he Congressional intent (behind section 812(d)) was not so much to benefit the decedent testator who is no longer among the living, but the remaining beneficiaries of the decedent's Estate, if some part of the Estate moved to charity and thus relieved municipal, state or Federal units of some burdens.’ Such an argument is disposed of by Y.M.C.A. v. Davis, 264 U.S. 47, 50, where, in discussing a forerunner of section 812(d), it was said:
Congress was thus looking at the subject from the standpoint of the testator and not from the immediate point of view of the beneficiaries. It was intending to favor gifts for altruistic objects, not by specific exemption of those gifts but by encouraging testators to make such gifts. Congress was in reality dealing with the testator before his death. It said to him
‘if you will make such gifts, we'll reduce your death duties and measure them not by your whole estate but by that amount, less what you give.’
There is no evidence within or outside the present will that decedent intended to make a charitable transfer through a constructive trust or otherwise. Cf. Marine Midland Trust Co. of Southern N.Y. v. McGowan, (C.A. 2) 223 F.2d 408. Petitioner's claim for a deduction must therefore fail in any event, although this result is also supported by a construction of section 812(d) that it applies ‘only to those gifts which pass by the terms of a testamentary instrument,‘ Delaney v. Gardner, (C.A. 1) 204 F.2d 855, 860,
and not, presumably, through some outside obligation, no matter how binding, undertaken voluntarily or otherwise by a legatee.
Petitioner disposes of this case by contending that the Court erred in applying a literal interpretation to section 812(d).
Decision will be entered under Rules 50 and 51.