The opinion of the court was delivered by: Igoe, District Judge.
Plaintiffs, as executors under the will of Herman Molner,
deceased, have brought this suit pursuant to Section 1346(a)(1)
of Title 28, U.S.Code, to recover federal estate taxes alleged to
have been erroneously or illegally assessed or collected by
virtue of the death of Herman Molner, who died May 28, 1951, a
resident of Cook County, Illinois, and a citizen of the United
States. Plaintiff, Lillian L. Molner, is one of the executors and
is the surviving spouse of Herman Molner.
This case has been submitted upon a stipulation of facts and
motion for summary judgment by each party on the issue whether a
surviving spouse's award allowed by the Probate Court of Cook
County on November 1, 1951, and paid to the widow qualifies for
the marital deduction under Section 812(e) of the Internal
Revenue Code of 1939, 26 U.S.C. § 812(e), in computing the
federal estate tax due on the estate of Herman Molner, deceased.
Plaintiffs' right to recover is dependent upon such
The will of Herman Molner was admitted to probate by the
Probate Court of Cook County, Illinois, on August 29, 1951, and
letters testamentary issued thereon.
On November 1, 1951, pursuant to the provisions of the Illinois
Probate Act, S.H.A. ch. 3, § 151 et seq., a surviving spouse's
award of $25,000 was allowed to Lillian L. Molner, wife of Herman
Molner, and was approved by the Probate Court. The award was paid
in full to her by the executors in three equal installments on
November 29, 1951, February 28, 1952, and May 30, 1952,
The executors filed a federal estate tax return on October 27,
Gross estate - $802,514.60
Deductions: (other than marital
and charitable) - $56,055.83
Surviving spouse's award $25,000.00
Schedules D, E, F 5,619.53
Article Third of Will 221,946.41
Charitable - $63,000.00.
Total deductions: $371,621.77.
Net Estate before Exemptions - $430,892.83;
and paid a tax due thereon of $96,597.14.
Upon audit, the Director determined that the valuation of the
gross estate should be increased by $30,300, thereby increasing
the estate subject to tax by $20,200 (the difference passing
under Article Third of the Will and qualifying for the marital
deduction). No other change was made in the return as filed.
As a result of the increase in the net estate subject to tax,
the federal estate tax due was increased by $5,817.60. The
executors accepted the increase and paid the amount of the
deficiency of $5,817.60 and $605.66 interest on July 23, 1954.
On June 26, 1956, plaintiffs filed a claim for refund of
$5,871.18, based upon
(1) Additional expenses of administration and non-marital
deductions — $3,778.26.
(2) Increase in marital deductions by reason of construction of
Will by Appellate Court — $14,504.80.
The Director allowed $1,107.35, the tax attributable to (1) but
disallowed the balance of $4,763.83 applicable to (2).
The reason given by the Director for disallowing the claim of
$4,763.83 was that the surviving spouse's award of $25,000 did
not qualify for the marital deduction under Section 812(e) of the
Internal Revenue Code of 1939, asserting (1) the award did not
constitute an inheritance from the decedent and (2) it
constituted a terminable interest under the Illinois law and was
disallowed by virtue of Section 812(e)(1)(B) of the 1939 Code.
This suit was brought to recover the amount of the tax allegedly
overpaid by reason of such disallowance. In view of the amount
repaid to plaintiffs in connection with that portion of the claim
that was allowed, the amount, if any, due plaintiffs is
The sole question for determination is whether the surviving
spouse's award allowed and paid to Lillian L. Molner, widow of
Herman Molner, pursuant to the Illinois law qualifies for the
marital deduction under Section 812(e) of the Internal Revenue
Code of 1939. If it qualifies, plaintiffs are entitled to
judgment in the amount of $4,648.55, plus statutory interest
thereon from July 23, 1954, and costs of this suit; if it does
not qualify, defendant is entitled to judgment and plaintiffs
shall take nothing by their suit.
Defendant has conceded that since the issuance of Rev.Rul. 83,
1953 — 1 Cum. Bull. 395, the award constitutes an interest which
passes to the surviving spouse, but states that the position of
the Treasury Department is that a surviving spouse's award will
qualify for the marital deduction only if it appears that the
spouse has a vested right of property which is not terminated by
her death or other contingency; that whether any interest thus
taken by the surviving spouse satisfies the statutory
requirements in this respect is to be determined in the light of
the applicable provisions of the State statutes, as interpreted
by the local courts.
Rev.Rul. 83 states, in part:
"Under the general rule of subparagraph (A) of
Section 812(e)(1) of the Code, the marital deduction
will be allowed with respect to any interest in
property included in the gross estate which passes
from a decedent to his surviving spouse as absolute
owner. In order to qualify under this subparagraph,
any right of a widow to an allowance in her husband's
estate must be a vested right of property which is
not terminated by her death or other contingency.
Therefore, if a widow's allowance for the full period
of settlement of the estate is such that the
allowance, or any unpaid balance thereof, will
survive as an asset of her estate in case she dies at
any time following the decedent's death, the interest
thus taken by the widow would clearly consitute a
deductible interest under Section 812(e)(1)(A) of
the Code. Whether any interest thus taken by a widow
satisfies the statutory requirements in this respect
is to be determined in the light of the applicable
provisions of the State statutes, as interpreted by
the local courts."
Defendant's contention is (1) that the surviving spouse's award
is subject to the provisions of subparagraph (B) of Section
812(e)(1) and (2) that under Illinois law the award is a
terminable interest as defined in (B).
Plaintiffs' position is (1) in view of the legislative history
relating to the 1950 amendment to the 1939 Code (S. Rept. No.
2375, 81st Congress, 2d Sess. 1950-2CB 483, 525, 576, U.S.Code
Cong. Service 1950, p. 3053), which eliminated the surviving
spouse's allowance as a general deduction for estate tax
purposes, the intention of Congress was that support allowances
actually paid to a surviving spouse out of the decedent's gross
estate should qualify for the estate tax marital deduction,
citing as authority the opinion of Judge Pierce, concurring in
part and dissenting in part, in Estate of Proctor D. Rensenhouse,
1959, 31 T.C. No. 81 (1959) (CCH Tax Court Reporter, 1959, p.
2069) (¶ 31.81 P-H T.C. 1959); and (2) in any event, the award
allowed under Illinois law is not a terminable interest within
the meaning of subparagraph (B) of Section 812(e)(1).
Assuming, without deciding, that subparagraph (B) of Section
812(e)(1) of the 1939 Code is applicable to the surviving
spouse's award generally, in view of defendant's concession that
it constitutes an interest which passes to the surviving spouse,
before it can be disallowed as a marital deduction under Section
812(e), it must be established that it constitutes a "terminable
interest" under subparagraph (B), that is an interest which will
terminate or fail:
"* * * Upon the lapse of time, upon the occurrence
of an event or contingency, or upon the failure of an
event or contingency to occur * * *
"(i) if an interest in such property passes or has
passed * * * from the decedent to any person other
than such surviving spouse (or the estate of such
"(ii) if by reason of such passing such person (or
his heirs or assigns) may possess or enjoy any part
of such property after such termination or failure of
the interest ...