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JACOBS v. UNITED STATES

November 15, 1971

William K. JACOBS, Jr. and Edna L. Jacobs, Plaintiffs,
v.
UNITED STATES of America, Defendant


Tyler, District Judge.


The opinion of the court was delivered by: TYLER

TYLER, District Judge.

This is an action brought by William K. Jacobs, Jr. and his wife, Edna L. Jacobs, seeking a refund of income taxes and interest from the date of payment. This court has jurisdiction pursuant to 28 U.S.C. § 1346 (a) (1).

 Plaintiffs and defendant ("the Internal Revenue Service" or "the IRS") have cross moved for summary judgment under Rule 56, Fed.R.Civ.P. There are no genuine issues of material fact; accordingly, the case is ripe for summary disposition.

 By agreement dated December 23, 1958, plaintiff Edna L. Jacobs, one of the joint taxpayers herein, created an irrevocable trust providing for payment of the net income from the trust estate to her sister, Viola L. Hendrickson, for life, with the remainder to the Tebil Foundation, Inc., a charitable foundation. *fn1" The plaintiff's husband, William K. Jacobs, Jr. (co-plaintiff herein), was named as trustee.

 In 1961, Edna L. Jacobs contributed stock, valued at $10,281.25, in a regulated investment company to the trust. The plaintiffs took a part of that contribution as a charitable deduction on their 1961 joint federal income tax return. That deduction was disallowed by the IRS on the ground that the powers granted the trustee under the trust instrument were so broad, when applied to a trust res of regulated investment company stock, that there was no assurance that the foundation in fact would receive the bequest or some determinable part of the gift. In short, the IRS ruled that the remainder interest was not presently ascertainable and, hence, not severable from the non-charitable interest. The deficiency assessment which was levied against plaintiffs was paid, and this action was brought to recover so much of the deficiency as stems from the disallowance of the charitable contribution, such amount being $3,410.42 plus interest from the date of payment.

 The trust agreement provided, in part, as follows:

 "ARTICLE I

 Disposition of Income and Principal

 A. The net income shall be paid to the Donor's sister, Viola L. Hendrickson, or applied directly for her benefit, so long as she shall live, in equal quarterly installments, as nearly as may be, or more often in the discretion of the Trustee.

 B. Upon the death of Viola L. Hendrickson, the principal of the trust, at that time remaining, shall be distributed to The Tebil Foundation, Inc. a New York membership corporation. * * *

 ARTICLE II

 Investment Provisions

 (c). To make such purchases or exchanges at such times, in such manner and upon such terms as he shall deem advisable, and to invest in such bonds, preferred or common stocks, mortgages, interests in any kind of investment trust, or other evidences of rights, interests or obligations, secured or unsecured, or in such other property, real or personal, as he shall deem advisable, whether or not any investment shall produce income or be of a wasting asset nature, and without regard to any law concerning the investment of trust funds or to the amount which shall be invested in any one security ...


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