The opinion of the court was delivered by: STEWART
This action is brought by Manufacturers Hanover Trust Company, as executor of the estate of Charlotte C. Wallace ("Estate"). Plaintiff challenges the Commissioner of Internal Revenue's ("Commissioner") use of gender-based mortality tables in calculating the present value of the reversionary interest in the trust of the decedent. This valuation determines whether the trust may be included in the estate of a decedent and therefore, be taxable. Plaintiff instituted this action for the refund of federal estate taxes from the United States of America ("Government").
Jurisdiction in this court is based on 26 U.S.C. § 7422 and 28 U.S.C. §§ 1331, 1346(a)(1). Both parties have moved for summary judgment pursuant to Fed. R.Civ.P. 56(c). We begin with a description of the undisputed facts.
On November 5, 1923, Charlotte Wallace established a trust and retained the right to the trust's income for her life. At the same time, she named her son Howard the beneficiary, to receive the income from the trust after her death. Charlotte also retained a reversionary interest in the trust income if her son predeceased her. On February 28, 1976, Charlotte died at the age of 88, and was survived by her son, who was 57 years old at the time.
Internal Revenue Code § 2037 provides that the value of a decedent's reversionary interest in a trust is includable in the decedent's gross estate if the value of that reversionary interest, immediately before the decedent's death, exceeds 5 percent of the value of the corpus. The Treasury Regulations ("Regulations")
provide both the actuarial tables and formulas to be used to calculate the value of the reversionary interest. Under the Regulations, the value of the reversionary interest is a function of the life expectancies of both the decedent and the trust beneficiary. The tables employed give one set of life expectancies for men and another for women.
The parties agree that the decedent in this case retained a reversionary interest within the meaning of section 2037, and that the present value of her reversionary interest exceeded the 5 percent limit when calculated with the sex-based mortality tables contained in the Treasury Regulations at issue. The parties further agree that the sex-based tables would yield the following results in the following situations:
Sex and Age of Sex and Age of Present Value of
Decedent Beneficiary Reversionary Interest
Female age 88 Male age 57 .06654
Male age 88 Male age 57 .06415
Female age 88 Female age 57 .03520
Male age 88 Female age 57 .03390
Finally, the Government admits that the value of the reversionary interest is below the 5 percent limit, and thereby not taxable, when calculated under the gender-neutral tables called for by the plaintiff.
The plaintiff challenges the Commissioner's use of the gender-based mortality tables on two grounds: first, that such tables exceed the Commissioner's statutory authority to promulgate regulations containing actuarial tables; and second, that such tables constitute impermissible gender discrimination that deprives the plaintiff of due process of law guaranteed by the fifth amendment. We address each of the grounds in turn.
I. The Secretary's Statutory Authority to Promulgate the Regulations
Plaintiff argues that the Regulations are beyond the authority granted to the Secretary by I.R.C. § 2037. Section 2037 provides in pertinent part:
The value of a reversionary interest immediately before the death of the decedent shall be determined (without regard to the fact of the decedent's death) by usual methods of valuation, including the use of tables of mortality and actuarial principles, under regulations prescribed by the Secretary.
Plaintiff argues that this section did not authorize the Secretary to promulgate regulations that employ sex-biased distinctions. We reject this argument.
The cases that plaintiff relies upon to argue that the Regulations are beyond the Secretary's statutory authority hold that the Secretary is authorized to promulgate regulations using an actuarial approach, which do not consider the actual health and physical condition of the beneficiary or decedent immediately prior to death. See Estate of Allen v. United States, 214 Ct. Cl. 630, 558 F.2d 14 (Ct. Cl. 1977); Rev. Rul. 66-307, 1966-2 C.B. 429; Estate of Dwight B. Roy, Jr., 54 T.C. 1317 (1970); Robinson v. United States, 454 F. Supp. 1160 (N.D. Cal. 1978), aff'd, 632 F.2d 822 (9th Cir. 1980). Yet the finding that the Secretary need not issue regulations that take into account factors other than age is greatly different from the conclusion that the Secretary may not. Indeed, as the Court of Claims noted in Estate of Allen, nothing in this legislative history specifically precludes such extrinsic considerations, or even specifically says that mortality tables are the sole method of valuation. 558 F.2d at 18. The question under section 2037, therefore is whether the sex-based tables represent a "usual method of valuation." We find nothing in the record that suggests they are not, and the cases and commentaries certainly suggest they are commonly used. See, e.g., Los Angeles Dept. of Water & Power v. Manhart, 435 U.S. 702, 725-26, 55 L. Ed. 2d 657, 98 S. Ct. 1370 (1978) (Burger, Jr. dissenting) ("Gender-based actuarial tables have been in use since at least 1843, and their statistical validity has been repeatedly verified. The vast life insurance, annuity and pension plan industry is based on these tables" (footnote omitted)). We thus conclude that the promulgation of the Regulations was not beyond the delegation of authority in section 2037.
II Constitutionality of the Regulations
The cross-motions for summary judgment on the issue of the constitutionality of the Treasury Regulations present three distinct issues: 1) do the Regulations discriminate on the basis of sex? 2) if so, does the plaintiff here have standing to raise a constitutional challenge to them? and 3) if so, is this discrimination impermissible under the fifth amendment?
With respect to the first question, it appears clear that the Regulations do discriminate on the basis of sex. The Regulations set forth two separate sets of tables, with the sexes of the decedent and the transferee the factors that determine which table is to be used. The Government argues that the Regulations do not discriminate on the basis of sex because the tax is assessed against an estate "-- a legal fiction that is separate and distinct from the decedent and that, of course, lacks any gender." Memorandum of Law in Opposition at 24. Inasmuch as the Regulations refer to the sex of the decedent to value ...