## Facts

- Walter C. Teagle died in 1962 with a gross estate exceeding $36 million.
- His will provided (after debts, expenses, and specific bequests) a general pecuniary charitable bequest of two-thirds of the estate to the Teagle Foundation, a tax-exempt charitable corporation.
- The will left the residue, including administration income, in trust for a life beneficiary with remainders over.
- During administration (taxable years ending in 1963, 1964, and 1965), the executors made substantial payments to the Teagle Foundation in partial satisfaction of the charitable bequest, treated as distributions of corpus: $13,165,575.75 (1963), $405,379.02 (1964), and $375,000 (1965).
- The executors also distributed estate income to the life beneficiary, including $100,000 in 1963, before the testamentary trust became fully operative.
- For estate tax purposes, the estate received an estate tax charitable deduction of $14,107,420.90 for the charitable bequest.
- The executors sought an additional income tax deduction to the estate under I.R.C. § 661(a)(2) for the corpus payments made to the Teagle Foundation.

## Issues

1. Whether an estate may claim an income tax deduction under I.R.C. § 661(a)(2) for distributions of corpus made during administration to satisfy a general pecuniary charitable bequest to a qualified charitable beneficiary.

## Decision

- The court denied the executors’ motion for summary judgment and granted the government’s cross-motion.
- The court held the estate was not entitled to a deduction under § 661(a)(2) for the corpus distributions made to satisfy the general pecuniary charitable bequest.
- Judgment was entered for the United States.

## Legal Principles

- I.R.C. § 661(a)(2) operates within Subchapter J’s scheme tying fiduciary distribution deductions to distributable net income (DNI) to allocate income taxation between the estate and beneficiaries without duplication or omission.
- Payments that are properly characterized as distributions of corpus to satisfy a fixed pecuniary legacy are not treated as income-carrying distributions of the type § 661(a)(2) is designed to deduct.
- A charitable legatee receiving a fixed pecuniary bequest is not treated as an income beneficiary for Subchapter J conduit purposes, particularly where the transfer does not depend on estate income and the recipient is tax-exempt.
- The Code is construed to avoid duplicative tax benefits where the same transfer has already produced an estate tax charitable deduction; § 661(a)(2) was not read to create an additional income tax deduction for the same corpus transfer.

## Conclusion

The Court of Claims held that an estate may not deduct under I.R.C. § 661(a)(2) corpus distributions made to satisfy a general pecuniary charitable bequest, especially where the estate already received an estate tax charitable deduction for that bequest.


Mott v. United States, 199 Ct. Cl. 127, 462 F.2d 512 (1972)