United California Bank and Lillian Disney Truyens, Co-Executors of the Estates of Walter E. Disney v. United States

The estate of Walter E. Disney (taxpayer) instituted a suit in district court for the refund of certain taxes assessed against it for the years 1967 and 1968. The district court held in favor of the taxpayer, and the United States appeals therefrom. We reverse.

I.

FACTS.

The parties stipulated to the following facts. Disney, by his will, left 45% of the residue of his estate to certain charitable organizations. During 1967 and 1968, ap-pellees, United California Bank and Lillian Disney Truyens, co-executors of the estate, sold certain securities included in the residue of the estate, on which sales net long-term capital gains of $500,622.38 and $1,058,018.43 were realized in 1967 and 1968 respectively. In 1967, a net short-term capital gain of $16,944.16 also was realized. Pursuant to the terms of the will, appellees set aside 45% of these net long-term capital gains to the charitable organizations.

Appellees computed the taxpayer’s income tax for the years 1967 and 1968 under the alternative tax described in I.R.C. § 1201(b). In computing the tax, appellees deducted the 45% of the net long-term capital gain which had been permanently set aside for charitable purposes from the…