Estate of Harry E. Wright, Jr. v. United States

When Harry E. Wright, Jr. died, his will directed the residue of his estate to go to charitable or other worthy causes. As the result of a will contest initiated by his sister and eventually settled, however, only 50% of the residual estate was actually distributed to charitable trusts, and the remaining 50% went to the challengers. The issue in this appeal is whether 100% of the income arising from the estate during the period when the will contest was pending is deductible in accordance with appellant’s interpretation of the face of the will, or, whether only 50% is deductible in accordance with the actual distribution under the settlement agreement. After disallowance of the deduction, the estate filed a refund suit and, on cross-motions for summary judgment, the district court entered judgment for the government from which the estate appeals.

The statute involved is I.R.C. § 642(c)(2), 26 U.S.C. § 642 (c)(2), which provides:

The key question is whether, under this statute, income from an estate can be said to be “permanently set aside” by a will during the period when a will contest is pending and when resolution of the will contest ultimately results in a partial…