     ESTATE OF EILEEN S. BELMONT, DECEASED, DIANE SATER,
          EXECUTRIX, PETITIONER v. COMMISSIONER OF
                INTERNAL REVENUE, RESPONDENT
              Docket No. 9409–11.           Filed February 19, 2015.

             Decedent’s (D) will directed that the residue of her estate,
          which included income in respect of a decedent, be left to
          charity. The estate (E) took a charitable contribution deduc-
          tion pursuant to I.R.C. sec. 642(c)(2) on its Federal income tax
          return, claiming that it had permanently set aside an amount
          of its gross income for charity. At the time of her death, D
          owned a condominium in which her brother (B) resided.
          During the protracted administration of the estate, B took a
          variety of legal actions and asserted a life tenancy interest in
          the condominium. B was subsequently awarded a life tenancy
          in the condominium. Because of the cost of litigation over the
          condominium, E no longer had sufficient funds to pay the
          amount previously deducted as a charitable contribution.
          Held: I.R.C. sec. 642(c)(2) provides that any part of the gross
          income of an estate, which pursuant to the terms of the will
          is permanently set aside during the taxable year for a purpose
          specified in I.R.C. sec. 170(c), shall be allowed as a deduction
          to the estate. Sec. 1.642(c)–2(d), Income Tax Regs., provides
          that no amount will be considered permanently set aside for
          charity under I.R.C. sec. 642(c)(2) ‘‘unless under the terms of
          the governing instrument and the circumstances of the par-
          ticular case the possibility that the amount set aside * * *
          will not be devoted to such purpose or use is so remote as to
          be negligible.’’ The possibility that costs involved in a dispute
          over the condominium would cause E to invade the amount
          set aside for charity was not ‘‘so remote as to be negligible’’
          as required under sec. 1.642(c)–2(d), Income Tax Regs. There-
          fore, E did not ‘‘permanently set aside’’ the charitable con-
          tribution amount as required under I.R.C. sec. 642(c)(2).

     Katherine R. Dodson and Brian J. Harstine, for petitioner.
     Richard J. Hassebrock, for respondent.
  RUWE, Judge: Respondent issued a notice of deficiency to
the Estate of Eileen Belmont (estate) determining a $75,662
deficiency in the estate’s Federal income tax for the taxable
period ending March 31, 2008. 1 The issue for decision is
whether the estate is entitled to a $219,580 charitable con-
  1 All section references are to the Internal Revenue Code (Code) in effect
at all relevant times, and all Rule references are to the Tax Court Rules
of Practice and Procedure, unless otherwise indicated. All monetary values
have been rounded to the nearest dollar.

84
(84)          ESTATE OF BELMONT v. COMMISSIONER                       85


tribution deduction for purposes of computing its income tax
for the taxable period ending March 31, 2008.
                         FINDINGS OF FACT

   Some of the facts have been stipulated and are so found.
The stipulation of facts and the attached exhibits are incor-
porated herein by this reference.
   Eileen S. Belmont (decedent) resided in Ohio at the time
of her death. Diane M. Sater, the executrix of decedent’s
estate, was a resident of Ohio at the time the petition was
filed.
   Decedent died testate on April 1, 2007. At the time of her
death decedent’s only heirs were a brother, David Belmont
(David), who lived in California and a half-sister in Ohio. On
April 5, 2007, a proceeding to administer decedent’s estate
was opened in the Franklin County, Ohio Probate Court
(Ohio Probate Court). James G. Flaherty is an attorney who
prepared decedent’s last will and testament (will) and rep-
resented the estate in the Ohio Probate Court. 2
   Decedent signed her will on February 11, 1994. The will
instructs that decedent’s real, personal, and intangible prop-
erty—with the exception of two ‘‘Swedish tiles’’ bequeathed to
a friend—be left to her mother (Wilma) if she were still alive
at the time of decedent’s death. Because Wilma predeceased
decedent, 3 the will provides that decedent’s real and per-
sonal property become part of the estate’s residue and be
distributed as follows: (1) $50,000 to David and (2) ‘‘the rest,
residue, and remainder’’ to the Columbus Jewish Foundation
(foundation). The foundation is a recognized section 501(c)(3)
charitable organization.
   At the time of her death decedent was the titled owner of
two pieces of real property: (1) her primary residence in
Westerville, Ohio (Ohio residence), and (2) a condominium in
Santa Monica, California (Santa Monica condo), which she
purchased on January 2, 2003. The estate sold the Ohio resi-
dence on February 29, 2008, for $217,900. 4 Decedent also
  2 On  September 6, 2013, Mr. Flaherty filed a motion to withdraw as
counsel for the estate because he was to be a witness in the trial before
this Court. The Court granted his motion on September 11, 2013.
  3 Wilma passed away on October 13, 2001.
  4 Proceeds from the sale of the Ohio residence were received by the es-
                                             Continued
86           144 UNITED STATES TAX COURT REPORTS                      (84)


maintained a retirement account with the State Teachers
Retirement Pension Fund of Ohio (STRPF). Following
decedent’s death the STRPF distributed $243,463 to the
estate. The $243,463 distribution was income in respect of a
decedent pursuant to section 691 and was reported on the
estate’s income tax return for its taxable period ending
March 31, 2008. Of the $243,463 distribution, $24,346 was
withheld for Federal tax and the remaining $219,117 was
deposited into the estate’s checking account.
   On April 8, 2008, the estate filed a first partial fiduciary’s
account with the Ohio Probate Court detailing the receipts
and disbursements of the estate from April 1, 2007, to March
31, 2008. The account reported total receipts of $426,557 and
total disbursements of $141,548 by the estate. As of March
31, 2008, the estate had $285,009 remaining in its checking
account.
   On July 17, 2008, the estate filed a Form 1041, U.S.
Income Tax Return for Estates and Trusts, for its taxable
period ending March 31, 2008. At the time the estate filed
its Form 1041 there were no income-producing assets
remaining in the estate. Certified Public Accountant (C.P.A.)
Connie Becker prepared the Form 1041. The estate did not
inform Ms. Becker of any claims against the Santa Monica
condo. In the Form 1041 the estate reported income of
$241,184, consisting of: the $243,463 STRPF distribution,
$721 of interest income, and a $3,000 long-term capital loss.
After claiming deductions for taxes, return preparation fees,
and other miscellaneous fees and expenses totaling $21,604,
the estate claimed a $219,580 5 charitable contribution
deduction. The estate claimed the $219,580 charitable con-
tribution deduction on the basis of decedent’s will leaving the
residue of her estate to the foundation. As of July 17, 2008
(the date the estate filed the Form 1041), the $219,580 chari-
table contribution had not been paid to the foundation. The
estate did not segregate the $219,580 from the other funds

tate before the closing of the taxable period ending March 31, 2008.
   5 There is a slight discrepancy between the $219,117 STRPF distribution

and the $219,580 charitable contribution deduction the estate claimed on
its Form 1041. Neither party disagrees that the deduction at issue is
$219,580.
(84)        ESTATE OF BELMONT v. COMMISSIONER               87


in its checking account which were used to pay claims and
administrative expenses.
  On June 1, 2009, the estate filed a second partial fidu-
ciary’s account with the Ohio Probate Court detailing the
receipts and disbursements of the estate from April 1, 2008,
to March 31, 2009. The balance remaining in the estate’s
checking account as of March 31, 2009, was $272,675.
  In July 1986 Wilma purchased and took title to a house in
Santa Monica, California (5th Street residence). David
resided in the 5th Street residence until August 2000, when
the house was sold and he moved back to Ohio to assist
decedent in caring for Wilma. As previously mentioned,
Wilma died on October 13, 2001.
  After Wilma’s death decedent purchased the Santa Monica
condo on January 2, 2003, for $285,000. To facilitate the pur-
chase of the Santa Monica condo, decedent made a downpay-
ment of approximately $100,000 and took out a $185,250
mortgage. In 2004 decedent paid in full the mortgage encum-
bering the Santa Monica condo. Although the record before
the Court does not provide the exact date, sometime in mid-
2006 decedent permitted David to move into the Santa
Monica condo. David resided at the Santa Monica condo for
approximately nine months until decedent’s unexpected
death on April 1, 2007. David apparently continued to reside
in the Santa Monica condo rent free until he was awarded
a life estate in January 2012.
  In order to complete the administration of decedent’s
estate, the estate was required to open an ancillary estate in
California to administer the Santa Monica condo. In late
2007 the estate retained the services of a prominent Cali-
fornia probate administration law firm, Hoffman, Sabban &
Watenmaker, to handle the ancillary estate administration in
California. The decision by the estate to hire Hoffman,
Sabban & Watenmaker was made after the law firm was
referred to the foundation by the Los Angeles Jewish
Foundation. Hoffman, Sabban & Watenmaker charged the
estate a preset statutory fee of ‘‘around $13,000’’ to handle
the ancillary estate administration and advised the estate
that it could be billed between $350 and $450 per hour for
any ‘‘extras’’ related to potential litigation or an appeal. On
February 14, 2008, the estate opened an ancillary estate with
88            144 UNITED STATES TAX COURT REPORTS                    (84)


the Los Angeles County Probate Court to administer the
Santa Monica condo.
   Following decedent’s death David discussed with Mr.
Flaherty the possibility of exchanging his $50,000 bequest
with the foundation for a life tenancy interest in the Santa
Monica condo. On February 14, 2008—the same date the
ancillary estate was opened in California—Ms. Sater mailed
to David a letter (1) advising him that he could not purchase
a life tenancy in the Santa Monica condo because the founda-
tion did ‘‘not desire to hold real estate as an investment’’ and
(2) requesting that he vacate the Santa Monica condo by
March 21, 2008, in exchange for a ‘‘$10,000 stipend’’ from the
foundation. David did not vacate the Santa Monica condo in
exchange for the $10,000 stipend.
   On April 2, 2008, David filed a creditor’s claim with the
Los Angeles County Probate Court claiming an alleged
breach of contract on the basis that an oral agreement
(agreement) existed between him, decedent, and their
mother, giving him a life tenancy interest in the Santa
Monica condo despite the agreement not being reflected in
decedent’s will. Peter Gelblum, a prominent California
attorney, represented David pro bono. David was a client of
a local mental health organization in California where Mr.
Gelblum is a member of the board of directors. 6 On April 24,
2008, David filed a Lis Pendens, Notice of Pendency of Action
(lis pendens) with the California Recorder’s Office and the
Los Angeles County Probate Court to alert third parties of
potential action against the Santa Monica condo.
   The estate rejected David’s creditor’s claim on May 13,
2008. On May 30, 2008, David filed an 850 Petition to Con-
firm Interest in Real Property (850 petition) with the Los
Angeles County Probate Court, asserting a life tenancy
interest in the Santa Monica condo on the basis of a
‘‘resulting trust’’ theory. In his 850 petition David claimed,
inter alia, that his resulting trust from the sale of the 5th
Street residence in 2000, along with his services to Wilma
before her death in 2001, provided at least part of the pur-
chase price for decedent’s acquisition of the Santa Monica
condo in 2003. On July 25, 2008, the estate filed its objec-
tions to David’s 850 petition. In its objections the estate
 6 David   apparently had long suffered from unspecified mental problems.
(84)          ESTATE OF BELMONT v. COMMISSIONER                        89


argued that David: (1) did not contribute to the purchase of
the 5th Street residence in 1986; (2) had no interest in the
5th Street residence when it was sold in 2000; (3) had no
interest in Wilma’s estate; and (4) had no ownership interest
in the funds decedent used to purchase the Santa Monica
condo or in the Santa Monica condo itself.
  On October 10, 2011, a trial was held in the Los Angeles
County Probate Court to determine whether David had an
interest in the Santa Monica condo. A judgment was entered
in favor of David on January 26, 2012, and the estate
appealed the decision on March 12, 2012. In an unpublished
opinion filed February 28, 2013, the California appellate
court upheld the decision of the Los Angeles County Probate
Court and affirmed David’s life tenancy interest in the Santa
Monica condo. 7
  The estate incurred various expenses as a result of the pro-
bate litigation and subsequent appeal concerning the Santa
Monica condo. In order to pay these expenses as well as the
continuing administrative costs of the estate, the estate
depleted some of the $219,580 that it had ostensibly set aside
for the foundation.
  At the time of trial before this Court on September 11,
2013, the estate had approximately $185,000 remaining in its
checking account.
                                OPINION

   The issue is whether the estate is entitled to a $219,580
charitable contribution deduction for purposes of computing
its income tax for the taxable period ending March 31, 2008.
The estate contends that during the taxable year ending
March 31, 2008, it permanently set aside $219,580 of its
gross income for the benefit of the foundation and thus is
entitled to a charitable contribution deduction for that
amount pursuant to section 642(c)(2) and section 1.642(c)–
2(d), Income Tax Regs. Respondent argues that the $219,580
  7 The original judgment of the Los Angeles County Probate Court or-

dered the estate to provide David a life tenancy in the Santa Monica condo
and to transfer the remainder interest to the foundation upon his death.
This would have required decedent’s estate to remain open until David’s
death. To resolve this issue, the California appellate court modified the
original judgment, ordering the estate to execute a life estate deed to
David and a remainder deed to the foundation.
90            144 UNITED STATES TAX COURT REPORTS                           (84)


was not permanently set aside for charitable purposes as
required by the Code and regulations and therefore is not
properly deductible by the estate.
   As a general rule, the Commissioner’s determination in the
notice of deficiency is presumed correct, and the taxpayer
bears the burden of proving that the determination is in
error. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115
(1933). Deductions are a matter of legislative grace, and the
taxpayer bears the burden of proving that he or she is enti-
tled to the claimed deductions. INDOPCO, Inc. v. Commis-
sioner, 503 U.S. 79, 84 (1992); New Colonial Ice Co. v.
Helvering, 292 U.S. 435, 440 (1934).
   Charitable contribution deductions from income are
allowed under sections 170 and 642(c). Section 170 provides
for income tax deductions for charitable contributions by
individual taxpayers and corporations; however, section 170
does not apply to charitable contributions made by estates or
certain trusts. Sec. 1.170A–1(j)(1), Income Tax Regs. Under
section 642(c)(2) an estate is allowed a current charitable
contribution income tax deduction, notwithstanding that the
amount will not be paid or used for a charitable purpose
until sometime in the future. 8 In the case of an estate, sec-
tion 642(c)(2) provides, in pertinent part:
  In the case of an estate * * * there shall also be allowed as a deduction
  in computing its taxable income any amount of the gross income, with-
  out limitation, which pursuant to the terms of the governing instrument
  is, during the taxable year, permanently set aside for a purpose specified
  in section 170(c), or is to be used exclusively for religious, charitable, sci-
  entific, literary, or educational purposes, or for the prevention of cruelty
  to children or animals, or for the establishment, acquisition, mainte-
  nance, or operation of a public cemetery not operated for profit. * * *

  An amount will not be deemed ‘‘permanently set aside’’ for
a charitable purpose under section 642(c)(2) ‘‘unless under
the terms of the governing instrument and the circumstances
of the particular case the possibility that the amount set
aside, or to be used, will not be devoted to such purpose or
use is so remote as to be negligible.’’ Sec. 1.642(c)–2(d),
Income Tax Regs.
  8 The deduction under sec. 642(c)(2) is to be distinguished from the de-
duction afforded to an estate under sec. 642(c)(1), which allows a deduction
for amounts actually paid during the taxable year to a charity by an es-
tate.
(84)        ESTATE OF BELMONT v. COMMISSIONER                91


   Thus, for an estate to properly claim a charitable contribu-
tion deduction pursuant to section 642(c)(2), three criteria
must be met: (1) the charitable contribution must be an
amount from the estate’s gross income; (2) the charitable con-
tribution must be made pursuant to the terms of a governing
instrument; and (3) the charitable contribution must be
permanently set aside for purposes specified in section
642(c)(2). Respondent does not dispute that the $219,580 dis-
tribution was to be from the estate’s gross income (i.e.,
income in respect of a decedent) or that the money was des-
ignated for the foundation pursuant to the terms of a gov-
erning instrument (i.e., decedent’s will). The parties agree
that in order for an amount to be ‘‘permanently set aside’’ for
a charitable purpose, the estate must be able to establish
that ‘‘under the terms of the governing instrument and the
circumstances of the particular case the possibility that the
amount set aside, or to be used, will not be devoted to such
purpose or use is so remote as to be negligible.’’ Sec.
1.642(c)–2(d), Income Tax Regs. The parties are in disagree-
ment over whether this standard was met.
   The estate argues that there was no ‘‘reasonably foresee-
able possibility’’ that it would incur ‘‘unanticipated costs
associated with litigating * * * [David]’s claims on the Cali-
fornia condominium’’. Respondent argues that ‘‘there was a
substantial possibility of a prolonged and expensive legal
fight which would have required the estate to dip into the
funds it allegedly ‘set aside’ for charity in order to not only
pay for the litigation, but to also pay additional administra-
tive costs for the estate as the probate proceedings dragged
on for years and years.’’ Respondent concludes that ‘‘the
[e]state was clearly on notice that a prolonged legal fight was
more than just a remote possibility at the time they claimed
the charitable deduction and it should have known that there
was more than a ‘negligible chance’ that it would have to
apply some of the funds received from the STR[PF] * * * in
order to cover the administrative costs of the estate as the
probate proceedings continued.’’
   The parties cite no previous Tax Court opinions that
directly address the issue. Although this Court has not had
occasion to consider the ‘‘so remote as to be negligible’’
standard in the context of section 642(c)(2), we have exam-
ined identical language in connection with the regulations
92            144 UNITED STATES TAX COURT REPORTS                        (84)


prescribed under section 170. See Graev v. Commissioner,
140 T.C. 377 (2013). In 885 Inv. Co. v. Commissioner, 95 T.C.
156, 161 (1990) (quoting United States v. Dean, 224 F.2d 26,
29 (1st Cir. 1955)), we defined ‘‘so remote as to be negligible’’
as ‘‘ ‘a chance which persons generally would disregard as so
highly improbable that it might be ignored with reasonable
safety in undertaking a serious business transaction’ ’’. In
Briggs v. Commissioner, 72 T.C. 646, 657 (1979), aff ’d with-
out published opinion, 665 F.2d 1051 (9th Cir. 1981), we con-
strued the standard as being ‘‘a chance which every dictate
of reason would justify an intelligent person in disregarding
as so highly improbable and remote as to be lacking in rea-
son and substance.’’ 9 With these interpretations in mind, we
will consider the facts and circumstances of the matter sub
judice to determine whether the possibility that the estate
would invade the money set aside for the foundation was ‘‘so
remote as to be negligible’’. See Graev v. Commissioner, 140
T.C. at 394; sec. 1.642(c)–2(d), Income Tax Regs.
   Respondent argues that it is appropriate to consider
David’s legal claims, all of which were instituted before the
estate filed its Form 1041 on July 17, 2008. The estate does
not dispute that the information it received between April 1
and July 17, 2008, is relevant to the analysis. Instead, the
estate argues that the facts known to it before the filing of
its Form 1041 on July 17, 2008, did not create more than a
negligible possibility that litigation would require the deple-
tion of its charitable set-aside.
   The information that was known or reasonably knowable
to the estate when it filed its Form 1041 on July 17, 2008,
indicates that David’s claim to a life tenancy interest in the
Santa Monica condo was a serious claim based on alleged
events that predated the end of the taxable year ending
March 31, 2008.
   The responsibility of the estate in claiming a charitable
contribution deduction pursuant to section 642(c)(2) was to
marshal information pertaining to the taxable period in order
to prepare its return. Using such information the estate was
  9 The  Commissioner has interpreted the ‘‘so remote as to be negligible’’
standard from a quantitative perspective in the estate tax context, requir-
ing at least a 95% probability that a bequest will pass to a qualifying char-
ity before a deduction is permitted. Rev. Rul. 70–452, 1970–2 C.B. 199.
(84)        ESTATE OF BELMONT v. COMMISSIONER                93


required to make a judgment regarding the possibility that
the funds ostensibly set aside for the foundation might be
depleted for another purpose (i.e., litigation over the Santa
Monica condo).
   The facts and circumstances known to the estate when it
filed its Form 1041 on July 17, 2008, were sufficient to put
the estate on notice that the possibility of an extended and
expensive legal fight—and consequently the dissipation of
funds set aside for the foundation—was more than ‘‘so
remote as to be negligible’’. To begin with, the estate was
aware of its financial situation. As of March 31, 2008, after
subtracting the funds that had been ostensibly set aside for
the foundation, there was ‘‘approximately $65,000’’ remaining
in the estate’s residue to cover the remaining expenses asso-
ciated with the estate administration. When the estate filed
its Form 1041 on July 17, 2008, there were no income-pro-
ducing assets remaining in the estate. From the amount
remaining in its residue, the estate was responsible for var-
ious expenses. First, the estate was responsible for paying
homeowners association fees and property taxes associated
with the Santa Monica condo. Second, because the estate
administration in Ohio could not be closed until the ancillary
proceeding in California was concluded, the estate was
responsible for attorney’s fees to Mr. Flaherty. The attorney’s
fees paid to Mr. Flaherty for his work on the Ohio estate
administration were not insignificant. For example, from
April 1, 2008, to March 23, 2009, the estate paid Mr.
Flaherty $29,548.15. Finally, the estate was responsible for
attorney’s fees to Hoffman, Sabban & Watenmaker for the
administration of the ancillary estate in California. These
fees included an upfront fee of $13,000 and approximately
$350 to $450 per hour for any extra legal services related to
potential litigation or an appeal.
   The estate faced the possibility that David would engage in
prolonged and expensive litigation over his interest in the
Santa Monica condo. David’s actions leading up to the estate
filing its Form 1041 on July 17, 2008, provided information
indicating that he would put up a litigious fight. First, David
did not vacate the Santa Monica condo and did not agree to
the request made in Ms. Sater’s letter dated February 14,
2008, to vacate the Santa Monica condo in exchange for a
‘‘$10,000 stipend’’. Second, on April 2, 2008, David filed a
94           144 UNITED STATES TAX COURT REPORTS                        (84)


creditor’s claim with the Los Angeles County Probate Court
asserting information supporting his claim to a life tenancy
interest in the Santa Monica condo. Third, on April 24, 2008,
David filed a lis pendens action with the California
Recorder’s Office and the Los Angeles County Probate Court.
Fourth, David filed an 850 petition with the Los Angeles
County Probate Court on May 30, 2008, asserting the basis
for his claims. The estate was aware of these claims and filed
its objections. Finally, David retained a prominent California
attorney, pro bono, to represent his interests in the Santa
Monica condo. All of these events occurred and were known
to the estate before July 17, 2008, when the estate claimed
a $219,580 charitable contribution deduction on its Form
1041. These facts and circumstances provided an indication
to the estate that the possibility of David litigating his
alleged interest in the Santa Monica condo was more than
negligible. Nevertheless, the estate failed to inform Ms.
Becker—the C.P.A. who prepared the return in question—of
David’s claims against the Santa Monica condo. 10
   The estate contends that David’s claims against the Santa
Monica condo had no reasonably foreseeable impact on the
amount set aside for the foundation at the time that the
estate took the deduction. The estate relies on Commissioner
v. Upjohn’s Estate, 124 F.2d 73 (6th Cir. 1941), to support
the proposition that ‘‘remote possibilities that may deplete
funds should not be considered when determining
whether funds are permanently set aside for purposes of
I.R.C. § 642.’’ 11 In Commissioner v. Upjohn’s Estate, 124 F.2d
at 76, the Court of Appeals for the Sixth Circuit stated:
  the bare possibility, considered abstractly and merely in terms of power,
  of an invasion of a fund devoted to charitable purposes, that is so remote
  that it may not, as a practical matter, be said to exist at all, does not

  10 Mr. Flaherty testified that the estate’s decision to take the sec.

642(c)(2) deduction was ‘‘[Ms. Becker’s] suggestion when she was preparing
the return.’’ According to Mr. Flaherty, Ms. Becker was selected to prepare
the estate’s Form 1041 because she is ‘‘knowledgeable in * * * 1041
issues’’.
  11 The statute at issue in Upjohn’s Estate was not sec. 642, but rather

the Revenue Act of 1936, ch. 690, sec. 162(a), 49 Stat. at 1706. Commis-
sioner v. Upjohn’s Estate, 124 F.2d 73, 74 (6th Cir. 1941). Sec. 162(a) was
the predecessor statute to sec. 642.
(84)         ESTATE OF BELMONT v. COMMISSIONER                   95


  render incapable of definite ascertainment the fund devoted to the
  beneficent purposes recited in the act. [Emphasis added.]

   We are not persuaded by the estate’s attempt to analogize
its situation to that of the estate in Upjohn’s Estate. In
Upjohn’s Estate there were no facts or claims giving rise to
potential litigation that threatened to deplete the estate’s
assets. To the contrary, the matter sub judice involves
existing claims over the Santa Monica condo which were
based on facts and circumstances alleged to have occurred
before the end of the estate’s taxable year. This information
was known to the estate at the time it took the charitable
contribution deduction, and the possibility that litigation
would continue at a steep expense was not ‘‘so remote as to
be negligible’’. As discussed above, during the taxable year
the estate made several attempts to remove David from the
Santa Monica condo; however, David rejected all financial
offers to relinquish the property. David then initiated various
legal actions to have his interest in the Santa Monica condo
adjudged.
   The estate also seeks support for its position from the
Court of Appeals for the Ninth Circuit’s opinion in Estate of
Wright v. United States, 677 F.2d 53 (9th Cir. 1982). In
Estate of Wright, the decedent’s will directed that the residue
of the estate go entirely to charitable purposes. Id. at 53.
Despite a pending will contest initiated by the decedent’s
sister, the taxpayer-estate took a charitable contribution
deduction for 100% of the income arising from the estate. Id.
at 53–54. After the will contest concluded, only 50% of the
residual estate was distributed for charitable purposes and
the remaining 50% went to the will challengers. Id. at 54.
The issue before the Court of Appeals was whether 100% of
the income arising from the estate during the period when
the will contest was pending was deductible pursuant to sec-
tion 642(c). Id. The Court of Appeals ruled for the Commis-
sioner, holding: ‘‘[W]e cannot say that funds are ‘permanently
set aside’ if the will is the subject of a compromised will con-
test.’’ Id.
   The estate attempts to distinguish its case from Estate of
Wright and argues that, because there is no will contest in
the matter sub judice, the possibility that the charitable con-
tribution would be invaded was so remote as to be negligible.
96         144 UNITED STATES TAX COURT REPORTS              (84)


Although we agree with the estate that there is no will con-
test in the matter sub judice, we find the Court of Appeals’
reasoning in Estate of Wright supportive of our decision. The
rationale underlying the Court of Appeals’ holding in Estate
of Wright is that pending litigation (e.g., a will contest) cre-
ates a possibility that a charitable gift may not be effected
and consequently, an estate cannot permanently set aside
funds as required by section 642(c)(2). Although David was
not contesting decedent’s will, his active litigation of his
property rights to the Santa Monica condo created a real
possibility that the funds set aside for the foundation would
be depleted during the pendency of the lawsuit. Given the
estate’s known financial situation and the claims brought by
David concerning the Santa Monica condo, a real possibility
existed that the funds set aside for the foundation would be
invaded in order to continue the estate administration. For
these reasons it was not ‘‘so remote as to be negligible’’ that
the funds set aside for the foundation would be depleted
because of the ongoing and future litigation over the Santa
Monica condo. Accordingly, we hold that the $219,580 was
not ‘‘permanently set aside’’ as required by section 642(c)(2)
and section 1.642(c)–2(d), Income Tax Regs.
  In reaching our decision, we have considered all arguments
made by the parties, and to the extent not mentioned or
addressed, they are irrelevant or without merit.
  To reflect the foregoing,
                       Decision will be entered for respondent.

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