A
J
Frost:—This
is
an
appeal
from
an
Estate
Tax
Assessment
dated
February
28,
1973,
wherein
the
Minister
disallowed
any
deduction
pursuant
to
paragraph
7(1)(b)
of
the
Estate
Tax
Act
in
respect
of
the
value
of
the
testamentary
gift
to
the
widow
of
the
deceased,
Ruth
Machacek.
Egon
Herbert
Machacek
died
on
December
22,
1971,
one
week
before
the
Estate
Tax
Act
was
repealed.
The
taxable
value
of
the
property
passing
on
death
amounted
to
$219,606.46.
The
decedent
was
survived
by
his
wife,
Ruth,
and
by
two
daughters,
Brigitte
Simsa,
born
on
November
15,
1945,
and
Renee
Machacek,
born
on
December
16,
1953.
Brigitte
was
an
adult
at
the
time
of
the
death
of
the
deceased
and
Renee
became
an
adult
four
days
later
[sic].
One
grandchild,
Caroline,
the
daughter
of
Brigitte,
was
an
infant
at
the
date
of
death
and
is
still
an
infant.
The
question
at
issue
is
absolute
and
indefeasible
within
the
meaning
of
paragraph
7(1
)(b)
of
the
Estate
Tax
Act,
which
paragraph
reads
as
follows:
7.
(1)
For
the
purpose
of
computing
the
aggregate
taxable
value
of
the
property
passing
on
the
death
of
a
person,
there
may
be
deducted
from
the
aggregate
net
value
of
that
property
computed
in
accordance
with
Division
B
such
of
the
following
amounts
as
are
applicable:
(a)
.
.
.
(b)
the
value
of
any
gift
made
by
the
deceased
whether
during
his
lifetime
or
by
his
will
that
can,
within
six
months
after
the
death
of
the
deceased
or
such
longer
period
as
may
be
reasonable
in
the
circumstances,
be
established
to
be
absolute
and
indefeasible
and
that
was
made
by
him
by
the
creation
of
a
settlement
under
which
(i)
the
spouse
of
the
deceased
is
entitled
to
receive
(A)
all
of
the
income
of
the
settlement
that
arises
after
the
death
of
the
deceased
and
before
the
death
of
such
spouse,
or
(B)
periodic
payments
in
ascertained
amounts
or
limited
to
ascertained
maximum
amounts,
to
be
made
at
intervals
not
greater
than
tweive
months,
out
of
the
income
of
the
settlement
that
arises
after
the
death
of
such
spouse,
or,
if
that
income
Is
completely
exhausted
by
those
payments,
out
of
the
income
and
capital
of
the
settlement,
and
(ii)
no
person
except
such
spouse
may
receive
or
otherwise
obtain,
after
the
death
of
the
deceased
and
before
the
death
of
such
spouse,
any
of
the
capital
of
the
settlement
or
any
use
thereof,
or
any
of
the
income
of
the
settlement
to
which
such
spouse
Is
entitled
or
any
use
thereof,
or
by
the
transfer
of
property
to
a
trust
that
at
the
time
of
the
transfer
was
a
settlement
to
which
subparagraphs
(i)
and
(ii)
apply,
the
creation
of
which
constituted
a
gift
inter
vivos
by
him
to
his
spouse
that
was
exempt
from
tax
under
Part
IV
of
the
Income
Tax
Act
by
virtue
of
paragraph
(e)
of
subsection
(1)
of
section
112
thereof;
Clause
4(e)
of
the
last
will
and
testament
of
the
deceased
dated
December
7,
1971,
provided
as
follows:
(e)
To
pay
the
income
of
the
rest
and
residue
of
my
estate
to
my
said
wife,
Ruth
Machacek,
during
her
lifetime
and
after
her
death
the
residue
of
my
estate
shall
be
divided
equally
between
such
of
the
said
Brigitte
Simsa
and
Renee
Machacek
as
shall
then
be
living,
and
equally
if
both
are
living
provided
that
should
either
of
them
not
be
living
but
have
issue
then
living
such
issue
shall
take
equally
per
stirpes
the
share
which
their
parent
would
have
taken
had
she
then
been
living.
By
agreement
dated
May
28,
1973,
the
two
daughters
of
the
deceased,
Brigitte
and
Renee,
disclaimed
and
released
the
trustees
from
any
right
they
had
or
may
have
had
to
any
part
of
the
capital
or
income
of
the
estate
during
the
lifetime
of
their
mother,
Ruth.
The
granddaughter,
Caroline,
being
an
infant,
could
not
give
a
release
to
the
trustees.
Paragraphs
7
and
8
of
the
will
authorized
the
trustees
to
encroach
for
the
benefit
of
any
infant
in
the
following
terms:
7.
My
Trustees
are
hereby
authorized
to
pay
to
or
use
for
the
advancement,
maintenance,
education
or
benefit
of
any
infant
who
is
entitled
to
a
contingent
interest
hereunder
the
whole
or
part
of
the
capital
and
income
of
the
prospective
share
of
such
infant
as
my
Trustees
shall,
in
their
uncontrolled
discretion
deem
advisable.
8.
I
declare
that
my
Trustees
shall
have
the
absolute
discretion
to
decide
whether
the
whole
or
the
annual
receipts
from
my
estate
shall
be
regarded
as
income
or
what
proportion
of
the
annual
receipts
shall
be
capital
and
what
proportion
income.
I
further
authorize
my
Trustees
to
pay
to
or
use
for
the
advancement
or
benefit
of
any
infant
who
is
entitled
to
a
contingent
interest
hereunder
the
whole
or
part
of
the
capital
or
income
of
the
prospective
share
of
such
infant
as
my
Trustees
shall
in
their
uncontrolled
discretion
deem
advisable.
The
will
provided
that,
after
certain
bequests,
the
estate
was
to
be
held
in
trust
to
pay
the
income
to
the
testator’s
wife
for
life
with
the
remainder
over
to
the
surviving
children
on
a
per
stirpes
basis,
subject
to
a
power
of
encroachment
in
favour
of
any
infant
child.
The
words
“absolute
and
indefeasible”
have
been
considered
in
a
number
of
cases.
In
two
recent
cases
before
the
Tax
Review
Board
—
and
Estate
of
Hyman
Kamichik
v
MNR,
[1973]
CTC
2208;
73
DTC
177—
Estate
of
Denzil
Olaf
MacNeill
v
MNR,
[1973]
CTC
2248;
73
DTC
189,
Judge
Flanigan,
then
Chairman
of
the
Tax
Review
Board,
held
that
an
encroachment
clause
for
the
benefit
of
children
must
impose
more
than
a
moral
obligation
to
do
what
a
natural
parent
would
do
for
his
children.
I
fully
agree
with
Judge
Flanigan
that
clauses
of
this
nature
do
not
detract
from
an
otherwise
indefeasible
settlement
under
paragraph
7(1)(b)
of
the
Act.
In
the
case
at
bar,
the
words
used
—
“for
the
advancement,
maintenance,
education
or
benefit
of
any
infant”
—
are
little
more
than
a
suggestion
to
look
after
the
children
in
a
natural
way,
and
cannot
be
considered
to
deprive
the
widow
of
a
tax
benefit
simply
because
they
happened
to
be
used
in
the
will.
For
these
reasons,
I
find
that
the
gift
to
the
widow
is
absolute
and
indefeasible.
The
appeal
is
allowed.
Appeal
allowed.
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