Andrus v. Commissioner , 15 B.T.A. 479 ( 1929 )

JOHN E. ANDRUS, JR., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

MARGARET A. THORPE, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

IDA B. WILLIAMS, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

HELEN A. BENEDICT, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Andrus v. Commissioner

Docket Nos. 33545, 33641, 34043, 37627.

United States Board of Tax Appeals

15 B.T.A. 479; 1929 BTA LEXIS 2845;

February 19, 1929, Promulgated

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Action of Commissioner affirmed, for lack of sufficient evidence showing he committed error in disallowing deductions claimed on account of alleged contributions to a charitable corporation during the years involved.

M. L. Seidman, C.P.A., for the petitioners.

Frank S. Easby-Smith, Esq., for the respondent.

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LITTLETOX

The Commissioner determined deficiencies as follows:

	1924	1925	1926
John E. Andrus, jr	$1,277.24	$1,933.08
Margaret A. Thorpe	2,895.26
Ida B. Williams	1,642.31	1,383.31
Helen A. Benedict	1,108.21	963.58	$1,661.45

The facts are stipulated.

The issue is whether each of the petitioners for the years involved is entitled to a deduction of $10,000 alleged to have been a charitable contribution made to the Julia Dyckman Andrus Memorial, Inc.

FINDINGS OF FACT.

John E. Andrus, Jr., Margaret A. Thorpe and Ida B. Williams are residents of Minneapolis, Minn. Helen A. Benedict is a resident of Yonkers, N.Y.

Julia Dyckman Andrus, wife of John E. Andrus, Sr., and mother of the petitioners, died intestate prior to March 1, 1913, possessed at the time of her death of a life estate with remainder over to the children in a certain tract of land containing approximately 112 1/2 acres, situated in Yonkers, N.Y.

For a long time after the death of Mrs. Andrus, her husband had planned to organize a charitable institution in memory of his wife, said institution to bear her name. It was his desire that the land mentioned should remain in an undivided condition and become the property of the proposed memorial corporation. This matter was referred to in discussion with his three sons and five daughters at various times during the several years prior to 1923.

From the inception of the plan the sons were willing to contribute their respective shares in the tract for the purpose contemplated, but the daughters were not. The unwillingness of the daughters to contribute their share in the land so displeased their father that, upon being advised of their attitude in the matter, he declared he would himself purchase the interest of those declining to freely contribute their share in said land and would himself contribute the shares thus purchased. About this time he wrote letters to his children advising them of his plans, and asked them to place a price on their undivided interest in the property. Upon receipt of his letters the children discussed the matter of the value of the property and agreed on the sum of $400,000 as a price at which they would sell the property to their father as a memorial to their mother.

The displeasure of the father became so impressed upon his daughters that eventually they decided to join the three sons in the creation of the corporation called the Julia Cyckman Andrus Memorial, Inc.

The aforesaid memorial was incorporated March 26, 1923, as a charitable organization under the laws of the State of New York for the following purposes:

To care for needy children and other persons in a suitable home or homes and in such other ways as may be thought desirable; to promote their welfare and to provide such oversight, guidance and assistance as may help to establish and maintain them as useful members of society.

The Julia Dyckman Andrus Memorial, Inc., is a charitable institution.

The board of directors of said memorial was composed of John E. Andrus, Sr., William H. Taylor, and Hamlin F. Andrus.

December 31, 1923, the petitioners in conjunction with the other children conveyed the property in question to the Julia Dyckman Andrus Memorial, Inc., at which time no written contract of sales was entered into, but notes were issued by the said memorial to the said children in the total amount of $400,000, said notes maturing over a period of five years. Each of the eight children received notes totaling $50,000, each note being for the sum of $10,000. The notes were identical, except for the dates of maturity and the name of the payee, and are as follows: $10,000.

On , after date, Julia Dyckman Andrus Memorial, Incorporated, promises to pay to the order of $10,000.00 at the office of , if she (or he) shall be living on that date, otherwise this note shall be null and void.

Value received with interest.

JULIA DYCKMAN ANDRUS MEMORIAL, INCORPORATED.

BY JOHN E. ANDRUS, President.

The first note of $10,000 received by each of the aforesaid children was, December 31, 1923, canceled and submitted to the memorial as a contribution for that year. From 1923 to 1927 the notes payable to the children and maturing in those respective years were canceled and given to the Julia Dyckman Andrus Memorial, Inc.

The alleged sale of December 31, 1923, as aforesaid, was not reported in the income-tax returns of the petitioners but each of them deducted as a contribution to the said memorial $10,000 as representing the face value of the notes canceled and delivered to said memorial, and in each subsequent year's returns like deductions have been claimed.

The Commissioner has treated the transfer of the property to the memorial in 1923 as a gift and allowed each of the children to deduct in 1923 as a contribution their pro rata share of the fair market value of the property on March 1, 1913, to the extent of the 15 per cent limitation allowed by law.

The property in question had a fair market value of $400,000 on March 1, 1913.

At the time the land was conveyed to the memorial, said memorial had no assets whatever. The petitioner, John E. Andrus, Jr., did not carry the notes received by him from said memorial on his books as an asset until after an examination of his books had been made by a revenue agent; nor was the property so carried.

The Julia Dyckman Andrus Memorial, Inc., was solvent during the years 1923, 1924, 1925, and 1926.

OPINION.

LITTLETON: The Commissioner allowed each of the children to deduct in 1923 as a contribution their pro rata share of $400,000, the value of the property to the extent of the 15 per cent limitation allowed by law.

In the light of the facts stipulated we are of the opinion that the action of the Commissioner should be approved.

The deed conveying the land to the Julia Dyckman Andrus Memorial, Inc., is not in evidence. It appears that the sons of Julia Dyckman Andrus were "from the inception of the plan" to create the charitable memorial corporation, "willing to contribute their respective shares in the tract for the purpose contemplated" and that subsequently the displeasure of the father at the unwillingness of the daughters to do likewise so impressed the daughters "that eventually they decided to join the three sons in the creation of the charitable corporation," whereupon, in 1923, the property was transferred to the corporation.

On December 31, 1923, the day the notes were executed and the transfer of the property made, eight of the notes of $10,000 each were "canceled and submitted to the memorial as a contribution for that year by the aforesaid children."

The Commissioner has determined that when the property was transferred to the corporation a gift thereof was then and there made by the petitioners and there is not sufficient evidence in the record to convince the Board that it was not the purpose and intention of petitioners at the time of the conveyance of the land, to make to the corporation an absolute gift or donation of his or her interest therein as a memorial to their mother, as contemplated by every one in the formation of the corporation.

Reviewed by the Board.

Judgment will be entered for the respondent.