Year Ended	James Q. duPont	Helen R. duPont
November 30, 1965	$-	$ 536
November 30, 1966	1,000	1,050
November 30, 1967	1,500	44
November 30, 1968	4,000	1,000
November 30, 1969	4,000	2,000
November 30, 1970	-	6,000
November 30, 1971	-	6,000
November 30, 1972	-	6,000
November 30, 1973	(deceased)	6,000

In May 1970, petitioner filed a request on Form 1026 for recognition as an exempt organization described in section 501(c) (13) with the district director of internal revenue, Philadelphia, Pennsylvania. Under date of July 29, 1970, a determination letter was issued by that office denying petitioner's request.

OPINION

The issue we must decide is whether petitioner is an organization described by section 501(c) (13) *20 Petitioner is a family cemetery company in whose cemetery burial is restricted, with minor exceptions, to the descendants of Pierre Samuel duPont.

Respondent first asserts that because petitioner is a family cemetery company, it cannot serve public purposes and cannot, therefore, be described by section 501(c) (13). Respondent urges that we adopt, as a precondition to exemption under section 501(c) (13), a test that a cemetery company be "public." We have fully considered this argument and rejected it in the recent decision of The John D. Rockefeller Family Cemetery Corporation, 63 T.C. 31">63 T.C. 31 (Dec. 17, 1974). We follow that case here.

However, unlike his position in Rockefeller, respondent in this case argues that petitioner does not meet any of the three statutory tests of section 501(c) (13). *21 Petitioner need meet only one of these tests to qualify for exemption. Commissioner v. Kensico Cemetery, 96 F.2d 594">96 F.2d 594 (C.A. 2, 1938), affirming 35 B.T.A. 498">35 B.T.A. 498 (1937); West Laurel Hill Cemetery Co. v. Rothensies, 139 F.2d 50">139 F.2d 50, 54 (C.A. 3, 1943), certiorari denied 321 U.S. 780">321 U.S. 780 (1944); Rose Hills Memorial Park Association v. United States, 463 F.2d 425">463 F.2d 425 (Ct. Cl. 1972); The John D. Rockefeller Family Cemetery Corporation, supra. Petitioner has carried its burden of proof and overcome the presumptive correctness of respondent's determination. Rule 142, Tax Court Rules of Practice and Procedure.

We think petitioner has demonstrated that it meets at least the test of being a cemetery company owned and operated exclusively for the benefit of its members. ^{Mercantile Bank & Trust Company v. United States, 441 F.2d 364">441 F.2d 364, 366*22 (C.A. 8, 1971).}

However, respondent alleges that petitioner is not owned and operated exclusively for the benefit of its members. He states that "members" means only owners of burial lots, and he argues that petitioner's charter and bylaws allow individuals other than members a voice in the control of the corporation. (13)-1 Sec. 1.501(c) (13)-1(a) (1), Income Tax Regs.

In West Laurel Hill Cemetery Co., supra, the Third Circuit expressed its approval of the predecessor of respondent's regulation, promulgated under the Revenue Act of 1932, which interpreted "members" to mean "lot owners." ^{139 F.2d at 54, the following:}

[West Laurel Hill Cemetery Company] was not owned and operated exclusively for the benefit of its members if members be taken to mean, as we think the Revenue Acts [of 1932 and 1934] intend, the owners of lots or burial rights in the cemetery. Here, the owners of lots or burial rights have neither had*23 nor have any voice in the management or operation of the company's affairs.

A brief inspection of petitioner's history shows an active and exclusive involvement on the part of the owners of the burial rights in the cemetery in petitioner's management and affairs. Petitioner's charter and bylaws provide that all members of petitioner have voting rights, that only members of the company may be elected to its board of directors, and that directors are to be elected by the general membership.

The record shows an active and orderly board of directors guiding petitioner's affairs. The board oversees the plans for erecting monuments and gravemarkers and maintains a grounds' committee. Purchase of additional land in 1959 was approved by vote of the members of the company. Any change in the bylaws must be approved by the membership, and such approval was voted by the members on three occasions. The only remaining question, then, is whether*24 the members of the company own lots or burial rights in the cemetery.

Article IX of petitioner's bylaws provides that membership in the company "shall include the right on the part of the member * * * to be interred in the cemetery or burial grounds owned or which shall be owned by the company;" subject, however, to the terms of Article XI. Article XI restricts burial to descendants of Pierre Samuel duPont de Nemours, their spouses, children, stepchildren and adopted children. Membership in petitioner is available to those persons whose burial is permitted under Article XI and to those to whom burial lots have already been assigned. Therefore, it seems clear that only the owners of lots or burial rights in the cemetery participate in the management and affairs of petitioner.

Petitioner's only business is to manage the cemetery and provide perpetual care for the gravesites. Its sole source of income has been contributions to its general fund, proceeds from the sale of burial lots and income from investments in the general fund. Its only expenditures have been for the care and maintenance of its cemetery land, for the purchase of additional cemetery land, and for the reasonable*25 administrative expenses incident to its operations.

We think that the entire record can only support the conclusion that petitioner is owned and operated exclusively for the benefit of those with burial rights in the cemetery. Petitioner is an organization described by section 501(c) (13) and is exempt from Federal income tax under section 501(a).

Decision will be entered for the petitioner.

Footnotes

1. All statutory references are to the Internal Revenue Code of 1954, unless other specified. ↩
2. This case was submitted for adjudication under Rule 122, Tax Court Rules of Practice and Procedure.↩ By order of the Chief Judge, dated September 25, 1974, this case was assigned to Judge Bruce M. Forrester for disposition.
3. SEC. 501. EXEMPTION FROM TAX ON CORPORATIONS, CERTAIN TRUSTS, ETC.
(a) Exemption From Taxation. - An organization described in subsection (c) or (d) or section 401(a) shall be exempt from taxation under this subtitle * * *
* * *
(c) List of Exempt Organizations. - The following organizations are referred to in subsection (a):
* * *
(13) Cemetery companies owned and operated exclusively for the benefit of their members or which are not operated for profit; and any corporation chartered solely for burial purposes as a cemetery corporation and not permitted by its charter to engage in any business not necessarily incident to that purpose, no part of the net earnings of which inures to the benefit of any private shareholder or individual. ↩
4. The three tests are as follows: (1) "Cemetery companies owned and operated exclusively for the benefit of their members," (2) "or which are not operated for profit;" (3) "and any corporation chartered solely for burial purposes as a cemetery corporation and not permitted by its charter to engage in any business not necessarily incident to that purpose, if such company or corporation is not operated for profit and no part of the net earnings of such company or corporation inures to the benefit of any private shareholder or individual." Sec. 501(c) (13). In 1970 Congress expanded the section to include crematory operations. P.L. 91-618, sec. 1. ↩
5. Since petitioner qualifies as an organization described by sec. 501(c) (13) by meeting this test, we will not belabor the issue by discussing whether it qualifies under the other two tests. ↩
6. Treas. Regs. 77, art. 526, which read in pertinent part as follows:
Art. 526. Cemetery companies. - A cemetery company may be entitled to exemption -
(1) If it is owned by and operated exclusively for the benefit of its lot owners * * * ↩

Document Info

Docket Number： Docket No. 7081-73.

Citation Numbers： 33 T.C.M. 1438, 1974 Tax Ct. Memo LEXIS 7, 1974 T.C. Memo. 314

Filed Date： 12/18/1974

Precedential Status： Non-Precedential

Modified Date： 11/20/2020

Authorities (2)

Commissioner of Internal Revenue v. Kensico Cemetery , 96 F.2d 594 ( 1938 )

mercantile-bank-trust-company-as-trustee-of-the-troost-avenue-cemetery , 441 F.2d 364 ( 1971 )

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