Broussard v. Comm'r of Internal Revenue, Docket No. 26850.

• Decision Date: 09 January 1951
• Docket Number: Docket No. 26850.
• Citation: 16 T.C. 23
• Parties: ESTELLE BROUSSARD, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
• Court: U.S. Tax Court

16 T.C. 23

ESTELLE BROUSSARD, PETITIONER,

v.COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Docket No. 26850.

Tax Court of the United States.

Promulgated January 9, 1951.

R. B. Cannon, Esq., and Frank C. Taylor, C. P. A., for the petitioner.

John P. Higgins, Esq., for the respondent.

Petitioner is a member of the Sisters of the Holy Cross whose headquarters is at Notre Dame, Indiana. She is one of the nine beneficiaries of a trust established by her father. In 1946, she visited her father who was seriously ill at Beaumont, Texas. On December 31, 1946, prior to her return to Washington, D.C., where she was music teacher in a school for girls operated by the Sisters of the Holy Cross, she had checks made out aggregating $6,000 as contributions to the order of Sisters of the Holy Cross. These checks were on the same date charged to her account on the books of the trust of which she was one of the income beneficiaries. The checks were delivered to her as a member of the Sisters of the Holy Cross for transmittal to the proper officials of the Order. The checks were not deposited and collected by the Sisters of the Holy Cross until in 1947. The Commissioner has determined the contributions were not deductible in 1946, because not paid in that year. Held, that under section 23(o)(2), I.R.C., ‘payment‘ of the contributions was made in 1946 and denial of deduction of the amounts in that year was error. Estate of Modie J. Spiegel, 12 T.C. 524, followed.

The Commissioner has determined a deficiency in petitioner's income tax for the year 1946 of $3,393.84. The deficiency is due to the addition to the net income of $30,710.37 reported on petitioner's return of ‘Unallowable deduction: (a) Donations $5,578.71.‘ This adjustment is explained in the deficiency notice, as follows:

(a) Deductions for contributions in the amount of $5,578.71 which were claimed for 1946 have been disallowed because they were not paid in 1946.

Petitioner contests this determination of the Commissioner by an appropriate assignment of error.

FINDINGS OF FACT.

The petitioner is an individual temporarily residing in Washington, D.C. Her permanent address is Beaumont, Texas. Her income tax return for the year 1946 was filed with the collector of internal revenue for the first district of Texas at Austin, Texas.

About 1922, petitioner Estelle Broussard, daughter of Mr. and Mrs. J. E. Broussard of Beaumont, Texas, under temporary vows, entered the Order of the Sisters of the Holy Cross, an organization of Catholic nuns. The Mother House (headquarters) of the Sisters of the Holy Cross is at Notre Dame, Indiana. About five years after she entered the Order of the Sisters of the Holy Cross, Sister Mary Rita Estelle, as she became known, took her perpetual vows, being the customary vows of poverty, chastity, and obedience. Throughout 1946, the taxable year involved in this proceeding, petitioner was head of the music department of Dunbarton College, a school for girls in Washington, D.C., supervised by the Order of the Sisters of the Holy Cross.

In 1929, J. E. Broussard, father of petitioner, created a trust estate designated ‘The Broussard Trust‘ with nine beneficiaries, each having a one-ninth interest in the income of the trust. Estelle Broussard was one of the nine beneficiaries. The Broussard Trust was a spend-thrift trust. The Broussard Trust has never had a bank account of its own, but uses the Beaumont Rice Mills, a corporation managed and controlled by the Broussard family, as its banker. Whenever funds belonging to the Broussard Trust came to hand, they were deposited by Beaumont Rice Mills in its own bank account and the trust given credit therefor on the books of the Rice Mills. Expenditures by the trust were made by checks of the Beaumont Rice Mills, which were charged to the account of the trust on the books of the mill.

Due to the fact that her beneficial interest in the Broussard Trust was not susceptible of being alienated by her, petitioner, since 1929, has been the recipient of an annual income subject to Federal income tax. Petitioner has not been required to use, nor has she used, such income for her personal necessities, pleasure or satisfaction. Her clothing, personal living expenses, and other necessities are furnished to her by the Order of which she is a member. Accordingly, petitioner's share of the income of the Broussard Trust has gone for charitable contributions, into educational trusts, and for like or similar purposes. Contributions to some of the aforementioned educational trusts were not deductible for income tax purposes as they were for a specific group instead of a general class of beneficiaries.

Petitioner has no personal bank account and transacts no worldly affairs of any sort. Some years ago she gave a general power of attorney to her brother, Clyde E. Broussard, and he attends to all secular matters for her. So completely does C. E. Broussard handle all of petitioner's affairs that he not only prepares, but signs on her behalf the Federal income tax returns that are required because she is a beneficiary of, and receives income from, the Broussard Trust.

In December 1946, J. E. Broussard, petitioner's father, had a serious illness. When he was brought home from the hospital, petitioner's superiors gave her permission to come to Beaumont and spend the Christmas holidays with him. While petitioner was in Beaumont at the bedside of her father in December 1946, she discussed with her brother, Clyde E. Broussard, the matter of making a substantial contribution or contributions to her Order. As a result of these discussions, on the afternoon of the day (December 31, 1946) that petitioner left Beaumont to return to Washington, D.C. two checks of Beaumont Rice Mills were issued, one for $5,000 and one for $1,000. Both were payable to the order of the Sisters of the Holy Cross. On the same day, December 31, 1946, that the two checks were issued, they were charged by Beaumont Rice Mills to the Broussard Trust and, in turn, were charged by the Broussard Trust to the account of Estelle Broussard on the books of the trust.

On December 31, 1946, the two checks that are in evidence as petitioner's Exhibits 1 and 2 were delivered by Clyde E. Broussard to Sister Mary Rita Estelle (petitioner herein) in person. They were delivered to her, a member of the Sisters of the Holy Cross, as a representative of that Order for transmittal to the Order. The check for $1,000 bears...