Collman v. C. I. R.
| Decision Date | 26 February 1975 |
| Docket Number | No. 73--2797,73--2797 |
| Citation | 511 F.2d 1263 |
| Parties | , 75-1 USTC P 9303 George A. and Meryl COLLMAN, Petitioners-Appellants, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Before KOELSCH and CHOY, Circuit Judges, and MARKEY, * United States Court of Customs and Patent Appeals.
The Collmans appeal from a Tax Court decision allowing them only a partial charitable tax deduction for dedicating 2.549 acres of land for public roadway purposes. We reverse in part.
In October, 1965 Collman, a citrus farmer, purchased 15 acres of real property (hereinafter 'the 15-acre grove' or the 'grove' in Orange County, close to the City of Anaheim boundary line. The 15-acre grove was a rectangular piece of property, approximately 625 feet by 1000 feet. On the south it was bounded by Orangethorpe Avenue. On the east and west it was bounded by groves owned by a man named Morlock. A street named Orchard Drive originated north of the grove and ran south until it reached the center of the northern border of the grove. From that point it turned and ran east, for approximately, 690 feet, at which point it again turned south, eventually terminating at Orangethorpe Avenue.
The grove was zoned for agricultural use. After purchasing it, the Collmans invested time and money to improve the grove for the growing of orange trees. In 1965, appellants netted a profit on their farm operation, but in each of the succeeding years they suffered a loss.
In 1965, Orange County decided to acquire a portion of the grove in order to realign Orchard Drive and extend it through the middle of the grove to connect up with Orangethorpe Avenue. The County Master Plan showed the ultimate width of the realigned road to be 80 feet; but because traffic in 1965 did not warrant such a wide road, the County planned to build a road only 60 feet wide (the 'interim width') and sought from appellants a strip of land with such dimensions.
The County did not move immediately for condemnation. Then in the middle of 1967, the County notified Mr. Collman that it was prepared to proceed with the realignment and that it planned to expand Orangethorpe Avenue from its then 50 foot width to a 'new interim width' of 70 feet. The ultimate width for Orangethorpe, according to the County Master Plan, was 95 feet.
During several conversations between County agents and Collman, the possibility of his dedicating to the County land necessary to construct the two roads to ultimate widths was discussed. The discussions resulted in an agreement on October 24, 1967 whereby Collman agreed to dedicate the land necessary to construct realigned Orchard and Orangethorpe to their ultimate widths in exchange for the County's promise to construct both roads to the ultimate, as opposed to interim, widths and to construct gutters and curbs. Although dedication of the land was not conditioned on an agreement by the County to rezone the grove, the road construction satisfied a County ordinance prohibiting commercial use of land unless adjacent roads were of ultimate widths.
Of the 2.549 acres conveyed, 1.759 acres (valued at $33,314) would have been required to build realigned Orchard to its interim width and to expand Orangethorpe to its new interim width. In other words, the 1.759 acres represent the amount of land the County would have condemned had not Collman agreed to dedicate it. The additional .79 acre represents the amount of additional land necessary to construct both roads from their interim to ultimate widths. The further cost to the County to construct both roads beyond their interim widths, including the cost of curbs and gutters, was $20,711.
In March 1969, almost 17 months after the agreement with the County and dedication of the right-of-way, Collman, apparently at the urging of his neighbor Morlock, joined with him in a petition to the City of Anaheim to annex certain land including the western portion of the grove. If appellant planned to develop part of the grove for residential or commercial uses, annexation was essential because only the City could provide sewer, water, and power facilities for the area. Development was also contingent upon compliance with a city ordinance which prohibited commercial use unless abutting roads were built to their ultimate widths, 10 additional feet of roadway were dedicated to the City for sidewalks and construction of the sidewalks were guaranteed.
In the summer of 1969, Collman petitioned the City for a zoning classification change for the northwest corner of the grove in the hope of obtaining a service station site and petitioned for a rezoning of the entire eastern portion of the grove. Collman agreed to dedicate land for sidewalks and to guarantee their construction, and in January 1970 the City approved annexation and reclassification of the entire 15-acre grove for commercial and residential uses.
On their 1967 income tax return, the Collmans valued the property dedicated at $49,710.02, subtracted therefrom $20,711.00 as the value of additional improvements provided by the County pursuant to the agreement, and took the difference ($28,999.02) as a charitable deduction.
The Commissioner disallowed any charitable deduction for the dedicated right-of-way. In their petition to the Tax Court, the Collmans placed the value of the property at $50,114.00 and, arguing there should be no offset, claimed the entire value as a charitable contribution.
Reversing the Commissioner's decision, the Tax Court allowed a partial charitable deduction for the dedication of the roadways. The Tax Court held that the Collmans were entitled to deduct only the value of 1.759 acres ($33,314), less the cost to the County of constructing the roadways beyond their interim widths with curbs and gutters ($20,711). The conveyance of the additional .79 acre used to build the roads to their ultimate widths did not constitute a charitable contribution, the Tax Court found, because that conveyance was made for the business purpose of obtaining desired zoning changes.
The Government did not cross appeal from the decision below, and consequently, there are only two issues presented by this appeal: 1) whether the Tax Court's finding as to Collman's motivation in dedicating the additional .79 acre was clearly erroneous; and 2) whether the Tax Court properly offset any allowable deduction by the value of additional construction work performed by the County at Collman's request.
Section 170(a) of the Internal Revenue Code of 1954 allows a deduction for charitable contributions, and section 170(c) specifically refers to charitable contributions to political subdivisions. 1 It is well settled that the term 'charitable contribution' as used in section 170 is synonymous with the word 'gift'. DeJong v. Commissioner of Internal Revenue,309 F.2d 373 (9th Cir. 1962). Harold DeJong, 36 T.C. 896, 899 (1961), aff'd, 309 F.2d 373 (9th Cir. 1962). Accord, Commissioner of Internal Revenue v. Duberstein, 363 U.S. 278, 285, 80 S.Ct. 1190, 4 L.Ed.2d 1218 (1960). Stated somewhat differently, the transfer does not constitute a gift where it is made 'in expectation of the receipt of certain specific direct economic benefits within the power of the recipient to bestow directly or indirectly, which otherwise might not be forthcoming.' Stubbs v. United States, 428 F.2d 885, 887 (9th Cir. 1970), cert. denied, 400 U.S. 1009, 91 S.Ct. 567, 27 L.Ed.2d 621 (1971).
The critical consideration, therefore, in determining the existence of a statutory gift or charitable contribution is the transferor's intention. Duberstein, supra, at 285--86, 80 S.Ct. 1190. Since a decision as to intent or motive necessarily must be based on the fact finder's experience with human conduct as applied to the totality of the facts in each case, primary weight in this area must be given to the fact finder's conclusions. Id. at 289, 80 S.Ct. 1190, 4 L.Ed.2d 1218. Thus, appellate review of determinations of charitable or donative intent is quite restricted. Where the trial has been by a judge without a jury, the judge's findings must stand unless 'clearly erroneous.' Fed.R.Civ.P. 52(a). 'A finding is 'clearly erroneous' when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.' United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 542, 92 L.Ed. 746 (1948).
The 'clearly erroneous' rule applies also to factual inferences from undisputed basic facts, id. at 394, 68 S.Ct. 525. In this case, therefore, our inquiry is limited to a determination whether the Tax Court clearly erred in inferring from all the facts that Collman dedicated the additional land (the .79 acre) needed for expanding the roads to their ultimate widths in order to obtain direct economic benefits (i.e., desired zoning changes).
In arguing that the Tax Court's finding is not clearly erroneous, the Government points to several undisputed items of evidence which tend to support the Tax Court's conclusions: 1) conveyance of the additional .79 acre which completely fulfilled County reclassification requirements and partially satisfied City requirements; 2) Collman's petition to the City, seventeen months after the transfer, for rezoning of the grove for commercial uses; 3) net farm losses...
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