DeJong v. CIR

• Decision Date: 25 October 1962
• Docket Number: No. 17713.,17713.
• Citation: 309 F.2d 373
• Parties: Harold DeJONG and Marjorie J. DeJong, Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
• Court: U.S. Court of Appeals — Ninth Circuit

309 F.2d 373 (1962)

Harold DeJONG and Marjorie J. DeJong, Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.

No. 17713.

United States Court of Appeals Ninth Circuit.

October 25, 1962.

William H. Dick, Stockton, Cal., for appellant (petitioners).

Crane C. Hauser, Chief Counsel, Int. Rev. Serv., Louis F. Oberdorfer, Asst. Atty. Gen., Meyer Rothwacks, Arthur E. Strout, Attys., Tax Division, Dept. of Justice, Washington, D. C., for appellee.

Before JERTBERG and MERRILL, Circuit Judges, and PENCE, District Judge.

JERTBERG, Circuit Judge

Before us is a petition to review a decision of the Tax Court of the United States holding that the sum of $400.00 paid by petitioners to The Society For Christian Instruction, Of Ripon, California in 1958 was not deductible as a charitable contribution under § 170 of the Internal Revenue Code of 1954 (26 U.S. C. § 170). The findings of fact and opinion of the Tax Court are reported at 36 T.C. 896.

Petitioners, husband and wife, residents of Ripon, California, filed a joint income tax return for the calendar year 1958 in which a charitable deduction in the sum of $1,075.00 was claimed for payment made by them to The Society For Christian Instruction, Of Ripon, California. The respondent decreased the deduction claimed by the sum of $400.00 on the ground that said amount of the claimed deduction of $1,075.00 did not constitute a charitable contribution under the above mentioned section. The Tax Court sustained the respondent's determination.

The stipulation of facts and the additional facts found by the Tax Court are not in dispute and may be summarized as follows:

The Society For Christian Instruction, Of Ripon, California (hereinafter referred to as the Society), is a non-profit corporation organized under the laws of the State of California, a corporation organized and operated exclusively for educational purposes, and exempt from federal income taxes under § 501(c) (3) of the 1954 Code, 26 U.S.C. § 501(c) (3).

The Articles of Incorporation of the Society provide, in part, as follows:

"Second: That the purposes for which said corporation is organized are:

"(1) To establish and carry on a seminary or school of learning where pupils and students may obtain a sound and thorough training in Christian religion and doctrines, mechanical, literary and general education of the highest order. Such training and education shall be Godcentered in accordance with the basic principles of this Society. These basic principles are the doctrines revealed in the infallible Word of God as expressed in the Three Formulas of Unity as subscribed to by the Reformed Churches, to-wit: The Heidelberg Catechism, The Belgic Confession and the Canons of Dort.

* * * * * *

"Sixth: That all persons eighteen years of age and over, who subscribe to the basic principles of this Society, as set forth in Article Second, Paragraph (1) of these Articles, may become members of this corporation. All members are obligated to contribute to the financial support of the Society to the best of their ability. Applications for membership may be submitted at any regular meeting of the Board of Trustees or of the membership of the corporation.

* * * * * *

"Ninth: That this corporation shall exist wholly from the voluntary contributions, collections, legacies, and any other funds which may be legally collected by or donated to this corporation. That there shall not be any profit to any of the members and that in the event of dissolution, the assets of the corporation shall pass to the National Education Foundation, Grand Rapids, Michigan."

The Society owned and operated a grammar school and a high school at Ripon, California¹ during 1958 and for some years prior thereto. These schools are full-time schools, accredited by the University of California, and instruction is given in Christian religion and doctrines as a part of their regular curriculum. Both petitioners had been members of The Christian Reformed Church for many years and attended the schools operated by the Society at Ripon, California. Petitioner Harold DeJong had been a member of the Society for many years and had served as a member and officer of the Board of Trustees of the Society for a number of years.

The Society charges no tuition but raises its funds from parents of enrolled students, supporting churches, non-student parent members and other persons interested in the schools. Funds from parents of students are secured in the following manner:

In the late summer or early fall of each year, enrollment committees appointed by the board of trustees of the Society meet with parents of prospective students. At these meetings the parents are given "a broad picture of what the cost will be in the operating budget for the coming year" and they are asked to contribute to the best of their ability and to try to carry as much "of the load as they feel they can". When a parent is known to be "pretty well-to-do" it is suggested that he contribute the full amount of the estimated cost per student for the coming year times the number of students he is enrolling. All of the parents interviewed are given an enrollment card to sign and are asked to indicate thereon the number of students they wish to enroll and the amount of the contribution they intend to make toward the operation of the school or schools. With the exception of a few parents who have reservations against signing a card of this nature, signed cards are received from all parents.

Children of non-society member parents are enrolled if facilities are available, and the parents sign a statement of policy agreeing with the principles and purposes of the schools. Non-member parents are also asked to contribute toward the operation of the school or schools.

Approximately 70 percent of the total income of the Society is derived from contributions from parents of enrolled students.

All moneys received by the Society are credited to the general operating fund of the Society without designation. No student is refused admission to the Society\'s schools for failure of his parents to contribute financially to the Society. All facilities of the schools are available to all students irrespective of the amounts pledged or contributed by their parents. However, all parents of prospective students do pledge a certain amount of money, although in some cases that amount is "very nominal." No action is taken to collect on delinquent pledges except persuasion.

During 1958, the taxpayers' two children, Robert and William DeJong, were full-time students of the grammar school operated by the Society. The taxpayers paid $1,075 in 1958 to the Society and deducted this amount as a contribution on their 1958 income tax return.

It was stipulated that the sum of $400.00 was "the approximate cost to The Society For Christian Instruction, Of Ripon, California of educating petitioners' two children during the calendar year 1958."

The sole question presented to us is whether the Tax Court erred in holding that the $400.00 paid by petitioners to the Society was in the nature of a tuition fee paid for the education which the Society was expected to furnish the petitioners' children, and therefore not deductible as a charitable contribution.

The pertinent parts of § 170 with which we are primarily concerned provide:

Internal Revenue Code of 1954:

"§ 170. Charitable, etc., contributions and gifts

"(a) Allowance of deduction. —

"(1) General rule. — There shall be allowed as a deduction any charitable contribution (as defined in subsection (c)) payment of which is made within the taxable year. A charitable contribution shall be allowable as a deduction only if verified under regulations prescribed by the Secretary or his delegate.

* * * * * *

"(c) Charitable contribution defined. — For purposes of this section, the term `charitable contribution\' means a contribution or gifts to or for the use of —

* * * * * * "(2) A corporation, trust, or community chest, fund, or foundation —

"(A) created or organized in the United States or in any possession thereof, or under the law of the United States, any State or Territory, the District of Columbia, or any possession of the United States;

"(B) organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes or for the prevention of cruelty to children or animals;

"(C) no part of the net earnings of which inures to the benefit of any private shareholder or individual; and

"(D) no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation.

A contribution or gift by a corporation to a trust, chest, fund, or foundation shall be deductible by reason of this paragraph only if it is to be used within the United States or any of its possessions exclusively for purposes specified in subparagraph (B)."

(26 U.S.C. 1958 ed., Sec. 170.)

Attention should also be noted of certain provisions of § 262 of the same Code:

"Personal, living, and family expenses

"Except as otherwise expressly provided in this chapter, no deduction shall be allowed for personal, living, or family expenses."

(26 U.S.C. 1958 ed., Sec. 262.)

Included in the findings of fact of the Tax Court is the finding that "at least $400 of the amount paid by petitioners to the society in 1958 was intended as payment in the nature of tuition for petitioners' children, a personal expense, and did not constitute a charitable contribution." In the course of its opinion, the Tax Court stated:

"Payments pledged and made by parents in the circumstances disclosed by the evidence were not voluntary and gratuitous contributions motivated merely by the satisfaction which flows from the performance of a generous act; they were induced, at least in substantial part, by the benefits which the parents sought and anticipated from the enrollment of their children as students in the society\'s school. Whether such payments be labeled as `tuitio

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