Dowell v. U.S.

• Decision Date: 28 April 1977
• Docket Number: No. 75-1912,75-1912
• Citation: 553 F.2d 1233
• Parties: 77-1 USTC P 9386 Ruth K. DOWELL, Individually and as Executrix of the Estate of H. B. Dowell, Deceased, Appellee, v. UNITED STATES of America, Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1233

553 F.2d 1233

77-1 USTC P 9386

Ruth K. DOWELL, Individually and as Executrix of the Estate

of H. B. Dowell, Deceased, Appellee, v. UNITED STATES of America, Appellant.

No. 75-1912.

United States Court of Appeals, Tenth Circuit.

Argued and Submitted March 14, 1977.

Decided April 28, 1977.

Leonard J. Henzke, Jr., Tax Div., Dept. of Justice, Washington, D. C. (Gilbert E. Andrews, Tax Div., Dept. of Justice, and Scott P. Crampton, Asst. Atty. Gen., Washington, D. C., on the brief; Nathan G. Graham, U. S. Atty., Tulsa, Okl., of counsel), for appellant.

James L. Kincaid, Tulsa, Okl. (J. Denny Moffett, Tulsa, Okl., on the brief), for appellee.

Before SETH and BARRETT, Circuit Judges, and KERR, District Judge. ^*

BARRETT, Circuit Judge.

The United States, through the Commissioner of Internal Revenue Service (IRS), appeals the findings, conclusions and judgment of the district court, following trial without jury, awarding plaintiff-appellee Ruth K. Dowell (Dowell), individually and as Executrix of the Estate of H. B. Dowell, Deceased, $3,648.03, representing refund of additional tax and interest paid. The award equals a deficiency assessment imposed by IRS against Dowell and her late husband following filing of their joint federal income tax return for the year 1971. Jurisdiction is conferred by 28 U.S.C.A. § 1291.

The issue presented is whether a "sponsorship gift" of $22,500.00 made by Dowell on February 25, 1971, to Oral Roberts Evangelistic Association, Inc., of Tulsa, Oklahoma, is a charitable contribution deductible under Section 170 of the Internal Revenue Code of 1954, 26 U.S.C.A., § 170. The Code allows a deduction from gross income (if deductions are itemized) for any charitable "contribution or gift" to or for the use of a corporation "organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes." 26 U.S.C.A., § 170(c). The gift here involved was made to the parent corporation of Oral Roberts University, Inc., and University Village, Inc., also of Tulsa, Oklahoma. Each of the corporations qualifies under § 170 of the Code.

Some basic rules governing our review should be observed before reciting the facts of this case. A case cannot be presented de novo on appeal. When a case is tried to the district court, the resolution of conflicting evidence and the determination of credibility are matters particularly within the province of the trial judge who heard and observed the demeanor of the witnesses. United States v. 79.95 Acres of Land, etc., Rogers Co., Okla., 459 F.2d 185 (10th Cir. 1972); Davis v. Cities Service Oil Company, 420 F.2d 1278 (10th Cir. 1970). The appellate court is not called upon to determine whether the trial court reached the correct conclusion of law, but rather whether it reached a permissible conclusion in light of the evidence. Kelly v. Layton, 309 F.2d 611 (8th Cir. 1962). The findings of a trial court will not be reversed on appeal unless they are clearly erroneous. Burgert v. Tietjens, 499 F.2d 1 (10th Cir. 1974). This rule applies to findings and conclusions involving mixed questions of fact and law. Hinde v. Hot Sulphur Springs, Colorado, 482 F.2d 829 (10th Cir. 1973); Fed.Rules Civ.Proc., rule 52(a), 28 U.S.C.A.

Dowell, then 76 years of age with developing cataracts and the prospects of surgery, and her aging, infirm husband, had determined in late 1970 to sell the family home in Tulsa and move into an adequate retirement center. Her husband required personal care and attention. Dowell had heard of University Village and in January, 1971, her daughter drove her to the facility where she visited with one Dan P. White about the accommodations, the financial aspects and the application for admission. White testified that he was sure that he told Dowell of the "sponsorship gift" which was in all such cases requested, although not required, as a condition or requisite for admission or continued residency. Dowell testified that she has no recollection of discussing a "sponsorship gift" with White or anyone else at University Village. She was at no time aware that any gift was required for residency.

On January 26, 1971, Dowell submitted her application for residency to University Village, after thoroughly inspecting the facilities and evaluating the accommodations, care and comfort. Mr. Dowell was to reside in the Health Center. On February 11, 1971, Dowell received a letter advising that she and her husband were accepted as residents of University Village. On February 25, 1971, Dowell submitted a check in amount of $22,500.00 payable to Oral Roberts Evangelistic Association, Inc. On March 26, 1971, Dowell moved into Cottage 16D at University Village, Inc. and on April 2 she signed a residency agreement with the Village whereby she agreed to pay a per month rental of $165.00 and additional amounts for other services. She paid $400.00 to $600.00 per month for her husband's health care.

Oral Roberts Association loaned University Village the amount by which construction costs of the Village exceeded the funds obtained from a Tulsa bank, secured by a first mortgage. University Village seeks to repay the funds borrowed for construction by means of the "sponsorship gifts" of the cottage and apartment units. The Village is designed to provide for the needs of those who reach retirement age. The Village prepares and widely distributes a brochure which acknowledges that the monthly rental and other charges are intended simply to cover current operating expenses, while the "sponsorship gifts" program is aimed at repayment of the monies borrowed for construction. The brochure explains: that the monthly charges do not include provisions for amortization of the loans and depreciation; that while a "sponsorship gift" is not a prerequisite for residency, it is requested; that a "sponsorship gift" does not entitle the donor to any "property rights"; that a Standard Agreement for Residency is executed with all residents covering their lifetime care "and is entirely separate and apart from any gift consideration." The record reflects that through March 1, 1975, the Village received "sponsorship gifts" totalling $4,844,604.00 and, of this amount, $4,322,712.00 or 89 percent was received from residents and $521,892.00 or 11 percent from relatives and friends of residents and from non-residents. As of March 1, 1975, the Village records revealed that: 40 of the residents made "sponsorship gifts" in whole or in part before their application for residency was accepted; that about 224 residents made the "sponsorship gift" in the full amount suggested for the cottage or apartment they rented; that some 16 residents gave more than that suggested; and that some 63 residents gave nothing or less than the suggested gift. The Village records reflect that relatives of 15 of the residents made the "sponsorship gifts" and that 11 of the residents made "deferred gifts" which, because they are not in cash or its equivalent in value, may be indeterminate and are not treated as "sponsorship gifts" by the Village. Of the 19 residents who moved out of the Village prior to March 1, 1975, 12 received either a full or partial refund of their "sponsorship gift."

Dowell testified that her primary concern, after viewing the Village facilities, was to obtain occupancy for herself and her husband because of the desirable accommodations, the general surroundings in the Village and the care and treatment her husband would receive. She further testified that she made the "sponsorship gift" because she wished to do so; she felt no duress to do so; she does not recall that anyone told her that such a gift was required for admission; she was not promised anything in return for the gift; while she knew of a possible tax deduction for the gift, this was not a consideration on her part and she would have made the gift without any deduction because of the building, the care she would receive and the life she could live in the Village and because of the good works of the Oral Roberts Association; she was never told that a "sponsorship gift" was required as a prerequisite to residency or continuing residency at the Village; not only did she not believe that a "sponsorship gift" was required for residency, but she was unaware of and therefore did not expect to receive lifetime care from the Village in exchange therefor; she made the gift out of charity and generosity knowing that her gift would help others; and she did not anticipate receiving any benefits from the gift nor did she expect that any part of the gift would ever be returned to her.

University Village, Inc. is uniquely designed, planned and managed for the elderly. It maintains five types of facilities to accommodate the residents, varying in design and utility from those for the bedridden to those for the physically mobile and independent. The rental and other charges do not repay the construction costs. The "sponsorship gifts" as suggested in the brochures of University Village, Inc., are essential to such construction cost repayments and are consistent with Oral Roberts' fund raising philosophy; that no applicant for residency is told or required to make a sponsorship gift as a condition for admission; monthly rentals are not reduced or modified for a gift made, and are the same (per unit charge) for all admittees.

The trial court found, inter alia : that although the brochures distributed by the Village to prospective applicants suggest a "sponsorship gift" that it is clear that none is required; that Dowell's testimony aforesaid established a prima facie case, which was not refuted or overcome by IRS; that of the total residents admitted to Village, (a) 13 or 2.5 percent made partial gifts, (b) 46 or 8.98 percent made no gifts, (c) that 16 or 3.1 percent gave more than the suggested gift amount, and 63 or 12.3 percent gave less, (d) that 24.38 percent either made no gifts, gifts of more than the...