Forbes Lithograph Mfg. Co. v. White
| Decision Date | 20 June 1930 |
| Docket Number | No. 3155.,3155. |
| Citation | 42 F.2d 287 |
| Parties | FORBES LITHOGRAPH MFG. CO. v. WHITE, Collector of Internal Revenue. |
| Court | U.S. District Court — District of Massachusetts |
Robert H. Holt and Gaston, Snow, Saltonstall & Hunt, all of Boston, Mass., for plaintiff.
Frederick H. Tarr, U. S. Atty., and J. Duke Smith, Asst. U. S. Atty., both of Boston, Mass., for defendant.
The first question is whether two payments of $50,000 each made by the plaintiff in 1921 and 1922 to the trustees of the Forbes Foundation were deductible from its income for these years as ordinary and necessary expense in carrying on its trade or business. Revenue Act of 1921, § 234a, 42 Stat. 254.
The facts are not in dispute and, in outline, are as follows: The plaintiff is a manufacturing concern employing about one thousand persons. Its place of business is in or near Boston. In 1921 it caused to be established the Forbes Foundation, and in that and the following year made to the Foundation the two payments in question. The Foundation was established to provide funds which could be used for the benefit of employees of the plaintiff and their dependents in case of illness or emergency. The trustees of the Foundation were appointed by the plaintiff and were removable by the plaintiff; they had power, with the approval of the plaintiff, to transfer the fund to any organization for similar purposes, or to terminate the trust and pay the remaining portion of the fund to the plaintiff. They were given very broad authority as to expenditure of the income, being free to use it for any charitable or educational purposes which in their judgment would be for the benefit of the plaintiff's employees. In the actual administration of the fund they carried out these purposes. On one occasion they made a contribution of $500 to the neighborhood Y. M. C. A.; and it is said that they felt free to assist employees in the education of their children, and in tiding over family emergencies caused by illness or accident.
The underlying purpose of the Foundation was to improve the esprit de corps of the plaintiff's employees. Trickey, the plaintiff's superintendent, testifies that it has had this effect; that the plaintiff has been benefited by the Foundation in the loyalty and good will which its employees show, and in improvement in its labor conditions compared with other similar concerns; that its employees are more loyal to it. I accept this testimony and find the facts to be as stated by the witness.
That the payments made to the Foundation passed definitely out of the control of the plaintiff is too clear for discussion. The trust was undoubtedly a separate entity not controlled by the plaintiff. It was established for bona fide business reasons, meeting in this respect the test stated in Sugarland Industries v. Commissioner, 15 B. T. A. 1265, where it was said: ...
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