FOUNDATION FOR DIVINE MEDITATION, INCORPORATED v. Commissioner

• Decision Date: 05 April 1965
• Docket Number: 2600-62.,Docket No. 2601-62
• Citation: 24 TCM (CCH) 411,1965 TC Memo 77
• Parties: The Foundation for Divine Meditation, Incorporated v. Commissioner. Merle E. Parker v. Commissioner.
• Court: U.S. Tax Court

24 T.C.M. (CCH) 411 (1965)

T.C. Memo. 1965-77.

The Foundation for Divine Meditation, Incorporated v. Commissioner.

Merle E. Parker v. Commissioner.

Docket Nos. 2601-62, 2600-62.

United States Tax Court.

Filed April 5, 1965.

Merle E. Parker, Cedar Heart of the Ozarks, Thornfield, Mo., (an officer) for the petitioners. Douglas W. Argue for the respondent.

Memorandum Findings of Fact and Opinion

TRAIN, Judge:

Respondent determined deficiencies in income taxes and additions to tax as follows:

                                                                                      Section         Section
                                                              Year    Deficiency     6651(a)1     6653(a)
                  The Foundation for Divine Meditation
                    Incorporated, Docket No. 2601-62 .....    1954    $70,092.60    $17,523.15      $3,504.63
                                                              1955     23,388.64      5,847.16       1,169.43
                                                              1956     14,128.14      3,532.04         706.41
                                                              1957      4,873.82      1,218.45         243.69
                                                              1958      9,579.38      2,394.85         478.97
                                                              1959     18,273.92      4,568.48         913.70
                  Merle E. Parker, Docket No. 2600-62 .....   1955     30,686.30     .........      
                                                              1956     17,155.18      4,288.80      
                                                              1957      4,563.64      1,140.91      
                                                              1958     11,607.26     .........      
                                                              1959     23,513.73     .........      .........
                

Some concessions have been made by respondent so that decisions will be entered under Rule 50 if any issues are decided adversely to the petitioners.

The issues for decision are:

(1) Whether, during the years in issue, the petitioner The Foundation for Divine Meditation, Incorporated (hereinafter sometimes referred to as FDM), was exempt from taxation under section 501(c)(3) as a religious or educational organization;

(2) If issue one is answered in the affirmative, whether any of FDM's income is subject to the unrelated business income tax imposed by section 511;

(3) Whether the petitioner Merle E. Parker (hereinafter sometimes referred to as Parker) realized taxable income from various payments made by FDM;

(4) Whether FDM is liable for additions to tax imposed by sections 6651(a) and 6653(a) for failure to file returns in, and underpayment of income taxes for, 1954 through 1959; and

(5) Whether Parker is liable for additions to tax imposed by section 6651(a) for failure to file returns in 1956 and 1957.

Findings of Fact

Some of the facts have been stipulated and the stipulation of facts and exhibits appended thereto are incorporated herein by this reference.

Petitioner, Parker, an individual, presently resides in Thornfield, Missouri. During the years in issue he resided at Valley Center, California, and filed Federal income tax returns with the district director of internal revenue at Los Angeles, California, for calendar years 1955, 1958, and 1959. In July 1945, Parker purchased a tract of property in Riverside, California, and established a retail nursery business which failed in 1947. In August 1947, Parker enrolled in Riverside College, Riverside, California, which he attended for one year. Between 1948 and 1953 he received training, primarily by correspondence courses, from the College of Universal Truth in Chicago, Illinois. After completion of these courses in 1953, this school awarded him doctorates in metaphysical psychology and in divinity. During the latter part of 1948, Parker and several other persons interested in metaphysical and occult doctrines held discussions for the purpose of forming an organization which later came to be known as "The International Fraternal Order of the Foundation for Divine Meditation." At trial Parker insisted that these persons remain anonymous.

Petitioner FDM is a nonprofit corporation organized in February 1955 under the laws of the State of California, located in Valley Center, California. It is a continuation of an unincorporated association organized by Parker in October 1949. On or about October 24, 1949, Parker caused to be filed with the office of the secretary of state of California a registration of the fraternal name "The Foundation for Divine Meditation." During the years 1954 through 1959 FDM did not file any Federal income tax returns.

The purposes for which FDM was organized are stated in the preamble to the by-laws dated October 24, 1949, as follows:

THEREFORE, hereby propose to establish, and as a result of such proposal, do hereby establish a Sacred Fraternal Order for the purpose of teaching, practicing, and applying the True Sacred Teachings and Commands of Jesus Christ, together with any and all other Sacred Teachings of Ancient Origin which may assist in the understanding of the Eternal Laws of Almighty God, and the name of this Sacred Fraternal Order hereby established is the INTERNATIONAL FRATERNAL ORDER OF THE FOUNDATION FOR DIVINE MEDITATION, which official abbreviation of such name is I. F. O. F. F. D. M. For the purpose of public identification, this Sacred Fraternal Order shall be known simply as THE FOUNDATION FOR DIVINE MEDITATION, and we hereby authorize, but do not require that this Sacred Fraternal Order be incorporated at some future date, and do empower the presiding officer and secretary of this Order to incorporate same, at such time as they shall deem it wise and expedient to do so.

The bylaws, rules and discipline provided for the offices of supreme grand counselor and national director, supreme grand secretary and national secretary, and supreme grand treasurer and national treasurer, which positions were to be held by Parker, Mary Lewis Anderson of Roanoke, Virginia, and Iyonne Edgar of Phoenix, Arizona, respectively. Other provisions of the bylaws provided for the establishment of schools, academies, churches, or branches throughout the United States, or in any country of the world, and the establishment of local study groups, councils and grand councils. The bylaws also provided for the creation of subordinate offices to be held by group leaders, counselors, and grand counselors, the duties of each being described therein. As of the time of trial, none of the subordinate divisions, schools, academies, churches, or branches thereof had been established. Neither was there any indication of the appointment of any of the subordinate officers authorized under the bylaws. The final article of the bylaws contained miscellaneous provisions and provided, in part, as follows:

The income of this Order shall be from donations, tuition fees, and gifts from Members and others who choose to assist its work, goals, and growth.

In August 1950, a four-page document drafted by Parker, entitled "CONSTITUTION," was filed with the County Recorder, Riverside County, California. Article II of this document provided that:

The primary purpose of THE FOUNDATION FOR DIVINE MEDITATION shall be to teach the application of certain spiritual, psychological, physical, and metaphysical principles to the problems of daily life. In furtherance of its goal it shall, from time to time, publish books, booklets, courses, and reports for the benefit of its Membership.

Article VIII, part 6, provided that:

The Members of this organization shall be of two classes with voting privileges as follows:

a — The Directorate, which shall include the Board of Directors and all Members who have completed prescribed studies necessary to receive appointments to the office of Counselor, or an office superior to that rank. Each member of the Directorate shall have one vote in matters pertaining to the organization.

b — General Membership, which shall include all degrees of the organization below that of Counselor. Members in this class shall not have the privilege of voting in matters pertaining to the organization.

Article VIII, part 9, provided that:

No provision of these Articles shall be construed as prohibiting any officer of this Organization from offering for sale to the public under his own name, or under the name of any organization or publishing firm other than THE FOUNDATION FOR DIVINE MEDITATION, any writing of any nature of which he is the author or copyright owner, except that the specific writings of Merle E. Parker comprising the basic study course of this Fraternal Order, and entitled "Power of the Ages", "Blueprint of Life", and "The Living Clay" respectively, shall not be sold to any person whomsoever without unanimous consent of all members of the Board of Directors of this Organization.

Article VIII, part 10, provided that:

The primary source of income of THE FOUNDATION FOR DIVINE MEDITATION shall be from gifts, contributions, and bequests from members or others who wish to assist its aims and goals.

The articles of incorporation of FDM were filed with the secretary of state of California in February 1955. Article Two (b) authorized execution of contracts, ownership of property and carrying on business activities, in broad terms. An amendment filed on March 5, 1956, provided that the property of FDM was irrevocably dedicated to religious and charitable purposes.

Parker, Mary Lewis Anderson and Iyonne Edgar were named as directors and officers. Since 1949, directors' meetings have been held on an average of less than once a year. These meetings were all held at the residence of the national secretary in Roanoke, Virginia. The meetings were attended only by Parker and the national secretary who in each instance acted as a quorum. The national treasurer was never in attendance. At the time of trial Parker had "lost track" of her.

Parker has held the position of national director of FDM since its formation in ...