Gund's Estate v. Commissioner of Internal Revenue

• Decision Date: 27 June 1940
• Docket Number: No. 8127.,8127.
• Citation: 113 F.2d 61
• Parties: GUND'S ESTATE et al. v. COMMISSIONER OF INTERNAL REVENUE.
• Court: U.S. Court of Appeals — Sixth Circuit

113 F.2d 61 (1940)

GUND'S ESTATE et al. v. COMMISSIONER OF INTERNAL REVENUE.

No. 8127.

Circuit Court of Appeals, Sixth Circuit.

June 27, 1940.

Claude M. Houchins, of Washington, D. C., and George R. Hunt, of Lexington, Ky. (Claude M. Houchins, of Washington, D. C., and George R. Hunt and Hunt, Bush & Lisle, all of Lexington, Ky., on the brief), for petitioners.

L. W. Post, Sp. Asst. to Atty. Gen. (James W. Morris, Asst. Atty. Gen., and Sewall Key and L. W. Post, Sp. Assts. to Atty. Gen., on the brief), for respondent.

Before HICKS, SIMONS, and ARANT, Circuit Judges.

ARANT, Circuit Judge.

This appeal challenges the correctness of a decision of the Board of Tax Appeals that a bequest to the Oak Grove Cemetery Association is not exempt from the federal estate tax under Section 303(a) (3) of the Revenue Act of 1926, as amended, 26 U.S. C.A.Int.Rev.Acts, pages 232, 235. The facts are stipulated.

Karoline E. Gund, a resident of Kentucky, died in Lexington on August 24, 1934. Her will provided for several bequests and for the creation of a trust of the residue for the benefit of Irene Dorner during her life, the remainder at her death to vest in the Oak Grove Cemetery Association of LaCrosse, Wisconsin, "to be held by the said cemetery company as a fund for the maintenance, care, additions and betterments to said cemetery." W. R. Springate and Irene Dorner, petitioners, were named executor and executrix, and trustees under the will.

In computing the estate tax, petitioners deducted the value of the bequest to the Cemetery Association, stipulated to be $101,105.68. The Commissioner disallowed the deduction, asserted a deficiency, and, upon review, was sustained by the Board of Tax Appeals.

The Oak Grove Cemetery Association is a corporation organized in 1872, pursuant to Chapter 67 of the Wisconsin statutes of 1858. It is managed by a board of trustees and an executive committee, the latter composed of the three officers of the Association. The board is elected annually by the owners of burial rights, and, in turn, elects the officers. Both serve without compensation.

The Association owns one hundred and three acres of land, used or held exclusively for burial purposes. Since 1880, there have been 14,459 burials. Individuals, without regard to race, color, religion or previous condition of servitude, may purchase burial rights, but must pay annual dues for maintenance. In addition, the County of LaCrosse, the City and County of LaCrosse together, and a number of churches have purchased burial rights in several plots, in which they permit the free burial of soldiers and poor or indigent persons.

Petitioners assert that the Commissioner erred in his determination that the Association was not organized and operated exclusively for religious or charitable purposes, within the meaning of Section 303 (a) (3) of the Revenue Act of 1926, as amended, and in failing to allow a deduction to the extent of the value of the bequest.¹

A cemetery association doubtless could be so organized and operated as to be a charitable organization within the meaning of the act, but it appears that no free burial space is ever provided by the Oak Grove Cemetery Association, or that less than fair value is ever charged for burial rights or upkeep. Consequently, we are of the opinion that the Board of Tax Appeals correctly held the bequest was not to or for the use of a corporation organized and operated exclusively for religious or charitable purposes within the meaning of the act.

In Schuster v. Nichols, D.C.Me., 20 F.2d 179, 181, it was held that contributions in the years 1918, 1919, 1920 and 1921 to the East Douglas Evergreen Cemetery Association, a corporation not distinguishable in purpose or operation from the Oak Grove Cemetery Association, were not deductible from gross income under the Revenue Act of 1918. Section 214(a) (11), Act of February 24, 1919, c. 18, 40 Stat. 1066, and the Revenue Act of 1921, Section 214(a) (11) (B), Act of November 23, 1921, c. 136, 42 Stat. 227, 239. Each act allowed as deductions contributions or gifts to any corporation organized and operated exclusively for charitable purposes, up to a maximum amount. The decision in that case turned upon the meaning of the word "charitable," the plaintiff contending that its scope was not limited to mere relief of poverty, distress, or almsgiving, but that it had a broader connotation, which embraced any purpose that had improvement and promotion of the general welfare as its end. Holding the contributions not deductible, Judge Brewster said:

"The language employed in framing section 214 of the Revenue Laws of 1918 and 1921 reflects an intent not to include cemetery corporations under the designation of charitable corporations. This intention appears clearly when we consider the context of the eleventh subdivision of section 214 (a) of the Revenue Act of 1918, and of clause B of subdivision 11 of section 214 (a) of the Revenue Act of 1921. In the earlier statute the allowable deductions are `contributions or gifts made within the taxable year to corporations organized and operated exclusively for religious, charitable, scientific, or educational purposes, or for the prevention of cruelty to children or animals.' In the latter statute the allowable deductions are to `any corporation, or community chest fund or foundation, organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, including posts of the American Legion or the Woman's Auxiliary units thereof, or for the prevention of cruelty to children or animals.'

"The position of the word `charitable,' in a sentence including religious, scientific, and educational purposes, all of which would be regarded as charitable purposes under the the statute of 43 Eliz., points irresistibly to the conclusion that Congress was here using the word `charitable' in its more narrow and restricted sense, as signifying those corporations which were organized and maintained exclusively for eleemosynary purposes. On any question of interpretation it is permissible to resort to the provisions of the whole act, in order to ascertain therefrom what meaning dubious language is intended to convey. Milford v. County Commissioners of Worcester, supra 213 Mass. 162, 100 N.E. 60.

"The provisions of section 231 of the Revenue Acts (Comp.St. § 6336 1/8o) also furnish unmistakable...