Havemeyer v. Commissioner of Internal Revenue, 315.

• Court: U.S. Court of Appeals — Second Circuit
• Writing for the Court: L. HAND, SWAN, and CHASE, Circuit
• Citation: Havemeyer v. Commissioner of Internal Revenue, 98 F.2d 706 (2nd Cir. 1938)
• Decision Date: 25 July 1938
• Docket Number: No. 315.,315.
• Parties: HAVEMEYER v. COMMISSIONER OF INTERNAL REVENUE.

98 F.2d 706 (1938)

HAVEMEYER v. COMMISSIONER OF INTERNAL REVENUE.

No. 315.

Circuit Court of Appeals, Second Circuit.

July 25, 1938.

Henry B. Closson and William M. Sperry, 2d, both of New York City, for petitioner.

James W. Morris, Asst. Atty. Gen., and Sewall Key, and Lee A. Jackson, Sp. Assts. to Atty. Gen., for respondent.

Before L. HAND, SWAN, and CHASE, Circuit Judges.

CHASE, Circuit Judge.

This petition for the review of a decision of the Board of Tax Appeals was brought to this court under a stipulation for change of venue, duly approved, which was entered into under the provisions of Sec. 1002 (b) of the Revenue Act of 1926, as amended, 48 Stat. 680, 760, 26 U.S.C.A. § 641 (b).

The question presented is whether the petitioner was entitled, under the provisions of Sec. 23 (n) (2) of the Revenue Act of 1932, 26 U.S.C.A. § 23 note, to a deduction for contributions he made in that year to an unincorporated association known as the United Special Aid Association. The Commissioner decided that he was not entitled to the deduction and determined the deficiency by adding the amount claimed to his gross income. The Board of Tax Appeals upheld the action of the Commissioner.

The United Special Aid Association was formed in 1918 by the petitioner, members of his family, and a close business associate. It was organized in compliance with the law regulating the formation of unincorporated associations and, to quote from its articles of association, "in order to unify and co-ordinate the charitable activities of themselves and other persons who may hereafter become members of this Association" and "to be operated exclusively for charitable purposes". Its members comprised the original signers of the articles of association to whom might be added such other persons as might be elected by a majority vote of the Board of Managers. A member was bound to pay annual dues of five dollars and was otherwise free to contribute or not as desired. The Board of Managers consisted of five persons to be elected at each annual meeting of the Association and the first such board was made up of the petitioner, his two brothers and the business associate. There has been held no annual meeting of the Association since its formation. Under a provision making three a quorum of the Board of Managers, the petitioner and two others have been in actual charge of its affairs. From the time it was formed and up to the year 1932, the Association had received $47,975.87 and had distributed the sum of $46,992.23. In 1932 it had nine members who contributed $3,618.85 of which the petitioner gave $2,257.60. That is the deduction he claimed which was disallowed. During 1932, the Association assisted nine indigent and deserving individuals. None of them were related to any of the members by blood or marriage and no member was under any legal or equitable obligation to contribute to the support of any of the beneficiaries who, though it was customary for a contributor to suggest the person to be aided, were all designated by the Board of Managers. They were mainly, though not entirely, old family retainers and all were needy and worthy.

The constitution of the Association provided in part that: "The purpose of this Association shall be to collect funds and therefrom to give relief to such indigent and deserving persons as the Board of Managers may from time to time consider to be in especial need of the bounty of the Association. No payment shall be made from the funds of the Association to or for the use of any officer, manager, or member of the Association." The provisions of the constitution have at all times been carried out in good faith and the books and records of the Association have always been kept without expense to it. The meetings of its Board of Managers have been held in the offices of Havemeyer & Elder, Inc., which is a corporation of which the members of the board who have been in active charge are officers.

The above mentioned statute relied upon in support of the deduction claimed, Sec. 23 (n) (2) of the 1932 Act, 26 U.S. C.A. § 23 note, provides that in computing the net income of an individual there shall be allowed as deductions the contributions or gifts made within the taxable year...