Old Colony Trust Co. v. Welch

• Decision Date: 18 October 1938
• Docket Number: No. 6913.,6913.
• Citation: 25 F. Supp. 45
• Parties: OLD COLONY TRUST CO. v. WELCH, Former Collector of Internal Revenue.
• Court: U.S. District Court — District of Massachusetts

25 F. Supp. 45

OLD COLONY TRUST CO. v. WELCH, Former Collector of Internal Revenue.

No. 6913.

District Court, D. Massachusetts.

October 18, 1938.

Sumner H. Babcock and Bingham, Dana & Gould, all of Boston, Mass., for plaintiff.

John A. Canavan, U. S. Atty., and C. Keefe Hurley, Asst. U. S. Atty., both of Boston, Mass., for defendant.

FORD, District Judge.

This is an action brought to recover Federal Estate Taxes assessed against the plaintiff as executor of the will of Philip G. Peabody. The right to trial by jury being waived, the case was heard without a jury. The question involved herein is whether bequests to the New England Anti-Vivisection Society and the Freethinkers of America, Inc., were exempt from estate taxes under the provisions of Section 303(a) (3) of the Revenue Act of 1926, 44 Stat. 72, as amended by Section 807 of the Revenue Act of 1932, 47 Stat. 282, 26 U.S.C.A. § 412(d), which reads as follows:

"For the purpose of the tax the value of the net estate shall be determined —

"(a) In the case of a resident, by deducting from the value of the gross estate * * *

"(3) The amount of all bequests, legacies, devises, or transfers * * * to or for the use of any corporation organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, including * * * the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private stockholder or individual * * *."

The special findings of fact required by Rule 52, Federal Rules of Civil Procedure, 28 U.S.C.A. following section 723c, which include and adopt those contained in the agreed statement of facts filed by the parties are as follows:

Philip G. Peabody, died a citizen of the United States and a resident of Boston, Massachusetts, on February 25, 1934, and the plaintiff was duly appointed executor of this will on October 30, 1934. The will provided that the residue of the estate was to be distributed in equal shares to the Massachusetts Society for Prevention of Cruelty to Animals, the New England Anti-Vivisection Society, and the Freethinkers of America, Inc. As a result of a compromise of this will each society was allotted the sum of $38,974.20. A deduction was allowed as to the share of the Massachusetts Society for the Prevention of Cruelty to Animals. On July 17, 1935 the Commissioner of Internal Revenue refused to allow the deductions in reference to the New England Anti-Vivisection Society and the Freethinkers of America, Inc., stating that "no deduction is made for the charitable, public, and similar gifts and bequests for the reason that from the evidence submitted as to the purposes and activities of the organizations in question, it appears that a substantial part of their activities is carrying on propaganda or otherwise attempting to influence legislation."

The reason assigned was based upon Section 406 of the Revenue Act of 1934, 48 Stat. 755, to which the Commissioner made reference, and which it is agreed between the parties to this suit is not applicable in view of the date of the testator's death on February 25, 1934, the effective date of the amendment being May 10, 1934. It was agreed for the purposes of this case that the 1934 Amendment had no retroactive effect.

The New England Anti-Vivisection Society is a Massachusetts corporation organized in 1895 and the testator was a charter member. Its charter states that it was organized for the purpose of systematic, scientific research relative to the practice of vivisection — its relation to science and its effect upon those who practice it and upon society; exposing and opposing secret or painful experiments upon living animals, lunatics, paupers, or criminals; urging education and legislation in pursuance of these ends; and issuing posters, pamphlets and other publications. This society published a monthly magazine called "Living Tissue" and had an office at 6 Park Street, Boston, where there were only three persons employed, an executive secretary, her assistant, and an investigator of laboratories, who received approximately salaries totalling $5,600 annually. There were 1,800 members in this society and they were divided into four classes of membership — honorary, life, active, and associate. Associate members paid $1 per year; active members paid $5 per year; and life members paid $100. The only sources of income were from members, bequests, and scattered donations. The monies received were invested and this furnished additional income all of which was expended for the up-keep of the offices at 6 Park Street, posters in the display window of the same, leaflets, publications of the magazine, and for salaries of the three paid employees. No part of the net earnings of the society inured to the benefit of any private stockholder or individual. It was listed as a charitable organization in Massachusetts and paid no taxes. All of its activities were in the direction of the humane education of the public. Its publication "Living Tissue" was devoted to the exposition of vivisection experiments performed upon animals and it described therein the cutting of living animals with knives, the effect of this treatment upon them and the effect of all of this upon those who practiced it and upon society in general. Radio talks were given informing the public of the extent and nature of vivisection, as their investigator found it in the medical laboratories and there was exposition of the various methods as to how the animals were supplied to the laboratories by those who purloined them from their owners. All the subjects dealt with in the pamphlets and radio talks concerned vivisection and cruelty to animals, and were related to the objects and purposes for which the organization was formed as described in the charter. It was one of the primary purposes of the society to create public opinion against vivisection. Lectures were given before various organizations for this purpose. This society sought for its aim in exposing the cruelties attendant upon animals in vivisection to inculcate a feeling of human sympathy, kindness, and a sense of justice on the public mind and in this manner benefit mankind in general. It also appeared that between the years 1917 and 1933 the society sponsored three bills in the Massachusetts Legislature asking that dogs be exempt from the practice of vivisection.

It is a matter of common knowledge that a very substantial part of the general public oppose vivisection and that in vivisection there is present pain and suffering and the infliction of pain on the unwilling, whether man or beast, is cruelty.

The Freethinkers of America, Inc., is a New York corporation, which was incorporated in 1929, and its charter declares that the purposes or objects for which it was organized were as follows, viz: "To enlighten all people upon the philosophy of free thought and by all legal means to uphold the fundamental American principle of the complete separation of church and state."

Its membership was composed of regular, contributing, supporting, sustaining, and executive members paying varied annual amounts into the organization for the right to membership. No part of its net earnings inured to the benefit of any private stockholder or individual.

It stated in a pamphlet, an exhibit in the case, issued by the corporation entitled "Aims and Principles of the Freethinkers of America" as it did also in its publication called the "Bulletin" that "Freethought declares that theology is condemned by reason as superstitious, and by experience as mischievous, and assails it as the historic enemy of progress."

And the organization demanded "that no religious instruction be given or religious observance be held in schools supported in whole or...