Pettit v. Comm'r of Internal Revenue , Docket No. 2518-71.

• Decision Date: 07 February 1974
• Docket Number: Docket No. 2518-71.
• Citation: 61 T.C. 634
• Parties: KARL D. PETTIT AND ESTELLE F. PETTIT, PETITIONERS v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT
• Court: U.S. Tax Court

61 T.C. 634

KARL D. PETTIT AND ESTELLE F. PETTIT, PETITIONERS

v.COMMISSIONER OF INTERNAL REVENUE, RESPONDENT

Docket No. 2518-71.

United States Tax Court

Filed February 7, 1974.

G. Thomas Reynolds, Jr., for the petitioners.

Howard W. Gordon, for the respondent.

Petitioners sought approval of a minor subdivision of their real estate from the municipal planning board in connection with personal estate planning. Local ordinances required increased right-of-way dedications along adjoining streets in conformity with the master plan of the municipality as a prerequisite to subdivision approval. In order to obtain such approval of their proposed subdivision, petitioners dedicated to the municipality 2.75 acres for roadway purposes. Subsequent to the conveyance of the rights-of-way, the applicable ordinance was declared unconstitutional by a New Jersey appellate court. Held: Petitioners are not entitled to a charitable deduction under sec. 170 I.R.C. 1954; for the dedication of the right-of-way easements. The requisite donative intent for a charitable gift was lacking, and petitioners received the benefit of subdivision approval as a result of their conveyance. The New Jersey appellate court's subsequent declaration that the pertinent ordinance was unconstitutional did not affect the prevailing state of mind of petitioners on the date of the conveyance so as to produce the necessary donative intent.

GOFFE, Judge:

Respondent determined a deficiency in the petitioner's Federal income tax for the year 1967 in the amount of $7,482.12. The only issue presented for our decision is whether the transfer of 2.75 acres by petitioners to the township of Princeton, N.J., for roadway purposes constituted a deductible charitable contribution under section 170, I.R.C. 1954.¹ The value of the land conveyed is not in dispute.

FINDINGS OF FACT

Some of the facts have been stipulated. The stipulation of facts, supplemental stipulation, and exhibits attached hereto are incorporated herein by this reference.

Karl and Estelle Pettit (herein referred to as petitioners) were legal residents of the township of Princeton, N.J., during the taxable year 1967. They filed their joint Federal income tax return for that year with the district director of internal revenue at Newark, N.J.

During 1967, the petitioners, who were in their seventies, decided to convey certain land to their children as part of their personal estate planning. Since it was their desire to combine two lots into one large lot prior to conveying the lots, the petitioners were required to satisfy the local ordinance relating to subdivisions which was then in effect and had been enacted pursuant to N.J. Rev. Stat. sec. 40:55-1.1 et seq. (1937). The Princeton Township land subdivision ordinance No. 278 required in section 8:4-3 that each lot of a subdivision front on an approved destination street at least 50 feet in width, or such wider circulation street as shown on the master plan or official map or specified elsewhere. Section 8:2-6 of the ordinance provided as follows:

Subdivisions that adjoin or include existing streets that do not conform to widths as shown on the Master Plan or Official Map or the street width requirements of this Ordinance shall dedicate additional width along either one or both sides of said road. If the subdivision is along one side only, one-half of the required extra width shall be dedicated.

A ‘Report on Master Plan for Road Development’ (herein referred to as the report or master plan) of Princeton was prepared by the township's planning board in October 1966 and made public in revised form on January 4, 1967. The master plan proposed that Ridgeview Road, the street upon which petitioners lived, be classified as a ‘minor collector’ road. Ridgeview Road was 16.5 feet wide in front of the petitioners' home and 25 feet wide on a section east of their home. The minimum required right-of-way width for a ‘minor collector’ road was 60 feet. The report, however, stated that—

It is not the intent of the Planning Board or the Township Committee to immediately start a vigorous road building campaign to install the roads as shown on this plan. Where roads traverse a certain parcel of property, it is the intent that these roads will usually be built as that property is developed. The roads as shown on the Road Master Plan are schematic and can be moved slightly to accommodate specific conditions. The roads as shown on the plan have been engineered from contour maps and are situated where intersections and grades will allow the intended type of road.

A sketch plat of the proposed subdivision of the petitioners' property was prepared on April 24, 1967; and submitted to the planning board for classification. The property contained in the subdivision was bounded by Cherry Valley Road on the north, Cherry Hill Road on the east, and by Ridgeview Road on the south. The petitioners owned other property on the southern side of Ridgeview Road which was not included in the subdivision. This property extended east to Cherry Hill Road. The two lots to be combined into lot 28 were located in the northern and eastern portions of the tract and fronted on Cherry Valley Road and Cherry Hill Road, respectively.

The petitioners' home was located on lot 29 and fronted on the northern side of Ridgeview Road.

At a meeting of the planning board on May 8, 1967, the proposed subdivision was presented for classification and, subsequently, classified as a minor subdivision. Approval of the subdivision was conditioned upon the satisfaction of certain requirements, one of which was the filing of a metes and bounds deed with the township clerk for 25-foot wide dedication strips along Cherry Valley Road, Cherry Hill Road, and Ridgeview Road, as reflected in the minutes of the board and correspondence received by the petitioners.

On July 26, 1967, the petitioners conveyed interests in lot 28, as shown on the proposed subdivision's sketch plat, to various related parties as gifts. The 19.752 acres were valued at $98,760 for the purpose of gift tax returns which were filed for the year 1967.

The planning board initially required the petitioners to dedicate a strip of land along the northern side of Ridgeview Road in order to obtain subdivision approval. Petitioner Karl Pettit contacted the chairman of the planning board, Hantz Sanders, and arranged for him to view the site of the required dedication. Pettit pointed out to him the inadvisability of meeting the dedication requirements on the northern side of the road because of the rough terrain present there and the greater expense to the township of such construction. He was also concerned that the stone gates, shrubbery, and the old butter-churning house— which were within 10 feet of the road in front of his house— would be destroyed if Ridgeview Road was widened in a northerly direction. Pettit offered to provide Sanders with the required dedication from the property owned by the petitioners on the southern side of the road which had level terrain.

The minutes of the September 11, 1967, meeting of the planning board stated that the Pettit subdivision plan was not acceptable for final board approval because the petitioners had indicated to one of the board members that they wanted the requirement of the dedication of a right-of-way along Ridgeview Road eliminated as a condition for the subdivision's approval. By a letter dated November 16, 1967, the petitioners offered the planning board a strip of land running on the south of Ridgeview in lieu of the required dedication from the northern side of the road. The letter stated:

We request that you review the approval of this subdivision and that the land for the widening of Ridgeview Road be accepted from the property which we own on the south side of Ridgeview Road in substitution for property on the North side of the road.

The facts which lead to this request are:

1. To align Ridgeview Road with the extension of the present Arreton Road (which we understand is to be renamed Ridgeview Road) on the Frederick G. Sigler, III tract to the east of Cherry Hill Road.

2. To make any road widening less costly— the topography on the north side of Ridgeview Road would require a considerable amount of fill and shoulder preparation.

3. To avoid any destruction of the gate pillars and shrubbery and damage to trees and the well houses all located within or close to the north side of Ridgeview Road.

We understand that any subdivision of the land owned by Mrs. Pettit on the south side of Ridgeview Road may require dedication of a second strip of land for road widening purposes since all Ridgeview Road properties as a condition to subdivision approval are presently being required to deed sufficient land to the Township for a road of 50 feet.

We would suggest, therefore, that the Township at this time, instead, accept dedication of a strip of land 17 feet in width along the entire length of the property on the south side of Ridgeview Road with a notation in the planning Board minutes that no further dedication of land from our property will be required for widening of Ridgeview Road as a condition of approval of subdivision of the land remaining. If this would assist the Township we would be pleased to cooperate.

We hope to be able to give the 20 Acre Cherry Valley— Cherry Hill Road property to our children during 1967 and appreciate your consideration of our request to make this possible.

The planning board acceded to the request of the petitioners in action taken at a meeting held November 21, 1967, ‘with the understanding that any future subdivision of (petitioners' remaining) land will require additional land for road widening purposes on the south side in accordance with the requirements of the Road Master Plan.’ Petitioners were informed of this action by letter dated December 1, 1967, wherein it was noted that the original condition of dedicating 25-foot right-of-way strips along...