Sanz v. Commissioner
| Decision Date | 30 October 1990 |
| Docket Number | Docket No. 5829-87. |
| Citation | 60 T.C.M. 1160 |
| Parties | Robert L. Sanz and Irene R. Sanz v. Commissioner. |
| Court | U.S. Tax Court |
Jasper G. Taylor III, Rosemary Mitchell, and Robert F. Corrigan, Jr., 1301 McKinney St., Houston, Tex., for the petitioners. Albert A. Balboni, for the respondent.
Memorandum Findings of Fact and Opinion
Respondent determined deficiencies in petitioners' income tax for the calendar years 1979 and 1981, in the amounts of $16,920 and $509,982, respectively, and for 1979 additions to tax under section 6653(a) and section 6621(c) in the respective amounts of $846 and an amount to be determined for the year 1979.1 Respondent determined additions to tax under section 6653(a)(1)and (a)(2), and section 6621(c) for the year 1981 in the respective amounts of $25,255 and amounts to be determined.
All of the issues raised by the pleadings have been disposed of by agreement of the parties, except the fair market value, if any, of 4,110 foreign language textbooks donated in 1979 by petitioners to the Prince of Peace Catholic Church, Houston, Texas.
Petitioners, husband and wife, who resided in Spring, Texas, at the time their petition in this case was filed, filed a joint Federal income tax return for the calendar year 1979 with the Director, Austin Service Center, Austin, Texas.
Robert L. Sanz (petitioner) is the son of Robert B. Sanz (Mr. Sanz) who was the founder of a foreign language program known as the "Sanz System." In the 1930s and 1940s, Mr. Sanz developed the "Sanz System" program of teaching foreign languages for the purpose of teaching such languages to select United States Government personnel. During the period from the late 1930s through the early 1970s, Mr. Sanz taught high-ranking government officials, both elected and appointed, including Presidents, Army generals, other military personnel, Defense Department personnel, Central Intelligence Agency personnel, National Security Agency personnel, Internal Revenue Service personnel, Department of Agriculture personnel, and Department of Labor personnel, using the Sanz System. After the teaching of foreign languages to government personnel by the "Sanz System" proved successful, several large companies engaged Mr. Sanz to teach foreign languages to their representatives who were to serve in various foreign countries. Textbooks were written by Mr. Sanz to be used in connection with the teaching of foreign languages through the "Sanz System." These books were published primarily in the 1940s and 1950s. Other than some books for teaching Spanish which were sold from about the mid-1940s to 1951, very few of the books were sold except to students taking courses using the "Sanz System." Occasionally, a student who had taken a course with the "Sanz System" would ask to buy a book with respect to another language and, under these circumstances the book would be sold to the student. Between 40 and 60 languages were taught using the "Sanz System" program and the most commonly taught languages were taught with textbooks written by Mr. Sanz. Mr. Sanz wrote textbooks for use with the "Sanz System" in Spanish, French, German, Russian, Portuguese, Italian, and a number of other languages. These books were written to be used by a teacher who was fluent in the language that was being taught.
Initially the government courses in the "Sanz System" were taught primarily in Washington, D.C., but later special language schools using the "Sanz System" were set up at various United States Air Force Bases and other installations. Most of the languages were taught in two courses. The basic course would use Book 1 of the language written by Mr. Sanz and the intermediate to advance course utilized Book 2. The curriculum of the two courses was sufficiently distinct that a government agency or a company could contract for one or the other course depending on the need.
Mr. Sanz personally wrote the Spanish and English books without assistance from others. However, he did not feel he was sufficiently fluent in French, Russian, German, and many of the other languages to write the books without assistance. Mr. Sanz would set up the format of the book, but the writing would be done by instructors of the Sanz School in these languages applying and adopting Mr. Sanz's system.
Mr. Sanz developed a heart condition in 1972 and gave up teaching in 1973. He had substantially curtailed his teaching activities before 1973. Petitioner joined his father in teaching languages by the "Sanz System" in 1972, after his father had a heart attack on March 14, 1972. However, Mr. Sanz did go to the school or to the defense language institute or other government agency if required during 1973 through 1975. In early 1976 Mr. Sanz sold the Sanz System School. Mr. Sanz was unable to make any satisfactory arrangement with the purchaser of the school to take the textbooks that he had been using in connection with the "Sanz System" and so the textbooks were not sold or transferred to the purchaser of the school. Shortly after selling the school, Mr. Sanz gave the unused textbooks which he still had to his son, one of petitioners in this case.
On October 8, 1979, petitioner donated 4,110 of the textbooks given to him by his father to the Prince of Peace Catholic Church in Houston, Texas (the Church), a qualified charity under section i70(c). The books donated were all language textbooks written and published by Mr. Sanz for use in the "Sanz System" foreign language school. Most of them had been written in the early 1950s and had a copyright date of 1951. The quantity of each type of book donated is as follows:
Number of
Title Books
French with Sanz I ................. 990
French with Sanz II ................ 109
German with Sanz I ................. 29
German with Sanz II ................ 122
Russian with Sanz I ................ 960
Russian with Sanz II 1,750
English with Sanz .................. 150
_____
Total number of books .............. 4,110
The textbooks donated by petitioner to the Church were small books without illustrations. They were printed on good paper. They were designed for use with the "Sanz System" course by a professor fluent in the language and familiar with the "Sanz System" of teaching. These textbooks differed in appearance and format from foreign language books customarily used in grade school and high school in the United States during 1979 and later years. The "Sanz System" books had never been used in any university system in the United States, since language was generally taught in the various universities on a different system from the "Sanz System."
Most of the books donated by petitioner in 1979 to the Church remained in storage at the Church until early 1986 when 3,000 of these books were shipped to the Archdiocese of Washington, D.C.
Petitioners on their Federal income tax return for 1979 deducted $33,840 as the fair market value of the 4,110 language books donated to the Prince of Peace Catholic Church with the statement "valued at cost of reproduction on date of gift 10-8-79." Respondent in his notice of deficiency disallowed the entire claimed deduction of $33,840 with the explanation that petitioners had not established that the value of the books donated was in excess of O.
OpinionSection 170(a)(1) allows as a deduction any charitable contribution made during a taxable year to a recognized charitable organization. If a charitable contribution is made in property other than money, the amount of the contribution to be deducted is the fair market value of the property at the time of the contribution. Section 1.170A-1(c)(1), Income Tax Regs. Fair market value is defined as the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having a reasonable knowledge of the relevant facts. Section 1.170A-1(c)(2), Income Tax Regs.
The fair market value of property such as the books here involved is a question of fact to be determined from the entire record. Estate of DeBie v. Commissioner [Dec. 30,900], 56 T.C....
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