Seed v. Comm'r of Internal Revenue

• Decision Date: 18 November 1971
• Docket Number: Docket Nos. 1845-69,2300-69.
• Citation: 57 T.C. 265
• Parties: HARRIS W. SEED AND NANCY C. SEED, PETITIONERS v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENTGRANT C. EHRLICH AND GRETCHEN W. EHRLICH, PETITIONERS v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT
• Court: U.S. Tax Court

57 T.C. 265

HARRIS W. SEED AND NANCY C. SEED, PETITIONERS

v.COMMISSIONER OF INTERNAL REVENUE, RESPONDENTGRANT C. EHRLICH AND GRETCHEN W. EHRLICH, PETITIONERS

v.COMMISSIONER OF INTERNAL REVENUE, RESPONDENT

Docket Nos. 1845-69

2300-69.

United States Tax Court

Filed November 18, 1971.

William K. Rogers, for the petitioner.

Robert H. Feldman, for the respondent.

Petitioners, two married couples who enjoyed playing golf, made payments of $4,000 per couple to the People-to-People Sports Committee (Sports Committee), a tax-exempt organization, and incurred additional out-of-pocket expenses in the amount of $450 per couple, in connection with a golf tour of Europe sponsored by the Sports Committee. The Sports Committee arranged a schedule of amateur golf competitions between participants in the golf tour and several European teams, as well as a number of social events at which the tour members could entertain the Europeans with whom they played golf. The $4,000 payments each couple made to the Sports Committee covered air transportation, hotel accommodations, certain meals and local transportation, greens fees, and other charges. If the tour were canceled, the payments were refundable. While in Europe petitioners stayed at ‘deluxe’ hotels and played golf at some of the finest golf courses in Great Britain and on the continent. Through the golf competitions and social activities planned as a part of the tour, petitioners met Europeans of a social and economic position similar to their own, to whom otherwise they might not have had access. In this manner, petitioners promoted the purposes of the Sports Committee by encountering the Europeans on a person-to-person basis in an atmosphere of mutual understanding and friendship. Held, whether the payments petitioners made in connection with golf tour are regarded as direct payments to the Sports Committee or as unreimbursed expenditures incident to the rendition of services to the Sports Committee, they are not ‘charitable contributions' within the meaning of sec. 170, I.R.C. 1954, and the regulations thereunder, in view of the substantial benefits received by petitioners in exchange for the payments.

The Commissioner determined deficiencies in petitioners' income tax as follows:

+----------------------------------------------------+
                ¦Petitioner                      ¦Year  ¦Deficiency  ¦
                +--------------------------------+------+------------¦
                ¦                                ¦      ¦            ¦
                +--------------------------------+------+------------¦
                ¦Harris W. and Nancy C. Seed     ¦1966  ¦$2,120.00   ¦
                +--------------------------------+------+------------¦
                ¦Grant C. and Gretchen W. Ehrlich¦1966  ¦1,318.98    ¦
                +----------------------------------------------------+
                

The sole question presented is whether amounts paid by petitioners in connection with a golf tour of Europe sponsored by the People-to-People Sports Committee are deductible as charitable contributions under section 170, I.R.C. 1954.

FINDINGS OF FACT

The parties have filed a stipulation of facts which, together with accompanying exhibits, is incorporated herein by this reference.

Harris W. and Nancy C. Seed, petitioners in docket No. 1845-69, are husband and wife. They filed a joint Federal income tax return for the calendar year 1966 with the district director of internal revenue, Los Angeles, Calif., and resided in Santa Barbara, Calif., at the time their petition herein was filed. Grant C. and Gretchen W. Ehrlich, petitioners in docket No. 2300-69, are husband and wife. They filed a joint Federal income tax return for the calendar year 1966 also with the district director of internal revenue, Los Angeles, Calif., and resided in Montecito, Calif., at the time their petition herein was filed.

Petitioner Harris W. Seed at all relevant times has been an attorney at law, admitted to practice before the Supreme Court of the State of California and the Tax Court of the United States. Petitioner Grant C. Ehrlich at all relevant times has been treasurer and a director of General Research Corp., a businessman, management consultant, and entrepreneur.

In 1966, all the petitioners were members of private golf clubs in Santa Barbara, Calif. They all enjoyed playing golf, and, except for Mrs. Seed, all were experienced golfers who played once or twice a week. Mrs. Seed was a beginning golfer in 1966 but has since played often. The Seeds and the Ehrlichs were friends. Mr. Seed also acted as general counsel for General Research Corp. of which Mr. Ehrlich was an executive.

Sometime around August, 1966, the Ehrlichs were approached by Robert Vaillancourt (Vaillancourt), the west coast chairman of the People-to-People Golf Committee, as possible participants in a forthcoming golf trip to Europe to be sponsored by the People-to-People Sports Committee, Inc. (Sports Committee). The Seeds were selected to participate in the same gold trip by Vaillancourt after they were initially recommended by the Ehrlichs to fill a late developing vacancy. The People-to-People Golf Committee, with which Vaillancourt was associated, was part of the People-to-People Sports Committee, which, in turn, was a branch of the general People-to-People Program.

The People-to-People Program was organized around 1957, at the suggestion of President Eisenhower, to supplement the efforts of the Government in broadening understanding and friendship with people of other nations. It functioned through committees, like the Sports Committee, led by prominent American citizens. These committees were private organizations which functioned on their own initiative and responsibility to make the objectives and principles of the United States better understood throughout the world. The Sports Committee was a nongovernmental, nonprofit membership corporation, which attempted to achieve these objectives through sports exchanges between the United States and foreign countries. Such exchanges involved presentation of athletic demonstrations and competitions as well as the training and teaching of athletes and coaches. The Sports Committee also provided gifts of sports equipment to needy, developing nations throughout the world. Based on a description of these activities presented to the Internal Revenue Service, the Sports Committee received an unpublished determination letter dated December 15, 1964, stating that it was an exempt organization under section 501(c)(3) of the Code and that contributions to it were deductible under section 170 of the Code. In some years prior to 1965 the exempt status of the Sports Committee was obtained through an annual certification by the U.S. Information Agency, pursuant to Rev. Rul. 57-38.

In addition to the various athletic activities which it financed out of its own funds, the Sports Committee sponsored certain foreign trips, involving either golf or tennis, in which the participants themselves bore the costs of the trips. The particular type of trip in which petitioners were selected to participate sought to bring people of similar social, economic, and professional positions together through a mutual interest in golf. A schedule of amateur golf competitions was arranged between the participants in the golf tour, who comprised the so-called People-to-People Golf Team (golf team), and several European teams comprised of golfers from the areas and courses to be visited. In some instances, trips of this nature were initiated by requests from U.S. embassies abroad and other Government officials. The tour itineraries were planned by the local chairmen of the various committees, which coordinated the activities of the Sports Committee in respect of specific sports, often after the Sports Committee had suggested the countries to be visited. The Sport Committee was advised of all the details relating to the tours, and, in turn, informed the U.S. Department of State about the projected tours. Though the Sports Committee has not received financial support from the U.S. Government, the State Department has lent some assistance in facilitating the visits of the participants on these tours in the countries visited. Also, the U.S. Information Agency has cooperated with the Sports Committee in respect of these tours.

One of the attractions of such a tour to the participants was the opportunity, otherwise normally unavailable to them, to meet foreigners of similar or perhaps of even higher social position than their own. Thus, in connection with the trip hereinafter described, petitioners on one occasion were guests on the estate of a well-known member of Britain's titled nobility. To date the Sports Committee has sponsored about 10 to 15 golf trips and about 10 tennis trips of the nature of the tour here in question. It was the view of the Sports Committee that the primary beneficiaries of these sports tours were the participants themselves, the foreigners whom they met, and the respective governments.

In connection with the golf trip to Europe in 1966 both the Seeds and Ehrlichs were made associate members of the People-to-People Sports Committee after some initial screening by Vaillancourt and his s lection committee. The selection process was based on an evaluation of the candidates' character, social position and, to a certain extent, golfing ability. Other than technical competency golfing proficiency was not a decisive criterion. The Sports Committee stressed the importance of a tour member's ability to be a good representative of the United States consistent with the aims of the People-to-People Program and, on occasion, rejected persons who had traveled on previously sponsored trips because they did not meet this requirement. The Sports Committee did not encourage, or, in fact, accept volunteers for such trips, and, in this instance, the selection of the participants was left to Vaillancourt. In some cases persons who were already associate members recommended possible participants to Vaillancourt.

Among the various...