Sullivan v. Comm'r of Internal Revenue, Docket No. 17467.

• Citation: 16 T.C. 228
• Decision Date: 29 January 1951
• Docket Number: Docket No. 17467.
• Parties: PRISCILLA M. SULLIVAN, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
• Court: United States Tax Court

16 T.C. 228

PRISCILLA M. SULLIVAN, PETITIONER,

v.COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Docket No. 17467.

Tax Court of the United States.

Promulgated January 29, 1951.

John E. Shea, Esq., for the petitioner.

Leo C. Duersten, Esq., for the respondent

Petitioner owned property which she caused to be conveyed to the Red Cross in 1942 for the duration of the war or until it should cease to be used as the headquarters for its Manchester, New Hampshire, Chapter, whichever event should first occur. She claimed deductions for charitable contributions in each of the years 1942 and 1943 of the rental value of the property. Held, petitioner made a single irrevocable gift to the Red Cross in 1942, in the nature of a determinable fee in the property, and is entitled to deduct as a charitable contribution in that year, under section 23(o), I.R.C., the value of the gift.

The respondent determined a deficiency in income tax for the year 1943, in the amount of $1,166.73, of which $1,074.73 is now in dispute. The principal issue is whether he properly disallowed deductions claimed by petitioner as charitable contributions under section 23(o) with respect to a transaction whereby petitioner in 1942 turned over without consideration a house owned by her in Manchester, New Hampshire, to the American National Red Cross to be held by it until termination of the war or until the premises should cease to be used by the Manchester Chapter of the Red Cross as its headquarters, whichever event should first occur.

Petitioner claimed a deduction for both 1942 and 1943 based upon rental value of the premises for each year, and the year 1942 is involved only because of the forgiveness feature of the Current Tax Payment Act of 1943, whereby tax liability for 1943 is made to depend upon computation of taxable net income for both 1942 and 1943. A subsidiary issue is whether the proceeding, to the extent that it relates to 1942, is barred by limitations.

By amended answer, respondent asserts that if petitioner is entitled to deduction with respect to the rental value of the property, then petitioner realized income in the amount of such rental value.

FINDINGS OF FACT.

Petitioner, an individual residing at 1330 Union Street, Manchester, New Hampshire, and 4871 Glenbrook Road, N.W., Washington, D.C., filed her individual income tax returns on the case basis for the calendar years 1942 and 1943 with the collector of internal revenue for the district of New Hampshire.

Prior to 1942 petitioner acquired under the will of her grandfather, who died April 13, 1938, certain real estate at 1800 Elm Street, Manchester, New Hampshire, consisting of a house, lot, and stable and garage combined. The residence at 1800 Elm Street was never rented by petitioner, nor occupied by any member of her family after she had acquired it. She never made any attempt to rent the premises.

On March 30, 1942, petitioner and her husband executed a deed conveying the property at 1800 Elm Street in fee simple to Thomas E. Dolan, an attorney, who, on the same day executed a deed conveying the same property to the American National Red Cross, referred to hereinafter as the Red Cross. Beginning with the habendum clause, the latter deed provided as follows:

TO HAVE AND TO HOLD the afore-described premises, with all the privileges and appurtenances thereunto belonging to it, the said American National Red Cross, until the termination and cessation of the state of war now existing between the Government of the United States of America and the Governments of Germany, Italy and Japan by treaty of peace or otherwise or until said premises shall cease to be used by the Manchester Chapter of the said American National Red Cross for the purpose to which the said premises are now being put by the said Manchester Chapter as its headquarters, whichever event shall first occur. This conveyance is made with the express restriction that no alterations or changes shall be made in the said building without the consent of the remainderman hereinafter referred to and that the premises shall not be used, nor put to any other purpose than as headquarters for the general work now being carried on by the said Manchester Chapter.

Upon the happening of the condition above set forth, for the consideration aforesaid, I do hereby remise, release and forever quitclaim the said premises to Priscilla M. Sullivan of said Manchester. To have and to hold the afore-described premises with all the privileges and appurtenances thereunto belonging to her, the said Priscilla M. Sullivan, and her heirs and assigns to them and their use and behoof forever. And I do hereby covenant with the said American National Red Cross and with the said Priscilla M. Sullivan, her heirs and assigns, that I will and my heirs and assigns shall warrant and defend the said premises to the said American Red Cross and to the said Priscilla M. Sullivan, her heirs and assigns forever, against the lawful claims and demands of all persons claiming by, from or under me.

Dolan did not at any time have any beneficial interest in the property. The two deeds were merely parts of a single transaction whereby petitioner gave to the Red Cross the above described interest in the property.

The Manchester Chapter of the Red Cross had already commenced occupancy of the premises at 1800 Elm Street in November 1941; its occupancy continued throughout the years 1942 and 1943, and it was still in possession at the time of the hearing in this case, November 1949. The Red Cross made no payment to petitioner for use of the premises.

The property at 1800 Elm Street was valued at $25,000 for local real estate taxes in 1941. Such taxes were assessed in the amount of $1,600 for 1941, which petitioner paid....