Читать книгу The Tax Law of Charitable Giving - Bruce Hopkins R., Bruce R. Hopkins, David Middlebrook - Страница 61
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Оглавление1 1 By contrast, most state charitable solicitation statutes contain a definition of the term gift. See Fundraising § 4.1.
2 2 For these purposes, the terms contribution, gift, and donation are synonymous (although the word donation tends to be used where the transfer is of a small amount of money or involves property of little value). E.g., Seed v. Commissioner, 57 T.C. 265 (1971); DeJong v. Commissioner, 36 T.C. 896 (1961), aff'd, 309 F.2d 373 (9th Cir. 1962). The IRS observed that the essential elements of a gift are (1) a donor that is competent to make the gift; (2) a donee capable of accepting the gift; (3) a clear and unmistakable intention on the part of the donor to absolutely and irrevocably divest himself or herself of the title, dominion, and control of the subject matter of the gift, in praesenti; (4) the irrevocable transfer of the present legal title and of the dominion and control of the entire gift to the donee so that the donor can exercise no further act of dominion or control over it; (5) a delivery by the donor to the donee of the subject matter of the gift or of the most effectual means of commanding the dominion of it; and (6) acceptance of the gift by the donee. INFO 2005-0141, citing Well v. Commissioner, 31 B.T.A. 899 (1934).
3 3 E.g., Channing v. United States, 4 F. Supp. 33 (D. Mass. 1933), aff'd per curiam, 67 F.2d 986 (1st Cir. 1933), cert den., 291 U.S. 686 (1934); McLaughlin v. Commissioner, 51 T.C. 233 (1968), aff'd, 69-2 U.S.T.C. ¶ 9467 (1st Cir. 1969); Ryan v. Commissioner, 28 T.C.M. (CCH) 1120 (1969); Oppewal v. Commissioner, 30 T.C.M. (CCH) 1177 (1971); Winters v. Commissioner, 30 T.C.M. (CCH) 1238 (1971); Summers v. Commissioner, 33 T.C.M. (CCH) 695 (1974); Brotman v. Commissioner, 36 T.C.M. (CCH) 279 (1977); Bass v. Commissioner, 46 T.C.M. (CCH) 1262 (1983); Whitaker v. Commissioner, 67 T.C.M. (CCH) 2408 (1994); Rev. Rul. 68-432, 1968-2 C.B. 104; Rev. Rul. 54-580, 1954-2 C.B. 97.
4 4 See, e.g., § 20.2.
5 5 Consideration is something being received (usually, goods and/or services) in return for a payment. When payments are made to receive something in exchange, the transaction is in the nature of a contract.
6 6 Reg. § 1.162-15(b).
7 7 Reg. § 1.170A-1(c)(5).
8 8 Rev. Rul. 86-63, 1986-1 C.B. 88.
9 9 See § 20.2.
10 10 Commissioner v. Duberstein, 363 U.S. 278, 285 (1960), quoting from Commissioner v. LoBue, 351 U.S. 243, 246 (1956).
11 11 Robertson v. United States, 343 U.S. 711, 714 (1952). A court of appeals observed that a transfer is a gift only if it is “not intended as a return of value or made because of any intent to repay another what is his due, but bestowed only because of personal affection or regard or pity, or from general motives of philanthropy or charity” (Schall v. Commissioner, 174 F.2d 893, 894 (5th Cir. 1949), quoting Bass v. Hawley, 62 F.2d 721, 723 (5th Cir. 1933)).
12 12 E.g., DeJong v. Commissioner, 309 F.2d 373 (9th Cir. 1962), aff'g 36 T.C. 896 (1961); Transamerica Corp. v. United States, 254 F. Supp. 504 (N.D. Cal. 1966), aff'd, 392 F.2d 522 (9th Cir. 1968); Fausner v. Commissioner, 55 T.C. 620 (1971); Wolfe v. Commissioner, 54 T.C. 1707 (1970); Howard v. Commissioner, 39 T.C. 833 (1963); Crosby Valve & Gage Co. v. Commissioner, 46 T.C. 641 (1966), aff'd, 380 F.2d 146 (1st Cir.), cert. den., 389 U.S. 976 (1967).
13 13 For example, in the context of the charitable split-dollar insurance plans legislation (see § 17.6), the legislative history states that the concept of a charitable gift “generally is interpreted to mean a voluntary transfer of money or other property without receipt of adequate consideration and with donative intent.” H. Rep. No. 106-478, 106th Cong., 1st Sess. 168 (1999). Also, Reg. § 1.170A-1(h)(1), (2). Also, Reg. § 1.170A-1(h)(1), (2). By contrast, however, the Tax Court, on one occasion, applied only the first element of that definition. In fact, the court wrote that, in determining whether the transactions ostensibly involving a gift were entered into “with the expectation of any quid pro quo from” the charitable organization involved, “we shall focus on the external features relating to” the transactions. Signom v. Commissioner, 79 T.C.M. (CCH) 2081, 2091 (2000).
14 14 Transamerica Corp. v. United States, 254 F. Supp. 504 (N.D. Cal. 1966), aff'd, 392 F.2d 522 (9th Cir. 1968); Crosby Valve & Gage Co. v. Commissioner, 46 T.C. 641 (1966), aff'd, 380 F.2d 146 (1st Cir.), cert. den., 389 U.S. 976 (1967); Estate of Wardwell v. Commissioner, 301 F.2d 632 (8th Cir. 1962), rev'g 35 T.C. 443 (1960); Citizens & S. Nat'l Bank v. United States, 243 F. Supp. 900 (W.D.S.C. 1965); Marquis v. Commissioner, 49 T.C. 695 (1968); Perlmutter v. Commissioner, 45 T.C. 311 (1965).A court rejected the government's assertions that donative intent was not present because the donor learned of the concept of a bargain sale (see § 7.18) only after the structuring of the transaction was underway and because the donor “desired the tax benefits flowing from a charitable contribution” (Davis v. Commissioner, 109 T.C.M. (CCH) 1451, 1459 (2015)). As to the latter, were that the law, there would be few deductible gifts.
15 15 In one instance, the IRS erroneously issued a tax refund to an individual; when the mistake was discovered, the individual's defense was that the refund was a gift from the IRS. The Tax Court observed that although the Commissioner of Internal Revenue “has the authority to make a refund of overpayments,” the court was “unaware of any provision [in the Internal Revenue Code] that authorizes him to make gifts” (Young v. Commissioner (unpublished) (2004)). Moreover, the court found itself “hard pressed to find that [the IRS] made the payment based on a detached and disinterested generosity, out of affection, respect, or admiration of [this taxpayer] so as to constitute a gift”) (see notes 10, 11). The court said nothing about donative intent.
16 16 Suna v. Commissioner, 56 T.C.M. (CCH) 720 (1988), aff'd, 893 F.2d 133 (6th Cir. 1990).
17 17 Douglas v. Commissioner, 58 T.C.M. (CCH) 563 (1989).
18 18 McLennan v. United States, 91-1 U.S.T.C. ¶ 50,230 (Ct. Cl. 1991), aff'd, 994 F.2d 839 (Fed. Cir. 1993). Another illustration of this donative intent element is an opinion holding that a payment incurred under duress, pursuant to an order from a city to fill a gully in a city street adjacent to the payor's property, was not a contribution (Alman v. Commissioner, 39 T.C.M. (CCH) 527 (1979)).
19 19 United States v. American Bar Endowment, 477 U.S. 105, 116–17 (1986).
20 20 Id. at 118.
21 21 Hernandez v. Commissioner, 490 U.S. 680, 692 (1989).
22 22 Id. at 690.
23 23 Id. at 691.
24 24 Cf. the dissent, id. at 704, which argued that the quid was exclusively of spiritual or religious worth and that precedents show that, in somewhat comparable circumstances, the IRS has a practice of allowing deductions for fixed payments for religious services. Subsequently, Congress, in the context of writing law as to charitable gift substantiation requirements and quid pro quo contributions, created exceptions for intangible religious benefits (see §§ 19.3(a), 20.2).
25 25 Rev. Rul. 78-189, 1978-1 C.B. 68. In Brown v. Commissioner, 62 T.C. 551 (1974), aff'd, 523 F.2d 365 (8th Cir. 1975), it was held that the payments are not deductible as medical expenses. IRC § 213.
26 26 Davis v. United States, 495 U.S. 472 (1990).
27 27 A discussion of gifts for the use of charitable organizations is in § 8.2.
28 28 Davis v. United States, 495 U.S. 472, 483 (1990).
29 29 Id. at 484–485.
30 30 Id. at 485.
31 31 Id.
32 32 Also Cook v. Commissioner, 57 T.C.M. (CCH) 681 (1989); Brinley v. Commissioner, 46 T.C.M. (CCH) 734 (1983); Priv. Ltr. Rul. 9405003.
33 33 Estate of La Meres v. Commissioner, 98 T.C. 294 (1992).
34 34 See § 6.3(d).
35 35 See § 6.5(c).
36 36 Estate of La Meres v. Commissioner, 98 T.C. 294, 308 (1992).
37 37 Id.
38 38 Id.
39 39 This type of gift is discussed in § 7.6.
40 40 McLennan v. United States, 91-2 U.S.T.C. ¶ 50,447, at 89,644 (Cl. Ct. 1991) aff'd, 994 F.2d 839 (Fed. Cir. 1993).
41 41 Id.
42 42 Id.
43 43 Id.
44 44 Id.
45 45 Id. at 89,645. This opinion was affirmed (McLennan v. United States, 994 F.2d 839 (Fed. Cir. 1993)).As an example of word processors' spell-checks running amok, the donor in a case at one stage was prepared to argue the issue of donative intent. In (presumably unreviewed) papers filed with the court, this came out as “donut of intent.” The court, in a delicious pun, observed that this is a doctrine “confected” by the donor, adding that this doctrine “presumably should not be confused with the more vanilla ‘donative intent.’” Palmer Ranch Holdings Ltd. v. Commissioner, 812 F.3d 982, 988, note 1 (11th Cir. 2016).
46 46 McGrady v. Commissioner, 112 T.C.M. (CCH) 688 (2016).
47 47 Id. at 693.
48 48 Gookin v. United States, 707 F. Supp. 1156 (N.D. Cal. 1988); Burke v. United States, 88-1 U.S.T.C. ¶ 9,391 (D. Conn. 1988); Davis v. Commissioner, 81 T.C. 806 (1983), aff'd, 767 F.2d 931 (9th Cir. 1985). Cf. Carter v. United States, 973 F.2d 1479 (9th Cir. 1992).
49 49 Miller v. Internal Revenue Serv., 829 F.2d 500, 502 (4th Cir. 1987).
50 50 Id. A charitable gift may be made by means of a payroll deduction program. Rev. Rul. 54-549, 1954-2 C.B. 94; Priv. Ltr. Rul. 200307084. An otherwise valid (and deductible) charitable gift may be a fraudulent conveyance that is voidable by creditors or by a bankruptcy trustee.
51 51 Goodwin v. United States, 870 F. Supp. 265 (S.D. Iowa 1994), aff'd, 67 F.3d 149 (8th Cir. 1995).
52 52 Id., 870 F. Supp. at 267.
53 53 Id. at 268. Also United States v. Terrell, 754 F.2d 1139 (5th Cir. 1985); Banks v. Commissioner, 62 T.C.M. (CCH) 1611 (1991).
54 54 Id. The “detached or disinterested” phraseology was in reference to the language used by the Supreme Court in Commissioner v. Duberstein, 363 U.S. 278, 285 (1960).
55 55 The U.S. Tax Court had occasion to apply the principles in Goodwin (supra note 51) in Brown v. Commissioner, 117 T.C.M. (CCH) 1339 (2019), and Felton v. Commissioner, 116 T.C.M. (CCH) 365 (2018).
56 56 See § 8.2.
57 57 IRC § 170(a). As to charitable organizations, see § 2.3.
58 58 E.g., Tripp v. Commissioner, 337 F.2d 432 (7th Cir. 1964); Thomason v. Commissioner, 2 T.C. 441 (1943).
59 59 See § 6.2(k).
60 60 See § 6.3(d).
61 61 McLennan v. United States, 91-1 U.S.T.C. ¶ 50,230 (Ct. Cl. 1991), aff'd, 994 F.2d 839 (Fed. Cir. 1993); Skripak v. Commissioner, 84 T.C. 285, 319 (1985); Allen v. Commissioner, 92 T.C. 1, 7 (1989), aff'd, 925 F.2d 348 (9th Cir. 1991).
62 62 IRC § 1001. E.g., Browning v. Commissioner, 109 T.C. 303 (1997) (value of state and federal tax benefits held not part of the amount realized from a bargain sale (see § 7.18)).
63 63 IRC § 164.
64 64 E.g., Rev. Rul. 79-315, 1979-2 C.B. 27, holding (3) (stating that the amount of a state tax rebate credited against tax is neither included in income nor allowable as a deduction under IRC § 164); Snyder v. Commissioner, 894 F.2d 1337 (6th Cir. 1990) (state tax reductions granted to horse-racing track that makes capital improvements held to not be income but a reduction in deductible tax liabilities).
65 65 Chief Couns. Adv. Mem. 201105010.
66 66 For example, the IRS ruled that proposed sales of columbarium niches and cenotaphs by a parish of the Roman Catholic Church for an amount greater than their fair market value would give rise to a charitable contribution deduction for the amount exceeding value. Priv. Ltr. Rul. 200213021. These niches would be used for the interment of cremated remains and the cenotaphs used for remembrances of loved ones who are buried elsewhere. The agency also ruled that, inasmuch as the niches and cenotaphs would be used for decedents for whom the Church had conducted or expected to conduct a funeral ceremony, the sales would not be an unrelated business.
67 67 See §§ 7.18, 20.2.
68 68 Singer Co. v. United States, 449 F.2d 413, 423 (Ct. Cl. 1971).
69 69 Id. at 423 (emphasis in original).
70 70 Id. at 424.
71 71 Id.
72 72 Id.
73 73 Ottawa Silica Co. v. United States, 699 F.2d 1124 (Fed. Cir. 1983).
74 74 Id. at 1135.
75 75 Id.
76 76 Id.
77 77 Considine v. Commissioner, 74 T.C. 955 (1980).
78 78 Id. at 968.
79 79 Signom v. Commissioner, 79 T.C.M. (CCH) 2081 (2000).
80 80 See § 8.3.
81 81 Rolfs v. Commissioner, 135 T.C. 471 (2010), aff'd, 668 F.3d 888 (7th Cir. 2012). Likewise, Patel v. Commissioner, 138 T.C. 395 (2012).
82 82 E.g., Stubbs v. United States, 428 F.2d 885 (9th Cir. 1970), cert. den., 400 U.S. 1009 (1971); Jefferson Mills, Inc. v. United States, 367 F.2d 392 (5th Cir. 1966); Wegner v. Lethert, 67-1 U.S.T.C. ¶ 9,229 (D. Minn. 1967); Allis-Chalmers Mfg. Co. v. United States, 200 F. Supp. 91 (E.D. Wis. 1961); Seldin v. Commissioner, 28 T.C.M. (CCH) 1215 (1969); Scheffres v. Commissioner, 28 T.C.M. (CCH) 234 (1969). Some old cases also are based on this rationale: e.g., Bogardus v. Commissioner, 302 U.S. 34 (1937); Channing v. United States, 4 F. Supp. 33 (D. Mass. 1933).
83 83 A purchaser of a ticket to an event held by or for the benefit of a charitable organization who does not attend the event is not the maker of a charitable gift, in that the purchaser receives a material benefit merely by having the right to decide whether to attend the event (Urbauer v. Commissioner, 63 T.C.M. (CCH) 2492 (1992)).
84 84 The Internal Revenue Service is referenced throughout as the “IRS.”
85 85 Rev. Rul. 83-104, 1983-2 C.B. 46.
86 86 Oppewal v. Commissioner, 468 F.2d 1000 (1st Cir. 1972); DeJong v. Commissioner, 309 F.2d 373 (9th Cir. 1962), aff'g 36 T.C. 896 (1961). The IRS ruled that payments to a church made in expectation that the church will pay the tuition for the contributors' children at a church-related school are not deductible as charitable gifts (Priv. Ltr. Rul. 9004030). By contrast, a contribution to a school was held to qualify as a deductible gift notwithstanding the fact that the donor's grandchild then attended the school (Priv. Ltr. Rul. 8608042).
87 87 Rev. Rul. 83-104, 1983-2 C.B. 46, 47.
88 88 Id. at 47–48.
89 89 Id. at 48. Also Haak v. United States, 451 F. Supp. 1087 (D. Mich. 1978); Yoshihara v. Commissioner, 78 T.C.M. (CCH) 789 (1999).
90 90 Sklar v. Commissioner, 282 F.3d 610 (9th Cir. 2002), aff'g 79 T.C.M. (CCH) 1815 (2000).
92 92 See § 20.2.
93 93 One of the arguments advanced by the appellants in Sklar v. Commissioner, 282 F.3d 610 (9th Cir. 2002), was that their theory as to deductibility of the tuition payments is in accord with the IRS's “policy” of permitting members of the Church of Scientology to deduct payments for certain services, as stated in a 1997 closing agreement. The appellate court stated in dicta that this policy is in violation of the Internal Revenue Code or the Establishment Clause. 282 F.3d at 618–620. The IRS thereafter issued an information letter explaining that tuition payments to religious schools are not deductible as charitable gifts (INFO 2004-0091). These litigants again sought a charitable contribution deduction for a portion of tuition they paid to a religious school and again lost in court. Sklar v. Commissioner, 125 T.C. 281 (2005), aff'd, 549 F.3d 1252 (9th Cir. 2008). The IRS's legal counsel discussed disguised tuition payment programs in Chief Couns. Adv. Mem. 200623063; the IRS discussed the general nondeductibility of tuition payments in INFO 2004-0091.
94 94 Rev. Rul. 76-232, 1976-1 C.B. 62. If the contribution is in excess of the monetary value of all benefits and privileges received, however, the amount of the excess would be a deductible charitable gift, as at an auction. Also, under appropriate circumstances, the expenses of attending a seminar may be deductible as a business expense, notwithstanding the fact that the seminar is conducted by a charitable or educational (IRC § 501(c)(3)) organization.
95 95 In one instance, a subscription by an individual for a “room endowment” to a charitable nursing home was held to create an enforceable legal obligation by the individual or her estate; when paid, it was, for tax purposes, properly deemed a charitable contribution, even though the subscription, which entitled the individual to occupy the room, was paid the day before she was admitted to the home (Estate of Wardwell v. Commissioner, 301 F.2d 632 (8th Cir. 1962)).
96 96 Rev. Rul. 80-77, 1980-1 C.B. 56.
97 97 Arceneaux v. Commissioner, 36 T.C.M. (CCH) 1461 (1977).
98 98 Wegner v. Lethert, 67-1 U.S.T.C. ¶ 9,229 (D. Minn. 1967). This opinion is surely in error, for the test is the extent of the value of the services received by the “donor” rather than the cost of providing the services or similar circumstances concerning the “donee.”
99 99 Gen. Couns. Mem. 39877.
100 100 Federal Election Commission Advisory Op. 1989-7.
101 101 In a somewhat mysterious application of this principle, the IRS ruled that contributions by certain graduates of a college or university to a historical preservation society would not be deductible by the donors, where the funds donated would be used to preserve the historically valuable characteristics of a building housing a fraternity of which the prospective donors were members (alumni), because of their “personal interest” in the fraternity (Priv. Ltr. Rul. 9119011).
102 102 Babilonia v. Commissioner, 681 F.2d 678, 679 (9th Cir. 1982), aff'g 40 T.C.M. (CCH) 485 (1980).
103 103 Id., 681 F.2d at 679.
104 104 E.g., Rev. Rul. 67-246, 1967-2 C.B. 104. See, e.g., § 20.2.
105 105 E.g., Priv. Ltr. Rul. 200012061.
106 106 Estate of Wood v. Commissioner, 39 T.C. 1 (1962).
107 107 Ryan v. Commissioner, 28 T.C.M. (CCH) 1120 (1969).
108 108 Murphy v. Commissioner, 54 T.C. 249 (1970); McMillan v. Commissioner, 31 T.C. 1143 (1959).
109 109 Feistman v. Commissioner, 30 T.C.M. (CCH) 590 (1971).
110 110 Cogan v. Commissioner, 30 T.C.M. (CCH) 987 (1971).
111 111 Brotman v. Commissioner, 36 T.C.M. (CCH) 279 (1977).
112 112 Hamilton v. Commissioner, 38 T.C.M. (CCH) 775 (1979).
113 113 Ehrhart v. Commissioner, 42 T.C.M. (CCH) 1285 (1981).
114 114 Poldrugovaz v. Commissioner, 47 T.C.M. (CCH) 860 (1984); Odd v. Commissioner, 47 T.C.M. (CCH) 1483 (1984).
115 115 Hernandez v. Commissioner, 51 T.C.M. (CCH) 1631 (1986).
116 116 Urbauer v. Commissioner, 63 T.C.M. (CCH) 2492 (1992).
117 117 Edwards v. Commissioner, 64 T.C.M. (CCH) 728 (1992).
118 118 Mount Mercy Associates v. Commissioner, 67 T.C.M. (CCH) 2267 (1994).
119 119 Graves v. Commissioner, 68 T.C.M. (CCH) 1445 (1994).
120 120 Tech. Adv. Mem. 9423001.
121 121 Page v. Commissioner, 58 F.3d 1342 (8th Cir. 1995). Likewise, Gunkle v. Commissioner, 104 T.C.M. (CCH) 527 (2012).
122 122 Ruddel v. Commissioner, 71 T.C.M. (CCH) 2419 (1996). Also, Lombardo v. Commissioner, 50 T.C.M. (CCH) 1374 (1985). These matters can operate in reverse. In one instance, an individual attempted to deduct payments made to two charities as business expenses; the court held that they were not business expenses but were charitable gifts—then disallowed the charitable deduction because the individual did not itemize deductions. Irwin v. Commissioner, 72 T.C.M. (CCH) 1148 (1996).
123 123 Pollard v. Commissioner, 105 T.C.M. (CCH) 1249 (2013). Cf. McGrady v. Commissioner, 112 T.C.M. (CCH) 688 (2016) (where the court rejected the IRS's argument that certain transfers were part of a quid pro quo arrangement).
124 124 Wendell Falls Development, LLC v. Commissioner, 115 T.C.M. (CCH) 1197 (2018), supp. by 116 T.C.M. (CCH) 504 (2018).
125 125 Triumph Mixed Use Investments III, LLC v. Commissioner, 115 T.C.M. (CCH) 1329 (2018). A court declined to resolve a quid pro quo issue in the charitable giving context on summary judgment (Pesky v. United States, 2013 BL 181354 (D. Id., July 8, 2013)).
126 126 Emanouil v. Commissioner, T.C. Memo. 2020–120 (2020).
127 127 Fakiris v. Commissioner, 113 T.C.M. (CCH) 1555 (2017).
128 128 Id. at 1561.
129 129 It is hard to see why this arrangement, admittedly clumsily structured, gave the company an element of dominion and control over the property, rendering the gift conditional in some inappropriate fashion. The company did not derive any benefit from its ability to transfer the property, which was always destined for charity.
130 130 IRC § 164(b)(6). This provision was added to the IRC on enactment of fiscal year 2018 budget reconciliation legislation (informally known as the Tax Cuts and Jobs Act) (Pub. L. No. 115-97, 115th Cong., 1st Sess. (2017) § 11042). This limitation applies to tax years beginning after December 31, 2017, and before January 1, 2026.
131 131 REG-112176-18 (Aug. 13, 2018). This proposal, which was foreshadowed by Notice 2018-54, 2018-24 I.R.B. 750 (June 11, 2018), also includes similar rules in connection with payments made by estates and trusts.
132 132 T.D. 9864 (June 11, 2019). Proposed regulations state that the quid pro quo principle is equally applicable where the donor expects to receive a benefit from a third party (REG-107431-19 (Dec. 13, 2019)).
133 133 Reg. § 1.170A-1(h)(3)(i).
134 134 Reg. § 1.170A-1(h)(3)(vi).
135 135 Reg. § 1.170A-1(h)(3)(ii). See § 3.1(b). Indeed, this proposal would not change existing tax treatment of law outside the charitable context, such as a state tax credit program relating to amounts paid by businesses (e.g., Information Letter 2018-0030 (Sep. 18, 2018)).
136 136 The Department of the Treasury and the IRS issued a notice providing a safe harbor for payments made by certain individuals (Notice 2019-12, 2019-27 I.R.B. 57). Under this safe harbor, an individual who itemizes deductions and makes a payment to a charitable organization in return for a state or local tax credit may treat the portion of the payment that is or will be disallowed as a charitable contribution deduction as a payment of state or local tax for purposes of the deduction cap. This disallowed portion of the payment may be treated as a payment of state or local tax in connection with the cap when and to the extent an individual applies the state or local tax credit to offset the individual's state or local tax liability.The IRS ruled that, if a C corporation makes a payment to or for the use of a charitable organization and receives or expects to receive a tax credit that reduces a state or local tax imposed on the corporation in return for the payment, the corporation may treat the payment as meeting the requirements for an ordinary and necessary business expense to the extent of the credit. The same outcome results where the payment is made by a business entity other than a C corporation that is regarded for federal income tax purposes as separate from its owners and where the credit pertains to a tax other than a state or local income tax. (Rev. Proc. 2019-12, 2019-4 I.R.B. 401.)
137 137 Reg. § 1.170A-1(b)(2).
138 138 Reg. § 1.170A-1(h)(4)(i). This position is based on case law (e.g., Singer Co. v. United States, 449 F.2d 413 (Ct. Cl. 1971)) and IRS guidance (e.g., Rev. Rul. 67-246, 1967-2 C.B. 104). Moreover, a person's expectation of a substantial benefit in return, from any source, has been held to reflect a lack of donative intent on the part of the donor (see § 2.1(a)) (e.g., Ottawa Silica Co. v. United States, 699 F.2d 1124 (Fed. Cir. 1983)).
139 139 See § 3.7.
140 140 Blake v. Commissioner, 697 F.2d 473 (2nd Cir. 1982), aff'g 42 T.C.M. (CCH) 1336 (1981).
141 141 Id., 697 F.2d at 480.
142 142 Id.
143 143 Rev. Rul. 80-77, 1980-1 C.B. 56.
144 144 Id.
145 145 Id.
146 146 Rev. Rul. 67-446, 1967-2 C.B. 119. In this instance, the benefits to the merchants and property owners were considered incidental in comparison to the benefits accruing to the public. Also Rev. Rul. 79-323, 1979-2 C.B. 106; Rev. Rul. 69-90, 1969-1 C.B. 63.
147 147 Rev. Rul. 74-246, 1974-1 C.B. 130.
148 148 Rev. Rul. 81-307, 1981-2 C.B. 78. Again (see supra note 146), the benefit to the donor was deemed incidental in comparison to the benefits accruing to the public.
149 149 Rev. Rul. 75-66, 1975-1 C.B. 85.
150 150 Priv. Ltr. Rul. 9447028.
151 151 Priv. Ltr. Rul. 9729024.
152 152 Rev. Proc. 97-52, 1997-2 C.B. 527.
153 153 See § 2.4(c).
154 154 See IRC § 4946.
155 155 See IRC § 4941. See Private Foundations ch. 5.
156 156 Private Foundations § 5.7(c).
157 157 H. Rep. No. 1337, 83d Cong., 2d Sess. A44 (1954); S. Rep. No. 1622, 83d Cong., 2d Sess. 196 (1954). These reports accompanied IRC § 162(b), which provides that a payment cannot be deducted as a business expense (under IRC § 162) when it is properly deductible as a charitable contribution (under IRC § 170) but is not deductible in a tax year because of restrictions such as the percentage limitations (see ch. 7).
158 158 Transamerica Corporation v. United States, 254 F. Supp. 504 (N.D. Cal. 1966), aff'd, 392 F.2d 522 (9th Cir. 1968).
159 159 Parker v. Commissioner, 86 T.C. 547 (1986). Also Snyder v. Commissioner, 86 T.C. 567 (1986).
160 160 Parker v. Commissioner, 86 T.C. 547, 565 (1986).
161 161 Kamilche Co. v. United States, 809 F. Supp. 763 (N.D. Cal. 1992).
162 162 Kamilche Co. v. United States, 53 F.3d 1059 (9th Cir. 1995).
163 163 E.g., United States v. Mitchell, 403 U.S. 190, 197 (1971); Burner v. Harmel, 287 U.S. 103, 110 (1932).
164 164 Klavan v. Commissioner, 66 T.C.M. (CCH) 68 (1993); Weiss v. Commissioner, 65 T.C.M. (CCH) 2768 (1993).
165 165 Mountanos v. Commissioner, 105 T.C.M. (CCH) 1818 (2013), 107 T.C.M. (CCH) 1211 (2014), aff'd, Fed. Appx. 592 (9th Cir. 2016).
166 166 Bond v. United States, 97-2 U.S.T.C. ¶ 50,868 (N.D. Ill. 1997).
167 167 Id. at 90,440.
168 168 20 U.S.C. § 1415.
169 169 Bond v. United States, 97-2 U.S.T.C. ¶ 50,868 at 90,440 (N.D. Ill. 1997).
170 170 Id.
171 171 See § 23.6.
172 172 Allen v. Commissioner, 91-1 U.S.T.C. ¶ 50,080 (9th Cir. 1991).
173 173 Id. at 87,325.
174 174 Id.
175 175 Id.
176 176 Id. at 87,326.
177 177 Id.
178 178 See the discussion of gifts of notes at § 4.8.
179 179 Bischel v. United States, 415 F. Supp. 2d 1211, 1213 (D. Nev. 2006). Likewise, a court wrote that an entity “cannot contribute a right it does not possess,” in denying a charitable deduction claimed for an ostensible gift of a restriction preserving the entire exterior of a certified historic structure where the entity only had rights to the building's facade (61 York Acquisition, LLC v. Commissioner, 106 T.C.M. (CCH) 594 (2013)). Also R.P. Golf v. Commissioner, 111 T.C.M. (CCH) 1362 (2016), aff'd, 860 F.3d 1096 (8th Cir. 2017) (charitable deduction not available for placement of conservation property on parcel the ostensible donor did not own).
180 180 Jones v. Commissioner, 129 T.C. 146,159 (2007). Although this decision was affirmed (560 F.3d 1196 (10th Cir. 2009) cert. den., 558 U.S. 881 (2009)), the appellate court did not address the matter of ownership of the property.
181 181 E.g., Rev. Rul. 67-137, 1967-1 C.B. 63; Priv. Ltr. Rul. 9350009. Generally, a payment to a charitable organization that results in placement of the donor's name on a building owned or occupied by the payee is considered a charitable contribution in full, with the benefit to the donor considered incidental (Rev. Rul. 77-367, 1977-2 C.B. 193).
182 182 E.g., Helvering v. Horst, 311 U.S. 112 (1940).
183 183 See § 5.6.
184 184 See § 5.7.
185 185 The anticipatory assignment-of-income doctrine can be similar to the step transaction doctrine. The latter doctrine is the subject of § 3.7.
186 186 E.g., Morgan Guaranty Trust Co. v. United States, 585 F.2d 988, 994 (Ct. Cl. 1978); S.C. Johnson & Son, Inc. v. Commissioner, 63 T.C. 778, 786 (1975).
187 187 Harrison v. Schaffner, 312 U.S. 579 (1941).
188 188 Peterson Irrevocable Trust No. 2 v. Commissioner, 51 T.C.M. (CCH) 1300, 1316 (1986), aff'd, 822 F.2d 1093 (8th Cir. 1987).
189 189 Greene v. United States, 806 F. Supp. 1165 (S.D.N.Y. 1992).
190 190 IRC § 1256(a)(3).
191 191 IRC § 170(e)(1)(A). See § 3.4(b).
192 192 See § 3.3.
193 193 The other argument was that the gains on the sales of the futures contracts were taxable by reason of the step transaction doctrine. See § 3.7.
194 194 Greene v. United States, 806 F. Supp. 1165, 1170 (S.D.N.Y. 1992).
195 195 Id. at 1172.
196 196 Id.
197 197 Jones v. United States, 531 F.2d 1343 (6th Cir. 1976), overruling Jacobs v. United States, 390 F.2d 877 (6th Cir. 1968).
198 198 Id., 531 F.2d at 1345–1346.
199 199 Id. at 1346, n. 3.
200 200 Id. at 1346.
201 201 Greene v. United States, 806 F. Supp. 1165, 1169 (S.D.N.Y. 1992). This case was affirmed in an opinion containing an extensive discussion of the anticipatory assignment-of-income doctrine as it applies in the charitable giving setting. 13 F.3d 577 (2d Cir. 1994).
202 202 Hudspeth v. United States, 471 F.2d 275, 279 (8th Cir. 1972).
203 203 Kinsey v. Commissioner, 477 F.2d 1058 (2d Cir. 1973).
204 204 Id. at 1063. Likewise, Ferguson v. Commissioner, 108 T.C. 244 (1997), aff'd, 99-1 U.S.T.C. ¶ 50,412 (9th Cir. 1999), in which stock was contributed to charities immediately before the issuer corporation merged following a cash tender offer; the gift was made after the stock changed into a fixed right to receive money, so the donors were taxable on the gain in the stock transferred. This case is discussed in § 4.6, text accompanied by notes 36–37.
205 205 Rauenhorst v. Commissioner, 119 T.C. 157 (2002).
206 206 Id. at 167, 168.
207 207 Rev. Rul. 78-197, 1978-1 C.B. 83. See § 3.7, note 73.
208 208 Rauenhorst v. Commissioner, 119 T.C. 157, 173 (2002). The court used the occasion of this opinion to note that although the “general principles underlying the assignment of income doctrine are well established,” the “precise contours of the anticipatory assignment of income doctrine in the context of charitable contributions of appreciated property have been the subject of some contention.” Id. at 163, 164.
209 209 See § 21.4.
210 210 Dickinson v. Commissioner, T.C. Memo. 2020-128 (2020).
211 211 Chrem v. Commissioner, 116 T.C.M. (CCH) 347 (2018), denying motions for summary judgment. The court noted a fact that is relevant to the argument that the doctrine is inapplicable in this case: the charity's “fiduciary duties as a custodian of charitable assets.” By tendering its shares, the charity immediately received over $4 million in cash; if the charity, however, did not tender its shares and the acquisition was abandoned, the charity would have been left holding a minority interest in a closely held corporation, the “market value of which might be questionable.”
212 212 E.g., Priv. Ltr. Rul. 9623035.
213 213 In almost every charitable gift situation involving money, the contribution is made with after-tax dollars. That is, the funds must first be taken into income before they can be deductible when transferred to charity. Here, however, the IRS concluded that a rebate paid by a retailer participating in the card program is not income to the cardholder. Rather, the rebate reflects a reduction in the purchase price paid for an item purchased with the company's card. This holding is based on Rev. Rul. 76-96, 1976-1 C.B. 23, as modified by Rev. Rul. 2005-28, 2005-1 C.B. 997, stating that rebates paid by an automobile manufacturer to qualifying retail customers who purchase new automobiles are not includible in the gross income of the customers.
214 214 Priv. Ltr. Rul. 200945022.
215 215 IRC § 316(a), which defines a dividend as a distribution of property by a corporation to its stockholders out of its earnings and profits.
216 216 Rev. Rul. 68-296, 1968-1 C.B. 105. Dividends are not deductible by the payor corporation.
217 217 Crosby Valve & Gage Company v. Commissioner, 380 F.2d 146 (1st Cir. 1967), aff'g, 46 T.C. 641 (1966).
218 218 See § 2.5(a).
219 219 As to the latter, see IRC § 512(b)(10).
220 220 Also Dave Inv. Co. v. Commissioner, 462 F.2d 1373 (9th Cir. 1972).
221 221 United States v. Knapp Brothers Shoe Manufacturing Corp., 384 F.2d 692 (1st Cir. 1967), cert. den., 390 U.S. 989 (1968).
222 222 The rules are somewhat different in this regard in such contexts as planned giving (see Part Four) and quid pro quo situations (see § 20.2), but even there the statement is correct as to the deductible portion of the transaction.
223 223 See § 7.18.
224 224 Musgrave v. Commissioner, 80 T.C.M. (CCH) 341 (2000).
225 225 See § 23.1.
226 226 See § 2.3.
227 227 See § 2.1(a).
228 228 Musgrave v. Commissioner, 80 T.C.M (CCH) 341, 344 (2000).
229 229 Id.
230 230 Id.
231 231 See § 21.4.
232 232 See § 2.4.
233 233 Reg. § 1.507-2(a)(8).
234 234 Priv. Ltr. Rul. 200037053. The IRS discussed the charitable gift completion requirements in INFO 2005-0141.
235 235 IRC § 139(c). This legislation was enacted in 2001, creating an exclusion from gross income for qualified disaster relief payments (IRC § 139(a)). The U.S. president, on March 13, 2020, declared the COVID-19 pandemic a national emergency, thereby triggering application of the federal tax disaster relief law, enabling employers to provide financial assistance to employees and their family members by means of charitable organizations.
236 236 IRS Tax Exempt and Government Entities Division, Disaster Relief: Providing Assistance Through Charitable Organizations (Pub. 3833 (rev. 2014)).
237 237 In a summary of the federal tax law concerning international grantmaking by charitable organizations, the IRS suggested that, to be an eligible recipient of financial assistance in the disaster relief context, an individual must be “needy”; the word distressed was not used (Chief Couns. Adv. Mem. 200504031).
238 238 See § 2.3(b), text accompanied by note 331.
239 239 See § Id., text accompanied by note 329.
240 240 In general, Tax-Exempt Organizations § 7.2(b) (2021 cum. supp.).
241 241 See § 21.4.
242 242 In general, Private Foundations § 9.3(b).
243 243 See § 2.4(c).
244 244 See Private Foundations chs. 5 and 9.
245 245 Priv. Ltr. Rul. 200307084.
246 246 See § 2.3(b), text accompanied by infra notes 363–373.
247 247 Amounts transferred by or for employers to or for the benefit of employees are presumed not to be gifts, but rather items of gross income. IRC § 102(c). The IRS ruled that this rule is “inoperative” in this case because the payments are made by the charitable organization.
248 248 Priv. Ltr. Rul. 200243050.
249 249 See § 2.1(a).
250 250 As to the latter, some charitable organizations have policies, perhaps reflected in bylaws, requiring individuals to contribute, often annually, as a condition of serving on the governing board. In some instances, a specific amount is mandated.
251 251 See § 2.1(a).
252 252 Taynton v. United States, 60-1 U.S.T.C. ¶ 9,458 (D. Va. 1960).
253 253 Alman v. Commissioner, 39 T.C.M. (CCH) 527 (1979).
254 254 E.g., Sedam v. United States, 518 F.2d 242 (7th Cir. 1975).
255 255 E.g., Priv. Ltr. Rul. 200534022. Indeed, because the organization characterized the sellers' payments in connection with this program as “voluntary contributions,” the IRS held that the organization was “encouraging the avoidance of federal income tax,” which was seen as a nonexempt activity that was one of the bases precluding the organization from acquiring recognition of tax exemption.
256 256 Priv. Ltr. Rul. 201437004.
257 257 Costello v. Commissioner, 109 T.C.M. (CCH) 1441, 1448 (2015).
258 258 Scheidelman v. Commissioner, 100 T.C.M. (CCH) 24 (2010).
259 259 Scheidelman v. Commissioner, 2012-1 U.S.T.C. ¶ 50,402 (2d Cir. 2012).
260 260 Id. at 84,333.
261 261 Id. at 84,334.
262 262 United States v. American Bar Endowment, 477 U.S. 105 (1986).
263 263 Priv. Ltr. Rul. 8725058.
264 264 Priv. Ltr. Rul. 200228001.
265 265 Dowell v. United States, 553 F.2d 1233 (10th Cir. 1977).
266 266 Commissioner v. Duberstein, 363 U.S. 278, 285 (1960).
267 267 DeJong v. Commissioner, 309 F.2d 373 (9th Cir. 1962).
268 268 See § 2.6.
269 269 Harbor Lofts Associates v. Commissioner, 151 T.C. 17 (2018).
270 270 See § 7.6(d).
271 271 Harbor Lofts Associates v. Commissioner, 151 T.C. 17, 25 (2018).
272 272 Id.
273 273 Id. Likewise, Presley v. Commissioner, 116 T.C.M. (CCH) 387 (2018), aff'd, 790 Fed. Appx. 914 (10th Cir. 2019).
274 274 Kalapodis v. Commissioner, 108 T.C.M. (CCH) 392 (2014).
275 275 A C corporation is also known as a regular corporation; this tax term is derived from the portion of the Internal Revenue Code creating the concept. IRC subch. C, consisting of IRC §§ 301–385. Discussion of C corporations as donors is in § 4.16.
276 276 An S corporation is also known as a small business corporation; this term is derived from the portion of the Internal Revenue Code creating the concept. IRC subch. S, consisting of IRC §§ 1361–1379. A Subchapter S corporation is a pass-through entity, which means it is not subject to federal income taxation (the taxation is of the shareholders). Discussion of S corporations as donors is in § 4.17.
277 277 A partnership also is a pass-through entity (see supra note 276) (the taxation is of the partners). The federal tax treatment of partnerships is the subject of IRC subch. K consisting of IRC §§ 701–777. Discussion of partnerships as donors is in § 4.18.
278 278 A limited liability company also is a pass-through entity (see supra note 276), with the incidence of taxation on the members, in that limited liability companies are generally taxed the same as partnerships. An illustration of a limited liability company as a donor is in § 10.3(f), note 228.
279 279 A discussion of trusts as donors is in § 7.21.
280 280 See § 6.3(c).
281 281 See, e.g., §§ 4.17, 4.18.
282 282 E.g., Skripak v. Commissioner, 84 T.C. 285 (1985); Weitz v. Commissioner, 56 T.C.M. (CCH) 1422 (1989).
283 283 Zavadil v. Commissioner, 106 T.C.M. (CCH) 346 (2013), aff'd to second issue, 793 F.3d 866 (8th Cir. 2015).
284 284 See § 2.1(a).
285 285 See Tax-Exempt Organizations, particularly pt. 3. In deciding whether an organization is a qualified charitable donee, the U.S. Tax Court will take judicial notice of this list. Van Dusen v. Commissioner, 136 T.C. 515 (2011); Viralam v. Commissioner, 136 T.C. 151 (2011); Jennings v. Commissioner, 80 T.C.M. (CCH) 783 (2000), aff'd, 19 Fed. Appx. 351 (6th Cir. 2001).
286 286 IRC § 501(c)(3).
287 287 IRC § 170(c).
288 288 IRC § 170(c)(1).
289 289 IRC § 2522(a).
290 290 IRC § 2055(a).
292 292 IRC § 501(c)(3).
293 293 IRC § 170(c)(2). The IRS issues rulings on the qualification of organizations as charitable donees. E.g., Priv. Ltr. Rul. 9037021.
294 294 The public safety testing organization is the subject of Tax-Exempt Organizations § 11.3.
295 295 IRC § 170(c)(1). These entities are not tax-exempt in the sense that they are described in IRC § 501(c). They are, however, very much tax-exempt organizations in the generic sense of that term. See Tax-Exempt Organizations § 19.23.
296 296 IRC § 170(c)(3). Veterans' organizations generally are tax-exempt by reason of IRC § 501(c)(19). See Tax-Exempt Organizations § 19.11(a). Some veterans' organizations are tax-exempt by reason of being classified as social welfare organizations under IRC § 501(c)(4) (see Tax-Exempt Organizations ch. 13), and some are classified as charitable organizations under IRC § 501(c)(3) (see Tax-Exempt Organizations pt. 3).
297 297 IRC § 170(c)(4). These organizations are tax-exempt by reason of IRC § 501(c)(8). See Tax-Exempt Organizations § 19.4(a). This is a category of charitable donee only in the case of contributions by individuals.
298 298 IRC § 170(c)(5). These organizations are tax-exempt by reason of IRC § 501(c)(13). See Tax-Exempt Organizations § 19.6.
299 299 IRC § 501(a).
300 300 IRC § 501(c).
301 301 IRC § 170.
302 302 IRC § 170(c).
303 303 These are entities that are tax-exempt, usually by reason of IRC § 501(c)(2). See Tax-Exempt Organizations § 19.2.
304 304 These are entities that are tax-exempt by reason of IRC § 501(c)(6). See Tax-Exempt Organizations ch. 14.
305 305 That is, they are organizations described in IRC § 501(c)(3).
306 306 IRC § 170(c)(2)(B).
307 307 IRC § 170(c)(2)(A).
308 308 IRC § 170(c)(2)(C). The private inurement doctrine is discussed in Tax-Exempt Organizations ch. 20.
309 309 IRC § 170(c)(2)(D).
310 310 See Tax-Exempt Organizations ch. 22.
311 311 IRC § 170(c)(2)(D).
312 312 See Tax-Exempt Organizations ch. 23.
313 313 Pennsylvania Co. for Insurance on Lives v. Helvering, 66 F.2d 284, 285 (D.C. Cir. 1933).
314 314 Int'l Reform Federation v. District Unemployment Board, 131 F.2d 337, 339 (D.C. Cir. 1942).
315 315 United States v. Proprietors of Social Law Library, 102 F.2d 481, 483 (1st Cir. 1939).
316 316 Helvering v. Bliss, 293 U.S. 144, 147 (1934) (emphasis supplied).
317 317 Bob Jones University v. United States, 461 U.S. 574, 586, 587–588 (1983).
318 318 Id. at 591–592.
319 319 Id. at 592.
320 320 Ould v. Washington Hosp. for Foundlings, 95 U.S. 303, 311 (1877). This broad definition of the term charitable and the reach of the public policy doctrine are discussed in Tax-Exempt Organizations § 6.2.
321 321 The law underlying these categories is discussed in Tax-Exempt Organizations ch. 7.
322 322 Reg. § 1.501(c)(3)-1(d)(2).
323 323 See § 2.3(b)
324 324 Reg. § 1.501(c)(3)-1(d)(2).
325 325 See § 2.3(b).
326 326 Reg. § 1.501(c)(3)-1(d)(2). College and university fraternities and sororities that maintain chapter houses for active members who are students at these institutions are not charitable organizations, but rather tax-exempt social clubs. IRC § 501(c)(7); see Tax-Exempt Organizations ch. 15; Rev. Rul. 69-573, 1969-2 C.B. 125. Gifts to a college or university to acquire or construct a housing facility for use by a designated fraternity or sorority are deductible; however, when the educational institution owns the facility and leases it on a short-term basis to the fraternity or sorority, the designation is not legally binding, and the fraternity or sorority house meets the standards of the college or university for other student housing. Rev. Rul. 60-367, 1960-2 C.B. 73.
327 327 See § 2.3(b).
328 328 Reg. § 1.501(c)(3)-1(d)(2).
329 329 Id.
330 330 Id.
331 331 Rev. Rul. 78-85, 1978-1 C.B. 150.
332 332 Rev. Rul. 69-545, 1969-2 C.B. 117. In general, see Hyatt & Hopkins, The Law of Tax-Exempt Healthcare Organizations, 4th ed. (Hoboken, NJ: John Wiley & Sons, 2013), particularly pt. 3.
333 333 E.g., Rev. Rul. 64-175, 1964-1 (Part 1) C.B. 185; Rev. Rul. 64-174, 1964-1 (Part 1) C.B. 183.
334 334 E.g., Rev. Rul. 75-74, 1975-1 C.B. 152.
335 335 E.g., Rev. Rul. 81-284, 1981-2 C.B. 130.
336 336 E.g., Rev. Rul. 76-204, 1976-1 C.B. 152.
337 337 E.g., Rev. Rul. 78-84, 1978-1 C.B. 150. It was held that an estate was entitled to a charitable contribution deduction for the gift of assets to a trust “to be used solely and exclusively in fostering and promoting the cause of patriotism, loyalty and fundamental constitutional government in the United States of America, and in combating subversive activities, socialism and communism, including, if deemed advisable, assistance in the teaching of the principles of conservatism in public affairs among college and high school students” (Buder v. United States, 7 F.3d 1382 (8th Cir. 1993)). The government argued that the trustees of the trust had discretion to dispense funds to organizations that engage in lobbying and political campaign activities, which might preclude the organization from qualifying as a charitable organization (see the text accompanied by notes 234 and 235); the court found that contention “cramped” and it “decline[d] to set a standard that is so rigorous that the average testator who is attempting to make a charitable donation will fail to meet it” (at 1386).
338 338 E.g., Rev. Rul. 80-200, 1980-2 C.B. 173.
339 339 E.g., Rev. Rul. 80-286, 1980-2 C.B. 179.
340 340 Hutchinson Baseball Enterprises, Inc. v. Commissioner, 73 T.C. 144 (1979), aff'd, 696 F.2d 757 (10th Cir. 1982).
341 341 Kentucky Bar Found., Inc. v. Commissioner, 78 T.C. 921 (1982).
342 342 The law underlying these categories is discussed in Tax-Exempt Organizations ch. 8. Also Hopkins, Gross, & Schenkelberg, Nonprofit Law for Colleges and Universities: Essential Questions and Answers for Officers, Directors, and Advisors (Hoboken, NJ: John Wiley & Sons, 2011).
343 343 Reg. § 1.501(c)(3)-1(d)(3)(ii)(1).
344 344 IRC § 170(b)(1)(A)(ii).
345 345 Reg. § 1.501(c)(3)-1(d)(3)(ii)(4).
346 346 Reg. § 1.501(c)(3)-1(d)(3)(i).
347 347 Id.
348 348 The law underlying these categories is discussed in Tax-Exempt Organizations ch. 10.
349 349 IRC § 170(b)(1)(A)(i). A charitable deduction was denied an individual who claimed to be a church because of belief in the Bible; the gifts were made to himself. The court said that a church cannot, for federal income tax purposes, consist of just one individual, in that the law requires a “group of people gathering together as part of an organized entity” (Richardson v. Commissioner, 70 T.C.M. (CCH) 14, 16 (1995)). Otherwise, the court added, “every individual taxpayer in the United States might declare himself to be a church in an attempt to avoid paying Federal income tax” (id.). An illustration of this latter observation appears in Lloyd v. Commissioner, T.C. Memo. 2020-92 (2020),
350 350 Richardson v. Commissioner, 70 T.C.M. (CCH) 14, 16 (1995).
351 351 Id.
352 352 IRC § 501(d).
353 353 The law underlying these categories is discussed in Tax-Exempt Organizations ch. 9.
354 354 Reg. § 1.501(c)(3)-1(d)(1)(i)(c).
355 355 Id.
356 356 The law underlying these categories is discussed in Tax-Exempt Organizations ch. 11.
357 357 Reg. § 1.501(c)(3)-1(d)(1)(i)(e).
358 358 Reg. § 1.501(c)(3)-1(d)(1)(i)(g).
359 359 IRC § 501(e).
360 360 IRC § 501(f).
361 361 IRC § 501(c)(3) and (j).
362 362 Priv. Ltr. Rul. 9247030. Also Tripp v. Commissioner, 337 F.2d 432 (7th Cir. 1964); Phinney v. Dougherty, 307 F.2d 357 (5th Cir. 1962); Davidson v. Commissioner, 60 F.2d 50 (2d Cir. 1932); Rev. Rul. 69-573, 1969-2 C.B. 125; Rev. Rul. 60-367, 1960-2 C.B. 73.
363 363 The IRS wrote that “restriction of charitable work to a small or identifiable class will cause such work to fail to meet the definition of charitable . . . unless such benefits are incidental to an identifiable public benefit” (Priv. Ltr. Rul. 9702040). Also: “A class of beneficiaries designated by the donor or by the donee's charter may be challenged where the class of prospective beneficiaries is so limited in size that the donee organization is considered to benefit specified individuals” (Priv. Ltr. Rul. 9316051).
364 364 Rev. Rul. 56-403, 1956-2 C.B. 307. A corporation was denied a charitable deduction for amounts given to a foundation established to provide educational opportunities for employees and their children because the foundation's educational benefits inured to only four children of the corporation's employees (Charleston Chair Co. v. United States, 203 F. Supp. 126 (E.D.S.C. 1962)).
365 365 E.g., Wendy L. Parker Rehabilitation Foundation Inc. v. Commissioner, 52 T.C.M. (CCH) 51 (1986).
366 366 Carrie A. Maxwell Trust, Pasadena Methodist Foundation v. Commissioner, 2 T.C.M. (CCH) 905 (1943).
367 367 Rev. Rul. 57-449, 1957-2 C.B. 622.
368 368 Priv. Ltr. Rul. 9631004.
369 369 Rev. Rul. 56-403, 1956-2 C.B. 307. Where, however, the fraternal entity is a local chapter, the requisite charitable class is not likely to exist (e.g., Priv. Ltr. Rul. 201017067).
370 370 A private foundation proposed to develop two parcels of property and sought a ruling from the IRS that the funds to be expended to that end would be considered qualifying distributions for purposes of IRC § 4942 (the private foundation mandatory charitable grant-making rules). The IRS acceded to that request with respect to only one of the properties, which was to be improved by creating a recreational facility available to the public. As to the second property, however, which was to be developed by establishing a computer instruction facility, the IRS ruled that the funds would not be qualifying distributions because of the limitations on access to the property (Priv. Ltr. Rul. 9702040). The IRS ruled that contributions to a fund established by a tax-exempt hospital were deductible as charitable contributions when the donors were the hospital, its employees, and employees of its affiliates; the fund provided emergency assistance to financially needy individuals who had suffered economic hardship due to accident, loss, or disaster. The more than 9,000 potential beneficiaries included 2,900 current employees of the hospital and 600 former employees (Priv. Ltr. Rul. 9316051). The IRS reconsidered this ruling because of its belief that it was inconsistent with the rules as to tax-exempt charitable organizations (Priv. Ltr. Rul. 9704028). Nonetheless, the IRS subsequently upheld the deductibility of contributions to this fund (the one in Priv. Ltr. Rul. 9316051), reiterating the presence of a charitable class and noting that the hospital would not be making any grants to the fund (Priv. Ltr. Rul. 9741047). This policy may be changing again. Initially, the IRS ruled that a private foundation can make grants to one of these disaster relief and emergency hardship programs when the grants are for charitable purposes and cause only incidental private benefit (Priv. Ltr. Rul. 9516047). Subsequently, however, the IRS held that grants of this nature are not for charitable purposes, amount to private inurement, result in self-dealing, are not qualifying distributions, and are taxable expenditures (Priv. Ltr. Rul. 199914040).
371 371 E.g., Rev. Rul. 77-246, 1977-2 C.B. 190 (elderly and disabled recognized by the IRS as charitable classes); Rev. Rul. 76-244, 1976-1 C.B. 155 (organization undertaking home delivery of meals to the elderly and disabled held charitable).
372 372 E.g., Rev. Rul. 75-196, 1975-2 C.B. 155 (law library held to be educational because access to it by lawyers was held to be a public benefit); Rev. Rul. 69-545, 1969-2 C.B. 117 (promotion of health held to be charitable activity because of overall benefit to the community).
373 373 Sound Health Association v. Commissioner, 71 T.C. 158, 185 (1978). The requirement of a charitable class is usually applied only when assessing the status of a charitable organization. That is, this type of a class is usually not required with respect to religious or educational entities. As to the latter, for example, the exempt function is that of disseminating knowledge; there are many rulings holding that organizations conducting educational programs for a limited group qualify as IRC § 501(c)(3) entities. E.g., Rev. Rul. 68-504, 1968-2 C.B. 211; Rev. Rul. 65-298, 1965-2 C.B. 163. Yet the IRS sometimes applies the charitable class requirement in the context of a putative educational organization. See text accompanied by supra note 364.
374 374 This reference to other charitable donees is to organizations that are the subject of § 2.3, text accompanied by supra notes 303–304.
375 375 IRC § 509(a).
376 376 See Tax-Exempt Organizations ch. 12.
377 377 See Tax-Exempt Organizations § 28.2(a)(iii).
378 378 IRC §§ 170(b)(1)(A)(i) and 509(a)(1).
379 379 Internal Revenue Manual § 321.3.
380 380 E.g., American Guidance Foundation, Inc. v. United States, 490 F. Supp. 304 (D.D.C. 1980). Also St. Martin Evangelical Lutheran Church v. South Dakota, 451 U.S. 772 (1981).
381 381 E.g., Tech Adv. Mem. 200437040.
382 382 Foundation of Human Understanding v. United States, 2009-2 U.S.T.C. ¶ 50,519 (U.S. Ct. Fed. Cl. 2009), aff'd, 614 F.3d 1383 (Fed. Cir. 2010), cert. den., 562 U.S. 1286 (2011).
383 383 See Tax-Exempt Organizations § 10.3 and § 12.3(a).
384 384 IRC §§ 170(b)(1)(A)(i) and 509(a)(1).
385 385 Rev. Rul. 74-224, 1974-1 C.B. 61. Also Chapman v. Commissioner, 48 T.C. 358 (1967).
386 386 Id. In general, see Tax-Exempt Organizations § 10.4 and § 12.3(a).
387 387 IRC §§ 170(b)(1)(A)(ii) and 509(a)(1).
388 388 Reg. § 1.6033-2(g)(5).
389 389 E.g., Parshall Christian Order v. Commissioner, 45 T.C.M. (CCH) 488 (1983).
390 390 E.g., Tennessee Baptist Children's Homes, Inc. v. United States, 604 F. Supp. 210 (M.D. Tenn. 1984). In general, Tax-Exempt Organizations § 10.5.
391 391 IRC §§ 170(b)(1)(A)(ii) and 509(a)(1).
392 392 Reg. § 1.170A-9(b). Also Rev. Rul. 78-309, 1978-2 C.B. 123.
393 393 See text accompanied by infra notes 414 and 415.
394 394 Reg. § 1.170A-9(b).
395 395 Educational institutions are discussed in greater detail in Tax-Exempt Organizations § 12.3(a); educational organizations in general are discussed at id. ch. 8.
396 396 IRC §§ 170(b)(1)(A)(iii) and 509(a)(1).
397 397 IRC § 170(b)(1)(A)(iii).
398 398 Rev. Rul. 69-545, 1969-2 C.B. 117.
399 399 Reg. § 1.170A-9(c)(1).
400 400 Rev. Rul. 74-572, 1974-2 C.B. 82.
401 401 IRC § 213.
402 402 Reg. § 1.170A-9(c)(1). The rules concerning the tax qualification of hospitals are discussed in Tax-Exempt Organizations § 7.6(a), (b).
403 403 Organizations that generally promote health are discussed in Tax-Exempt Organizations § 7.6.
404 404 IRC §§ 170(b)(1)(A)(iii) and 509(a)(1).
405 405 IRC § 170(b)(1)(A)(iii).
406 406 Reg. § 1.170A-9(c)(2)(vii).
407 407 Reg. § 1.170A-9(c)(2)(iii).
408 408 The rules concerning medical research organizations are discussed in Tax-Exempt Organizations § 7.6(c).
409 409 See § 5.6.
410 410 IRC §§ 170(b)(1)(A)(ix) and 509(a)(1). It is intended that this provision be interpreted in like manner to and consistent with the rules applicable to medical research organizations (see text accompanied by supra notes 397–408).
411 411 IRC §§ 170(b)(1)(A)(iv) and 509(a)(1).
412 412 See § 2.4(a), text accompanied by supra notes 370–373.
413 413 The rules concerning these supporting foundations are discussed in Tax-Exempt Organizations § 12.3(g)(v).
414 414 IRC §§ 170(b)(1)(A)(v) and 509(a)(1); Reg. § 1.170A-9(d).
415 415 IRC § 170(c)(1). The rules concerning governmental units are discussed in Tax-Exempt Organizations §§ 7.14, 12.3(a), and 19.19.
416 416 See § 2.4(a), text accompanied by supra notes 414 and 415.
417 417 IRC §§ 170(b)(1)(A)(vi) and 509(a)(1).
418 418 Reg. § 1.170A-9(e)(2).
419 419 IRC § 509(e).
420 420 IRC § 509(d); Reg. § 1.170A-9(e)(7)(i).
421 421 Reg. § 1.170A-9(e)(6)(i).
422 422 IRC § 4946(a)(1).
423 423 Reg. § 1.170A-9(e)(6)(i).
424 424 See § 2.4(a), text accompanied by supra notes 378–415.
425 425 Rev. Rul. 76-416, 1976-2 C.B. 57.
426 426 See § 2.4(a), text accompanied by supra notes 378–383.
427 427 Rev. Rul. 78-95, 1978-1 C.B. 71.
428 428 Reg. § 1.170A-9(e)(6)(v).
429 429 Reg. § 1.170A-9(e)(7)(i).
430 430 Reg. § 1.170A-9(e)(7)(ii).
431 431 Reg. § 1.170A-9(e)(6)(ii). E.g., Rev. Rul. 76-440, 1976-2 C.B. 58.
432 432 Reg. § 1.170A-9(e)(4)(i).
433 433 Reg. § 1.170A-9(e)(3).
434 434 Id.
435 435 Id.
436 436 Reg. § 1.170A-9(e)(10)(i). These rules, concerning all three categories of donative-type public charitable organizations, are discussed in Tax-Exempt Organizations § 12.3(b).
437 437 IRC § 509(a)(2); Reg. § 1.509(a)-3(a)(4). Also IRC § 170(b)(1)(A)(viii).
438 438 IRC § 509(a)(2)(A)(i).
439 439 IRC § 509(a)(2)(A)(ii).
440 440 See § 2.4(a), text accompanied by supra notes 414 and 415.
441 441 See § 2.4(a), text accompanied by supra notes 378–415.
442 442 See § 2.4(a), text accompanied by supra notes 416–436.
443 443 IRC § 4946. See Tax-Exempt Organizations § 12.2.
444 444 IRC § 509(a)(2)(A); Reg. § 1.509(a)-3(a)(2).
445 445 Reg. § 1.509(a)-3(c)(3).
446 446 Reg. § 1.509(a)-3(b)(1).
447 447 IRC § 509(d).
448 448 IRC § 509(e).
449 449 IRC § 509(d).
450 450 IRC § 509(e).
451 451 IRC § 509(a)(2)(B).
452 452 Reg. § 1.509(a)-3(a)(3).
453 453 Reg. § 1.509(a)-3(c)(1)(i). These rules are discussed in Tax-Exempt Organizations § 12.3(iv).
454 454 IRC § 509(a)(3); also IRC § 170(b)(1)(A)(viii).
455 455 See § 2.4(a).
456 456 Id.
457 457 Reg. § 1.509(a)-4(a)(5).
458 458 IRC § 509(a)(3)(A); Reg. § 1.509(a)-4(a)(2). The term supported organization is defined in IRC § 509(f)(3).
459 459 IRC § 509(a)(3)(B). These organizations are sometimes referred to as Type I, II, or III organizations, respectively. The Type III supporting organization is defined in IRC § 4943(f)(5)(A). Inasmuch as Type III supporting organizations are classified as either functionally integrated Type III supporting organizations or other Type III supporting organizations, there are four types of supporting organizations. In general, Reg. §§ 1.509(a)-4(f)(4), (g)(1)(i).
460 460 Reg. §§ 1.509(a)-4(a)(3), 1.509(a)-4(f)(2).
461 461 Reg. § 1.509(a)-4(i)(2).
462 462 IRC § 509(f)(1). If a Type III supporting organization was supporting a foreign-supported organization on August 17, 2006, the second of these rules does not apply until the first day of the third tax year of the organization beginning after that date (IRC § 509(f)(1)(B)(ii)).
463 463 IRC § 509(f)(2).
464 464 Reg. §§ 1.509(a)-4(f)(4), 1.509(a)-4(g)(1)(i).
465 465 Reg. §§ 1.509(a)-4(f)(4), 1.509(a)-4(h)(1).
466 466 Reg. § 1.509(a)-4(f)(4).
467 467 Reg. § 1.509(a)-4(e)(1), (2).
468 468 See text accompanied by infra notes 478–483.
469 469 Reg. § 1.509(a)-4(e)(2).
470 470 Reg. § 1.509(a)-4(c)(1).
471 471 Reg. § 1.509(a)-4(i)(1).
472 472 Reg. § 1.509(a)-4(i)(1)(iii).
473 473 Id.
474 474 Reg. § 1.509(a)-4(i)(3).
475 475 Reg. § 1.509(a)-4(i)(4)(i)(A).
476 476 Reg. § 1.509(a)-4(i)(4)(i)(B).
477 477 Reg. § 1.509(a)-4(i)(4)(i)(C).
478 478 Reg. § 1.509(a)-4(i)(5)(i)(A).
479 479 Reg. §§ 1.509(a)-4(i)(5)(ii), 1.509(a)-4T(i)(5)(ii)(B).
480 480 Reg. §§ 1.509(a)-4(i)(5)(i)(B), 1.509(a)-4(i)(9).
481 481 Reg. § 1.509(a)-4(i)(6).
482 482 Reg. § 1.509(a)-4(i)(7).
483 483 Reg. § 1.509(a)-4(i)(8).
484 484 See Private Foundations ch. 7.
485 485 IRC § 4943(f)(1), 3(A).
486 486 See supra note 468.
487 487 IRC § 4943(f)(5)(B).
488 488 IRC § 4943(f)(1), 3(B).
489 489 IRC § 4943(f)(2).
490 490 See Private Foundations ch. 6.
491 491 IRC § 4942(g)(4). As to the second element of this rule, a payment also is not a qualifying distribution if the IRS determines by regulation that the distribution “otherwise is inappropriate” (IRC § 4942(g)(4)(ii)(II)).
492 492 IRC § 4945(d)(4). See Private Foundations ch. 9. A supporting organization that wishes to avoid these rules may make application to the IRS, pursuant to special procedures, to change its public charity status (Ann. 2006-93, 2006-48 I.R.B. 1017).
493 493 That is, organizations that are tax-exempt by reason of IRC § 501(c)(4). See Tax-Exempt Organizations ch. 13.
494 494 That is, organizations that are tax-exempt by reason of IRC § 501(c)(5). See Tax-Exempt Organizations ch. 16.
495 495 That is, organizations that are tax-exempt by reason of IRC § 501(c)(6). See Tax-Exempt Organizations ch. 14.
496 496 IRC § 509(a)(3), last sentence; Reg. § 1.509(a)-4(k).
497 497 IRC § 509(a)(3)(C); Reg. § 1.509(a)-4(a)(4). These rules are discussed in Tax-Exempt Organizations § 12.3(c).
498 498 Pension Protection Act of 2006, Pub. L. No. 109-280 § 1226.
499 499 That is, organizations that are described in IRC § 501(c)(3).
500 500 See § 5.6(a), text accompanied by note 53.
501 501 IRC §§ 170(b)(1)(A)(vii) and 170(b)(1)(F)(i). This report is summarized in Private Foundations § 15.7(l). A subsequent report on supporting organizations issued by the Congressional Research Service is summarized in Private Foundations § 16.11.
502 502 IRC § 4942(j)(3). The rules concerning private operating foundations are discussed in Private Foundations § 3.1.
503 503 IRC §§ 170(b)(1)(A)(vii) and 170(b)(1)(F)(ii).
504 504 See Private Foundations § 6.5.
505 505 The rules concerning conduit foundations are discussed in Private Foundations § 3.2. For this tax treatment to occur, the donee private foundation must make an election (Reg. § 1.170A-9(g)(2)(v)) to treat the qualifying distributions as distributions out of corpus, so as to substantiate the larger charitable deductions. In a situation in which the election was not made, because the foundation was unaware of it (despite the involvement of professional tax advisors), the IRS exercised its discretionary authority (Reg. § 301.9100-3) to grant an extension of time to make this election (Priv. Ltr. Rul. 200311033).
506 506 IRC §§ 170(b)(1)(A)(vii) and 170(b)(1)(F)(iii).
507 507 The rules concerning common fund foundations are discussed in Private Foundations § 3.3.
508 508 That is, an organization described in IRC § 501(c)(3).
509 509 IRC §§ 511–514.
510 510 Reg. § 1.513-1(b).
511 511 The test is discussed in Tax-Exempt Organizations § 24.1.
512 512 United States v. American College of Physicians, 475 U.S. 834 (1986).
513 513 Reg. § 1.513-1(a).
514 514 IRC § 511(a)(2)(A).
515 515 IRC § 511(a)(2)(B).
516 516 See Tax Exempt Organizations § 4.4.
517 517 E.g., Reg. § 1.501(c)(3)-1(e)(1).
518 518 E.g., Reg. § 1.501(c)(3)-1(c)(1).
519 519 See Tax-Exempt Organizations § 4.5.
520 520 Id. § 4.3.
521 521 IRC § 513(c).
522 522 IRC § 162.
523 523 Reg. § 1.513-1(b).
524 524 See §§ 2.5(f), (g).
525 525 IRC § 513(c).
526 526 Id.
527 527 IRC § 512(a)(1).
528 528 Reg. § 1.513-1(c).
529 529 Reg. § 1.513-1(c)(1).
530 530 Id.
531 531 Reg. § 1.513-1(c)(2)(i).
532 532 Id.
533 533 Id.
534 534 Reg. § 1.513-1(c).
535 535 IRC § 513(a).
536 536 Reg. § 1.513-1(a).
537 537 Reg. § 1.513-1(d)(2).
538 538 Reg. § 1.513-1(d).
539 539 Reg. § 1.513-1(d)(2).
540 540 Id.
541 541 Reg. § 1.513-1(d)(3).
542 542 Id.
543 543 IRC § 512(a)(1).
544 544 See § 2.5(g).
545 545 IRC § 511.
546 546 IRC § 513(a)(1).
547 547 IRC § 513(a)(2).
548 548 That is, organizations that are described in IRC § 501(c)(3).
549 549 That is, institutions that are described in IRC § 511(a)(2)(B).
550 550 IRC § 513(a)(3).
551 551 IRC § 513(d).
552 552 IRC § 513(d)(2)(A).
553 553 That is, organizations described in IRC §§ 501(c)(3), (4), or (5), respectively. Social welfare organizations are the subject of Tax-Exempt Organizations ch. 13, and labor and agricultural organizations are the subject of id. ch. 16.
554 554 IRC § 513(d).
555 555 IRC § 513(d)(3)(A).
556 556 That is, organizations described in IRC §§ 501(c)(3), (4), (5), or (6), respectively. Business leagues are the subject of Tax-Exempt Organizations ch. 14.
557 557 IRC § 513(e).
558 558 IRC § 513(f).
559 559 See § 2.3(b).
560 560 IRC § 513(h)(1)(A). The IRS is of the view that this exception is unavailable when the solicitation is in competition with for-profit vendors or is illegal (Tech. Adv. Mem. 9652004). Of course, the exception is not available when the monetary limitation is exceeded (e.g., State Police Association of Massachusetts v. Commissioner, 72 T.C.M. (CCH) 582 (1996)).
561 561 IRC § 513(h)(1)(B). When this exception is not available, such as when one of the parties is not a charitable organization, the resulting revenue is taxable unless it can be sheltered by means of another exception, such as by characterizing it as a royalty. See text accompanied by infra note 563. In this setting, even the exchange of mailing lists can give rise to taxable income (e.g., Tech. Adv. Mem. 9635001).
562 562 IRC § 512(b).
563 563 IRC §§ 512(b)(1), (2), (3), and (5). Most of the controversy in this context centers on the scope of the term royalty. E.g., Sierra Club, Inc. v. Commissioner, 86 F.3d 1526 (9th Cir. 1996).
564 564 IRC §§ 512(b)(4) and 514. The unrelated debt-financed income rules are the subject of Tax-Exempt Organizations § 24.12.
565 565 IRC § 512(b)(13).
566 566 IRC §§ 512(b)(7), (8), and (9).
567 567 IRC § 512(b)(12).
568 568 IRC § 512(a)(6). Final regulations to accompany this statute were issued on November 19, 2020 (T.D. 9933); they are summarized in Tax-Exempt Organizations § 25.5(b) (2021 Cum. Supp.).
569 569 IRC § 512(b)(12).
570 570 IRC § 512(b)(6).
571 571 See § 2.1.
572 572 See § 2.1(f).
573 573 See § 2.3.
574 574 See § 2.2.
575 575 In one instance, an attempted bequest of a half-interest in real property failed to qualify for the estate tax charitable contribution deduction because the charitable recipient of the interest failed to accept it (Tech. Adv. Mem. 9443001).
576 576 An individual must itemize deductions to claim a charitable contribution deduction. See § 2.6. In one case, the business expense deduction for payments was denied because the payments were charitable gifts; however, the charitable deduction was denied because the individual taxpayer did not itemize deductions (Irwin v. Commissioner, 72 T.C.M. (CCH) 1148 (1996)).
577 577 See § 2.1(f).
578 578 See § 23.1.
579 579 See § 2.4.
580 580 See § 3.6.
581 581 See § 7.3.
582 582 See Part Three.
583 583 See § 8.5.
585 585 See § 2.7.
586 586 One entity that is not entitled to a charitable contribution deduction under any circumstance is a partnership. IRC § 703(a)(2)(C). Instead, when a gift is made from a partnership, each partner takes into account his, her, or its distributive share of the deduction. IRC § 702(a)(4); Reg. §§ 1.702-1(a)(4), 1.703-1(a)(2)(iv). In general, see § 4.18.
587 587 See § 2.3.
588 588 Rev. Proc. 2018-32, 2018-23 I.R.B. 739 § 2.01.
589 589 See § 2.4(a).
590 590 Rev. Proc. 2018-32, 2018-23 I.R.B. 739 § 2.03.
591 591 See Tax-Exempt Organizations § 28.5.
592 592 Id. § 28.4.
593 593 Rev. Proc. 2018-32, 2018-23 I.R.B. 739 § 3.01.
594 594 Id.
595 595 Id. § 3.04.
596 596 Id. § 4.01.
597 597 IRC § 6033(j). See Tax-Exempt Organizations § 28.5.
598 598 Rev. Proc. 2018-32, 2018-23 I.R.B. 739 § 4.02.
599 599 Id. § 4.03.
600 600 Id. § 4.04.
601 601 Id. § 4.05.
602 602 Id. § 4.06.
603 603 Id. § 5.01.
604 604 Id. § 7.01(1)-(3).
605 605 IRC § 4946(a)(1)(C)-(G).
606 606 Rev. Proc. 2018-32, 2018-23 I.R.B. 739 § 7.01(4), (5).
607 607 Id. § 7.02.
608 608 IRC § 7428. See Tax-Exempt Organizations § 27.5(b). An action pursuant to these procedures may not, however, be brought with respect to a revocation of status caused by application of IRC § 6033 (j) (see text accompanied by supra note 597 (IRC § 7428(b)(4)).
609 609 IRC § 7428(c).
610 610 Rev. Proc. 2011-33, 2011-25 I.R.B. 887 § 5.02.
611 611 IRC §§ 671–679.
612 612 This principle includes the charitable contribution deduction. Reg. § 1.671-2(c). For example, a charitable contribution made by a trust that is attributed to the grantor (an individual) is aggregated with the grantor's other charitable contributions to determine their deductibility under the percentage limitations (see ch. 7). Reg. § 1.671-2(c).
613 613 IRC § 671.
614 614 Reg. § 1.671-2(e).
615 615 Generally, the grantor of a trust is the person who contributes the principal to the trust (Bixby v. Commissioner, 58 T.C. 757 (1972); Rev. Rul. 87-127, 1987-2 C.B. 156; Priv. Ltr. Rul. 9338015). The IRS published final and temporary regulations providing guidance as to the qualification of persons as grantors of trusts (T.D. 8890).
616 616 Reg. § 1.671-1(a).
617 617 IRC § 673.
618 618 IRC § 674(a).
619 619 IRC § 674(b)(4).
620 620 Reg. § 1.674(a)-1(b)(1)(iii). The IRS ruled that an arrangement by which the “presumptive remaindermen” of three charitable lead trusts would serve as “charitable appointers” (those who designate the income beneficiary charities) following the death of the trusts' grantor would not cause the trusts to be treated as owned by the grantor (Priv. Ltr. Rul. 200029033).
621 621 IRC § 675.
622 622 A nonadverse party is a person who is not an adverse party. IRC § 672(b). An adverse party is a person having a substantial beneficial interest in a trust that would be adversely affected by the exercise or nonexercise of the power that they possess with respect to the trust. IRC § 672(a); Reg. § 1.672(a)-1(a). A person having a general power of appointment over trust property is deemed to have a beneficial interest in the trust. IRC § 672(a); Reg. § 1.672(a)-1(a).
623 623 IRC § 676.
624 624 IRC § 677. The IRS examined a proposed trust agreement and concluded that the grantor would not be treated as the owner of the trust, although the agency observed that actual operation of the trust could lead to a different conclusion (Priv. Ltr. Rul. 199927010, corrected by Priv. Ltr. Rul. 200003059). The IRS reviewed the operations of an ostensible charitable remainder trust (see ch. 10) and, finding various inappropriate payments out of trust income, concluded that the trust cannot qualify as a charitable remainder trust but rather is a grantor trust, with the trustee being owner of the trust (Chief Couns. Adv. Mem. 200628026).
625 625 IRC § 678.
626 626 IRC § 679.
