The Tax Law of Charitable Giving. Bruce R. Hopkins

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