Broussard v. Commissioner

Estelle Broussard, Petitioner, v. Commissioner of Internal Revenue, Respondent Broussard v. Commissioner Docket No. 26850 United States Tax Court 16 T.C. 23; 1951 U.S. Tax Ct. LEXIS 319; January 9, 1951, Promulgated *319 Decision will be entered for the petitioner. Petitioner is a member of the Sisters of the Holy Cross whose headquarters is at Notre Dame, Indiana. She is one of the nine beneficiaries of a trust established by her father. In 1946, she visited her father who was seriously ill at Beaumont, Texas. On December 31, 1946, prior to her return to Washington, D. C., where she was music teacher in a school for girls operated by the Sisters of the Holy Cross, she had checks made out aggregating $ 6,000 as contributions to the order of Sisters of the Holy Cross. These checks were on the same date charged to her account on the books of the trust of which she was one of the income beneficiaries. The checks were delivered to her as a member of the Sisters of the Holy Cross for transmittal to the proper officials of the Order. The checks were not deposited and collected by the Sisters of the Holy Cross until in 1947. The Commissioner has determined the contributions were not deductible in 1946, because not paid in that year. Held, that under section 23 (o) (2), I. R. C., "payment" of the contributions was made in 1946 and denial of deduction of the amounts in that year was error. *320 Estate of Modie J. Spiegel, 12 T. C. 524, followed. R. B. Cannon, Esq., and Frank C. Taylor, C. P. A., for the petitioner. John P. Higgins, Esq., for the respondent. Black, Judge. BLACK *23 The Commissioner has determined a deficiency in petitioner's income tax for the year 1946 of $ 3,393.84. The deficiency is due to the *24 addition to the net income of $ 30,710.37 reported on petitioner's return of "Unallowable deduction: (a) Donations $ 5,578.71." This adjustment is explained in the deficiency notice, as follows: (a) Deductions for contributions in the amount of $ 5,578.71 which were claimed for 1946 have been disallowed because they were not paid in 1946. Petitioner contests this determination of the Commissioner by an appropriate assignment of error. FINDINGS OF FACT. The petitioner is an individual temporarily residing in Washington, D. C. Her permanent address is Beaumont, Texas. Her income tax return for the year 1946 was filed with the collector of internal revenue for the first district of Texas at Austin, Texas. About 1922, petitioner Estelle Broussard, daughter of Mr. and Mrs. J. E. Broussard of Beaumont, Texas, *321 under temporary vows, entered the Order of the Sisters of the Holy Cross, an organization of Catholic nuns. The Mother House (headquarters) of the Sisters of the Holy Cross is at Notre Dame, Indiana. About five years after she entered the Order of the Sisters of the Holy Cross, Sister Mary Rita Estelle, as she became known, took her perpetual vows, being the customary vows of poverty, chastity, and obedience. Throughout 1946, the taxable year involved in this proceeding, petitioner was head of the music department of Dunbarton College, a school for girls in Washington, D. C., supervised by the Order of the Sisters of the Holy Cross. In 1929, J. E. Broussard, father of petitioner, created a trust estate designated "The Broussard Trust" with nine beneficiaries, each having a one-ninth interest in the income of the trust. Estelle Broussard was one of the nine beneficiaries. The Broussard Trust was a spendthrift trust. The Broussard Trust has never had a bank account of its own, but uses the Beaumont Rice Mills, a corporation managed and controlled by the Broussard family, as its banker. Whenever funds belonging to the Broussard Trust came to hand, they were deposited by Beaumont*322 Rice Mills in its own bank account and the trust given credit therefor on the books of the Rice Mills. Expenditures by the trust were made by checks of the Beaumont Rice Mills, which were charged to the account of the trust on the books of the mill. Due to the fact that her beneficial interest in the Broussard Trust was not susceptible of being alienated by her, petitioner, since 1929, has been the recipient of an annual income subject to Federal income tax. Petitioner has not been required to use, nor has she used, such income for her personal necessities, pleasure or satisfaction. Her clothing, personal living expenses, and other necessities are furnished to her by the Order of which she is a member. Accordingly, petitioner's share of the income of the Broussard Trust has gone for charitable *25 contributions, into educational trusts, and for like or similar purposes. Contributions to some of the aforementioned educational trusts were not deductible for income tax purposes as they were for a specific group instead of a general class of beneficiaries. Petitioner has no personal bank account and transacts no worldly affairs of any sort. Some years ago she gave a general*323 power of attorney to her brother, Clyde E. Broussard, and he attends to all secular matters for her. So completely does C. E. Broussard handle all of petitioner's affairs that he not only prepares, but signs on her behalf the Federal income tax returns that are required because she is a beneficiary of, and receives income from, the Broussard Trust. In December 1946, J. E. Broussard, petitioner's father, had a serious illness. When he was brought home from the hospital, petitioner's superiors gave her permission to come to Beaumont and spend the Christmas holidays with him. While petitioner was in Beaumont at the bedside of her father in December 1946, she discussed with her brother, Clyde E. Broussard, the matter of making a substantial contribution or contributions to her Order. As a result of these discussions, on the afternoon of the day (December 31, 1946) that petitioner left Beaumont to return to Washington, D. C. two checks of Beaumont Rice Mills were issued, one for $ 5,000 and one for $ 1,000. Both were payable to the order of the Sisters of the Holy Cross. On the same day, December 31, 1946, that the two checks were issued, they were charged by Beaumont Rice Mills *324 to the Broussard Trust and, in turn, were charged by the Broussard Trust to the account of Estelle Broussard on the books of the trust. On December 31, 1946, the two checks that are in evidence as petitioner's Exhibits 1 and 2 were delivered by Clyde E. Broussard to Sister Mary Rita Estelle (petitioner herein) in person. They were delivered to her, a member of the Sisters of the Holy Cross, as a representative of that Order for transmittal to the Order. The check for $ 1,000 bears the endorsement of Sister M. Davida. The check for $ 5,000 bears the endorsement of the Sisters of the Holy Cross, Eastern Province Exchange. The Eastern Province Exchange includes Washington, D. C., and extends from Massachusetts through Texas. Petitioner did not endorse either of the checks as they were not made out to her. Petitioner left for Washington, D. C., on December 31, 1946, and arrived there in January 1947. The two checks were deposited for collection by the Sisters of the Holy Cross in 1947 and in due course were collected by the Order. OPINION. This proceeding presents for the determination of the Court a single question, namely, the deductibility of certain contributions *26 made*325 by petitioner. The amount of the contributions ($ 6,000) is not in dispute, and the fact that they were made to an organization within the permitted class described in section 23 (o) (2) of the Internal Revenue Code is not contested by respondent. The issue between the parties narrows itself down, therefore, to this: In what taxable year are the contributions involved in this proceeding deductible from petitioner's taxable income? Petitioner contends they are deductible in 1946. Respondent has determined to the contrary. The applicable statute is printed in the margin. 1 Section 29.23(o)-1, Regulations 111, reads in part, as follows: Contributions or Gifts by Individuals. -- A deduction is allowable under section 23(o) only with respect to contributions or gifts which are actually paid during the taxable year, regardless of when pledged and regardless of the method of accounting employed by the taxpayer in keeping his books and records. * * * *326 It is clear from the findings of fact which we have made that the two checks aggregating $ 6,000 were not actually deposited and collected by the Sisters of the Holy Cross until in the year 1947. It is equally clear that the checks were made out to the Sisters of the Holy Cross on December 31, 1946, by the Beaumont Rice Mills. On that same day they were charged by Beaumont Rice Mills to the Broussard Trust and, in turn, were charged by the Broussard Trust to the account of Estelle Broussard, the petitioner, on the books of the trust. On the same date they were delivered to petitioner Estelle Broussard, a member of the Sisters of the Holy Cross, for transmittal to the Order. The money represented by these checks no longer was the property to Estelle Broussard. From and after their issuance these checks belonged to the Sisters of the Holy Cross. When the Rice Mills checks were delivered by C. E. Broussard to Sister Mary Rita Estelle in her capacity as a Sister of the Holy Cross, delivery to that Order occurred. Such seems plainly to have been the intention of the parties and there is no valid reason so far as we can see why their intention should not be given its legal effect. *327 When this is done, we think a payment of the $ 6,000 in question to the Sisters of the Holy Cross took place on December 31, 1946. We think the facts in the instant case bring it within the ambit of our decision in Estate of Modie J. Spiegel, 12 T. C. 524. In that case *27 the petitioners' decedent in December 1942, drew and delivered two checks for contributions to organizations qualifying under section 23 (o) (2) of the Internal Revenue Code. The checks were presented to the drawee banks and paid in January 1943, one of them after the death of the decedent. On these facts we held that under section 23 (o) "'payment' of the contributions or gifts was made in 1942," and that the Commissioner's denial of the deductions in that year was error. We see no distinction in substance between the facts in the instant case and those which were present in the Spiegel case, supra. It is true that the Sisters of the Holy Cross did not have a local house in Beaumont, Texas, where the checks were issued as did the charities located in Chicago, in the Spiegel case. But in the instant case the checks were made out direct to the order of "Sisters*328 of the Holy Cross," in the same manner as the checks were made out direct to the respective charities in the Spiegel case, and were delivered to Sister Mary Rita Estelle, a member of the Order, for direct transmittal to the proper officials of the Order. It seems to us that this was just as effective delivery to the Sisters of the Holy Cross as if they had a house in the City of Beaumont. We, therefore, think there is no distinction in substance between the facts of the instant case and those which were present in the Spiegel case. Therefore, following that case, we decide the only issue involved in favor of the petitioner. Decision will be entered for the petitioner. Footnotes 1. INTERNAL REVENUE CODE. SEC. 23. DEDUCTIONS FROM GROSS INCOME. In computing net income there shall be allowed as deductions: * * * * (o) Charitable and Other Contributions. -- In the case of an individual, contributions or gifts payment of which is made within the taxable year to or for the use of: * * * * (2) a corporation, trust, or community chest, fund, or foundation, created or organized in the United States, * * * organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes. * * * * * * *↩ to an amount which in all the above cases combined does not exceed 15 per centum of the taxpayer's adjusted gross income. * * *