Cooley v. Commissioner

Jacob J. Cooley, Petitioner, v. Commissioner of Internal Revenue, Respondent Cooley v. Commissioner Docket No. 68893 United States Tax Court 1959 U.S. Tax Ct. LEXIS 46; 33 T.C. 223; November 6, 1959, Filed *46 Decision will be entered for the respondent. In 1952, petitioner purchased certain automobiles from General Motors subject to the specific condition that he donate them to the United Jewish Appeal. Held, that inasmuch as these automobiles were never available for resale by petitioner, his charitable deduction should be limited to the amount he paid for them. Sec. 23(o), I.R.C. 1939. T. Holmes Bracken, Esq., for the petitioner. Raymond T. Mahon, Esq., for the respondent. Raum, Judge. RAUM *224 Respondent determined a deficiency in petitioner's income tax for the calendar year 1952 in the amount of $ 6,068.68. In his 1952 return, petitioner claimed a charitable deduction in the amount of $ 24,700 which he alleges was the fair market value at retail of certain automobiles donated by him in 1952 to the United Jewish Appeal (U.J.A.). The question is whether petitioner was entitled to a deduction in the above amount or whether, as respondent maintains, the deduction should be limited to $ 17,581.72, the amount paid by petitioner for the automobiles. FINDINGS OF FACT. Most of the facts have been stipulated and are incorporated herein by reference. Petitioner, *47 an individual residing in New Haven, Connecticut, and his former wife, Esther Cooley, from whom he is now divorced, filed a joint income tax return for 1952 with the director of internal revenue for the district of Connecticut. In 1952 and prior thereto, petitioner was the major stockholder and principal officer of several corporations franchised as authorized Chevrolet dealers in and around New Haven, Connecticut. Petitioner never sold automobiles as an individual, proprietor, or partner and, prior to the transaction in question, his dealings with General Motors Corporation were always in the capacity of an employee of a corporation, and for the benefit of a corporation. In 1951 petitioner was approached by Leo Goldberg and requested to donate Chevrolet automobiles to U.J.A. for export to the State of Israel for use by disabled veterans. Leo Goldberg, Ltd., was the authorized Chevrolet dealer for General Motors in Israel. In the latter part of 1951, petitioner approached the officials of the Chevrolet Division of General Motors with the object of acquiring automobiles to be donated to U.J.A. Since the automobiles were for export to Israel, petitioner was referred to General Motors' *48 Foreign Distributor's Division. Petitioner's dealership corporations have never transacted any business with the Foreign Distributor's Division and, in the transaction in question, petitioner was acting as an individual rather than as an officer or employee of any of his corporations. After negotiations, an agreement was reached between petitioner, the Foreign Distributor's Division, and Leo Goldberg, Ltd., which *225 provided for the Foreign Distributor's Division to sell to petitioner, through Leo Goldberg, Ltd., 13 1952 model Chevrolet sedan automobiles. On January 4, 1952, petitioner made payment for these automobiles directly to General Motors by personal check in the amount of $ 17,581.72, and the automobiles were then delivered by General Motors to U.J.A. in New York City for shipment to Israel. In 1952, Chevrolet automobiles were in short supply and Chevrolet dealers were working on a quota basis with General Motors whereby each dealer was assigned fewer automobiles than he desired and could sell. The automobiles in question did not in any way affect the quota assigned to petitioner's corporations. They were sold to petitioner with the specific condition that they*49 be donated to U.J.A., and they were never available for resale by petitioner or by any of the dealership corporations in which he had an interest. Neither petitioner nor any of his corporations could have obtained these automobiles except for the fact that they were to be donated to U.J.A. OPINION. It is generally true, as petitioner contends, that a taxpayer is entitled to deduct the fair market value of property (other than money) contributed to a charity. Regs. 118, sec. 39.23(o)-1(g). But "fair market value" is not to be determined in a vacuum. To the contrary, it must be determined with respect to the particular property in question at the time of contribution, subject to any conditions or restrictions on marketability. In the present case it is clear that petitioner did not at any time have a right to resell the automobiles in question. He never intended to resell them and could not have done so without violating a specific condition of his arrangement with General Motors. Plainly, these automobiles were not marketable in petitioner's hands, and it would be completely unrealistic to permit him a deduction based on the 1952 retail value of marketable models. The situation*50 is analogous to that presented in a wide variety of cases holding, in other contexts, that property otherwise intrinsically more valuable which is encumbered by some restriction or condition limiting its marketability must be valued in the light of such limitation. Cf., e.g., ; . Petitioner has not shown that he is entitled to deduct more than the $ 17,581.72, which the respondent allowed. Cf. . Decision will be entered for the respondent.