Evening star., 1936-05-03
TAX CASE PER|LS
MELLON ART GIFT
WrangIe Over Income Levy
Throws Gallery Project
Into Confusion.
BY JAMES WALDO FAwCETT.

BY JAMES WALDO FAWCETT.
Is Washington to lose the art gal
iery and pictures promised by former
Secretary of the Treasury Andrew w.
Mellon to the Nations Capital more
than year ago?
That question was raised soon after
the gift was announced and now
again is being asked by many persons
interested in the fulfilment of the
pledge.
The problem is involved in the con-
troversy over Melons income tax re-
turns, is represented in the Govern
ment's claim for additional payments
amounting to S3075,103 and in a
counter-claim for refunds amounting
to sl3e,045, and is argued in the
fourth part of a supplementary brief
filed by Attorneys Frank j. Hogan and
D. D. Shepard with the Board of Tax
Appeals last Friday
To provide for numerous philan-
thropies, the brief explains, the for
mer Secretary established in 1880 the
A. w. Mellon Educational and Char
liable Trust, to which he gave during
the next four years approximately
S20.000,00O large portion of which
was "earmarked" for the gallery and
its contents. Such gifts, Melons law
yers declare, should be exempt from
taxation Specifically, they insist, pc
titioner is entitled to a deduction on
account of his gifts in the year 1881
amounting to $3,247,6 sos" And the
principle of exemption was admitted
by the Bureau of Internal Revenue
in a ruling dated March s, 1888, to
the effect that the Educational and
Charitable Trust met the requirements
OF the law.
Ruling Rescinded.
However, the Bureau of Internal
Revenue on April 3, 1885, during
the tax appeal hearing in Pittsburgh
notified Mellon that it rescinded its
ruling. Immediately the entire gallery
project was thrown into confusion,
condition IN which it has remained
ever since.
The issue is stated by Hogan and
Shepard as follows: Petitioner is
entitled to a deduction from gross
income on account of his contributions
and gifts. including his gifts to the
Mellon Institute and the A. W. Mel
Ion Educational and Charitable Trust
to the aggregate amount provided in
section % (n) OF the revenue act of
1928.
The A. w Mellon Educational
and Charitable Trust is valid,
charitable trust, organized by petit
toner exclusively for public. religious,
charitable, scientific. literary and edu-
cational purposes.
The A. w. Mellon Educational and
Charitable Trust has been operated
exclusively for public, religious, char
ltable, scientific, literary and educa-
tional purposes.
mo part of the net earnings of
the A. w Mellon Educational and
Charitable Trust has Injured to the
benefit of the creator, his heirs or
any person having persona, interest
in the organization"
Beneficiaries Not Definite.
The Government. however, contends
that Mellon has not named definite
beneficiarieS-a point which his at
torneys answer with the basic legal
claim that "deflniteness of beneficial
ries is not an essential element of d
charitable trust; charitable trust is
favored in the law and will be upheld
unless manifestly contrary to law, and
its enforcement is vested in the A.
torney General of the State of the
creators domicile and when in favor
of the Nation, in the Attorney Gen
eral OF the United States, the petit
.tioner intended and did create valid
enforceable charitable trust"
Mellon, in simpler language. insists
that he gave something away and
should not be penalized for doing so,
especially when his country is the re-
cipient of the gift.
Hence the question: Could the for
mer Secretary cancel his offer and
dispose of his money and his great
masterpieces of painting elsewhere
and to some other purpose? The an
swer, it seems, depends upon the de-
cision of the Board of Tax Appeals.