Evening star., 1952-05-02
Tax Benefits vs.. Contributions

Commissioner Dunlap of the Bureau of In
ternal Revenue has advised the Senate Finance
Committee that the essential question in deter
mining whether tax concessions should be
granted to the makers Of unrepaid political
loans is whether bona fde debtor-creditor
relationship exists"
At the same time a spokesman for the bu-
reau indicated that there would be no reversal
OF the rulings by which three wealthy bene-
factors of the Democratic Party were given per-
mission to write off as bad non-business debts,
deductible for tax purposes, the unpaid balances
on more than 100000 of loans which they had
made to party agencies
On the face of the commissioners stated
conditions for such concessions the rulings in
the disputed cases-handed down before Mr.
Dunlap took his present of1ce-would seem to
be either exceedingly naive or to be based upon
information about the transactions which has
not yet been publicly disclosed.
The loans in question took place over
period of nearly ten years, dating back to the
time of the 1910 campaign. AS loans, they did
not run counter to the Corrupt Practices Act
which limits individual political contributions AS
revealed by Senator williams, Republican, of
Delaware, however, the beneficiary of the trans
actions, the New York State Democratic Com
mittee, in each case informed the lenders that
1t could, or would, settle at only ten cents on
each dollar. The lenders then requested, and
received, rulings from the bureau that the "oans"
were not taxable as gifts but that the unpaid
balances could be written off as bad non business
debts A proper inference, therefore, is that the
bureau did consider that a bona f1de debtor
creditor relationship existed in these cases.
1t is true that one of the rulings, given to
Richard J. Reynolds in 1948 and signed by Deputy
Commissioner E. l. McLarney, referred to aSSur-
anceS which MIR. Reynolds said he had received
that repayment of the loans -. would be made
on an annual basis" retraced alleged demands
which Mr.. Reynolds said he made for repayment,
and referred to the committee as having assets
of no consequence" It stretches credibility
however, to accept these circumstances as evi-
dence that bona f1de debtor-creditor relation
ship truly existed It is interesting too that this
ruling was given by the bureau within 48 hours
of its being requested, and that no record has
been produced to show that the bureau sought
any facts behind the statements offered by Mr..
Reynolds.
MIR. Reynolds, and the others who stood to
benefit by the rulings in question, were realistic
businessmen. They were undoubtedly aware of
the extent and nature Of the assets of the New
York committee and equally knowing about the
ptospecCS Oh theH loans pelng repaid. The TACT
that'two of the lenders already have claimed they
did not take advantage of the favorable rulings
has little bearing on the exchange. The whole
pattern OF the deals has color of tax avoidance
with the blessings of the bureau
1t is appropriate that the Senate Finance
Committee should now be considering review
OF the whole business And it is within the
province OF Congress to see that laws are drawn
and enforced in manner to protect public
interests rather than party interests.