Court Opinion

ID: 4480633
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:14:26.902733+00
Date Added: 2024-06-11T14:53:11.030489
License: Public Domain

DawsoN, /., dissenting: I respectfully dissent as to issue No. 2. Admittedly, the statute affords very little help in answering the question: What is an unreasonable accumulation? Nor are the regulations any more helpful since section 1.504-(b) (1) merely provides that: Amounts accumulated out of income become unreasonable wben more income is accumulated than is needed, or when the duration of the accumulation is longer than is needed in order to earry out the purpose constituting the basis of the organization’s exemption. * * * Indeed, the nebulous nature of the “unreasonable” accumulation concept used in section 504(a) prompted the Court of Appeals for the Third Circuit in Erie Endowment v. United States, 316 F. 2d 151, 155, to say: “Beasonableness,” that hobgoblin of judicial minds, can only be divined on the basis of all relevant facts. The standard to be applied is whether the taxpayer can justify the total accumulation of income at the end of the taxable year, in terms of both time and amount, on the basis of a rational total program of charitable intent. The plan must be viewed in its entirety. * * * [Emphasis added.] I would apply this standard flexibly so as not to tie the hands of charitable foundations so tightly that no room is left for practical administration of its “total program of charitable intent.” Here the foundation’s articles provided for a general program of scholarships, and the evidence, even if regarded by the majority of my colleagues as weak, establishes that part of the foundation’s income was accumulated in order to implement such a program. The foundation has created scholarship funds at Massachusetts Institute of Technology, Valparaiso University, .and Northwestern Military Academy. And another scholarship fund is in the process of being established at Trinity College. Each of the scholarship funds .at Massachusetts Institute of Technology and Valparaiso University now aggregates about $15,000. In my opinion other significant factors are (1) that the accumulated income of the foundation rose from $3,399 on August 31, 1952, to a high of $22,179.94 on August 31, 1959, and declined to a deficit by August 31, 1964; (2) that over the 14-year period from 1952 to 1966 the foundation has made charitable -contributions totaling $198,951.50; and (3) that to subject the foundation to -the tax deficiencies here asserted for the years 1959 through 1962 rwill cause the tax burden to fall upon income which has already been fully distributed for charitable purposes. Therefore, I would hold that the accumulations were reasonable in amount and duration to carry out the foundation’s charitable purposes. Cf. A. Shiffman, 32 T.C. 1073 (1959); Samuel Friedland Foundation v. United States, 144 F. Supp. 74 (D.N.J. 1956); and Hulman Foundation, Inc. v. United States, 217 F. Supp. 423 (S.D. Ind. 1962). DeeNNEN, J., agrees with this dissent.