concurring: I think the majority decision is correct solely because of the statutory mandate. Considerations of “detached and disinterested generosity,” “legal duty,” and “control” are, in my opinion, wholly immaterial. Cf. Jordon Perlmutter, 45 T.C. 311, 317 (1965). Beyond this, the majority analysis of these phrases may lead to future misinterpretation and misapplication of its holding in a wide area of situations involving contributions to private charitable foundations which have for many years been considered proper deductions.
Section 512(b) (10) of the Internal Revenue Code of 1954 specifically states:
In the ease of any organization described in section 511(a), the deduction allowed by section 170 (relating to charitable etc. contributions and gifts) shall bo allowed (whether or not directly connected with the carrying on of the trade or business), but shall not exceed 5 percent of the unrelated business taxable income computed without the benefit of this paragraph.
Congress, in enacting the predecessor of this provision, which contained substantially identical language (sec. 422, I.R.C. 1939), made clear its intention:
The contribution, whether made by a trust or other ecoempt organisation, must be paid to another organisation to be allowable. For example, a section 101(6) incorporated educational institution operating an unrelated business would be allowed a deduction up to 5 percent of its unrelated business net income for amounts of income from any source paid oyer to the Bed Cross but would not be allowed any deduction for amounts of business income which are used to defray its own expenses in administering its own educational program. [Emphasis added.] [H. Bept. No. 2319, 81st Cong., 2d Sess., p. Ill (1950) ; S. Bept. No. 2375, 81st Cong., 2d Sess., p. 109 (1950).]
In addition, section 681 of the Internal Revenue Code of 1954 specifically denies to a charitable trust any deduction “with respect to income of the taxable year which is allocable to its unrelated business income for that year.” See also H. Kept. No. 2319, supra at 127; S. Rept. No. 2375, supra at 119.
Finally, the Congress in taxing unrelated business income sought generally to eliminate the distinction between situations where such income was earned directly by the charitable organization or by a subsidiary of that organization. Both the House and Senate committee reports state:
Some of the witnesses who appeared before your committee took the position that this unrelated business income should be taxed only if received by a subsidiary organization. However, it is difficult to see why a difference in taw treatment should he allowed merely because in one case the income is earned directly by an educational or charitable organization, while in the other it is earned by a subsidiary of such am organization. In both cases the income is derived from the same type of activities and disposed of in the same manner. Moreover, in most cases the business functions now carried on by subsidiaries could be transferred to the parent if the tax were applied only to the income of the subsidiaries. [Emphasis added. H. Rept. No. 2319, supra at 37; S. Rept. No. 2375, supra at 39.]
Against this 'background, it seems to me that Congress has seen fit to deny the right to deduct from unrelated business income the expenses of administering a charitable program, whether such income is earned directly by the charitable organization or indirectly by a subsidiary which is an integral part of the overall complex.
I would deny the deduction herein on this ground alone.
Fat and Dawson, //., agree with this concurring opinion.