*205 Decision will be entered under Rule 50.
Petitioner contributed the amounts of $ 20,000, $ 15,000, and $ 10,000 in the respective taxable years 1944, 1945, and 1946 to an irrevocable Employees' Benefit Trust created for the purpose of extending financial assistance to certain of its needy employees and their beneficiaries in cases of sickness, injury or other disability, etc. Held, the trust was organized and operated exclusively for charitable purposes, and the contributions petitioner made thereto are proper deductions from gross income to the extent such contributions, together with the other charitable contributions made by petitioner in the taxable years involved, do not exceed the 5 per cent limitation prescribed by section 23 (q) of the Internal Revenue Code.
*188 This proceeding involves deficiencies in income and excess profits taxes for the fiscal years ended October 31, 1944, 1945, and 1946 as follows:
| Fiscal year | Income tax | Excess profits tax |
| 1944 | $ 0.92 | $ 25,696.11 |
| 1945 | 12,825.00 | |
| 1946 | 3,164.94 | 1,428.90 |
Not all of the deficiencies are in controversy.
The contested issue is whether the contributions made by the petitioner to its Employees' Benefit Trust of the amounts of $ 20,000, $ 15,000, and $ 10,000, in the respective taxable years 1944, 1945, and 1946, are allowable deductions from petitioner's gross income.
The case was submitted upon a stipulation of facts and oral testimony. The stipulated facts are found accordingly.
FINDINGS OF FACT.
Petitioner is a Missouri corporation organized in 1893 and having its principal office in St. Louis, Missouri. Its returns for the periods involved were filed with the collector of internal revenue for the first district of Missouri*207 at St. Louis, Missouri. Petitioner is engaged in the manufacture, purchase, and sale of forest products and the processing and preservative treatment thereof, with plants located in eleven different states. Petitioner employs approximately 800 employees in its various operations. The officers of petitioner are John S. Penney, president, George C. Hannaway, Meyer Levy and I. C. *189 Miller, vice presidents, E. W. Jones, treasurer, and A. W. Taylor, secretary. Its directors are E. E. Pershall, George C. Hannaway, Meyer Levy, T. J. Moss, and John S. Penney.
For a great many years petitioner has followed a policy of extending financial aid and assistance to those of its employees who were in financial distress because of illness, injury or other form of disability suffered or sustained by the employee, or any member of his immediate family, where the employee involved did not have the necessary financial resources to meet such situation. Between $ 4,000 and $ 5,000 a year was spent by petitioner in pursuance of this policy.
With the advent of the war petitioner's labor turnover was constantly increasing. Petitioner decided that if it could put into effect a tangible, definite*208 and specific plan to give financial assistance to needy employees in distress, it would improve management and labor relationship. In furtherance of establishing a definite plan, the management of petitioner caused a trust instrument to be prepared which was submitted to the board of directors. The plan, as set forth in the trust agreement, was adopted by the directors and the proper officers were authorized to execute the trust agreement and take such action as was necessary to carry the plan into execution. Petitioner's officers were directed to submit the trust instrument to the Commissioner of Internal Revenue for determination as to whether it complied with the provisions of the Internal Revenue Code. The office of the Commissioner recommended certain amendments and modifications. On July 31, 1944, a trust instrument embodying such amendments and modifications was executed by the properly authorized officer of petitioner, establishing the "T. J. Moss Tie Company Employees' Benefit Trust." This trust was at the time and since has been approved by the Commissioner of Internal Revenue as being a tax exempt organization under the provisions of section 101 (8) of the Internal*209 Revenue Code. The said trust was created and organized and now exists under the laws of the State of Missouri.
The trust agreement executed July 31, 1944, reads in part as follows:
THIS TRUST AGREEMENT, Made and entered into at Saint Louis, Missouri, this 31st day of July, 1944, and executed in triplicate, by and between T. J. Moss Tie Company, a corporation, organized and existing pursuant to the laws of the State of Missouri (hereinafter sometimes referred to as "Company"), party of the first part, and John S. Penney, George C. Hannaway and Meyer Levy, all of the City of Saint Louis, Missouri (hereinafter sometimes referred to as "Individual Trustees"), parties of the second part, and The Boatmen's National Bank of Saint Louis, a banking corporation, located in the City of Saint Louis, Missouri, and authorized by law to act in a trust capacity (hereinafter sometimes referred to as "Corporate Trustee"), party of the third part.
WITNESSETH:
WHEREAS, the objective of this Agreement is to make permanent a long established policy of the Company to render financial assistance to its employees *190 and thus contribute to their general welfare, social security and financial independence. *210 The fund hereby established is to be made available solely for such aid. It is proposed to communicate to the employees of the Company the program of aid herein provided so that they may know that the plan enables them and their beneficiaries to obtain aid in the event of mishap, misfortune or after their retirement. It shall be impossible for any diversion or use of the trust funds to occur other than for the exclusive benefit of the employees and their beneficiaries whether by operation under the terms hereof, by natural termination of the Trust, by power of revocation or amendment, by the happening of a contingency or by a collateral agreement, or by any other means. The plan establishes a practical and equitable means whereby employees who have been in the Company's employment for a period of three years or more shall receive financial aid from funds contributed solely by the Company under conditions as outlined in the plan. The Company deems that it can best serve its employees and fulfill its social and moral obligations to them and to the community by the establishment and maintenance of this trust fund. For years the Company has followed the policy of providing for employees*211 during illness and other periods of need and for employees who have reached an age that justified retirement. The contributions have been made on the basis of the employee's individual requirements. This policy was established by T. J. Moss, founder of the Company, it was continued by J. W. Fristoe, his successor, and it has been adhered to by the present management. It has resulted in a more liberal assistance to the employees than could be done under any other plan and it is the purpose of this Agreement to perpetuate that policy;
* * * *
ARTICLE I
The Trust Fund1. The Company simultaneously with the execution hereof has deposited with the Corporate Trustee the sum of One Thousand Dollars ($ 1,000.00) which shall constitute the initial Trust Fund. From time to time hereafter additional sums may be deposited hereunder which shall be added to and become a part of this Trust Fund.
2. The Company may, and it is its intention to, appropriate to the Trust such portion of the net earnings of the Company each year during the term of this Trust as may be determined by the Board of Directors of the Company. The determination of the amount of the appropriation, if any, by the Board*212 of Directors shall be conclusive and binding upon the Trustees and all interested persons. The Company may appropriate the capital stock or securities of the Company to the Trust in lieu of a cash appropriation of net earnings.
3. The Company shall not be obligated to make any contribution or appropriation whatsoever unless same be authorized by the Board of Directors of the Company, and nothing herein shall be construed to require the Company to make any contribution or appropriation whatsoever to the Trust Fund beyond the initial contribution.
4. Upon the deposit of any money or assets with the Corporate Trustee hereunder, all right, title and interest of the Company therein shall cease and terminate, and no part thereof or income therefrom shall be diverted to the Company, directly or indirectly, for any purpose other than that of providing benefit payments to employees and their beneficiaries. No part of the Trust Fund nor income therefrom shall at any time revert to the Company. Upon the transfer to the Corporate Trustee hereunder all responsibility of the Company for any *191 appropriation to the Trust Fund shall cease and the Company shall have no responsibility for*213 the acts of the Individual or Corporate Trustees in the administration of the Trust Fund.
5. No employee of the Company or beneficiary of this Trust shall be required to make any contribution to the Trust Fund, but the Corporate Trustee may accept and receive any gift, contribution or other transfer of property to the Trust Fund to be administered hereunder.
* * * *
ARTICLE II
Beneficiaries1. All employees and former employees of the Company who shall have attained the age of twenty-one years, and who shall have been continuously in the employ of the Company for at least three years, are eligible as beneficiaries under this Trust. Only those persons who are customarily employed more than twenty hours per week, and more than five months per year shall be deemed to be employees under this Agreement.
2. Loaders, stackers and other yard laborers in the timber production areas shall not be considered as employees of the Company so as to qualify as beneficiaries hereunder, since some of them from time to time work for the Company's competitors. Tie handlers and other laborers in wood preserving plants operated by the Company shall be eligible to become beneficiaries.
* * * *
4. Beneficiaries*214 under this Trust Agreement shall be divided into two classes: (a) Active beneficiaries who shall consist of those employees certified by the Company to the Corporate Trustee, as provided by the foregoing paragraphs, and who are active in the employment of the Company, and (b) Inactive beneficiaries, who shall consist of former employees of the Company, who, because of age, physical disability, or other cause, are not in the employment of the Company, but who are eligible to benefits hereunder, and have been approved by the Individual Trustees for such benefits and certified to the Corporate Trustee as beneficiaries. All reference herein to "beneficiaries" shall include both classes, unless special reference is made to one or the other class.
5. The following persons shall be ineligible to be beneficiaries hereunder:
(a) Members of the Board of Directors of the Company.
(b) Any employee or former employee of the Company determined by the Individual Trustees to be possessed of real or personal property which, in the opinion of the Individual Trustees, is sufficient to care for his needs without receiving benefits hereunder.
6. Any employee receiving from the Company an annual salary, *215 including bonus, of $ 10,000.00 or more shall not be entitled to receive any benefits from the Trust so long as he shall receive such salary. However, in the event of a reduction in salary or of retirement, such employee shall be entitled to the same benefits enjoyed by the other beneficiaries of the Trust.
* * * *
11. Upon dissolution of the Company, or upon its permanent discontinuance in business, the Trust herein created shall terminate. Upon the organization, consolidation or merger of the Company with any other corporation or firm, the Trust herein created may be continued or terminated, as the Individual Trustees, in their absolute discretion, shall determine. In the event of the termination of this Trust for any reason, the Individual Trustees shall direct the Corporate *192 Trustee to distribute free from trust all of the assets of the Trust estate to one or more non-profit organizations, formed and operated exclusively for religious, charitable, scientific, literary or educational purposes or for the prevention of cruelty to children or animals or for the promotion of social welfare.
* * * *
ARTICLE III
Duties and Powers of the Individual Trustees1. This Trust*216 Fund is created so as to better enable the Company to assume a share of responsibility for the general welfare, social security and financial independence of its employees by continuing its policy of granting financial aid and assistance to employees in accordance with their individual requirements. The Individual Trustees in the discharge of their duties herein imposed upon them shall follow the precedents heretofore established by the Company in rendering financial aid to the employees, and such past practices shall ever be a guide to them in the distribution of the Trust Funds.
2. The Individual Trustees are vested with full, complete and absolute discretion to direct and order distribution of the Trust Fund in the manner herein provided.
3. In accordance with the purposes and objects of the Trust, the Individual Trustees are authorized and empowered to direct such distribution out of the assets of the Trust Estate, both principal and interest, as the said Individual Trustees deem meet and proper for the payment of benefits to beneficiaries of the Trust herein to carry out the purposes and intents of this Trust, and more specifically to direct distribution thereof for the following*217 purposes, to-wit:
(a) To grant financial aid and assistance to beneficiaries who, because of age, physical disability or other cause, have been retired by the Company from active employment regardless as to whether such retirement occurred prior or subsequent to the date of this Agreement.
(b) To render financial aid to any beneficiary who by reason of sickness or physical disability of any kind suffered by himself so that said beneficiary may be restored to health and well-being and obtain the benefits of adequate medical care and attention during the illness and convalescence.
(c) To provide financial aid in the event any beneficiary of the Company suffers misfortune or mishap of any kind, nature or description, and the Individual Trustees, in their absolute discretion determine it to be for the best interest of said beneficiary that financial assistance be given to said beneficiary.
(d) To render financial aid in the event of the death of a beneficiary to his widow, minor children and other dependents when the Individual Trustees, in their absolute discretion, find that the death results in extraordinary financial hardship on such survivors. The Company has made provisions for*218 the payment of death benefits to its employees, or some of them, and it is not intended that this Fund shall generally provide for such death benefits except in extraordinary circumstances.
(e) To authorize the distribution of financial aid to a beneficiary upon the termination of his employment by the Company when the Individual Trustees, in their absolute discretion, determine such aid to be proper to carry out the purposes of this Trust.
(f) To direct the distribution of financial aid to employees who are temporarily unemployed for causes beyond their control, in the event the Individual Trustees determine that such aid is fitting and proper taking into consideration general economic conditions as well as the size of and probable demands against the Trust Fund.
*193 4. The Individual Trustees shall at all times have the right to authorize the increase, decrease or termination of any installment payment or other payment to be made in the future to or for the use of any beneficiary so that such payments shall at all times be subject to the absolute discretion of the Individual Trustees. The Individual Trustees shall, in so far as they deem it to be in the best interest of the*219 employee, permit any beneficiary to indicate whether benefits to be paid to him should be in a lump sum or in installments.
The Individual Trustees in directing the distribution of the Fund may, if they determine it to be proper, direct the purchase of any annuity contract for the beneficiary, and may designate any insurance company to be selected by them, and may specify the terms of the contract to be entered into by the Corporate Trustee.
5. The Individual Trustees shall be charged with the duty and responsibility of the management and administration of the assets and property of the estate as they, in their absolute discretion, determine to be the best interest of said estate and the beneficiaries thereof. * * *
* * * *
11. Upon the death, resignation, refusal or inability to act of an Individual Trustee at any time, his successor as Individual Trustee shall be appointed by the Board of Directors of the Company, and such successor as Individual Trustee shall succeed to all the duties, discretions and responsibilities of his predecessor in office. It is intended that there shall be at all times three Individual Trustees who are members of the Board of Directors of the Company, *220 and the removal or discontinuance of an Individual Trustee as a member of the Board of Directors of the Company shall be effective as a resignation as an Individual Trustee.
12. The majority vote of the Individual Trustees shall constitute the final and binding determination of the Individual Trustees upon any matter on which all the Trustees shall not be unanimous.
ARTICLE IV
Duties and Powers of the Employee Committees1. Under the direction of the Individual Trustees, and in accordance with regulations adopted by them, there shall be established among the beneficiaries of the Trust, Employee Committees so divided into units as to represent generally all the beneficiaries of the Trust. The number of Employee Committees, their personnel, and their respective terms of office shall be determined in accordance with the regulations established by the Individual Trustees.
2. The members of the Employee Committee shall be selected from time to time from amongst those employees who have general knowledge and acquaintance with the employees of their unit so that they may be in a position to advise the Trustees from time to time concerning the individual needs and requirements of the*221 beneficiaries in their units.
3. Each of said Employee Committees shall, from time to time, and in accordance with the regulations adopted by the Individual Trustees, recommend to the Individual Trustees beneficiaries of their unit for benefits under the Trust herein. The recommendations of the Employee Committees shall include the names of the beneficiaries and the facts and circumstances prompting the recommendations.
4. The Individual Trustees shall in all cases, except those determined by the Trustees to require expedient action, obtain the recommendation of the appropriate *194 Employee Committees before taking any action upon payments to any beneficiaries.
5. The recommendations of the Employee Committees shall not be binding upon the Individual Trustees but shall be solely advisory.
Article V, "Duties and Powers of the Corporate Trustee," provides that the corporate trustee is to have custody of the assets of the trust fund, make distributions as directed by the individual trustees, and comply with the directions of the individual trustees pertaining to the management and control of the trust property. The corporate trustee was to receive such compensation as the individual*222 trustees determined to be fair and reasonable.
ARTICLE VI
Miscellaneous1. This Agreement may be amended by an instrument of writing executed by the Company and the Individual Trustees, but no amendment shall be effective to revest any interest in the Trust Fund in the Company or to divest the employees of the right to receive in substantially the manner outlined herein the benefits of the Trust herein created. The duties and responsibilities of the Individual and Corporate Trustees shall not be increased without their respective written consents.
2. No beneficiary shall have the right or power to assign, hypothecate, mortgage, pledge of otherwise anticipate or create any lien upon his interest in the Trust Fund. The interest of any beneficiary in the Trust Fund shall not be subject to or liable for his debts, claims for alimony, support or his other obligations, nor shall any involuntary assignment thereof by operation of the law be possible.
* * * *
6. Unless sooner terminated in accordance with the provisions hereof, the Trust shall continue for the longest period permitted by law, which under the provisions of Section 3541a and 3541b of the Laws of Missouri, 1941 (pages *223 716 and 717), shall be for such term as may be necessary for the accomplishment of the purposes for which this Trust was created. If the said statutes become invalid or inoperative, and in the absence of any statute or ruling applicable to the terms of the Trust, the Trust herein shall terminate twenty-one years after the death of the last to survive of the beneficiaries in being at the date hereof, who are or hereafter may become a beneficiary of the Company.
* * * *
During its fiscal year ended October 31, 1943, petitioner contributed the amount of $ 1,000 to such trust. In the respective taxable years ended October 31 involved herein petitioner contributed to such trust $ 20,000 in 1944, $ 15,000 in 1945, and $ 10,000 in 1946.
No contributions have been made to such trust by petitioner subsequent to the fiscal year ended October 31, 1946. No contributions to such trust have been made by any beneficiary-employee or by any person, firm or corporation other than petitioner.
The trust at all times since its creation has been operated strictly in accordance with the terms and provisions of the trust instrument. *195 Distributions from such trust have been made for the purposes*224 and in amounts as follows:
| Because of illness of: | |||
| Physical | |||
| Year | incapacity of | ||
| Member of | beneficiary | ||
| Beneficiary | family of | ||
| beneficiary | |||
| 1945 | $ 421.07 | $ 325.00 | |
| 1946 | 650.00 | 450.00 | |
| 1947 | 2,581.91 | 400.00 | |
| 1948 | 2,797.67 | $ 690.00 | |
| 1949 | 660.00 | 1,700.00 | 785.00 |
| 1950 | 1,380.00 | 1,700.00 | 4,680.00 |
| 1951 (to 7/31) | 3,475.00 |
The number of eligible employees of petitioner and the approximate aggregate compensation paid to them in the respective taxable years are as follows:
| Number of | Aggregate | |
| Year | employees | compensation |
| 1944 | 350 | $ 633,301.16 |
| 1945 | 372 | 715,823.09 |
| 1946 | 390 | 784,681.97 |
The net income of petitioner, after deducting the contributions to its Employees' Benefit Trust and its other charitable contributions as shown on its income and excess profits tax returns for the taxable years 1944, 1945, and 1946, is as follows: 1944, $ 436,141.43; 1945, $ 382,075.26; and 1946, $ 581,054.29.
The amounts claimed by petitioner as deductions for charitable contributions, other than to its Employees' Benefit Trust, were as follows: 1944, $ 4,505; 1945, $ 10,208.61; and 1946, $ 6,006.84.
All employees of the petitioner who were*225 beneficiaries received a copy of the trust at the time of its establishment, and new employees, who may become eligible, have been made acquainted with the terms of the trust.
OPINION.
The issue presented is whether the amounts contributed by the petitioner to its Employees' Benefit Trust in the respective taxable years involved are allowable deductions from its gross income.
The respondent contends that the trust in question is primarily a profit sharing and pension plan trust, and since the taxable years involved are subsequent to the amendment of section 23 (p) of the Internal Revenue Code by the Revenue Act of 1942, the amounts contributed can be deducted, if at all, only under that section. Tavannes *196 v. Commissioner, 176 F. 2d 211; Times Publishing Co., 13 T. C. 329, affd. 184 F. 2d 376.
Petitioner contends that its Employees' Benefit Trust is not a pension, profit sharing, stock bonus, or annuity plan, within the meaning or contemplation of sections 165 and 23 (p) of the Code, but an exempt organization and plan organized and operated exclusively for charitable purposes.
*226 If the trust in question is a pension, profit sharing, or annuity plan, the respondent's disallowance of the contested deductions must be sustained.
The provisions of the trust instrument, however, disclose that the primary and sole purpose of the plan was the promotion of social welfare of petitioner's employees. The specific objects of the plan, as set forth in Article III, are to render financial assistance to those employee-beneficiaries who are in need of such assistance by reason of sickness, physical disability, and misfortune; those temporarily unemployed for reasons beyond their control; and members of the immediate family of an employee where his death results in extraordinary financial hardship. The distributions made by the trustees pursuant to the provisions of the trust were made only for such purposes.
Treasury Regulations 111, section 29.23 (p)-1, 1 interpreting section 23 (p) of the Code, provides:
* * * Section 23 (p) does not apply to a plan which does not defer the receipt of compensation. Neither does section 23 (p) apply to deductions for contributions under a plan which is primarily a dismissal wage, or unemployment benefit plan or a sickness, accident, *227 hospitalization, medical expense, recreational, welfare, or similar benefit plan, or a combination thereof. * * *
We think the petitioner's Employees' Benefit Trust is of the character defined in the Regulations as not embraced in section 23 (p) of the Code. Hence, it is not a pension, profit sharing plan within the purview of sections 165 and 23 (p) of the Code.
We, therefore, consider whether the contested deductions are allowable under section 23 (a)(1)(A) as ordinary and necessary expenses of carrying on petitioner's business, or as contributions to a charitable trust, as defined in section 23 (q) of the Code. Section 23 (a) (1)(B), which was added by the Revenue Act of 1938, provides that if contributions are deductible under section 23 (q) they may not be deducted under section 23 (a)(1)(A) as business expenses. Cf. McDonnell Aircraft Corporation, 16 T. C. 189.
Petitioner contends that its *228 Employees' Benefit Trust was a charitable trust, and points to the stipulated fact that the respondent at all times has held that the trust was a tax exempt organization under the *197 provisions of section 101 (8) of the Code. The fact that an organization qualifies as exempt from tax under the various subdivisions of section 101 does not per se make the contributions to such organizations deductible. In order to be deductible under section 23 (q) the contributions must be made to or for the use of "A corporation, trust, or community chest, fund, or foundation, * * * organized and operated exclusively for religious, charitable, scientific, veteran rehabilitation service, literary, or educational purposes or for the prevention of cruelty to children * * *."
We are convinced that the trust in question was organized and operated exclusively for charitable purposes during the taxable years involved. The sole object of the trust was to accept, hold, administer, invest, and disburse its funds for social welfare, a recognized charitable purpose.
The trust is not revocable and the corpus or income thereof cannot revert to the petitioner. In the event of its termination for any*229 reason Article II, paragraph 11, provides that the corporate trustee is "to distribute free from trust all of the assets of the Trust estate to one or more non-profit organizations, formed and operated exclusively for religious, charitable, scientific, literary or educational purposes or for the prevention of cruelty to children or animals or for the promotion of social welfare."
In the case of John R. Sibley et al., Executors, 16 B. T. A. 915, we held that contributions made by an individual to a corporation formed for the purpose of extending aid and assistance to the employees of Sibley, Lindsay & Curr Co. were deductible as charitable contributions under section 214 (a)(11) of the Revenue Act of 1921. 2Proctor Patterson et al., Executors, 34 B. T. A. 689; Mutual Aid & Benefit Ass'n v. Commissioner, 42 F. 2d 619; and Gimbel v. Commissioner, 54 F. 2d 780.
*230 Since 23 (q) of the Code grants corporations the right to deduct charitable contributions similarly allowed to an individual by section 23 (o), with certain exceptions not material here, we think the rationale of the Sibley case, supra, is applicable and controlling here. Cf. Eagan v. Commissioner, 43 F. 2d 881.
We, therefore, hold that the contested deductions constitute contributions of petitioner to a charitable trust within the purview of section 23 (q) of the Code, and are deductible to the extent that such contributions, together with the other contributions made by petitioner in the taxable years involved, do not exceed the 5 per cent limitation prescribed by such section.
Decision will be entered under Rule 50.
Footnotes
1. As amended by T. D. 5666, 1948-2 C. B. 34↩.
2. Section 214 (a)(11) of the Revenue Act of 1921 is the forerunner of section 23 (o), Internal Revenue Code, which allows charitable deductions to individual taxpayers. The Revenue Act of 1936 added section 23 (q), now section 23 (q), Internal Revenue Code↩, granting to corporations the right to deduct charitable contributions.