1929 BTA LEXIS 2260">*2260 Under section 403(a)(3) of the Revenue Act of 1921, a bequest of personal property and a devise of real estate to the Glenwood Cemetery Associationheld not to be to a corporation organized and operated exclusively for charitable purposes and the value of such property so bequeathed and devised may not be deducted from the gross estate in determining the value of the net estate subject to the tax.
17 B.T.A. 654">*654 These proceedings are for the determination of a deficiency in estate tax on the estate of George I. Wilber, who died July 13, 1922.
The deficiency determined by the Commissioner amounts to $22,725.55, of which amount the petitioner concedes that $409.55 is due, leaving a balance of $22,316 contested.
Since the Commissioner's determination other expenses have been paid or incurred, which petitioner claims are deductible from the gross estate, as indicated in our findings of fact.
FINDINGS OF FACT.
The petitioner is a national banking corporation and the executor and trustee of the last will and testament of George1929 BTA LEXIS 2260">*2261 I. Wilber, deceased, who died July 13, 1922. Said last will and testament was probated and the petitioner was appointed executor and trustee 17 B.T.A. 654">*655 thereof by the Surrogate of Otsego County, New York, on August 25, 1922, and is now acting as such.
The petitioner duly filed a return for Federal estate tax on January 3, 1924, in which the amount of said tax as computed by the petitioner was stated at $224,826.03. This amount was duly paid. The Commissioner under date of November 25, 1925, notified petitioner of his audit and review of said return resulting in a tentative determination of a deficiency in said tax of $44,684.64. A copy of said tentative determination is attached to the petition.
The petitioner protested each of the Commissioner's tentative determinations and submitted considerable evidence by affidavit in support of its protest. An oral hearing before the Commissioner was held June 14, 1926, and on October 8, 1926, the Commissioner mailed his final determination in which some of the protests were upheld, and in which the tentative deficiency was reduced from $44,684.64 to $22,725.55, the amount then determined to be due.
Of the last amount stated the1929 BTA LEXIS 2260">*2262 petitioner concedes that $409.55 is due the Federal Government, leaving a balance of $22,316, the amount involved in this appeal.
The Commissioner's final determination increases the valuation of the decedent's Wilber National Bank capital stock by $100 per share or $76,700 and disallows the deduction of $82,700, the value of the property bequeathed to Glenwood Cemetery Association as a charitable gift, thereby increasing the amount of the estate and decreasing the deduction as set up in the return.
It was stipulated by the attorneys for the parties herein (1) that the sum of $4,335.44 had been paid by the petitioner as such executor as administration expenses in addition to the amount allowed in the determination; (2) that the executor had handled interest, dividends and other property which entitled the executor to commissions to the extent of $12,858.14 over and above the amount determined to have been earned; (3) that the executor had paid to its attorney for his legal services since said determination the sum of $20,000; and (4) that said sums are deductible amounts.
The decedent owned 767 shares of the capital stock of the Wilber National Bank of Oneonta, N.Y. The total1929 BTA LEXIS 2260">*2263 capital stock of 1,000 shares of a par value of $100 was held at the time of decedent's death by about 24 different stockholders, none of whom was a member of decedent's family. The bank never paid over 12 per cent dividends. At the time of decedent's death banking was going through a period of readjustment. Government bonds were selling below par. The bank had suffered losses. The book value of the stock of the bank at the date of the death of decedent was $600 per share. The fair market value of the stock at that date was $500 per share. At 17 B.T.A. 654">*656 the date of the death of decedent the bank became the owner of real estate including the bank building appraised at $95,000.
By his will the decedent gave real and personal property to the Glenwood Cemetery Association valued at $82,700. The fourth clause of said will, omitting description of land devised, is as follows:
% fourth: i g/ive and Bequeath to my Executor and Trustee, its Successor or Successors Four hundred shares of the Capital Stock of the Albany and Susquehanna Railroad Company, to be held by it in Trust for the benefit of the Glenwood Cemetery Association, partly located in the City and town of Oneonta, 1929 BTA LEXIS 2260">*2264 N.Y., the Net Income therefrom is to be paid to said Association during the lives of David W. Mix and David Forrest Wilber, Jr., (my nephew) or the longest lived of them; at the decease of the longest lived of them, the said Executor and Trustee, its Successor or Successors shall Transfer and deliver to the said Glenwood Cemetery Association the said shares of the Capital Stock of the Albany and Susquehanna Railroad Company, and I WILL and DIRECT that the same be held by the said Association for the purposes hereinafter stated, to wit: - the same to be held by it as an endowment stock, for a perpetual fund, and the Dividends, uses and Income therefrom to be used for the perpetual care of the lots known as the David Wilber and George I. Wilber Circle Burial lots; and any surplus income not needed for the care of these two described lots may be added to the endowment fund, to be used for the general expenses and upkeep of said Cemetery, and I suggest that a portion of the income of said stock shall be used for the erection of a public Vault, (unless previously erected) and for the erection, later on, when required of an Iron Vehicle Bridge across Glenwood Gorge, near where the old foot1929 BTA LEXIS 2260">*2265 bridge formerly stood, when deemed advisable and when prices become more normal. The receipt of the Treasurer thereof shall be sufficient discharge to my executor and Trustee for the same. This legacy is payable and to take effect immediately after my decease, so far as it relates to income, and lands. I ALSO GIVE - DEVISE and BEQUEATH to the said Glenwood Cemetery Association of Oneonta, N.Y., ALL MY RIGHT - TITLE - INTEREST and OWNERSHIP in and to the following lands and premises, located in the City and Town of Oneonta, N.Y., described as follows: * * *
The Glenwood Cemetery Association is an incorporated association, organized May 12, 1886, pursuant to chapter 133, Laws of 1847, entitled "An Act authorizing the incorporation of rural cemetery associations."
The decedent was much interested in the cemetery, and was a director of the same for over 28 years. His parents and his wife had been buried there. He was a lot owner therein and had helped the cemetery financially during his lifetime. There were two Wilber family lots or plots therein, circular in form, about 50 feet each in diameter. During decedent's life these family plots were mowed and received the same care1929 BTA LEXIS 2260">*2266 as the rest of the cemetery.
The cemetery originally comprised about 60 acres of land, and after the devise of certain lands by the decedent, approximately 200 acres of land. In it there are about 1,100 lots and there have been 17 B.T.A. 654">*657 about 1,500 interments. Burial has not been denied to anyone on account of poverty, race, color or previous condition of servitude. There have been only three of four burials in a section of the cemetery set apart for the burial of persons not able buy a lot.
The Cemetery Association never issued any stock. Up to the time of decedent's death there were no salaried officers. The by-laws make no mention of salaries to any officers.
In a pamphlet or circular containing the by-laws, rules and regulations of the Glenwood Cemetery Association and the names of the trustees and officers thereof, it is stated:
When a lot has once been purchased with the enclosure of our ground, it becomes for all time the property of the family and cannot be taken for debt, or sold for secular uses, and the ground cannot be encroached upon for any purpose.
The trustees believe that all will aid in this great enterprise, and take an active interest in the1929 BTA LEXIS 2260">*2267 improvement and prosperity of the Association.
They would add for the information of lot owners that the law is explicit pertaining thereto, and that all sums paid for lots, or for repairing or improvement upon the same, are expended solely for the care and advancement of the ground.
Sections 3 and 4 of Article III of the by-laws are as follows:
SEC. 3. Interments are subject to the following charges, to be paid to the Superintendent, before or at the time of interment, namely:
Opening, closing and sodding the grave of a person over seven years old, five dollars. Opening, closing and sodding the grave of a child under seven years old, three dollars.
SEC. 4. Single graves may be procured in public lots appropriated for that purpose, at ten dollars each for an adult and six dollars for a child, which price will include the opening and closing and sodding the grave. If lots should afterwards be purchased and the bodies removed the full cost of the graves located will be allowed after deducting the expense of the original interment, and for the disinterment of the remains.
OPINION.
LITTLETON: At the hearing it was conceded by counsel for the Commissioner, and the1929 BTA LEXIS 2260">*2268 evidence so warrants, that the petitioner is entitled to additional deductions as follows:
| Administration expenses | $4,335.44 |
| Executor's commissions | 12,858.14 |
| Legal services | 20,000.00 |
| Total | 37,193.58 |
The foregoing expenses, incurred since the original determination by the Commissioner, are reasonable and are properly deductible. ; ; John A.17 B.T.A. 654">*658 ; ;
The other issues are as to the market value of the 767 shares of stock of the Wilber National Bank and whether the bequest and devise of property of the value of $82,700 to the Glenwood Cemetery Association was to or for the use of a corporation "organized and operated exclusively" for "charitable purposes."
The decedent owned at his death 767 shares of the stock of the Wilber National Bank, the book value of which is stipulated to have been $600 per share and the Commissioner1929 BTA LEXIS 2260">*2269 determined its market value to be about the same. This the petitioner contests, insisting that its fair market value, as shown by an appraisement and from some sales of same shortly prior to decedent's death, was only $500 per share. In our opinion, the evidence justifies us in determining the market value of the stock of the Wilber National Bank to be $500 instead of $600 per share. The Commissioner, therefore, erred in increasing the valuation of the decedent's Wilber National Bank stock $100 per share, or $76,700 more than claimed and stated in petitioner's tax return.
The Commissioner held that the bequest and devise of property of the value of $82,700 to the Glenwood Cemetery Association was not an authorized deduction from the decedent's gross estate under the provisions of section 403(a)(3) of the Revenue Act of 1921.
Whether such holding is correct, is the remaining issue for our determination.
The Act provides that for the purpose of the tax the value of the net estate shall be determined by deducting from the value of the gross estate:
(3) The amount of all bequests, legacies, devises * * * to or for the use of any corporation organized and operated exclusively1929 BTA LEXIS 2260">*2270 for * * * charitable * * * purposes * * * no part of the net earnings of which inures to the benefit of any private stockholder or individual, or to a trustee or trustees exclusively for such * * * charitable * * * purposes.
The specific purposes for which the 400 shares of stock of the Albany & Susquehanna Railroad Co. were bequeathed by the decedent to the Glenwood Cemetery Association, as expressed in his will, were that the income from same be paid to the Glenwood Cemetery Association during the lives of David W. Mix and David Forrest Wilber, Jr., or the longest lived of them and after the death of the longest lived of them the same to be held by it "as an endowment stock, for a perpetual fund, and the Dividends, uses and Income therefrom to be used for the perpetual care of the lots known as the David Wilber and George I. Wilber Circle Burial lots; and any surplus income not needed for the care of these two 17 B.T.A. 654">*659 described lots may be added to the endowment fund, to be used for the general expenses and upkeep of said Cemetery, and I suggest that a portion of the income of said stock shall be used for the erection of a public Vault, (unless previously erected) and for1929 BTA LEXIS 2260">*2271 the erection, later on, when required of an Iron Vehicle Bridge across Glenwood Gorge, near where the old foot bridge formerly stood, when deemed advisable and when prices become more normal. The receipt of the Treasurer thereof shall be sufficient discharge to my Executor and Trustee for the same. This legacy is payable and to take effect immediately after my decease, so far as it relates to income, and lands. I ALSO GIVE - DEVISE and BEQUEATH to the said Glenwood Cemetery Association of Oneonta, N.Y., ALL MY RIGHT - TITLE - INTEREST and OWNERSHIP in and to the following lands and premises, located in the City and Town of Oneonta, N.Y.," describing same.
The devise of the land to the Glenwood Cemetery Association does not state the number of acres nor specify for what purpose it should be used.
There is nothing in the fourth clause of the will bequeathing and devising the property mentioned therein which in words designates the property as being for "charitable" purposes.
It is necessary, therefore, for the Board to decide whether the Glenwood Cemetery Association is a corporation organized and operated exclusively for charitable purposes within the meaning of the 19211929 BTA LEXIS 2260">*2272 Revenue Act.
The Glenwood Cemetery Association was organized pursuant to the provisions of chapter 133, Laws of 1847 (New York), entitled "An Act authorizing the incorporation of rural cemetery associations."
It appears that on May 10, 1886, twelve persons held a meeting at the Central Hotel in the village on Oneonta, N.Y., for the purpose of organizing a "Cemetery Association" in that village; that they did organize, elected six trustees "to manage the concerns of said association," for which they adopted the name "Glenwood Cemetery Association."
The by-laws, rules and regulations of the said association, provide
When a lot has once been purchased within the enclosure or our ground, it becomes for all time the property of the family and cannot be taken for debt, or sold for secular uses, and the ground cannot be encroached upon for any purpose.
* * *
* * * All sums paid for lots, or for repairing or improvement upon the same, are expended solely for the care and advancement of the ground.
The by-laws provide for the payment to the superintendent of certain charges, before or at the time of interments.
17 B.T.A. 654">*660 Section 4 of Article III of the by-laws, is as follows:
1929 BTA LEXIS 2260">*2273 Single graves may be procured in public lots appropriated for that purpose, at ten dollars each for an adult and six dollars for a child, which price will include the opening and closing and sodding the grave. If lots should afterwards be purchased and the bodies removed the full cost of the graves located will be allowed after deducting the expense of the original interment, and for the disinterment of the remains.
The Act of 1847, under which the Glenwood Cemetery Association was organized, has, among others, the following provisions:
SEC. 4. Any association incorporated under this act, may take by purchase or devise, and hold within the county in which the certificate of their incorporation is recorded, not exceeding two hundred acres of land; to be held and occupied exclusively for a cemetery for the burial of the dead. * * * Any association incorporated under this act, may hold personal property to an amount not exceeding five thousand dollars, besides what may arise from the sale of lots or plats.
SEC. 7. * * * One-half at least of the proceeds of all sales of lots or plats shall be first appropriated to the payment of the purchase money of the lands acquired by1929 BTA LEXIS 2260">*2274 the association, until the whole purchase money shall be paid, and the residue thereof to preserving, improving and embellishing the said cemetery grounds and the avenues, or roads leading thereto, and to defraying the incidental expenses of the cemetery establishment. And after the payment of the purchase money and the debts contracted therefor, and for surveying and laying out the land, the proceeds of all future sales shall be applied to the improvement, embellishment and preservation of such cemetery and for incidental expenses, and to no other purpose or object.
SEC. 10. The cemetery lands and property of any association, formed pursuant to this act, shall be exempt from all public taxes, rates and assessments; and shall not be liable to be sold on execution, or be applied in payment of debts, due from any individual proprietors. But the proprietors of lots or plats in such cemeteries, their heirs, or devisees, may hold the same exempt therefrom so long as the same shall remain dedicated to the purpose of a cemetery, and during that time, no street, road, avenue, or thoroughfare shall be laid through such cemetery, or any part of the lands held by such association, for the1929 BTA LEXIS 2260">*2275 purposes aforesaid; without the consent of the trustees of such association, except by special permission of the legislature of the state.
SEC. 11. Whenever the said land shall be land off into lots or plats, and such lots or plats or any of them shall be transferred to individual holders, and after there shall have been an interment in a lot or plat so transferred, such lot or plat from the time of such first interment shall be forever thereafter inalienable, and shall upon the death of the holder or proprietor thereof descend to the heirs at law of such holder or proprietor, and to their heirs at law forever; provided, nevertheless, that any one or more of such heirs at law may release to any other of the said heirs at law his, her or their interest in the same, * * *
Many authorities are cited in support of petitioner's contention that Glenwood Cemetery Association is organized and operated exclusively for charitable purposes.
We find nothing in the original articles of incorporation of Glenwood Cemetery Association, nothing in the law under which it was 17 B.T.A. 654">*661 incorporated, and nothing in the evidence as to its method of operation, that indicates that it was "organized1929 BTA LEXIS 2260">*2276 and operated exclusively for charitable purposes."
The act under which Glenwood Cemetery Association was organized has been long since repealed. See McKinney's Consolidated Laws of New York, Book 34, Membership Corporations Law, p. 150.
Various sections of New York laws and numerous authorities are cited in an attempt to sustain the contention that Glenwood Cemetery Association is organized and operated exclusively for charitable purposes.
In our opinion, however, in the circumstances of the instant case, neither the old nor the new law warrants such conclusion. The most that can be said is that the Glenwood Cemetery Association was organized and operated exclusively for cemetery purposes. The law did not provide for the giving to the poor either lots or graves in the cemetery, but there was a fixed price for each.
The fact that no one, who could pay the price, was excluded from becoming a purchaser of a lot, or, if unable, was never forbidden free burial in a certain section of the cemetery, did not make its operation "exclusively" for charitable purposes.
Those who did buy lots, secure deeds thereto and have interments made therein acquired inheritable property, 1929 BTA LEXIS 2260">*2277 for which they are presumed to have paid full value and were in no sense objects of charity or the recipients of charitable gifts.
The fact that Glenwood Cemetery Association was organized and is operated exclusively for cemetery purposes; that no part of its net earnings inures to the benefit of any private stockholder or individual; that its purposes are public rather than private; that the real estate of such cemetery is exempt from taxation, does not necessarily constitute it an organization or association operating "exclusively for charitable purposes."
In the organization and operation of the Glenwood Cemetery Association, as disclosed by the evidence, there no doubt enter benevolent and charitable purposes, and the bequest and devise by the decedent of the shares of stock and land mentioned in clause four of his will, might be considered to constitute a benevolent act and charitable gift to the association.
How much of what was given should be considered exclusively for charitable purposes, how much attributed to benevolence and how much for the perpetual care of the family circle burial lots of David Wilber and George I. Wilber, we can not from the evidence1929 BTA LEXIS 2260">*2278 determine.
Benevolence has a broader meaning than charity. Charity may be benevolence, but all benevolence is not necessarily charity. Acts of benevolence and charity are highly favored.
17 B.T.A. 654">*662 The tax statutes limit deductions to organizations whose purposes are exclusively charitable (aside from those clearly not to be considered here) and in the light of the law under which the Glenwood Cemetery Association was organized and the purpose and method of its operations as disclosed by the evidence, we are of the opinion that the action of the Commissioner in disallowing the claimed deduction of the bequest and devise of property of the value of $82,700 to the Glenwood Cemetery Association should be approved, and we so adjudge. See , and .
Reviewed by the Board.
Judgment will be entered under Rule 50.