*809 In computing gift tax, gifts made to a corporation entirely devoted to making charitable donations, whose principal organizer and financial backer was also the principal controller of its benefactions, help being given by the corporation in small amounts to some of his relatives only because they were ill or destitute and not because they were related to him, held deductible.
*778 The Commissioner determined deficiencies of $23.25, $13.13, and $69.74 in petitioner's gift taxes for 1933, 1934, and 1935, respectively, by disallowing the deduction of contributions to a corporation which petitioner organized for charitable purposes.
FINDINGS OF FACT.
Petitioner, a resident of Philadelphia, Pennsylvania, made cash contributions of $8,100 in 1933, $6,750 in 1934, and $8,900 in 1935 to the Otto Co. This Delaware corporation was organized by him and two others on February 7, 1931, for the purpose of acting:
* * * as a charitable organization for the relief of distress and for the support*810 of worthy needy, indigent, sick or unemployed persons and for the purpose of assisting partially in the support and maintenance of worthy persons whose means and capacities for self-support are inadequate to their needs by reason of age, infirmity or otherwise; and for the purpose of receiving and distributing donations of supplies and money for the foregoing purposes, and collecting and receiving money for other charitable organizations and corporations and distributing such contributions among such charitable organizations and corporations; * * *
The Otto Co. has no capital stock. Its three organizers constituted its officers and board of directors, petitioner being president. They served without compensation. The annual expenses of the corporation were about $150.
Having inherited a substantial fortune from a great-aunt, petitioner has devoted his time and attention to social service. He was a founder of the Playground Association of Philadelphia in 1908, and in private or official capacity has been constantly interested in recreational facilities for the underprivileged and in other charitable works. In organizing the Otto Co., he hoped that the contributions *779 *811 of others besides himself would make it possible to achieve more in these fields, but he has been the company's principal support, the contributions of others amounting to only $175 in 1933, $2,446 in 1934, and $995 in 1935.
During those years the Otto Co. made gifts of $8,379.01 in 1933, $9,196.00 in 1934, and $9,758.04 in 1935, to approximately sixty donees, including numerous charitable, religious, and educational organizations. Among the donees were the Playground Association and the National Recreation Association, with which petitioner had previously been connected, the American Academy of Political & Social Science, the Red Cross, the Boy Scouts, community chests, shurches, colleges, and hospitals. It contributed between $1,200 and $1,400 a year to the support of a needy and mentally defective woman who was distantly related to petitioner and whose sister appealed to him for help. It contributed about the same amount to petitioner's sister-in-law, whom his brother had deserted in 1916 and who appealed to him for aid in 1931 when she found it impossible to secure work. It contributed $25 a month to each of two aged distant relatives whose means were very meager. Petitioner*812 knew these beneficiaries very slightly; he had perhaps amde small gifts to some of them before the Otto Co. was formed, but all lived in distant cities and he had seen them only a few times in his life. The aggregate amount paid to them was $3,425 in 1933, $3,265 in 1934, and $2,847 in 1935.
The Otto Co. likewise assisted other individuals whom petitioner thought needy and worthy. It paid the expenses of a young man who was preparing himself at college to be a recreational director; of a young architect who held a French scholarship; of an architect temporarily destitute; of young men otherwise unable to attend college; of a superannuated minister; of hospital care for a was veteran's daughter, a needy archaeologist, and a trained nurse who had suffered a nervous breakdown and whom petitioner's wife had previously aided; of a young Syrian whom petitioner had assisted at college before the company was formed; of a needy farmer requiring farm machinery; of an aged colored woman without means; and of others needing assistance. These persons were recommended or applied to petitioner personally for help. No substantial part of the company's activities was carrying on propaganda, *813 or otherwise attempting to influence legislation. The Otto Co. was organized and in 1933, 1934, and 1935 was operated exclusively for charitable purposes.
OPINION.
STERNHAGEN: The Commissioner disallowed a deduction in each year of the excess over the $5,000 exclusion, holding that the Otto Co. *780 was not within the description of section 505(a)(2)(B), Revenue Act of 1932:
In computing net gifts for any calendar year there shall be allowed as deductions:
(a) RESIDENTS. - In the case of a citizen or resident -
* * *
(2) CHARITABLE, ETC., GIFTS. - The amount of all gifts made during such year to or for the use of -
* * *
(B) a corporation, or trust, or community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, including the encouragement of art and the prevention of cruelty to children or animals; no part of the net earnings of which inures to the benefit of any private shareholder or individual.
The argument is that because to some extent the corporation used its funds to help petitioner's relatives it must be regarded as outside the statutory category, citing *814 . That case held the corporation to be only a means for enabling its sole shareholder to deduct contributions to relatives which were not deductible if the contributions were made by him directly.
In our opinion the evidence in this case, which seems to be quite complete, shows that the corporation was consistently devoted entirely to making charitable donations. The help that was given to petitioner's relatives was in small amounts and only because they were ill or destitute and not because they were related to petitioner. This does not appear in the DuBios case. The contributions were no less prompted by a charitable purpose than were those to the numerous other donees. Certainly, as shown by its charter and by the petitioner's testimony, which was entirely credible, the purpose of its formation was entirely charitable, and we find nothing in the evidence of its activities to indicate that its operations were not exclusively so. It does not appear to have been organized primarily as a device for providing tax deductions, but altruistically as an instrument of charity, with no ulterior design. There is no reason to deny its*815 charitable character under the statute because the principal organizer and financial backer is also the principal controller of its benefactions. See . Of course the evidence must be reasonably convincing of the charitable purpose and operation of the corporation; but, that being established, the gift tax deductions of contributions to it are as available to its sole or controlling organizer and sponsor as to others. In the DuBois case the evidence was held to indicate the purpose to provide petitioner with a tax deduction and thus the finding of the statutory condition of exclusive operation for charitable purposes *781 could not be made. Here we think the evidence compels the finding.
, was a case where the purpose of the trust seeking exemption was found from the instrument and the testimony to be private beneficence to the founder's blood relatives and not charity.
In our opinion, the contributions made by petitioner in the taxable years to the Otto Co. were deductions and their disallowance as such was error.
Decision will be entered*816 for the petitioner.