The John Danz Charitable Trust v. Commissioner of Internal Revenue

The instant petition was filed to review a decision of the Tax Court, 18 T.C. 454 , which ordered and decided that there were deficiencies in the income tax of petitioner for three years: 1943, 1944 and 1945. There are three questions presented :

John Danz and Jessie Danz were grantors in a written trust agreement whereby there were conveyed to Trustees 6,228 shares of stock in a theatre corporation, of which 900 shares were allocated to The John Danz Charitable Trust and the balance to six other private trusts. The powers of the Trustees as to all these trusts were broadly defined in the same instrument. They were permitted to “invest funds of the trust estates in any property * * * and whether or not speculative in character. They may carry on any trade or business on behalf of the trust estates. * * * They may loan funds of the trust estates with or without security. * * * In investing or speculating with trust funds, trustees may combine funds of any trusts created by grantors, whether created by this or any other instrument.”

The Trustees were not intended, as the above provisions show, to act as a religious, educational or charitable institution. But, apparently, the…

(dissenting).

I have a somewhat different view of the statutes here applicable, — one that has led me to believe that Arthur Jordan Foundation v. C. I. R., 7 Cir., 210 F.2d 885 , which reaches the opposite conclusion, is correctly decided.

I do not think Ralph H. Eaton Foundation v. Commissioner of Internal Revenue, 9 Cir., 219 F.2d 527 , furnishes any solution for this case. It was decided upon a claim for exemption under Sec. 101 (6) of the Revenue Code which refers to “corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes * * *.” The John Danz Charitable Trust does not come within any of those categories. It is, as the Tax Court pointed out in its opinion, “a genuine valid trust * * * taxable under Supplement E”. The tax is imposed by Sec. 161 and ■ the deduction claimed is that allowed by Sec. 162(a).

A difference in phraseology in Sec. 101 (6) and Sec. 162(a) suggests a different congressional intent with respect to corporations and foundations on the one hand and trusts on the other. Sec. 101 (6) which commanded the decision in the Eaton Foundation case refers…

231 F.2d 673 55-2 USTC P 9723 The JOHN DANZ CHARITABLE TRUST, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. No. 13608. United States Court of Appeals Ninth Circuit. Oct. 25, 1955. Rehearing Denied May 14, 1956. F. A. LeSourd, Little, LeSourd, Palmer & Scott, Seattle, Wash., for petitioner. H. Brian Holland, Asst. Atty. Gen., Melva M. Graney, Carolyn Just, Ellis N. Slack, Sp. Assts. to Atty. Gen., John Potts Barnes, Chief Counsel, Internal Revenue Service, Chicago, Ill., for respondent. Before POPE and FEE, Circuit Judges, and CLARK, District Judge. JAMES ALGER FEE, Circuit Judge. 1 The instant petition was filed to review a decision of the Tax Court, 18 T.C. 454 , which ordered and decided that there were deficiencies in the income tax of petitioner for three years: 1943, 1944 and 1945. There are three questions presented: 2 '1. Whether the trust, which was authorized to and did conduct businesses for profit, was 'organized and operated exclusively for * * * charitable * * * purposes', and is thus exempt from tax under Section 101(6) of the Internal Revenue Code, simply because the trust fund is payable only to such exempt organizations as John Danz, one of the…