Evergreen Cemetery Association of Seattle, a Corporation v. United States

444 F.2d 1232 EVERGREEN CEMETERY ASSOCIATION OF SEATTLE, a corporation, Appellant, v. UNITED STATES of America, Appellee. No. 24805. United States Court of Appeals, Ninth Circuit. July 7, 1971. Rehearing Denied August 13, 1971. 1 Joseph D. Holmes, Jr. (argued), of Karr, Tuttle, Campbell, Koch & Campbell, Seattle, Wash., for appellant. 2 William Friedlander (argued), W. Forbes Ramsey, Attys., Tax Div., Johnnie M. Walters, Asst. Atty. Gen., Washington, D. C., Eugene G. Cushing, U. S. Atty., Albert E. Stephan, Asst. U. S. Atty., Seattle, Wash., for appellee. 3 Before CHAMBERS and HAMLEY, Circuit Judges, and GOODWIN, District Judge. * ALFRED T. GOODWIN, District Judge: 4 A cemetery "perpetual care" corporation appeals from a district court judgment denying a refund of capital-gain taxes paid in 1963 and 1964. We affirm. Two corporate entities are material: 5 (1) The Evergreen Cemetery Company operates for profit three cemeteries in the Seattle area. It sells cemetery lots, burial crypts, and monuments. It also derives income from opening and closing graves and from the sale of flowers. This company will be referred to as "Sales." 6 (2) Evergreen Cemetery Association of Seattle,…

A cemetery “perpetual care” corporation appeals from a district court judgment denying a refund of capital-gain taxes paid in 1963 and 1964. We affirm.

Two corporate entities are material :

(1) The Evergreen Cemetery Company operates for profit three cemeteries in the Seattle area. It sells cemetery lots, burial crypts, and monuments. It also derives income from opening and closing graves and from the sale of flowers. This company will be referred to as “Sales.”

(2) Evergreen Cemetery Association of Seattle, plaintiff, is the successor to the assets of the “Perpetual Care Fund *1234 of the Evergreen Cemetery Co. of Seattle.” The fund was established by Evergreen Cemetery Company in 1940. A trust agreement vested the fund in individual trustees. Since 1946, the fund has been managed by plaintiff, a nonprofit, nonstock corporation, organized to comply with local statutes governing perpetual-care funds for cemeteries. This company will be referred to as “Care.”

Sales deposits with Care a portion of the sale price of each grave, niche, or crypt sold. Care, in turn, remits annually to Sales all its net income from investments. Sales uses the income to maintain the cemetery.…

(concurring) :

I concur in the result. If the Care company were actually paying currently the total cost of maintenance of sold lots, I would extend Revenue Ruling 58-190 to give Care income tax exemption.

He who buys “perpetual care” necessarily thinks the price he pays covers total care beginning now. When it does not and the sales company makes up the difference between cost of maintenance of sold lots and the income of the perpetual fund, charity becomes too intertwined with promotion. And, so I am not shocked by Care failing to get income tax exemption, which for practical purposes applies only to capital gains.

Of course, I do not mean to suggest that separate lawn mowers should be bought for sold and unsold lots. There could be a proper allocation of total costs.