The Tax Law of Charitable Giving. Bruce R. Hopkins

Читать онлайн книгу.

The Tax Law of Charitable Giving - Bruce R. Hopkins


Скачать книгу
intended for such a use.70

      The case concerned an individual who formed a private operating foundation in the early 1970s and had been president of it since the date it was established. From time to time, he contributed futures contracts to the foundation and claimed charitable contribution deductions for these gifts. In 1974, he obtained a private letter ruling from the IRS that the charitable contributions deductions were proper and that no gain need be recognized when the foundation sold the contracts.

      The step transaction doctrine was inapplicable in this instance, the individual argued, because no prearrangements were made with respect to the gifts. He maintained that he donated all of his interest in the long-term capital gain portions of the futures contracts, free and clear. The IRS, by contrast, contended that the gift transfers should be treated together with the later future sales and division of proceeds as a single transaction. The government argued that this individual's plan was to meet the foundation's operating needs by selling selected futures contracts with unrealized appreciation of equal amounts. Rather than donating cash, this argument went, he tried to donate the futures contracts with a restriction that he would keep the short-term capital gains on their sale.

      As to this case, the individual claimed that the sales were not prearranged but rather were the prudent acts of the trustees of a charitable organization in need of operating funds. The IRS argued that the standing instruction reflected a prearranged plan to use the charity to sell the futures contracts, cover its needs with the long-term gains, and enable the individual to keep the short-term gains without having to pay taxes on the entire proceeds of the sale. The court held that there was no evidence to suggest that the individual was the source of the standing instruction and thus that his control over the sale of the contracts was not such that the contributions and sales could be viewed as step transactions encompassed within a unified plan.