Contents

§ 3.1 MEANING OF GIFTWhen a private foundation 126 is a charitable donee and the donor is a disqualifiedperson 127 with respect to the foundation, care must be exercised thatthe contribution is not an act of self-dealing. 128 An act of self-dealing can becaused if the making of a gift bestows a benefit of some consequence on the disqualifiedperson/donor. When the benefit is merely “incidental and tenuous,”however, an act of self-dealing will not result. 129The application of rationales other than the quid pro quo test in relativelyrecent years is somewhat surprising, in that Congress, speaking by means of legislativehistory in 1954, wrote that gifts are “contributions which are made withno expectation of a financial return commensurate with the amount of thegift.” 130 Thus, it would seem that the quid pro quo test should, unquestionably, bethe law.(d) Absence of Value TransferredIn some instances, a federal income tax charitable contribution deduction isdenied because nothing of substance or value was transferred to a charitableorganization. For example, in one case, a charitable contribution deduction forthe transfer by a corporation of certain film property to the Library of Congresswas denied on the ground that what was physically conveyed (principally, negativeson nitrate-base plastic) had little value; the donor claimed a deduction ofmore than $10 million. 131 Also, a motion picture production company retainedaccess to the property and was relieved of storage costs and potential liability,which the court found to undercut the concept of a gift.In another case, donors of mining claims to charity were held not to be entitledto any charitable deduction, because the claims lacked any value. 132 Thecourt found a “total absence of objective support for the value claimed” and thatthe testimony of the “donor’s” expert witness stated values that were mere“financial fantasies.” 133Still another case offers a graphic illustration of this point. In this instance, acourt upheld the IRS’s denial of a charitable contribution deduction claimed by acorporation for an alleged donation of real property to a state. The IRS had deniedthe deduction primarily on the basis that the corporation did not own the realproperty that it had purported to contribute. 134 On appeal, however, the decisionwas reversed, with the court—applying the doctrine of collateral estoppel—ruling126 See § 3.4.127 See IRC § 4946.128 See IRC § 4941. See Hopkins and Blazek, Private Foundations: Tax Law and Compliance, 2d ed. (Hoboken,NJ: John Wiley & Sons, 2003) (Private Foundations) at ch. 5.129 Private Foundations § 5.7(c).130 H. Rep. No. 1337, 83d Cong., 2d Sess. A44 (1954); S. Rep. No. 1622, 3d Cong., 2d Sess. 196 (1954). Thesereports accompanied IRC § 162(b), which provides that a payment cannot be deducted as a business expense(under IRC § 162) when it is properly deductible as a charitable contribution (under IRC § 170) but is not deductiblein a tax year because of restrictions such as the percentage limitations (see Chapter 7).131 Transamerica Corporation v. United States, 254 F. Supp. 504 (N.D. Cal. 1966), aff’d, 392 F.2d 522 (9th Cir.1968).132 Parker v. Commissioner, 86 T.C. 547 (1986). See also Snyder v. Commissioner, 86 T.C. 567 (1986).133 Parker v. Commissioner, 86 T.C. at 565.134 Kamilche Co. v. United States, 809 F. Supp. 763 (N.D. Cal. 1992). 75