Brundage v. Commissioner, 54 T. C. 1468 (1970)

A gift to a city for use in a museum that is an integral part of the public school system qualifies for an additional charitable deduction as a gift to an educational organization.

Summary

In Brundage v. Commissioner, the U. S. Tax Court ruled that a gift of an oriental art collection to the City and County of San Francisco for use in the M. H. de Young Memorial Museum qualified for an additional 10% charitable deduction. The museum was deemed an integral part of the San Francisco school system, satisfying the requirements of an “educational organization” under section 170(b)(1)(A)(ii) of the Internal Revenue Code of 1954. The court’s decision hinged on the museum’s extensive educational programs and its close ties with the city’s schools, despite the museum’s primary function not being formal instruction. This ruling expands the scope of what constitutes an educational organization for tax deduction purposes, impacting how similar contributions should be assessed.

Facts

In 1959, Avery and Elizabeth Brundage agreed to donate their extensive oriental art collection to the City and County of San Francisco for permanent display in the M. H. de Young Memorial Museum. The museum, conveyed to the City in 1919, was described as serving educational purposes and was supported by public funds. In 1963, the museum maintained an education department offering courses for children and adults, with significant attendance from San Francisco school children. The museum’s educational activities were closely integrated with the city’s public school system, including special services and exhibitions.

Procedural History

The Commissioner of Internal Revenue determined a deficiency in the Brundages’ 1963 federal income tax, disallowing a charitable deduction for their gift to the museum. The Brundages petitioned the U. S. Tax Court, arguing that their gift qualified for an additional 10% deduction under section 170(b)(1)(A)(ii) as a contribution to an educational organization.

Issue(s)

1. Whether a gift to the City and County of San Francisco for use in the M. H. de Young Memorial Museum qualifies for an additional 10% charitable deduction under section 170(b)(1)(A)(ii) as a gift to an “educational organization. “

Holding

1. Yes, because the museum is an integral part of the San Francisco school system, and the gift to the City for use in the museum was considered a gift for the expansion and development of the city’s educational organization within the scope of section 170(b)(1)(A)(ii).

Court’s Reasoning

The court found that the museum, despite not having formal instruction as its primary function, met the criteria of an “educational organization” under section 503(b)(2) because it operated a school with a regular faculty, curriculum, and enrollment. The court rejected the Commissioner’s argument that the museum did not qualify as an educational organization under the regulations, finding that the legislative history supported a broader interpretation. Furthermore, the court accepted the Brundages’ alternative argument that the museum was an integral part of the San Francisco school system, which itself was an educational organization. The court cited several Revenue Rulings to support the position that contributions to facilities facilitating the educational activities of a recognized educational organization qualify for the additional deduction, even if those facilities are also open to the public.

Practical Implications

This decision expands the scope of what constitutes a qualifying gift to an educational organization for tax deduction purposes. Practitioners advising clients on charitable contributions should consider the broader definition of educational organizations, which can include museums that are closely tied to public school systems. This ruling may encourage donors to contribute to educational institutions beyond traditional schools, colleges, and universities, impacting how similar cases are analyzed in the future. The decision also highlights the importance of the integration between the recipient institution and the public education system in determining eligibility for enhanced charitable deductions.