SCOTUS Reports

Tag: Broussard v. Commissioner

  • Broussard v. Commissioner, 16 T.C. 1315 (1951): Deductibility of Charitable Contributions Via Check

    16 T.C. 1315 (1951)

    A charitable contribution is deductible in the year the check is delivered to the charity, even if the charity deposits the check in a subsequent year.

    Summary

    Estelle Broussard sought to deduct charitable contributions made via checks delivered to the Sisters of the Holy Cross on December 31, 1946. The checks were not deposited until 1947. The Tax Court held that the contributions were deductible in 1946. The court reasoned that delivery of the checks to a representative of the charity constituted payment in 1946, regardless of when the checks were actually deposited and cleared by the bank. This decision aligns with the principle that delivery to the payee signifies payment for tax purposes.

    Facts

    On December 31, 1946, Beaumont Rice Mills issued two checks totaling $6,000 payable to the Sisters of the Holy Cross. These checks were charged to the Broussard Trust, which in turn charged them to Estelle Broussard’s account (the petitioner). C.E. Broussard delivered the checks to Sister Mary Rita Estelle, a member of the Sisters of the Holy Cross, for transmittal to the Order. The checks were not deposited and collected by the Sisters of the Holy Cross until 1947.

    Procedural History

    The Commissioner of Internal Revenue disallowed the deduction for 1946. Broussard petitioned the Tax Court for review. The Tax Court reversed the Commissioner’s decision, holding that the contributions were deductible in 1946.

    Issue(s)

    Whether charitable contributions made via checks delivered to the charity on December 31, 1946, but not deposited until 1947, are deductible in 1946.

    Holding

    Yes, because delivery of the checks to the Sisters of the Holy Cross on December 31, 1946, constituted payment in that year, regardless of when the checks were deposited.

    Court’s Reasoning

    The Tax Court relied on Section 23(o) of the Internal Revenue Code, which allows deductions for charitable contributions, payment of which is made within the taxable year. The court also cited Section 29.23(o)-1, Regulations 111, stating that a deduction is allowed only for contributions actually paid during the taxable year. The court emphasized that the checks were made out directly to the “Sisters of the Holy Cross” and delivered to Sister Mary Rita Estelle for direct transmittal to the Order. The court stated, “When this is done, we think a payment of the $6,000 in question to the Sisters of the Holy Cross took place on December 31, 1946.” The court found no substantive distinction between this case and Estate of Modie J. Spiegel, 12 T.C. 524, where similar checks were deemed deductible in the year of delivery, not the year of deposit. The court reasoned that delivery to a member of the order was equivalent to delivery to the order itself, effectively transferring ownership of the funds at that time.

    Practical Implications

    This case provides clarity on the timing of charitable contribution deductions when payment is made by check. It reinforces the principle that a charitable contribution is deemed paid when the check is unconditionally delivered to the charity. Legal practitioners can use this case to advise clients on the proper timing for claiming charitable deductions. Taxpayers can rely on this case to support a deduction in the year of delivery, even if the check isn’t cashed until the following year. The case highlights the importance of proper documentation, such as maintaining records of when checks were issued and delivered. Later cases have cited Broussard and Spiegel to reinforce the principle that delivery of a check constitutes payment, provided the check is honored upon presentation. This ruling benefits taxpayers by allowing them to plan their charitable giving strategically to maximize tax benefits within a given year.

  • Broussard v. Commissioner, 16 T.C. 23 (1951): Deductibility of Charitable Contributions by Check

    16 T.C. 23 (1951)

    A charitable contribution made by check is deductible in the year the check is delivered to the charity, even if the check is not cashed until the following year.

    Summary

    Estelle Broussard, a member of the Sisters of the Holy Cross, sought to deduct charitable contributions made to her order in 1946. She delivered checks to the order on December 31, 1946, but the checks were not deposited and collected until 1947. The Tax Court held that the contributions were deductible in 1946 because “payment” occurred when the checks were delivered to the Sisters of the Holy Cross, aligning with the intent of the parties involved. The court relied on the precedent set in Estate of Modie J. Spiegel, which addressed a similar issue.

    Facts

    Estelle Broussard was a member of the Sisters of the Holy Cross, taking vows of poverty, chastity, and obedience.
    She was a beneficiary of the Broussard Trust, established by her father, which provided her with taxable income.
    Broussard did not use the trust income for personal needs; her expenses were covered by the Order.
    In December 1946, while visiting her ailing father, she discussed making contributions to her Order with her brother, Clyde Broussard.
    On December 31, 1946, two checks totaling $6,000 were issued by Beaumont Rice Mills, payable to the Sisters of the Holy Cross, and charged to Broussard’s account within the Broussard Trust.
    The checks were delivered to Broussard, as a representative of the Order, on December 31, 1946, for transmittal to the Order’s officials.
    Broussard departed for Washington, D.C., that same day and the checks were deposited by the Sisters of the Holy Cross in 1947.

    Procedural History

    The Commissioner of Internal Revenue determined a deficiency in Broussard’s 1946 income tax, disallowing the deduction for charitable contributions, claiming they were not paid in 1946.
    Broussard contested the Commissioner’s determination in Tax Court.

    Issue(s)

    Whether the charitable contributions made by check were deductible in 1946, when the checks were delivered to the charity, or in 1947, when the checks were deposited and collected.

    Holding

    Yes, the charitable contributions were deductible in 1946, because “payment” occurred when the checks were delivered to the Sisters of the Holy Cross.

    Court’s Reasoning

    The court relied on Section 23(o)(2) of the Internal Revenue Code, which allows deductions for charitable contributions “payment of which is made within the taxable year.”
    The court emphasized that the checks were made out to the Sisters of the Holy Cross, charged to Broussard’s account, and delivered to her as a representative of the Order on December 31, 1946.
    The court determined that at the moment of delivery, the money represented by the checks no longer belonged to Broussard but to the Sisters of the Holy Cross. The court stated, “When this is done, we think a payment of the $ 6,000 in question to the Sisters of the Holy Cross took place on December 31, 1946.”
    The court found the case analogous to Estate of Modie J. Spiegel, 12 T.C. 524, where checks delivered in December 1942 but paid in January 1943 were deemed deductible in 1942.
    The court dismissed the Commissioner’s argument that the absence of a local house of the Sisters of the Holy Cross in Beaumont, Texas, made a difference, noting that the checks were made out directly to the Order and delivered to a member for transmittal.

    Practical Implications

    This case confirms that for tax purposes, a charitable contribution made by check is considered “paid” when the check is delivered to the charity, not when the check is cashed. This rule provides clarity for taxpayers making year-end contributions.
    Taxpayers can rely on the date of delivery as the date of payment for deduction purposes, even if the charity deposits the check in the subsequent year.
    This ruling emphasizes the importance of documenting the date of delivery of charitable contributions, especially for checks delivered close to the end of the tax year.
    Later cases have cited Broussard to support the principle that delivery constitutes payment when the donor relinquishes control of the funds. This case is often used in conjunction with Estate of Modie J. Spiegel to illustrate the “delivery equals payment” rule for charitable contribution deductions.