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Cruttenden, Walter W. and Fay T
D'Angelo Associates, Inc
Davenport, H. L. and Neysa C
DeClue, Thomas and Eulene
D’Esti, Joseph A. and Helen T
Devincenzi, Lawrence F
Diaz, Leonarda C ...
Dunn, Herbert A. and Georgia E
Dunn, Stanley A
Eppler, Katherine G., Individually and Personal Representative
Epstein, Perry and Mildred
Exchange National Bank of Tampa, et al., Executors
Farm Service Cooperative
Fenton, Robert G., Estate
Fine, Betsy
First Northwest Industries of America, Inc.
Geckler, Bazil T. and Louise G .....
Glen C'Brien Movable Partition Co.....
Goldsborough, Marcia P., Estate
Goodspeed, Warren M., Scholarship Fund
Gordon, Arthur Z. and Theresa
Gordon, Clara W., and Dave, Estates
Greene, Albert A. and Margaret L., et al
Greer, John L. Individually and Executor
Greer, Russell Z., Estate
Haddock, Gilbert Roger
Halfhill, Martin . and T. Louise
Hammel, John P. and Beverly K
Harges, Michael T. and Janet G
Hargrove, John T. and Ruth D
Harmon, John J. and Elizabeth A
Harrah, Scherry
Heyman, Joseph S. and Virginia S
Heyman, Richard S. and Rosalee A
Historic House Museum Corp
Holland, John C. and Marie
Hollingshead, Jean C., Estate
Home Mutual Insurance Co
House, Andy B
Huckaba, Donald L. and Marilyn E
Huffaker, Walter D. and Lois Simpson
Humbert, Virginia I., and Ralph H., Estates
International State Bank .....
Jewett, George F., Jr., and Lucille M
Johnson Investment & Rental Co
Julia R. & Estelle L. Foundation, Inc
Kappel, William J., Estate, and Sara Kappel Courtley
Keeler, Harry C. and Geraldine L
Keeler, Shirley W

191
121
922
370
909
240
1067
715
361
1077
439
404
145
263
684
817
534
492
1077
515
525
404
534
294
294
511
959
959
674
240
959
735
482
482

12
1046
578
944
158
534
158
542
173
430
895

1

415

24 279

637 771 623 240 391 613 1087 873 370 674 240

Ketter, Melvin P. and Mildred J ......
Kirk, Eugene Brooks, Estate and Mary Ann
Kraasch, Otto H. and Agnes J
Kuckhoff, F. Albert and Jean M
Lamphere, Claire E. and Lula L
Lane-Burslem, Iona Sutton
Laure, George R. and Esther L
Levy, Milton L., Estate
Llewellyn, Morgan and Mattie, et al
Lorch, Joseph and Hannah
Lusich, Nick L. and Jacqueline E
MacArthur, Steven J., Estate and Judith A. Pledger

(formerly Judith A. MacArthur)
Magill, William and Joyce
Malag Tube Specialties, Inc
Manufacturers Hanover Trust Co
Marcus, Anita
Marcus, Charles
Martin, Timothy W. and Karen E
Ma-Tran Corp ...
Matsuda, Kenji and Jean S
Matthews, Richard D. and Donna M..
McCallister, Russell E. and Marie
McDonald, Joseph F. and Mary G
Miller, Harris M. and Phyllis
Miller, Katherine Buppert
Milliken, Arthur, Estate
Mogab, Charles A. and Colleen
Moore, John M. and Barbara G
Morris, Jerald D. and Joan C., et al
Nespor, Maurice J. and Anita M
Nicholas, Nick B. and Clevonne R.
Noble, Glenn A. and Iva Lee
Northern Trust Co., Trustee
O'Connell

, Philip J., et al., Coexecutors
O'Donoghue, Harriette G., Estate, Transferee
O'Neil, Harold N. and Catherine
Otey, John H., Jr., and Bettye G
Pelt, J. C. and Jewel ....
Pfohl, Pauline M., Estate
Pityo, William D. and Patricia A
Pledger, Judith A. (formerly Judith A. MacArthur),

Individually, Executrix, and Cotrustee
Pulpit Resource
Pulver Roofing Co...
Quarrie, William F., Mable E., and

Margaret K., Charitable Fund
Reading, William H. and Beverly S
Richwine, Karen T. B

959 465 465 263 562 562 959 158 959 959 505 240 448 1077 883 208 1024 959 240 1057 916 182 542 1077 534 312 756 630 225

959 594 1001

182 730 1077

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Role, Theodore and Josephine V
Rose, Albert E. and Edwina ..
Rosefsky, Alec and Edith
Russell, Thomas C., Estate
Schaffan, Stephan and Mildred
Schelberg, William V., Estate
Schendel, Sophie E
Schultz, Arthur F., Estate and Madeline M
Scott, Joy Harper (Owens)
Selden, Theodore E. and Lonnie A
Siddiqi, Musheer H
Smith, Arthur C., Jr
Smith, Martha T
Soelling, Warner M. and Patricia
Sordello, Frank J. and Anna M
Spickler, De Wayne ....
Steger, William T. and Ruth C
Stephens, James E. and Eula F..
Swartz, Robert J. and Adele M
Tracy, John E. and Evelyn P
Tufts, John F. and Mary A., et al
212 Corp
W-L Molding Co
Weber, Joseph C. and Kathryn Q
Westenskow, Carl E. and Donna J
Whipling, Loretta (formerly Loretta Spickler)
White, Armada J ....
Wiese, William M
Wilkerson, Donald L. and Mary A., et al
Woo, James J. and Margie W
Wright, Marion E. and Sharon A
Wright, Wendell W. and Zona M
Yang, Harold S.
Yang, Harold S. and Ruth S. T
Ziegler, Donald E. and Claudia J

341
558
909
40
86
690
534
788

71
240
553
651
651
1052
959
959
756
756
341
397
756
788
1087

52
959
959
534
712
240
959
534
534
959
959

139

341 558 909

86 690

788

71 240

REPORTS

OF THE

UNITED STATES TAX COURT

Julia R. & ESTELLE L. FOUNDATION, INCORPORATED,
PetitioNER v. COMMISSIONER OF INTERNAL REVENUE,

RESPONDENT

553 651 651 1052 959 959 756 756 341 397 756 788 1087

52 959 959 534 712 240 959 534 534 959 959

Docket No. 6263–76. Filed April 5, 1978. Petitioner, a private foundation, incurred expenses attributable in part to its investment activities and in part to its making distributions to public charitable, educational, and scientific organizations. Held, only the investment-related expenses are deductible in calculating net investment income under sec. 4940, I.R.C. 1954.

Albert R. Mugel, for the petitioner.
Kenneth Bersani, for the respondent.

OPINION

139

TANNENWALD, Judge: Respondent determined a deficiency of $1,119.76 in petitioner's excise tax liability under section 4940(a)' for the taxable year ending December 31, 1973. The sole issue for decision is the extent to which the expenses of petitioner in the conduct of its operations are deductible in determining "net investment income” under section 4940(c).

All of the facts have been stipulated, and the stipulation,

'All section references, unless otherwise indicated, are to the Internal Revenue Code of 1954, as amended and in effect during the taxable year in issue.

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together with the exhibits, is incorporated herein by this reference.

Petitioner had its principal office in Buffalo, N. Y., at the time it filed its petition herein. It filed its annual report (Form 990– AR) and its private foundation return (Form 990–PF) for the taxable year 1973 with the Philadelphia Service Center, Philadelphia, Pa.

During the taxable year in issue, petitioner was exempt from taxation under section 501(a) as an organization defined in section 501(c)(3). It was also a private foundation under section 509(a), but not an “operating foundation" within the meaning of section 4942(j)(3) in that it was not engaged in the active conduct of charitable functions. Its sole charitable activity, during such period, consisted of making distributions to public charitable, educational, and scientific organizations.

During 1973, the fair market value (on a monthly average basis) of the securities owned by the petitioner and cash balances was $8,205,058; it owned no assets other than assets held for the production of income subject to excise tax under section 4940, except stationery, stamps, and similar items of inconsequential value; it had gross investment income of $456,618; it received gross contributions, gifts, and grants totaling $704,168, which were entered on its books as “gifts from trusts.” Of this latter amount, all but $5,823 was received from the John R. Oishei Appreciation Trust (a private foundation as defined by section 509) in the month of January 1973.

During 1973, petitioner made qualifying distributions within the meaning of section 4942(g) in the amount of $1,005,950, of which $410,075 was a distribution of income and $595,875 constituted a distribution of corpus.

At all relevant times, petitioner's directors and officers, other than its secretary, served without compensation for services rendered to the petitioner. Its directors determined which public charitable, educational, and scientific organizations were to receive distributions from the petitioner and the amounts thereof and made all ultimate investment decisions.

Petitioner paid the following expenses during 1973:

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