71 T.C. 252">*252 Respondent determined the following deficiencies in, and additions to, the Federal gift taxes of petitioners:

71 T.C. 252">*253 The sole issue we must decide in this case is whether expenditures made by petitioners to finance the election campaigns of various individuals for public office constitute transfers taxable as gifts. ²

FINDINGS OF FACT

Some of the facts have been stipulated and are found accordingly. The stipulation of facts and attached exhibits are incorporated herein by this reference.

Petitioners David W. Carson and Marjorie E. Carson ^{31978 U.S. Tax Ct. LEXIS 23">*25} are husband and wife who resided in Kansas City, Kans., at the time their petition was filed. Petitioner David W. Carson has been engaged in the private practice of law in Kansas City, Kans., since 1937.

During the calendar year 1967, petitioner established a Wyandotte County Campaign Fund at Guaranty State Bank, Kansas City, Kans., to which he transferred $ 83,654. These funds were disbursed during 1967 solely at petitioner's direction and control for the sole purpose of paying political campaign expenses for various local candidates.

During 1968, petitioner transferred $ 8,000 to the Chipman for Attorney General Campaign. These funds were disbursed solely at petitioner's direction and control for the sole purpose of paying campaign expenses. Also during 1968, petitioner expended $ 21,745.97 for advertising and postage expenses of the Chipman for Attorney General Campaign. These expenses were incurred and the funds disbursed at the direction of petitioner.

71 T.C. 252">*254 During 1970, petitioner transferred $ 19,000 to the General Campaign Fund of Bouska for Attorney General, and $ 14,059 to the General Campaign Fund of Frizzell for Governor.

During the calendar quarter ending 1978 U.S. Tax Ct. LEXIS 23">*26 March 31, 1971, petitioner transferred $ 40,404.04 to the Neath for Mayor Campaign. These funds were disbursed solely at petitioner's direction and control for the sole purpose of paying campaign expenses.

During the calendar quarter ending March 31, 1971, petitioner transferred $ 7,000 to the Matson for Commissioner of Finance Campaign. These funds were disbursed solely at petitioner's direction and control for the sole purpose of paying campaign expenses.

During the calendar quarter ending June 30, 1971, petitioner expended $ 9,000 for advertising and postage expenses of the Neath for Mayor Campaign. These expenses were incurred and the funds disbursed at the direction of petitioner.

During the calendar quarter ending June 30, 1971, petitioner transferred $ 2,000 to the Matson for Commissioner of Finance Campaign. These funds were disbursed solely at petitioner's direction and control for the sole purpose of paying campaign expenses.

During the calendar quarter ending September 30, 1971, petitioner expended $ 3,609.24 for advertising and postage expenses of the Matson for Commissioner of Finance Campaign. These expenses were incurred at the direction of petitioner.

During the calendar 1978 U.S. Tax Ct. LEXIS 23">*27 quarter ending December 31, 1971, petitioner expended $ 1,000 for advertising and postage expenses of the Matson for Commissioner of Finance Campaign. These expenses were incurred and the funds disbursed at the direction of petitioner.

All funds transferred or expended by petitioner for the taxable periods involved herein relate to local political offices in Kansas City, Kans., except the campaigns of Chipman for Attorney General, Bouska for Attorney General, and Frizzell for Governor. ⁴

The transfers, expenditures, and disbursements described 71 T.C. 252">*255 above, which serve as the basis for the deficiencies asserted by respondent, are summarized in the following table. The recipient listed represents the particular candidate 1978 U.S. Tax Ct. LEXIS 23">*28 benefiting from the expenditure.

All of the amounts summarized above (with the exception of the amounts relating to Bouska for attorney general and Frizzell for Governor) involved disbursements solely at petitioner David W. Carson's direction and control for the sole purpose of paying campaign expenses. The disbursements would typically involve expenses for stationery, stamps, and printing to send out 71 T.C. 252">*256 mailers, letters, or brochures, and sometimes 1978 U.S. Tax Ct. LEXIS 23">*29 involved employment of public relations people to do the art work or put the ideas advanced in the most presentable form. Additionally, disbursements were made for the purchase of radio time, television time, and advertisements in newspapers.

Petitioner owned property in a number of counties in Kansas, including Leavenworth, Wyandotte, Finney, Kearny, Grant, Stevens, Haskell, and Greenwood. Some of the property was used in the production of oil and gas, while other property was agricultural property in the process of being made irrigable. Petitioner was concerned about an oil depletion tax being imposed, and also was apprehensive that the State might impose water table levels in western Kansas generally conflicting with his irrigation efforts. Petitioner also owned a large stock interest in a bank in Kansas City, Kans.

After participating in prior campaigns for mayor, petitioner's law firm was employed to litigate the constitutionality of an urban renewal statute that led to their representation of the Kansas City Urban Renewal Agency for a 9-year period. His firm was also employed by the city as professional counsel in annexation procedures of the Fairfax industrial district into 1978 U.S. Tax Ct. LEXIS 23">*30 Kansas City, Kans. Additionally, based on petitioner's prior experience, he anticipated that his participation in the campaigns would result in referral of legal business of a general nature by the people that he met during the course of the campaign as well as individuals he assisted.

While petitioner knew the individuals he supported personally, he knew only Mr. Matson well. All of the candidates, other than Mr. Matson and Mr. Neath, were attorneys. Mr. Matson and Mr. Neath were the only candidates petitioner supported for whom he had done legal work.

Petitioner selected the candidates he would support by singling out those he thought would be the most compatible with the advancement of his property interests and would be the best for the business of his law firm.

Petitioner filed original Federal gift tax returns for the calendar years 1967 and 1968 on April 12, 1969, and returns for all other periods involved on May 23, 1974. On none of these returns were any of the amounts expended for or contributed to various political candidates by petitioner reported as taxable 71 T.C. 252">*257 gifts. Marjorie E. Carson filed original Federal gift tax returns for all of the taxable periods involved herein 1978 U.S. Tax Ct. LEXIS 23">*31 on May 23, 1974.

A statutory notice of deficiency pertaining to the taxable periods involved herein was mailed to each petitioner on September 16, 1974. Respondent determined that the transfers by David E. Carson to and for the benefit of election campaigns of various individuals for public office constituted taxable gifts, and asserted deficiencies totaling $ 5,237.15 against each petitioner. Respondent further determined that Marjorie E. Carson's failure to timely file Federal gift tax returns for the years 1967 and 1968 was not shown to be due to reasonable cause within the meaning of section 6651(a), resulting in additions to tax in the amount of $ 284.09.

OPINION

The only issue before us is whether the funds petitioner expended directly or contributed to campaign committees on behalf of candidates for State and local offices are taxable gifts within the purview of section 2501. ^{51978 U.S. Tax Ct. LEXIS 23">*32}

Section 2501 imposes an excise tax upon "the transfer of property by gift." The tax applies whether the transfer is direct or indirect, and whether the property is real or personal, tangible or intangible. Sec. 2511(a). Where property is transferred for less than an adequate and full consideration, in money or money's worth, the amount by which the value of the property transferred exceeds the value of the consideration received is deemed a gift subject to the tax. Sec. 2512(b).

Respondent argues that petitioner transferred funds for the benefit of political candidates, and received no consideration reducible to money or money's worth. Petitioner contends that an examination of the purpose and history of the gift tax compels the conclusion that it was never intended to and does not encompass political contributions. We agree with petitioner.

We begin by emphasizing that we do not face circumstances where the relationship between the contributor and candidate, familial or otherwise, suggests that the political candidate is also the natural object of the donor's bounty. In such a case, careful 71 T.C. 252">*258 scrutiny of all the facts and circumstances may 1978 U.S. Tax Ct. LEXIS 23">*33 require a different conclusion.

We continue by recapitulating the key facts before us in order to carefully circumscribe the parameters of our holding. It is undisputed that we are considering run-of-the-mill campaign contributions (although in some instances relatively large ones). The largest portion of petitioner's support was on behalf of candidates for local office in Kansas City, Kans. Petitioner's support for local candidates was through the direct payment of campaign expenses for the printing and distribution of campaign literature, for advertising, and for media access. Funds for local candidates were disbursed only at petitioner's direction and under his control.

Petitioner also contributed significant amounts to the campaign funds of candidates for the State offices of attorney general and Governor. Some of the money expended on behalf of the candidates for State offices was incurred and disbursed at the direction of petitioner, while other funds were simply transferred to the general campaign fund of the candidate involved. ^{61978 U.S. Tax Ct. LEXIS 23">*34} Petitioner was well acquainted with only one of the candidates he supported.

These facts do not suggest a gift to the candidate, but the use of petitioner's resources to promote the social framework petitioner considered most auspicious to the attainment of his objectives in life. Petitioner focused on the social structure most conducive to his economic aspirations; others may focus on a social structure advancing their own notions of social justice, or conditions they deem essential for world peace or public order. In either case, in the particular circumstances before us, the individual candidate may generally be viewed, for purposes of the gift tax, as the means to the ends of the contributor.

This characterization is consistent with the position respondent has historically taken in a series of revenue rulings concerning the taxability of the candidate on campaign contributions. Rev. Proc. 68-19, 1968-1 C.B. 810, 811 (1968), provides:

Political funds are not taxable to the political candidate by or for whom they are collected if they are 1978 U.S. Tax Ct. LEXIS 23">*35 used for expenses of a political campaign or some similar purpose. However, any amount diverted from the channel of campaign 71 T.C. 252">*259 activity and used by the political candidate for any personal purpose is income taxable to such candidate for the year in which the funds are so diverted. * * *

* * * *

The expenditure of political funds by a political candidate for other than campaign or similar purposes will be considered a diversion of such funds requiring the funds so expended to be included in his income. * * *

The language of the ruling makes it clear that respondent recognizes campaign contributions are intended to advance the campaign, not personally benefit the candidate. Indeed, the ruling "[presumes] in the absence of evidence to the contrary that contributions to a political candidate are political funds which are not intended for the unrestricted personal use of such recipient." Rev. Proc. 68-19, supra, 1968-1 C.B. at 811. We believe this accords with our interpretation of the nature of a campaign contribution. While there are marked differences in the use of the word gift in the income and gift tax laws, there is no basis for different characterizations of the factual nature of 1978 U.S. Tax Ct. LEXIS 23">*36 a campaign contribution. ⁷

We note that the Internal Revenue Service administered the gift tax law consistent with this reading of the statute for more than one-third of a century. From 1924, when the gift tax was first enacted, until 1959, the Service issued no regulations or rulings indicating that campaign contributions were subject to the gift tax. It was not until 1959 that respondent issued a 1978 U.S. Tax Ct. LEXIS 23">*37 revenue ruling simply declaring, without the benefit of any analysis, that campaign contributions are subject to the gift tax. (See Rev. Rul. 59-57, 1959-1 C.B. 626; see also Technical Information Release 1125, Dec. 17, 1971; Rev. Rul. 72-355, 1972-2 C.B. 532.) ⁸ The absence of any decided cases on the point 71 T.C. 252">*260 during this long period of time also demonstrates that the respondent was not administratively applying the gift tax to campaign contributions. ^{91978 U.S. Tax Ct. LEXIS 23">*38}

Congress is peculiarly aware of and knowledgeable about political campaign contributions and their financing. Yet there is no evidence in the legislative record that it contemplated application of the gift tax to campaign contributions. And as noted, until quite recently, the Service took no action even suggesting it considered inter vivos gifts and campaign contributions as cognate concepts rather than two conceptually different phenomena. The only reasonable conclusion is that a settled position contrary to respondent's present interpretation prevailed from enactment of the first gift tax in 1924 until the end of the 1950's. In view of this history, we believe a change in this settled interpretation was inappropriate absent a change in the statute. See Crown v. Commissioner, 67 T.C. 1060">67 T.C. 1060 (1977), affd. 585 F.2d 234 (7th Cir. 1977).

We find this long-settled interpretation consistent with the legislative history and purpose of the 1978 U.S. Tax Ct. LEXIS 23">*39 gift tax. The Supreme Court long ago explained that purpose as follows:

The gift tax was supplementary to the estate tax. The two are in pari materia and must be construed together. Burnet v. Guggenheim, supra, 286. An important, if not the main, purpose of the gift tax was to prevent or compensate for avoidance of death taxes by taxing the gifts of property inter vivos which, but for the gifts, would be subject in its original or converted form to the tax laid upon transfers at death. [Estate of Sanford v. Commissioner, 308 U.S. 39">308 U.S. 39, 308 U.S. 39">44 (1939). Emphasis added; fn. ref. omitted.] ¹⁰

The development of the gift tax reinforces this conclusion. The gift tax in 1924 was adopted as a "corollary" or as supplemental to the estate tax. 65 Cong. Rec. 3119, 3120, 3122, 3172, 8095-8096 (1924) (remarks of Representative Green). See 308 U.S. 39">Estate of Sanford v. Commissioner, supra n. 2; R. Paul, Federal Estate and Gift Taxation, sec. 15.04, p. 963 (1942). The 71 T.C. 252">*261 committee reports on the 1924 Act make clear that the tax was designed --

to impose a tax which measurably approaches 1978 U.S. Tax Ct. LEXIS 23">*40 the estate tax which would have been payable on the donor's death had the gifts not been made and the property given had constituted his estate at his death. The tax will reach gifts not reached, for one reason or another, by the estate tax. [H. Rept. 708, 72d Cong., 1st Sess. (1932), 1939-1 (Part 2) C.B. 457, 477; S. Rept. 665, 72d Cong., 1st Sess. (1932), 1939-1 (Part 2) C.B. 496, 525. Emphasis added.]

In repealing the 1924 Act 2 years later, Congress established a conclusive presumption that gifts made within 2 years of death were made in contemplation of death and subject to the estate tax. For purposes of the estate tax, such gifts were conclusively presumed to be testamentary. After the presumption was declared unconstitutional ( Heiner v. Donnan, 285 U.S. 312">285 U.S. 312 (1932)), a gift tax was included in section 501 of the Revenue Act of 1932, 47 Stat. 169. In interpreting the 1932 Act and subsequent revenue laws, we have been advised by eminent authority that:

The thought in 1924 was to achieve a "unified scheme of taxation of gifts whether made inter vivos or at death." Every provision of the existing gift tax statute must be interpreted in the light of this fundamental purpose, 1978 U.S. Tax Ct. LEXIS 23">*41 which carried over in all its essential outlines to the 1932 gift tax. [R. Paul, Federal Estate and Gift Taxation, sec. 15.04, p. 963 (1942). Emphasis added; fn. refs. omitted.]

A rebuttable presumption that gifts within 3 years of death were testamentary (for purposes of the estate tax) was retained as a central feature of the law until 1976. The presumption provided a bridge joining the gift and estate taxes which, despite significant differences, shared a common purpose and direction. The unification of these taxes into one system of transfer taxes in 1976, while reducing the significance of the bridge, confirms the common purpose of the two taxes. ¹¹

This review of the legislative history of the gift tax clearly demonstrates that it was intended to backstop the estate tax -- to impose a tax on inter vivos dispositions to beneficiaries under circumstances that (aside from the time of making the arrangements) are akin to dispositions generally made at death. We fail to see how 1978 U.S. Tax Ct. LEXIS 23">*42 a campaign contribution can be considered this type 71 T.C. 252">*262 of disposition. It is doubtful that testamentary campaign contributions are problems plaguing estate planners or clogging probate courts. The vicissitudes of politics make political candidates an unlikely object for a decedent to "settle" his estate on, and an aspiring politician planning to finance his political ascendancy on testamentary campaign contributions may not rise far or fast. A campaign contribution is simply not a transfer that avoids the death tax, or property that, but for the transfer "would be subject in its original or converted form to the tax laid upon transfers at death." ^{121978 U.S. Tax Ct. LEXIS 23">*43}

Respondent nevertheless contends that the statute itself is very broad, providing that "any transfer for less than an adequate and full consideration in money or money's worth" shall be "deemed a gift." But words do not have an immutable meaning without regard to the purpose and circumstances attending their usage. As the Supreme Court stated long ago:

It is a familiar rule, that a thing may be within the letter of the statute and yet not within the statute, because not within its spirit, nor within the intention of its makers. This has been often asserted, and the reports are full of cases illustrating its application. This is not the substitution of the will of the judge for that of the legislator, for frequently words of general meaning are used in a statute, words broad enough to include an act in question, and yet a consideration of the whole legislation, or of the circumstances surrounding its enactment, or of the absurd results which follow from giving such broad meaning to the words, makes it unreasonable to believe that the legislator intended to include the particular act. 1978 U.S. Tax Ct. LEXIS 23">*44 [Holy Trinity Church v. United States, 143 U.S. 457">143 U.S. 457, 143 U.S. 457">459 (1892).] ¹³

The present case is an example of circumstances that may be within the letter of the statute, but only by a literal reading at war with its purpose and history. Indeed, in reenacting the gift tax in 1932, Congress stated it intended the tax to apply when 71 T.C. 252">*263 property "is donatively passed to or conferred upon another," explaining further:

Since the tax is designed to reach all transfers to the extent that they are donative, and to exclude any consideration not reducible to money or money's worth, it is provided in this section that where the transfer is made for less than an adequate and full consideration in money 1978 U.S. Tax Ct. LEXIS 23">*45 or money's worth, the excess in value of the property transferred over such consideration shall be deemed a gift. [H. Rept. 708, 72d Cong., 1st Sess. (1932), 1939-1 C.B. (Part 2) 477-478. Emphasis added.]

In view of the language that follows the word "donative" (and the objective test being prescribed), Congress clearly did not use the word "donative" to refer to the intent required to make a common law gift. It apparently contemplated cases that, despite the literal words of the statute and considering all the facts and circumstances, were simply transfers foreign to the purpose of the statute. ^{141978 U.S. Tax Ct. LEXIS 23">*46} This view is wholly consistent with the language of the regulations basing the tax on "the objective facts of the transfer and the circumstances under which it is made." Sec. 25.2511-1(g)(1), Gift Tax Regs.

We conclude by noting that the parties have discussed Stern v. United States, 436 F.2d 1327">436 F.2d 1327 (5th Cir. 1971), at some length. On facts not fairly distinguishable from those before us, the Fifth Circuit held the contributions were exempt from the gift tax under language in the regulations providing that "a sale, exchange, or other transfer of property made in the ordinary course of business * * * will be considered as made for an adequate and full consideration in money or money's worth." Sec. 25.2512-8, Gift Tax Regs. While the holding of the Fifth Circuit supports and is consistent with the result we reach herein, we prefer to rest our holding on the broader grounds that campaign contributions, like those before us, when considered in 71 T.C. 252">*264 light of the history and purpose of the gift tax, are simply not "gifts" within the meaning of the gift tax law.

Decision will be entered for the petitioner.

Tannenwald, J., concurring: I agree with the result reached by the majority. However, I would eschew the various arguments related to political support in order to attempt to achieve social or economic 1978 U.S. Tax Ct. LEXIS 23">*47 objectives of a taxpayer and protection and advancement of the taxpayer's property interests (see Stern v. United States, 436 F.2d 1327">436 F.2d 1327, 436 F.2d 1327">1330 (5th Cir. 1971)) or relating to inferences to be drawn from the legislative history of the estate and gift taxes. Rather, I would rest my position on the fact that, absent a familial or other personal relationship between a candidate and his benefactor, campaign activities of political candidates (with which political contributions or direct expenditures benefiting such activities are intertwined) are "an inextricable part of the election process -- one of the most sensitive elements in the fabric of the democratic way of life." See Nichols v. Commissioner, 60 T.C. 236">60 T.C. 236, 60 T.C. 236">239 (1973), affd. per curiam 511 F.2d 618">511 F.2d 618 (5th Cir. 1975), cert. denied 423 U.S. 912">423 U.S. 912 (1975). See also McDonald v. Commissioner, 323 U.S. 57">323 U.S. 57, 323 U.S. 57">63 (1944); cf. Carey v. Commissioner, 56 T.C. 477">56 T.C. 477 (1971), affd. per curiam 460 F.2d 1259">460 F.2d 1259 (4th Cir. 1972), cert. denied 409 U.S. 990">409 U.S. 990 (1972). Such being the case, I would treat this case as falling within the philosophical ambit of the aforementioned cases and "stay our hand." See 60 T.C. 236">Nichols v. Commissioner, supra at 239. See also S. Rept. 93-1357, 1978 U.S. Tax Ct. LEXIS 23">*48 pp. 32-33 (1974), 1975-1 C.B. 517, 580-581; 120 Cong. Rec. 21,576, 21,796 -- 21,797 (daily ed. Dec. 17, 1974); 120 Cong. Rec. 12,594, 12,596 (daily ed. Dec. 20, 1974).

Hall, J., concurring: In most cases, including this one, political contributions proceed from the donor's desire to see his own views regarding political policy given effect. I do not believe any gift is usually involved for gift tax purposes because 71 T.C. 252">*265 there is rarely, if ever, a desire to benefit the donee in his personal capacity, but rather only a desire to further the donor's own political objectives through the candidate. Such an expenditure, given solely to be used in facilitating the propagation of views of political policy which resemble the donor's, is no more a gift to the recipient than is an expenditure for a newspaper advertisement a gift to the paper. In either case, the recipient is primarily viewed as a means for propagating the taxpayer's own views. I would not lay down as a matter of law that a political contribution may never be a gift. The question should be left open, for example, whether a father's substantial contribution to his son's candidacy might be a gift for gift tax purposes under certain 1978 U.S. Tax Ct. LEXIS 23">*49 circumstances. Here, however, no such facts are involved and no gift tax was due.

Simpson, J., dissenting: I agree with the dissenting opinion of Judge Chabot in which he carefully develops and documents his reasons for holding that the political contributions at issue in this case should not be exempted from the gift tax. However, I wish to add and emphasize some additional reasons for dissenting in this case.

At the outset, I want to emphasize that we are not called upon to express our individual views as to whether political contributions should, or should not, be subject to the gift tax. As a court, it is our responsibility to take the law as enacted by the Congress, to ascertain the legislative purpose, and to apply the law so as to carry out such purpose. As Judge Chabot demonstrates, the terms of the gift tax statute are certainly broad enough to include gifts to political organizations, and there is no basis for this Court to conclude that the statute should not be applied as written. There is no legislative history indicating that contributions to political organizations were not to be subject to the gift tax, and as Judge Chabot's opinion shows convincingly, 1978 U.S. Tax Ct. LEXIS 23">*50 the reasons given by the majority for its conclusion are totally inconsistent with the precedents of this and other courts. Indeed, to exempt gifts to a political organization from the gift tax is inconsistent with the legislative 71 T.C. 252">*266 action in explicitly denying exemption of gifts to organizations which engage in lobbying or political activities.

Moreover, when the "pins and needles Act" ¹ was before the Senate, Senator Stevenson offered an amendment which would strike section 14, relating to contributions to political organizations, from the act. He urged the Senate to adopt his amendment because he believed that such contributions should not be exempted from the gift tax. Senator Long opposed the amendment for several reasons, including his belief that Congress never intended to make such gifts subject to the gift tax. Senator Stevenson's amendment was rejected by a tie vote. 120 Cong. Rec. S21796-S21797 (daily ed. Dec. 17, 1974). Thus, there was not even a majority vote in the Senate in favor of the particular provision which prospectively exempted gifts to political parties subject to certain restrictions. In the light of this legislative history, there is surely no basis for 1978 U.S. Tax Ct. LEXIS 23">*51 saying that Congress clearly intended to exempt from the gift tax all contributions to political organizations.

Whether contributions to a political organization should be subject to the gift tax raises a question of policy to be decided by the Congress, not by this Court. Congress has decided that certain gifts made after May 7, 1974, are exempt but there are restrictions on the gifts that qualify for such exemption -- restrictions that prevent the investment income of a political organization from avoiding tax, and restrictions to prevent the appreciation in value of contributed property from avoiding tax. If earlier gifts are to be exempt from the gift tax, then Congress should so provide, subject to such restrictions as it may decide are appropriate to carry out its tax policies. As a court, we cannot, and should not, make such policy decisions and decide under what conditions and limitations political contributions should be exempt from the gift tax.

Chabot, J., dissenting: The majority conclude that the transfers here at issue are not subject to tax under section 71 T.C. 252">*267 2501(a)(1), ¹ even though the 1978 U.S. Tax Ct. LEXIS 23">*52 language of sections 2511(a) ^{21978 U.S. Tax Ct. LEXIS 23">*53} and 2512(b) ³ literally encompasses these transfers.

The reasons presented in the majority opinion --

(1) Have the effect of repealing several provisions of the Internal Revenue Code;

(2) Are warranted by neither the Code, the legislative history, nor prior Court rulings; and

(3) Are likely to create unwarranted confusion for the future. Accordingly, I respectfully dissent.

The majority opinion (p. 1978 U.S. Tax Ct. LEXIS 23">*54 258 supra) recapitulates "the key facts before us in order to carefully circumscribe the parameters of our holding." However, the majority do not simply reach a result on a state of facts. In response to the statute's command (sec. 7459(b)), ⁴ the majority set forth their reasons. If these reasons truly justify the result reached by the majority in this case, then 71 T.C. 252">*268 the same result should obtain in other sets of facts to which these stated reasons have equal application. ^{51978 U.S. Tax Ct. LEXIS 23">*55} For example, although the "key facts" are stated to include the fact that "the largest portion of petitioner's support was on behalf of candidates for local office in Kansas City, Kans.," we may safely assume that the majority would reach the same result if the largest portion of support was on behalf of candidates for State office in Maine or California.

Under these circumstances, it is necessary to examine the reasons set forth by the majority, and to weigh the consequences of acting in accordance with these reasons.

The majority opinion (p. 258 supra) sets forth standards for exclusion of transfers from the gift tax, as follows:

These facts do not suggest a gift to the candidate, but the use of petitioner's resources to promote the social framework petitioner considered most auspicious to the attainment of his objectives in life. Petitioner focused on the social structure most conducive 1978 U.S. Tax Ct. LEXIS 23">*56 to his economic aspirations; others may focus on a social structure advancing their own notions of social justice, or conditions they deem essential for world peace or public order. In either case, in the particular circumstances before us, the individual candidate may generally be viewed, for purposes of the gift tax, as the means to the ends of the contributor.

The majority repeal (or at least make into surplusage) much of section 2522(a) of the Internal Revenue Code of 1954 and its predecessors, section 1004(a)(2) of the Internal Revenue Code of 1939, section 505(a)(2) of the Revenue Act of 1932, and section 321(a)(2) of the Revenue Act of 1924. The majority repeal the restrictive language added to these provisions by section 201(d)(4)(C) of the Tax Reform Act of 1969 and section 517(a) of the Revenue Act of 1934.

Section 2522(a)^{61978 U.S. Tax Ct. LEXIS 23">*57 1978 U.S. Tax Ct. LEXIS 23">*58 1978 U.S. Tax Ct. LEXIS 23">*59 1978 U.S. Tax Ct. LEXIS 23">*60 1978 U.S. Tax Ct. LEXIS 23">*61} provides for deductions from the gift tax in 71 T.C. 252">*269 the case of "charitable" gifts. (Section 2522(b) provides similar rules as to gifts by nonresident aliens.) The charitable gift 71 T.C. 252">*270 deduction also was provided by section 321(a)(2) of the Revenue Act of 1924, section 505(a)(2) of the Revenue Act of 1932, and section 1004(a)(2) of the Internal Revenue Code of 1939.

Analysis of these provisions indicates that, in substantially all cases, a transfer that would qualify for gift tax deduction as a charitable contribution to a governmental body, to a charitable organization, or to a fraternal organization, also would qualify under the majority opinion in the instant case as not being a gift. If a transfer does not constitute a gift, then it appears to be a useless act to provide for a deduction of the amount of the transfer. Consequently, it appears that the charitable contribution deduction provisions (at least, pars. (1), (2), and (3) of sec. 2522(a)) are impliedly repealed or made surplusage by the language of the majority opinion set forth above.

Since the majority opinion takes the position that this was the law from the start of the gift tax, it appears that the charitable gift tax deduction was surplusage at all times during the history of the gift tax, thus impliedly 1978 U.S. Tax Ct. LEXIS 23">*62 making surplusage the predecessors of section 2522(a), as well. (See C. Blake McDowell, Inc. v. Commissioner, 71 T.C. 71">71 T.C. 71 (1978).) This is contrary to the "settled position" of the Court; a change in such a "settled position" may well be "inappropriate, absent a change in the statute."

In M. D. Thatcher Estate Co. v. Commissioner, 38 B.T.A. 336">38 B.T.A. 336 (1938), the Board redetermined a deficiency in gift tax under the Revenue Act of 1924. In doing so, the Board focused on both section 319 of the 1924 Act (predecessor of section 2501) and section 321(a)(2) of the 1924 Act (predecessor of section 2522(a)). The Board concluded that a transfer for "civic and philanthropic uses" was deductible under the "charitable contribution" provisions in section 321(a)(2) of the 1924 Act. The Board thought it helpful, in arriving at its conclusion, to note (38 B.T.A. 336">38 B.T.A. at 343) that --

71 T.C. 252">*271 In Ould v. Washington Hospital, supra [95 U.S. 303], a charitable use is defined as follows:

A charitable use, where neither law nor public policy forbids, may be applied to almost anything [sic] that tends to promote the well-doing and well-being of social mean [sic].

If the Board could have forecast the test set forth in the 1978 U.S. Tax Ct. LEXIS 23">*63 majority opinion, it would not have needed to consider section 321(a)(2) of the 1924 Act; it could have stated that a transfer for civic and philanthropic uses is a "use of [the donor's] resources to promote the social framework [those directing the donor] considered most auspicious to the attainment of [their] objectives in life." Those directing the donor "may focus on a social structure advancing their own notions of social justice, or conditions they deem essential for world peace or public order. In either case, in the particular circumstances before us, the [donee organization] may generally be viewed, for purposes of the gift tax, as the means to the ends of the contributor." The Board could have concluded that, therefore, the transfer was not a transfer by gift, within the meaning of section 319 of the 1924 Act.

Two years later, in Faulkner v. Commissioner, 41 B.T.A. 875">41 B.T.A. 875 (1940), the Board (four members dissenting) sustained a determination by the respondent that a transfer by Mary duPont Faulkner to the Birth Control League of Massachusetts was subject to gift tax under the Revenue Act of 1932. The majority in that case concluded that the league's purposes included the influencing 1978 U.S. Tax Ct. LEXIS 23">*64 of legislation to such an extent that the league was not a permissible donee under section 505(a)(2)(B) of the Revenue Act of 1932 (predecessor of section 2522(a)(2)), as amended by section 517(a) of the Revenue Act of 1934. In a separate memorandum decision, the Board sustained a disallowance of an income tax deduction. The income tax case was appealed and reversed (112 F.2d 987">112 F.2d 987 (1st Cir. 1940)), on the ground that the transfer was for the use of the Brookline Mothers' Health Office, which had an identity sufficiently separate from the league to be an eligible donee. Whereupon, the Board modified its earlier opinion in the gift tax case to allow the deduction (42 B.T.A. 1019">42 B.T.A. 1019). Under the teaching of the majority in the instant case, the Board should have ruled for Mrs. Faulkner in the gift tax case on first consideration, since it was clear that both the league and the health office were means 71 T.C. 252">*272 to the end of Mrs. Faulkner in improving the social structure to advance her notions of social justice. Such a transfer, the majority tell us, is not even a gift for gift tax purposes.

More recently, the Court struggled with these same questions, holding that section 1004(a)(2)(B) of the Internal Revenue Code of 19391978 U.S. Tax Ct. LEXIS 23">*65 (predecessor of section 2522(a)(2)) permitted a gift tax deduction for a transfer for the use of the Kentucky Social Welfare Foundation ( Davis v. Commissioner, 22 T.C. 1091">22 T.C. 1091 (1954)), but did not permit gift tax deductions for transfers to the Foundation for World Government ( Estate of Blaine v. Commissioner, 22 T.C. 1195">22 T.C. 1195 (1954)). In Blaine, the donee organization was regarded by the respondent as exempt from income tax under section 101(8) ^{71978 U.S. Tax Ct. LEXIS 23">*66} of the Internal Revenue Code of 1939 (predecessor of section 501(c)(4)), as a "social welfare" organization. The Court concluded that Mrs. Blaine's "dominant aim was to organize a foundation to assist in bringing about a world government as rapidly as possible." Under the standard enunciated in the majority opinion in the instant case, the Blaine transfers were not subject to the gift tax because, clearly, they were made to an organization that Mrs. Blaine viewed as the means to her end of advancing conditions she deemed "essential for world peace or public order."

Apart from the implied general repeal of the charitable gift provisions, the majority's approach effects an implied repeal of the amendment made by the Revenue Act of 1934, which provided that a charitable organization would no longer be a qualified donee under the gift tax deduction provision if a "substantial part of the activities of [the organization] is carrying on propaganda, or otherwise attempting, to influence legislation" (sec. 517, Pub. L. 73-216, 48 Stat. 760). Since it is clear that (under the standards set forth by the majority herein) attempting to influence legislation can cause a transfer to be excluded from the gift tax, there is no need to disqualify an organization as a charitable gift donee merely because of excessive lobbying. Indeed, if the transfer is to an organization which has lost its charitable status because of excessive 71 T.C. 252">*273 lobbying, it 1978 U.S. Tax Ct. LEXIS 23">*67 would appear that under the majority's approach that fact alone should be sufficient to make a prima facie case that the transfer is excludable from gift tax.

It is even more clear that the majority's approach impliedly repeals the amendment by the Tax Reform Act of 1969 which provides that a charitable organization loses its gift tax qualified donee status if it intervenes "in (including the publishing or distributing of statements) any political campaign on behalf of any candidate for public office" (sec. 201(d)(4)(C), Tax Reform Act of 1969, Pub. L. 91-172, 83 Stat. 75). Indeed, the very transfers dealt with in the instant case are, and are intended to be, interventions in political campaigns on behalf of candidates for public office. It is obviously useless to disqualify an organization from being an eligible donee under the charitable gift-deduction provision merely because its activities are precisely the sort which justify a complete exclusion from the gift tax. ^{81978 U.S. Tax Ct. LEXIS 23">*68}

II. No Authority in the Statute, Legislative History, or Prior Court Rulings

(A) The Statute

The Congress has provided by statute for a tax "on the transfer of property by gift" (sec. 2501(a)(1), set forth at n. 1 supra) and has instructed us by statute that "Where property is transferred for less than an adequate and full consideration in money or money's worth, then the amount by which the value of the property exceeded the value of the consideration shall be deemed a gift, and shall be included in computing the amount of gifts made" (sec. 2512(b), set forth at n. 3 supra, emphasis supplied). The majority implicitly concede that the letter of the statute would 1978 U.S. Tax Ct. LEXIS 23">*69 impose the tax.

The statute, as in effect during the taxable periods before us, provided a number of exclusions and deductions as follows:

(1) Section 2501(a)(2) (relating to transfers of intangible property by nonresident aliens);

71 T.C. 252">*274 (2) Section 2517(a) (relating to joint and survivor annuity elections under certain tax-qualified plans and certain other arrangements); and

(3) Section 2522 (relating to deductions for charitable and similar gifts).

In addition, the statute provided for annual per-donee exclusions (sec. 2503(b)) and lifetime deductions (sec. 2521).

The statute provided no exclusion or deduction for "political contributions," as the term is used by the majority herein, except to the extent that the majority's opinion encompasses section 2522, as described above. Indeed, for the taxable year 1970 and the taxable periods falling within 1971, the statute specifically provided (sec. 2522(a)(2), as amended by sec. 201(d)(4)(C), Tax Reform Act of 1969) that if a donee organization participates or intervenes in political campaigns on behalf of candidates for public office, then the donor cannot deduct gifts made to that otherwise eligible donee organization.

Thus, the statute does not 1978 U.S. Tax Ct. LEXIS 23">*70 authorize the exclusion which the majority would grant -- indeed, the majority point to no authority in the language of the statute.

Instead, the majority rely upon a statement in the opinion of the Supreme Court in Holy Trinity Church v. United States, 143 U.S. 457">143 U.S. 457, 143 U.S. 457">459 (1892), for authority to depart from the language of the statute where it is "at war with its purpose and history."

As the analysis in part I of this dissent shows, the deduction for charitable gifts was part of the gift tax legislation when the gift tax was first enacted in 1924; it was part of the legislation when the gift tax was resurrected in 1932; and it has continued in essentially similar form until now. Litigation over the years has been founded on the assumption that transfers, of the sort that the majority now describe as not being subject to the tax, were transfers subject to the tax. That litigation focused on whether the transfers were deductible under the narrower rules of the charitable gift deduction. Under these circumstances, I would conclude that the majority's position is the one at war with the statute's purpose and history.

(B) The Legislative History

The majority focus on the expressed purpose 1978 U.S. Tax Ct. LEXIS 23">*71 of backstopping the estate tax, the requirement of "donative intent," and a published ruling which "makes it clear that respondent recognizes 71 T.C. 252">*275 campaign contributions are intended to advance the campaign, not personally benefit the candidate." P. 259 supra.

As to backstopping the estate tax, there are numerous estate tax cases involving bequests which, in the language of the majority, "focus on a social structure advancing [the decedent's] notions of social justice, or conditions [the decedent deemed] essential for world peace or public order." These cases have held such bequests are not deductible from a decedent's gross estate as transfers for public, charitable, or religious use under section 2055(a) or its predecessors. ^{91978 U.S. Tax Ct. LEXIS 23">*72} And yet the majority are, by their holding, exempting transfers from the gift tax that if made at death are subject to the estate tax. Further, if we are to interpret the two transfer taxes in a similar manner, the majority's rationale could be extended to exempt "social framework" bequests from the estate tax as well. This would have the result of making parts of section 2055(a) surplusage. ¹⁰

As to "donative intent," the Supreme Court has rejected the requirement of "donative intent" in favor 1978 U.S. Tax Ct. LEXIS 23">*73 of a broad and comprehensive definition of the term "gift." In Commissioner v. Wemyss, 324 U.S. 303">324 U.S. 303, 324 U.S. 303">306 (1945), the Court stated:

Had Congress taxed "gifts" simpliciter, it would be appropriate to assume that the term was used in its colloquial sense, and a search for "donative intent" would be indicated. But Congress intended to use the term "gifts" in its broadest and most comprehensive sense. * * * Congress chose not to require an ascertainment of what too often is an elusive state of mind. For purposes of the gift tax it not only dispensed with the test of "donative intent." It formulated a much more workable external test, that where "property is transferred for less than an adequate and full consideration in money or money's worth," the excess in such money value "shall, for the purpose of the tax imposed by this title, be deemed a gift * * *." * * * [Citations omitted.]

Finally, as to whether personal benefit to the candidate is required, as distinguished from benefit to the campaign, it is not 71 T.C. 252">*276 necessary for taxability that the donee be benefited in any materialistic sense. Nor is it necessary for taxability that the transfer be directly to the donee, if the transfer benefits 1978 U.S. Tax Ct. LEXIS 23">*74 the donee. E.g., sec. 25.2511-1(h)(3), Gift Tax Regs.; Skouras v. Commissioner, 14 T.C. 523">14 T.C. 523 (1950), affd. 188 F.2d 831">188 F.2d 831 (2d Cir. 1951). Further, the fact that the donor benefits from the transfer in that it furthers his purposes does not mean the transfer is not a gift, as long as the donor is not receiving "consideration in money or money's worth." 324 U.S. 303">Commissioner v. Wemyss, supra;Merrill v. Fahs, 324 U.S. 308">324 U.S. 308 (1945); Estate of Hundley v. Commissioner, 52 T.C. 495">52 T.C. 495 (1969), affd. per curiam 435 F.2d 1311">435 F.2d 1311 (4th Cir. 1971); Hrobon v. Commissioner, 41 T.C. 476">41 T.C. 476, 41 T.C. 476">498-502 (1964).

In sum, the majority have combed the legislative history and have found nothing directly on point. From this, they conclude that the Congress did not intend to subject to the gift tax the transfers described in the majority's standards. However, the absence of statements directly on point could just as easily lead to the conclusion that the Congress did not intend to exempt such transfers from the tax. The important point here is that a clear legislative history is necessary if we are to depart from the Congress' enacted definition and statutory system of exclusions and deductions. Such clear expressions of intent 1978 U.S. Tax Ct. LEXIS 23">*75 have not been adduced by the majority. The legislative history does not support the majority's analysis.

(C) Prior Court Rulings

The majority rely upon neither of the two court rulings most closely on point. The majority note that Stern v. United States, 436 F.2d 1327">436 F.2d 1327 (5th Cir. 1971), "supports and is consistent with the result we reach herein." However, the majority choose to rely on neither the authority nor the reasoning of Stern. Similarly, the majority note that DuPont v. United States, 97 F. Supp. 944">97 F. Supp. 944 (D. Del. 1951), which reached the opposite conclusion, dealt specifically in dictum with transfers to political parties. The majority dismiss the DuPont case as distinguishable. ^{111978 U.S. Tax Ct. LEXIS 23">*76}

71 T.C. 252">*277 The relevant cases of this Court dealing with transfers described in the majority's standard ( 38 B.T.A. 336">M. D. Thatcher Estate Co. v. Commissioner, supra;41 B.T.A. 875">Faulkner v. Commissioner, supra;22 T.C. 1091">Davis v. Commissioner, supra;22 T.C. 1195">Estate of Blaine v. Commissioner, supra) all conflict with the reasoning advanced by the majority.

Firstly, as the majority note in passing (n. 5 in the majority opinion), the Congress has acted in this area.

Section 14, Pub. L. 93-625, 88 Stat. 2121, ¹² added paragraph (5) to section 2501(a), to read as follows:

(5) Transfers to political organizations. -- Paragraph (1) shall not apply to the transfer of money or other property to a political organization (within the meaning of section 527(e)(1)) for the use of such organization.

This amendment (enacted Jan. 3, 1975) applies to transfers made after May 7, 1974. The same act 1978 U.S. Tax Ct. LEXIS 23">*77 (sec. 10(a), 88 Stat. 2118) enacted section 527(e), ^{131978 U.S. Tax Ct. LEXIS 23">*78} referred to in section 2501(a)(5).

The Congress has not otherwise modified section 2501 after the taxable periods before us, with respect to the transfers here at issue or transfers described in the majority's standards.

The question then arises as to whether the holding of this case applies to transfers made after May 7, 1974, or whether the holding is "good only for this train and this ride." Note in this connection that, in order to qualify under the "pins and needles 71 T.C. 252">*278 Act" rule, the transfer must be made to a political organization and that "political organization" is a term defined in detail in the statute.

Secondly, if the majority's standard applies after the "pins and needles Act," the question arises as to the extent to which that standard repeals or makes into surplusage a number of provisions that have been enacted by the Congress, and the extent to which prior decisions of this Court have been implicitly overruled (e.g., 22 T.C. 1195">Estate of Blaine v. Commissioner, supra) or made obsolete (e.g., 38 B.T.A. 336">M. D. Thatcher Estate Co. v. Commissioner, supra;41 B.T.A. 875">Faulkner v. Commissioner, supra;1978 U.S. Tax Ct. LEXIS 23">*79 22 T.C. 1091">Davis v. Commissioner, supra).

The majority do not rest their conclusion upon Stern v. United States, 436 F.2d 1327">436 F.2d 1327 (5th Cir. 1971), or section 25.2512-8, Gift Tax Regs., and have made no conclusory findings of fact which would compel the Stern result. Under these circumstances, it does not appear that it would be fruitful to examine, in dissent, what should be the effect of Stern on our decision in the instant case.