The settlor, Francis Edward McGillick, created a Foundation by deed of trust bearing date of January 6, 1937. The settlor's will, dated May 26, 1936, was incorporated into and made part of the trust instrument. In Paragraph "First" of the deed of trust it is provided:

"FIRST: The said trustees and their successors in their collective capacity shall be designated as far as practicable

FRANCIS EDWARD McGILLICK FOUNDATION

and under that name shall, as far as practicable, conduct all business and execute all instruments in writing or otherwise in the performance of their trust."

The trust 1958 U.S. Tax Ct. LEXIS 98">*114 instrument recites, inter alia:

"FOURTEENTH: The fiscal year of the trustees shall end on the 31st day of December in each year.

IN CONSIDERATION OF the donations to and formation of the Francis Edward McGillick Foundation, I, Francis Edward McGillick, Donor, do hereby authorize, empower and direct the said Foundation through its Trustees to assume, pay, and carry out the following bequests and obligations, which are fully set forth in my Last Will and Testament, a copy of which is included herein and made a part hereof. Where executors are mentioned in my said Will, they are to act as Trustees of this Foundation. My Will and the Foundation are the same. At my death, all the Executors mentioned in my Will are to be Trustees of the Foundation."

"The trustees hereby accept this trust subject to the aforementioned bequests and obligations of the Donor as set forth in his Last Will and Testament, as follows: * * *" (Underscoring supplied.)

Incorporation of the Foundation after the settlor's death, in the event that he does not effect the incorporation in his lifetime, is provided for in paragraph 13 of the settlor's will which is part of the deed of trust.

The trustees appointed by the 1958 U.S. Tax Ct. LEXIS 98">*115 settlor in the trust instrument are himself, his wife, Margaret A. McGillick, now deceased, and A. Louise Schultz McGillick, present wife of the settlor.

At the date of the execution of the trust instrument the settlor transferred to the Foundation 49 shares of the capital stock of the F. E. McGillick Company, a Pennsylvania corporation. In 1949 and 1951 valuable parcels or real estate were added to the trust res. Since December, 1949, the income from the trust has been accumulating in the hands of the trustees. The value of the estate at the date of the present accounting is shown by the record to be $ 1,133,039.91.

The deed of trust, including, as it does, the will of the settlor, provides for the administration and settlement of his testamentary estate and the payment of certain charges and legacies. The residuary estate is given in trust to provide annuities for the settlor's widow, children and some other relatives and to provide monies for the Foundation for the maintenance of two educational funds and a system of vocational schools.

30 T.C. 1130">*1138 1.

There are no dispositive provisions in the deed of trust apart from those in the will which is included in the instrument. No power of revocation 1958 U.S. Tax Ct. LEXIS 98">*116 is reserved in the deed of trust. In Ingel's Estate, 372 Pa. 171">372 Pa. 171, 372 Pa. 171">176, it is held:

"* * * trusts are irrevocable unless a power of revocation is expressly reserved: * * *"

See also Thompson v. Fitzgerald, 344 Pa. 90">344 Pa. 90; Donnan's Trust Estate, 339 Pa. 43">339 Pa. 43; Fishblate v. Fishblate, 238 Pa. 450">238 Pa. 450; Kraft v. Neuffer, 202 Pa. 558">202 Pa. 558; Rynd v. Baker, 193 Pa. 486">193 Pa. 486; Wilson v. Anderson, 186 Pa. 531">186 Pa. 531.

The fact that an executed will of the settlor is made part of the declaration of trust does not render the declaration void or ambulatory and the trust res and the income therefrom are bound irrevocably by the provisions of the instrument: Mayor and City Council of Baltimore v. Williams, 6 Md. 235">6 Md. 235, 6 Md. 235">262, 6 Md. 235">263; Restatement of Trusts, sec. 330, Comment (e) and Illustration (2); Padfield v. Padfield, 72 Ill. 322">72 Ill. 322; Hamilton Trust Company v. Bamford, 141 A. 267; Hammett v. Farrar, 29 S. W. 2nd 949; Brainerd v. First National Bank, 169 S. W. 2nd 802.

Notwithstanding that the settlor might make some other disposition by will of his property which is outside the trust, yet, as to the property given and conveyed to the Trustees of the Francis Edward McGillick Foundation in the lifetime of the settlor under the provisions of 1958 U.S. Tax Ct. LEXIS 98">*117 the deed of trust of January 6, 1937, the said deed is conclusive and irrevocable.

2.

There is no provision in the deed of trust for the distribution of the income of the Foundation during the life of the settlor. Very specific directions are given for the payment of income after his death. The provisions in the instrument for charitable and educational uses are all included in the will which is incorporated in the deed of trust. This is evidence of the settlor's intention that distribution for these purposes is not to be made until his death.

This intention of the settlor is further evidenced by the fact that the Foundation has never been incorporated. In Paragraph 13 of the will the settlor directs his executors to incorporate the Foundation if he has not done so in his lifetime. There is no charitable corporation with the name Francis Edward McGillick Foundation existing at the present time, although the trustees hold the income and corpus of the trust for the benefit of the unincorporated Foundation established at the inception of the trust.

The donor appears to regard this trust as a decedent's estate, with provision for the payment of funeral expenses, administration expenses, 1958 U.S. Tax Ct. LEXIS 98">*118 other charges, legacies and annuities to be paid before the charitable provisions of the trust become operative. A strong indication of this appears in Paragraph 19 of the will which is part of the trust instrument and provides as follows:

"19. I hereby authorize, empower and direct my Executors, hereinafter named, when in their judgment and discretion there are more than sufficient funds to provide for the annuities to my wife and children, to transfer or set over to the Francis Edward McGillick Foundation any surplus to form or create the F. E. McGillick Priesthood Fund and the Margaret A. McGillick Sisterhood Fund. After the creation of these two funds, I authorize, empower, and direct my Executors, when in their judgment and discretion it is possible, to transfer and set over unto the Francis Edward McGillick Foundation, whatever funds have accumulated which are not needed to care for the annuities, salaries, and other expenses, for the purposes and uses as set out in paragraph twenty-one (21). I also authorize, empower and direct my Executors to transfer and set over unto the Francis Edward McGillick 30 T.C. 1130">*1139 Foundation, upon the death of my wife and all of my children, the principal 1958 U.S. Tax Ct. LEXIS 98">*119 fund of my estate and all the unpaid income or net proceeds thereof."

In the case at bar there is an implied direction to accumulate the income of the trust during the lifetime of the settlor. This is a logical inference where the carrying out of the provisions of the trust instrument will be secured thereby: Billings Estate, 268 Pa. 71">268 Pa. 71, 268 Pa. 71">74; Rhode Estate, 5 Fid. Rep. 189, 192.

There are conflicting provisions in the deed of trust. The entire instrument must be considered and effect given to all of its reconcilable parts in order to carry out the intent of the settlor as expressed in the language which he used: Wolters Estate, 359 Pa. 520">359 Pa. 520, 359 Pa. 520">525; Damiani v. Lobasco, 367 Pa. 1">367 Pa. 1, 367 Pa. 1">6, 367 Pa. 1">7.

The entire estate embraced by the deed of trust of January 6, 1937, is committed irrevocably by the settlor to the charitable uses therein provided, subject only to the payment of expenses, charges, legacies and annuities which he has directed. The proper distribution of the income and principal of this trust to the charitable beneficiaries named in the trust instrument may only be made after the settlor's death and after the other charges against the fund have been paid or provided for.

3.

The Court approves 1958 U.S. Tax Ct. LEXIS 98">*120 the claim which the trustees have submitted for additional compensation.

Distribution of the balance shown by the account will be made without prejudice to any rights which the Meadville Park Theater Corporation may have in the same by reason of an alleged fraudulent conveyance by the settlor on January 2, 1952, of an account receivable of F. E. McGillick Company to the trustees of the Foundation. The claim of the Meadville Park Theater Corporation is approximately $ 14,000.00 and the value of the account receivable is $ 146,833.31.

A decree will be entered in accordance with this opinion.

DECREE

And now to wit September 24, 1957, the account in this case having been filed and confirmed nisi and having been examined and audited by the Court, upon consideration thereof it is decreed that the account be confirmed absolutely, and that the funds in the hands of the accountant, to wit $ 1,133,039.91, be paid in accordance with the schedule of distribution hereto attached and made part hereof unless exceptions are filed within ten days.

Per Curiam

Opinion 1958 U.S. Tax Ct. LEXIS 98">*121 filed by Boyle, P. J.

At the time of the creation of the Foundation in 1937, the net assets of the Company had a fair market value of over $ 500,000. 30 T.C. 1130">*1140 During the calendar years 1949 through 1952, the net fair market value of the assets of the Company, other than those distributed to the Foundation on December 31, 1949, was in excess of $ 500,000.

On March 15, 1951, the Foundation by its trustees applied for a ruling exempting it from Federal taxation under the provisions of section 101 (6), I. R. C. 1939. The exemption application stated that the Foundation engaged in the "Operation of rental properties, sales of real estate, investments," and that it derived its income from "Rentals of properties, sales of lots, investments in properties for foundation purposes." The exemption application further stated that McGillick rented and sold properties owned and operated by and for the Foundation, and devoted the benefits of his long experiences to the determination of investments, his purpose being to build up the funds of the Foundation to enable it to carry on the work for which it was created.

On October 3, 1952, respondent ruled that the Foundation was neither organized nor operated exclusively 1958 U.S. Tax Ct. LEXIS 98">*122 for purposes coming within the meaning and intent of section 101 (6), I. R. C. 1939. After receiving this ruling, the trustees requested a reconsideration by letters dated October 16, 1952, March 17, 1953, and March 24, 1953. On June 12, 1953, the head of Special Technical Services Division of the Treasury Department affirmed the original ruling.

The only tax returns filed by the Foundation from 1937 through 1952 were those filed in 1950 through 1952 on Form 990-A (Return of Organization Exempt from Tax under section 101 (6) of the Internal Revenue Code). ² The failure to file Federal income tax returns Form 1120 for the years 1949 through 1952 was not due to reasonable cause. On these returns the Foundation stated that the nature of its activities was the "Rental and sales of real estate." McGillick and Louise, who was an attorney, signed these returns as president and treasurer, respectively.

For the years 1950 through 1958 U.S. Tax Ct. LEXIS 98">*123 1952, the Foundation reported the following income:

30 T.C. 1130">*1141 The Foundation also reported income earned by the Company as follows:

The Foundation received no income from 1937 through 1948 when the Company, by deed dated December 30, 1949, transferred to the Foundation title to certain parcels of real property. The conveyance provided, among other things, as follows:

This Conveyance is Made Subject, however, 1958 U.S. Tax Ct. LEXIS 98">*124 to the payment by the * * * Foundation of all mortgages now outstanding against said above described properties.

This Conveyance is also made subject to the payment by the * * * Foundation of certain monies to the wife, children and grand-children of * * * McGillick, and to certain charitable institutions, after the decease of * * * McGillick, as set forth in a certain Instrument in writing, dated May 26, 1936, and supplements thereto.

This Conveyance is also accepted by the * * * Foundation with the understanding that none of the above recited properties are to be sold during the lifetime of * * * McGillick.

These parcels of real property transferred to the Foundation were income-producing properties held by the Company primarily for investment purposes. The interest in real properties which the Company conveyed to the Foundation had a net fair market value on December 30, 1949, of $ 566,038.58 over and above the mortgages in the amount of $ 194,711.42. The cost of the properties to the Company was $ 478,895.52.

On December 31, 1951, the Company transferred to the Foundation two improved parcels of real estate. The fair market value of the interest in properties transferred to the 1958 U.S. Tax Ct. LEXIS 98">*125 Foundation was $ 64,257.16 and the properties were subject to mortgages in the amount of $ 4,257.16. The cost to the Company was $ 39,149.92.

During the years 1950 through 1952, the officers and trustees of the Foundation held title to the shares of stock in the Company and to the property which had been distributed by the Company to the Foundation. The trustees continued to rent this property and manage it in a manner much the same as had the Company.

On April 2, 1952, the Company transferred to two individuals named Norbert F. and Ruth Dougherty $ 5,000, plus 3.125 acres of land, which had a tax basis to the Company of $ 4,730.31 and a fair market value of $ 22,563.07. In exchange, the individuals transferred to the 30 T.C. 1130">*1142 Foundation property which had a fair market value of $ 80,000, and which was subject to a mortgage in the amount of $ 52,436.93, which was assumed by the Foundation. The Company, in closing its books for the calendar year 1952, charged the $ 5,000 and the recorded book cost of the land in the amount of $ 1,822 against and in reduction of an existing indebtedness owed by the Company to the Foundation.

During the years 1949 through 1952, McGillick and Louise were husband 1958 U.S. Tax Ct. LEXIS 98">*126 and wife and resided at 503 North Homewood Avenue, Pittsburgh, Pennsylvania. For the years 1949 through 1951, McGillick and Louise filed joint income tax returns with the collector of internal revenue for the twenty-third district of Pennsylvania. For the year 1952, McGillick filed an individual income tax return with the district director of internal revenue at Pittsburgh, Pennsylvania. He failed to file a declaration of estimated tax for that year.

On the return filed by McGillick and Louise for the calendar year 1950, McGillick reported $ 20,000 as salary from the Company. On the Form 990-A filed by the Foundation for 1950, $ 10,000 of such salary was shown to have been paid by the Foundation and the remaining $ 10,000 was shown to have been paid by the Company. The amount reported as paid by the Foundation was returned to the Company and credited as an advance by McGillick. McGillick had no salary from the Foundation or the Company in 1951 and 1952.

During the years 1949 through 1952, McGillick and Louise were the sole trustees of the Foundation. McGillick was president and general manager of the Company and the Foundation and Louise was their treasurer. Substantially all 1958 U.S. Tax Ct. LEXIS 98">*127 of the Foundation's income for the years 1949 through 1952 has been accumulated by its trustees.

For the years 1932 through 1952, the Company's income, salary accrued for McGillick's services, salary retained by McGillick, withdrawals from and advancements to the Company by McGillick were as follows:

30 T.C. 1130">*1143 By the end of 1951, McGillick's advances exceeded his withdrawals 1958 U.S. Tax Ct. LEXIS 98">*128 by $ 147,015.51. He donated this amount to the Foundation in 1952. A reasonable salary for McGillick's services to the Company in 1950 is $ 6,000. A reasonable salary for his services to the Foundation is $ 6,000.

The Company's current earnings and profits for the years 1949 through 1951 were $ 10,475.87, $ 1,693.43, and $ 17,450.70, respectively. Its current earnings for the year 1952, including the gain to it on the exchange of property with the Doughertys, were $ 17,167.37. The Company had no accumulated earnings and profits during the years referred to.

The Company was not organized or operated exclusively for the purposes set forth in section 101 (6).

Some part of the Foundation's net earnings may inure to the benefit of private individuals. During the years 1949 through 1952, none of the Foundation's gross income in excess of amounts conceded by respondent was paid or permanently set aside for the purposes specified in section 23 (o), I. R. C. 1939, or used exclusively for religious, charitable, or educational purposes.

OPINION.

I.

Respondent's alternative argument that section 166 applies to this trust ^{31958 U.S. Tax Ct. LEXIS 98">*130} will not bear analysis. It is based on the form of the instrument which 1958 U.S. Tax Ct. LEXIS 98">*129 incorporates in the deed a "will" in which McGillick sets forth the purposes of the gift. But we are concerned here only with the property already given, and with respect to that, it is well settled, as petitioners point out, that the "will" loses its ambulatory character and that the gift is irrevocable. Hamilton Trust Co. v. Bamford, 141 A. 267 (N. J. Ch. 1928), affirmed per curiam without opinion 147 A. 909 (N. J. Err. & App. 1929); Hammett v. Farrar, 29 S.W.2d 949 (Commission of Appeals, Texas 1930); Restatement, Trusts sec. 330, comment e and illustration 2. ⁴ Of course, other property may (or may not) be left by McGillick when he dies. As to that, any current will, whether or not identical with the one incorporated 30 T.C. 1130">*1144 in the deed, may be effective. But as to the property now vested in the trustees, and as to the income from it during the instant years, which is all that is here involved, the form of the document and the fact that it is called a "will" is totally irrelevant. Section 166 is accordingly inapplicable since the trust is not revocable.

This being so, petitioners contend that, even though a part of the Foundation's income may accumulate and eventually inure to the benefit of the private individuals who are to receive bequests and annuities under the directions in McGillick's "will," this does not prevent an otherwise eligible charity from attaining exemption under section 101 (6). ⁵ The payments in question are said to be considered prior charges against the property donated, and with respect to all that remains, organizations have been held to be created and operated exclusively for the purposes specified. Lederer v. Stockton, 260 U.S. 3">260 U.S. 3; Emerit E. Baker, Inc., 40 B. T. A. 555; Edward Orton, Jr. Ceramic Foundation, 9 T.C. 533, 1958 U.S. Tax Ct. LEXIS 98">*131 affd. (C. A. 6) 173 F.2d 483. See also William L. Powell Found. v. Commissioner, (C. A. 7) 222 F.2d 68.

Here it may be that one of the purposes of the Foundation is religious and that some of its property and income may turn out to be dedicated to that objective. But the gifts to be made from the fund and which were to be paid before any charity would benefit were not merely charges on the original transfer as in 260 U.S. 3">Lederer v. Stockton, supra;Emerit E. Baker, Inc., supra;Edward Orton, Jr. Ceramic Foundation, supra. They were not payable immediately out of either income or principal, and 1958 U.S. Tax Ct. LEXIS 98">*132 the former has to be accumulated until McGillick's death, under the State court decree. ⁶

It cannot thus be said now, as it was in the cited cases that any immediate gift has been made to an individual; and that hence the gift to charity has merely been reduced by the charge so created. It is possible and even probable that the income now being earned may be used for the benefit of these individuals, the donees, in the future. There is nothing in the record to demonstrate that at the time of final distribution there will remain enough of the corpus to pay the described obligations and gifts without resorting to the accumulated income, nor indeed anything to convince us that the trustees cannot 30 T.C. 1130">*1145 first exhaust the accumulations before resorting to corpus. ⁷ On that ground alone, we should disapprove the attempted resort to section 101 (6), requiring as it does that the purpose of the organization shall be "exclusively" charitable and that no part of the income can inure to the benefit of a private individual. Gemological Institute of America, 17 T.C. 1604, 1958 U.S. Tax Ct. LEXIS 98">*133 affirmed per curiam (C. A. 9) 212 F.2d 205; Mabee Petroleum Corp. v. United States, (C. A. 5) 203 F.2d 872.

In addition, however, it seems clear that the administration expenses of McGillick's estate, as well as all kinds of his taxes and certain debts, are payable in the future out of these funds. ⁸ This is a direct benefit to him, increasing the private wealth which he can safely dispose of in his lifetime. Had he provided that these funds were to be used to pay his butcher bills or his house rent, they would clearly inure to his personal benefit, Louis W. Hill, 33 B. T. A. 891, affd. (C. A. 8) 88 F.2d 941; Estate of A. E. Staley, Sr., 47 B. T. A. 260, affd. (C. A. 5) 136 F.2d 368, certiorari denied 320 U.S. 786">320 U.S. 786, and not be eligible for preferred treatment under section 101 (6). Scholarship Endowment Foundation v. Nicholas, (C. A. 10) 106 F.2d 552, certiorari denied 308 U.S. 623">308 U.S. 623. 1958 U.S. Tax Ct. LEXIS 98">*134 We see no distinction in theory from the present provision making this gift, principal and accrued income, liable, as it does, for personal expenses to which he may now or in the future be subject.

Furthermore, the required payment of salary to McGillick for services, which he is already obligated to perform for the Company and the similarly required future payments to his sons, and which are, or certainly may in the future be unreasonably large, prevents us from being able to say that this Foundation was "organized" exclusively for charitable purposes. See Texas Trade School, 30 T.C. 642.

The latter propositions are, perhaps, also consistent with respondent's other alternative that petitioner McGillick is taxable on the trust income under section 167 because the income is in effect distributed or accumulated for his benefit, or under Helvering v. Clifford, 309 U.S. 331">309 U.S. 331. But since 1958 U.S. Tax Ct. LEXIS 98">*135 this is expressly an alternative, we prefer to rest our decision on the principal contention, and content ourselves with disposing of this by holding, in accordance with the deficiency notice, that the Foundation is not an exempt organization under section 101 (6).

30 T.C. 1130">*1146 II.

What we have said also disposes of petitioners' further contention that the Foundation is entitled to deduct the entire amount of income received because this is either currently distributable to, or must be accumulated for charitable uses. Secs. 162 (a) and (b). That it is not currently distributable is now conceded by petitioners, in accordance with the holding of the local Probate Court. ⁹ In addition, there is no real showing, as we have already pointed out, that some part or all of the accumulated income may not eventually come into the hands of private individuals. It cannot thus be treated as irrevocably destined for charity. Boston Safe Deposit & T. Co. v. Commissioner, (C. A. 1) 66 F.2d 179, affirming 26 B. T. A. 486, certiorari denied 290 U.S. 700">290 U.S. 700.

III.

When we come to the Company, a more elementary situation 1958 U.S. Tax Ct. LEXIS 98">*136 is presented. It is a commercial corporation engaged in the real estate business and presumably organized and operated for profit. The only theory on which its income could be viewed as nontaxable would be an application of the "feeder" doctrine. Roche's Beach, Inc. v. Commissioner, (C. A. 2) 96 F.2d 776; Willingham v. Home Oil Mill, (C. A. 5) 181 F.2d 9, certiorari denied 340 U.S. 852">340 U.S. 852; C. F. Mueller Co. v. Commissioner, (C. A. 3) 190 F.2d 120. But see United States v. Community Services, (C. A. 4) 189 F.2d 421, certiorari denied 342 U.S. 932">342 U.S. 932; Donor Realty Corporation, 17 T.C. 899; Joseph B. Eastman Corporation, 16 T.C. 1502; Eaton Foundation v. Commissioner, (C. A. 9) 219 F.2d 527, affirming a Memorandum Opinion of this Court; John Danz, 18 T.C. 454, affd. (C. A. 9) 231 F.2d 673, certiorari denied 352 U.S. 828">352 U.S. 828; Randall Foundation v. Riddell, (C. A. 9) 244 F.2d 803. Cf. section 301 (b), Revenue Act of 1950, amending section 101, I. R. C. 1939; section 601, Revenue Act of 1951; S. Rept. No. 2380, 81st Cong., 2d Sess. (1950), p. 116.

But while the ownership of its stock by the Foundation does indeed provide a possible charitable destination for some of the earnings distributed 1958 U.S. Tax Ct. LEXIS 98">*137 by it as dividends, it cannot be said that the Company was organized as well as operated for charitable purposes. Under section 101 (6), the organization is as important as the operation and one is as essential to exemption as the other. There can be no dispute that here the Company was organized solely as a commercial venture. That alone bars its exemption. In that respect the case is vitally different from such cases as Mueller where the "feeder" corporation was organized as such and with no other destination for its income.

30 T.C. 1130">*1147 It may be added that the record requires a finding that not all of the income of the Company would be devoted to the Foundation in any event. At least 1 share of its stock is claimed by a private individual, and it is our best judgment from the stipulation that such a claim would be sustained.

On this issue, also, the deficiency must be approved.

IV.

It seems to be accepted by both parties that the distributions by the Company to the Foundation from 1949 through 1952 were taxable as dividends only to the extent of the stipulated earnings and profits existing in those years; and that any excess is to be applied first against the Foundation's basis with the balance 1958 U.S. Tax Ct. LEXIS 98">*138 taxable as capital gain.

Although these matters are stated to be in controversy, the briefs apparently eliminate any real issue. The figures are not materially in dispute and the computations involved can be left to the proceedings under Rule 50. The slight discrepancy in amounts has been resolved in our findings in favor of respondent for lack of proof to the contrary. ¹⁰

V.

McGillick's salary from the Foundation is said to be reasonable because in accord with customary allowances to trustees under Pennsylvania law. ^{111958 U.S. Tax Ct. LEXIS 98">*139} There are several difficulties with this contention. In the first place it was in 1950, not 1949, that McGillick was awarded the salary of $ 10,000 which is in issue. But the large income collections upon which the fees are computed by petitioners were received in 1949, not 1950. The 1950 receipts would not warrant anything like the fees contended for by petitioners under their assumption of what a Pennsylvania court would award. Parenthetically, it may be noted that there is no evidence that any application for approval of the compensation in dispute was ever made to the local Probate Court.

In the second place, as has been noted in connection with the preceding point, most of the distribution, even in 1949, was from capital and it becomes highly doubtful whether any court would award fees based on income receipts under such circumstances.

Respondent has determined that $ 6,000 was reasonable compensation to McGillick for his services to the Foundation in 1950, and we 30 T.C. 1130">*1148 find nothing in the record to demonstrate the error of that determination.

The deficiency 1958 U.S. Tax Ct. LEXIS 98">*140 in this respect is sustained.

VI.

In a previous controversy between the Company and respondent, we decided that a reasonable annual salary for McGillick's services to the Company for the years 1948 and 1949 was $ 12,000. F. E. McGillick Co., a Memorandum Opinion of this Court dated December 11, 1953. After the December 30, 1949, distribution of $ 566,038.58 to the Foundation, the Foundation had property with a fair market value in excess of $ 500,000 which had until then belonged to and been managed by the Company. The earnings attributable to this property owned by the Foundation in 1950 far exceeded the earnings on the property retained by the Company. We have already concluded that McGillick's services to the Foundation in 1950 were worth $ 6,000. The facts existing in 1950 are materially different from those which were previously before us, and this issue must be decided de novo. Glenshaw Glass Co., 13 T.C. 296. Upon consideration of the facts presented, we have concluded that petitioners have not proved that McGillick's services in 1950 to the Company were worth more than $ 6,000 nor that the Company was entitled to a deduction of any greater amount. Respondent's determination 1958 U.S. Tax Ct. LEXIS 98">*141 in this respect is accordingly sustained.

VII.

Petitioners contend that respondent erred in charging the Company with a taxable gain on the exchange of certain cash and property for other property. Petitioners appear to be arguing that the distribution by a corporation of a dividend in appreciated property is not taxable to the corporation. General Utilities Co. v. Helvering, 296 U.S. 200">296 U.S. 200. In this case, however, the Company transferred property and cash to a third party and received other property from it in return. At that point the Company was taxable on the difference between its basis and the fair market value of the property received. Sec. 111, I. R. C. 1939. The fact that it distributed the property so received in the course of completing the transaction with the third party cannot have the effect of eliminating the taxability of a transaction, the characteristics of which had already become fixed. Commissioner v. Court Holding Co., 324 U.S. 331">324 U.S. 331; Rose Kaufmann, 11 T.C. 483, affd. (C. A. 3) 175 F.2d 28. That the Company never physically received the property but caused it to be transferred directly to the Foundation does not affect the Company's tax liability. United States v. Joliet & Chicago R. Co., 315 U.S. 44">315 U.S. 44; 1958 U.S. Tax Ct. LEXIS 98">*142 Commissioner v. First 30 T.C. 1130">*1149 , (C. A. 5) 168 F.2d 1004, certiorari denied 335 U.S. 867">335 U.S. 867; Helvering v. Horst, 311 U.S. 112">311 U.S. 112.

It is unnecessary to consider whether the gain from this exchange might fall within one of the statutory nonrecognition provisions, since no such contention is advanced.

Although the matter is not clarified in the briefs, respondent's request for increased deficiencies against the Foundation for 1952 appears to be the result of this same transaction. The receipt by the Company as income of the profits on the exchange would place them in possession of an equivalent amount of additional earnings and profits adequate to support the finding that the receipt of the proceeds of the exchange by the Foundation, stated to be in the amount of $ 17,832.76, constituted an additional taxable distribution by the Company. ¹² This aspect being raised by respondent's amended answer seeking an increased deficiency, the burden of proof as to any disputed facts accordingly rests upon respondent. However, all of the facts of the transaction appear to be in evidence and are contained in our findings. Whatever burden of proof was accordingly involved, respondent must hence be 1958 U.S. Tax Ct. LEXIS 98">*143 held to have sustained.

Respondent's computation of the amount of gain not being questioned, the determination as well as the increased deficiency claimed in the amended answer is approved.

VIII.

Respondent determined deficiencies in additions to tax under section 291 (a), I. R. C. 1939, for the failure of the Foundation to file income tax returns for 1949 through 1952 and for the Company's failure to file for 1950 through 1952. No returns were filed by either organization in these years, except for the Forms 990 and 990-A filed by the Foundation for 1950 through 1952.

Petitioners point out that Louise, the treasurer 1958 U.S. Tax Ct. LEXIS 98">*144 of both the Company and the Foundation, was an attorney, and would have us conclude that this alone establishes reasonable cause. This we are unable to do, for there is no showing that Louise had any connection with petitioners' tax matters except to sign the Forms 990 and 990-A. See C. R. Lindback Foundation, 4 T.C. 652, affirmed per curiam (C. A. 3) 150 F.2d 986.

No other excuse is even intimated as to the Company, but it is also suggested that the pendency of the applications for exemption 30 T.C. 1130">*1150 constituted reasonable cause as to the Foundation. But until long past the time for filing the 1949 return, no such request had even been filed. As to 1950 through 1952, we regard the matter as controlled by Automobile Club v. Commissioner, 353 U.S. 180">353 U.S. 180. There the Supreme Court held that "the Form 990 returns are merely information returns in furtherance of a congressional program to secure information useful in a determination whether legislation should be enacted to subject to taxation certain tax-exempt corporations competing with taxable corporations. Those returns lack the data necessary for the computation and assessment of deficiencies and are not therefore tax returns within the 1958 U.S. Tax Ct. LEXIS 98">*145 contemplation of § 275 (a)." (Emphasis added.) It is true the question there was the running of the statute of limitations rather than the addition to tax. But if the paper filed was not a return for any purpose, we fail to see how the mere pendency of the application for exemption can be considered a legitimate excuse for failing to file any return whatever for 4 successive years.

The situation is quite different from that in Hartford-Connecticut Trust Co. v. Eaton (C. A. 2) 34 F.2d 128, to which petitioners refer. That was a case where a fiduciary Form 1041 had been filed instead of the return Form 1040. It was later held in Germantown Trust Co. v. Commissioner, 309 U.S. 304">309 U.S. 304, that the former was a return for purposes of computation and collection of the tax in that all of the material except the tax computation itself was called for by it. In the Germantown Trust case for purposes of the statute of limitations, as in Hartford-Connecticut Trust Co. v. Eaton, supra, 1958 U.S. Tax Ct. LEXIS 98">*146 in the case of the addition to tax, it is evident that a fiduciary return Form 1041 is quite different from a Form 990 which was required, as petitioner correctly states, by section 54 (f) rather than by section 142.

The conclusion of any adequate excuse for failing to file a return cannot, as we have already noted, be reconciled in the case of a Form 990 with 353 U.S. 180">Automobile Club v. Commissioner, supra, which the Supreme Court obviously did not think inconsistent with its previous decision in 309 U.S. 304">Germantown Trust Co. v. Commissioner, supra. And the statement in petitioners' brief that "Congressional intent appears to be substantiated by the provisions of Section 6501 (g) of the 1954 Code, wherein Congress declares the return executed by a charitable organization will begin the running of the Statute of Limitations," actually leads to the diametrically opposite conclusion as to the delinquency penalty. Cf. John Danz, supra at 465.

The deficiencies in additions to tax are approved.

IX.

The final question is McGillick's liability for additions to tax under section 294 (d) (1), I. R. C. 1939, for failure to file a declaration of 30 T.C. 1130">*1151 estimated tax for 1952. Petitioners have submitted neither evidence 1958 U.S. Tax Ct. LEXIS 98">*147 nor argument to justify this failure. The deficiency in this respect must therefore be sustained, except that the amount which will depend upon McGillick's taxable income may be arrived at in the recomputation.

Decisions will be entered under Rule 50.