## Facts

- G.A. Buder died leaving a will that directed a portion of the residuary estate to thirteen listed “charitable, benevolent or educational” recipients.
- Twelve recipients were existing organizations; the thirteenth was a testamentary trust created by the will.
- The trust’s stated purposes were to promote patriotism and loyalty to the United States and to oppose socialism and communism.
- The will granted trustees broad discretion to use trust principal and income in whatever way they deemed most advisable and effective to advance those purposes.
- The estate claimed a federal estate-tax charitable deduction for all thirteen transfers; the IRS allowed the deduction for twelve recipients but disallowed it for the trust.
- After paying the assessed tax, the estate filed a refund action; the district court held the trust qualified for the charitable deduction, and the United States appealed.

## Issues

1. Whether a residuary bequest to a testamentary trust with broadly stated patriotic/anti-communist purposes and expansive trustee discretion qualifies for the federal estate-tax charitable deduction.
2. Whether labeling a beneficiary “charitable” and asserting philanthropic intent can satisfy the federal requirement that the donee be organized and operated exclusively for charitable or educational purposes.

## Decision

- The Eighth Circuit reversed the district court and held the bequest to the trust was not deductible as a charitable transfer for federal estate-tax purposes.
- The court concluded the trust instrument permitted substantial noncharitable activity, including political or ideological advocacy, because the trustees were not legally confined to exclusively charitable or educational means.
- The IRS properly disallowed the charitable deduction for the trust.

## Legal Principles

- A federal estate-tax charitable deduction is allowed only for transfers to or for the use of an entity organized and operated exclusively for charitable, educational, or similar purposes, with no more than an insubstantial noncharitable purpose.
- The governing instrument must impose legally enforceable limits that restrict the entity’s purposes and powers to qualifying charitable or educational activities.
- Descriptive labels in a will (e.g., “charitable, benevolent or educational”) and the testator’s general intent do not control if the instrument authorizes nonqualifying activities.
- A trust that can use assets for political or ideological advocacy fails the “exclusively” requirement even if some contemplated activities could be charitable or educational.
- State-law acceptance of a purpose as “charitable” does not determine federal tax deductibility when the federal standard requires tighter restrictions on noncharitable and political activity.

## Conclusion

Because the will’s language gave trustees open-ended authority to pursue patriotic and anti-communist objectives by potentially political or ideological means, the trust was not organized and operated exclusively for charitable or educational purposes, and the estate was not entitled to a charitable deduction for the bequest.


Buder v. United States, 7 F.3d 1382 (8th Cir. 1993)