## Facts

- Elizabeth M. Haas died leaving testamentary bequests of $25,000 to Grove Cemetery Association and about $2.5 million to Watertown Cemetery Association, both nonprofit cemetery associations in Watertown, New York.
- The estate claimed a federal estate-tax charitable deduction under 26 U.S.C. § 2055(a)(2), asserting the recipients were corporations organized and operated exclusively for charitable or religious purposes.
- The cemetery associations were not affiliated with, or supervised by, any church or religious body.
- The associations did not generally provide free burial to indigents and did not customarily sell burial plots at reduced prices.
- The IRS disallowed the deduction; the estate paid the assessed tax and interest and sued for a refund.
- The district court entered judgment for the United States, and the estate appealed.

## Issues

1. Whether bequests to nonprofit cemetery associations qualify for the estate-tax charitable deduction under 26 U.S.C. § 2055(a)(2) as transfers to corporations “organized and operated exclusively” for charitable or religious purposes.
2. Whether operating a nonprofit cemetery, without a regular practice of free or reduced-cost burial for those unable to pay and without religious affiliation, satisfies the “charitable” or “religious” requirements of § 2055(a)(2).
3. Whether the Internal Revenue Code’s separate income-tax provisions for cemeteries indicate Congress did not intend cemeteries, as such, to be treated as charitable or religious for estate-tax deduction purposes.

## Decision

- The Second Circuit affirmed the judgment for the United States.
- The court held that nonprofit cemetery associations are not deductible recipients under § 2055(a)(2) unless they are organized and operated exclusively for charitable or religious purposes in the traditional sense.
- On this record, neither cemetery association qualified as charitable or religious within § 2055(a)(2), so the estate was not entitled to a refund.

## Legal Principles

- A § 2055(a)(2) deduction requires that the transferee corporation be organized and operated exclusively for charitable or religious purposes; nonprofit status and public usefulness alone are insufficient.
- “Charitable” purpose is assessed by the entity’s total operations; a cemetery’s functions must reflect recognized charitable activity (commonly including services provided without regard to ability to pay) to qualify.
- “Religious” purpose requires more than incidental accommodation of religious practices; lack of church affiliation or supervision weighs against treating a cemetery association as organized and operated exclusively for religious purposes.
- Statutory structure can evidence congressional intent: distinct income-tax provisions for cemeteries (including § 501(c)(13) and § 170(c)(5)) and the absence of a parallel estate-tax provision support treating cemeteries separately from § 2055(a)(2) charitable/religious recipients.

## Conclusion

The court held that bequests to nonprofit cemetery associations were not deductible from the gross estate under § 2055(a)(2) because the associations neither operated with traditional charitable characteristics (such as regular free or reduced-cost burial for those unable to pay) nor functioned as religious organizations, and the Code’s separate cemetery provisions supported that result.


Child v. United States, 540 F.2d 579 (2d Cir. 1976)