## Facts

- Glenn McIninch died leaving a will that made two disputed bequests relevant to the federal estate tax.
- First, McIninch bequeathed money to a fraternal order that operated for charitable, social, and fraternal purposes.
- The will did not restrict the fraternal order’s bequest to any particular charitable activity or use.
- Second, McIninch bequeathed money to a trust directing the trustee to invest the principal and use the income to maintain the McIninch family plot in a specified cemetery.
- The trust further directed that any remaining income (after caring for the family plot) be used to maintain and beautify the rest of the cemetery.
- The estate (through its representative, First National Bank of Omaha) claimed both bequests were deductible from the gross estate as charitable transfers under 26 U.S.C. § 2055(a)(3).
- The United States disallowed the charitable deductions and assessed estate tax on the bequests.
- The estate paid the tax and sued for a refund in federal district court.
- The district court held the bequests were taxable (i.e., not deductible as charitable transfers), and the estate appealed to the Eighth Circuit.

## Issues

1. Whether an unrestricted bequest to a fraternal order with mixed purposes (charitable, social, and fraternal) qualifies for the estate-tax charitable deduction under 26 U.S.C. § 2055(a)(3).
2. Whether a trust directing income to maintain a private family burial plot, with any excess income applied to the general maintenance and beautification of the cemetery, is “exclusively” charitable so as to qualify for a charitable deduction under 26 U.S.C. § 2055(a)(3).

## Decision

- The court held the estate was not entitled to a charitable deduction for the bequest to the fraternal order because the gift was not restricted to charitable use and the recipient was not shown to be operated exclusively for charitable purposes.
- The court held the estate was not entitled to a charitable deduction for the cemetery trust because the trust required expenditures for a private family plot and therefore did not commit the transferred property exclusively to charitable purposes within the meaning of § 2055(a)(3).
- The Eighth Circuit affirmed the judgment for the United States, leaving the estate tax assessment in place and denying the requested refund.

## Legal Principles

- For an estate-tax charitable deduction under 26 U.S.C. § 2055(a)(3), the transfer must be to (or for the benefit of) qualifying charitable objectives, and the donated interest must be dedicated to charitable use rather than potentially diverted to noncharitable ends.
- A bequest to an organization with both charitable and noncharitable objectives does not qualify where the governing instrument leaves the recipient free to apply the funds for noncharitable purposes.
- A transfer in trust is not deductible as “charitable” when a material part of the trust’s required administration serves a private purpose (such as perpetual care of a particular family burial plot), even if any excess may benefit a broader public area.
- The taxpayer bears the burden of showing that the statutory requirements for the charitable deduction are satisfied, including that the gift is confined to charitable use.

## Conclusion

The court rejected the estate’s attempt to treat two testamentary transfers as charitable deductions under § 2055(a)(3): an unrestricted bequest to a fraternal organization with mixed purposes and a cemetery trust that obligated spending for a private family plot. Because the will and trust terms did not confine the transferred interests to charitable use, the bequests were taxable and the estate was not entitled to a refund.


First National Bank of Omaha v. United States, 681 F.2d 534 (1982)