Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 76-20

1976-1 C.B. 22

Section 61

IRS Headnote

Gross income; gift of manuscript containing memoirs and gratuitous services. A taxpayer's gift to a private foundation of a manuscript containing taxpayer's memoirs, together with gratuitous assistance in its preparation for publication by the foundation of which taxpayer and taxpayer's spouse were sole trustees, followed by the appointment of an additional trustee, not a disqualified person, to have sole authority with respect to the manuscript and its publication, does not result in gross income to the taxpayer.

Full Text

Rev. Rul. 76-20

A taxpayer made an outright and irrevocable gift to a foundation of all right, title, and interest in a manuscript containing the taxpayer's memoirs. At the time the gift was made, the manuscript was in such form that it could be edited and published without further substantial original writing on the part of the taxpayer. The taxpayer did however, assist the foundation in its task of preparing the manuscript for publication but the taxpayer was not compensated for this service.

The foundation was organized in 1970, under a State nonprofit corporation act and has been operating as a private foundation as defined in section 509 of the Internal Revenue Code of 1954. It fulfills its general charitable purpose by making grants to public charities such as colleges, churches, museums, and hospitals and is not a sham entity that is manipulated by the taxpayer and taxpayer's spouse, who are the trustees of the foundation. See Best Lock Corporation, 31 T.C. 1217 (1959), which held that a foundation that had a valid charitable purpose was not a sham to be disregarded for assignment of income purposes.

After the irrevocable gift was made, the foundation, as the absolute owner of the memoirs, appointed an additional trustee, who was unrelated to and independent of the other trustees, to negotiate an agreement for publication of the memoirs with a publisher. The new trustee prior to the appointment was not a disqualified person as that term is defined in section 4946(a) of the Code, and has sole authority and responsibility for determining the final form and content of the manuscript. The new trustee also has sole authority and responsibility for entering into contracts on behalf of the foundation with respect to the publication and use of the memoirs and will remain as a trustee until such memoirs are published and all other contracts dealing with the memoirs, such as magazine or movie rights, have been completed or fulfilled. The taxpayer did not participate in any negotiations with the publisher and did not receive any compensation for assisting the foundation in its task of preparing the manuscript for publication.

Held, for Federal income tax purposes, the taxpayer is not required to include any amount in gross income as a result of the foundation's use or disposition of the memoirs, or as a result of the taxpayer's gratuitous performance of services in assisting the foundation in its task of preparing the memoirs.

Compare Rev. Rul. 71-33, 1971-1 C.B. 30, which holds, in part, that a taxpayer who conveyed all right, title, and interest in a manuscript containing his memoirs to a foundation and gratuitously assisted in preparing the manuscript for publication did not realize income from the foundation's use or disposition of the memoirs. In Rev. Rul. 71-33 the taxpayer was not a trustee of the foundation.