Before GOODRICH, McLAUGHLIN and STALEY, Circuit Judges.
This is an appeal from a judgment for the United States in a suit brought by a taxpayer, Gracelawn Memorial Park, Inc., to recover for taxes paid and, it is alleged, erroneously collected. The issue turns on whether certain sums paid in connection with the purchase of cemetery lots were includible in the taxpayer's (Gracelawn) gross income.*fn1
The facts are not complicated and a simple statement will bring out the question involved. Gracelawn Memorial Park, Inc. (Gracelawn) is a corporation organized for profit. It maintains a cemetery of the memorial park type in the State of Delaware. Its business consists of three items: (1) Sale of cemetery lots; (2) Services with respect to interment of persons who are to be buried in the cemetery; and (3) Sale of markers for graves of those buried. When a purchaser buys a burial lot he is required, by his contract, to pay an additional sum which is a certain portion of the lot purchase price specified in the contract. These additional payments are deposited in two funds by Gracelawn.*fn2 One of these funds is a trust for perpetual care. This insures the continuous maintenance of the purchaser's lot and the general condition of the cemetery. The other special fund is a building fund. This is set up in a trust instrument and it is the situation created by payments to this fund which is the occasion for this lawsuit.*fn3
The taxpayer, in this suit, seeks to recover a portion of its taxes paid in 1952, 1953 and 1954. It contends that the money paid into this building fund by lot purchasers did not constitute part of Gracelawn's gross income for the taxable years in question.*fn4
The trust instrument around which the controversy revolves was written with skill and thoroughness. It is a much more tightly drawn document than that which the Fourth Circuit had before it in National Memorial Park v. Commissioner, 4 Cir., 1944, 145 F.2d 1008, discussed by both parties in the argument of this case. It has been summarized adequately and accurately by Judge Layton in his opinion in the district court*fn5 and his summary is set out in full in the margin.*fn6
The Government attacks, although not head on, the provisions of the trust. The suggestion is that this is not a real trust but another name for Gracelawn itself. It is true that there is complete interlocking of the trustees with officers of Gracelawn. It is also true that Gracelawn, in its corporate capacity, has in fact substantial control over the operation of this trust. But it is also true that in the event the objects of the trust are not carried out the payments are to be remitted to Gracelawn's customers or their representatives and not back to Gracelawn. We do not stop long with this point for we are not prepared to call the trust invalid nor need we do so to settle this case.
The language which we think raises the real problem comes in the trust agreement setting up the building fund. The preamble states the desire that a suitable building or buildings be built "for the use of lot owners and their families as a chapel, administrative building and for such other purposes as are consistent with the operation of a cemetery * *." When the trust fund reaches $75,000 the trustees are directed, as appears in Judge Layton's summary,*fn7 to use the funds for the acquisition of a suitable site or sites and for erection of a building on the land acquired. Gracelawn, at the discretion of its officers, may accelerate the growth of this fund by additional appropriations to it.
Despite the care with which this trust agreement is drawn and the perseverance with which arguments have been made to exclude the payments from the gross income of the taxpayer, we think that clearly the building fund payments are part of taxpayer's gross income and that the district court was correct in so holding. Gracelawn argues that this fund is just like the fund for perpetual care which in the past has not been includible as part of a cemetery's gross income. Commissioner of Internal Revenue v. Cedar Park Cemetery Ass'n, 7 Cir., 1950, 183 F.2d 553; American Cemetery Co. v. United States, D.C.D.Kan.1928, 28 F.2d 918; Troost Ave. Cemetery Co. v. United States, D.C.W.D.Mo.1927, 21 F.2d 194. It is conceded that cemetery lots sold with a perpetual care agreement will benefit a cemetery company by providing a more attractive burying ground than one in which there is no perpetual care provision for lots purchased. And it can be agreed that people who can afford it would rather have a lot with perpetual care than one that does not carry that provision. Thus, the perpetual care arrangement no doubt helps sell cemetery lots.
But the provisions in litigation here are quite different and go well beyond those sustained in the perpetual care cases. There is contemplated in the trust agreement the possibility of the construction of facilities for other types of burial - "vaults, crypts, columbariums." A charge will be made for the use of these facilities which after completion of the building will be retained by Gracelawn.*fn8 The taxpayer makes an argument distinguishing taxability for the tax years here involved from what would occur if and when crypts, columbariums, etc. are built. It acknowledges that when income begins to be received from such construction that income is subject to taxation. Of course this conclusion is correct. But it is irrelevant. Our question is not whether the money received from the use of a capital investment is taxable but whether the money received with which this income producing asset will be built is taxable. Teleservice Company of Wyoming Valley v. Commissioner, 3 Cir., 1958, 254 F.2d 105, is comparable in this phase of the case.
Further, suppose the building fund does provide a building for administration and a chapel. It appears from the depositions in this case that the present administration building, deemed inadequate by an officer of Gracelawn, is used for salesmen's meetings and other activities pursuant to the running of an enterprise for profit. While a chapel, as this officer pointed out, is convenient for people who have burial rites to perform in bad weather, it is remembered that part of the income of Gracelawn comes from charges made for services in connection with burials. And, as far as we can see, there is no reason why a charge should not be made.
Finally, the preamble to the agreement is so broad as to include "such other purposes as are consistent with the operation of a cemetery." Any ordinary construction of a document would certainly require the specific provisions to be interpreted in the light of a statement of purpose. In other words, we find in this careful document a provision for what is in effect a deferred building fund for the purpose of the taxpayer's enterprise for profit. Of course these provisions benefit a lot owner in the sense that it makes his purchase one in a more desirable and better kept-up cemetery. But we think the provision for a capital fund is there just the same and it is for the corporation's benefit.
Gracelawn makes much of the point that under the provisions of the trust this money, accumulated during the taxable years here involved, is not now available to the taxpayer.It says that this fact makes the fund not "income" under the rule of Eisner v. Macomber, 1920, 252 U.S. 189, 40 S. Ct. 189, 64 L. Ed. 521. But the argument will not stand close inspection. We are willing to concede here that the trust is effective and that persons whose money goes into it will get it back if the trust fails. But the broad provisions of the trust make it readily available to promote future capital improvements in the taxpayer's property.*fn9 The situation is comparable, although ...