Edward Orton Jr., Ceramic Foundation v. Commissioner
United States Tax Court
56 T.C. 147 (1971)
- Written by Daniel Clark, JD
Facts
The Edward Orton Jr., Ceramic Foundation (foundation) (plaintiff) was created by the will of Edward Orton, a major figure in ceramics engineering. The foundation produced pyrometric cones, which were used to measure time, temperature, and atmosphere during the firing of ceramics. The foundation’s cones were peerless in their quality and utility for both commercial and academic applications. Some competitors produced products that could perform functions similar to those of the cones, but the foundation’s cones were the market standard. The bulk of the foundation’s operations were devoted to manufacturing and selling the cones at a profit. The foundation’s profits were channeled back into the foundation’s operational activities or used to fund research fellowships and grants in the field of ceramics engineering. In 1947, the United States Tax Court and, on appeal, the Sixth Circuit Court of Appeals, held that the foundation was exempt from tax under § 501(c)(3) of the Internal Revenue Code (code). In 1951, Congress enacted § 502 of the code to narrow the scope of organizations that could qualify for § 501(c)(3)’s exemption. In light of § 502’s enactment, the Internal Revenue Service (IRS) (defendant) determined that the foundation was no longer tax-exempt. The foundation petitioned the Tax Court to review the IRS’s determination.
Rule of Law
Issue
Holding and Reasoning (Sterrett, J.)
Dissent (Raum, J.)
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