Eat the Cake and Have It Too

AM AN WORTH one million dollars, and with a taxable income of one L hundred thousand dollars, can make a gift of one hundred and fifty thousand dollars to Dartmouth College, maintain his present net income and reimburse his heirs for the net amount of the gift.

To those who may remark "lt's all done with mirrors," let me say "No, it's all done with the fifteen per cent exemption granted under the Federal Income Tax Law on gifts to educational institutions."

I have been asked by Sid Hayward to write an article describing (among other things) just how this somewhat extraordinary result is accomplished.

However, an article on such a subject promises a new high record in tediousness, so I'm going to dwell on the "among other things" and it's not going to be an article, just an informal letter from Bill Minsch '07 to the other Bills and Eddies among the alumni. The technicalities will be only alluded to, and then by results rather than by methods. The things we have to consider are too serious to be dealt with too seriously. So, leaving first things 'till the last, let's consider the "among other things."

A POINT OF WEAKNESS

We have been watching Dartmouth grow and develop from Wheelock's little log school for Indians into a small queer backwoods college, into a larger but still bucolic institution inhabited mainly by farm boys from central and northern New England, and finally in the last forty years, with a great forward surge, into—well, you are Dartmouth men; you can supply your own descriptions, adjectives and all.

During that great forward thrust nearly everything has kept pace. The only really important item lagging in the big parade is endowments. It's easy enough to recognize the truth of that statement when you know that while Dartmouth's endowment per student is less than $7,000, Harvard has more than $16,000 per student, Yale $17.000, Williams $10,000, Amherst if you please, over $18,000, and Wesleyan $11,000. Others whose per-student endowment is substantially greater than Dartmouth's are Princeton, Bowdoin, Brown, M. I. T., Hamilton and Stanford.

When you consider those figures and the things that have been done, and are being done, at Hanover, you've got to admit a New England miracle. Up that way they "Prime the Pump" with cold water, hard work and thrift, not with gold.

We must of course be fair about it, admit that we're endowed with more mountains, woods and generally beautiful country than all the rest of them put together, and we know that geography is an important part of sound education, just as are those hard winters which Yankee ingenuity has transformed from a liability into an important asset.

It must be very difficult to measure educational results for purposes of comparison, because they do not come in quarts or pounds or even kilowatt hours, but without benefit of a "yardstick" our own observation of results at Hanover is convincing enough.

I remember some years ago being on a south-bound train with an old friend, a member of the Harvard Corporation, when in looking through a newspaper he saw an announcement that a great foundation, having completed a survey of educational methods, ranked Dartmouth first among the liberal arts colleges. Well, complete incredulity was the only thing that staved off apoplexy. After all, he was a loyal son of Harvard.

But we don't need a brief. We're just a group of Dartmouth men talking it over among ourselves, so why argue what we already accept.

A CHALLENGE FROM THE STRONG

The point is where do we go from here? The world lately has gone completely mad. Why this is and what it signifies we will leave to the sociologists, and they will need at least a hundred years to find the right answers. In the meantime, we are concerned with the immediate results.

This social revolution is producing just as many problems for the colleges as it is for business and for individuals. Only one of those problems is to be discussed here, and that is the subject of money.

Let's get this straight right away. Dartmouth is making no plea of the "Brother Can You Spare a Dime" variety. Its budget is balanced. Thanks to wise management and loyalty of the alumni to "The Alumni Fund," the College has, with no impairment of its services, operated through the lean years in black ink. A considerable deficit on the costs of rebuilding Dartmouth Hall has been carried forward to be paid off gradually as funds are available. And doubtless the same "whittling down" process will need to be followed in financing the projected upperclass dining hall.

There is no weak cry of destitution, but a challenge from the strong that it be made still stronger.

Dartmouth men everywhere are familiar with and proud of the record of the Alumni Fund. From a maximum total of $129,-786.50 some years ago it dropped to $67, 200.40 in 1933. Now it's climbing again. Last year under the skilful management of Jack Hubbell '21 it produced 194,654.78 from a new high record of 7,543 contributors, and before long the total dollars will be making new tops.

GIFTS FALLING OFF

A phase of college finance not so familiar to the alumni is gifts and bequests. In years past there has been a steady if not large flow of funds in that form from friends both of the alumni and outside the alumni, adding to the money available for general uses, building up equipment, bringing to fruition some of the dreams of new projects, making it possible to hold strong teachers on the faculty. There must nevertheless be times when Hoppy and his associate administrators feel they are running a training school for richer institutions because, strange as it may seem, professors have ambitions for their families, even as you and I. Our contests with other colleges are not confined to the gridiron.

For more than two years the Alumni Council has been studying how best to meet the problem presented by the shrinkage in the general flow of funds, caused by the lessening number and smaller size of gifts and bequests and by the decreasing return from its investments as a result of constantly lowering interest rates.

There are many plans in the making and before long we're going to ask you "Stout Fellas" in various parts of the country to lend a hand. We want you to give us the names of men of wealth in your communities whose attention you think could be attracted to Dartmouth. We'll want to know who might best solicit their interest for Dartmouth, and how. Tell us also where their interests lie, be it music or medicine, scholarships or skating, language or literature.

To be sure, we most want to meet the really understanding citizen who comprehends that it is the funds not restricted to any one purpose that add greatest strength to all the purposes of the College, because they can be applied where most needed as the necessity arises.

NEW FACILITIES OF VITAL IMPORTANCE

But for those who wish to endow some specific undertaking which particularly engages their attention there is a long list of projects from twenty-five thousand dollars with which some music lover might permanently endow the Handel Society, to President Hopkins' life-long dream of some day building fine social and dining halls on the campus, balancing the intellectual center grouped about Baker Library. Another pressing need in Hanover is the provision of a modern and adequate theater and auditorium.

As the discussion indicates, it is not our intention to confine our efforts to Dartmouth men. On the contrary, we particularly seek outside interest and aid, and especially so because the Alumni Fund is given the center of the stage for our own alumni.

OF NATIONAL SIGNIFICANCE

Dartmouth is not a parochial institution, nor has its service to the nation ever been parochial. One of the latest and most conspicuous examples of this is the Eye Clinic, which came into being within the last few years with so important a discovery in measuring and treating eye defects that it has already attracted to it scientists and patients from foreign lands, and money from the Rockefeller Foundation.

But to get back to the opening sentence on how a man can give money without divesting himself of it; to eat his cake "and have it too." The plan works out one hundred per cent only for the person blessed with considerable means, and it is the rather extraordinary fact that in the case of a taxable income above $100,000 a substantial gift can be made to an educational institution, payments being made over a period of years, and the donor's net income and net estate actually increased.

BONA FIDE INFORMATION

The facts and figures have been supplied by a well qualified estate engineer. His plan has been checked by accountants and attorneys and passed by them as compatible with the tax laws. The plan depends upon the fact that taxes are so high, and are levied on a progressive bracket basis. The Federal and State Revenue Laws provide for the exclusion of bequests and immediate gifts from the taxable estate, and where such bequests or gifts are made for an educational or charitable purpose, no transfer taxes are imposed. The same revenue acts permit the deduction from gross income of contributions to educational or charitable institutions in an amount equal to 15% of the donor's taxable income of the year in which the gift was made. For example, a client of this estate engineer, a resident of one of the eastern states, having a taxable income of $100,000, made such a gift of $150,000 from capital assets, without reducing the amount his heirs would have received had he not made the gift and yet the donor himself actually increased his own current net income by about $1,000 per annum.

Here are a few figures indicating results that can be obtained for various incomes and estates. These figures are calculated on the basis of Federal and New York State taxes. (See Exhibit A.)

Now while these very gratifying results can be enjoyed only by those of large income, the 15% exemption provides a worth while opportunity to lesser incomes as shown by the table above. (See Exhibit B.)

There are a great many Dartmouth men and others outside the alumni body planning to leave bequests to the college of varying amounts in their wills. This of course is very much to be desired, and undoubtedly in most of those cases it would not fit in with the benefactor's plans to make the gift during his lifetime. But the fact which this discussion is endeavoring to illuminate is that sums made as bequests are oftentimes very considerably reduced by state and federal inheritance taxes, while on the other hand, by skillful planning the tax laws can be turned to very good account in the case of gifts during one's lifetime.

It might not be amiss to close with the suggestion that witnessing the benefit to Dartmouth of placing upon a secure and permanent foundation some particular project in which the donor is interested will give him much greater satisfaction than to leave the matter to a posthumous gift.

EXHIBIT A Rateof Taxes Amt.of Returned GainSpread of Taxable Allowable Top Size of Total Net Value To Net orthe Gift Income Deduction Brackets Estate Gift To Estate Estate Loss 15% State & Fed. 10 years $100,000 $15,000 65% $1,000,000 $150,000 $ 99,000 $143,000 $ 44,000 10 years 130,000 19,500 70% 2,000,000 200,000 123,000 200,000 77,000 10 years 170,000 25,500 72% 3,000,000 300,000 162,000 279,000 108,000 10 years 250,000 37,500 74% 5,000,000 500,000 218,000 408,000 190,000

EXHIBIT B SCHEDULE SHOWING THE SAVING IN INCOME TAX WHEN 15 PER CENT OF INCOME IS CONTRIBUTED TO APPROVED CHARITABLE CORPORATIONS (Based on 1936 Rates)% of AddedContribution OutlayDonor's 15% Saving on Saving on Total Tax Represents an to TotalIncome Contribution Normal Tax Surtax Saving Added Outlay of Contribution $15,000 $ 2,250.00 $ 90.00 $ 190.00 $ 280.00 $1,970.00 87.55 20,000 3,000.00 120.00 370.00 490.00 2,510.00 83.66 25,000 3,750.00 150.00 622.50 772-50 2,977.50 79.40 50,000 7,500.00 300.00 1,980.00 2,280.00 5,220.00 69.60 75,000 11,250.00 450.00 4,707.50 5,157.50 6,092.50 54.16

[The following article on a subject vitalin its importance to Dartmouth has beenwritten by Mr. Minsch at the request ofthe editors. He is well qualified to lead thisdiscussion by two years of service as chairman of the Alumni Fund Committee, bytwo years as president of the Alumni Council, and many years of experience in financial matters. ED.]