གས་

he staf, with was Dice the brief was Born the stad i IS VITNce with the ball subt that it was tellet so make a gift of

the time of the 1968

r that the pit was to mover more years than be President had been kimsed to make a large SECT TEA, but he did but knu by whom. Mr. Sanember any inssies of a speette figure for that he was mon fa mallit between the Versund that Mr Morgan had the principal

that be pushed Mr. Morgan and Mr. Krogh to matters of the President me ing the activities ← dera ise be said he wanted them for other things. le àne i that the papers had been transferred to Actives in March 1979 ani bellened that everything cat was no essary to te the gift by that time. gar met with the stad. De i nei mate that he not Filman of the specift mentions of the President gt to cover 1969 and the carryover period, as indi»mared by the President's attorneys. In a memoed by Mr. Mergan to Mr. Douglas Parker of the White August 14, 1973, in response to the White House reset forth his "basi: recollection of the facts regarding the and also did not refer to any such conversations. Mendam Exhibit I 9 gave no indication that he was followections from the President or Mr. Ehrlichman to make a ely 1969. In this regard his memorandum states:

In February and early March, I was in Europe handling the rangements for the President's trip.

I coordinated the transfer of the balance of the President's gators to GSA and the Archives which occurred on March 27, ugh I did not supervise the actual transaction."

to discuss his activities in California in April, which dow.

Mr. Morgan not refer in his memorandum to any r. Ehrlichman as to President Nixon's intentions,

but he also did not even refer in any respect to any portion of the transfer of the papers on March 27 as being for gift purposes. This and other information discussed below leads the staff to question whether Mr. Morgan believed that his role with respect to the papers in early 1969 was to carry out an intention of the President to actually make a gift then, rather than to transfer the papers to the National Archives for processing for subsequent gift designations, as discussed more fully below.

Kalmbach, DeMarco law firm's involvement in the personal finances and tax affairs of the President

The President decided to shift the handling of his legal matters from the Mudge, Rose law firm in New York to a California law firm, since the President desired to reside in California when he left the White House. As indicated above, the staff understands that the contemplated meeting between Messrs. Ritzel, Morgan and Krogh on the President's finances never took place and that Mr. Ritzel's February 28 letter to Mr. Krogh was his last involvement in the President's personal affairs in 1969 and 1970 (other than the sale of the New York apartment). Thus, there was a transition in the early part of March with respect to legal advice on the President's personal matters. It was decided to switch the President's legal matters to the California law firm of Kalmbach, DeMarco, Knapp and Chillingworth. The staff has met with both Herbert Kalmbach and Frank DeMarco, and their versions of their firm's involvement in the personal finances and tax affairs of the President are discussed below.

Kalmbach version.-Mr. Kalmbach recalls that his firm first began representing President Nixon in March 1969, at which time he was called by H. R. Haldeman and asked to represent the President in connection with the then-pending acquisition of the San Clemente property. Mr. Kalmbach said that it was in either late March or early April 1969 that he was advised by Mr. Ehrlichman that their firm would also be asked to handle the President's personal tax work." Mr. Kalmbach indicated that from these two conversations he understood that his law firm would represent the President in the acquisition of the San Clemente property, set up the foundation, and handle the President's personal tax work. He said in his initial staff interview that he does not recall in his conversation with Mr. Ehrlichman any discussion of President Nixon's gift of papers to the Archives and was not aware at that time of any such gift.

Mr. Kalmbach said that he discussed the legal work they were to handle for President Nixon with his partner, Mr. DeMarco, and asked him to handle the documentation of San Clemente, set up the foundation and handle the tax matters. Mr. Kalmbach told the staff that he did not mention the gift of papers to Mr. DeMarco and that he was not aware at this time of any such gift.

In a second staff interview, Mr. Kalmbach stated that, while he had no specific recollection of discussing the papers with Mr. DeMarco, his impression was that he may have done so. Mr. Kalmbach said that he got this impression from seeing his calendar for March 26, 1969, which had Mr. Morgan's name on it. He said that this caused him to think that Mr. Morgan may have discussed the papers with him.

11 He was advised by Mr. Ehrlichman that Mr. Edward L. Morgan would be the person in the White House who would be the coordinator on these matters.

Section 170(a)(3) of the Internal Revenue Code provides that a charitable contribution which consists of a "future interest in tangible personal property shall be treated as made only when all intervening interests in, and rights to the actual possession or enjoyment of, the property have expired." The regulations under this provision (Regs. 1.170-1(d) (2)) state:

"The term 'future interest' includes situations in which a donor purports to give tangible personal property to a charitable organization, but has an understanding, arrangement, agreement, etc., whether written or oral, with the charitable organization which has the effect of reserving to, or retaining in, such donor a right to the use, possession, or enjoyment of the property.' This provision was adopted to prevent income tax deductions in cases where a donor has transferred the title to property to a charity, but has retained sufficient rights to the property so that the donor effectively continued to enjoy full use of the property.9

As a factual matter, the staff believes that the restrictions in effect prevent any person from having access to the papers unless they are authorized by the President. The General Services Administration and the National Archives personnel have told the staff that they have agreed to the restrictions in the deeds on both gifts of papers and have prohibited public access accordingly. If no one can have access to the papers except the President and those he designates, then no one except the President and those he designates can make significant use of or can significantly enjoy the papers. The National Archives does have possession of these papers, and the restrictions and retained rights do not permit the President in any way to regain possession of the papers or to sell them. But the Archives already has custody of all other pre-Presidential papers in its capacity as storage agent for the President. Under the restrictions, the Archives can have access to the donated papers only for purposes of conducting their "archival duties" (i.e., for purposes of cataloging and storing the papers, a task which they perform also for papers stored with them but not donated). Thus, the Archives has little if any more ability to enjoy the papers which were donated than it has over other papers which the President still owns; and the President maintains a substantial right of enjoyment over the papers he has donated to the Archives. In fact, the gift has given the Archives few additional rights in the papers and has taken few rights away from the donor other than the right to sell them. Thus, the staff believes that the restrictions and retained rights contained in both the 1968 and 1969 chattel deeds make the gifts of papers gifts of future interests.

În addition, the staff believes that the restrictions relate to the tangible personal property, as is limited by section 170(a) (3). The restrictions go beyond preventing the Archives from publishing the papers (which restriction would not affect the tangible personal property). Under the restrictions the Archives cannot allow any individual (such as a scholar desiring to examine the papers for research purposes only) to view the papers. Archives' employees themselves cannot look at the papers except for purposes of cataloging

This purpose is clearly stated in the legislative history of this provision which was enacted in 1964. See H.R. Rep. No. 749, 88th Cong., 1st Sess., pp. 55-56.

them. In addition, the restrictions apply to all donated papers even though President Nixon has no common law copyright in many of the papers. For example, a sizable portion of the "General Correspondence File" donated in 1969 and all of the "Children's Letters" collection donated in 1968 consist of letters received by the President. The common law copyright to these letters belongs to the writers of the letters, not to the President. (This point is discussed in detail in the analysis of Professor L. Hart Wright, which is set out in Exhibit I-4.) In these cases, the restrictions on access and the rights retained by the President must relate to the tangible personal property since the restrictions in fact apply to these letters and since the President has no intangible property rights in the letters. For these reasons, the staff believes that the gifts of 1968 and 1969 are gifts of future interests in tangible personal property for which section 170(a) (3) prevents an income tax deduction until the end of Mr. Nixon's presidency.

Deduction for gift of papers in 1969

As indicated above, the staff believes that a valid gift of papers was not made prior to July 25, 1969, and, therefore, recommends denial of the charitable contribution deduction for 1969 and the carryovers in subsequent years. Also, the staff believes that a deed is necessary for this gift because of the restrictions and that since delivery of the deed conveying title of the papers to the United States, was not made until after April 10, 1970, the gift was not valid before July 25, 1969. But, even if the staff believed that a valid gift had been made before July 25, 1969, it believes that the gift represents a gift of a future interest in property and, therefore, that the charitable contribution deduction would in any event not be allowable for 1969 and subsequent

years.

Carryover of excess deduction for gift of papers in 1968

The staff did not examine President Nixon's tax returns for any year prior to 1969 for any purpose other than to determine the effect certain items on prior tax returns had on the tax returns under examination by the staff. The charitable contribution deduction taken with respect to the gift of papers in 1968, however, was in excess of the maximum amount deductible in that year; consequently, an amount (the excess was $9,447) was available as a carryover to 1969 and the four succeeding taxable years. This amount was not taken as a deduction in 1969 or in the subsequent years because the deduction claimed by the President on his 1969 tax return was large enough to cover the maximum amount available in 1969 and in the succeeding years since then. Since the staff believes that the charitable contribution deduction for the gift of papers in 1969 should be disallowed, this would have the effect of making the carryover of the excess deduction from the 1968 tax return available in 1969. It is for this reason that the staff believed it was necessary to make a recommendation with respect to the 1968 gift.

Because the staff believes that the restrictions contained in the 1968 chattel deed make the gift a gift of a future interest in property, it also believes that the carryover, which would otherwise be available for 1969 (since the deduction for the gift of papers in 1969 is disallowed), is not available.

Statement on tax return on restrictions of gift

The Internal Revenue Service's regulations require anyone taking an income tax deduction for a gift of property to a charity to include on the tax return certain information, including any restrictions that may be attached to the gift. The President's tax return for 1969 had an information sheet consistent with what was required by the regulations, setting forth a brief description of the relevant information about the gift. As to any restrictions, it was stated on the tax

return:

"None. The gift was free and clear with no rights remaining the taxpayer."

This is essentially the same statement that was contained in the 1968 tax return relating to the gift of papers in that year.

The staff believes that this statement on the tax return is inaccurate. The staff has no conclusive evidence, however, that the statement was made intentionally by those preparing the President's tax returns or any evidence that the President was aware of this statement on his tax return.

This statement on the 1969 return was prepared primarily by Frank DeMarco, according to his statements and the statement of Arthur Blech, the President's accountant, to the Joint Committee staff. Mr. DeMarco states that he knew of the 1969 deed and its contents at the time the statement was prepared, but that since the 1968 deed contained similar restrictions and the 1968 tax return contained the statement of no restrictions, he believed that a similar statement was appropriate on the 1969 return.

6. Staff Analysis of Facts Relating to the Second Gift of Papers Apart From the Deed

A. INTENTIONS OF PRESIDENT NIXON TO MAKE A GIFT IN EARLY 1969

During the course of its investigation into the validity of the deduction for the second gift of papers, the staff made an effort to determine whether President Nixon intended to make a gift of his papers in the early part of 1969 and the amount of the intended gift, including whether the thinking at this time was to make a bulk gift (that is, one large enough to permit a carryforward) or a one-year gift for tax purposes. The staff discussed this issue with several members of President Nixon's staff who were handling his personal finances in early 1969, other individuals who were involved in President Nixon's legal and financial matters at that time, and personnel at the National Archives who were involved in the discussions and arrangements with the White House staff relating to the gift. The following discussion of intentions is based on the information the staff has received in the interviews with these people and in the various items of correspondence and memoranda that the staff obtained. The staff has specifically asked the President's counsel to furnish all materials which may in any way provide information on the intent to make a gift in the early part of 1969, but as yet at least, the staff has not received any information other than what is summarized below. During our interviews, there were references to other internal White House memoranda not referred to below, but the staff has not been furnished copies of them.