ever, are distinct from the sanctions imposed for failure to support; they are imposed upon the unwise expenditure of ADC funds, not the failure of the parent to generally provide for the child's support. Petitioner stresses the fact that the protective payee provision is an extraordinary measure sparingly applied and was not applied in her case. However limited the provision might be, it nevertheless exists. The extent of its application and its application to petitioner's situation do not detract from its obvious purpose to protect the interests of the dependent child. Petitioner asserts that she had a legally enforceable economic right to receive the welfare benefits under the holding of Goldberg v. Kelly, 397 U.S. 254 (1970), and that the payments must be accorded the same status as additional earnings or gifts received by petitioner which were applied to the support of herself and her children. She emphasizes that she enjoyed the same degree of freedom and control with respect to the expenditure of the ADC funds as do other parents in the expenditures of their resources for their family support. Goldberg v. Kelly, supra, involved the very narrow constitutional question of whether the due process clause of the 14th amendment required an evidentiary hearing before welfare benefits could be terminated. The Supreme Court held that such a hearing was required to insure continuation of the recipient's bare necessities and such consideration outweighed the Government's interest in a summary adjudication. The Court in a footnote at 397 U.S. 262 fn. 8, observed that welfare benefits should be regarded as a property rather than a gratuity. The Court did not, however, determine the recipient of the benefit although it may have described the nature of the benefit. Our conclusion that the benefit belongs to the dependent child, not the parent, does not conflict with the rationale of Goldberg v. Kelly, supra. We see little difference between ADC benefits for the child paid to the parent and support in kind furnished by an institution. We held in Hazel Newman, 28 T.C. 550 (1957), that although only the taxpayer paid funds to certain institutions for the support of her niece and nephews, she was not entitled to claim the minor children as exemptions because such payments constituted less than one-half of the total dollar value of the support provided by the institutions. See also John L. Donner, Sr., 25 T.C. 1043 (1956). We hold, therefore, that the ADC benefits were received by petitioner for the benefit of her minor children and constitute "support" by the State of Illinois, not "support" furnished by petitioner. Petitioner has, therefore, not furnished over one-half of the support of her two minor children and is not entitled to claim them as dependents on her Federal income tax return for the taxable year 1969. Decision will be entered for the respondent. THE BRANERTON CORPORATION, PETITIONER V. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT JACK LINDNER AND ANNE LINDNER, PETITIONERS V. COMMISSIONER OF INTERNAL REVenue, ResponDENT Docket Nos. 5040-73, 5042-73. Filed March 5, 1974. Rule 70 (a) (1), Tax Court Rules of Practice and Procedure.— More than 30 days after joinder of issue, but prior to any informal consultation or communication between the parties, petitioners served written interrogatories (pursuant to Rule 71) upon respondent. Respondent filed (pursuant to Rule 103) a motion for a protective order. Held, a protective order will be granted for a reasonable period of time with direction that the parties attempt to attain the objectives of discovery through informal consultation or communication before utilizing the procedures provided by the rules. Stephen L. Packard, for the petitioners. D. Ronald Morello and Barry D. Gordon, for the respondent. OPINION DAWSON, Judge: This matter is before the Court on respondent's motion for a protective order, pursuant to Rule 103 (a) (2), Tax Court Rules of Practice and Procedure, that respondent at this time need not answer written interrogatories served upon him by petitioners in these cases. Oral arguments on the motion were heard on February 20, 1974, and, in addition, a written statement in opposition to respondent's motion was filed by the petitioners. The sequence of events in these cases may be highlighted as follows: The statutory notices of deficiencies were mailed to the respective petitioners on April 20, 1973. As to the corporate petitioner, the adjustments relate to (1) additions to a reserve for bad debts, (2) travel, entertainment, and miscellaneous expenses, (3) taxes, and (4) depreciation. As to the individual petitioners, the adjustments relate to (1) charitable contributions, (2) entertainment expenses, (3) dividend income, and (4) medical expenses. Petitions in both cases were filed on July 2, 1973, and, after an extension of time for answering, respondent filed his answers on September 26, 1973. This Court's new Rules of Practice and Procedure became effective January 1, 1974. The next day petitioners' counsel served on respondent rather detailed and extensive written interrogatories pursuant to Rule 71. On January 11, 1974, respondent filed his motion for a protective order. The cases have not yet been scheduled for trial. Petitioners' counsel has never requested an informal conference with respondent's counsel in these cases, although respondent's counsel states that he is willing to have such discussions at any mutually convenient time. Consequently, in seeking a protective order, respondent specifically cites the second sentence of Rule 70 (a) (1) which provides: "However, the Court expects the parties to attempt to attain the objectives of discovery through informal consultation or communication before utilizing the discovery procedures provided in these Rules." It is plain that this provision in Rule 70 (a) (1) means exactly what it says. The discovery procedures should be used only after the parties have made reasonable informal efforts to obtain needed information voluntarily. For many years the bedrock of Tax Court practice has been the stipulation process, now embodied in Rule 91. Essential to that process is the voluntary exchange of necessary facts, documents, and other data between the parties as an aid to the more expeditious trial of cases as well as for settlement purposes. The recently adopted discovery procedures were not intended in any way to weaken the stipulation process. See Rule 91(a)(2). Contrary to petitioners' assertion that there is no "practical and substantial reason" for granting a protective order in these circumstances, we find good cause for doing so. Petitioners have failed to comply with the letter and spirit of the discovery rules. The attempted use of written interrogatories at this stage of the proceedings sharply conflicts with the intent and purpose of Rule 70 (a) (1) and constitutes an abuse of the Court's procedures. of Accordingly, we conclude that respondent's motion for a protective order should be granted and he is relieved from taking any action with respect to these written interrogatories. The parties will be directed to have informal conferences during the next 90 days for the purpose making good faith efforts to exchange facts, documents, and other information. Since the cases have not been scheduled for trial, there is sufficient time for the parties to confer and try informally to secure the evidence before resorting to formal discovery procedures. If such process does not meet the needs of the parties, they may then proceed with discovery to the extent permitted by the rules. An appropriate order will be entered. 1 Part of the explanatory note to Rule 91 (60 T.C. 1118) states that"The stipulation process is more flexible, based on conference and negotiation between parties, adaptable to statements on matters in varying degrees of dispute, susceptible of defining and narrowing areas of dispute, and offering an active medium for settlement." ROBERT F. COLLINS, PETITIONER V. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT Docket No. 5841-72. Filed March 7, 1974. In 1968 T, a physician, established a charitable foundation to Jack E. Bratter and Bradley D. Marcus, for the petitioner. The Commissioner determined a deficiency in petitioner's 1968 income tax in the amount of $5,219.1 Four issues are presented for decision. These are (1) whether the Commissioner conducted an "unnecessary" examination or investigation in respect of petitioner's tax liability for 1968 contrary to the provisions of section 7605 (b), I.R.C. 1954; (2) whether the Commissioner failed to comply with the Service's recognized procedure (set forth in Rev. Proc. 68-28, 1968–2 C.B. 912) in reopening a closed tax year of petitioner; (3) in the event either of the above questions is answered affirmatively, whether the Commissioner's procedural noncompliance deprived the resultant deficiency notice of any validity; and (4) if the deficiency notice is valid, whether the charitable foundation created and endowed by petitioner normally receives a substantial part of its support "from direct or indirect contributions from the general public" as provided in section 170(b) (1) (A) (vi) of the Code. In the event that respondent prevails on the first two issues, the third issue becomes moot; alternatively, if the third issue is reached and decided in favor of petitioner, it will become unnecessary to consider the final issue. FINDINGS OF FACT The parties have filed a stipulation of facts which, together with its accompanying exhibit, is incorporated herein by this reference. 1 Subsequent to the issuance of the deficiency notice, the parties stipulated to a computational error by respondent. Petitioner Robert F. Collins, a physician, resided in North Hollywood, Calif., at the time of filing his petition herein. He timely filed a Federal income tax return for the taxable year 1968 with the district director of internal revenue at Los Angeles, Calif. On or about November 22, 1968, petitioner established the Collins Foundation (foundation), a California corporation, and contributed to it $1,000 cash and the building in which he conducted his medical practice. The building had a fair market value of $40,000, and it together with the $1,000 cash comprised the sole assets of the foundation. Subsequently, the foundation executed a lease of the entire building to petitioner for 1 year with five 1-year options to renew. The foundation's initial board of trustees consisted of petitioner and his two sisters, both of whom were registered nurses holding college degrees. By limiting board membership to his immediate family, Dr. Collins hoped to retain personal control of the foundation's activities. The foundation had no office or telephone, nor did it employ any secretarial help. Instead it shared petitioner's personal office space, using that mailing address. Petitioner's wife handled what correspondence there was. Petitioner's alleged purpose in creating the foundation was to promote and foster the study of human "traits" with respect to their causal relationship to human "attitudes." The Internal Revenue Service approved the foundation's tax-exempt status under section 501 (c) (3). There were difficulties in resolving certain fundamental definitional problems as well as in developing basic projects, and the activities and research conducted by the foundation have been quite limited both in amount and scope. Dr. Robert Morman, a "research teacher" at City College of Los Angeles, prepared a pamphlet under the aegis of the foundation in 1970 designed to identify "attitudes" on drivers' problems in order ultimately to develop a set of highway safety "predictors." Throughout the preparation of the pamphlet Morman was employed on a full-time basis by City College and he received no compensation from the foundation, although it did pay unspecified costs associated with the pamphlet. In 1972, Dr. Lawrence H. Brown, professor emeritus at Creighton University, initiated a study of "traits," pursuant to a research grant of an undisclosed amount from ⚫ the foundation; a resulting pamphlet was produced in 1973. At some time in the first part of 1973, the foundation hired Dr. Brown to conduct "basic research" as a full-time employee. The record does not disclose whether the compensation received by him is consequential in amount. In the case of both foregoing pamphlets, the record is unclear both as to the number of copies produced and as to the manner of their dissemination, if they were in fact distributed at all. |