Mr. McKEITHEN. As it eventually occurred, proceeds of his writing were assigned directly by the President to certain organizations, including, I believe, the Nixon Foundation. On page 210 of the Joint Committee report, paragraph No. 6 on that page deals briefly with the assignment of royalty income to charities. We do not have any information as to exactly which charities this income was assigned and the amount of such assignments.

Mr. McCLORY. You do not know whether the proceeds from the sale of "Six Crises" went directly to the Boys' Clubs of America? Mr. McKEITHEN. I do not know.

Mr. McCLORY. Thank you.

The CHAIRMAN. Mr. Doar.

Mr. DOAR. Members of the committee, it might be helpful to summarize the legislative history of this particular section of the IRS Code that provides for deductions of gifts of papers to the Government, for example public men's papers.

In February of 1969 there was a law on the books of the United States that permitted taxpayers to make gifts of papers to the Government and claim a deduction of the fair market value of the gift. There was also a provision in the Code that permitted taxpayers to make gifts of such papers so that they could carry forward the deduction for 5 years, if they so desired.

The amount of the deduction for any particular year, regardless of the size of the gift, was limited to 30 percent of the taxpayer's adjusted gross income, so that if a person in one particular year desired, he could give 200 percent of his adjusted gross income and carry forward 170 percent of that amount for 5 years. I am sure that many of the members of the committee are familiar with other carry forward and carryback provisions of the Internal Revenue Code.

Now, sometime in the late spring in one of the committees, on the Tax Committee of the House of Representatives, consideration began to be given to the elimination of this provision and to putting a stop to it. Ordinarily when the tax laws are amended they are usually amended prospectively; that is, the taxpayers of the United States receive notice. that at some date in the future they will no longer be able to claim a particular deduction. That is ordinarily the way deduction eliminations are handled by the Congress, if I understand it correctly.

In the end of July or right after the 1st of August the committee of the House that was preparing the amendment to the IRS, including a number of reforms to the IRS, included a recommendation or I believe the House passed a bill that eliminated this particular deduction as of the close of 1969. And when the bill got over to the Senate there was debate on the floor and in the committee, and in the Senate Finance Committee as to the fact that this was not an appropriate kind of deduction, that a great number of persons had taken advantage of this deduction, of this claim by giving papers, and that it was the kind of a thing that ought to be eliminated. As a result of the viewpoints of several of the U.S. Senators who were on the committee, the Senate Finance Committee passed a bill that provided that the deduction be eliminated, but eliminated retroactively back to December 31, 1968.

So, when the bill came to conference in the end of November 1969, you had a House bill that provided the deduction would be eliminated

as of December 31, 1969, and a Senate bill that provided it would be eliminated as of December 31, 1968. In the conference committee, the committee members of the House and the Senate compromised and set the elimination of the deduction for July 26, 1969, and so that is the legislative history of the elimination of this deduction that included the right to give away enough papers so that you could accumulate deductible items for 5 years.

Mr. HOGAN. Mr. Chairman?

The CHAIRMAN. Ms. Holtzman.

Ms. HOLTZMAN. Thank you, Mr. Chairman. Mr. Nussbaum, in line with the question asked by Mr. McClory regarding the assignment of writings or proceeds of writings to charitable groups such as the Boys' Clubs, even though assignment is made of the royalties to a charitable organization, the taxpayer still has to claim those proceeds as income, and then takes the assignments as a deduction, is that correct?

Mr. NUSSBAUM. That is correct. As the memo from Mr. Ehrlichman to the President states: "While we will have to account for those proceeds in gross income, the amount will be deductible as a charitable contribution."

Mr. HOGAN. May I ask a question? One interpretation is possible that Mr. Doar outlined that they have been alleging the deduction over a 5-year period, but is it not also possible that in the Ehrlichman memorandum that they were referring to new papers which would be accumulated during that year? In other words, Presidential papers are accumulated on a constant basis.

Mr. NUSSBAUM. Presidential papers are accumulated on a constant basis, but the 1968 gift and the 1969 gift consisted solely of pre-Presidential papers. But, as to whether it is possible that Mr. Ehrlichman had that in mind, the accumulation of Presidential papers, I guess I would have to say that is possible, yes.

Mr. HOGAN. Thank you.

The CHAIRMAN. The committee will please defer questions until we have gotten through with this presentation. I think the presentation will not take too long, and I think the committee members can ask questions thereafter.

Mr. NUSSBAUM. Thank you, Mr. Chairman.

In early 1969 Mr. DeMarco, Frank DeMarco, who was a partner of Herbert Kalmbach, one of the attorneys who handled the President's tax returns, Mr. Kalmbach's firm, in other words, replaced the Nixon, Mudge Rose firm in New York as the President's attorneys with respect to his returns.

On March 20, 1969, the 1968 papers, the gift of the 1968 papers was delivered to the Archives in Washington, D.C. Now, these are the papers, as you will recollect, that were picked up on December 30, 1948, and taken to a Federal record center in New York.

On March 20, 1969, they went from New York to the Archives in Washington and were placed in a room there, a room called 14-W for Walter.

Now, the President also had a large amount of papers which had not been given to the Government. As you understand, the 1968 gift was a selection of a portion of those pre-Presidential papers. Those papers were moved initially from New York to the Executive Office Building in Washington. And without going into a great amount of

detail because it is all in the Joint Committee report, there were discussions in March 1969 between members of the White House and people at the Archives.

We do know that on March 26 and 27, all the President's prePresidential papers which had not been previously deeded in 1968 were delivered to the Archives and placed also in a separate room, a room different, or a section different from the room in which the 1968 papers were placed.

Now, the Joint Committee staff concludes-and when I talk about the Joint Committee, of course, I am talking about the Joint Committee on Internal Revenue Taxation-concludes that they believe that this transaction was for the purposes of storage so that the people in the Archives could work on the papers. It is the position of the White House in this regard that the delivery of the papers on March 26 and 27 constituted the making of the gift which was eventually deducted under the 1969 tax return.

Now, all the facts here again are contained in the Joint Committee report, and I do not plan at this particular point to go over each particular memorandum and letter, but I think it is safe to say, and I do not think anyone contests this point, I think this is uncontradicted that no one at the White House told anyone at the Archives or anyone at the General Services Administration that a gift was being made on March 27, 1969, when the papers were delivered to the Archives.

The Archives claims, and you will see this when you read the Joint Committee report, that the papers were delivered at their request, and they initially, the White House requested that the Archives people work on the papers, sort them and select them at the Executive Office Building. The Archives people, after beginning this process, felt that they did not have enough room there and requested the papers come and be stored at the Archives, where it would be much easier to work on them.

Mr. WIGGINS. Mr. Chairman? Counsel, who are you talking about when you say White House at this point?

Mr. NUSSBAUM. I am talking about the White House, Mr. Morgan and Mr. Stewart, Edward Morgan who is a deputy counsel to the President, who was on Mr. Ehrlichman's staff and Mr. Stewart.

Mr. WIGGINS. In both cases when you referred to the White House. now you are talking about Ed Morgan and Mr. Stewart?

Mr. NUSSBAUM. That is correct. That is correct.

In any event, the papers were delivered on March 26 and March 27, 1969, and by papers, I am talking about the pre-Presidential papers which were not deeded to the Government in 1968.

Now, on April 8, 1969, Ralph Newman, who was an appraiser, does come into the Archives, and he does do an appraisal of the 1968 papers. Now again, so I can be clear, by 1968 papers. I mean those papers which were deeded and delivered at the end of 1968.

Now, he has to do the appraisal at this point because the income tax return for 1968 shortly has to be filed. It is not necessary to do an appraisal until that return is filed. And Mr. Newman does come in on April 8, 1968, does go into the Archives and does do an appraisal of the 1968 papers, and eventually they are valued at approximately $80,000.

Mr. COHEN. You mean 1969 ?

Mr. NUSSBAUM. I'm sorry, April 8, 1969. Yes.

Now, initially Mr. Newman stated to the Internal Revenue Service and to the Joint Committee staff that in April 1969, he also viewed the 1969 papers to determine, to see if there was a sufficient amount of papers to make a gift of approximately $500.000. Subsequent to those statements by Mr. Newman, the people at the Archives, Sherrod East, who accompanied Mr. Newman in April 1969, stated that Mr. Newman never viewed the 1968 papers in April 1969.

Subsequent to that, subsequent to those statements by the people at the Archives, Sherrod East, Mr. Newman reviewed his records, and by this time had retained an attorney, and discussed the matter with his attorney, and in looking at his records determined that he was incorrect when he said that in April 1969 he viewed the 1969 papers. He said he never viewed the 1969 papers in April 1969. All he did, as the Archives said, was view the 1968 papers on April 8, 1969.

Initially Mr. Newman had stated that he believed that he was first contacted by Frank DeMarco in April of 1969 and asked to look at the 1969 papers, and he believed that to be true. Later, after looking at this records, as I indicated, he realized, he found certain correspondence, which we will refer to later on, and he realized that first contact with Mr. DeMarco, Mr. Newman's first contact with Mr. DeMarco did not come in April 1969, but came in the end of October 1969. And he knew that he did not look at the 1969 papers until after he had talked with Mr. DeMarco.

So. consequently, his present statements to this committee as well as to the Joint Committee and to the IRS is that the first time he viewed he looked at the 1969 papers when they were in the Archives was in November 1969 and not in April 1969. But, in April 1969, as I indicated, he did look at the 1968 papers, did appraise them, and that appraisal was in part of the tax return which was filed by the President in April 1969 for the tax year 1968.

Mr. SMITH. Mr. Nussbaum, you speak of the 1968 papers and the 1969 papers. Now, what you are talking about are the papers delivered in 1968 and the papers delivered in 1969 and claimed as a deduction, is that correct?

Mr. NUSSBAUM. By the 1968 papers I mean the papers which were given as a gift to the United States in 1968. and the 1969 papers, I mean the papers which it was claimed on the President's tax returns were given as a gift to the United States in 1969.

Mr. SMITH. And they were all pre-Presidential papers?

Mr. NUSSBAUM. They are all pre-Presidential papers, that is correct. Now, let me turn, as I indicated I am not taking every single thing in the report, just trying to touch on certain of the more important things, but on April 21, 1969, that date is another significant date.

On that date, according to Frank DeMarco, and according to Edward Morgan, a deed was signed in California by Mr. Morgan on behalf of the President in which Mr. Morgan deeded on behalf of the President, or the President deeded through Mr. Morgan as his agent approximately $500,000 of pre-Presidential papers to the United States, these papers having previously been delivered to the Archives n March 26 and March 27, 1969.

Now, DeMarco says such a deed was signed. Morgan says that the deed was signed.

Now, in order to just elaborate a bit on this story, DeMarco first, when he was first interviewed by the Joint Committee did not recollect such a deed being signed. Later, when he sent a written statement to the Joint Committee, he did state that he recalled that Mr. Morgan did sign such a deed in 1969, on April 21, 1969.

Mr. DeMarco's secretary has testified before the California secretary of state, and has submitted an affidavit which states that she recalls typing a deed for the President in 1969. Mr. Morgan has stated that he recalls signing a deed on April 21, 1969. Now, this deed is apparently no longer in existence, and no one other than the people who have testified with respect to it have seen this deed.

The deed was destroyed, and I will get into that a little bit later on when I deal with the re-execution in 1970.

The deed was kept, as I indicated, by Mr. DeMarco. It was never given to the Archives. And as I indicated also, it was destroyed, except for one portion which Mr. DeMarco says was not destroyed, and that portion is in existence, and that is listed on page A-187. As you can see, that is entitled "Schedule to a Chattel Deed" dated March 27, 1969. Mr. DeMarco has testified or has stated that when Mr. Morgan came out to California, one of the purposes being to sign a deed of papers, that he thought that Mr. Morgan would bring with him a schedule of papers which were to be given as a gift in 1969. When Mr. Morgan arrived in California Mr. DeMarco had stated Mr. Morgan did not have such a schedule. Thus, Mr. DeMarco said he sat down and he had typed this schedule A which you are now looking at at page A-187. Mr. McKeithen reminds me that Mr. DeMarco that he had typed this himself, this particular schedule himself. And this schedule was attached then to the deed which Mr. Morgan is said to have executed on April 21, 1969.

The deed itself, along with the schedule, was kept by Mr. Morgan. Excuse me, it was kept by Mr. DeMarco, not by Mr. Morgan, by Mr. DeMarco in his personal custody. As I indicated, it was never given to anyone, never given to the Archives.

It was later destroyed, but this schedule A was not destroyed according to Mr. DeMarco, and he, to my knowledge-Mr. McKeithen interviewed him and another member of our staff-does not know why this was saved and the deed was destroyed.

Now, I should also indicate to the committee that the California secretary of state, which recently prosecuted a case against Mr. DeMarco in the sense that they wanted to take away his notary, and Mr. DeMarco ultimately, on June 17, resigned his notary, his position as a notary public in California, so the proceedings ended on June 17. But, the California secretary of state indicated to us or representatives of his office indicated to us that they had some question as to whether or not this particular schedule A was typed in 1969 when Mr. DeMarco said it was typed. They are in the process of examining this typewritten document against the typewriters or against samples from the typewriters which Mr. DeMarco had in his office in 1969. They did not complete that process because in order to conclude it it required additional documents from Mr. DeMarco, and those documents were subpenaed for the notary hearing which was scheduled