SP CI L TT NTIONs tne cautonary notce on ths page that put

shed rungs of the ureau do not have the force and effe
of Treasury Decsons and that they are appcabe ony to facts presented n the pubshed ca
Treasury Department : : : : : ureau of Interna Revenue
Interna Revenue uetn
Cumuatve uetn -1
NU RY- UN , 1931

IN T IS ISSU /
Page
Introductory Notes I
Contents ........ - III
Rungs Nos. 4888-5124- INDI N tfN fcSITY
oard of Ta ppeas .... LI R RI S 1-97
T wn ct) . . . LOOMINGTON . . oo.214 ,
Part II (1926 ct) 215-305
Part III (1924 ct) 306-336
Part I (1921 and Pror cta) 337-435
Saes Ta 436-448
state Ta 449-482
Capta Stock Ta 483-488
Msceaneous Ta 489-494
Msceaneous 495-533
Inde 535-549
The rungs reported n the Interna Revenue uetn are fer the nformaton of ta payer and ther counse as
showng the tread of offca opnon n the admnstraton of the ureau of Interna ReTenoe the rungs other than
Treasury Decson have none of the force or effect of Treasury Decsons and do not commt the Department to
any nterpretaton of the aw whch has not been formay approved and promugated by the Secretary of the
Treasury. ach rung embodes the adntanstrabTe appcaton of the aw and Treasury Decsons to the entre
state of facts upon whch a partcuar case rests. It s especay to be noted that the same resut w not neces-
sary be reached n another case uness a the matera facts are dentca wth those of the reported case. s t s
net aways feasbe to pubsh a compete statement of the facts underyng each rung, there can be no assurance
that any new case s dentca wth the reported case. s bearng out ths dstncton, t may be observed that the
rungs pubshed from tme to tme may appear to reverse rungs prevousy pub hah ed.
Offcers of the ureau of Interna Revenue are especay cautoned aganst reachng a concuson n any case
merey ea the bass of smarty to a pubshed rung, and shoud base ther |udgment on the appcaton of a per-
tnent provsons of the aw and Treasury Decsons to a the facts n each case. These rungs shoud be used as ads
n studyng the aw and ts forma constructon as made n the reguatons and Treasury Decsons prevousy ssued.
In addton to pubshng a Interna Revenue Treasury Decsons, t s the pocy of the ureau of Interna Revenue
to pubsh af rungs and decsons, ncudng opnons of the Genera Counse for the ureau of Interna Revenue,
whch, because they announce a ratng or decson upon a nove queston or upon a queston n regard to whch
there e sts no prevousy pubshed rung or decson, or for other reasons, are of such mportance as to be of
genera nterest. It s aso the pocy ef the ureau to pubsh a rungs or decsons whch revoke, modfy, amend,
or affect n any manner whatever any pubshed rung or decson. In many nstances opnons of the Genera
Counse for the ureau of Interna Revenue are net o genera nterest because they announce no new rung or no
new constructon of the revenue ews but smpy appy rungs aready made pubc to certan stuatons of fsct whch
sre wthout speca sgnfcance. It s not the pocy of the ureau to pubsh such opnons. Therefore, the numbers
sesgned to the pubshed opnons of the Genera Counse fer the nrean of Interna Revenue are net consecutve.
No aapubhshed rung or decson w be cted or reed upon by any offcer or empoyee of the ureau of Interna
Revenne as a precedent n the depss rten of other cases. Uness otherwse specfcay ndcated, a pubshed
and approva of the Genera Couase for the ureau ef
UNIT D ST T S GO RNM NT PRINTING O IC , W S INGTON : 1931
er sae by the Superntendent ef Documents, Washngton,
See back of tte for pr
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1
The Interna Revenue uetn servce for 1931 w consst of weeky
buetn and semannua cumuatve buetns.
The weeky buetns w contan the rungs and decsons to e
made pubc and a Treasury Department decsons (known as Treas-
ury decsons) pertanng to Interna Revenue matters. The sem-
annua cumuatve buetns w contan a rungs and decsons
(ncudng Treasury decsons) pubshed durng the prevous s
months.
The compete uetn servce may be obtaned, on a subscrpton
bass, from the Superntendent of Documents, Government Prntng
. Offce, Washngton, D. C., for . 2 per year.
New subscrbers and others desrng to obtan the 1919, 1920, and
1921 Income Ta Servce may do so from the Superntendent of Docu-
ments at prces as foows: Dgest of Income Ta Rungs No. 19
(contanng dgests of a rungs appearng n Cumuatve uetns 1
to 5, ncusve), 50 cents per copy Cumuatve uetns Nos. 1 to 5,
contanng n fu a rungs pubshed snce pr, 1919, to and n-
cudng December, 1921, as foows: No. 1, 30 cents No. 2, 25 cents
No. 3, 30 cents No. 4, 30 cents No. 5, 25 cents.
Persons desrng to obtan the one ssue of Saes Ta uetn for
1920, uetn ST-1-20, and the Cumuatve uetns for anuary-
une and uy-December, 1921, may procure them from the Supernten-
dent of Documents at 15 cents and 5 cents each, respectvey, per copy.
Persons desrng to obtan the Interna Revenue uetn servce for
the years 1922, 1923, 1924, 1925, 1926, 1927, 1928, 1929, 1930, and 1931
may do so at prces as foows:
Cumuatve uetn 1-1 ( anuary- une, 1922) 40cents
Cumuatve uetn 1-2 ( uy-December, 1922) 30 cents
Cumuatve uetn II- ( anuary Tune, 1923) 30cents
Cumuatve uetn II-2 ( uy-December, 1923) 40cents
Cumuatve uetn III- ( anuary- une, 1924) 50 cents
Cumuatve uetn III-2 ( uy-December, 1924) 50 cents
Dgest No. 13 ( anuary, 1922-December, 1924) 60cents
Cumuatve uetn I -1 ( nntary- nne, 1925) 40 cents
Cumuatve uetn I -2 ( uy-December, 1925) 35 cents
Dgest No. 17 ( anuary-December, 1925) 25cents
Cumuatve uetn - anuary- une, 1926) 40cents
Cumuatve uetn -2 ( uy-December, 1926) 30 cents
Dgest No. 21 ( anuary-December, 1926) 15cents
Cumuatve uetn T-1 ( anuary- une, 1927) 40 cents
Cumuatve uetn I-2 ( uy-December, 1927) 40 cents
Dgest No. 22 ( anuary, 1925-Deoember, 1927) 35 cents
Cumuatve uetn YII-1 ( anuary- une, 1928) 35 cents
Cumuatve uetn II-2 ( uy-December, 1928) 50cents
Cumuatve uetn III-1 ( anuary- une, 1929) 50 cents
1 Cumuatve uetn UI-2 ( uy-December, 1929) 55 cents
Cumuatve uetn I -1 ( anuary- une, 1930) 50cents
Cumuatve uetn I -2 ( uy-December, 1930) 50 cents
Cumuatve uetn - ( anuary- une, 1931) 65 cents
nqures n regard to these pubcatons and subscrptons shoud
be sent to the Superntendent of Documents, Government Prntng
Offce, Washngton, D. C.
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INTRODUCTORY NOT S.
The Interna Revenue Cumuatve uetn -, n addton to
a decsons of the Treasury Department (caed Treasury decsons)
pertanng to Interna Revenue matters, contans Genera Counse s
opnons, and rungs and decsons pertanng to ncome, saes, estate,
capta stock, and msceaneous ta es, as ndcated on the tte-page
of ths uetn, pubshed n the weeky uetns ( oume , Nos.
1 to 26, ncusve) for the perod anuary 1 to une 30, 1931. It
aso contans a cumuatve st of announcements reatng to decsons
of the Unted States oard of Ta ppeas pubshed n the Interna
Revenue uetn Servce from December 22, 1924, to une 30. 1931.
Income Ta rungs are prnted n four parts. Rungs under the
Revenue ct of 1928 are pubshed as Part I, the secton headngs
correspondng wth the sectons of that aw and the artce headngs
correspondng wth the artce headngs of Reguatons 74. Rungs
wder the Revenue ct of 1926 are pubshed as Part II, the secton
and artce headngs correspondng wth the secton and artce head-
ngs of the Revenue ct of 1926 and Reguatons 69. Rungs under
the Revenue ct of 1924 are prnted as Part III, the secton and
artce headngs correspondng wth the secton and artce headngs
of the Revenue ct of 1924 and Reguatons 65. Rungs under the
Revenue ct of 1921 or earer cts are prnted as Part I , the
secton and artce headngs correspondng wth the secton and
artce headngs of the Revenue ct of 1921 and Reguatons 62.
R I TIONS.
The foowng abbrevatons are used throughout the uetn:
. , C. etc. The mmes of Indvduas.
. R. M. Commttee on ppeas and Revew memorandum.
. R. R. Commttee on ppeas and Revew recommendaton.
. T. . oard of Ta ppeas.
- . . Cumuatve uetn.
Ct. D. Court decson.
C. S. T. Capta Stock Ta Dvson.
1). C. Treasury Department crcuar.
. T. state Ta Dvson.
0. C. M. Genera Counse s memorandum.
1. T. Income Ta Unt.
M, N, , Y, Z, etc. The names of corporatons, paces, or busnesses, accord-
t R to content.
Mm. Mmeographed etter.
MS. Msceaneous Dvson.
0. or L. O. Soctor s aw opnon.
0. I). Offce decson.
Op. . G. Opnon of the ttorney Genera.
8. T. Saes Ta Dvson.
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S. M. Soctor s memorandum.
So. Op. Soctor s opnon.
S. R. Soctor s recommendaton.
T. Tobacco Dvson.
T. . M. dvsory Ta oard memorandum.
T. . R. dvsory Ta oard recommendaton.
T. D. Treasury decson.
and y are used to represent certan numbers, and when used wth the word
doars represent sums of money.
The practce of promugatng Treasury Decsons that embody
court decsons reatng to the nterna revenue has been dscontnued.
ereafter opnons of the courts, wth approprate headnotes for the
nformaton and gudance of ta payers and offcers and empoyees of
the ureau of Interna Revenue, w be pubshed n the Interna
Revenue uetn wthout forma approva and promugaton by the
Secretary of the Treasury.
NNOUNC M NT R L TING TO O RD O T PP LS D CISIONS.
Under the provsons of the Revenue cts of 1924 and 1926, reat-
ng to appeas to the oard of Ta ppeas, the Commssoner may
acquesce n the decson of the oard or he may, f the appea was
heard by the oard pror to the passage of the 1926 ct, cause to be
nsttuted a proceedng n court for the coecton of any part of a
ta determned by the Commssoner to be due but dsaowed by the
oard, provded that such proceedng s commenced wthn one year
after fna decson of the oard. s to appeas heard by the oard
after the passage of the 1926 ct, the Commssoner may, wthn
s months after the oard s decson s rendered, fe a petton for
a revew of the decson by a Crcut Court of ppeas or by the
Court of ppeas of the Dstrct of Coumba. In order that ta -
payers and the genera pubc may be nformed as to whether or
not the Commssoner has acquesced n a decson of the oard of
Ta ppeas dsaowng a ta determned by the Commssoner to
be due, announcement w be made n the weeky uetn at the
earest practcabe date. Decsons so acquesced n shoud be reed
upon by offcers and empoyees of the ureau of Interna Revenue as
precedents n the dsposton of other cases before the ureau.
or addtona nformaton whch w be of assstance n the use
of the Interna Revenue uetn servce read the Introductory Notes
to the atest Dgest.
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CONT NTS.
Rung.
Rung o.
-2-4900
-3-4907
-3-4908
-4-1917
-8-4951
-8-4952
--4981
--4982
-16-5029
-16-5031
-18-5030
-20- 5069
-22-5086
-23-5091
-23-5089
-24-5109
-2-4895
-2-4896
-2-4897
-3-4905
-3-4906
-4-4913
-4-4915
-5-4922
-5-4923
-6-4928
-O-4929
-6-4930
-7-4938
-7-4939
-7-4940
-8-4947
-8-4948
-8-4949
-9-4956
-9-4957
-9-4958
-9-4961
-10-4969
-10-4966
-10-4967
-10-4965
-10-4968
- 1-4975
-11-4976
- 1-4978
- 1-4979
--4977
-12-4986
-12-4989
-12-4987
-12-4988
-13-4997
-13-4998
-13-5000
-13-5001
-13-5002
-14-5009
-14-5010
-14-5008
-14-5011
-14-5012
- 5-6016
-15-5017
-15-5018
-15-5019
-16-5027
-16-5025
-16-5026
Page.
1M
449
449
174
450
456
222
177
123
495
148
t
450
178
221
293
487
352
469
186
333
414
117
323
363
424
274
300
442
393
436
489
189
190
191
320
454
283
301
258
335
223
327
384
397
350
332
421
375
378
28(1
391
357
372
458
808
411
1 7
4:7
457
140
411(1
MS
405
428
380
420
Rung.
Court decsons Contnued.
320.,
321..
322
323..
324
326..
326
327.
328 -
329 -
330.
331.-
332.
333
334.
335
336
337.
338.
339
340. -
341..
342..
343.. .
344.
345.
346.
347
348.
349
350 -
351
352.
353
354
355
Genera Counse s memoranda
7408-
8481
8488
8619-
8751 -
8896 -
8933
8036
8980... - ----
8982
8991..-
9064 -
9067
9086.
9087 -
9091
9094
9114
9122
9147.
9156.....
9162
9210 -
9234
9252
9333
9357
9401
9422
9453
9459
9461
9466
ng No.
-16-5028
-17-5034
-17-5037
-17-5038
-17-5039
-18-5045
-18-6046
-18-6048
-18-6047
-18-5049
-19-5055
-19-5066
-19-5058
-19-5057
-20-5064
-20-5065
-20-5086
-20-5068
-21-5075
-21-5076
-21-5078
-22-5083
-22-5085
-23-5093
-23-5092
23-5096
-23-5097
-24-5103
-24-5107 1
-24-5106
25-51 12
-25-5113
-25-5114
-26-5122
-26-5123 1
-26-5120
--4889
-7-4941
-6-4927
-7-1935
-6-1926
-5-1921
-3-4902
-2-1893
-9-4959
-5-4920
-4-4914
-9-4900
-8-4946
-14-5007
-7-1937
-10-4963
-8-4944
-13-4995
- 1-4973
-12-4985
-13-4996
- 6-5024
-21-5073
-24-5102
-15-5015
-15-5014
-17-5036
-18-5043
-22-5084
-23-5095
-22-5082
-21-5072
-21-5074
( )
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Oenera Counse s memo-
randa Contnued.
9490 -
9503
9541 -
9552
9575
oard of Ta ppeas:
1757
5120
7382
7451
8737
8738-
9094 _
9824
10949
10979
11357
12228
13183
14387
14481
14500...
15281
16104 _
16382
16400.
16480....
16405 ,
16544
16553
16618
17130
17040
18216..-
18808
U187
19371...
19552...
19745...
r
20210-
205S7
20633-
20635-
20640.
20666..
20667-
20785-
2097
20985..
20996..
21038-
21048-
21065-
21186..
21258..
21416-
21500-
21594..
21727..
21728..
21826-
21877-
22213-
22233-
22391..
22477..
22482..
22484-
22485..
Rung No.
-24-5104
-25-5116
-24-510S
-26-5119
-2 -5121
-7-4931
-7-4934
-25-5110
-16-5022
-1-1909
-f-4909
-17-5033
-17-5033
-12-4083
-26-5118
-9-4953
-26-5118
-17-5033
-14-5004
--4888
- 1-4972
-21-5071
2-10-4962
-24-5101
-16-5022
-5-4918
-16-5022
-12-498S
-10-4962
-22-5080
-4-4909
-24-5101
- 1-4972
--4888
-16-5022
-24-5101
-3-1901
-9-4953
-3-4901
- 1-4972
-26-5118
-16-5022
-9-4953
-4-4909
-4-4909
-23-5088
-19-5051
-23-5088
-23-5088
-17-5033
-17-5033
-12-4983
-24-5101
- 1-1972
-21-5071
-15-5013
--1888
-16-5022
-16-5022
--1888
-5-4918
-19-5051
-19-5051
-21-5071
-5-4918
-5-4918
-10-4962
-7-4934
-8-4943
-8-4943
-8-1943
-8-4943
- 1-4972
-15-5013
Page.
M6
529
259
183
381
S9
10
53
32
77
6
49
41
74
60,93
6
77
49,89
71
79
63,94
5
54
75
17,18
20
63,94
11
36,84
80
56
49,89
9
80
11
79
11
6
60,93
2,51
64
32
54
61
40
25
30
93
77
55
r s,
185, M
9,13
29
76
49,89
92
24
90
84
25
43
30
73
73
15
96
56
40
58
71
69
46
oard of Ta ppeas Contd
23214
23730
23847
23980
23939
24172.
24204
24289
24374.
24449
24464..
24581-
24584-
24643-
24660.
24762.
24859.
24860.
24936.
24961.
4
24997.
25061.
25111.
25112.
25200.
25262.
25544.
25570.
25730.
25737.
25761.
26776.
25998.
26029.
25032.
26038.
26039.
26040.
26127.
26191.
26274.
26342.
26486.
26611.
26804.
26814.
26868.
26913-
27092.
27407.
27408.
27466.
27965-
28143.
2M22
28334.
28360.
28394.
28613-
28614.
28615.
28787.
28867.
28881 .
28930.
28931.
28932.
28933.
29006.
29030.
29071.
29087.
29227.
Rung No.
-8-4943
2
-5-1918
9, 24
-10-4962
79
-9-4953
19
-3-4901
32
-17-5033
11, 93
-25-5110
47,67
-12-4983
80
-21-5071
77
-21-5071
66
-25-SII0
/18 0.
78,82
--4888
48
-2-4803
91
-12-4983
11
-21-5071
14
-1I-4972
68
-9-4953
93
-9-4953
93
-5-4918
67
-21-5071
20
-21-5071
20
-17-6038
6
-10-4962
62,93
-15- 5013
7
-15-5013
7
-15-50T3
1
-9-4953
85
-12-4983
90
-9-4953
79
-9-4953
86
--4888
29,30
-15-5013
66
-2-4892
58
-I3-4994
5
-12-1983
59
-24-5101
92
-3-4901
52
-3-4901
26
-3-4901
52
-3-1901
79,92
-I-4888
54,00
-22-5080
53,90
-I-4888
44
-21-5071
62
-21-5071
64
-10-4962
59
-19-5051
77,98
-10-4962
5
-10-4962
18
--4888
22
- 8-5042
16
-18-5042
16
-10-4962
82
-1I-4972
86
-15-5013
24
-22-5080
22
-5-4918
28
-16-5022

-16-5022
67
-I-4972
33
-II-4972
33
- 1-4972
33
-15-5013
73
-5-4918
91
-3-4901
15
-5-4918
80
-13-4994
74
-13-4994
78
-13-4994
74
-13-4994
74
-25-5110
3S
-6-4925
28
-24-5101
70
-5-4918
81
-I9-5T 51
66
-5-4918
50
-10-4962
91
1 The contents contan references to oard of Ta ppeas ncquesceneesand r
ony durng the s months ended une 30, 1931, nasmuch as references to the
Ta ppeas acquescencesand nonaequescences contaned n the rmmttvest
In the cumuatve buetns coverng tho earer respectve perods.
pubshed
of the oard of
furnshed
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II
Rung No.
oard oTa ppeas Contd.
30151.
um.
32015.
32198.
33193..
34191.
-19-5051
- 4-5004
-10-5022
-13-4994
-9-4953
-4-4909
-8-4943
-21-5071
--4972
-21 5071
-26-5118
-18-5042
-5-1918
-22-5080
-9-4953
- 1-4972
--4972
-15-5013
--4888
-2-4892
-23-5088
-23-5088
-16-5022
-25-5110
-4-4909
-16-5022
-17-5033
-23-5088
-16-5022
-15-5013
-13-4994
-25-5110
-25-5110
-5-1918
-4-1909
-20-5061
-25-5110
-18-5042
-17-5033
-26-5118
-4-4909
-17-5033
-8-4943
-4-4909
- 2-4983
--4972
-23-5088
-23-5088
-23-5088
-23-5088
-3-4901
-3-4901
-3-4901
-5-4918
-21-5071
-26-5118
-16-5022
-4-4909
-22-5080
-10-4962
-17-5033
-17-5033
-22-5080
-22-5080
-22-5080
-22-5080
-10-4962
-4-4909
-15 -5013
-16-5022
-5-4918
-5-4918
-4-4909
--4972
-2-4892
--4888
-16-5022
-21-5071
-25-5110
-2-4892
-6-4925
-24-5101
Page.
38
29
93
32
40,43
87
53,90
93
35
93
71
70
40
69
44
79
8,51
60
2
26
14,77
6
97
75,96
/20 7,
179,85
80
60
74
61,93
41
62
76
17
7S
79
76
41
41
41
41
52
52
36
-I
29
72
30
77
79
0
64
54
S
78
78,88
88
79
13
59
2
s
9
39,85
82
4(1
66
5
11
17
:
62
97
ung.
oard of Ta ppeas Contd
35169.. -
35325.
35386..
35444.
36111.
36156 -
36157
36368
36836
36900. -
36950.. -
36955.
37005 -
37009
37099..
37299.
37307 .
37355
37374.
37377
37411.
37412
37413
37414
37415..
37416.
37417.
37418 -
37419
37420
37850 -
37955.
37956 -
38012.
38016
38098.-
38098.
38348 -
38505..
38562
38720 -
38773..
38939
38992 .
39021.. -
39025..
39037..
39101 -
39192
39193
39270 --
39383
39463 -
39648
39759.-
39944.
40018.. -
40021
40075.. - -
40131
40208.
40500
40529
40672
40685
40790 -
40798
40963
40984
41042
41046 -
41138
41185. - -
41167
41184 -
41239
41314 -
41387..
41399
41543
41568
41597.
41601
Rung No. Page.
-17-5033
43
-6-4925
56
-6-4925
56
-25-5110
54
-22-5080
86
-10-4962
91
-5-4918
2,34
-15-5013
40
-3-4901
21,58
19,67
60
-26-5118
-13-4994
-21-5071
4
-22-5080
85
--4972
8
-21-5071
79,89
88
-22-5080
-15-5013
79
-25-5110
56
-5-4918
91
-6-4925
35
-4-4909
10
-4-1909
10
--4909
23
-4-4909
53
-4-4909
9
-4-1909
10
--4909
10
-4-4909
10
--4909
10
-1-4909
9
-1CM962
54
-17-5033
54
-17-5033
54
-24-5101
65
--4888
22,69
-19-5051
84,89
-19-5051
84,89
-17-5033
50
-4-4909
72
-21-5071
4
-5-4918
56
-5-4918
73
-21-5071
S
-6-1925
54
-21-5071
13
-21-5071
6
-21-5071
4,67
-5-1918
91
-4-4909
68
-4-4909
68
-17-5033
7,66
-25-5110
96
-13-1994
90
-2-4892
90
-16-5022
77
-26-5118
36
-16-5022
2
-17-5033
61,93
-15-5013
73
-7-4934
82
-20-5061
27
-7-4934
76
-14-5004
84
-17-5033
79,92
-5-4918
91
-22-5080
12,45
-22-5080
87
-21-5071
57
-9-4953
12
-18-5042
88
--4888
54,90
-17-5033
54
-5-4918
56
-5-4918
73
-16-5022
56
-21-5071
56
--4972
86
-10-4962
78,86
-21-5071
4
-5-1918
54
--4972
61)
-25-5110
28
--4972
8.
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III
Offce decsons (I. T.) Contd.
4564
256
2967
2568
2568
2570
2571
2572
2573
2574.
2575.
2576.
2577
Offce decsons (M6.):
110
I
112
113
114_
115
Mmeographs:
3853
3867
3869.
3878
No.
-12-4 4
151
-13-4999
299
-14-500S
106
-16-5023
142
-17-50 8
230
-18-5044
123
-19-5062
101
-19-5063
115
-19-5054
116
-20-5062
200
-20-5063
216
-20-50S7
523
-22-5081
161
-23-5090
164
-23-5004
300
-25-5111
119
-2-1898
502
-6-4932
503
-10-4970
504
- 5-6020
505
-1 -5059
506
-23-5098
507
-2-4894
139
-7-4936
179
-9-4955
140
-21-6077
52-S
-23-5100
141
-6-4931
608
-12-4990
624
-12-1991
501
-12-4993
526
-17-5040
521
-25-5116
622
-26-5I24
531
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CONT NTS O CUMUL TI ULL TINS (I- T.) I TO 5 S. T. OR 1321) ND 1921 INT RN L
revenue -. -2, n-, n-2, m-.m-2.r-, v-2. v-, v-2. v-. v-2, vn-, vn-2, vm-, vm-2.
II-.I -2, ND -L
Cumuatve uetn.
Rung Nos.
Income Ta :
December, 1919 (No. 1)
anuarv- une, 1920 (No. 2)
uy-December, 1920 (No. 3)
anuarv- une, 1921 (No. 4)
uv-December, 1921 (No. 5)
Sa es Ta :
1920 (ST. 1-20)
anuary- une, 1921
uy-December, 1921
Interna Revenue uetn:
anuarv- une, 1922 (No. 1-1)
uv-December, 1922 (No. 1-2).--
anuary- une, 1923 (No. II-)
uv-December, 1923 (No. II-2)...
anuarv- une, 1924 (No. 111-1)...
uv-December, 1924 (No. III-2)..
anuarv- une, 1925 (No. I -1)....
uv-D ecember, 1925 (No. I -2). _
anuary- une, 1926 (No. -)
uv-December, 1926 (No. -2)-..
anuary- une, 1927 (No. I-1)...
uy-December, 1927 (No. I-2)..
anuarv- une, 1928 (No. II-1)...
uy-December, 1928 (No. II-2).
anuary- une, 1929 (No. I1I-1)..
uv-December, 1929 (No. III-2)
anuarv- une, 1930 (No. I -1)...
uv-December, 1930 (No. I -2)..
v- une, 1931 (No. -)
(I )
1-655
656-1033
1034-1368
1369-1710
1711-1996
1-112
113-265
266-356
1-383
384-665
666-956
957-1276
1277-1641
1642-1949
1950-2251
2252-2523
2524-2813
2814-3026
3027-3291
3292-3557
3558-3784
3785-4052
4053-4248
4249-4487
4488-4683
4684-4887
4888-5124
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O RD O T PP LS
CUMUL TI LIST O NNOUNC M NTS R L TING TO
D CISIONS O T UNIT D ST T S O RD O T
PP LS PU LIS D IN T INT RN L R NU UL-
L TIN S R IC ROM D C M R 22, 1924, TO UN 30,
1931, INCLUSI .
1 I -26-5118
The Commssoner acquesces n the foowng decsons of the
Unted States oard of Ta ppeas:
Ta payer.
oard of Ta ppeas.
No.
oume.
Page.
13055
12
556
3346
3
415
11903
10
646
9265
11
820
1598
6
1065
4211
3
1126
1929
2
253
14544
17
1324
14544
17
1324
4361
5
113
25200
30661

98
30661
21
98
3522
4
589
17780
10
763
21860
17
17
9591
8
460
10847
10
849
3078
4059
) -
787
9229
8
1260
3718
3
705
7476
7
305
7343
7
1230
11838
12
1252
1164
1
837
13605
18
1287
1907
4
1184
41748
22
153
12075
12
1238
12616
12
1238
aron, Theodore.-
battor Reatv Co
bbeve Cotton Ms
ckerman- ohnson Co
cme Ms, Inc
cme, Pamers DeMooy oundry Co.
corn Refnng Co .-
dams, va, estate of
dams, va ., e ecutor
dams, . G
dams, onor
dams, Mner
dams Motor Co
damson, Chares ., trustee
damson, enry
daskn, erman
derCo., The --
der, Segmund
. G. 4 S. Mnng Co
guar Land ssocaton, The
|a Coa Co
|a nameng oundry Co
kron Rubber Moud Machne Co.
abama Coca-Coa ottng Co
abama Cooperage Co
Mba o Paper Co
e ander ros. Lumber Co
e ander County Natona ank
e ander County Savngs ank
No. 5118 ncudes a acquescence and nonaequescence notces pubshed n the Interna Rev-
servce to and ncudng une 30, 1931.
(1)
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2
cquescences Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume
e ander Manufacturng Co
merca Cabes, Inc.1
en, .
en, Mrs. .
en et a., ames ., e ecutors
en, Lous
erton, Robert
ance Mng Co
ng Cory Co.3
sop, dward ., estate of 4
rsop, dward ., e ecutor
umnum ake Co
mercan uto Trmmng Co. et a.
mercan ag Co..
mercan o Co
mercan Coortypc Co
mercan Cream of Tartar Co
mercan Creosotng Co., Inc
mercan eature m Co. --
mercan et Co
mercan nance Mortgage Co_.
mercan rut Growers, Inc
mercan awaan Steamshp Co..
mercan Lace Manufacturng Co..
mercan LaDcntee, Inc
mercan Lawyers Co
mercan Locker Co
mercan Manganese Stee Co
mercan Ms Co
mercan Natona ank of St. Pau
mercan Packng Co., Inc
mercan Photo Payer Co
mercan Seang Co.8
mercan Seatng Co.T
mercan Seedess Rasn Co
mercan Show ntertanment Co
mercan Stee Co
mercan Stone Co
mercan Teegraph Cabe Co
mercan 3 Way Lu fer Prsm Co., Inc
mercan Trust Co., admnstrator
mercan Trust Co., trustee
mercan ave Co
mercan Warehouse Co
mes, Chares Lesey, e ecutor
mes, Chares W., estate of
mes, ohn S
cquescence reates to aD Issues e cept as to tentatve ta .
state ta decson.
cquescence reates to a ssuos e cept the thrd ssue.
state ta ders-on acquescence reates ony to 11112 trust.
cquescence reates to ssues Invovng offcers saares and ega e penses.
cquescence n decson In so far as t reates to Incuson n nvested cnpta of (1) 25,000 pad oy
ta payer n 1915 for nventon on whch patents were pendng, (2) 600 for counse fees.
cquescence reates to frst ssue of decson.
5656
9
347
9092
10
213
7290
7
1266
7289
7
1256
f 8(590
8
693
I 36157
20
713
383
2
1313
16431
13
1385
15649
10
457
6606
7
574
6519
7
848
/ 4669
1 8444
6519

7
848
1193
3430
6
1007
31782
21
128
5418
3
824
7901
1(1
1276
2078
2
847
17777
12
247
4437
11
1271
14882
18
509
40018
22
32
9043
11
635
4225
7
13
8293
8
419
611
1
575
23214
21
370
34372
21
408
8145
7
659
( 14702
1994
I
2
460
33212
30751

14
476
1173
3
195
1290
2
419
4772
4
649
14676
14
328
15725
15
452
7679
5
954
8368
7
641
10898
9
242
2967
2
991
5935
9
571
12962
13
105
29173
18
580
4696
4
1204
29330
19
8
10520
14
1067
10520
14
1067
8895
9
1336
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cquescences Contnued.
Ta payer.
Docket
No.
oard of Tat ppeas.
oume.
mgo Coa Co
namosa armers Creamery Co
nderson, den
nderson, Isabe
nderson, ohn, estate of
nderson Gustafson
nderson- arrngton Coa Co
nderson Lnd Manufacturng Co
nderson, Gustave ., trustee
nderson Lumber Co., .
ndrews, ffe, estate of
ndrews et a ., ames M., e ecutors 1
ngeo Co., G
ngeo rut Co., G
nger, dward
nger Corporaton
ngo Caforna Trust Co., trustee
nnston Cty Land Co
nthracte Trust Co., admnstrator estate of ohn
oseph rown, deceased 1
ntcch, Grego
ntonopos, George
ntonopos, ast
partment Corporaton..
ppaachan Reaty Co
ppe et a., bert ., e ecutors
ppe, acob, estate of
ppeby, |r., Scott
ppegate, Raph ndrew, e ecutor. _
ragon Ms
renas Compress Co
rcade Department Store, Inc
rchbad, |r., et a., R. W., e ecutors.
rchbod, ohn ., e ecutor
rcher Paper Co., The
rcher-Strauss Rubber Co
rds Co
rmstead, D. L.
rmstrong, rd
rmstrong, .
rmstrong, .
rt rass Co
rter Pant Gass Co
rthurs, W. C
rt Meta Constructon Co...
ssocated udng Co
ssocated Denta Suppy Co.
ssocated Gas fe ectrc Co.
tkns, ma oster
tkns, ohn ., estate of
tantc Cty ectrc Co.
11684
29352
16058
1394
32561
1556
743
3074
32561
9103
13096
13096
10869
10869
25958
25960
19247
1368
4947
19057
3925
4013
26571
29140
9685
7041
7041
25046
7970
18044
4378
6298
4695
8629
342
17194
25188
13023
14750
21952
28227
3297
232
3297
19841
1574
2468
4943
12733
5650
2296
15485
3377
17871
8
13
1 )
5
10
3
6
a
10
15
13
13
12
12
17
17
18
2
3
18
17
12
10
10
18
10
17
8
18
4
8
1
9
12
13
0
1
6
15
2
3
4
14
9
2
9
9
15
state ta decson.
cquescence does not reate to decson regardng 1918 ta es or nger Ms.
state ta decson acquescence reates to t hrd ssue of decson.
1 cquescence reates to a ssues e cept affaton wth mercan as Sc ectrc Co.
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4
cqotbscbnceb Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
tantc Coast Lne R. R. Co
tantc Coast Lne R. R. Co.1
tas Pvwood Co
tas Tack Co
tterbury, Grosvcnor a
ubrev, George
uchncos , . owand, e ecutor.
udtorum Co
uerbach, Sao
ut Wborg Co
ut Wborg Co. of New York.
ut Wborg Co. of Uruguay. .
ustn, . Pumer, estate of
ustn Co., M.
other, oseph P
ato Specates Manufacturng Co.
utovent an ower Co
very, Thomas
von Ms
von Street Trust
erod, erman
yer, Chares
yer, Wam P.
.
ach, L., estate of
ackus Sons, |r.,
adger Takng Machne Co.
adgey, fred
ahr, W.
aey, ohn W
ae, e ander
a e, Mrs. e ander
ard, ames
aud Machne Co., The
aker Lumber Co
aker s Mutua Cooperatve ssocaton.
aaban atz Corporaton..
afour, Sr Robert.
amert, . T
ank of rady
ank of Commerce
ank of artsve, The
ank of London South merca, Ltd
ank of New York Trust Co., e ecutor _
ank of Rockngham
anna Manufacturng Co
asse, ndrew
anta Refrgerator Co
ardwe, Prtchard Co
2505
10983
25797
4725
19S
4409
24312
4483
1976
16655
24376
24375
24377
9357
14883
2778
10449
15928
240
27688
6246
4459
22505
6442
16230
10637
3777
10239
36955
38562
41399
5020
3901
4784
4783
9393
201
3271
33265
5386
2344
3227
1899
4800
999
22015
24282
39037
4682
762
20502
17164
36771
41521
2
9
17
9
1
8
11
5
2
10
17
17
17
10
13
5
5
11
7
3
18
7
10
6
8
21
10
3
12
12
4
2
2
20
(3
2
8
3
10
1
17
21
3
1
16
15
20
350
1 cquescence reates to frst ssue of decson.
1 Nonacquescence notce n the case of GrosTenor tterbury (C . I -, 4) recaed.
8 state ta decson.

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cque8cen ce8 Contnued.
Ta payer.
Docket
No.
oard or Ta ppeas.
oume.
arker, George ., estate of
arker, O.
erkey, G. C.
arnard, Mrs. C.
arnes Coa Mnng Co. and Coumbus Coa
Mnng Co
arnett,
arnette, atherne Wknson, soe and ony her .
arr, R. -
arrows, etcher L
arry, .
arrv, ohn nthony
artey, R.
arton Wson, Inc
artron, .
ass Pubshng Co., . P
astrop Mercante Co., Ltd
at son-Cook Co
an 111, Lous S., estate of2
aumann et a., Ma , e ecutors
aumhoff, George W
ay Cty ue Co
ay Rd ge Land Improvement Co
ay State Securtes Co
each musement Corporaton
eacon Coa Co.
eaver Lumber Co
ecker, S. L
ecker ros
ecker Paper Co
eeer, oseph G
ekns ousehod Shppng Co
e, . R - -
e, ames
e-Rogers Zcnmurray ros. Co
eamore, Davd
ee Ise Creamery Co
ee Ise ast Sde Creamery Co
engrath, W. - - --
emont ote Co., ugust
emont Shore Co
emont Stone Co
erdge O Co
et Raway Co. of Chcago
ems, sr., Thomas
endhem, . M., estate of
endhem, enretta
endhem, uus, e ecutor
enham Ice Cream Co
enne, George ., estate of
I cquescence reates to ssues 2 and 4 of decson.
state ta decson.
1 cquescence, reates to second and thrd ssues of decson.
cquescence reates ony to ssues nvovng computaton of net ncome for 1918 and 1919 and e cessve
deprecaton restored to ncome for 1918 and 1919.
8728
3583
24352
22454
3209
28743
16379
16743
26868
3158
99
1724
2623
11913
2721
11742
8124
5458
20263
6981
1624
34384
21217
3685
18288
11894
3534
9400
9949
16954
4555
2367
8618
21981
27272
8859
1220
6385
12317
12317
2018
16382
25998
12410
28531
6296
4289
3100
7964
7963
7964
3401
12962
13
3
19
18
3
18
16
21
4
1
2
4
13
3
12
7
6
21
8
3
20
16
3
14
9
8
9
10
14
13
19
7
4
3
14
14
3
18
21
12
11
9
2
8
8
8
5
13
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2

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5
6

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6
ce|rr se NC Certmed.
Ta payer.
Docc:
No.
oard of Ta ppeas.
oume.
entey, .
enton County ardware Co.
enz ros. Co
erg Industra coho Co., Davd
ergfed, Carona
ergfed, Rudoph
erzz ros. Co
ern, Inc., Irvng.
ermngham Lumber Co
ernard s, Inc., George
ernd, ohn M
erncedae Coa Co
ernsten, . R
ernsten, anne
ernstorfT, ans
ernuth-Lembcke Co
erthod, zabeth
esse, Ma we
essemer Investment Co .
est rewery Co
ettendorf, oseph W
ettcns, bert
ckett-Swett Lvestock Co
ckey, Mton II
g Rapds ectrc Co
g Western O Gas Co
fe Co., Raymond R
s ros, Memora Corporaton
o Packng Tradng Co
nger, Robert
ngham, rthur W., e ecutor 1
rd, Samue
rkeand, .
rmngham Trust Savngs Co., e ecutor
rn, enry.
scayne Trust Co., e ecutor
shop, ohn ., trustee
shop, Martha ., e ecutr 2
shop, Roand P
shop, Samue D., estate of1
shop, Wam T
tter Root Stock arm
vn, Wam T
by Co., otham
|ornstad, Otto
ack Rver Sand Corporaton 1
ack Yates, Inc
acke, . W
ackstone, D. L., admnstrator
ar eneer Co
ake, ohn . L
tzer, Ma
och, .
t atata ta decson acquescence reates to deductons for
state ta docson.
cquescence reates to ssue 2 of decson.
2512
9896
19965
13102
26459
26458
22388
3049
2654
5410
3340
9824
13183
24997
1258
1258
4054
17018
7248
4971
5295
19139
2035
1488
8347
297
14868
7150
15399
1346
17216
31984
20303
6721
8464
7440
610
13686
16885
29173
20069
14007
20069
14008
5777
39025
15577
18115
19933
3442
2282
10401
6703
7461
10076
and e ecutors
5
314
10
809
26-
1214
13
1349
19
312
19
312
16
1307
2
77
1
1201
8
716
4
291
16
696
6
323
6
323
8
787
17
599
12
1306
3
567
8
1011
16
1354
3
378
2
535
12
326
1
544
9
737
9
427
15
320
7
1182
18
733
22
111
15
1001
4
259
3
209
5
245
1
416
18
1016
18
580
14
130
13
784
14
130
13
784
10
81
21
1051
14
144
12
20
18
490
2
873
2
747
12
456
5
886
651
3
696
6
563
rs
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1
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1
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2
2

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5
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cor C NC f Contnued.
Ta payer.
ock, anche Leter, estate of1
odget, anne
odget, Wam, estate of
odget, Wam, estate of1
odget, Wam P...
odget et a., Wam P., e ecutors
odget et a., Wam P., e ecutors 1
odgett, ohn W
ogg Lttauer, Ine
oom, Davd, estate of2
oom, onas
oom, onas, e ecutor
oom ros., Inc
oomfed, rederck
ow et a., dee M., admnstrators 1
ow, George P., estate of1
udworth, Mrs. W. M
ue Rdge Overas Co
ue Rver Pacer Mnng Co
umentha, S.
um s, Inc.
nmsten Reaty Corporaton, L. M
oadwee, Isabee M
oa s Ros Corporaton
oard, R.
oas, Chares S., estate of
ockhoff, arry W
oercke Runyon
oettcher et a., mma C, e ecutors 1
ogart, Lacey L., admnstrator Leon C. Rggs
estate
oggs, Mary Waker, e ecutr 1
oggs, R. ., estate of1
oggs uh, Inc
oggs O Corporaton.
oge Co., Inc., W. S
oker Cutery ardware Co., Inc
o and, Mary
oand, Wam P
onger- rankn Lumber Co
onaparte, en C, estate of
onneve Lumber Co
onne ros., Inc
onwt Teer Co
oone, D. W
oone, .
oone, ames D
oone, W. ._
ooth urnture Carpet Co
orden, Spencer, estate of1
orden, |r., Spencer, e ecutor 1
1 state ta decson.
f ta decson.
uk Muee reates to 191 saary Issue.
72109 31 2
39270
29393
10344
28934
29392
10344
28934
35356
6297
35160
35159
35160
9440
6501
30077
30077
6285
10210
6299
17082
2523
30353
10743
22370
18534
1139
3206
2981
32095
1932
12309
12309
9269
18119
40165
2208
13267
25111
25112
8077
1652
3657
7806
21859
27824
28700
3053
3052
3051
3163
426
5909
5909
20
13
13
18
13
13
18
13
3
20
20
20
10

16
10
7
6
8
12
7
17
20
11
16
18
2
3
3
19
2
11
11
11
19
5
12
21
21
7
1
2
15
17
9
9
9
9
6
6
6
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cquescence Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
osshardt, rank
oston Odsmobe Co
oston Safe Depost Trust Co. et a., e ecutors
oston Store, Inc., The
oston Structura Stee Co
oteford-Constantne Tyer
oucher-Cortrght Coa Co
ouden, Chares
owen, an
owman, . .
owman, . W
owman, . Wam
ovce tract Co
o d, . ---
o|er Co., .
ovne Ctv Lumber Co
oynton, Chares T., estate of
oynton, N.
oynton Gasone Co.
radford Co
radey, W. C...
radshaw, Rosena W
rady, dwn ._
raey, . R...
ray- erguson Gn Co
rand, fred
rand, Php R
randes Investment Co
randes Sons, . L
randenburg, dwn C, e ecutor estate of George
M. Oyster, |r
randon, D. S.
rannun Lumber Co
rauer, Pau, estate of
rauer et a., Mary ., e ecutors
ray, zabeth ., admnstratr estate of Rch-
ard ray
rav, Rchard, estate of
rehmer, ugust . W., estate of1
rehmer et a., Otto T., e ecutors 1
reevoort ote Co
rewer, . R., admnstrator
rewer, Magge, estate of
rewer Co.,
rewster Laundry
rcke, Maude nea --
rer Coeres 4.
4436
11239
31537
4216
836
9759
11616
6764
7965
2690
15850
7467
18935
9327
6751
5739
10495
840
9145
5342
6909
6910
8384
47
5621
7434
17221
5399
8572
8432
1545
1546
7390
20124
2836
730
730
2801
2801
5844
5844
539
21393
21393
78
14005
14321
f 11406 1
19365
I 28186
11672
21074
4
16
21
7
1
10
7
7
2
10
8
10
9
6
4
10
5
11
4
10
2
0
6
4
4
9
9
1
17
17
1
10
17
12
11
14
rggs Turvas
rggs-Weaver Machnery Co
state ta decson.
1 cquescence reates to deducton of e penses for annua pcnc.
s cquescence does not reate to net oss deducton.
cquescence reates to deducton of amounts e pended for resurve|-ng. mantanng, and markng
boundares of pettoner s property and the cost of removng a boer and nstang a new one.
G
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1
3
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1
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#
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euu sc c S Contnued.
Ta payer.
Doc tet
oard of Ta ppeas.
oume.
Page.
27921
17
1173
19187
2
495
/ 13658
14
797
20063
14
801
9173
10
306
27702
20
127
27704
20
127
1906
2
S3
1904
2
48
21038
20
890
3897
7
414
3896
7
414
3897
7
414
11647
8
969
20527
9
1008
13792
13
174
f 13932
7747

10
510
I 31427
27779
I
13
981
7994
6
895
499
1
502
3675
4
1129:
8191
9
521
11161
16-
1036
11224
10
1036
4947
3
486-
6056
4
74
16200
14
609
11162
10
1036
12748
13
832
2973
4
56
38939
21
1111
9748
10
106
7967
8
112
12709
14
609
12703
9
719
/ 11134
I 21634
1370
4937
4
1191
10995
8
1164
25154
16
485
1037
6
914
93
1
320
34404
19
777
129
I
342
23730
20
419
4055
8
787
176
1
83
7892
6
881
3719
5
1135
3719
5
1135
7447
15
727
6568
9
171
37420-
2
573
37 5
20
573
rghton Syndcate No. 1
r, Wam
rnkerhoff- ars Trust Savngs Co
rsto, P. L
rtan, .
rtan, Mrs. .
rtt, en|amn T
rtt, Mary ., estate of
roadbent, rederck M., estate of _.
roadhead, net N., estate of
roadhead, Shedon ., estate of
roadhead, Wam ., admnstrator
rodbeck|Lucy
ranson, W. S
rookyn Trust Co., e ecutor L
rooks Sons, M. S
rown, Chares
rown, dward T
rown, dwn M
rown, enry I
rown, acob ., trustee
rown, ames
rown, ames Crosby
rown, ohn oseph, estate of 1
rown, Rves S., e ecutor
rown, R. L
rown, Thatcher M
rown, Water
rown, Warren
rown gency, Inc
rown rown, Inc
rown Co., .
rown Coa Coke Co., R. L
rown Lumber Co
rowne, dward I., estate of
rowne, Water D
rownfed, Maro
rownng, . T
rownng Co., . M. M. S
rownsve Matamoros rdge Co.
race Co . L
ruce tman Drug Co
ruekner et a., Wam T., trustees..
rnere, enry
run Coa Co
runer Wooen Co., Inc
rtmner, rnod W., estate of
runner, mma ., e ecutr
runton Studos, Inc., Robert
rush, George De orest
rvan, e ander -
ryan, een
1 state ta decson.
G
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1
3
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1
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2

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5
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e
10
cquescences Contnued.
Ta payer.
ryan, een M
ryan, Isobe S
ryan, . St. George
ryan, ohn Stewart
r van, Norma S
ryan, 2d, Thomas Pckney
ryson, C.
rvson, M. T
ryson, T. W
uck, en ., estate of
uck, Truman, estate of 1
uckeye rewng Co
uckeye Producng Co.
uedngen, Robert
ueua vsta ardwood Co
uffao orge Co.
uffao Steam Pump Co
ugher, rederck ., estate of
ugher et a., rederck McLean, e ecutors.
u, rchbad ., estate of
u, rnest M., e ecutor
uard, ernce
uock, .
urgess, Rchard
urg, Oscar
urgo, .
urgueres Co., Ltd., . M
urke, .
urke, Thomas, estate of
urke ectrc Co.2
urkhart, Rosa . --
urktt, George W., estate of
urev Tobacco Co. of rankfort
urngton Overa Manufacturng Co., The.
urns, . R
urns, Samue
urns, W.
urnsde Stee Co
urr, erome P
urr, Water C
urtse et a., ertram W., e ecutors
usche, . C.
ames.
uss Co
uter Grocery Co. et a.,
uter, Inc.. ohn W
vers Co., . M
yfed, Gadys R
vrd Prntng Co
vron Shoe Manufacturng Co., Inc.
ywaters, . unter
y waters, P. -
ywaters, R. S
oard of Ta ppeas.
No.
oume.
Page.
37417
20
573
37416
20
573
37412
20
573
37411
20
573
37418
20
573
37419
20
573
25155
16
485
25157
16
485
25172
16
485
12988
12
434
17660
13
415
8779
15
435
8779
15
435
5855
6
335
2306
3
503
3170
5
947
3170
5
947
6035
9
1155
6035
9
1155
6888
7
993
6888
7
993
7566
7
456
13117
12
51
1311
3
1134
5782
6
1297
4232
4
4
8601
12
879
31949
19
743
12626
13
781
1697
5
553
2749
11
275
2038
3
1158
21311
13
892
2106
2
143
12611
5
1003
8673
13
579
4753
12
1209
3292
3
20
13099
11
1005
13100
11
1005
2650
6
412
9447
1
10202
10
1345
10755

2952
2
266
5978
4
378
1572
1
1105
7451
19
660
989
2
19
14902
15
55
463
1
666
6288
7
495
6287
7
495
6289
7
495
state ta decson nonacquescence notce pubshed n Cumuatve uetn III-1, page 52, r
cquescence reates to ssue 5, as to patent group No. 2, and ssue 6.
state ta decson.
G
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1
3
-
0
1
-
2
2

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7

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2
7
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3
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0
0
0
0
8
9
0
5
4
4
2
7
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11
cgu sc NO s Contnued.
Ta payer.
Docket
No.
oard of Ta p||eas.
oume.
Page.
c.
1 cquescence
1135).
604
1223
20
347
109
1301
1109
1059
1059
602
1277
1123
962
543
561
414
411
720
1109
446
446
1067
940
1076
933
441
1160
75
287
983
1271
166
539
1119
456
455
893
627
457
1397
675
675
675
675
675
1042
1042
reates to deducton of contrbuton u State rewers ssocaton and a ntoo wth the
does not reate to that part of decson nvovng appcaton of yers decson (1 . T. .,
Cadac utomobe Co. of Inos
Cafsch Lumber Co
Carns, .
Caforna rewng ssocaton 1
Caforna Canneres Co
Caforna Deta arms, Inc
Caanan Road Improvement Co
Caowav, uer ., estate of
Caoway et a., Ida C, e ecutors
Camden urngton County Ry. Co
Camden Wooen Co
Cameron, W.
Camp, rancs M
Campen, rtz
Campbe, . O
Campbe et a., Nancy Carver Lathrop, trustees.
Campbe, Nge Lese
Canaan, arry and ate
Cantne, Martn
Canton rt Meta Co
Canton Stee Ceng Co
Cantre Co., The red
Can von Lumber Co
Cape, . W.
Capta Cty Investment Co
Capto ote Co.
Capto Park ote Corporaton
Capto Securtes Co
Capto Theatre Co
Caps, Mary, deceased, estate of3
Capps, Lna
Carbo Petroeum Co.4
Carey, C. W.
Carse Garment Co
Carmchae, D. L
Cannchae, .
Carnahan, .L
Carnaton Mk Products Co
Carney, Rchard
Carney Coa Co.
Carpenter, D. M
Carpenter, ohn
Carpenter, Mary --
Carpenter, Mary ., admnstratr .
Carpenter, Maud ., estate of
Carr, . Lawrence
Carr, atheen M
2657
24643
18143
3903
2228
9820
13303
32146
32146
4991
10655
9313
16618
21986
5631
16617
373
304
16797
7111
7112
3141
4917
7069
5376
6610
7134
7705
3031
6224
6720
4451
9524
2432
3632
12061
12493
34915
/ 19552
19789
7027
5562
8496
11072
11073
11071
11070
11070
18282
18279
5
20
12
5
2
6
12
18
18
3
12
9
21
16
6
15
1
1
18
6
t
3
4
7
4
5
3
8
4
2
12
6
3
5
12
21
20
6
10
8
S
8
8
8
15
15
1 state ta decson.
cquescence reates to a ssues of decson e cept fourth ssue.
I to ssues 2 and 4 n decson.
s No. 2 and wth respect to fsca year ended May 31,1917, under
.No. 1.
G
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2
0
1
3
-
0
1
-
2
2

0
3
:
5
7

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2
7
/

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3
0
0
0
0
0
8
9
0
5
4
4
2
7
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12
cqm sc Nc Contnued.
Tapayer.
Docket
No.
oard of Ta ppeas.
oume.
Carro Chan Co.1
Carro Mercante Co., . S
Carter, MacDonad Mer, Inc.
Carter, Warren
Case Pow Works, . I
Cass, vn C
Cassdy Co., Inc
Caste, rank ., estate of
Caswe Co., George W
Ceuod Co
Centadrnk ters Co., Inc
Centra musement Co
Centra uto Market
Centra ank ock ssocaton
Centra Savngs ank
Centra States Coa Co
Centra Unon Trust Co. of New York et a., e ecu-
tors 2
Centra Wsconsn Creamery Co
Chamber of Commerce udng Co
Champon Coated Paper Co
Champon Stove Co
Chander, .
Channon Manufacturng Co., ames -.
Chapn Laundry Co
Chappeow dvertsng Co
Chareston Securty Co., e ecutor
Charters Creek Coa Co
Chase, esse
Chatham Phcn Natona ank
Chattanooga Mattress Co - ---
Chatterton Son
Cheeseman, W. C
Cherokee Ochre Co
Chcago cceptance Co
Chcago re rck Co
Chcago, Indanapos Lousve Ry. Co.-
Chcago Insuated Wre Manufacturng Co
Chcago Raway qupment Co
Chcago Starch Co
Chcago Takng Machne Co
hckasha Cotton O Co
Ids Co., W.
hom s Sons Co., Wm. (Chshom Shove Co.)..
ate, |r., Chares ., estate of
Chormann et a., gnes . C, e ecutors
Chormann, rederck, estate of
Choynsk, erbert
Chrstensen, N. P
Chrstopher, L.
Chrstopher Co. of Caforna, L.
Chrstopher Co. of Deaware, L.
Nonacquescence notce n case of Carro Chan Co. (C. . I -1, 4) recaed.
1 state ta decson. . , . m_ . .
cquescence reates to cost of bank budng, ts physca fe from date of acquston, and March I.
1913, vaue.
104
4222
11744
12954
9605
664
19890
9368
24878
13878
8543
19459
5214
2418
8327
40984
5006
8735
40790
13350
9598
19279
870
4039
6803
7650
12688
3843
9652
35942
107
3714
6057
20811
9846
12764
11063
11152
2380
3964
18438
19427
12363
30165
4127
1840
13552
10345
10345
14448
4380
8931
16085
17448
14
11
3
16
11
19
14
6
2
7
19
10
4
21
15
11
10
1
3
8
6
13
4
10
19
1
4
5
16
9
12
10
10
10
4
13
13
13
18
3
3
16
10
10
14
7
13
13
13
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13
cqcescenoes Contnued
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Church 4 ocs Co
Cncnnat Mnng Co
Ctzens Loan ssocaton
Ctzens Natona ank
Ctzens Trust Co. of Utca
Ctrus Soap Co. of Caforna.
Ctr Gas Co. of Norfok 1
Cty Natona ank
Cty Natona ank of Commerce,
Cty Park rewng Co
Cark, . ., estate of
Cark, rank ., e ecutor
Cark, Grace Scrpps
Cark, Grace Scrpps and Re
Cark, arod
Cark, Le M
Cark, Roy C
Cark Co
Cark Co., ames T
Ceveand ome rewng Co
Ceveand Snow-Church Co
Ceveand Trndad Pavng Co. of Deaware.
Ceveand Trust Co., trustee
Ceveand Wooen Ms
Cne, Mrs. a Ppes
Cne, W. D.s_.
Coquet Cooperatve Socety
Coates, ane
Coatsve oer Works
Cobb, L. S
Cockran, . T...
Cocks-Cark ngravng Co.
Codrngton, the M
Coffn, Irene
Conn-Goodman Co
Coe, W. C
Coe, Mrs. W. C
Coeman, ames
Cotz, en|amn
Coege Pont oat Corporaton.
Cons, red
Cons, W. C. and C. C
Cons and wfe, W. D
CoUnsou, ohn W
3526
8427
412
6148
3373
13249
/ 11730
14199
28912
22111
7973
820
8015
20103
36901
536
1707
8049
34191
5785
3660
73
169
17294
28141
6029
Coffn, Wnthrop
Coffman-Dobson ank Trust Co., e ecutor
Coghn ectrc Co
Cohn Sons Co., M.
6930
39021
5456
8603
16097
7136
3801
6604
4685
5930
11556
12498
28049
21038
1879
7361
9238
7167
9133
9134
4891
3004
764
26672
5986
11148
550
4
8
1
5
2
14
17
17
10
6
12
16
1
2
9
19
4
5
1
1
14
15
8
15
15
21
3
9
3
8
0
12
20
3
7
7
7
.3
3
1
16
5
7
1
cquescence n so far as decson determnes that Cty Gas Co. of Norfok and rgna Raway
Power Co. were afTated wth each other.
1 cquescence reates to ssue as to whether proceeds of a note coected u 1919
r aso decson as to ffth ssue.
to aowance of offcers saares.
f..r
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14
cquescenceb Contnued.
Ta payer.
Comus, |r., C. Carro
Comer-Green Lumber Co.1
Coona Creosotng Co., Inc
Coona Trust Co., e ecutor
Coumba Theatre Co
Coumbus read Co
Coumbus Cannng Co
Coumbus Coa Mnng Co
Co vert, Warner L
Combs, sr., W.
Comey ohnson Co
Commerca Co. of gypt, Inc
Commerca urnture Co
Commerca Trust Co
Commerca Trust Co.
Commodore s Pont Termna Co
Compton, nna L., e ecutr
Compton, orace ., estate of
Comstock-Caste Stove Co
Concord ectrc Co
Concrete ngneerng Co
Conen, Wam
Coney Tn o Corporaton
Conn, acob
Connectcut ectrc Manufacturng Co.
Connectcut Natona Pavements, Inc..
Conne, zra ., estate of
Connorzed Musc Co
Conover Co., C.
Conrad Co., Inc.
Durk
Conrad ardware Co
Conrad Shoe Co -
Consodated rck Co - -
Consodated ectrc Lamp Co
Consumer s Coa Co
Consumers Ice Co
Conway, dran C
Cook, . G
Cook, ohn
Cook, R.
Coon aey State ank
Cooper, . . T., estate of
Cooper, . T
Cooper, C.
Cooper, dna
Cooper, Samue -
Cooper- rannan Nava Stores Co
Copand, Davd
Corbett, ott R
Corbett, amton
Corbett, enry L
oard of Ta ppea .
No.
oume.
Page.
24660
21
210
20916
12
250
17777
12
247
24878
19
174
1414
3
622
5823
4
1126
05S2
10
1085
3209
3
891
9170
6
823
10182
6
249
11133
8
52
5810
3
1163
6507
8
71
31926
18
1248
31927
21
732
13402
18
385
8519
11
26
8519
11
26
3347
4
114
4355
7
1027
19257
19
212
815
1
472
15693
17
65
11978
16
73
7549
6
1360
3448
3
1124
12368
11
1254
7179
7
213
9830
7
1234
10042
1
18293

13
1332
19582
11584
8
512
597
1
798
23120
30506

831
555
1
616
8121
10
851
12704
11
144
1614
9
664
1741
6
111
6331
4
916
3643
3
668
11352
13
132
12634
9
21
3144
7
798
2206
4
1267
2206
4
1267
959
1
615
10068
9
105
9557
15
238
11836
8
438
16643
8
438
11837
8
438
cquescence reates to deprecaton aowance.
state ta decson.
1 cquescence n so far as oard has rued that pettoner s ta abe as a trust for 1922 and 1923.
cquescence reates to a ssues e cept Gaoway note ssue.
G
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1
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15
cquescence Contnued.
Ta payer.
Corbett, Merrtt
Gorman Co
Cornng Gass Works
Coronado O Gas Co
Corscana Gas ectrc Co
Certez O Co
Cosby-Wrth Saes ook Co
Cotton Concentraton Co
Conch, .C
Couter, |r., Chares
Covert, sther ee
Covngton Cotton O Co
Cowe, Matte, and Mona Cowe, e ecutrces,
estate Robert Cowe
Cowe, Robert, deceased, estate of
Co e, |r., et a., fred C., trustees
Co e, Sopha G
Cove, rthur
Cragg, Thomas W
Crag O Co
Crak, ohn
Crampton, atharne S., e ecutr 1
Crampton, Orson L., estate of1
Cranda orse Co
Crane, Chares W
Crane, rederck G., estate of_
Crane, . T
Crane, Rose P., e ecutr .
Crary et a., Cavert, e ecutors 1
Crary, Louse ., estate of
Cravens, Water
Crawford Loan bstract Co.
Crav, ames R
Cravton, . S.
Crenn, .
Cremn, T. O
Crescent Cap Co., Inc
Crescent Coa Mnng Co
Crews, C. W., estate of
Crews, Davd W., estate of
Crews et a., rank --
Crews, ate Downng, acnnstratr .
Crder ros. Commsson Co
Crfy, Dane ., estate of
Crfy et aL, George Snyder, e ecutors 1.
Crocker Co., Inc., . S
Croker, |r., Rchard
ocket
No.
18733
22491
6227
9826
10603
4499
22233
26175
4625
202
8181
20048
5534
691
691
6805
2121
24513
28293
9706
20230
2283
11362
11362
7924
28881
10695
15374
16789
27271
10695
15374
16789
18366
18366
3381
7681
6364
11306
9197
9198
10557
2208
981
9010
9010
981
128
6085
13847
17210
18747
17210
18747
11601
6096
oard of Ta ppeas.
oume.
15
16
13
9
14
6
20
19
4
1
6
12
12
3
3
6
5
17
17
2
10
10
8
19
9
19
9
19
19
3
10
7
11
5
5
10
6
8
8
8
8
10
15
15
15
12
G
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1
3
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1
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2
2

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3
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5
7

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16
cqcescences Contnued.
Ta payer.
Crompton udng Corporaton.
Cronnger Packng Co
Crosby, verett U
Crosby, Manard
Crosby-Chcago
Cross Investment Co
Crossman, are L
Crothers, R.
Crouse, Cavn
Crowe Corporaton
Crowe Lumber Gran Co
Crown Cemetery ssocaton.
Crown Manufacturng Co
Crown Wamette Paper Co
Cruger Co
Crysta ock Coa Coke Co....
Crvsta Ice Co
Cuba Grapefrut Co., Inc.
R. .
Cuuan, . S
Cuman, |r., oseph ._
Cuum, Lous W
Cmnmngs, W.
Cunnngham Sons Co.
Curee, W. S.
Curry et a., bert, admnstrators
Curry, Wam L., estate of
Curts, rank G., estate of
Curts, arret ., deceased, estate of.
Curts, Lous
Curtss, George W
Curtss, Genn
Curtss, Lena P
Cusack Co., Thomas
Cushman Manufacturng Co., . T
Cuyahoga Co., The
I).
Dagger Co.,
Da, |r., W.
Day News Pubshng Co., The
Day Pantagraph, Inc.
Dafada Reaty Co., Inc
Daton, dward ----
Daton Gymnasum and Swmmng Schoo, Inc.
Day, Davd R., estate of
Dana Co., Inc., Wam .
Dane ros. Co
Darng, ay N
Darng-McDuff Coa Co
Darrow, rank D
Docket
No.
4301
12981
3764
2365
11674
799
7052
19619
5841
3717
5411
366
118
532
9450
11358
31010
11974
14518
31305
13134
7954
15828
16487
5914
29089
2678
10640
7099
1638
17730
17730
4720
442
11164
2327
27407
27408
1987
2143
3721
14733
14734
21115
4158
4126
5275
1657
194
1373
11064
10840
6302
19866
929
oard of Ta ppeas.
oume.
2
14
4
14
14
2
10
5
11
5
6
(
12
14
11
15
14
5
16
3
9
10
6
17
17
6
3
10
4
21
21
3
2
3
13
19
4
9
5
2
1
3
11
7
4
15
8
cquescence reates ony to determnaton of pad-n surpus at date of
deprecaton.
G
e
n
e
r
a
t
e
d

f
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L

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2
0
1
3
-
0
1
-
2
2

0
3
:
5
7

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0
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0
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8
9
0
5
4
4
2
7
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17
c uasc NC s Contnued.
Ta payer.
oard of Ta ppeas.
No.
oume.
Page.
1372
5
76
33974
19
1324
10299
10
1233
32950
20
931
2616
2
359
20324
16
65
8219
8
981
3877
9
1212
42219
22
595
2691
2
328
5497
6
281
6885
8
299
16915
17
142
1552
3
896
11227
10
191
6182
4
1236
28483
19
339
33165
19
595
34920
21
614
15610
10
1036
20178
19
580
11165
10
1036
15610
10
1036
10892
12
412
2459
2
102
25964
17
670
6926
7
811
643
2
444
20950
15
225
3331
3
343
118
532

773
12195
11
706
27766
17
927
29111
19
452
29111
19
452
18064
15
306
8112
7
286
5025
7
158
8573
7
279
10563
9
1365
13038
13
587
5663
4
1043
3005
2
729
8630
7
94
13574
14
205
23968
29740
15
1035
19462
13
1376
5040

1155
10012
12733
14
863
2528
6
732
2528
6
732
13526
11
620
16495
20
637
Dartt Co., C.
Dtstague, . P
Davs, C. R
Davs, I. M
Davs, Mary Cheney
Davs, Mrs. W.
Davs, Sade S., e ecutr 1
Davs, Wttam C
Davs ndrews Co
Davs Co., The
Davs Yarn Co., Inc
Dayton Wrght rpane Co
Dean, nne L
Deck Camp Tank Co
Deerand Turpentne Co
De ord, Unon C
De orrest, Robert W
De art, |r., ohn S
Deano, ugene, estate of
Deano, enne W., estate of1
Deano, Moreau
Deano, Moreau and Wam ., e ecutors
Deatour everage Corporaton
De Lsser, orace, estate of1
De, Wam ., estate of
Deto Grass Rug Co.2
Denhom Mc ay Co
Denta Co. of merca
Denver Crown Ry. Co
Depost Trust Savngs ank, e ecutor..
Derbv, da Portner
DeRoy et a., be ., e ecutors
DeRoy, Lous ., estate of
Derschug, ohn N.
Des Cognets, sr., Lous
Desher ote Co
Dea Mones Improvement Co
Detrot gg scut Specaty Co
Detrot Opera ouse, Inc
Detrot apor Stove Co
Deutsch, uus W
De an Co
De au , Norman
De ed, Sanford
De ore, red
Dewey, Mdred McLean
Damond Pow, eather Down Co
Dbbe, Leon N., e ecutor 1
Dbbe, Lous N., estate of
Dcenso, epo
Dck, . enry, estate of
state ta decson.
I cquescence reates to frst ssue n decson.
cquescence reates to ssue 2 of decson.
G
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2

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8
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2
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18
cquescence Contnued.
Tapayer.
oard of Ta ppeas.
No.
oume.
Page.
16495
20
637
11637
14
1295
156
1
108
5193
8
722
29208
18
790
29208
18
790
548
1
507
8367
10
141
9730
6
1371
4563
3
65
25449
18
638
1794
2
127
26913
20
404
3575
2
983
475
1
641
863
1
1082
3874
11
39
7382
24464

757
14551
13
921
14387
19152

248
21392
17
1123
21392
17
1123
10300
11
812
13905
16312

256
4468
2
1098
1050
5
766
30943
18
230
9974
12
271
5762
9
1081
25359
12
271
1629
6
455
1629
6
455
11218
12
1102
11220
12
1102
11219
12
1102
18030
12
1102
288
1
372
5738
9
496
13329
9
218
11449
8
676
2276
2
469
31064
19
76
19392
15
570
14954
14
1185
17254
18
374
20169
17
486
20169
17
486
3152
9
1216
18280
15
1042
18281
15
1042
7020
8
955
15815
14
225
17019
10
1150
Dck et a., Wam ., e ecutors
Dckey, Water S
Dckey Grocery Co., L. Z
Dcknson .
Dcknson, acob M., estate of
Dcknson, |r., et a., acob M., e ecutors
Desng, red D., e ecutor
Detrch, Gustav
Detrck, erman T
D, Lews
D Cons Co
Dng Cotton Ms
Don Suppy Co
Ds ros. Co
D e Manufacturng Co
Dobson, ames
Dockum, arry
Dodson, ruce, estate of 1
Doerfer, Magdaen, benefcary, etc
Doernbecher Manufacturng Co
Doerschuck et a., George C, e ecutors and trustees2
Doerschuck, Gustav . L., estate of2
Doherty Co., en C
Dog, Inc., Wam S
Domenco ante s Sons, Inc
Donaghey Rea state Constructon Co
Donadson, R. Goden
Donadson Co., Inc., L. S
Donadson Iron Co
Donadson Reaty Co
Donason, re M., e ecutor1
Donason, ohn ., estate of
Dorn, Lous, estate of
Dorn, Rene
Dorn, R.
Dorn Co., R.
Dougas, George P. and esse P
Dougas Park ockey Cub
Douty, .
Downg, Robert
Downng Co., T. D
Dravton Ms
Dudey, W. S
Duffed et a., Dve ., e ecutors
Duke, Nanane
Duany, George W., estate of2
Duauy, |r., et a., George W., benefcares 2
Duncan Co.,
Dunn, esse P
Dunn, Dewtt C
Dunn Co., ohn
Dunn Manufacturng Co
Dunson Ms
cquescence reates to ssues and 8 of decson.
state ta decson. , . .
c uettcencereates to ssue wth respect tostatuteof mtatons.
G
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19
Ta payer.
oard of Ta ppeas.
No.
oume.
Page.
3121
5
239
23930
18
554
3644
4
743
8629
8
919
3351
5
711
29452
18
875
5593
4
24
13565
12
96
12515
13
116
8664
11
796
12163
8
1169
4240
3
41
9762
10
1245
2685
2
463
2684
2
463
2686
2
463
679
2
19
1171
2
19
9354
10
110
3940
4
967
3940
4
967
1842
1
998
17827
18
545
10021
10
39
581
1
556
6413
7
152
4695
4
483
2270
2
603
36900
21
1343
24271
18
1230
6995
6
74
2 513
19
707
7096
7
290
17552
16
147
11954
10
508
20482
17
628
18036
12
1058
16693
15
494
10639
9
1404
26136
15
1075
7636
5
309
6503
6
89
22557
11
101
672
2
44
7049
10
79
7048
10
79
11448
12
681
46178
20
796
6805
6
1322
19858
18
1314
10399
1
11395
14
1148
14631
Inc.
Durabt Stee Locker Co
Durron Co., Inc
Durkn, P. rank
Dustn, nne M., estate of 1
Dyer et a., George R., e ecutors 2.
.
agan, Mary ., estate of 2...
age Shoe Manufacturng Co
are, s P
ast Lynn Coa Co
ast Market Street ote Co...
astern Shoe Manufacturng Co
astack, ames L
a tand, Thomas
aton, Chares
aton, zra Z
aton, Macom
cksten, se S
cksten, Lous
dgar, Cnton G
dmonds, eanne, e ecutr
dmonds, ohn W., estate of
dmunds, . M
dmundson, D. Lee
dwards, Water
gan ausman Co., Inc
ggnk, enry
hrch. |r., ranz, estate of
mcr mend
nee, nna, estate of
kdah, arry ---
ba Manufacturng Co
ectrc ppance Co
ectro Magnetc Too Co
tfreth, my en
as ro., nc, G
as Sc Co., oseph
kns, Luther
ott, . M
ott, W.
s, Wade
m Cty Cotton Ms
m Cty Nursery Co
mhurst Investment Co
Paso Southwestern Co-
Paso ectrc Co
Paso ectrc Ry. Co
sasser, Neson ., e ecutor
II. I nuou 1.,
mery, rd, Thayer Dry Goods Co..
mpre State nance Corporaton
mswer, Chares C, estate of
mswer, Lzze, e ecutr
ngneers
O
state ta decson acquescence reates to thrd ssue of decson.
G
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20
ctu sc NC s Contnued.
Ta payer.
oard of Ta ppeas.
No.
oume.
Page
802
1
760
6193
8
1289
5981
8
1289
24962
21
406
24961
21
406
8471
10
1248
10006
9
588
13718
14
1124
10251
7
919
10250
7
919
2333
3
51
7376
13
616
2208
5
541
14406
12
739
362
3
897
7347
5
806
3221
3
1180
6797
8
867
21644
16
1042
1669
2
115
34226
18
1130
14068
13
705
17174
17
429
19198
18
686
6463
12
1232
21107
10
716
32137
21
664
19022
9
416
19022
9
416
10547
11
818
16544
20
980
3706
6
44
1601
3
726
7268
7
172
9823
6
1069
5570
8
58
12990
10
709
1811
2
130
10914
10
43
654
7
657
16342
13
1080
13424
13
1079
12398
17
507
210
1
1058
1399
3
97
18234
16
181
20178
19
580
3286
3
884
11055
13
969
ngander, . L
ngcman, .
ngeman, M. S
nns, . N - -
nns, Oscar M
nns- rown Co
n tress rck Co
re Sk Ms
rwn, . C
rwn, Mrs. . C
scave, |r., Wam M
sperson, Mrs. Nes (Mee).
ssanbee Mnes Co.
sseen Reaty Corporaton
ttenson Wnng Dry Goods Co
vans, Leroy G
vans, W. L -
vens oward re rck Co
vergreen Road Land Co
ves, . C
wad Co
wng, oseph Neff -
change ank Trust Co. of Shreveport, La.,
admnstrator
change Natona ank
yestonc, rank
ysenbach, Oscar
ar Stock Trust1
archd, Marcus D., estate ofs
archd, Nee ., e ecutr 2
atoute Iron Stee Co
a|ardo Sugar Co. of Porto Rco
aketnd Shp Co
atco, George
arow, Samue, estate of2
arm Impement Co
armers Merchants Natona ank
armers Merchants Natona ank of Nocona,
Te
armers Merchants State ank
armers ank Trust Co., e ecutor 2
armers Cooperatve ssocaton
armers Cooperatve Co
anners evator Co
armers eed Co. of New York
armers ue Co
armers Loan Trust Co., admnstrator
armers Loan Trust Co., e ecutor
armers Loan Trust Co., e ecutor1
armers Loan Trust Co. and Isabee W. Tford,
e ecutors
armers Unon Co-Operatve ssocaton
cquescence, does not reate to Issue nvovng |ursdcton of oard.
1 state ta decson.
Nonacquescence notce n ths case, pubshed n Cumuatve uetn 1 -2, recaed.
state a decson acquescence reates to ssue 1 of decson.
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21
odubscbncks Contnued.
Ta payer.
Docket
Wo.
oard of Ta ppeas.
oume
armsworth oyt Co__
ard- tte Co
Pawkes, Lese
|ar Co., Inc., red-
edera dvertsng gency Inc
edera earngs Co Inc
edera Creosotng Co., Inc
edera Gas, O Coa Co., trustees for
edera odng Co
edera Pate Gass Co
eges, Ma
edman, Davd
rfdman, Ma
e, .
eows Medca Manufacturng Co
enner, Chares . and rgna S
erguson, Chares
erry Market, Inc
erry Son, Inc., C. S
bre Contaner Co
bre Yarn Co
cken Tobacco Co., .
dea Investment Co
dety-Phadepha Trust Co., e ecutor
dety-Phadepha Trust Co., e ecutor 1
dety Trust Co.
dety Trust Co.
ed Co., Marsha
fth Thrd Unon Trust Co., trustee
er bre Co
nance poraton Deveopment Corporaton
of merca
ncham, dward, estate of1
neham, mma, e ecutr 1
nck Co., enry
nk Co., George
nsver, Chares
ppn, . O
restone, sther
rst Natona ank of Durant, Oka
rst Natona ank of vanston, Wyo
rst Natona ank of ort Dodge, Iowa
rst Natona ank of Goodand, ans
rst Natona ank of Los ngees
rst Natona ank of Marow, Oka
rst Natona ank of Omaha
rst Natona ank of Rchmond et a., admns-
trators 1
rst Natona ank of Rock Rapds, Iowa
rst Natona ank of Seepy ye, Mnn
rst Natona ank of Stoughton, Ws
16287
737
11305
9327
9835
11512
12957
19391
21196
9233
17777
7888
2003
1055
6036
5604
31263
5592
8980
2216
11313
3671
23211
36759
7475
7244
10440
983
27597
28469
4920
13638
15279
36836
24877
6805
30071
30071
4339
1369
6468
980
740
6913
19
8021
1280
2817
9889
30033
32385
687
2334
2790

16
1
14
9
19
9
12
15
1
6
13
3
18
7
6
ft
14
5
18
9
10
10
2
16
17

13
14
20
14
6
16
16
4
5
8
2
2
6
1
7
5
6
9
17
19
6
7
2
state ta decson.
1 cquescence reates to deducton of ta es on rea estate and persona property.
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cquescenceb Contnued.
Ta payer.
oard of Ta ppeas.
No.
oume.
Page.
38016
20
272
2581
5
1176
13912
14
87
13912
14
87
7594
7
968
433
1
242
12809
13
383
7212
9
419
7212
9
419
7856
9
514
13829
13
909
17945
12
20
746
2
31
24558
16
1366
10383
9
579
151
1
412
12221
11
903
28322
21
286
10103
9
377
13118
12
51
9944
7
1098
10236
7
209
7141
7
611
2881
6
291
10576
12
104
10577
12
104
19064
12
104
2521
6
21
641
1
1230
489
2
1223
3864
6
536
27092
20
861
27092
20
861
22754
19
958
17414
18
819
21928
16
1390
21928
16
1390
22753
19
958
9232
5
118
17191
11
1401
3260
4
427
28904
34477
15
774
16389
15
115
4743
5
810
28558
18
442
28558
18
442
10585
10
658
2525
2
1087
10614
13
1
10615

1
22514
3182
3
1207
3253
3
494
307
1
510
rst Savngs Trust Co., e ecutor and trustee
rst State ank
she, enry R
she Marks
sher, Car G
tchburg Steam ngne Co
ach, ohn
emng, C. ., estate of1
emng et a., dmund ., e ecutors 1
etcher, Chares ., estate of1
e be e Co
nt, rnest P
nt Rver rck Co
ood, Mrs. . D
orence Ms, Inc
orda Grocery Co
oyd, T.
ynn, arrson Conroy, Inc
oer Wa Paper Co
oey, D. O
on tus Shoe Co
orbes, Rose D
orbes, W. S
orgeus, . W
orrester, D. ruce
orrester, W. S
orrester-Nace o Co
orstmann, uus
ort Orange Paper Co
ort Wayne ngneerng Manufacturng Co
ort Worth Warehouse Storage Co
orve et a., C. S., admnstrators.
orve, sr., Php, estate of
oster, d
oster, orence
oster, . M., estate of
oster, Mrs. ames Martn, e ecutr s
oster, Seffe
oster Gasse, Ltd
ostora Mng Gran Co
ower, sr., . S.
o , Rchard M
o Sons, Inc., W. P.
o Rver Iron Co
rance, George enry, estate of1
rance, Nanne ., e ecutr 1
raucescon Co., . C .
rancs, T.
rank fe Seeder Co
rank Seeder, Inc -
ranke, Osmond ., e ecutor.1 -
ranke, Inc., So
ranke Tton, Inc
state ta decson.
cquescence reates to ssues 2 and 4 of decson.
cquescence reates to frst ssue of decson.
G
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2

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23
cquescences Contnued.
Ta| payer.
Docket
No.
oard of Ta ppeas.
oume.
Page.
rankn, Wrt
rankn Ms
rank-Severs Undertakng Co.
raser, rthur C
raser rck Co
r, George
red
reedom O Works Co.
reeand Catte Co
reeman, Dougas S
rees, |r., Peter
rey, |r., et a., Mtche M., e ecutors Wam .
Scafe estate
redrch Sons Co.,
redman Neckwear Corporaton, L
rend, George
rend, Oscar, e ecutor estate of erman . Meyer.
rschkorn, . S
rshkorn Rea state Co
rost, Chares
rost et a., . Y., e ecutors
ruen Investment Co
uer, O. R
Guy
fc Co
G.
Gaats, erry.
Gaagher, Thomaa P
Gaen Paper Co
Gaumbeck, C
Gavn, ohn M., admnstrator .
Gambee, Wheeer
Gamon Meter Co
Gano, M. Rea
Gantz Tank Co -
Garber, . .1.
Garber, M. C.1
Garden, .
Gardner, .
Gardner Governor Co. a-
Gardner Prntng Co
Garretson, Sopha M
Garrson Co
Garv, the
W. W -
8, . W
9266
9267
11423
2194
6495
12028
5929
9865
9707
17882
20128
9518
37413
11307
391
3412
19334
5000
1062
7879
14270
26422
10441
1126
10801
9362
3362
10747
21862
1377
10641
820
3972
395
28421
1007
3708
14097
3710
13909
15926
5218
321
5061
5818
150 6
34371
34370
4242
7
8
7
3
6
10
6
10
8
20
12
1
2
15
8
4
7
15
16
12
2
11
11
2
8
17
5
9
0
4
1
19
16
11
11
16
7
5
4
10
17
18
18
4
636
977
1290
94
346
1252
997
409
823
1236
573
737
338
1318
61
712
686
431
463
554
1295
542
1025
641
960
213
17
76
1404
1085
1234
1124
518
212
979
979
592
1089
70
37
1381
460
1204
1204
619
1 cquescence reates to ssue as to whether the ncome reazed under agreement of Deceraher 14,1918,
s ta abe n proportonate amounts to the severa pettoners or whether such pro|ortonnte amounts are
ta abe one-haf to the pettoners and one-haf to ther respectve wves.
cquescence does not reate to that part of decson nvovng appcaton of yers decson (1 . T.
., 1135).
72109 31 3
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0
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8
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0
5
4
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2
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24
cquescences Contnued.
Ta payer.
Gassner, Lous
Gate Ctv Coffn Co...
Gatff Coa Co --
Geger raverman urnture Co
Gem State Lumber Co
Genera Lead atteres Co
George, Mke
Georga Car Locomotve Co.1
Georga Creosotng Co., Inc
Georga ngneerng Co
Georga- orda Land Co
Georga Manufacturng Co
Georga State Savngs ssocaton
Georga eneer Package Co
German town rad Co
Gcrst ct a., erbert --
Gesse et a., gbert G., e ecutors
Gcttvs, M.
Gant Tre Rubber Co
Gfford, arry N
Gbert, |r., Cnton, e ecutor
Gbert, sr., Cnton, estate of
Gbert Creek Land Co
Ges, da R
Ges Co., George
Gen, Margaret
Gespe, Rchard T
Gespe Coa Co
Gam Manufacturng Co
Govch Co., oe
Gson, arry W
Grard Coa Co
Gackner Reaty Corporaton, ohn.. .
Gady Manufacturng Co
Gobe-Gazette Prntng Co
Gobe Outet Co
Goyd, emmon
Godar, Wam ., estate of
Gocner urnture Co
Goerke Co., The
Goethe Co., fred C
Goconda O Co
Godberg, arry 8
Godberg, Lous M
Godberger, Leo G
Godman, f
Godman, I
Godman, Lous ., estate of
Godman ct a., Robert P., e ecutors 2
cquescence reates ony to ssue 1 n decson.
state ta decson.
Docket
oard of Ta ppeas.
No.
oume.
Page.
4017
4
1071
4517
3
226
11084
8
726
1906
2
171
3984
2
489
718
2
392
5774
6
124
3131
2
986
17777
12
247
28143
21
532
31095
16
1253
1718
5
893
5352
4
748
3479
2
584
5215
3
1336
3879
3888
5365
4
658
5366
5367
12394
15
624
3495
3
441
9412
7
1249
2677
3
334
21416
20
765
21416
20
765
13848
14
921
1536
1
1066
5387
4
335
1785
2
75
3851
2
1317
12509
13
926
964
1
967
7746
6
864
2395
2
1221
3724
6
105
10338
11
151
227
1
337
3899
1
18457
I
16
161
24196
14029
10
165
33183
39411

966
23730
20
419
3500
2
1290
5992
7
860
13273
15
199
10176
7
955
5389
4
1073
11615
9
1355
243
1
249
11907
12
874
11173
12
874
11463
11
92
11463
11
92
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1
3
-
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1
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8
9
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5
4
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25
cquescences Contnued.
Ta payer.
Godschndt et a., Georgette, e ecutors 1
Godschmdt, enry P., estate of1
Godsmth, Lan M
Godsten, Davd S
Godsten, as
Godsten, Mrs. as
Good Manufacturng Co
Goodn, C. W., estate of1
Goodng, Mrs. . G. -
Goodng, Mrs. red W.3
Goodatte, Raymond R --
Goodman, mma ., estate of
Goodwn, C.
Goodwn, Moe
Goodyear, Chares ., estate of1
Gopher Grante Co
Gordon urnture Co
( oss Prntng Press Co
Gottfred, edwg
Gotteb ros -
Goud, zra
Gouston dvertsng gency, Inc., rnest .
Graft, George
Gramercy Investng Co. of New York
Gramercy Investng Co. of Pennsyvana
Grand Rapds Natona ank
Grand Rapds Show Case Co
Grant, een M. W., estate of 1
Grant Constructon Co., George
Grant Trust Savngs Co., trustee
Gras, Rudoph
Graves, Cavn T
Graves, George
Gray, Mary C., estate of _-_
Gray, |r., |.
Gray eta., Raph W., e ecutors1.
Gray, W.
Gray Davs, Inc
Gray Prntng Co., The
ydon, Samue
at ear Sprng Co.
Great Northern Ry. Co.4
Green O Soap Co
Green Rver Dstng Co
Greenbaum, Mchae
Greenebaum, Moses ., e ecutor1
Greene Co., . -
Greenve Coa Co
Greenve Opera ouse ssocaton
Greenve Te te Suppy Co
oard of Ta ppeas.
No.
oume.
Page.
16138
14
1010
16138
14
1010
6335
7
151
5161
3
425
8268
6
1142
8269
6
1142
19840
15
583
4220
8
1277
3264
4
389
3263
4
388
4007
4
165
10124
12
823
21337
9
1209
21338
9
1209
10304
11
833
6631
5
1216
2470
3
311
5224
11
365
8553
5
297
887
1
684
21727
21
824
7396
18082
549
24631
8
1166
1356
2374
8
13
2373
8
13
19327
15
1166
9714
12770

1024
13792
13
174
2584
5
395
3659
3
1026
2340
5
1163
20666
17
1318
8113
7
286
28937
19
455
716
2
672
28937
19
455
4552
6
347
143
1
222
4503
4
1264
1477
2
552
10489
12
383
8433
11850

225
3574
3
467
10604
16
396
3836
2
979
10124
12
823
3127
5
442
3784
3
1323
2311
5
887
168
1
152
state ta decson.
Revokes nonacnuescence pubshed n Cumuatve uetn I- at page 7.
1 cquescence reates to deprecaton and obsoescence ad|ustments.
b reates to a ssues of decson e cept ssue nvovng the queston whether the company
1 the ta abe years nterest earned hut not pad n those years on obgatons of
ft.
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26
cq ubscences Contnued.
Ta payer.
oard of Ta ppeas.
oume. Page
Greenwood Cemetery ssocaton.
Grcever, Mr. and Mrs. .
Grey ock Ms 1
Gresemer, Chester P
Grffn, P. P
Grffth, . C
Gr, Inc., ugust
Grmmer, enry
Grttman, red
Grover, rthur
Guarantee Constructon Co. .
Guarantee Tte Trust Co...
Gueph ote Corporaton
Guenther, Pau
Guest, my
Guggenhemer, . Randoph
Gurnee, Water S..estate of
Gus Sun ookng change Co_
Gutterman Sons Co., . M
Gutterman Strauss Co
aag, nora C
aag, nora C, former e ecutr .
aag, Lous ., estate of
aas, Otto
adaway, ohn
adden, |r., et a., ohn spnwa, e ecutors .
adden, Mare Torrance, estate of8
adden, T. Irvng, e ecutor
agerstown Shoe Leggng Co
agcrty Shoe Co., P
anes, rances W
a, Chares Ward
a et a., ohn S., e ecutors
a Co., Inc., . .4
aahan, Stephen
aam, dwn C
aenbeck, arry C, estate of
aenbeck, ohn ., e ecutor
acr, Mary s
amersag, . P
amersag, uan L
amton Chambers Co., Inc.
amton Manufacturng Co
ammack, Rsh Sons Co
ammerschmdt ranzen Co_
ammersey, Chares
3000
5690
11926
10827
11546
11400
7372
16025
1159
1828
1848
6063
1064
1755
26039
33205
13625
10441
10786
10458
234
26942
36292
26941
36290
26941
36290
3542
12717
9421
9421
16398
463
16023
31805
11650
13552
4612
6848
3582
12470
12470
14063
25751
13597
13596
131
2507
10516
13751
20501
2
6
9
10
7
11
9
3
11
3
10
7
2
19
9
12
13
8
1
19
19
19
3
13
10
10
17
1
15
20
6
16
3
14
2
10
10
14
15
15
1
3
6
12
16
cquescence n decson n so far as the oard hods that thero s no defcency for 1917.
cquescence reates to fourth ssue of decson.
3 state ta decson nonacquesccnce notce n ths case pubshed n Cumuatve uetn II-2, page
47, revoked.
1 Nonacquesccnce notce n the case of . . a Co., Inc. (C. . -, 6), recaed.
cquescence does not reate to deductbty of chartabe contrbutons.
G
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1
3
-
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1
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2
2

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7

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9
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5
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27
cquescences Contnued.
. Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
ammon, ram ., estate of 1
ammond, .
ampton Co
ampton Cotton Ms
ancock Constructon Co. et a
ancock nttng Ms
anev and wfe, dgar P
any, W. W
ansen, ans C, estate of
ansen, . fred, e ecutor
anson, Maud astngs
ardng Gass Co
ardy, George W
arme, enry
armony Grove Ms, Inc
arnsberger s, Inc
arre, fred, e ecutor
arrs, en
arrs, Car C w,
arrs, Chares L., admnstrator estate of Wam
L. arrs, deceased 1
arrs, . L
arrs, Sam
arrs, Wam L.
arrs
deceased, estate of
musement Co. of Mchgan
arrs Co., .
arrs- mery Co
arrs Grocery Co., Inc., W.
arrods Motor Car Co
art Cotton Ms.
art, ohn W.
artford Connectcut Western R. R. Co
artford at Cap Co
artey, arry
artman Co., W.
art-Wood Lumber Co
aske, George S., estate of
aske, . mory, estate of
aske, athryn M., e ecutr George S. aske
estate
ass, . S.
astngs, ce M
astngs, O. ,.,
atcher, . S
atze fe ueher, Inc.1
aupt, oseph
ausmann, Lous, e ecutor 1
ausmann, Theresa R., estate of 1
averstck, dward
awkns, C.
10914
11163
2054
589
11758
16520
3486
8516
6744
6744
5109
19708
7981
38855
4500
7053
25783
10980
33872
4426
10430
8614
9623
4426
17841
17842
12123
13998
22502
113
3884
6184
834
9032
12781
3916
2021
7400
27725
40208
2984
4335
7102
4335
14817
5106
5107
28742
9501
11454
5781
5931
5931
9882
418
10
10
2
2
11
15
6
6
6
6
8
15
6
19
2
7
20
10
19
6
14
11
5
15
16
10
3
5
2
7
2
7
16
20
5
2
6
13
8
8
18
10
6
5
5
13
6
state ta decson.
1 cquesrem e reates to second ssue of decson.
G
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1
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2
2

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4
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28
cqtr C NC Contnued.
Ta payer.
Dockot
No.
oard of Ta ppeas.
oume.
awks Nursery Co
ayes Te te Co., Inc
aynes, Chares ., e ecutor
aynes, rederck
aynes, R. R., estate of
aysett, ohn
azett Moss, Inc
earn, en|amn ., estate of
earn, the D., admnstratr ...
eath, .
eathcote, ruce, admnstrator -
eaton Constructon Co., C. T
ecker, Dane
eddon, Chares
efetz, ascha
eneman Lumber Co.a
ed, ntonette ., e ecutr of estate Wam
D. ed
ed, Wam D., estate of
eer eta., . S., e ecutors
eer ros. Co
eer Too Co
eman, Isaaa W., estate of
enderson, Mrs. ce D., e ecutr
enderson, |r., Mrs. S.
enderson, |r., S.
enderson Co., . C
enderson Cotton Ms
enderson Overand Co., The
enderson Tre Rubber Co
ennger et a.,
enry, ohn
enry, Matte ., conservatr 1
enry, R. D
enser rewng Co., oseph
entz, Leonard S
epburn, onzo arton, estate of
erad-Despatch Co
crenden, en C, estate of1
err, erbert
ermabrecht, ohn
eron Meta ed Co
ess ros.
ess udng Co.
cssenbruch et a., erman M., e ecutors..
essenbruch, Ida M., estate of
ethcrngton, zabeth N. C
cuben, Inc., G.
cwett Gran Provson Co. of scanaba.
e ter, Percy
eydrck, L. C
1469
844
9584
7247
9584
13119
2247
10285
10285
6015
11141
11944
13695
7735
15914
9237
10175
1988
1988
4575
9073
9072
4575
1875
1917
1916
5272
5504
4776
11953
205
6375
7268
3545
11874
41597
9651
4556
6983
29036
752
3236
8039
13936
19251
20345
39003
17907
17907
28334
13125
18683
7878
4120
5503
1
4
6
7
6
12
2
9
0
7
8
11
17
15
15
11
3
3
10
9
9
10
2
2
2
5
4

12
9
6
7
3
12
21
8
4
6
20
6
2
7
15
10
10
20
13
1 I
8
1 sate ta decson.
1 cquescence reates to ssue as to market vaue on March 1, 1913, of tmber owned on that date.
cquescence reates to frst Issue of decson.
G
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.
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#
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29
cquescen-ces Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
eyn, Otto P
bbard, Spencer, artett Co.
ckory Spnnng Co
cko , Lee
cks, ohn ., estate of 1
cks, L. R. and R. ., dstrbutees 1
ggnbotham- aey-Logan Co.2
ggns, Chares
gh et a., orace S., benefcares
ghand musement Co
ghand Land Co., Ltd
ghands Casket Manufacturng Co
et a., G. ., admnstrators 1
, .
, . L
, Lena G
enmeyer, . ., estate of 1 :-
enmeyer, Mary, e ecutr estate of . . -
enmeyer, deceased 1
fbnan, M. P. G
nckey, Raph L
nshaw, R.
rsch Dstng Co., S
rst egev Lnseed Co
tchcock, abert
ochschd, erthod
ochschd, arod
odges, red G
oe Co., Inc., R
of rau Co.
of rau Co
offman, rnest Gustav, estate of
offman, .C
oden Martn Lumber Co
ougsworth, Turner Co
omes et a., oseph ., e ecutors ..
omes, Lea ., estate of
omes, Mton
omes, Sue ., estate of1
ot et a., ames ., e ecutors 1
ot, Robert L., estate of
ot-Grante Ms Co
ot Pad Ms, Inc., . M
oton Co., rank....
ome enefca ssocaton
ome Industry Iron Works
ome State ank
ong-Cooper Co
ood, Chares
ood Wheeer urnture Co
ooper, arry
oover et a., George S., e ecutors
1 state ta decson.
cquescence reates to thrd ssue of decson.
cquescence reates to frst ssue of decson.
3788
7431
367
367
6702
7253
7253
4691
30008
6291
5316
2320
532
4220
1689
6215
5800
1862
1862
2372
4193
33021
15816
7482
6107
3081
4058
3080
4057
7729
7216
6134
4636
7914
6611
826
656
42801
7970
33300
42801
12636
12636
1784
8745
10261
19589
7991
14462
15000
6990
21048
5271
25737
4
.5
2
1
7
(
9
8
22
7
3
2
(3
S
. 5
9
S
2
2
2
6
10
1 1
4
4
9
7
6
12
8
4
2
1
22
10
21
22
14
11
1
9
10
15
8
15
11
4
22
8
20
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30
cqotescences Contnued.
Ta payer.
oover, George W., estate of 1
opkns, ames Robert
opkns, Water L
orn ardart akng Co
ortenstne, . L., coadmnstrator _
oskns, ohn
oskns Lumber Co., . S
ote Charevo Co
ote Grunewad Co., Ltd
ote Patten Co. et a - -
ote Wsconsn Reaty Co.
ouck Co., Ltd
ouse errmann
ouston et Termna Ry. Co. ..
ouston ros. Co
ovey, Peter P
ovey Co., C.
oward Theatre Co
owe, fred L
owe, Chares M., admnstrator .
owe, red
owe, Thomas
ower Seaman, Inc
ub Dress Manufacturng Co
ub, Inc., The
ub Shoe Co
uber, Wam D
udson, Chares I., estate of .
uev, . L
uff, ndrews Thomas
ughes, ohn N
ughes Coa Co
ughes Co., d. S ----
ughson, rank C
ubert, dmund D., estate of4.
ume, .
umphrey Co.,
umphres, C. C_.
.
unng Mercante Co
unncutt, Mary L
unt et a., the P., e ecutrces
unt, ohn ., estate of1
unt, Warner D., estate of 1
unter, Mrs. Oe
unter Coa Co
Docket
oard of Ta ppeas.
No.
oume.
Page.
25737
20
906
32797
19
693
1476
2
549
41764
20
486
3633
3
697
10241
7
299
2390
3
846
21826
22
170
1593
5
761
5792
13
943
11755

22220

16
334
22221
8159
7
670
14090
30958

621
8494
6
1364
33597
21
804
1677
2
1099
5448
4
175
16310
16
57
20667
17
1318
7382
24464
21
767
12489
12
610
12492
12
510
4196
4
261
283
1
197
3553
3554
3
1259
1170
2
836
9975
12
1
3351
5
711
6132
4
370
336
1
542
9104
8
206
7142
8
306
6748
14120

949
6690
11294

242
11204
12
818
11027
9
31
15829
18498

312
3511
3
441
29821
17
811
15
1
130
3621
10
1004
9801
12
396
9801
12
396
31968
19
624
6292
7
495
2503
2
828
1 state ta decson.
8 cquescence reates to thrd ssue of decson.
cquescence reates to ssues 6 and 8 of decson.
state ta decson acquescence reates to ssues concernng checkng account, rea estate, and penson
fund.
G
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1
3
-
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1
-
2
2

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:
5
7

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9
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5
4
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31
cqotebcences Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
untngton Cearfed Teephone Co. and Sum-
merve Teephone Co
upfe Co., Inc., . Chr. G.1
urey, . W
uron udng Co
uron Portand Cement Co
utchns Lumber Storage Co.
utchns Lumber Storage Co
utchnson, ames M
utchnson, Wam N
utchson, Chares
uttersche ruder Gemende et a., trustees, etc_-
u ford, C. C
uyer s
yams Coa Co., Ltd., et a., Robert P
ymans et a., dwn C, e ecutors 4
yme Pantng Manufacturng Co., Lous.
Inos Merchants Trust Co., e ecutor 8
Inos Merchants Trust Co., e ecutor estate of
Wam R. Manerre, deceased
Inos Paper o Co
Inos Smetng Refnng Co
Impera urnture Co
Independent etna Sprnker Co
Independent rewng Co. of Pttsburgh 8
Independent ectrc Machnery Co
Independent Lfe Insurance Co. of merca 7
Inde Noton Co.8
Indana Creosotng Co., Inc
Innes- ehney Optca Co
Internatona eddng Co
Internatona oer Works Co
Inter-Urban Constructon Co
Iron Cty ectrc Co
Iron Cty Improvement Co
Irvng ank-Coumba Trust Co. et a., e ecutors-
Irvng ank-Coumba Trust Co. et a., e ecutors .
Irvona Coa Coke Co
Irwn, enne I., e ecutr estate of Mary .
McCah
Irwn, .
Irwn ue Co., .
358
9834
7339
18127
3334
4973
3307
7129
11284
11285
8053
15757
34014
1357
1445
219
17895
2903
11204
3106
770
21180
16929
10588
25755
3242
2742
25295
1023
17777
3368
12733
2322
4387
6103
2138
9651
20055
23184
2547
9392
9030
1
9
6
15
4
13
11
11
13
14
20
1
f
5
12
4
4
1G
9
15
4
3
17
3
12
7
14
3
4
4
4
8
16
18
2
8
0
1 cquescence reates to good-w and bad-debt ssues.
1 cquescence does not reate to that part of decson nvovng appcaton of vers decson (1 . T. .,
5 reates to deducton of cost of wardrobe and traveng e penses.
4 state ta decson.
1 state ta decson acquescence reates to ssues concernng checkng account, rea estate, and penson
1 cquescence reates ony to ssue 1 n decson.
: cquescence reates to oard s nterpretaton of secton 245(b) of the Revenue cts of 1921 and 1924.
1 cquescence does not appy to that part of decson reatng to appea of Uuaranty Constructon Co.
(2 . T. ., 1145).
state ta decson acquescence reates to ta abty of 415 shares of Peeress Push Manufacturng
Co. stock and 499 shares of Otto aeger Son, Inc., stock.
G
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a
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2
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1
3
-
0
1
-
2
2

0
3
:
5
7

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8
9
0
5
4
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32
cquescences Contnued.
Ta payer.
Docket
No.
oard of Ta ppons.
oume.
Isaacs Co., Inc., Reub_
Isand Lne Shppng Co_
Israe, oseph
Ives, omes
ack, Cec M_.
ackng, D. C.
ack s
acks, Rome C
ackson, nnette T.1
ackson, Carone Mather, estate of 2.
ackson, George .1
ackson, ames .
ackson, Maron M., e ecutor 3
ackson, Ws .1
ackson Tnde 1
ackson Sanatorum ospta Co
acob, en
acobs, rthur
acobs, Wam M
aeger, Otto, estate of1
ames, rthur Curtss 1
ames, . R
ames Manufacturng Co., D. O
ameson, . M., estate of
amestown Worsted Ms
ankowsky, Smon
areck Manufacturng Co
audon ngneerng Co., . S
enckes Spnnng Co
ennngs, . T
eweers udng Co
ewett, ohn
ewett Co
oe, .
oe, L.
ohn ancock Mutua Lfe Insurance Co.
ohns, Margaret
ohns, Waace C
ohnson, C. L
ohnson, Chares R
ohnson, . C, e ecutor
ohnson, ar O
ohnson, dwn M
ohnson, anne W
ohnson et a., omer S., e ecutors 5
ohnson, . L
59
3414
27780
31428
5646
14995
17662
4272
22561
23939
9001
20303
9002
12944
12945
15996
17856
29452
9003
9000
3089
30082
30629
10742
20055
2509
4068
21943
25783
92
20587
10798
14060
215
3222
1533
8738
5416
6801
6802
9047
8353
8352
7565
9877
11250
8259
1415
15301
9550
10748
1
4
13
5
13
9
18
19
11
15
11
12
18
11
11
9
22
20
11
16
13
2
17
20
1
18
12
15
4
3
2
20
3
9
9
10
9
9
7
8
13
5
10
8
11
8
cquescence does not reate to tentatve ta ssue.
3 state tu decson acquescence reates to deductons for attorneys foes and e ecutors commssons.
state ta decson.
stuto ta decson acquescence reates to ta abty of 415 shares of Peeress Push Manufacturng
Co. stock and 49 shares of Otto aeger Son, Inc., stock.
state ta decson acquescence reates to vaue of stock.
G
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a
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d

f
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Y
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U
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)

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2
0
1
3
-
0
1
-
2
2

0
3
:
5
7

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0
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8
9
0
5
4
4
2
7
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#
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33
cqt|escences- Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
ohnson, |r., ohn ., estate of
ohnson, ate, estate of
ohnson, Nes
ohnson, R. ., estate of
ohnson, Robert G., e ecutor
ohnson, Sarah L., estate of1
ohnson et a., Seymour, e ecutors 1
ohnson, Stephen O., estate of2
ohnson, T.
ohnson, Theodosa, e ecutr
ohnson Locke Mercante Co
ohnston, . T. M
ohnston, Mary rg, e ecutr 1
ohnston, W.
ohnstone, dward
ohnstown udng and Loan ssocaton.
ohnstown Democrat Co., Inc
oet-Norfok arm Corporaton
ones, . W.| admnstrator
ones, Mrs. . W., estate of
ones, rank
ones, George C
ones, enry M
ones, ersche
ones, Lo M
ones, Water
ones Co., T. P
ones oow Ware Co
ones Lumber Co
ordan Marsh Co
osyn Manufacturng Suppy Co
oyce- oebe Co., The
ume Reaty Constructon Co
ustus Parker Co
ahn, bert
ahn, ugene S
ahuku Pantaton Co.
aser, rthur
.
atenbach Stephens, Inc.
amper, Lous
anawha Cty Co -
ansas Cty Southern Ry. Co. et a.3
ansas Mng Co
ansas Savngs Trust Co. et a., admnstrators
of estate of . W. Shuths, deceased
arges osery Co
arno-Smth Co
arr, dmund
3839
7442
3265
7441
7441
7442
6812
6812
9550
6870
3839
32226
8466
10928
6352
15298
30694
2898
1647
6795
8218
8218
28614
4864
7325
12662
944
28613
28615
4294
14751
3275
4458
9809
4267
11758
13770
13842
10430
19156
1289
9426
19702
22231
6100
14630
12054
2835
1827
11384
14619
1525
4
10
t
10
10
10
10
11
7
4
15
9
7
12
17
6
2
8
8
8
21
6
1
21
21
2
12
6
3
G
6
11
13
14
14
12
2
12
14
13
16
3
2
8
13
2
1 state ta decson.
1 state ta decson: acquescence reates to vaue of stock.
1 cquescence reates to deducton from ncome of amortzaton of dscount, commsson, and e penses
on bonds sod n pror years.
G
e
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a
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e
d

f
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Y
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k

U
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v
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)

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2
0
1
3
-
0
1
-
2
2

0
3
:
5
8

G
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2
7
/

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0
0
0
0
8
9
0
5
4
4
2
7
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34
cquescences Contnued.
Tapayer.
Docket
No.
oard of Ta ppeas.
oume.
artman, be
asco Ms, Inc
ass, Ma and enne
atz esthof, Ltd.
aua Raway Co., Ltd
aufman, . R
aufman, Mrs. . R
aufman, Ltd., arry S
aufman, Samue R., estate of 1
aufman, Straus Co
aufman, Una Lbby, e ecutr 1
aufmann, fred D., estate of 1
aufmann, Raymond M., e ecutor
aweah Lemon Co
ay, Waace G
ay Manufacturng Co --
ean, amton
eeer, Isaac P
eeer rass Co
eeer Reaty Co
een, erbert Ide
eenan, atherne P.1
eener s O, Natura Gas ue Co
ceney, bert P.
eews Reaty Co., Inc.3
em, . D
ckaha Sugar Co., Ltd
eer, Ida . ...
eer Mechanca ngneerng Corporaton
eey, arry P
eey, Thomas
eogg Commsson Co
ey, rmn L., admnstrator 1
ey, Dane
ey, .
ey, Mare ., estate of 1
ey, Marv L, estate of1
ey, M. W., estate of 1
ey, Over Warren, estate of 1
ey, T. eff, coe ecutor 1
esey, S. R -
eso, rgna..
emp, .
emper, ackson ., admnstrator -
enefck, Nee, e ecutr estate of Wam ene-
fck, deceased
enefck, Wam, estate of
ennedy, D. ., deceased, estate of1
ennedy ct a., nne S., e ecutors1
ennedy, ohn T
ennngton Co., R.
ennngton Reaty Co
enny ros. Co., The
13244
22355
1259
4707
11101
12811
12812
8154
11845
4698
2649
4698
10907
10907
4583
10102
26365
33608
10745
6379
6218
6218
22262
6352
7862
21916
10489
2488
15435
291
6741
6891
7036
3945
7092
8365
1796
12394
36157
32971
7092
32971
6082
8351
4 3 .S
12198
523
523
5244
5244
19785
7836
7837
7834
1530
10
15
1
5
13
9
9
5
5
2
5
11
11
5
10
18
10
8
9
9
15
7
6
17
12
4
13
2
6
9
9
6
s
10
3
15
20
18
8
18
6
9
20
14
3
3
4
4
16
state ta decson.
cquescence n resut ony of docson.
cquescence reates to deprecaton and obsoescence ad|ustments.
G
e
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r
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d

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0
1
3
-
0
1
-
2
2

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3
:
5
8

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2
7
/

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3
0
0
0
0
0
8
9
0
5
4
4
2
7
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,

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35
cquescences Contnued.
Ta payer.
oard of Ta ppeas.
No.
oume.
Page.
410
2
63
19018
16
630
14337
14
603
1473
2
838
3182
3
1207
14531
9
1208
10805
13
786
15985
15
1114
15986
15
1114
29006
21
254
10990
15
359
6931
4
1294
37377
20
80
23937
18
571
11968
8
475
9942
9
502
8283
10
698
8283
10
098
6729
10
308
9695
4
1253
8315
6
884
12288
11
296
8392
8
981
8216
8
981
8409
8
981
8217
8
981
6760
3
1348
2879
3
755
3094
7
771
4482
3
669
21788
15
1270
3707
1
1 I DSC,
|
979
18061
3707
1
11986

979
18061
12355
9
671
6881
9
1335
12433
11
779
2874
2
369
4004
4005
6061
6
617
6102
10157
10430
14
1259
30615
20
934
16433
18
249
1495
1
1048
11318
10
1234
5191
18
966
enosha rut Co
ensngton Water Co
entucky ectrc Lamp Co
entucky Land, Gas O Co
esser, George ., estate of 1
etcham, . R..
eystone Natona ank of Pttsburgh, Pa.
er, . L
er, W. ._.
eruff, Thomas C
eser Son Co., Inc.,
by Car oundry Co
an Co
mer, George L
mba, Davd
ng, ar
ng, a Day, e ecutr
ng, Robert C., estate of
ng, Wam C
ng Lumber O Co_
ng-Parker, Inc
ng ey, Louse
ngston, George M
ngton, ammond L
ngton, O. M
ngton, W. W
ns, braam
rk Coa Co
rkenda, . P., estate of 1
rkand ros. Co., Inc
sse, Carone T.1-
ster et a., orence L., admnstrators s.
ster, Wam ., estate of .
ster Land Improvement Co. .
au, an Petersom, Dunap, Inc.
auber mbrodery Works
ecman Dry Goods Co
en, orence L.s_
en, Isadore
emyer, George N
ne, enry, e ecutor.
ng, Mary Cark
state ta decson.
cquescence reates to deducton of fees pad to attorneys.
cquescence reates to ssue as to whether the ncome reazed under agreements of Decernber 14,1918,
t ta abe n proportonate amounts to the severa | ettoners or whether such proportonate amounts are
ta abe one-haf to the ett oners and one-haf to ther respectve wves.
cquescence reates to a ssues e cept ssue wth respect to queston of aowance of amortzaton n
M18 of costs ncurred n 1919.
cquescence reates to a ponts of decson e cept that pertanng to the year 1919.
G
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0
1
3
-
0
1
-
2
2

0
3
:
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8

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0
0
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0
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8
9
0
5
4
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#
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36
cquescence s Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
napp, tte __
napp ros. Co_.
ne, ohn
nffn, Leonard.-
noerschd, . C.
nowton, Chares C, estate of.
nowton, Isabee ammond, admnstratr .
no , Chester
no et a., Grace M., e ecutors estate of Seymour
. no
no , Seymour ., estate of
no ve rck Co
nutson ardware Co
obbe Co., Inc., Php
och Co., Inc., Isse :
oee, Wam .
oen ros., Inc
oepr, oseph O
oynos Co
ongsberg, Nathan
onod, arbara
ossar Co., Inc
ountze, nne P
ountze, Luther, estate of
rauss, e ander
repke, . C
reg Tannng Co
rueger roughton Lumber Co.1
ru, rancs
uhr ct a., urgeu
uhr Sons, urgen
unke Co., Inc
urtz, Ma
urtz, Robert
urzman, Samue.
ye, Wam ...
Laccy, Mrs. . L
Lackawanna Trust Co. et a., e ecutors .
La rancaso Pece Dye Works
Lang, ohn
Lake, . W
Lam, . W
Lamb Lumber Impement Co
Lamborn, rthur II
2775
19430
7420
7959
20503
18884
18885
18886
18887
18888
18884
18885
18886
18887
18888
2441
2936
2936
8844
4384
3308
322
6093
712
14006
4130
6016
9670
18400
11878
16398
3611
10716
3318
17130
16985
13436
13436
3519
11411
15960
11412
15959
10659
16701
25156
12368
15068
39944
2010
1323
14242
9346
7
13
12
5
16
19
19
3
3
12
5
1
1
7
1
13
4
1
9
10
17
17
5
7
4
18
10
12
12
3
8
15
16
1 1
14
22
2
8
6

1 cquescence does not reate to ssue nvovng respondent s moton to dsmss because petton 1
not ted wthn 00-day perod.
2 . state ta decson.
G
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)

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2
0
1
3
-
0
1
-
2
2

0
3
:
5
8

G
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0
0
0
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8
9
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5
4
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2
7
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37
cquescences Contnued.
Ta payer.
Lambrecht, Rchard G
La Montagne s Sons, Inc., .
Lancaster ens Co.1
Landreth Co., . .2
Lang, ohn
Lang room Co
Langdon, arret
Langenbach, dward
Langey Co., W. C
Langey Mchaes Co
Lanter, ernard P., estate of8
Larrowe Mng Co
Larsh, D. L
Lash Co., Lee
Lassen Lumber o Co
Lasster Co., Robert G
Latham, een, admnstratr 8
Latham, . ., estate of
Lathrop Co., Inc., C P
Laurens Trust Co
Lautz Marbe Corporaton
Law Credt Co
Lawer, R. ., estate of
Lawer, Mrs. R. ., e ecutr
Lawrence, . M
Lawson, ohn
Lawson, W.
Leach, Mar - W
Leach, W.
Lee, Mrs. eanne
Lee, ohn C
Lee, Matda oz
Lee Co., Wson
Lefang, . M.
Leggett, Davd G., deceased, estate of .
Lehgh udng Corporaton
Lehgh aey Coa Saes Co
Lehmann et a., dward ., trustees 5_--
Lechner ordan Co
Leter, Lev Z., estate of
Legh ton ros. Prntng Co
Leghton Suppy Co
Leand, enry M
Leand, Wfred C.
Lembcke Co., Inc., ernuth
Lembeck, Gustav W
Leno Land Co
Leon Iron Co
Leonard, rthur
Leonard, Chares M
Docket
oard of Ta ppeas.
No.
oume.
Page.
8366
10
141
10610
16
398
11603
10
1153
15835
I 11
I 15
1
655
14370
12
435
8281
9
39
9842
7
1142
2131
2
777
2567
2
199
6420
9
1020
20202
20
1065
2733
3
245
12621
6
1086
6190
6
165
3431
6
241
15882
16
1151
21479
16
48
21479
16
48
6603
5
879
3930
3
331
6674
5
1287
508
5
57
19395
17
1083
19395
17
1083
13566
13
463
2284
2
747
4510
12
1076
13416
18690

781
7300
16
1309
5985
6
1005
5984
6
1005
7676
6
1132
10911
10
283
7309
6
4
3847
3
193
6607
7
460
19751
15
1401
32137
21
664
4867
4
133
16617
15
414
10329
8
1006
5744
7
99
7768
8
974
7769
8
974
849
1
1051
4863
16
250
1083
5
1206
14771
14
830
3156
4
1221
3157
4
1221
cquescence reates to ssue whether Invested capta for 1919 shoud be reduced on account of the 1918
defcency barred by the statute of mtatons.
1 cquescence reates to a ssues n both decsons e cept nvested capta queston n decson pubshed
n .T. .,1.
1 state ta decson.
Nonacquescence notce n ths case, pubshed n Cumuatve uetn I -2, page 0, recaed.
cquescence does not reate to ssue nvovng |ursdcton of oard.
G
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U
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t
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)

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2
0
1
3
-
0
1
-
2
2

0
3
:
5
8

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0
0
0
0
8
9
0
5
4
4
2
7
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#
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36
cquescences Contnued.
Tapayer.
oard of Ta ppeas.
No.
oume.
Page.
13725
13726
14
139
29404
24356
28333
549
6056
4
74
5846
13
871
10587
8
1150
6444
5
892
7435
8
298
6832
5
689
25262
19
99
20462
18
337
20462
18
337
29984
19
605
3247
3
422
9987
10
536
9918
16
61
3097
2
788
4639
12
850
7109
15
124
5902
6
41
7416
4
910
2212
2213

617
6257
5
778
4398
6
181
3760
4
155
0842
4
1181
4133
9
447
29944
20
731
29944
20
731
14501
15
149
8805
8
285
2235
2
308
3489
5
169
38
2
740
13790
14
703
6725
9
24
6800
12738

1390
42201
22
595
42201
22
595
24354
19
855
14541
1.
17624

15
680
30395
1619
4
1245
11279
11069

243
1935
4
76
10031
11438
19050
11
15
179
1048
13732
18
699
Lesser ros. Co
Lester, George - -
Lester, Lucy C , estate of
Letts, rthur, estate of
Levee, nna L. Stark, e ecutr 1
Levn, N
Levne, yman
Levne ros. Co., Inc.
Levnsten, . .
Levy, che, estate of1
Levy et a., oseph P., e ecutors 1
Levy, M. L
Lew Co., Ma
Lews, T.
Lews Co., Chares C
Lews- a Iron Works
Le ngton Reaty Co
Levdg, .
L ommedeu Sons Co., Chares
Lbby oun, Ltd
Lberman, Meyer
Lberty gency Co
Lberty Iron Works
Lberty Lght Power Co
Lckumovtz, Morrs
Ldstone Co., R. D
Lebes, eena, e ecutr 1
Lebes, Isaac, estate of1
Lebes Co.,
Lebman-Swaney Reaty Co
Lfe Savng Devces Co
Lggett, . T
Lhue Pantaton Co., Ltd
Ly, . T
Lmbert, Chares P., estate of
Lubcrt Co., Chares P
Lmroth, Chares W., estate of
Lmroth et a., Carone ., e ecutors
Lncon, W. P
Lncon Cotton Ms
Lndahr Santarum, Inc
Lndsey-Long Coa Lumber Co
Lnn, Gus
Lsk Manufacturng Co., Ltd.
Lster, . C
state ta decson.
cquescence reates to ssues 3, 5, and 8 n decson.
cquescence does not reate to ssue I of decson.
cquescence reates to nvested capta Issue.
G
e
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a
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d

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Y
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k

U
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t
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)

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2
0
1
3
-
0
1
-
2
2

0
3
:
5
8

G
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2
7
/

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3
0
0
0
0
0
8
9
0
5
4
4
2
7
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39
cqttebcences Contnued.
Ta payer.
Lster, ames R
Ltaker, . D
tte, Theodore W
Lve Stock Natona ank.
Lvermore, Norman
Lvermore Co., Norman
Lvngston, efferson
Lovd, ugustne M
Lovd, dward
Loyd, Wam S
Lobeenz, esse 1
Locke, Thomas
Lockport Paper Co
Locks and Canas on Merrmack Rver, Propretors
of the
Lockwood, R. ., estate of
Loeb, Car M.
Loeb, uus. .
Loetecher, Chrstan, estate of2
Loetscher et aL, ohn ., e ecutors . -
Loffand, . M
Loffand, T. S
Lofts, . M. and . S., admnstrators.
Lofts, S. T. ., deceased, estate of
Logan ryan
Lonergan, ohn
Long, Davd T .
Long, M.
Long Isand oundry Co., Inc
Loose, a C., e ecutr
Loose, acob L., estate of
Loper, . T
Lord, se
Lord ushne Co
Lord Motor Car Co
Lorng et a., ugustus P., e ecutors3
Lorng,
Lorrane Turpentne Co.4
Los ngees Cemetery ssocaton
Los ngees Towe Servce Co
Los ngees Trust Savngs ank
Loughborough, .
Lousana ockey Cub, Inc
Lousve eneer Ms
Loveace- ubanks Lumber Co
Loveand, Russe
1 cquescence reates to frst and second ssues of decson.
1 state tar decson acquescence reates to a ssues, e cept those nvovng deductons or e ecutors
commssons, attorneys fees, and msceaneous admnstraton e penses.
1 state ta decson.
cquescence reates to ssue 3 of decson.
Docket
No.
3411
27273
10699
2467
6423
6422
6424
30142
12091
12092
12093
29788
10616
4872
299
3843
3082
9191
9192
3083
4061
14325
14325
13425
13426
7581
7581
4008
6441
20138
7721
2726
8699
8699
10080
17189
10597
12124
4718
39872
12069
34503
293
8866
23391
2818
8746
14654
10180
15235
1926
oard of Ta ppeas.
oume.
3
19
10
7
11
11
18
15
15
15
17
8
9
1
4
14
14
10
10
6
0
4
4
17
8
2
15
15
112
9
6
20
15
20
2
6
10
13
12
10
10
72109 31-
G
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a
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f
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Y
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U
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)

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2
0
1
3
-
0
1
-
2
2

0
3
:
5
8

G
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2
7
/

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3
0
0
0
0
0
8
9
0
5
4
4
2
7
P
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40
cquescences Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Page.
Lovett, oanna, e ecutr estate of Thomas .
Lovett
Lovett, Thomas ., deceased, estate of
Lowe, mv, estate of1
Lowry, . unt
Lozer, Charotte C, estate of1
Lube, aron D
Lube, braham P
Lube, acob
Lube, Morrs M
Lube, Samue L
Lucas, M
Luce urnture Co
Lucker, Laurence
Lukns, . W
Lunmus, .
Lupton, . T
Luton Mnng Co., Inc
Lynch Constructon Co
Lynes, my
Lynes, Samue
Lyon ard Co., Inc_
M.
2940
2940
39872
11972
7513
26187
26188
26186
26185
26184
12068
6536
36368
2544
31350
31855
13680
3375
7089
7090
7486
11380
Mabe evator Co. 1110
Mac dam oster, Inc 10443
MacDouad- atchuck Prntng Co 279
Mackav, Mton CS33
Mackenze, R. ., estate of 1 11141
Macke, osephne 20936
Mackntosh- emph Co 20640
MacMan, . It 6602
Macman Co The 5240
MacPherson, Warren 34673
/ 4284
MacRae, ugh | 19271
Madson edze State ank 1127
Macr, Mrs. W. N 7854
Maer, W. N 7855
Magee urnace Co.3 5600
Mag, Robert M 22482
Magnus, Mabee Rcvnard, Inc 119
Magure state, Ltd., ohn 10390
Mane Dary Co 4675
Mane Rea state Tte Co 30151
Mase, |r., Nchoas 2422
Manckrodt, sr., dward 1750
Manckrodt, sr., dward, estate of 11032
Manson Co., . R --- 13719
Maone, dwn 5225
Matter, Maurce 14502
Mande ros 1977
Maney Mng Co 7704
Manerre, Wam R., deceased, estate of 3106
state ta decson.
Nonacquescence notce pubshed n Cumuatve uetn I -2, page 6, recaed.
cquescence reates to second ssue of decson.
cquescence reates to frst ssue n decson.
3
20
11
7
10
10
10
10
10
18
9
21
3
21
19
12
3
7
7
2
S
4
11
8
19
21
14
4
10
1
7
7
11
20
1
17
4
21
a
4
14
14
6
14
4
14
4
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41
cqt|escences Contnued.
Docket
oard of Ta ppeas.
No.
oume.
Page/
9123
8
221
8111
7
286
10230
10
633
341
1
706
611
1
575
5808
13
145
215
4
765
f 14091
32375
1
22
817
I 32033
14092
I
13
657
1580
6
368
2242
4
867
544
1
1240
6208
10
763
17780
10
763
3799
10
763
17646
10
763
3858
10
763
17646
10
763
20287
8
1100
10806
7
895
10875
7
895
13912
14
87
7132
6
729
3797
3
82
15384
15
1080
34364
18
597
8419
12
1376
10453
11
685
20308
10
1140
4574
7
454
10979
22
342
10617
12
267
3001
6
472
3341
10
1221
448
1
449
289
3
745
19803
18
810
/ 1496
2
26
I 6514
11
973
1378
3
1
26507
18
674
10032
13
1133
3861
9
338
33191
21
96
33192
21
96
33194
21
96
33193
21
96
2116
3
242
14551
13
921
10853
10
1189
1322
3
566
26776
16
1239
/ 18325
1 37209

1164
3774
5
181
Ta payer.
Mann, P. L
Mannng, Chares N
Mannng Co., L.
Manomet Cranberry Co
Manora Deveopment Corporaton..
Mante, Lee
Manve enckes Co
Mape-Sterng Coa Co
Marbe Shattuck Char Co
Margod Garden Co
Marne Insurance Co., Ltd
Markenhem Co., The
Markc, van
Marke (II), George ., estate of
Marke, |r. (I), George
ke, sr., George ., estate of
e, ohn
e, ohn, trustee
owtz, Dane S
Marks, . en|amn
Marks, Isaac
Marks, oseph D
Marks, Wson
Marboro ertzer Co
Marn Grocery Co
Marqusee, ack
Marsh, . W
Marsh ork Coa Co
Marsha, dward
Marsha Spencer Co
Martha Reaty Co
Martn, .
Martn, Darwn D
Maryott Spencer Loggng Co. et a
Mason Cotton M Co
Mason Machne Works Co
Massachusetts Protectve ssocaton, Inc.
Massengae dvertsng gency
Mather Paper Co.1
Matheson, Wam
Mathews, W.
Matns ros. Co
Matthews, ette
Matthews, |r., Chares D
Matthews, dward C
hews, oseph L
age, Chares enry
er, Chares ., estate of
Maury Mng Co
Maus, nna R. and L. M
Mayer, CP
yer, enry, estate of
1 Nonacquescence notce pubshed n Cumuatve uetn -, page 7, recaed.
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5
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42
cquescences Contnued.
Ta payer.
Mc ester- dwards Coa Co
Mc rde, . T., estate of
Mc rde, Rose L.. admnstratr 1
Mc ryde Sugar Co., Ltd
McCabe Co., M. -----
McCah. ugene P., admnstrator estate of Mary
. McCah-
McCah, Mary ., estate of
McCaum, .
McCann Co., Inc., .
McCarthy, ohn rancs, estate of
McCarthy, Water R., e ecutor
McCarthy Sons, Inc., ohn
McCaucy Co., C. R
McCoud, Chares
McCogan, deade, admnstratr 1
McCogan, Dane ., estate of 1
McConneU, .
McCormck, sr., ohn
McCormck et a., Robert
McCoy- randt Machnery Co
McCreery, enry
McCreery, Water ., estate of
McCutcheon, oward
McDonad, . ..- --
McDonad, Mary ., e ecutr 1
McDonad, Mrs. Lyde
McDonad, Patrck ., estate of
McDonne, dward
McDonne, . S
Mc etrdge, dward P__
Mc etrdge, Georgana
Mc etrdge, Martha G
McGnns, ob
McGynn, . P
McGown- oshee Lumber Co.2
McGrath, . R
McGrath Co., Wam
Mcntosh, Rchard
Mcntosh Ms
Mc enua, ames P
Mc nnon, L. ., estate of
Mc nght, . udson
Mc nght, R. C
McLean, Carone S
McMchae, Morgan
McMan Meta Co .
McMnuve Manufacturng Co
McMun, M. ., estate of
McNaghten et a., Macom, e ecutors
NcNe, Robert .
McReynods, oseph
4490
4885
4885
11102
21
2547
2547
14311
6578
8277
17334
17334
354
1273
20405
3147
3147
3211
22235
1880
1605
10733
3557
19247
24401
25554
25158
3042
9336
3042
6194
13546
11503
11210
11209
6647
4714
10446
495
5317
15199
9832
121
2650
4048
10804
1534
2221
3841
38833
8015
5846
17261
21189
31121
10
8
8
13
1
2
2
14
14
14
9
9
1
1
13
10
10
6
16
1
2
8
4
IS
18
16
2
9
2
4
0
9
9
9
4
4
10
6
10
10
9
1
6
3
13
4
4
2
19
12
13
16
17
1 state ta decson.
1 cquescence reates to thrd ssue of decson.
cquescence reates to deducton of oss on account of worthess stock
G
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0
5
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7
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43
cquescence s Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
McWams, . W -
Mead ct aL. Wam W., e ecutors
Meade Cvce Co
Meadow ork Coa Co
Mechancs ank of rookyn
Mechancs Reaty Co., Inc., and Mechancs Reaty
Co. of Pennsyvana
Megeath, Ida
Megcath, 8.
Megeath, Samue
Megeath et a., George W
Mene, dward, estate of1
Mene, the G., e ecutr 1
Menhard, Carre W
Meck, .
Meton, ger
Mepham, George S
Mercante Trust Co., e ecutora
Mercer, ohn W
Merchants ank Trust Co
Merchants Natona ank
Merchants Transfer Storage Co
Merckens, ugust
Meredth, . T.
Meredth, G. W., estate of
Mereen- ohnson Machne Co
Merges Co.,
Merat, Chares
Merke room Co
Merren, . .
Merr Trust Co
Mcrtz, dward P.
Messenger Pubshng Co
Mesta Machne Co --
Metare Cemetery ssocaton
Meta Crafters, Inc
Metasap Chemca Co
Metcaf, dwn D., estate of-
Metcaf, Morrs
Metro Pctures Corporaton of New ngand 4
Metro Pctures m change of Pennsyvana
Metropotan Laundry Co
Metzger, L
Metzger, Wam
Meurer Stee arre Co., Inc
Me can Teegraph Co.
Meyer, nton M
Meyer, erman ., estate of
Mever ro. Co.,
Meyers Machne Co., Ward
Me rowtz, m
14977
25979
7228
5756
9770
9755
2351
7119
2815
9248
7118
3098
3098
2100
7623
5699
1981
9528
8233
21728
8179
30906
10108
1540
4478
3531
11640
12438
10594
4953
19847
30151
5695
1569
2841
437
19842
13569
13348
25479
4437
747
538
9682
35169
7749
9093
5737
1062
5384
35796
3241
15
6
10
0
9
2
6
5
G
5
6
6
3
6
7
3
13
6
21
6
17
7
2
9
5
11
9
3
18
21
5
2
12
4
15
12
13
If.
11
1
2
5
21
7
Id
3
4
4
18
3
1 state ta decson.
state ta decson acquescence reates to ssue regardng ta abty of proceeds of fe nsurance n
-oess of 40,000 e empton and ssue as to bequest of works of art to or for the use of the Cathoc Cathedra,
5. Lous, Mo.
1 cquescence n decson regardng promssory note and prnceeds of o runs.
s to Issues nvovng offcers saares and ega e penses.
9 to a ssues e cept as to tentatve ta .
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-
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1
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2
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0
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5
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7
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44
cq uescencbs Contnued.
Ta payer.
Mam each Improvement Co
Mche, George
Mchgan Con Lock Co
Mchgan Lthographng Co
Mchgan Trust Co. et ah, e ecutors.--
Mcke, Tom
Mddeton Compress Warehouse Co_
Mdand Coa Co
Mdand Natona Lfe Insurance Co...
Mdand Refnng Co
Mdand aey R. R. Co.
Mdwest ote Co
Mes Co., W. C
Mar, W. D
Mard et a., verett L., trustees
Mer, ddson
Mer, .
Mer, dward
Mer, G.
Mer, enne L., e ecutr
Mer, ohn L., estate of
Mer, Peter
Mer, Staney R
Mer, Davb Co
Mken, George W., estate of2
Mng Moore Mercante Co
Ms, Lucy M., estate of2
Mton, George ., estate of2
Mton, |r., George ., e ecutor2
Mwaukee rass Manufacturng Co
Mwaukee Woven Wre Works
Mner rees Lumber Co
Mner Lthographng Co., . C
Mnneapos Sash Door Co
Mnneapos Syndcate
Mnnesota Cement Constructon Co
Mtche dvertsng gencv, Inc
Mtche uto Co., . P
Mtten, Robert
Mobery ue Transfer Co
Mobery O Co
Mobe Devery Co
Mobe Rver Saw M Co
Mobe Towng Wreckng Co
Mogg Coa Coke Co
Mone Dspatch Pubshng Co
Monarch Cooperage Co
Monarch ectrc Wre Co
Monk, enry
Monroe Cotton Ms
Monroe urnture Co., Ltd., et a
cquescence reates to ssues 2 and 3 of decson.
state ta decson.
oard of Ta ppeas.
No.
oume.
Page.
14869
14
10
439
5
979
4368
2
1314
1423
1
989
6725
9
24
440
5
979
1125
1
1145
27
1
311
28889
14
200
709
2
292
1983
2
296
25000
19
423
2933
5
121
3439
9559

625
10638
9
1404
840
5
294
1596
3
726
3465
7
921
26342
20
379
4469
6
401
4397
11
854
4397
11
854
31389
20
230
17002
12
702
20267
15
13
10123
7
785
7560
5
1060
1028
3
1016
19224
17
380
19224
17
380
3424
13542
10
936
21024
8163
16
75
10579
10
521
468
1
588
388
2
505
10163
13
1303
6284
6
151
10351
10
1311
7597
10
1001
10891
11
731
27862
17
1242
3552
3
163
7124
8
1224
8700
8
368
9080
17824

152
12408
10
588
9235
11
934
11590
13
929
13405
12
158
11396
9
16
3310
6
172
2543
2
743
G
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1
3
-
0
1
-
2
2

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3
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8

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0
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0
8
9
0
5
4
4
2
7
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45
cquescences Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Montgomery, Lawrence
Moon, nne
Moon, O. L
Moore, nna ., e ecutr 1
Moore, dward, estate of1
Moore, George
Moore, .
Moore, L. C
Moore, Tom ( ayette T.) 3
Moore, Wam, estate of 1
Moore Stave Co., Lucas
Moore Scrver Co.-
Moores, arry C
Moorhouse, braham, estate of1
Moorhouse et a., Mary zabeth, admnstrators1.
Moors, ohn
Mooyer, Chrstan, estate of1
Mooyer, Margaret ., e ecutr estate of Chrstan
Mooyer, deceased 1
Moorefed and wfe, W.
Moreand Co., Thomas
Morgan, Caud
Morgan, ohn
Morgan, Water G
Morrs, omer P
Morrs, ohn T
Morrs aey Stee Co
Morrs Cummngs Dredgng Co
Morrson Wooen Co
Morrson-Merr Co
Morsman, dgar M., estate of
Morsman, |r., dgar M., admnstrator
Morton, . D
Mosby Co., Inc., .
Mosentha, Php ., estate of
Mosentha, Water ., e ecutor
Moser Wacker, Inc
Mosher Manufacturng Co
Moser, M.
Moser, Moses, estate of1
Mossberg Pressed Stee Corporaton
Mossman, Yarnee Co.8
Mountan Ice Co
Mount ernon Car Mfg. Co
Mount ernon Natona ank.
28583
8675
8674
10542
40790
14953
3544
3709
13907
18273
10542
5146
678
4209
5101
5101
1021
3404
3404
5721
18367
6290
10978
3449
6510
6525
16604
9492
9596
9543
4358
32075
517660
1 32075
3559
2781
6994
6994
4475
1886
5304
17895
8757
3269
. 11076
11459
20512
14207
237
17
6
6
13
21
14
8
11
19
13
5
2
3
8
8
1
2
2
4
16
7
10
5
15
9
10
10
2
14
13
14
6
6
12
12
4
7
5
16
9
17
13
2
1 state ta decson.
1 cquescence reates to ssue as to whether the ncome reazed under agreements of December. 14,
19 8, s ta abe n proportonate amounts to the severa pettoners or whether such proportonate amounts
are ta abe one-haf to the pettoners and one-haf to ther respectve wves.
cquescence reates to deducton of e pendtures for archtect s servces n 1920 and 1921.
1 state ta decson nonacqueseence notce pubshed n Cumuatve uetn UI-1, page 57, re-
caed, n so f r as same reates to ssue 2 of decson.
state ta decson: nonacqueseence notce pubshed n Cumuatve uetn III-1, page 57, recaed.
8 cquescence reates to ssues decded adversey to the Commssoner, wth the e cepton of ssues
nvovng deducton of tentatve ta es n determnng the earnngs avaabe for payment of dvdends n
IMS and 1919.
G
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1
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46
cqtr sc NC s Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Moyse, Sdney G
Mudd Motor Co.. Ray
Mueer Metas Co
Mur, ames S
Muns, Wam
Mutbestos Co
Mumper, ewngs
Munger, L. S
Munger, Trude T
Munn ote Co
Munsey Trust Cov trustee
Munson, Caros W
Munson, dgar, e ecutor estate of arret .
Curts, deceased
Murchson Natona ank
Murphy, .
Murphy, Ray Sater, benefcary
Murphy Transfer Storage Co
Musseman, C.
Musser, R. C
Mutua Chemca Co. of merca
Mutua Cotton Ms Co
Mycr Thread Manufacturng Co., enry
N.
Nabors O Gas Co
Nace, ruce
Nahman, fred
Nartzk, uus ., estate of
Nathan, Morrs, estate of1
Natona ank of atmore
Natona Casket Co
Natona m Pubcty Co .
Natona Gauge qupment Co
Natona Grocer Co .
Natona Industra coho Co
Natona Land Co
Natona O Products Co -
Natona Pano Manufacturng Co.2
Natona Ppe oundry Co
Natona Pneumatc Co
Natona Sash Door Co
Natona Straw Works
Natona Takng Machne Saes Corporaton
Natona Tea Co
Nava Stores qupment Co
Nazareth Cement Co
Neapotan Ice Cream Co
Needes rooker Co., Inc., L
Ne, ames
Neser, C.
Nekonegan Paper Co
Neuberger, Ma and Rudoph
state ta decson.
cquescence does not reate to tentatve ta ssue.
5967
1192
4395
3648
13917
7598
14053
28479
16897
13819
27766
16562
442
608
7137
26472
8191
11554
160
4781
10083
16413
3641
7962
10578
23145
4316
11448
3844
19982
1807
13413
562
4853
11130
13570
3333
20486
32997
3651
5788
5065
5272
23189
13003
2446
11793
41651
9290
11796
21064
3035
3036
4
3
3
3
14
6
13
16
10
14
17
18
3
1
9
7
1
3
12
15
2
7
12
21
8
12
3
16
4
14
1
7
10
12
11
19
5
5
16
5
17
16
4
8
21
8
IS
16
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1
3
-
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1
-
2
2

0
3
:
5
8

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8
9
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5
4
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47
cquesce ces Contnued.
Ta payer.
Neusteter Sut Co
Nevns, rank
Nevns, rank ., admnstrator.
N evns, Thomas ., estate of
Newbod Son Co., R. S
New Centurv Coor Pate Co
Co. _
Newe, ohn T
Newyn Coa Co
Newman, Lews D
Newman Theatre Co
Newman, Wam C.1
Newmarket Co
New Oreans Can Co
New Oreans, Te as Me co Ry.
News Leader Co
Newton, .
Newton, W.
Newton Cotton Ms
New York ower Co
New York, rookyn Manhattan each Ry. Co-
New York, Ontaro Western Ry. Co
New York Takng Machne Co
Nagara Searchght Co., Inc
Nce a earng Co
Nchos, . M
Nchos, ohn W. T., estate of
Nchos et a., George, e ecutors
Nchos, Roy
Nchos Contractng Co
Nchoson, e ., e ecutr 4
Nckey, . ., estate of
Nckey Sons, . .
Nckev, S. M
.Nckey, W.
N on, ate I
Noe, Rchard
Nokoms Cotton Ms
Noan, Caude
Node orst Co.5
Norfok Western Ry. Co
North mercan Mortgage Co.
North mercan O Consodated 7.
North Iowa rck Te Co
North Mc ester Coa Co
North Street Trust
oard of Ta ppeas.
No.
oume.
Page.
4001
8
477
3344
12
866
3350
12
869
3350
12
869
5698
7
471
10986
10
1032
24094

93
41675
9753
9
835
19138
9
158
3694
4
390
6530
10
158
1489
2
537
11994
7
1175
400
6
436
33675
18
1212
9626
7
1153
9627
7
1153
10731
12
176
3861
9
338
4945
3
606
974
1
1172
12363
13
154
9505
10
922
2109
5
484
12623
15
1155
9599
10
919
9599
10
919
24016
17
580
13399
15
102
24204
21
795
1961
3
173
1235
1236
1237
I 3
173
1238

1239
1967
3
173
1962
3
173
1186
2
524
3223
3
1180
4557
2
1205
27682
16
1233
9867
12
417
3601
3
597
15798
18
418
8714
16107

68
5655
10
1290
6831
5
200
10545
6
947
1 cquescence does not reate to deducton of amount of bad debt ascertaned to be worthess and
( barged off n 1920.
cquescence reates to second ssue of decson.
1 Revokes nonacquescence pubshed n Cumuatve uetn II-1, page 39.
state ta decson.
1 cquescence reates to thrd ssue of decson.
1 cquescence reates to ncome from deprecated vaue of guders.
T rames/w/f reates to determnaton of cost and vaue of o propertes and mprovements thereon for
purposes, and mathematca cacuaton of nvested capta.
G
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2
0
1
3
-
0
1
-
2
2

0
3
:
5
8

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7
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3
0
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0
0
0
8
9
0
5
4
4
2
7
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48
cquescences Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Northeastern O Gas Co
Northern ote Co
Northern Mchgan Transportaton Co
Northern Natona ank
Northern Trust Co. et a., e ecutors
Northern Trust Co., e ecutor 1
Northwest Lumber Co
Northwestern States Portand Cement Co.2
Northwestern Yeast Co
Northwood Co.,
Norton et a., ram S., e ecutors 3
Norton, ames ., estate of
Norve, . R
Norve, Mrs. . R
Norwood, Caef Co
Noyes, Chares R., estate of
O.
Oates, Mrs. Omer
O ren et a., anche, e ecutors
O ren Leather nsh Corporaton, oseph...
Ocean ccdent Guarantee Corporaton, Ltd
O Connor Co., .
Oconto as Motor Car Co
O Day,
O Dav Investment Co
Oet|en, C. G
O ar, P. ., estate of
O are, . rank
Oho g Sandy Coa Co., trustees for
Oho rass Co
Oho Grease Co .
Oho Sheep Woo Growers ssocaton Co
Okahoma Operatng Co
Od armers O Co
Ods, Mard O.5
Oeet, Israe
dnger ghanders, Inc
Onger Mortuary ssocaton
Oscn, ohn
Oseu Water Towng Co
O Meara, C.
O Nea, en|amn Pascha
O Ne, ohn, estate of3
O Ne, |r., et a., ohn ., e ecutors3
O Ne Machne Co
Oppenhemer, Leon
Opperman Coa Co
2231
3525
2768
3168
16691
4316
7127
10650
15310
5763
10456
1511
5122
19038
19038
7720
7719
9
18486
8393
13042
25747
9630
3114
1060
12471
24581
16632
11613
4184
30377
7888
13600
6023
15149
12660
2824
8718
9622
532
532
1460
1908
9822
22421
5185
5185
7922
9977
3317
14729
15792
3
3
10
8
9
4
16
16
6
6
1
1G
S
10
12
8
6
1
IS
20
13
11
3
12
15
17
4
14
17
12
15
8
0
6
5
1
11
18
4
4
9
7
state ta decson acquescence reates to trusts of 1912, 11)19, and 1921.
cquescence reates to rst, second, thrd, fourth, and s th ssues of decson.
3 state ta decson.
state ta decson acquescence reates to ssues 2 and 3 of decson.
6 cquescence docs not reate to partnershp ssue.
G
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)

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2
0
1
3
-
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1
-
2
2

0
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:
5
8

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0
0
0
0
8
9
0
5
4
4
2
7
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#
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49
cqotescences Contnued.
Dockot
oard of Ta ppeas.
No.
oume.
Page.
10949
21
257
20399
11
101
28294
17
368
5588
9
249
12900
14
1403
3396
3
141
10493
8
382
14690
12
870
4711
7
882
7520
6
358
19402
12
769
4494
5
651
19366
15
870
3946
2
489
1637
5
921
19809
18
539
19809
18
539
1033
8
1197
7390
4
108
4377
6
1179
_3879
13
500
2227
6
843
84
2
391
1093
2
348
7961
11
1329
1847
5
423
14481
18898
20
72
21186
8162
5
1017
1943
2
870
4526
5
1223
20657
18
1314
3028
2
1001
6055
5
1067
4279
6
310
5502
5
1S9
5447
3
403
1181
1
882
3382
5
975
3382
5
975
18430
9
878
13896
13
540
5500
5
189
9504
9
1236
4684
3
840
2833
2
851
4894
4
605
583
2
415
Oregon rass Works
Orando Petroeum Co
Orr, en|amn
Orth, rank L
Ortsefcn, dam 1
Osage Steamshp Co., Ltd
Osborne Cark Lumber Co.
Ortrow, Samue D
Ots, ames
Ots Stee Co
0 Tooe, ames
Ottoander, C. . W
Overand nght Co., Inc
Overand Lumber Co
Owen- mes- mba Co
Owen, rank G., estate of 1
Owen, Lea S., admnstratr 2.
Owens otte Co
Oyster, |r., George M., estate of.
Uzark Ms, Inc
Paauhau Sugar Pantaton Co.
Pabst, rdon
Pacfc akng Co
Pacfc Car qupment Co..
Pacfc Coast Ppe Co.
Pacfc Coast Redwood Co
c Door Sash Co.4.
Pacfc Novety Co
Pacfc Ppe Suppy Co
Pacfc Reaty Corporaton
Pacfc-Southwest Trust Savngs ank, admns-
trator
Paducah Inos R. R. Co
Paducah Water Co
Paget, . .
Paas do Modes
Pamer, ar M --
Pamer, . C
Pantazas, Chares
Pantazas, ames
Pantnd ote Co. and Pantnd udng Co
Par-a-Tc O Co.5
Pars Coak, Sut Mnery ouse
Parsh, 8. W
Parsh-Watson, M
Parsh-Watson Co., Inc
Parsan, The
1 cquescence reates ony to deducton of contrbuton to church budng fund.
1 state ta decson.
1 cquescence reates to ssue 1 of decson.
d s fndng as to vaue of certan machnery and equpment.
tend to that part of the oard s decson whch purports to hod that secton
f 1928 s appcabe to the case.
G
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U
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t
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)

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2
0
1
3
-
0
1
-
2
2

0
3
:
5
8

G
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2
7
/

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3
0
0
0
0
0
8
9
0
5
4
4
2
7
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e
50
cquescences Contnued.
Park musement Co.
Park ros. Rogers, Inc
Parker, rthur M., estate of.
Parker, dward L
Parker, George S
Parker, een Ptts
Parker, Nora D
Parker, W. D
Parker Grave Co
Parker Wre Goods Co
Parkersburg Maretta Sand Co
Parma Co
Parrs, Wam
Parsha, Wam W
Patapsco aast Co
Patch, radford C
Pate, Zebuon ance
Patterson, George ., estate of
Patterson, G. S
Patterson, W.
Patterson Produce Co
Pau, ar
Pauson, Pedcr, estate of
Pauson et a., Wam I., e ecutors.
Payne, dward W
Peabodv Coa Co
Pearce et a., rthur P., trustees
Pearce, |r., Chares
Pear, en, estate of
Pear, ernard, soe dstrbutee
Pearsa, Gbert
Pearsa Co., Inc
Peavy- yrnes Lumber Co.2.
Peavy-Moore Lumber Co.2.
Peavy-Wson Lumber Co.s.
Peck, George
Peck s urnture Co.3
Pederson, ans
Pedersou, Mare
Peebes et a., W. S., admnstrators 1.
Peeress Pacfc Co.
Pennsua Shpbudng Co
Penn Chemca Works
Penna, P.
Penungton-Gesser Co
Docket
oard of Ta ppeas.
No.
oume.
Page.
7926
15
106
16921
16
587
2460
6
719
14954
14
1185
41873
19
171
5602
10
854
14186
14
1185
8647
13
1239
8646
13
1239
38348
21
51
3999
5452
8
448
12050
11
87
14553
18
429
29437
20
320
6452
7
318
1800
1
1081
6332
4
916
14955
13
1236
20657
18
1314
12345
16
716
8901
7
621
3994
4
950
13927
11
7S1
13571
10
732
13571
10
732
9065
12
781
19256
18
1081
9615
13
150
5606
6
450
16433
18
249
16433
18
249
11997
10
467
12722
5
1177
15824
16354
14
625
25984
15823
16355
14
625
25986
15822
16356
14
625
25985
29232
19
345
16108
16
1008
12329
14
1089
12328
14
1089
9380
5
386
14376
10
103
5741
9
189
9247
7
442
21861
17
17
10082
11
648
1 state ta decson.
cquescence does not reate to affaton ssue, e cept wth regard to Peavy-W Uson Lumber Co. and
Chrste astorn Ry. Co. for 1917, 1918, and 1919.
a cquescence does not reate to easehod ssue.
cquescence reates to ssues (c), (d), and (e).
G
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f
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2
0
1
3
-
0
1
-
2
2

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3
:
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8

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7
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0
0
0
0
0
8
9
0
5
4
4
2
7
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51
cquescences Contnued.
Ta payer.
Pennsyvana Co. for Insurances on Lves and
Grantng nnutes, e ecutor under the w of
Mary . rtt, deceased
Pennsyvana Co. for Insurances on Lves and
Grantng nnutes et a., e ecutors 1
Pennsyvana Sat Manufacturng Co
Peopes Ice Cod Storage Co
Peopes Trust Co., trustees
Perkns, .
Perkns, oten
Perkns Land Lumber Co
Perkns Manufacturng Co.
Permanent Loan and Savngs ssocaton _
Perry, . G
Perry, Mary R.
Perry, .
Perry Dormney.
Perryman, . R
Persons, ames _.
Peru Char Works..
Peruna Co.3
Petauma Santa Rosa R. R. Co. _
Peters, ohn
Peters Manufacturng Co
Peterson Co., George C
Pevey Darv Co
Pfaff, Chares, estate of
, . M.
Pheps, Martha ., e ecutr 1
Pheps, Wam L., estate of 1
Pheps-Waters Co.
Phps, dward S
Phps, George .1
Phps, ohn D., estate of1
Phps, oseph dward, e ecutor1.
Phps, oseph W., estate of1
Phps, Lee
Phps, T. C
Phfmont Reaty Co
Pho Corporaton, L. .
Docket
No.
oard of Ta ppeas.
oume.
1904
20263
27199
38453
41691
14365
8472
5152
6851
f 11363
17041
12741
23894
35148
37930
2268
9023
42492
9022
852
2735
6301
3250
3408
5102
12333
13830
25276
2091
1266
161
31537
14749
21953
28226
4803
4803
19119
2376
6352
6352
6352
6352
29493
12802
11758
16673
24755
32327
2
21
18
10
10
6
14
17
2
9
20
9
1
5
3
11
11
10
1
1
1
21
13
6
6
15
9
7
7
7
7
20
9
11
16
state ta decson.
1 cquescence reates to ssue as to vaue of good w for nvested capta purposes for 1919.
cquescence reates to that part of decson as to the purchase of ta payer s own bonds at ess than
Par whch were hed as an nvestment.
cquescence does not reate to ssue as to whether Pheps-Waters Co. was a transferee of Wsconsn
Chemca Co.
G
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)

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2
0
1
3
-
0
1
-
2
2

0
3
:
5
8

G
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2
7
/

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3
0
0
0
0
0
8
9
0
5
4
4
2
7
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#
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52
cquescences Contnued.
Ta payer.
Phpps, enry C.
Phpps, ohn S- -
Phoen Natona ank
Phoen Savngs ank Trust Co.
Pckerng, Lorng
Pckerng, Rose C
Pctora Revew Co., The.
Pedmont Lumber Co
Pedmont-Mount ry Guano Co
Perce- rrow Motor Car Co
Person Co
Pke County Coa Corporaton1
Pne, . rank ----
Pne uff Compress Warehouse Co.
Pne Rdge Mnes Co
Pnhorn, Rchard, estate of
Poneer Laundrv Co
Pttard, . T
Ptts, ohn L., estate of
Pttsburgh essemer Coa Co.
Pttsburgh Grndng Whee Co..
Pttsburgh-Northern Coa Co...
Panters Nut Chocoate Co...
Panz, Tnc, Theo
Paut Co., L. S
Pumb, Raph II
Punkett, Chares T
Punkctt, orence C
Punkett, Lvda
Punkett, Wam C
Pvmouth Coa Mnng Co
Poe ey, Inc
Ponset Ms
Pochronades, Pau
Pomeranz, aron
Pomeranz, braham
Pomeranz, Otto S
Pomons, Denns
Pomons, Spro
Pond, D.
Poor s Pubshng Co
Pope, rthur
Pope, Carence ,
Pope, Mrs. Carence
Pope Sanatorum Co
Popuar Dry Goods Co
Popuar Prced Taorng Co ----
Port Townsend Puget Sound Ry. Co.
Post, ames
Docket
oard of Tu ppeas.
No.
oume.
Page.
1/ 26040
,.
33203
1293
/ 26038

33204
1293
13149
14
115
13149
14
115
5908
5
670
5S40
. 5
C70
f 4487
6661
5
416
I 11303
12828
14
778
8542
8
72
893
2
396
21340
12
678
7189
4
625
27573
16
555
7989
5
938
2208
5
541
6388
7
1104
4739
5
821
1804
5
929
32385
19
28S
f 5626
1 ,
9004
f 5
45
/ 2558
1 2559

712
2837
6
105
/ 8788
10081

173
7866
10
1158
16563
15
535
3370
7
295
3701
3
1265
3758
3
1265
3757
3
1265
3756
3
1265
4003
3
1023
30916
19
1317
83
1
6
1265
2
1263
11759
11
507
11760
11
507
11761
11
507
3382
5
975
3382
5
975
14460
12
865
17596
14
1389
6849
14
584
2151
3
595
2500
3
595
4148
4
1085
2141
6
78
9222
8
831
2554
2
357
12488
12
510
cquescence reates ony to ssue 1 n decson.
state ta decson.
G
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1
3
-
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1
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2

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5
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0
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0
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8
9
0
5
4
4
2
7
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53
cquescenceb Contnued.
Ta payer.
Docket
oard of Ta ppeas.
No.
oume.
Page.
27350
17
921
27350
17
921
11992
12
190
11991
12
190
11990
12
190
5928
6
110
37414
20
573
26274
30358

1
5792
13
943
9888
10
166
9888
10
166
11945
12
492
10400
11
1313
10400
11
1313
3740
6
835
5422
6
633
5422
6
633
11558
12
702
6862
6
329
6862
6
329
25729
18
377
8858
7
621
4644
7
492
7996
20629

322
10192
12
637
9816
9
645
3896
7
414
7755
6
1116
7755
6
1116
8737
20
447
8737
20
447
11764
7
1237
159
1
202
2951
5
107
2951
5
107
9380
5
386
17156
17174
17155
17173
17156
17
429
17158
17157
17153
17154
3838
4
967
3838
4
967
5198
4
70
4364
4
585
4365
4
585
5273
3
823
3195
3
836
4053
8
787
Poston, Carence ., estate of
Poston et a., oyd ., admnstrators
Pottash, arry
Pottash, Ma
Pottash ros
Potter arms, Inc
Potts, en
Potts Run Coa Co.1
Pound ote Co., .
Powe, ope Ives, estate of2
Powe, T. I. are, e ecutor2
Powe Coa Co.3
Power, Chares . and ohn M., e ecutors 2
Power, Thomas C, estate of2
Power ro., T. C
Powers, Mary ., e ecutr 2
Powers, Rchard ., estate of2
Powers, Samue L
Powers Mayer, Inc
Powers Maver Manufacturng Co
Pratt et a., my ., e ecutrccs 2
Pratt, Wam ., estate of
Pratt Letch worth Co
Premer O Co
Premer Packng Co
Preston, omer M
Preston et a., omer M., admnstrators
Prestwood, . M., estate of
Prestwood, N. ., admnstrator
Preuss, a ., e ecutr
Preuss, Gustav ., estate of
Prce, Samue
Producers ue Co
Prouty et a., nson ., e ecutor 2
Prouty, C. C., estate of 2
Pryor, Luke, estate of2
Pugh, sr., Mrs. ohn
Pugh, |r., . C, estate of
Pugh, sr., . C, estate of
Pugh, |r., Mrs. . C
Pugh, sr., Mrs. . C, e ecutr
Pugh, L. G
Pugh, Mrs. L. G
Pugh, O. L L.:
Pugh, Mrs. O. L
Purce, nne L., e ecutr
Purce, oseph, estate of
Purdy enderson Co
Purty Oate Co
Purty Oats Co. of Davenport
Putnam, enretta, deceased, estate of2
Putney Mercante Co., L.
Putze, enry
1 cquescence In ssue reatng to vaue of coa n ands In 1903
state ta decson.
cquescence reates to a ssues e cept |ursdcton ssue.
G
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1
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2

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9
0
5
4
4
2
7
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54
cquescences Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
-
uadrca Manufacturng Co.
ueay, P.
ueen Cty Prntng Co
up God Mnng Co
R.
Radc Co., ohn
Radt, tta, admnstratr .
Radn, Samue, estate of
Ranbow Royaty Co..
Rass, bert
Rass, Car
Raegh Smokeess ue Co.
Rammng, R. W
Randoph ote Co
Raner Grand Co
Rankn, . rk
Ransom, Inc., Stephen.
Rapd Transt Land Saes Co
Rauh Sons ertzer Co., .2 ,
Ravn Corporaton
Ravncr, Wam
Ray, Pau
Raymond- adey Corporaton
Ra vve Coa Co
Read Phosphate Co
Rea state Trust Co. et a., e ecutors estate
of George W. Mken s
Reaty ssocates, as syndcate manager
Reaty Saes Co
Redands Securty Co
Reed, . M
Reed, Lea
Rees, .
Reese Drng Co
Rega Shoe Co
Rehm, Oscar
Rechenback, arrv L
Renhardt, ane R
Renhart, Patrck D
Resner Mfg. Co., W.
Rezensten, Lous, trustee
Rezensten Trust state, Rosa
Renaker, .
Renard, Lous, estate of5
Renard, Waace, e ecutor8
Renfro, . T
Renfro, Mrs. Inez C
2814
7196
6985
16400
5576
8175
8175
3619
/ 33908
1 37955
33909
37956
7767
5983
1580
4236
26191
41046
7904
7905
37850
45662
10720
45481
8284
41543
5128
38992
10238
10123
27921
18145
5703
6776
5110
41138
27009
784
20633
2015
994
16702
12436
8146
8146
13120
35444
35444
6138
6138
2
6
6
21
5
8
8
3
21
21
6
6
6
11
17
20
12
1 )
10
20
4
20
13
7
17
10
5
6
8
21
18
1
21
1
2
15
13
9
9
12
21
21
8
8
1 cquescence n ssue reatve to deducton of wages and e penses of e pert pressman n 1923.
1 cquescence reates to ssue 1 of decson.
state ta decson.
G
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Y
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U
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)

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2
0
1
3
-
0
1
-
2
2

0
3
:
5
8

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2
7
/

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3
0
0
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0
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8
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0
5
4
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2
7
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55
cq ttescenceb Contn uef.
Ta payer.
Reserve Loan Lfe Insurance Co.1.
Reserve Natura Gas Co. of Lousana.
Retaers re Insurance Co
Retaw Mnes Co
Re Machnery Suppy Co
Reynods, . D
Re nods, . ----
Rhodes, rownson ampman, Inc.
Rbbon Cff rut Co
Rce edng, Inc
Rch and wfe, C. R
Rchand County udng and Loan ssocaton..
Rchmond osery Ms
Rchmond Mca Co., Inc
Rckard, George L
Rcker, George
Rcks, W. R
Rffe, enry ----
Rggs, Leon C, estate of, Lacey L. ogart, admns-
trator
G. D
derck
, |r., Samue, e ecutor
t Co., George
ectrc Co
Rter, oseph
Rver Ra Storage Co
Rvervew State ank
Roach Studos, a
Roanoke Ms Co.
Robert Treat ote Co
Roberts, . S
Roberts, rances ., estate of
Roberts, .
Roberts Co., U. N
Roberts, ncent G
Robertson, Chares
Robertson, arrv
an, .
on, ames L
n, ndrew P
on Co., . M.
Robnson, . M., estate of
Robnson Shows Co., ohn
Rock Isand Sash Door Works
Docket
No.
21489
29554
32965
8704
9006
14185
17707
3733
2208
1791
7829
25575
894
12337
5219
2823
10120
21259
38675
3703
7763
13065
15606
6817
12803
3576
1932
5599
24335
7102
8565
12756
14392
1233
11180
29227
23221
20985
5344
17698
9579
1270
5344
595
5436
17227
34709
14924
5652
6341
13893
7258
oard of Ta ppeas.
oume.
18
11
15
3
5
3
10
17
2
12
3
(
15
13
15
10
12
3
2
0
s
6
10
9
13
1
12
20
18
20
7
10
9
2
7
1
13
20
12
5
1
12
13
cquescence n so far as decson hods that pettoner s entted to a deducton n the amount of 4 per
cent of the mean of the reserve funds requred by aw and hed at the begnnng and end of the ta abe years
undmnshed by the amount of e empt nterest.
cquescence reates to cam for pad-n surpus deprecaton pror to ugust 31, 1916 and depreca-
ton durng fsca years ended ugust 31, 1917, 1918,1920, and 1921.
quescence reates to ssues 2, 3, 4, 5, and 6 n decson.
72109 31 5
G
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U
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)

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2
0
1
3
-
0
1
-
2
2

0
3
:
5
8

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2
7
/

n
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3
0
0
0
0
0
8
9
0
5
4
4
2
7
P
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56
cquescence Contnued.
Ta payer.
oard of Ta ppeas.
No.
oume.
Page.
3873
4
313
2451
2
817
29672
19
277
10184
11
782
7915
5
654
11030
14
312
13042
10
682
25747
12
1195
2551
7
293
1009
2
1141
41239
21
1124
22484
20
799
10843
7
711
25964
17
570
10842
7
711
13581
24740

816
41239
21
1124
15536
15
638
18486
16
519
22477
20
799
35386
20
989
35325
20
989
7532
11
828
41184
21
193
41184
21
193
8759
8
369
3079
4060

787
8642
7
1112
8643
7
1112
2092
2
341
990
2
19
991
2
19
8596
11
921
1844
2
260
9074
22072

285
7281
7
196
8690
8
693
10212
10
1340
2161
3
809
1508
3
868
37355
45065
22
587
542
1
1111
89
1
453
38720
41165
20
589
7673
10987

1018
18216
19
906
3067
2
1159
9063
7
903
Rockford rck Te Co
Rockford Maeabe Iron Works
Rockwe Manufacturng Co
Rodefer O Co., Davd
Roden Coa Co
Roe, Chares ., estate of1
Roebng, ar G., estate of
Roesch, Wam
Roesse Co., Ltd., Lous
Rogers, Cnton, estate of
Rogers, C. Marsha
Rogers, ate
Rogers, Noah C, e ecutor 1
Rogers, R. M
Rogers, Robert C
Rogers, Rochester ., e ecutor 1
Rogers, T. . and ctora
Rofe, Ward G., e ecutor2
Roo, Lous C
Ronck, Le
Ronck, Nathan
Romayor Grave Co
Romberger et a., Georganna M., e ecutors .
Romberger, enry ., estate of1
Rome Wre Co
Roos, Mortz
Roper, sha
Roper, Mrs. sha
Rose Co., dward
Rosentha, en|amn
Rosentha, annah S
Rosenwad We, Inc
Roshek ros. Co. Roshek Reaty Co.
Rosyn ue Co.
Ross Co., Inc., .
Ross, ames, estate of1
Ross-Sper Gove Co
Rosser, Luther Z., estate of
Roth, Chares ., estate of
Roth, W.
Roth ote Co
Roth Shoe Co., Whtney
Rottenberg, Samue
Rouse, cmpstone Co., Inc.
Rowe, enry C
Rowe, ohn
Rowe, M. D.5
statetn decson.
1 state ta decson acquescence reates to ssues 2 and 3 of decson.
cquescence reates to tentatve ta ssue.
cquescence reates to ssue concernng openng nventory at December 1, 1917.
cquescence reates to frst ssue of decson.
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57
cquescences Contnued.
Ta payer.
Rowe, Mrs. M. D.1
Roya Coeres Co., The
Roya ue Co
Roya Wet Wash Laundry, Inc.
Rubens Co., Chares
Rubensten, Gertrude G., e ecutr 2.
Rubensten, Lous, estate of
Rub-No-More Co
Rucker, .
Rucker, W.
Ruckman Coa Co
Rudoph, . L
Rudoph Co., Inc., M.
Rudoph, T. T
Ruf, rank ., estate ofs
Ruos, . D
Ruprecht, Chares C
Russe, Chares ., estate of
Russe, Mary I. ., estate of
Russe Mng Co
Russe Whee oundry Co
Ruud Manufacturng Co
Ryan Co
Ryan, ohn C, estate of
Rvan, ate C, e ecutr
Rye each Peasure Park Co., Inc
Ryman, . ., estate of
Ryman, Nancy
S.
St. Car Guaranty Tte Co...
St. Lous Maeabe Castng Co.
St. Lous Screw Co
St. Luus Unon Trust Co., e ecutor
Sachs, Chares
Sackett, . T
Sadder, ohn
Safe Guard Check Wrter Corporaton
Sakowtz, Lous
Samon, George
Samon, Water
Saomon, Leon
Sampe at Stores Co., Inc
Sampson, Wam C
Sanborn, red C.5
Sanborn ros., successors, etc
Sand Sprngs ome
1 cquescence reates to frst ssue of decson.
1 state ta decson acquescence reates to ssue regardng ta abty of proceeds of fe nsurance n
w otMO,000 e empton and ssue as to bequest of works of art to or for the w of the Cathoc ( uthedra,
t. Lous, Mo. , ..
cquescence does not reate to ssue nvovng tentatve tu ad|ustment.
1 n Cumuatve uetn I -2,88, wthdrawn. SeeI.T.2 f.,onpat e. U.
Docket
No.
9064
233
9386
11481
5736
6356
12569
3795
3795
57
2928
2929
4277
4571
2069
4570
9528
9119
22638
24312
11250
183
2029
16278
54
1986
1986
13108
1706
1705
oard of Ta ppeas.
oume.
7578
5490
15168
2077
11032
7561
7577
3796
11451
10807
5733
3115
3725
12231
6042
204
40963
11082
4871
7
L

14
d
)
1

0
5
t
1
0
13
13
10
11
13
1
3
15
2
2
2
6
5
5
8
0
2
14
6
1
2
10
7
3
3
4
8
13
1
19
14
6
Page.
903
369
741
470
626
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58
cquescencbb Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Saner-Ragey Lumber Co.
San rancsco Lumber Co.
Sanford Cotton Ms
Sanger, as ., estate of_
Santa Mara Gas Co
Sargent, Mar|ore L
Sau, Maurce
Savannah Rver Lumber Co. et a.1.
Savannah Shp Chandery Suppy Co.
Savnar Co., Inc
Sawyer Mng Co
Sayre Stampng Co
Scafe, Wam ., estate of
Scaes, . L.2
Schatznger, ernhard, estate of2
Schatznger, Sabna, e ecutr 2
Scheer, braham
Scheuer, erman, estate of2
Schck, ndrew, deceased, estate of
Schff, en|amn
Schng Gran Co
Schemmer Graber Co., The
Schesnger, rmn
Schett, doph
Schossberg, dwn
Schmck, Wson
Schmd, ohn
Schmdapp und, Charotte R
Schmdt, TSdward
Schmdt, dward ., trustee
Schmdt, dward C
Schmdt, rederck W
Schmdt, II, rederck W
Schmdt Sons, Inc., C
Schoekopf, Water
Schoenhet et a., Wam, e ecutors
Schofed, ohn
Schro, Wam
Schroth, oseph, estate of2
Schroth, ua nna, e ecutr 2
Schubert, ndrew II
Schuen Co.,S
Schutze. . Wam
Schuz, . ., estate of
Schuz, mma ane, e ecutr 2
Schuz akng Co
Schw-arzer Co., .
Schwng, Samue P., estate of2
Schwnn, Ignaz
Scott, ohn
Scott Sheby D
Scovfe, George S
1 cquescence reates to nffaton for 1917 and ncuson of Savannah Rver Lumber Co. n
group for 1918-1921.
state ta decson.
431
3
027
10643
10
1242
12813
14
1210
6981
8
107
11507
10
1412
3678
4
298
14067
13
705
14354

16130

14
ea
26936
14805
13
958
3624
9
465
20921
17
160
3040
2
166
391
1
338
11408
10
1024
11383
12
1353
11383
12
1353
10857
11
836
4621
9
486
3659
3
1026
4742
3
640
5939
8
1048
1422
2
823
13728
11
601
10016
7
150
2006
2
683
1971
3
1141
11714
10
1152
36836
20
88
43991
21
1400
43990
21
1400
43994
21
1400
43989
21
1400
43992
21
1400
43988
21
1400
6212
4
1032
9857
9858

33
34036
19
234
25776
20
1027
3914
5
326
3914
5
326
6667
4
35
34828
20
264
21581
18
444
5686
7
900
5686
7
900
2074
3
470
667
3
535
3633
3
697
8441
9
1304
10418
6
761
6180

1219
2443
2
813
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59
cqukbcences Contnued.
Ta payer.
Docket
No.
oard of Tat p
oume. Pate
Scranton ectrc Co.1
Scrpps et a., Wam ., trustees under decaraton
of trust e ecuted by ames . Scrpps
Seaboard Ms, Inc. ( etmann Co., Inc., suc-
r)
Secor ote Co
Securtes Investng und, Inc
Securty Trust Savngs ank, trustee 2_
Securty Trust Co-e ecutor 2
Segman, George W., e ecutor
Segman, Isaac N., estate of
Ses oto Crcus Co
Sewyn Operatng Corporaton
Seneca Coa Mnng Co
Sentne Pubshng Co
Serren, nna, e ecutr 2
Semen, ohn, estate of
Servce Recorder Co., The
Seven Nneteen fth venue Co
Severa Co., W.
Sever, Maron Shanwad ,_.
Shaffer, ohn C
Shanwa, Maron D.
Shamokn aey Pottsve R. R. Co...
Shaney urness, Inc
Sharpe, Mary .4
Sharpe, Rchard
Sharp, W. Z
Shaw, . W
Shaw, Carone ., e ecutr
Shaw, Guthre, e ecutor
Shaw, ames G., |r., estate of
Shaw, R. S., estate of
Shawver Co., W.
Sheakey ennedy ros
Shcane uto Co., . W
Sheen, esse G
Sheet Meta Constructon Co., Inc
Sheffed Dentfrce Co.5
Shedon Manufacturng Co.,
Sheton et a., Chares ., e ecutors1
Shepard, Stuart G
Sherdan Meat Co
Sherdan, Thomas
an Statcr Co
rchbad
enry Lambert
herwood, ohn W .
Shner O M Manufacturng Co
Shpowners Merchants Tugboat Co
Shope rck Co
17872
434
5499
5023
5024
224
10304
6720
9758
9758
13964
4851
1049
5712
8836
8836
2201
6031
1702
14410
1072
14410
4944
26029
17127
17126
10598
15612
26804
9644
9644
26804
34252
6282
5187
543
5089
11814
12836
2161
17132
5493
13698
4313
22257
22258
7748
2875
3955
6531
15
1
11
4
10
10
12
5
2
8
7
7
2
r
3
14
9
1-4
3
21
17
17
8
13
21
9
9
21
20
7
9
6
3
13
13
3
15
10
4
4
16
16
8
11
4
S
1 cquescence reates to a ssues e cept affaton wth mercan Gns ectrc Co.
state ta decson.
cquescence reates to ssue as to whether certan ncome accrung to estate of pettoner s father was
uabo ncome to pettoner.
cquescence n so far as decson reates to reducton of dstrbutabe royaty ncome to an amount
oa to that found for each of the other two pettoners.
reates to aocaton of ta n consodated return.
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60
cqt|escences Contnued.
Ta payer.
Dock t
No.
oard of Ta ppeas.
oume.
Shorb, Louse Gassc
Shotter, S. O. and Isabe, e ecutors.
Shotter, S. P., deceased, estate of._
Shreveport Cresotng Co., Inc
Shuths, . W., deceased, estate of.
Shure Co., N
Shutter, Maron D
Shutteworth, Wony Co., Inc
Sbey et a ., ohn R., e ecutors
Sbey, Rufus ., estate of
Sckes, Mrs.
Sege, ugene, e ecutor 1
Sege, acob, estate of
Sk, Mrs. W. W
Sk, . W
S , Mrs. S.
Sver Co., Inc., Wam
Sverman, e ander
Smmons Co
Smon, . S
Smon, ate M
Smonds Co., C.
Smons, |r., and wfe, ames
Smons rck Co.2.
Snshemer, Sdney W
Sou Cty Stock Yards Co.
Sknker et a., Isabea N., e ecutrces4
Sknker, Thomas ., estate of
Sknner, rederka
Sater, Chas. W
Sater, . N., trust
Sattery, Stephen
S. L. udng Corporaton
Sne, ohn T
Smth, ert
Smth, Mrs. ert
Smth, urns Lyman
Smth, Mrs. D. Sydney
Smth, rancs
Smth, arry ., e ecutor 4
Smth, arry . P
Smth, |r., Mark
Smth, Theodore
Smth, Water T
Smth Corporaton, Robert
Smth Insurance Servce, Inc
Smth Son Co., Lee S
Smth Machne Co., .
Smythe, rnest ., estate of
f 12904
Sntzcr-Warner Co | 19220
32219
3134
3134
17777
1827
3655
1316
1362
24921
24921
10430
18879
18879
10864
10864
25171
9708
10389
1927
4912
9993
267
5329
13973
24509
27247
11068
f12228
120210
11155
11155
41568
4134
8191
9312
36950
6752
5329
5329
25149
3262
1020
3098
2552
20942
1054
4841
31639
10901
3328
7519
12198
22
2
2
12
2
4
2
S
16
16
14
19
19
7
7
16
10
6
8
4
10
1
5
14
21
13
13
20
s
9
9
19
9
5
5
1 )
4
1
6
7
19
9
4
21
9
3
7
14
16
1 state ta decson acquescence n oard s fndng that transfer of a certan easehod by decedent
pas not made to take effect n possesson or en|oyment at or after death.
cquescence does not reate to contrbuton to the Year Cub.
8 cquescence reates to ssue 4 of decson.
state ta decson.
Revokes nonacqueseence pubshed n Cumuatve uetn I-1 at page S.
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cquescences Contnued.
Ta payer.
Docket
No.
oard of Ta p eas.
oume.
Snow, rancs S
Snyder, Wam
Sofsburg, Louse
Soof, . W - -
Soomon, arry
Somers Lumber Co
Sonenbck, Davd
Sonora ank Trust Co
Sooy, Chares
South Chcago Drug Co
South ucd Savngs Loan Co
Southack, ugusta G., estate of
Southeastern press Co.1
Southern musement Co., Inc -
Southern eed Co
Southern Press Coth Mfg. Co
Southern Sand Grave Co., Inc
Southern Tre Rubber Co
Spadng, atherne
Spang-Chafant Co., Inc
Spezer, Lena
Spencer, rank
Spencer, Mary R
Spencer Lumber Co. eta., .
Sphar rck Co -
Spofford, annah M., admnstratr of estate of
Lucy M. Ms
Sporborg, Wam D., admnstrator
Sprague, zabeth S
Sprague Tre Rubber Co
Sprng rook Ice Co
Sprngdae Cemetery ssocaton
Sprnke, ames L., estate of
Squer, . entey
Stafford, Wam
Stafford-Lowdon Co
Staev, .
Staer, Wnner C
Stamey-Mackey Constructon Co
Standard rewery, Inc
Standard Gas Products Co
Standard Marne Insurance Co., Ltd
Standard Refractores Co
Standard Sk Dyeng Co
Standfer Constructon Corporaton, G. M
Stanfed, Theodore
Staney, ames T
Staney Insuatng Co
1 cquescence reates to ssue 1 of decson.
1 state ta decson.
6850
13186
7249
7250
482
20112
2401
3665
7838
2882
15157
19508
6359
24172
32373
40021
42431
13753
13754
13587
13004
6603
22717
7302
10469
2389
20635
25255
7639
2086
1028
7914
6740
4717
12862
4169
10401
12078
14313
9088
6435
10750
1271
10226
10492
9843
4822
3617
3618
11694
5550
/ 3076
1 4056 /
17323
2983
14
11
12
1
15
2
4
7
10
13
14
3
19
14
300
6
736
10
303
5
879
18
210
7
588
9
858
3
413
21
859
20
58
10
452
2
946
3
1016
8
1272
8
173
11
610
12
433
3
223
12
456
13
1223
14
1199
7
1121
9
932
9
1038
4
383
10
374
5
1221
4
853
6
24
9
648
4
525
8
787
15
158
2
967
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2

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62
cqttescences Contnued.
Ta payer.
Stapey Co., Inc., O. S
Star Porcean Co
Starck, Php ., estate of 1
Starck, Php T., e ecutor estate of Php
Starck
Stark, rthur L., estate of1
Stark rck Co
Starks, Ns O., estate of
Starks, Sanford P
Starks, Sanford P., admnstrator
Starr, C. L
Starr, oward W
Starrett, Pau
State ank of cester
State Consodated O Co
Stearns, rank ., e ecutor
Stearns, . M., estate of
Steee, Wedees Co
Sten et a., Sade S., e ecutors 1
Stenhach Co
Stene, Cnton R
Stene, George
Stene, oseph ., admnstrator
Stene, oseph ., estate of
Stene, atherne
Stene, Wam
Stewagon, ohn W., estate of 1
Stephens ue Co., Inc
Sterng Reaty Co
Stern, Car
Stern, m
Stern, oseph
Stern, ues
Stern, Lous
Stern, Samue
Stern et a., Samue . ., e ecutors 1
Sternberg, .
Stevenson, D. M
Steverson, . N
Stewart, Mee spcrson
Stewart ennett Inc
Stewart Co., red S
Stewart Co., G. S
Stegtz, Trebcr Co., Inc
St, George W
Stwater Mng Co
Stwe Paper Co., .
Stmpson, Dorothv aker 2__
Stockbrdge, M. C
Stockbrdge, Mrs. M. C
Stowerck Chocoate Co
Stott, noch, estate of
Stouts Mountan Coa Co
1 state ta decson.
cquescence reates to ssue 1 of decson.
Docket
No.
oard of Ta ppeas.
7685
5002
4051
4051
10587
12582
20933
20934
20933
12739
101
6557
5913
35047
16672
19922
16672
19922
10215
4621
2888
20941
20939
20932
20932
20938
20937
28469
15343
26383
6333
19377
2186
5887
2187
19376
5943
2459
26486
14698
11179
27894
32754
5975
3065
653
6521
5687
7301
25061
1866
1867
6030
12195
6542
oume.
Page.
13
557
4
3
514
3
514
8
1150
12
667
19
325
19
325
19
325
9
886
1
681
4
398
8
878
19
239
16
889
16
889
11
279
9
486
3
348
19
325
19
325
19
325
19
325
19
325
19
325
17
910
13
666
8
1000
5
871
5
89
14
838
5
89
5
870
14
838
2
102
21
728
9
552
18
1099
18
1010
20
850
5
436
2
1016
1
452
8
391
5
280
6
531
19
1059
2
327
2
327
4
467
11
706
4
1292
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5
4
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63
cqt|escences Contnued.
Ta payer.
Docket
oard of Ta ppeas.
No.
oume.
Page.
7645
8
317
3877
9
1212
3378
2
1264
5533
7
887
16537
16
1192
3398
8
1170
5069
3
1035
19507
14
902
1909
6
417
1909
6
417
15235
10
1174
32884
18
537
30204
39931

1033
992
2
19
993
2
19
904
2
19
905
2
19
1923
1
1121
9236
11
587
25063
15
1265
6406
4
1198
8790
6
703
18599
19
480
13852
18
983
676
1
1040
13145
10
1325
9079
7
890
531
2
1104
9442
9
984
11810
16
540
8383
12
5
7949
17814

861
10348
8
407
5377
7
380
16104
16553
20
749
3077

787
9190
2786
4
1068
2863
5
990
21268
18
379
21268
18
379
3688
5
264
6322
15
1287
6322
15
1287
10266
19783

966
9240
8
404
4331
3
37
1436
2
223
10221
7
445
7411
5
1293
26851
41474

11
Stratton Grocery Co
Strauss, Davd, estate of1
Strauss Market, Inc
Strffer, Inc., dward C
Stroh rewery Co
Stromberg ectrc Co
Strong, ewat Co., Inc
Strong, omer L
Strong, .
Strong, Stea
Strother Lumber Co., G.
Struthers-Zeger Cooperage Co -..
Stryker, rthur
Stumer, ne anche
Stumer, anche G
Stumer, Los M
Stumer (II), Lous M
Suburban Investment Co., The
Sugar Run Coa Mnng Co
Sugarand Industres
Suhr, Chares L
Suvan Grante Constructon Co
Sumtomo ank, Ltd
Summt Coa Co
Summt Whoesae Grocery Co
Sumpter aey Ry. Co
Sumpter Coca-Coa ottng Co
Sunfower Packng Corporaton
Sunnvsde Coa Coke Co.2
Sunshne Coak Sut Co
Superheater Co
Superor ngravng Co
Superor Motor Parts Co.
Superor Pocahontas Coa Co
Superor Tube Co.
Susman, Otto
Sutft , S. D
Swaney, wng
Swanston George, estate of1
Swanston, Robert, e ecutor1
Swartz Co., Inc., . R
Sweeney, dward ., estate of
Sweeney, esse Gar, e ecutr 1
Sweeney ames Co
Sweet, Gertrude
Sweeten, P. P
Swnehart Tre Rubber Co
Sydco Photopay Corporaton
Syvan ectrc ath, Inc.
Syracuse Washng Machne Corporaton
state ta decson.
cquescence reates to second ssue of decson.
cquescence does not reate to speca assessment.
G
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a
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1
3
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1
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2

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0
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0
0
8
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0
5
4
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2
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64
cquescences Contnued.
Ta payer.
Docket
No.
oard of Ta| ppeas.
oume.
Tagabue, Chares ., estate of 1
Tat, ames
Takamne Laboratory, Inc
Tacott, enretta ., estate of 1
Tacott et a., . rederck, e ecutors
Tampa ectrc Co
Tarr, rank
Ta|-or,
Tayor, a D., e ecutr
Tayor, arret
Tayor, oward M
Tayor, Lous R
Tavor, Moses
Ta vor, P. L
Tayor, T. ., estate of
Tayor Constructon Co., Inc., .1.
Teague, .
Te- ectrc Co
Tempe, Water P
Tempeman, Water
Tempeton, eny fe Co., Ltd
Tennessee bre Co
Ter ush, Davd
Termna Propertes Co
Termna Raroad ssocaton of St. Lous
Terre, dgar
Tc arkana Cotton O Co., Inc
Te as Chemca Co
Thes, |r., George
Thomas, . L
Thomas Shoe Co.. The
Thompson, fred C
Thompson, . W
Thompson, Meve W.4
Thompson, Seetha O. (Mrs. . C.)
Thompson, Sude
Thompson, Mrs. T. C, e ecutr 1
Thompson, T. C, estate of1
Thompson, W
Thompson, W. an
Thompson ack
Thompson Co., ohn R
Thompson Pacfc Coast Co., L.
Thompson Scenc Raway Co., L.
Thompson Scenc Raway Co. of New ersey, L. .
32095
13908
3199
16136
16136
13344
28332
29593
3543
3050
7617
3066
12732
20940
8789
10020
7617
11877
4040
315
12018
20463
6145
18432
10717
4015
39451
26162
28661
3132
1888
6360
3958
9213
209
30690
7412
23609
1895
30691
5280
5280
677
17509
10837
7917
1869
/ 9679
I 10315
26611
19
11
7
15
15
13
3
0
7
2
14
1 )
7
11
7
13
3
1
10
20
15
4
10
17
7
1
11
3
6
1
IS
10
IS
9
IS
3
3
5
10
11
10
2
0
21
1203
718
state ta decson.
1 cquescence re: U s to ssue as to whether the ncome reazed under agreements of December 14, 101S,
Is ta abe n proportonate amounts to the severa pettoners or whether such proportonate amounts are
ta abe one-haf to the pettoners and one-haf to ther respectve wves.
cquescence reates to ssues nvovng contrbutons to Y. M. C. . and nmortaton of dscount
on bonds.
1 cquescence reates to amounts receved from partnershp of Thompson -Worey dorag 1920
and 1922.
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1
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2

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65
c tr sc NC Contnued.
Thorkdsen, Thomas
Thorn, Susan ., estate of1
Thorpe, een Converse
Thorwarth, ohn ., estate of
315 West 97th Street Reaty Co., Inc
Threefoot, ., estate of
Tbbs, Waam
Tetz, Louse C, admnstratr
Tetz, Robert M., estate of
Tfft, Laver Co., Inc
Tford, enry Morgan, deceased, estate of.
T3t,C.
Tfton, S. U., estate of.
Tnde, rank T. .
Tte Insurance
Co.
Ttus, Lous
Ttusvfe Trust Co., e ecutor..
Tvo Theatre Co
Toccoa urnture Co
Todd, C. Lee.-- -
Todd, George W
Todd, Lbanus M
Tomfohrde, ndreas, estate of.
Tomnson, . G
Tonawanda Power Co.
Tooke, C.
Topeka Tent wnng Co.
Tower Co., .
Towe, George
Towns ospta, Chares _
Townsend, nna M.3
Townsend, . Ray 5
Townsend Lumber Co
To away Tannng Co
Trace ork Mnng Co --
Tracy, Thomas -
Transatantc Cock Watch Co - --
Trathen, Mrs. . Res
Treat ardware Corporaton
Trefrv, W. S.--
Tr County Lght Power Co
Troost venue Cemetery ssocaton
Tro e Manufacturng Co., The
Troy Manufacturng Co
Trust Co. of Georga, e ecutor
Trustee Property No. 4
Tschffey, rederck
Tsvogou, Constantne
Tucker, . G
Tucker, Geneveve
Tucker, enry St. George, e ecutor
1 state ta decson acquescence reates to ssue 1 of decson.
1 cquescence does not reate to tentatve ta ssue.
state ta decson.
Docket
oard of Tat ppeaR
No.
oume.
Page.
385
2
570
18234
16
181
4206
3
1006
7638
12
1306
9898
10
368
521
9
499
21647
16
68
9314
9
1123
9314
9
1123
12456
12
481
3286
3
884
18041

19963
437
6378
8
914
8999
11
1257
9195
11
288
85
2
582
2450
2
754
1508
3
868
7452
6
610
14429
12
804
1022
1
868
2959
3
327
2960
3
327
9615
13
150
7068
7
961
2889
1
3870
1
1195
6506
25837
17
690
3440
3
521
11402
16
101
16218
19
208
2317
2
701
20046
12
1343
20047
12
1343
830
1
894
5084
5694

371
16030
15
872
15152
15
1107
4897
3
1064
8270
8
981
4524
6
768
3397
10
134
2710
2
1165
1114
4
1169
587
1
653
6585
7
119
12988
12
434
38012
21
627
6407
5
1242
3634
3
743
7863
13
932
3470
2
796
19016
17
135
G
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1
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1
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2

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66
cquescences Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Tucker, Martha S., estate of
Tugren, erbert W - -
Tugren, 8. Mnard..
Tusa O ygen Co
Tunneton ank
Tur Iron Car Co., Inc.. -
Turner, Mrs. W. --
Turner Termna Co
Tutte, oward
Tweve ast Thrty-frst Street ote Co
Twn Cty Sand Grave Co
Two Nnety-Two atbush venue Corporaton.
Tver ppach, Inc
Tyer, May L
Tyer Warehouse Co
U.
Ucta Investment Co
Uhrbrand Lervck Constructon Co.
Uferts, .
Uendorff, Php, estate of
UUman et a., rederc, e ecutors
Underwood, .
Unoa Rea state Co
Unon Co
Unon Department Store Co
Unon Meta Manufacturng Co
Unon Pacfc R. R. Co.1 -
Unon Pate Wre Co
Unon Stock Yards Co
Unon Termna evator Co
Unon Trust Co., e ecutor
Unon Trust Co. of Ceveand, Oho, e ecutor 1
Unted usness Corporaton of merca
Unted Motor Co
Unted States nveope Co. -
Unted States dety Guaranty Co
Unted States Merchants Shppers Insurance Co. .
Unted States Mortgage Trust Co., e ecutor 1
Unted States Payng Card Co
Unted States Refractores Corporaton 4
Unted States Too Co
Unted States Trust Co. of New York et a., e ecu-
tors 1
Unted States Trust Co. of New York, e ecutor
Unted States arnsh Te Co
Unted Studos, Inc
Unted Thacker Coa Co., trustees for.
Unty Schoo of Chrstanty
19016
32599
32600
20925
11433
9255
4162
3934
32998
3645
7171
5189
995
10722
512
5792
29892
14034
13686
16885
39270
25761
3457
15630
7835
35
2524
24449
28823
7078
7388
16271
4478
6983
21 (541
12744
7422
12432
4263
10439
2459
19305
5642
4650
7856
11030
15069
23900
7888
1799
17
16
16
18
12
9
5
3
19
3
11
3
0
10
1
13
21
11
18
20
20
3
14
8
1
4
17
17
12
14
9
5
19
12
10
5
13
2
15
9
3
9
14
15
15
15
4
state ta decson.
s cquescence wth respect to affaton ssue.
cquescence reates to ssue as to osses.
cquescence reates to a ssues e cept ssue wth respect to queston of aowance of
1918 of costs ncurred n 1919.
G
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1
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1
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2

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5
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#
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67
cquescences Contnued.
Ta payer.
Unversa Stee Co. .
rntennyer, vn
Utca Motor Car Co
tne, Mara Crstna Mdence ores, estate
ance, dgar
anco Ms, Inc
ancouver ome Co
an de amps oand Dutch akers.
an oozer, W. C, estate of1
an anne Revovng Door Co.
Wam ., e ecutors.
Wam ., estate of.
an Ceave Trust
an tten, Chares
an eet, Carey
an ook, .
an ook, Mrs. .
an orn Co., Inc., Over
an Lndey Nursery Co.,
an Lndey Orchard Co.,
an Schack, en L., estate of 2
an Wnke, Marsha, e ecutor
aucan, Samue M
audreu Lumber Co
aughan, ohn Chares, estate of 1
aughan, . W
aughan, Leonard oden, coe ecutor
aughan arnes, Inc
eteh, dwn P
M. L
, Lumber o Co
rgna Raway Power Co.3
scose Co., The -
sta de rroyo
tamn Co
oebe, acob, estate of 1
oebe. Water W., e ecutor 1
otz, bert L., estate of
otz, atherne L., e ecutr
on Paten, ar
on Ruck, ar, estate of
r, . L._
W.
Carrage Co
arod ., estate of.
12380
26612
9086
39037
19545
13276
5550
1430
24204
9988
13030
13030
13584
13585
30673
8793
2047
9358
9359
8252
3109
3109
7127
36900
18488
6908
10514
21782
10514
7311
1179
5200
3546
9040
11731
3164
10231
24936
6009
6009
25604
25604
16959
9857
9858
5453
28394
1982
oard of Ta ppeas.
oume.
16
11
10
21
18
12
4
2
21
11
11
11
18
8
2
8
8
9
2
2
9
21
16
8
10
19
10
6
1
0
3
11
21
7
7
16
16
10
14
4
21
1
state ta decson.
1 state ta decson acquescence reates to trusts of 1912, 1619, and 1921.
1 cquescence n so far as decson determnes that Cty Gas Co. of Norfok and rgna Raway
Power Co. were affated wth each other.
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1
3
-
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1
-
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2

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:
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9

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3
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0
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8
9
0
5
4
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2
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68
cquescencbs Contnued.
Ta payer.
Wadsworth, esse ., e ecutr estate of arod .
Wadsworth, deceased
Wagner, fred T
Wah, enrv
Wah, . S--
Wah, W. Wey
Wamanao Sugar Co
Wad, Lous
Waker, |r., . C
Waker, |r., Mrs. II. C
Waker-Crm Co., Inc., The
Wa, rank
Wa Ochs, Inc
Waace arnes Co
Wangford, C.
Wangford, mer R
Was Tractor Co
Wasdorf, Mr. and Mrs. dward
Wash, oseph ., e ecutor 1
Wash, . M
Wash, oseph M
Water, George L., estate of1
Water et a., oward ., e ecutors estate of George
L. Water, deceased 1
Water Co., Inc., D. N.
Water Co., Inc., et a., D. N.
Water Rea state Co
Ward, amton
Ward, Wm
Warner Co., T. W. (a Deaware corporaton)
Warren Co., The
Warren, b
Warren, Raymond L
Washburn, Cheney D
Washngton Cadac Co
Washngton Caterng Co
Washngton ote Co.2
Washngton Paper Stock Co
Washngton Pece Dyeng nshng Co
Wasscrman, Isaac, estate of
Watson, C. C
Watson, .
Watson, athcrne
Watson, Martha ., estate of
Watson, Mrs. Myrte
Wasontown rck Co
Watterson ote Co
Wausau Cannng Co
Waynesboro Manufacturers ssocaton
Weakey Coak Sut Co
Weaver, ee R
Weaver, ee R.3
Weaver, ames
Weaver, M.
Docket
No.
1982
23744
2292
24762
2004
24879
4629
8266
8267
446
7359
3857
3653
231
230
663
2410
6388
13150
34196
1782
1782
4006
7618
7618
11322
10471
22109
4588
2550
42218
2475
4471
7051
6609
7133
1321
4619
27597
20810
39193
39192
7228
6286
3580
5792
13966
1277
4001
2925
2924
8488
2922
oard nf Ta m h1s
oume.
I
17
2
21
2
13
8
6
6
1
4
4
10
4
4
3
4
7
18
IS
2
2
1
10
10
8
7
19
3
7
22
7
3
9
1
4
10
15
20
20
6
7
3
13
14
1
8
2
4
8
2
1 state ta decson.
3 cquescence does not reate to that part of decson nvovng appcaton of the yers decson (1 .
T. ., 1135).
3 .Revokes nonacqncscence pubshed n Cumuatve uetn -2, page 4.
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1
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-
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8
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5
4
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69
cquescekces Contnued.
Ta payer
oard of Ta ppeas.
No.
oume.
Page.
3852
4
15
2921
2
976
2923
2
976
7955
4
664
178
1
871
1279
1
759
2404
3
247
2724
3
247
7070
9
238
5591
5
366
9146
11
503
22574
20
1011
3647
3
355
2563
2
84
2604
6
300
31379
21
614
9645
13
1342
13048
14672

1184
10433
13
249
10433
13
249
11917
13
1284
10059
7
615
4004
1
4005
6061
t 6
617
6102

10157
11134
21634

1370
12587
12
800
30910
20
1113
38016
20
272
5199
9
1169
548
1
507
10106
8
442
10106
8
442
8019
19871

954
24497
15
482
6984
9
69
105 IS
1
17055
1
12
1394
25239
42238
22
595
2843
2
483
6872
4
629
2172
3
128
2723
5
11 sr.
300
1
436
6032
4
147
14790
16
378
16883
17
1120
3763
2
1308
1 1452
10
17
Weaver, M. ., estate of _
Weaver, S. P
Weaver, T. L
Weaver, Water
Webb fe ocorsesk, Inc..
Webb, Leand D
Webb Press Co., Ltd.
Webb, Stuart W
Weber- unkc-Lange Coa Co...
Weber- ng Lumber Co
Wedgwood Sons, Ltd., osah.
Weed, enrv D
Weeks Co., L. S
Wehner, Robert
We- amson Co., Inc.
Werner, . L
Wengarton, Davd, estate of
Wengarten, Meve D., e ecutor2.
Wes, . W. D
Wess, Pau
Wessenbach, Mnna .
Wech et a., . Soher, trustees.
Wech, rank P.
Wefare Loan Socety of Lancaster, Pa
Wes, D. S., estate of
Wesh Packng Co
Wenze, rnst, estate of
Werbeovsky, braham, e ecutor
Werbeovsky, . ., estate of
Werk Co., M_.
Werner, enrv P -
Werner Werner Cothng urnshng Goods Co
Weser ros., Inc
West, dward
West ay Co., The
West Corporaton, . C ---
West nd Consodated Mnng Co.
Westergren, Inc., M. k_.
West Pont Investment Co
West 28th Street Corporaton
West rgna Coa Co
West rgna Maeabe Iron Co..
Westermann Pagano, Inc.
Western mercan O Coa-
escence pubshed n Cumuatve uetn -2, page 4.
a.
reates to second ssue of decson.
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1
3
-
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1
-
2
2

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:
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9

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70
w|n SC NC S Contnued.
Ta payer.
Docket
No.
oard of Ta ppcds.
oume.
Western ank Trust Co.
Western aterte Roofng Co
Western Maryand Ry. Co.1
Western Star Mng Co
Western Wheeed Scraper Co.
Western Znc O de Co
Westand Co
Wharton et a., Gerad ., e ecutors 3
Wharton, ohn G., estate of
Wheary, George
Wheatev. ames .
Wheeer, D.
When Cothng Co
Whsnant, . P
Whte, sa L., estate of 8
Whte, |r., ames
Whte, ohn ., estate of 8
Whte, ua
Whte, R. ., e ecutor
Whte, Robert P..
Whte et a., W. T., e ecutors 8
Whte Trust No. 1, R. . and .
Whtehead, CP. -
Whtehouse Leather Products Co., Inc
Whteey, urt ., estate of
Whtng, C. L., Inc
Whtng Lumber Co
Whtman, Carence
Whtman, Nathane, deceased, estate of s
Whtman Sons, Inc., Carence
Whtmeyer, a
Whtmore, vah P
Whtson, Thomas
Whorton et a., Gen C, e ecutors 8
Why brow, CI arence
Wckens Co
Wckwre, Theodore ., estate of
Wckwre et a., Theodore ., |r., e ecutors
Wedemann rewng Co., George
Wedenbeck, me T
Wcss, . C
Wess, Oga
Wggnton, George P
Wber, George I., estate of3
Wber Natona ank of Oneonta, N. Y., e ecutor
and trustee 3
Wbur, Loyd
Wdermann Co., C
28542
29180
39948
33931
8475
2852
12001
8604
19755
26439
26439
4799
9665
21093
428
31522
12768
5622
31246
5623
31246
5554
12768
28141
23948
10673
8472
11046
29071
14110
1399
10316
15888
3090
7086
3478
3094
609
16476
5574
5574
7955
20935
7615
7637
11425
21666
21666
5636
10611
8289
19
19
12
5
14
7
15
13
13
5
S
16
1
17
15
4
21
4
21
4
15
15
11
12
10
7
21
10
3
11
6
5
2
7
1
10
10
10
4
19
7
7
9
17
17
5
8
cquescence reates to reducton by 2 per cent of ncome ta of ta payer for caendur years 1918 and
191S.
cquescence does not reate to that porton of decson whch hods that secton 284(c) of the Revenue
ct of 11 26 s appcabe to the case,
s state ta decson.
cquescence reates to tem (2) of decson.
Nonacquescence notce n ths case, pubshed n Cumuatve uetn I -2, page 6,
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0
1
3
-
0
1
-
2
2

0
3
:
5
9

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0
0
8
9
0
5
4
4
2
7
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71
cquescences Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Wev, dward N
W hte et a., ugh, e ecutors and trustees
WOkens Lange
Wkes, . rank
Wkes, . Renwck
WUkes- arre Lace Manufacturng Co
Wfkns, L.
Wknson, W. ., estate of 1
Wams, arry
Wams, Robert W., e ecutor of estate of en C.
onaparte
Wams oundry Machne Co
Wams Steamshp Co
Wamson, e ander __
Wamson Rauers Co
Wamson Mng Co
Ws, Mrs. W. T
W s, W. T
WOhnore, Thomas
Wow uncton Tract Co
Wson ros. Co
Wson Co., Wam
Wson, Chares Scotto, estate of
Wson, .
Wson, anne L., e ecutr a
Wson, urnture Co
Wson, .
Wson, osephne ., estate of a
Wnant, ohn G
Wng, R.
Wnshp, Chares N
Wnter Garden, Inc
Wsconsn ydro- ectrc Co
Wssner, nna M
Wof, . .G...
Wof Manufacturng Co
Wofe, mma S., estate of3
Wofe, L. G., admnstrator2
Wofe, Russe. e ecutor3
Wofe Co., Udopho
Woferman, red, e ecutor
Woferman, Lous, estate of4
Women s ppare Co
Wood ros. Thresher Co
Wood, av
Wood, T.
Woodbury Shoe Co
Woodcffe Sk Ms
Woodmar Reaty Co
Woodruff Lumber Co
Woodruff Son, ohn T
22485
7462
10649
29037
12024
12023
452
4208
16379
16743
4207
1652
10190
8725
2343
11292
1042
15679
15679
32850
31186
8460
14505
4909
6911
4909
11317
18157
25729
28295
24499
6754
8246
9601
43993
2970
8626
16149
20202
16149
16010
11291
11291
4001
5877
13014
11029
10229
559
30984
7262
6864
20
11
15
11
11
1
6
16
6
1
15
7
2
12
5
7
7
18
21
7
18
5
12
8
10
15
18
17
17
10
10
10
21
8
10
15
20
15
15
10
10
8
4
11
9
19
1
17
6
6
1 cquescence reates to ssues 2 and 4 of decson.
1 state ta decson.
1 cquescence reates to deducton of Pennsyvana and New ersey nhertance
4 state ta decson acquescence reates to frst ssue of decson.
72109 31 6
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2
0
1
3
-
0
1
-
2
2

0
3
:
5
9

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0
8
9
0
5
4
4
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72
cquescences Contnued.
Ta payer.
Woods Sons Co., oseph W
Woods Theatre Co., .
Woods, Wam Stone, estate of
Worcester ank Trust Co. et a., admnstrators..
Wrght, George M
Wrght, erbert N., estate of
Wrght, O. ., estate of
Wrght, Pear Ross, admnstratr
Wrght, W. -
Wrght s utomatc Tobacco Packng Machne Co_
Wvatt et a., zabeth C. R., e ecutors
Wvckoff, Rchard D
Wyman Co., C. C
Wyomng Te Tmber Co
.
Yahoa Sand Grave Co -
Yakma op Co_
Yaden, Percv
Yae revda Paper o Manufacturng Co
Yamh ectrc Co
Yeow Popar Lumber Co
Yoder, dward
Yokohama -Ito washa, Ltd
Yost erreU.
Youe, George
Young, I. ., estate of
Young, May S., e ecutr 1
Young, Mna ., e ecutor
Young, S. Marsh
Young Iron Works
Young Men s Chrstan ssocaton Retrement
und, Inc.2
Youngstown read Co
Younker ros., Inc
Yow, rances Whte
Z.
Zegen, rederck
Zenth Mng Co
Zegcr, |r., Wam
Zmmerman, . W
Zmmerman, enne
Zour Drawn Metas Co
Docket
No.
9156
11067
7462
14230
20555
14230
12096
12096
4270
1837
17698
32016
10676
21370
24574
2281
9527
38505
3353
29270
9894
3220
2653
2085
20756
7440
3847
4720
1839
33329
36261
41599
1333
5522
5555
6426
5454
123
2513
2145
4908
oard of Ta ppeas.
oume.
8
12 I
11
13
19
13
12
12
10
1
10
19
8
9
6
8
20
2
20
12
3
5
2
18
6
3
6
2
21
18
10
8
1
5
2
8
1 onacquescence notce n ths case, pubshed n Cumuatve uetn I -2, page 6, s recaed.
3 cquescence s n the resut ony.
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2
0
1
3
-
0
1
-
2
2

0
3
:
5
9

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/

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0
0
0
0
0
8
9
0
5
4
4
2
7
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73
The Commssoner does NOT acquesce n the foowng decsons
of the Unted States oard of Ta ppeas:
Ta payer.
oard of Tas ppeas.
No.
oume.
Page.
41167
20
243
24341
16
497
13189
12
692
21808
18
919
9092
10
213
6606
7
574
6519
7
848
6519
7
848
6439
4
568
350
2
498
4437
11
1271
10619
7
1043
4772
4
649
14676
14
328
669
1
839
38773
46660
20
586
25960
17
1376
8904
9
1302
8904
9
1302
38607
20
5
8629
8
919
20887
1
20888
20889
954
20890

12926
19339
: u
1359
28263
29547
1
1172
17871
IS
1084
10983
9
1193
11497
12
3
9629
6
876
12169
13
1213
10292
13
1195
10292
13
1195
21877
22213

1160
19727
19
858
28787
40075
20
1196
1217
1
1135
dams, Cec
dams, Wam P
tkn, . ng
abama y-Product Corporaton.
. mercas Cabe, Inc.
ng Cory Co.
sop, dward ., estate of1
sop, dward ., e ecutor 8
magamated Sugar Co
mercan press Co
mercan eature m Co.1
mercan Leather Products Co
mercan Seatng Co.
mercan Seatng Co.5
mercan Stee Co
mercan Tobacco Co
nger Corporaton e
nkeny, ohn D., e ecutor 7..
nkeny, Lev, estate of 7
nthony, . D
rchbod, ohn ., e ecutor 8.
nod et a., ohn .
thens rck Te Co.
therton et a., C. ., trustees.
tantc Cty ectrc Co.10
tantc Coast Lne R. R. Co.
tas Tack Co.12
udubon Park Reaty Co
ud, . W
utomatc re arm Co. of Deaware 1 ..
utomatc re arm Co. of New York 13.
utomobe Underwrters, Inc
venue gency Loan Corporaton 14
ver, Genn M
yers fc Co., L. S.
Nonacquescence reates to ssue as to tentatve ta .
1 Nonacquescence reates to thrd ssue.
state ta decson nonacquescence reates ony to 1917 trust.
Nonacquescence n so far as t reates to ncuson n nvested capta of the sum of 108,716.37.
1 Nonacquescence reates to second and thrd ssues of decson.
Nonacquescence reates to decson regardng 1918 ta es of nger Ms.
r state ta decson.
state ta decson nonacquescence reates to frst and second ssues of decson.
I Nonacquescence reates to fraud penates.
II Nonacquescence reates to ssue respectng affaton wth mercan Gas fc ectrc Co.
1 Nonacquescence reates to second ssue of decson.
Nonacquescence reates to ssue nvovng reducton of nvested capta on account of dvdend pay-
ment.
11 cquescence notce pubshed n Cumuatve uetn -2, page 3, recaed.
Nonacquescence reates to ssue wth respect to affaton wth venue State ank.
11 Ths notce, whch was orgnay pubshed n uetn I -41, page 1, was repubshed n Cumuatve
uetn - page 6, for the reason that the cose was erroneousy ncuded n the st of cases acquesced
n, pubshed n Cumuatve uetn I -2, page 1.
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74
No acquescences Contnued.
Ta payer.
.
aev, . P
aev, Mrs. . P
aker, dward
aker Lumber Co
a Roer earng Co.1
a et a., Water ., coe ecutors-
amberg Cotton Ms Co
ancker, |r., .
ank of Dupn
ank of Itay, San rancsco, Caf _
ank of Topeka
arnes, deade C
arnes et a., Chares G., e ecutors.
arnes, |r., ohn, estate of
arnes, oseph
arnes, oseph, admnstrator
arnes, Wam C
Docket
arnette, atherne Wknson, soe and ony her2 .
arron- nderson Co
artett et a., Php C. ., e ecutors
artett, crsche, estate of
arton, Mary L., trustee
arton, Ots, estate of
ates, . W. (Mrs.)
ates- owman Corporaton
aucum, amma
eacon Coa Co.2
eck, Maron . urt3
ehow state Co
ew Cotton Ms4
emont Iron Works
eowsky, Morrs
et Raway Co. of Chcago 5
enedct, ames ., estate of 8
enson Lumber Co
enson Tmber Co
erger, Mathda W
erger, Water
erks oundry Manufacturng Co
ern Dye Works
est Stee Castngs Co
ggs, sr., .
cke, . Constant
cke, Car
cke, Gadys
cke, Gadys, guardan
oard of Ta ppeas.
No.
oume.
Page.
33724
18
105
33725
18
105
25080
17
733
32359
21
124
15233
15
862
6858
8
180
9445
10104
(
1236
18617
11
420
12950
12
652
15810
13
1226
18850
15
1301
17411
17
1002
8624
8625

360
5266
7
924
9577
7
924
5266
7
924
17410
17
1002
16379
16743

1390
24769
17
686
23581
16
510
23581
16
510
12934
5
1008
12934
5
1008
18611
11
420
11357
20
460
20085
17
1312
11894
9
280
19593
17
413
12670
12
1365
9561
14
912
10454
6
722
9656
7
424
4289
9
304
21621
16
438
19519
9
593
16311
9
593
6110
10
747
6111
10
747
6998
5
756
15714
13
1354
8326
6
274
15255
15
1092
28933
20
784
28932
20
784
28930
20
784
28932
28933
20
784
Revokes acquescence pubshed n Cumuatve uetn II1-2, page 4.
Nonacquescence reates to frst ssue of decson.
Nonacquescence n so far as decson aows pettoners to deduct for the years 1920 and 1921 ther ao-
cabe porton of edera estate and State transfer ta es pad on shares receved by them by vrtue of a com-
promse agreement modfyng the terms of the w and n e cess of ther shares recevabe under the w.
Nonacquescence n that part of decson aowng speca assessment.
Nonacquescence reates to ssues nvovng edera ncome ta es added to ncome for 1917, 1918, and
1919, n respect of whch pettoner was entted to be rembursedby ts tenant companes.
state ta decson.
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75
NoN cgtr sc NC s Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
ngham, rthur W., e ecutor 1
ngham, Robert W ---
rmngham Coke y-Products Co_
ack Rver Sand Corporaton 1
ar, dward T
ar, W. ., estate of
ar Co., . C
aney, dth
ock, . ates
ock, . ates, e ecutor
ock, rank ., estate of
ock ohner Mercante Co
ossburg Mercante Co
um s, Inc. - -
umberg ros. Co.s
ydenburgh, a
oger Crawford, Inc
onwt Teer Co --
oston Safe Depost Trust Co. et a., e ecutors 3_
ouevard udng Co
ourne, my ., estate of
owman . Wam 7
oy kn, zabeth W
oyne Cty Lumber Co
rackenrdge, George W., estate of
radey, M. ., estate of
raunsten, Louse R
rawner, e ander arrson, estate ofs
rawner, rances, e ecutr
renneman, Davd
renneman, . L.
renneman, erna L
rant, . S., admnstrator
rcke, Maude nea 8
rer Coeres 9.
rttngham, uan .
rttngham, uan G
ronson et a., ames D., trustees s
rooks, W. . 10
rown, enry W., estate of
rown, acob
rown, Reynods D., admnstrator
rown Co., M
ryant Stratton Commerca Schoo, Inc_
20303
8823
21808
19933
25684
2440
7147
10613
18792
18793
18793
4576
2880
2523
12137
9921
14745
26037
32131
43918
7883
18935
29784
4635
6515
30638
13776
16092
16092
8361
8323
8324
8860
14321
11406
19365
28186
13557
16535
18435
18535
7702
10991
33042
16469
33042
24864
43
15
8
18
IS
18
4
11
13
11
11
11
4
4
7
17
12
5
13
10
2(1
21
8
16

7
11
19
10
15
15
10
10
10
e
17
12
13
13
7
12
20
18
20
9
1
1 state ta decson Donacquescenoe reates to deducton of the amount under paragraph (2), sect
403(a), Revenue ct of 1921, undmnshed by 21,763.40 of the deductons under paragraphs (1) and I
of sad secton.
Nonacquescence reates to ssue 1 of decson.
a state ta decson.
4 Nonacquescence reates to ssues as to procedure for handng nstament saes.
Nonacquescence reates to frst ssue of decson.
Nonacquescence does not reate to deductbty of New York nhertance ta .
1 Nonacquescence reates to deducton of contrbutons to a trust.
1 Nonacquescence reates to net oss deducton.
Nonacquescence reates to depeton ssue.
u Revokes acquescence pubshed n Cumuatve uetn 11I-1 at page 6.
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76
Non acquescen ces -Contnued.
Ta payer.
ucke Prnters Ink Co
uock, .
urdck, eene adwn, e ecutr .
urdck, uan, estate of
urdne Reaty Co., ohn M
urges, Rchard
urke ectrc Co.1
urton, Lawrence mer
yck, W. S
yers, oward Webster
Cadwaader, ohn, estate of
Cadwaader, |r., et ah, ohn, e ecutors.
Caforna rewng ssocaton
Caaway, uer
Cambrdge Ice Co
Campbe, rcher Maynard
Campbe, . L..
Campbe Co., ohn
Campe, Mnne L
Capto ote Co.3
Carbo Petroeum Co.4
Carey, C. W.
Carney Coa Co.8..
Carro, Legh
Carruthers, Mabe G
Carter Co., W. W.
Centra Savngs ank 8
Centra Unon Trust Co. of New York, guardan.
Century. Musc Pubshng Co
Chadbourne Moore
Chamberan, en Steee.
Chamberan, Seah
Chambers, nna M.
Chander, Maran Ots
Chapn, W.
Chapn Constructon Co
Chcago Lumber Co. of Omaha. .
Chcago Portrat Co
Chcago Tte Trust Co. et a.
Lous M. Stumer) .-
Docket
No.
trustees (estate
40500
28612
21065
21065
33071
25908
1697
2689
2260
10319
13296
13296
3903
2264
7282
18320
18321
19591
30688
6610
7134
9524
2432
5562
8496
32852
25741
689
5006
26518
12840
17066
16598
24285
29479
16597
24284
29480
17686
26057
16259
2267
3200
28516
21396
22438
oard of Ta ppeas.
oume.
19

20
20
20
17
5
553
5
99
4
842
8
1191
15
1
15
1
5
347
4
842
9
150
6
60
8
1076
15
458
17
575
4
441
12
166
6
539
10
1397
20
1029
16
515
1
849
10
1408
17
881
12
647
16
961
19
126
19
126
17
820
16
1248
4
842
3
25
18
916

1129
18
395
Nonacquescence reates to ssues 1 and 2, and ssue 5 as to patent group No. 1.
Nonacquescence reates to queston of nfUon as to the companes ncuded n the unts.
Nonacquescence reates ony to that part of decson whch reates to appcaton of the yers decson
(1 . T. ., 1135).
Nonacquescence reates to fourth ssue of decson.
6 Nonacquescence reates to ssues 1 and 3 n decson.
Nonacquescence reates to ssue No. 1 n so far as t reates to fsca year ended May 31,1919.
1 cquescence notce pubshed n Cumuatve uetn -2, page 1, recaed.
8 Nonacquescence reates to obsoescence ssuo.
cquescence notce pubshed n Cumuatve uetn I -, page 10, recaed.
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77
Nonacqubscbncbs Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Ctzens Investment Co
Cty utton Works
Cty Natona ank
Cark, ames
Ceveand, Panesve shtabua R. R. Co
Ceveand, Panesve astern R. R. Co
Cne, Mrs. a Ppes
Cne, W. D.
Cngan, Margaretta T
Cohn Sons Co., M.
Cons-McCarthy Candy Co
Comer-Green Lumber Co.4
Commerca Trust Co.
Connectcut Passumpsc Rvers R. R. Co.
Conne, G.
Conne, Mrs. G.
Conneee, C. U
Conover Co., S.
Consodated Investment Co
Consodated Te te Corporaton .
Consorzo enezano d rmamento e Navgazone. -
Contnenta Natona ank Trust Co., e ecutor__
Contnenta Screen Co
Converse Cooperage Co
Conway, . W
Coon aey State ank
Corbett Stuart
Com Products Refnng Co
Corneus Lumber Co
Crabtree Co., .
Crane, T. I
Crocker Co., . S
Cross Mountan Coa Co
Crown Potteres Co
Cunnngham- eckemeer Suppy Co
Curran, Maurce
Curts Leather Co., . G
D.
Dahnger, Chares W...
D ramon, enretta
Day Pantograph, Inc. .
Day Record Co
Dane, Chares R
9094
20975
15826
19641
11918
4927
4927
6929
6930
4227
7361
9238
4302
20916
31927
8424
9100
18405
18406
3363
3926
13603
15983
39759
26814
30350
12518
2263
11352
11855
24374
4273
5889
27769
4581
1219
10043
15838
793
14397
33721
10644
4126
12058
20037
22044
16
16
19
12
4
4
o
15
6
4
12
21
15
15
4
6
13
10
21
20
19
17
4
13
11
22
5
5
17
6
2
12
14
5
13
20
7
9
13
16
1 Nonacqueseence reates to deducton n 1919 of commssons ncurred n sae of property aso decson
as to fourth ssue.
1 Nonacqueseence reates to queston of affaton as to the companes ncraded m the unts.
Nonacqueseence reates to 25 per cent penaty for faure to fe a return.
4 Nonacqueseence reates to ssue whether the consodated return for 1919 started the runnng of the
statute of mtatons as to the Comer-Green Lumber Co.
Nonacqueseence n so far as oard has rued that pettoner s not ta abe as an assocaton for 1924.
Nonacqueseence reates to frst ssue of decson n so far as t hods that the ncome was not reazed
unt the year n whch the ta es became due and payabe and aso to the second ssue of decson.
1 Nonacqueseence reates to ssue nvovng oss of 1,000 on Gaoway note.
Nonacqueseence reates ony to ssues nvovng reducng nvested capta by reducng current earnngs
avaabe for dvdends by Uu accrued for current year.
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78
Nonacqt|escences Contnued.
Ta payer.
Docket
No.
oard of Tan ppeas.
oume.
Dane, S. - --
Darby, Rufus C. .
Darne, Inc., R.
Dauphn Depost Trust Co., trustee.
Davs, Chas.
Davs, Oscar
Day, enry M
De orest, ua N
Denert, sr., Oscar
Derav Lumber Co
Deto Grass Rug Co.1
Dennett, red
DeReuter, Ronad
DeRouet, Nancy
Derscbug. ohn N.2
Desmond s, Inc
Dckerman ngs, Inc
Deckorhoff, Raffoer Co
Descher, fred
Don, ohn P
Dodson, ruce, estate of2
Doe, rank P., estate of8
Doe et ay Laura . M., e ecutors .
Doehne, George, estate of
Don, arret M., estate of4
Dothan O M Co
Downg, Mary M
Duggan, anna, estate of
Duggan, ames, e ecutor
Duhme, Ophea, estate of
Duncan Coa Co., W. G
Dunson Ms5
DuPont, Perre S
Dustn, nne M., estate of 11
Dwght Loyd Snterng Co..
.
astern Steamshp Lnes, Inc.
astsde Manufacturng Co...
dgar Co., ames
gyptan Powder Co
dtz Son, Inc., Marc.
am, arvey
1148 fth venue Corporaton
kn, Dr. Wm. S
kns, Wam M
son, . R
mery et a., are C, e ecutors
I Nonacquescenoe reates to second Issue n decson.
Nonacquescence reates to ssue 1 of decson.
3 state ta decson.
Nonacquescence does not reate to deductbty of New York nhertance ta .
6 Nonacquescence reates to ssue regardng |ursdcton.
state ta decson nonacquescence reates to frst and second ssues of decson
20036
2265
22314
41387
18622
18625
30198
5857
6937
41867
6926
11498
6243
28931
18064
14465
4928
25079
13121
10985
7382
24464
20681
20681
9344
5594
25565
2394
4706
4706
6858
12347
17019
26996
8629
120
24870
22722
14606
28918
22251
24711
28952
37180
18001
34032
18629
27807
30309
9766
16
4
18
21
11
11
12
4
11
20
7
7
7
20
15
15
4
17
IS
9
21
18
18
6
9
19
6
8
8
8
13
10
IS
8
1
17
18
16
17
18
16
20
11
16
15
9
G
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1
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79
Nonacqt|escences Contnued.
Ta payer.
Docket
No.
oard of
p
oume.
mery, |r., Lews, estate of
mpre Machne Co
nns, . N. and O. M
sperson, Nes, estate of
sperson, Mrs. Nes (Mee), e ecutr _
vergreen Cemetery ssocaton of Chcago-
ces or-Leader Laundry Co
ve Prescrpton Pharmacy, Inc
O Co --
ar Stock Trust
ane, veyn rancs
armers Cooperatve Creamery
armers Depost Natona ank and ffated
anks
armers Loan Trust Co., e ecutor
armers Loan Trust Co., e ecutor 1
dety Coumba Trust Co., e ecutor 1 --.
dety Trust Co.
ed, Marsha-
fth Thrd Unon Trust Co., trustee
rst Natona ank of rdgeport, Conn., e ecutor.
rst Natona ank of Duuth, admnstrator
rst Natona ank, resno, Caf
rst 8tate ank of rackettve, Te
rst State ank of Wemar
rst Trust Savngs ank
tzgerad, Mary
550 Park venue Corporaton
a num Insuatng Co.
etcher, O. - ---
etcher Savngs Trust Co., e ecutor 1
nt, Goerng Co., Ltd
orshay, Stewart
oster, ce sher
oster, . M., estate of
oster, ames ., estate of 1
oster, Mrs. ames Martn, e ecutr 6
o , ugene
rancescon Co., . C
rancs, rancs, guardan
rancs, r., rancs
rank, Wam G., admnstrator
et a. Thomas ., e ecutors and trustees.
9766
19745
25570
15281
7071
7071
37307
9221
34062
28764
32137
16725
31444
6220
18234
21621
40672
13638
11840
26127
18721
18502
18503
15811
12876
12657
16011
11746
810
33838
5120
33059
37099
20078
23847
10126
12928
11493
21928
20535
10585
16724
16724
9344
6515
7282
3068
1 state ta decson.
Nonacquescence reates to ssue nvovng |ursdcton of oard.
state ta decson nonacquescence reates to ssue 2 of decson.
1 Nonacquescence reates to ssue concernng Invested capta for 1920 and 1021.
1 Revokes acquescence notce pubshed n Cumuatve uetn I-1 at page 2.
Nonacqaescence reates to ssue 1 of decLIon.
Nonacquescence reates to thrd ssue of decson.
9
16
21
11
11
21
8
21
16
21
15
21
5
16
16
21
13
15
20
18
13
13
9
10
11
5
20
5
20
20
19
20
7
16
13
16
17
10
15
15
6
11
9
7
G
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a
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f
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1
3
-
0
1
-
2
2

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5
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#
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80
Nonacquescences Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
G.
Gaum, bert ., trustee.
Ganah Lumber Co
Garber, . .1
Garber, M. C.1
Gardner Governor Co.2
Garneau Co., Inc., oseph
Genera o Corporaton
Genera Manfod Prntng Co
Georga Car Locomotve Co.3
Gbson, ate oa, estate of
Gdeon- nderson Co
Gette, Car W
Gette, atherne
Gnsburg Co., Inc., en
Grard Trust Co., e ecutor4
Grard Trust Co. et a., e ecutors
Gass, ndrew, estate of
Geu-hman, Ph
Genn, Thomas
Goddard, ohn N
Godfrev, onathan
Gong e Manufacturng Co
Gonzous Creek O Co. (dssoved), trustee for cred-
tors of
Goodrum, |r., .
Gordon, enry
Grand Rapds Natona ank s
Grandn, orence
Grandn, George W., trustee
Grandn, enry
Graves et a., . ., commttee for credtors of
Whttaker acon
Great ear Sprng Co.
Great Northern Ry. Co.7
Greenbaum, en
Greene et a., Rchard T., trustees.
Greck Condensed uttermk Co..
Grevock Ms8
Ground Grpper Shoe Co., Inc.
Guarantee Constructon Co. -_
6101
24289
3708
14097
3710
13909
321
40
32198
14577
3131
7402
22365
27010
18754
45556
11298
23208
28361
18121
2262
18621
18720
17584
13393
18613
13838
21116
25740
25742
25742
22631
10489
8433
11850
28888
23973
3691
11926
17940
19371
1828
1848
10
21
11
11
6
1
22
12
2
7
18
18
14
10
n
16
19
17
4
11
18
15
12
11
12
9
16
16
16
12
12
20
15
7
9
21
Nonacquescence reates to ssue as to whether the agreements of December 14, 1918, and the dscharge
thereof were productve of ncome ta abe for the years nvoved, and, f so, to what e tent.
Nonacquescence reates ony to that part of decson whch reates to appcaton of the yers decson
(1 .T. ., 1135).
Nonacquescence reates to thrd ssue of decson.
4 state ta decson.
cquescence notce pubshed n Cumuatve uetn III-2, page 20, recaed.
8 Nonacquescence does not reate to deprecaton and obsoescence ad|ustments.
Nonacquescence reates to ssue nvovng the queston whether the company shoud accrue aa ncome
n the ta abe years nterest earned but not pad n those years on obgatons of other corporatons owned
by t.
Nonacquescence n decson n so far as the oard hods that t has ursdcton to determne the over-
payment for 1917.
Nonacquescence reates to second ssue of decson.
G
e
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a
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d

f
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)

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2
0
1
3
-
0
1
-
2
2

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:
5
9

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2
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2
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/

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3
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0
0
0
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8
9
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5
4
4
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#
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81
Nonacqt|escences Contnued.
Ta payer.
Docket
No.
oard of Ta| pwas.
oume.
Page.
Gud Co., Inc., .
Guf States Stee Co
Gwn, ar S
.
aght, George W
aer, Mary 1
amton, arrs 4 Co..
amton Wooen Co
amet Ice Co
anfv, ovsus2..
anf y, Martha M.2
anon, Mary
annba Mssour Land Co
arbour-Longmre Co
aran Co., O.
arper, arry
arret Cotton Ms
arrs, zabeth
arrs O Co., C. C
arry Co S.
artford- armont Co.
artmann, Chares
aske arker Car Co
ass, . S.
atze ueher, Inc.5
aubcns, enry, e ecutor
awkns, rank
ay, ane urt
aynes, wood estate of
eay, enry W
eay, Raymond
eneman Lumber Co.T
enrch, Samue G., estate of
epcrehausen et a., George, e ecutors
epersha8en, Php, estate of2
emock oow Coa Coke Co
enaghan, zabeth
endrcks, armon W
enn, . W., trustee
epburn, C. sher, estate of2
ermance, . P
un. ames
Co
8741
f 9276
18358
I 18359
17983
6141
14063
25751
4170
15687
29670
25516
20996
20996
27251
9084
6905
1374
29087
6228
11820
8011
1644
9016
18930
7009
14817
9501
11454
11418
2572
19614
11724
19560
19649
10175
2420
24911
24911
8837
27252
4554
4303
9690
11192
32297
28862
32108
11
12
14

14
12
21
16
21
21
16
9
7
1
20
5
11
13
4
12
14
9
13
10
17
1
:
13
18
18
11
2
18
18
10
16
1
8
11
11
18
14
914
1244
393
1075
488
735
334
433
379
379
809
1072
314
1027
143
734
420
937
211
98
146
1087
1352
993
738
842
413
796
27
27
1229
406
218
218
1176
809
1257
190
1386
420
892
867
1 ooacquesMnoe reates to ssue concernng deductbty of chartabe contrbutons.
state ta decson.
Revokes acquescence pubshed n Cumuatve uetn v, page 19.
Nonacquescence reates to frst ssue of decson.
1 Nonacquescence reates to thrd ssue n decson.
Nonacquescence n so far as decson aows pettoners to deduct for the years 1920 and 1921 ther
Docabe porton of edera estate and State transfer ta es pad on shares receved by them by vrtue of a
compromse agreement modfyng the terms of the w and n e cess of ther shares recevabe under the
w.
Nonacquescence reates to ssue as to tentatve ta .
G
e
n
e
r
a
t
e
d

f
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L

n

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U
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)

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2
0
1
3
-
0
1
-
2
2

0
3
:
5
9

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2
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2
7
/

n
u
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3
0
0
0
0
0
8
9
0
5
4
4
2
7
P
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,

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s
_
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#
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e
82
Nonacquescences Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume. Page.
erzog, Php W
ess ros.1
ewtt Rubber Co
t-key, .
ggnbotham- aey-Logan Co.a
ton et a., Laura R.
nd, George U
nd, Roph Co
nman, Thos. P
rsch Co., doph
rsch-Wes Manufacturng Co
of rau Co., The 4
offman, Isabea C, estate of
offman et a., Meyer C, e ecutors .
offmann, rederck
ofed, Mary D. Moore
ooway, W. W., admnstrator
ovoke Westfed R. R. Co
ome uders Shppng ssocaton..
ome Ice Cream Ice Co
ome Laundry Co
ood, Chares C -
oughton Dutton udng Trust-
ouston et Termna Ry. Co.5
oward Co., . W. . P
owe, Chares
owe, Chares M., admnstrator 1
ubert, dmund D., estate of7
umphreys, . C
unt, . C
untngton, nne
untngton, Waace
upfe Co., Inc., . Chr. G.
utchngs, mma urt
utchns Lumber Storage Co.10
utchson, Chares 11
utt Catte Co
utt Contractng Co
ynes, Wam
Nonacquescenee reates to second ssue of decson.
Nonacquescenee reates to frst, second, and fourth ssues of decson.
state ta decson.
Nonacquescenee reates to thrd ssue n decson.
Nonacquescenee reates to second and fourth ssues of decson.
1 Nonacquescenee reates to ssue 1 of decson.
state ta decson nonacquescenee reates to ssue concernng transfer of stock.
1 Nonacquescenee reates to obsoescence ssue.
Nonacquescenee n so far as decson aows pettoners to deduct for the years 1920 and 1921 ther
aocabe porton of edera estate and State transfer ta es pad on shares receved by them by vrtue of a
compromse agreement modfyng the terms of the w and n e cess of ther shares recevabe under ue
w.
10 Nonacquescenee reates ony to that part of decson whch reates to appcaton of the yers decson
(1 . T. ., 1135).
Nonacquescenee reates to deducton of amount e pended for tranng to keep n condton for
stunt actng.
6245
8039
325
19107
4b91
40131
19167
19167
18615
3230
30494
6134
5338
3361
s-.
28361
8425
7044
37633
6047
27466
34558
41601
45738
49130
8494
19863
27805
7382
24464
11204
4069
19888
25807
25806
9834
19567
3307
8053
26433
26433
10
7
1
11
8
21
18
18
11
7
14
6
7
19
9
8
19
4
19
20
6
15
16
21
12
9
15
15
15
9
17
4
13
17
17
16
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
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a
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g

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Y
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r
k

U
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v
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)

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2
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1
3
-
0
1
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2
2

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5
9

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2
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8
9
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5
4
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#
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83
Nonacqubscencbs Contnued.
Ta payer.
Docket
o.
oard of Ta ppeas.
oume.
I.
Inos Merchants Trust Co., e ecutors 1
Inos Rura Credt ssocaton
Impera Coa Coke Co
Independent rewng Co. of Pttsburgh
Independent rck Co
Independent Lfe Insurance Co. of merca3
Indana arbor et R. R. Co
Indana Rong Ms Co
Indana Stove Works4
Indanapos Street Ry. Co
Indvdua Towe Cabnet Servce Co
Industra Loan Investment Co
Ingewood Park Cemetery ssocaton
Inman, dward
Interburban Constructon Co
Irvng ank-Coumba Trust Co. et a., e ecutors .
ackson, nnette T.
ackson, Carone Mather, estate of
ackson, George .8
ackson, Mnne L., estate of 8
ackson, Ws .
ackson Tnde
acob ros. Co
aeger, Otto, estate of
ames, rthur Curtss
ames omstrom Pano Co
efferson Gas Coa Co
ohnson et a., omer S., e ecutors e.
ohnson, Stephen O., estate of8
ohnston, Mrs. . ., deceased
ohnston, R. ., her at aw
ones, ohn M., estate of 8
ones, Loua ., e ecutr 8
ones, S.
11204
5058
21808
3242
8198
25295
21550
37661
12259
8148
8787
1231
12586
20664
3249
2501
2687
7028
20055
9001
20303
9002
4219
9003
9000
18832
20055
2509
18833
14951
33247
9550
9550
14355
14355
39743
39743
27220
12
3
18
4
11
17
16
13
8
7
17
6
4
5
5
d
11
15
11
3
11
11
19
16
13
19
16
11
11
12
12
20
20
17
1 state ta decson nonacquescenee reates to ssue concernng transfer of stock.
1 Nonacquescenee reates ony to ssue 2 n docson.
1 Nonacquescenee n assumpton of authorty by the oard to pass upon consttutonaty of secton
5(b) of the Revenue cts of 1921 and 1924 and refusa to admnster same.
1 Nonacquescenee reates to second Issue of decson.
state ta decson nonacquescenee reates to deducton for e ecutors commssons and attorneys
IMS.
4 Nonacquescenee reates to tentatve ta ssue.
Mate ta decson nonacquescenee reates to deducton of the amount under paragraph (2), secton
(a), Revenue ct of 1921, undmnshed by 21,753.40 of the deductons under paragraphs (1) and (3) of
ad secton.
1 state ta decson.
ta decson nonacquescenee reates to trust nstruments of 1918 and 1921.
G
e
n
e
r
a
t
e
d

f
o
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L

n

Z
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g

(
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Y
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k

U
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v
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t
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)

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2
0
1
3
-
0
1
-
2
2

0
3
:
5
9

G
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2
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2
7
/

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3
0
0
0
0
0
8
9
0
5
4
4
2
7
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_
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#
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84
Nonacquescences Contnued.
Ta payer.
Docket
No.
oard of Ta ppea .
oume.
.
aaua Land Trust.
ab, Lous
ansas Cty Southern Ry. Co. et a. .
een, erbert Ide
eeney, George ., estate of
eeney, Raymond G., e ecutor
eews Reaty Co., Inc.
ehota Mnng Co
eer, Samue
eogg-Mackay Co
ey Largo Shores Propertes, Inc.
eystone Coa Mnng Co
eystone Stee Wre Co
nnett-Odom Co.
rby Lumber Co
rk Co., ames S
sse, Carone T
sse, Carone T.4
ster et a., orence L., admnstrators 5.
ster, Wam ., estate of s.
ster Land Improvement Co. .
ttery Reaty Co
en, orence L.7.
yman,
ohn, ches
ohn, Le
rueger roughton Lumber Co.8.
uhn, .
ynett, arod
L.
Lancaster et a., ohn L., recevers.
Lancaster Lens Co.
28263
29547
19421
19422
12054
8423
11715
14424
11715
14424
10489
1117
38096
38098
21594
40529
10168
17496
20659
44954
30175
18203
21788
3707
11986
1806
3707
11986
18061
12355
15114
34274
4004
4005
6061
6102
10157
6753
16478
16477
17130
18631
13190
9863
11603
t
15
15
16
6
15
1.5
12
3
21
20
21
10
16
19
19
17
15
15
11
11
9
14
4
16
16
18
11
12
9
10
1 Nonacquescence reates to e cuson from ncome for the year 1919 of addtona compensaton for trans-
portng Unted States mas, awarded by the Interstate Commerce Commsson n 1919.
1 Nonacquescence does not reate to deprecaton and obsoescence ad|ustments.
Nonacquescence reates to transferee abty.
Nonacquescence reates to deducton of aquot part of cost of mprovements to certan property.
Nonacquescence reates to ssue as to whether the agreements of December 14,1918, and the dscharge
thereof were productve of ncome ta abe for the years nvoved, and, f so, to what e tent.
Nonacquescence reates to ssue wth respect to queston of aowance of amortzaton n 1918 on costs
Incurred n 1919.
Nonacquescence reates to queston n decson pertanng to the year 1919.
Nonacquescence reates to ssue nvovng respondent s moton to dsmss because petton was not
fed wthn 60-day perod.
Nonacquescence reates to the ssue as to whether a return sgned by the presdent and secretary was
the return requred by statute, the fng of whch started the runnng of the statute of mtatons.
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85
Nonacqcescknces Contnued.
Ta payer.
Docket
No.
oard of Ta ppcus.
oume.
Land Improvement 4 Suppy Co
Landreth Co., . .1
Langwe Rea state Corporaton
Lawsou, ohn S
Leasng udng Co
Le us, Mary ee urt
Lee Lve Stock Commsson Co
Lee Shoe Co., Inc., ohn
Lehmann et a., dward ., trustees 3_
Levne ros. Co., Inc.
Levnsten, . .s
Lews, ohn
Ley, red T
Ley Co., Inc., red T
Lbby, Margarctta ., estate of 9
Lberty Insurance ank
Lbertv Natona Co
Leber et a., . W., e ecutors
Lghtnng Creek O Gas Co
Lsk Manufacturng Co., Ltd.7.
Lvezey, . M
Loyd, rnest
Lobsenz, esse9
Lock, Moore Co., Ltd
Loetscher, Chrstan, estate of -,
Loetscher et a., ohn ., e ecutors
Loewensten ros. Garment Co
Lorrane Turpentne Co.
Los ngees Sat Lake R. R. Co. ..
Lousana Nava Stores, Ine
Ludngton, Chares ., estate of
28773
15835
23758
6108
14423
18745
280
10061
32137
6832
25262
26118
37005
18168
28979
5070
22372
9720
8584
23204
10031
11438
19050
20440
24414
29788
9295
14325
14325
8465
34503
21741
18449
23208
18
11
17
10
16
17
7
11
21
5
19
19
21
9
18
14
18
13
11
15
15
8
17
7
M
14
13
20
18
18
16
M.
Magee urnace Co. 5600
Maher, osephne 20996 21
Mahonng Coa R. R. Co 2202 4
Ma|estc Coa Co.. 21808 18
Maey Co., dward 9677 6
Manckrodt, |r., dward 11031 14
Manckrodt, sr., dward 10 1750 4
Mata Tempe ssocaton 29476 16
1 Nonacquescence reates ony to nvested capta ssue.
Nonacquescence n so far as decson aows pettoners to deduct for the years 1920 and 1921 ther
aocabe porton of edera estate and State transfer ta es pad on shares receved by them by vrtue of a
promse agreement modfyng the terms of the w and n e cess of ther shares recevabe under the
L
1 N onacquescence reates to ssue nvovng |ursdcton of oard.
.N onacquescence reates to ssue 6 n decson.
N onacquescence reates to ssue 1 of decson acquescence as to ths ssue pubshed n Cumuatve
uetn I -2, page 35, recaed.
state ta decson.
| Nooacquescenoe reates to deprecaton ssue.
f Nonacquescence reates to thrd and fourth ssues of decson.
I state ta decson nonacquescence reates to ssues nvovng e ecutors commssons, attorneys fees,
nd msceaneous admnstraton e penses.
II Nonacquescence reates to ssue 2 of decson.
Nonacquescence reates to frst ssue of decson.
G
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86
Nonacqotescences Contnued.
Ta payer.
oard of Ta ppeas.
No.
oume.
Page.
693
6
952
6101
10
747
12165
17
335
12165
17
335
324
2
188
20955
18
558
8115
11
162
20509
18
428
27965
21
384
9583
8
209
28250
20
162
2125
2
921
9216
10
1017
12468
13
335
37009
41314
20
560
22731
13
423
41387
21
1214
22731
13
423
19819
16
569
21462
16
556
11272
15
947
11271
15
947
13292
29938

1181
10446
10
961
19740
8
1301
17261
16
479
24105
20
68
9528
13
85
19847
18
156
18502
18503

1096
4437
11
1271
27956
19
299
9093
10
213
6052
5
435
7282
9
156
25000
19
423
11066
11
1223
21555
16
1111
14087
13
1081
25377
16
1267
19135
14
23
36111
45700

515
25730
19
911
Manhattan rewng Co
Mann, rankn P., estate of
Mansfed, enry ., estate of 1
Mansfed, Mnne I., e ecutr 1
Martme Securtes Co.2
Marston. dgar L
Martn dvertsng gency, Inc., Mac.
Mastck, Lzze S.1
Matern, Wam
Mathews, ohn
Matthessen, Conrad enry
Matthessen, |r., . W
Mc voy Co
McCung et a., u L., e ecutors
McCure Pne Co
McCormck et a., Cyrus ., e ecutors
McCormck, ames, estate of
McCormck, Nette ower, estate of
McCutchen, C.
McDonough, ames .
McDowe, S. L
McDowe, Mrs. S. L
McGee, Nee
McGown- oshee Lumber Co.
McMurtre, dnah
McNe, Robert .5
Meagher, Chares
Mercante Trust Co., e ecutor
Merren, . .7
Merrtt, Thomas ., estate of
Metro Pctures Corporaton of New ngand 8_
Metropotan Securtes Corporaton
Me can Teegraph Co.8
Manus Motor Works, Inc
Mddese Ice Co. eta
Mdand aey R. R. Co.
Md-West o Co
Man, M.
Mer, Carence
Modern Inventons Corporaton
Mor, arry C
Mosseff, Leon
Moter, Carre
state ta decson.
a Ths notce, whch was orgnay pubshed n uetn I -41, page 1, was repubshed n Cumuatve
uetn -, page 7, for the reason that the case was erroneousy ncuded In the st of cases acquesced
n, pubshed n Cumuatve uetn I -2, page 3.
state ta decson nonacquescence n so far as decson hods us nonta abe the vaue of property
paced n trust under the nstrument of uy 27,1918.
Nonacquescence reates to second Issue of decson.
6 Nonacquescence reates to deducton of commsson pad to agents for negotatng et
state ta decson nonacquescence reates to deductbty ot remander vaue of the r
bequeathed to charty.
Nonacquescence n decson regardng certan shares of stock.
s Nonncquescence reates to tentatve ta ssue.
9 Nonacquescence reates to ssue of 1 decson.
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87
NoN cgu SC NC S Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Page.
Moore, L. C. 1
Moore, Tom ( ayette T.) 1 -
Moore Corporaton, ohn C
Moore Cotton Ms Co
Morgan, rooks
Morre Co., ohn
Morrs, Caspar W
Morsman, dgar M., estate of
Morsman, |r., dgar M., admnstrator .
Moser, Car
Moser, George
Moser, osephne T
Moser, uus C
Mossman, Yarnee Co. 4
M. S. C. odng Corporaton et a
Muer, Car, estate of
Murphy, dward
Murphy et a., ames C, e ecutors
Murphy O Co
M. W. S. Reaty Co.--
Myers, Long Co
N.
Natona ank of Topeka
Natona ectrc Tcket Regster Co.
Natona Pano Manufacturng Co. 8.
Natona Products Co
The.
Natona Refnng Co. of Oho et a
Natona Sugar Manufacturng Co
Natona Tank port Co
Neson, C. N., estate of
Neuman Co. ct a., . L
Nevn, Wam L., e ecutor 5
New ersey Porcean Co
Newman, Lan D-. -.
Newman, Loyd D
Newman et a., Loyd D., e ecutors
Newman, Lous, estate of
Newman, Wam C.7
New Oreans, Te as Me co Ry. Co.8
1 Nonacquescence reates to ssue as to whether the agreements of December 14, 1918, and the dscharge
thereof were productve of ncome ta abe for the years nvoved, and, f so, to what e tent.
1 Nonacquescence reates to ssue nvovng gfts and sae of certan stock.
1 state ta decson nonacquescence notce pubshed n Cumuatve uetn III-1, page 57, recaed
n so far as same reates to ssue 2 of docson.
4 Nonacquescence reates to ssue nvovng deducton of tentatvo ta es n determnng t .o earnngs
avaabe for payment of dvdends n 1918 and 1919.
1 stato ta decson.
6 Nonacquescence reates to tentatve ta ssue.
T Nonacquescence reates to deducton of amount of bad debt ascertaned to be worthess and charged
off n CO.
1 Nonacquescence reates to ssues 1 and 4 n decson.
72109 31 7
3709
13907
18273
18861
29543
18614
15114
34274
27806
32075
32075
13473
13475
13474
13471
3269
11076
4620
9720
40798
4166
14440
30188
12358
24511
18850
13097
37745
3333
20486
6136
12120
186
10605
3274
7702
18348
31551
29568
15940
15936
15939
15939
6530
400
11
10
15
17
11
14
16
14
14
12
12
12
12
7
13
21
s
15
21
14
15
17
17
18
11
7
11
1
7
3
7
16
10
15
15
15
15
15
10
6
979
140
1140
662
420
1405
108
108
672
672
672
672
45
216
1175
216
952
1195
133
460
1301
48
42
1103
46
632
611
236
577
1217
127
533
15
1059
369
309
309
309
158
430
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88
Nonacqt|escences Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
New York Trust Co., trustee
Nes re rck Co
950 Park venue Corporaton
907 fth venue, Inc
960 Park ve. Co., Inc., et a
920 odng Corporaton
Node orst Co.1.
Nord op Ranch
Nordhot, ohn
Norfok nttng Ms Corporaton.
North mercan Mortgage Co.
North mercan O Consodated s
North Star Grante Corporaton
Northern Trust Co., e ecutor
Northern Trust Co., e ecutor 5
Northsde aduct Co.8
Northwestern Improvement Co
Northwestern States Portand Cement Co.7...
Norton et a., rank ., e ecutors 8
Norton Constructon Co., Inc
Norwch Worcester R. R. Co
Norwood Lumber Co
Noyes, Chares R., estate of
Nunnay, .
Nunnay, Wnshp
Oho as Dye nshng Works.
Obct Motor Co
Od Coony R. R. Co
Od Domnon Steamshp Co
Ods, Mard D.
Onda Gasone Co
Onger Corporaton
O Nc, ohn
O Ne, Mrs. ohn ( rances).
Ortsefen, dam 11
Ostenberg, W.
Ott, W M
Ottey, ohn
28250
2628
34034
34033
6978
34031
9867
6149
3766
4341
15798
8714
16107
37299
2473
7127
11728
14200
12106
5763
10456
5594
41042
2020
3785
18486
18627
18620
20395
14700
7820
24462
8718
15799
19077
25469
16864
16864
12900
19306
34015
13713
18623
20
6
20
20
7
20
12
10
4
5
IS
12
21
9
9
9
14
7
9
21
2
G
10
11
11
10
16
6
1G
16
13
9
16
1G
14
17
f
11
1 Nonacquescence reates to frst ssue of decson.
1 Nonacquescence reates to ssue regardng ncome from purchase of own debentures.
Nonacquescence reates to bass of chargng depeton on cost of defendng tte to o propertes and
to ssue nvovng ncome earned n 1916 and reeased to ta payer n 1917.
state ta decson.
e state tar decson nonacquesoenoe reates to trust created on ebruary 9( 1917.
Nonacquescence n so far as decson determnes that ghand Park Co. and Northsde aduct Co.
were affated wth rgna Raway Power Co.
1 Nonacquescence reates to ffth ssue of decson.
8 Nonacquescence does not reate to deductbty of New York nhertance ta .
state ta decson nonacquescence reates to ssue 1 of decson.
10 Nonacquescence reates to partnershp ssue.
11 Nonacquescence does not reate to deducton of contrbuton to church budng fund.
G
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3
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2

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5
4
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89
Nonacqt|escences Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Ottumwa Serum Co
Ou udng and Loan ssocaton.
P.
15114
34274
Pacfc Coast Ppe Co.1..
Pacfc Door Sash Co.2.
Pacfc Southwest Trust Savngs ank, e ecutor5.
Pametto Coa Co
Paramount nttng Ms..
Parrett, O. S
Paso Robes Mercante Co.
, Martha
n, rc
Peavy- yrnes Lumber Co.4.
Peavy-Moore Lumber Co. .
Peary-Wson Lumber Co. .
Peck s urnture Co.5..
Pederson, ans e
Pederson, Mare
Peeress Wooen Ms
Peton, onoro Gbson, e ecutr .
Perbohner, acob
Peruna Co.7
Petauma Santa Rosa R. R. Co. 8
Petts, Lzze da, estate of
Pheps-Waters Co.
Phadepha uartz Co
Pedmont-Mount ry Guano Co. 10
Petsch, my Lake, deceased, estate of 11.
Petsch, Water G., e ecutor 11
7961
14481
18898
21186
12136
9478
18272
20306
29902
6766
11655
28038
32298
27804
15824
16354
25984
15823
16355
25986
15822
16356
25985
16108
12329
12328
12038
7402
38096
38098
5102
12333
13830
37099
19419
6677
1757
5424
5424
14
6
11
20
14
16
11
17
4
12
18
IS
10
14
14
11
16
14
14
13
7
21
11
11
20
15
13
3
6
6
Nonacquescence reates to Issue 6 of decson.
Nonacquescence n oard s concuson that secton 331 of the Revenue ct of 1918 Is not appcabe.
state ta decson.
1 Nonacquescence reates to affaton ssue, e cept wth regard to Peavy-Wson Lumber Co. and
Chrste 5t astern Ry. Co. for 1917, 1918, and 1919.
1 Nonacquescence reates to easehod ssue.
I Nonacquescence reates to ssue (a).
Nonacquescence reates to Issue as to whether the oard had ursdcton to hear and determne a
defcency for 1920.
Nonacquescence reates to that part of decson as to the purchase of ta payer s own bonds at ess than
par whch were retred.
Nonacquescence reates to ssue as to whether Pheps-Waters C o. was a transferee of Wsconsn Chem-
ca Co.
II Revokes acquescence notce pubshed n Cumuatve uetn -2, page 3.
n Nonacquescence reates to ffth ssue of decson.
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#
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90
Nonacqt|escences Contnued.
Ta payer.
Pke County Coa Corporaton
Pttsburgh Gasone Co
Pttsburgh nfe orge Co
Pttsburgh Provson Packng Co.
Pttsburgh Suppy Co.1
Pttsburgh Unon Stock Yards Co
Pttsburgh ave oundry Constructon Co.
Panters Natona ank
Potter, .
Potter, . L
Potter, more L
Potts Run Coa Co.s
Powe Coa Co.
Prescott et a., Over, e ecutors s
Prescott, Wm. R
Prndbe, ohn
Prndbe, Loretta
Prtzaff, rederck C
Progress Paper Co
Prosser, Seward
Provdence Worcester R. R. Co
Provdent Trust Co. et a., admnstrators
.
uaker Mad, Inc.
R.
Radford Grocery Co., . M.
Raston Stee Car Co
Randa, George W., estate of.
Rankn, . rk 7
Rauh Sons ertzer Co., .
Rebadow, nna N
Red Samon Cannng Co
Recb, M.
Reed, ohn L.
Reese, .
Rey, Warren.
Renbod, erman, estate of...
Reance Manufacturng Co
Docket
No.
7189
39463
41854
7464
9219
15813
32370
18864
9219
15813
32370
9089
22455
7432
25544
33878
26274
30358
11945
7883
18626
15344
15345
6109
39648
8520
6297
7775
4976
11421
21500
7640
18158
5850
6765
26191
41046
10720
15937
4146
9847
20996
18404
5380
11418
6021
oard of Ta ppeas.
oume.
1 Nonacquescence reates ony to ssue 2 In decson.
8 Nonacquescence reates to Issue Invovng speca assessment.
b Nonacquescence docs not reate to ssue regardng vaue of coa n ands n 1903.
Nonacquescence reates to ursdcton ssue.
8 Nonacquescence does not reate to deductbty of New York nhertance ta .
stato ta decson.
Nonacquescenco as to ssto nvovng deducton of tem of 1,209.95 n 1924.
Nonacquescenco reates to ssues 3 and 4 of decson.
4
21
6
16
14
16
6
IS
10
20
18
19
12
8
11
1G
c,
n
20
7
5
5
10
19
16
4
17
12
15
15
8
21
15
7
17
7
G
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a
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2
0
1
3
-
0
1
-
2
2

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3
:
5
9

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8
9
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5
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#
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91
Nonacqt|escences Contnued.
Docket
No.
oard of Ta ppeas.
oume.
Remngton Rand, Inc.
Remngton Typewrter Co.
Renzehausen rederck C
Reserve Loan Lfe Insurance Co.1
Reynods, Mary G., estate of.
Reynods, Php M., estate of.
Rhode Isand Too Co.
Rchfed O Co
Rchmond et Ry. Co
Rggs Natona ank
Rndge Land Navgaton Co.
Roach, a
Roanoke Ms Co. _.
Robertson, . G
Robertson Co., . P.
Robeson, mma . .
Robeson, George W.
Robeson, Irvng S
Robeson, Robert
Robnson, Care
Robnson Co., . M.s
Robnson, Mrs. C.
Rodenbough, zabet McCahan, estate of 4
Rodenbough, mer ., e ecutor of the estate of
zabeth McCahan Rodenbough, deceased 4
Rofe, Ward G., e ecutor 6
Root, enry L., estate of4
Root, Suse M., e ecutr 4
Rosenbaum ros., Inc
Rosyn ue Co.
Rosseter, ohn
Roth, W.
Rothschd Coortype Co
Rouse, empstone Co., Inc. .
Rowe, M. D.s
Rowe, Mrs. M. D.8
Roya Syndcate
34726
2788
10658
21489
29554
32965
8625
8624
2832
15799
19077
7218
30903
3698
29256
36156
42069
23221
28867
14104
26268
26267
22126
26269
24584
5652
8271
465
465
18486
2825
2825
13050
9074
22072
6179
6012
12663
7673
10987
9063
9064
37374
39101
40685
21998
9528
11
773
4
880
8
87
18
359
8
360
8
360
3
180
13
1050
13
1291
17
615
2
1179
20
919
18
474
19
534
14
887
18
323
18
323
18
323
18
323
19
751
5
1217
8
972
1
477
1
477
16
519
5
696
5
696
11
736
16
285
12
254
4
834
14
718
7
1018
7
903
7
903
20
255
18
731
13
85
Roya Taors
Ruf, rank ., estate of9
Nonacquescence In decson Invovng Issues regardng (1) the deductbty of reserves to cover a-
bty on outstandng coupons attached to guaranteed premum reducton poces, and (2) the dsaowance
by the Commssoner as a deducton of 5,642.15 representng ta es pad and other rea estate e penses.
1 Nonacquescence reates to March 1, 1913, vaue of water rghts.
Nonacquescence reates to frst ssue n decson.
4 state ta decson.
1 state ta decson nonacquescence reates to Issue 1 of decson.
Nonacquescence reates to ssue nvovng notce of defcency for fsca year 1917 and speca assessment
ssue.
: Nonacquescence reates to fna ssue of decson.
Nonacquescence reates to second ssue of decson.
o reates to deductbty of remander vaue of the resduary estate
G
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0
1
3
-
0
1
-
2
2

0
3
:
5
9

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8
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5
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#
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92
Nonacqt|tescences Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
s.
St. Lous Maeabe Castng Co.1
St. Lous Natona aseba Cub
Saeger, Wford C
Sage, Margaret Ova, estate of
Saks Co.
Sanderson, en|amn ., e ecutor ___
San oaqun rut Investment Co..
Sansome, rederck
Sarfert, Ma
Sass, Morrs
Savannah Rver Lumber Co. et a. _
Scarbrough, . W
Scarbrough, Mrs. . W.
Scarbrough, Lemue
Scha, Wam
Schmdapp Trust und No. 1340, acob G
Schoenhet et a., Wam, e ecutors 8,4
Schoette Co., dwn
Schreer Co., onrad.
Scoto aey Suppy Co
Scowcroft Sons Co., ohn
Scranton ectrc Co.
Scuy Syrup Co., D.
Seaboard Natona ank of New York, N.
ecutor1
Seas, ctora D. (Mrs.)
Seas Shppng Co., Inc
Y., e -
Sever, Maron Shanwad
Shaffer, C.
Shaffran, Moe
Shanwad, Maron D.9
Sharpe, Mary .
Sheffed Dentfrce Co.8
5490
15168
26798
7562
5882
21258
28979
6988
6989
20801
26032
3436
6922
14354
16130
26936
17099
24483
17098
24484
17097
24482
9721
19163
26127
16626
1941
3600
27602
29583
17872
10005
9690
18624
20714
22077
41648
14410
9872
29987
14410
17127
11814
6187
6186
25640
40672
15
9
6
20
18
16
22
5
12
14
17
18
17
18
17
18
13
20
14
13
9
17
18
15
10
11
11
16
14
12
18
U
17
13
8
8
16
21
Shto Co., ohn.
Shto Reaty Co
Shoemaker, ora .
Shutteworth, ames ., estate of .
Nonacquescence reates to tentatve ta ssue.
state ta decson.
Nonacquescenec reates to affaton of Savannah Rver Tmber Co. and Port Wentworth Lumber Co.
wth group for 1918-1921.
Ths case was nadvertenty prnted n uetn v 111 - s as havng been acquesced n by the Com-
mssoner.
a Nonacquesceneo reates to ssue respectng affaton wth mercan Oas ectrc Co.
6 Nonacquescencereates to ssue as to whether oard had | ursdcton to hear and determne defcences.
T Nonacquescence wth respect to oard s actou n e cudng from ncome the amount receved from
Mary . Sharp trust.
8 Nonacquescence reates to oss sustaned through obsoescence of trade-mark
Nonacquescence reates to deducton for e hauston of fe estate.
G
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d

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2
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1
3
-
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1
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2
2

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:
5
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8
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5
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#
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93
Nonacc|t|escences Contnued.
Ta payer.
oard of Ta ppeas.
No.
oume.
Page.
18879
19
683
28360
29619
20
563
18879
19
683
28360
29619
20
563
1739
1
1113
15153
8
41
21523
16
793
13973
24509
14
878
27247
15548
22667
17
504
40643
29560
6498
5
918
12228
20210

973
30040
21
169
30040
21
169
5882
6
36
27976
16
658
3767
4
514
13179
11
902
665
1
1086
24172
32373
40021
19
490
42431
20785
20
1180
14464
16
268
22194
11
437
24859
30362
20
417
24859
30362
20
417
24860
20
417
30966
35016
20
19
30966
35016
20
19
12 175

25842
1
13
13
29779
553
1
810
11724
13
796
22371
18
740
25061
19
1059
30915
19
601
, ugene, e ecutor
Sege, acob, estate of
Sege, Inc., oe
Sver ng Consodated Mnng Co. of Utah-
Smmons Gn Co
rck Co.
Smpe ngneerng Co.
Soshemer ros., Inc
Sou Cty Stock Yards Co.
Socum, da M., e ecutr 4
Socum, Grant ., estate of4
Socum et a., erbert ennan, e ecutors.
Sma, G. G
Smth, Carence C.
Smth grcutura Chemca Co
Smthers, rancs S., estate of4 -
Southeastern press Co. .
South Penn O Co
Sowers Manufacturng Co
Spencer, Maron Parsons 8
Sproehne, bert W., estate of.
Sproehne, Isabe G., e ecutr
Sproehne, ohn R
Sprunt, ames, enevoent Trust
Sprunt et a., ames Laurence, trustees.
Standard Lfe Insurance Co. of merca 7.
Stange, . .8
Starbuck, . ., admnstrator
Stener Manufacturng Co.
n, Dorothy aker .
ros., Inc.
nonacquescence In oard s determnaton that transfer of a certan easehod by
1 a bona fde sae for a far consderaton n money or money s worth.
__.nce reates to contrbuton to the Year Cub.
1 Nonacquescence reates to ssue 3 of decson.
1 state ta decson.
1 Nonacquescence reates to ssue 2 of decson.
Revokes acquescence pubshed n Cumuatve uetn II-2, 3 .
Nonacquescence reates to ssue nvovng the queston of reserve.
1 cquescence notce n the case of . . Stange (C. . I -2, 4) recaed.
.Nonacquescence reates to ssue nvovng ta abe proft derved from sae of securtes.
Nonacquescence reates to deducton of net oss for 1921 n computng net ncome for fsca year ended
uuary31, 1924.
G
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a
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d

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1
3
-
0
1
-
2
2

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3
:
5
9

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3
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0
0
0
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8
9
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5
4
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7
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94
Nonacquescences Contnued.
Ta payer.
Docket
No.
oard of Ta
oume.
Stcpens- damson Manufacturng Co_
Stetson 4 son
Stevens, . G
Stevens Thompson Paper Co_
Stewart, Davd 1
Stone, George L
Stoney, Mary M. (Mrs.)
Strckand, D.
Strckand, Ove
Strckand, D. . and Ove
Strong, . R., estate of
Sugg, . D., estate of
Sunn, L.
Sunnysde Coa Coke Co.
Superor Motor Porta Co.5
Superor Tube Co.4
Swenson, Crstna, estate of
Swcnson, S. T., e ecutor
Swft, Luce W
Swft Co., C.
Sykes, Rchard, estate of5
T.
Tat, ames
Tayor, Thaa C
Temoyan et a., nne, trustees
Temoyan, Mrs. ormg, estate of
Termna Raroad ssocaton of St. Lous 7.
Te as Pacfc Ry. Co
Te te M Suppy Co
Thomas, C. R_-_
Thomas, Thomas ., estate of
Thomas, W. ubrey
Thomas Coa Co.8
Thompson, Meve W.
Thorn, Susan ., estate of 10
Thome, Neae Co., Inc
Tghe, nna M
Tnde, rank T.
Tobn, Chares
Trppensee Manufacturng Co
13462
18641
25010
30443
8736
16318
3501
18309
10766
18628
40707
40708
23159
12468
8860
7483
9442
10348
16104
16553
16177
16177
18516
12315
12136
13908
17799
22239
22239
26162
28661
9863
10382
7139
4230
4229
8098
23609
18234
12491
13472
8999
25922
13261
16
11
14
5
17
9
11
16
16
10
13
6
6
9
8
20
14
14
11
12
14
16
11
17
16
16
17
9
8
8
6
6
10
18
16
13
12
11
17
15
NonaoquescGnce reates to ssue I of decson.
Nona uescence reates to the thrd ssue of decson.
Nonacquesceu e reates to fna ssuo of decson.
Nonacquescence reates to speca assessment.
state ta decson.
Nonac quescence reates to ssue as to whether the agreements of December , 1918, and
hereof were productve of ncome ta abe for the years nvoved, and, If so, to what e tent.
I Nonactucscence does not reate to ssues nvovng contrbutons to Y. M. C. . and
dscount on bonds.
Nonacquesccnce reates to second ssuo of decson.
Nonacmescence reates to perod of mtaton for coecton of 31,205.51
year return for 1919 aso concuson that books were kept on accrua bass
10 state ta decson nonacquescence rentes to ssuo 2 of decson.
Nomcquescence reates to tentatve ta
the dscharge
of
G
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a
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)

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2
0
1
3
-
0
1
-
2
2

0
3
:
5
9

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2
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2
7
/

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3
0
0
0
0
0
8
9
0
5
4
4
2
7
P
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/


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w
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/
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s
s
_
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#
p
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95
No acquescbnces Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Trumbe Refnng Co. of rzona.
Turners as Power ectrc Co.
Turnure, George
Two-Repubcs Lfe Insurance Co..
U.
Underwood, Lucy C, estate of1
Unted States Merchants Shppers Insurance
Co.
Unted States Refractores Corporaton
Unted States Trust Co. of New York et a., e -
ecutors of rancs S. Smthers, deceased 4
Upham, Roy
.
an Schack, en L., estate of8
an Zandt, acobs Co
rgna Carona Securtes Corporaton et a.
rgna Raway Power Co.9
on Ruck, ar, estate of4 7
Wadde, Mary T...
Waggoner, da
Waggoner, R. M
Wagner, Rchard G.
Wacott Lathe Co...
Waden nfe Co.
W.
Wado, Chares G, estate of
Waker, Wam a, estate of.
Waters, rances W. (Mrs.)
Waworth, Chares W
Wanamakcr, ohn, estate of 4.__
Wardaw, W. C
Warner, red W
Warren, Wm. C
Washburn, . L
Washngton ote Co.8
11763
17492
26434
32151
26306
10045
29363
2473
10439
5642
665
16105
7127
6863
1 11605
7484
/ 9040
11731
16626
4228
5881
4265
5880
1142
12977
26163
18721
23973
18616
8794
31551
2261
3713
18632
27590
6609
7133
8085
18960
18960
14
15
9
21
13
9
1
16
9
8
6
9
14
6
9
9
9
2
17
18
15
11
0
16
4
5
11
16
Washngton Post Co 8085 10
We, oseph, estate of 4 18960 15
We, Sopna, admnstratr 4 18960 15
1 Nonacquescenee reates to thrd ssue, of decson.
1 Nonacquescenee reates to premum reserve ssue.
1 Nonacquescenee reates to ssue wth respect to queston of aowance of amortzaton n 1918 on costs
ncurred In 1919.
state ta decson.
1 state ta decson nonacquescenee reates to trust created on ebruary 9, 1917.
Nonacquescenee n so far as decson determnes that ghand Park Co. and Northsde aduct Co.
were affated wth rgna away 5t Power Co.
1 Ths case was nadvertenty prnted n uetn III-48 as havng been acquesced n by the Com-
reates ony to that part of decson whch reates to appcaton of the yers decson
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96
Nonacquescbncbs Contnued.
Ta payer.
Wessenbach, Mnna . _
Wes ros. Constructon Co
Western change ank
Western Maryand Ry. Co.s
Western Wheeed Scraper Co.8..
Wheatey, ames .
Wheeer, Chares S., estate of ..
Wheeer, Lan M., e ecutr s_
Whte, C.
Whte Wes Co
Whte age O Refnng Co.
Whtehouse, Syb.-
Whtchurst et a., ohn L
Whtehurst et a., Mary M
Wckersham, Chas.
Wdcncr, George D
Wdcncr, oseph
Wder, erbert ., estate of s.
Wknson, W. ., estate of _8-.
Wams arvey Corporaton.
Wshre O Co., Inc
Wson, hu Cement
Wson, George
Wson, Mrs. enry
Wson, Mton ., estate of.
Wson, Wam W
Wson Syndcate Trust
Wson Trust
Wndfeder, ohn ., estate of 5
Wnker ro. Co., Isaac
Wnshp, C. R_.
Wnshp, zabeth T. (Mrs.) ...
Wre Whee Corporaton of merca.
Wsconsn rdge Iron Co
Wofford, G. T
Wof et a., Ma , trustees
Wofe, mma 8., estate of7
Wofe, Russe, e ecutor 7
Docket
No.
oard of Ta ppeas.
oume.
4004
1
4005
6061
6
617
6102
I
10157

11015
16
79
4967
12
66
6475
12
889
12001
14
496
9665
8
1246
22391
20
695
22391
20
695
30308
15
1375
20035
19
416
30448
19
185
13220
7
600
12446
12
1416
12447
12
1416
18612
11
420
7723
8
651
7724
7725

661
32131
20
1159
16379
16743

1390
19409
19941
16
752
29697
3927
13
1150
8500
11
963
8501
11
963
35075
16
1280
26814
20
829
8502
11
963
12427
27808

508
39383
20
549
4166
5
952
11932
13775
15
38
1S618
11
420
18630
11
420
26555
16
737
13739
13
246
12529
15
1225
6149
10
835
16149
15
835
16149
15
835
1 Nonacquescence reates to queston n decson pertanng to the year 1919.
Nonacquescence reates to ssues concernng: contrbutons to ssocaton of Raway ecutves and
accrua n caendar year 1 19 of ncreased compensaton for transportaton of ma, awarded by Interstate
Commerce Commsson on December 23,1919.
1 Nonacquescence reates to that porton of decson whch hods that secton 284(c) of the Revenue
ct of 1926 s appcabe to the case.
Nonacquescence reates to tem (3) n decson.
8 state ta decson.
Nonacquescence reates to ssue 1 of decson.
7 Nonacquescence reates to deducton of Connectcut and West rgna Inhertance ta es.
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97
Nonacquescences Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume. Page
Wofennan, red, e ecutor 1
Wofcrman, Lous, estate of 1
Wood, S. ..
Woodrow Lee Trust
Woodruff, rnest
Woodruff, Geo. C
Woodruff, as. W
Woods Machne Co., S.
Woodward, Davd
Wooston, euah . ., estate of
Worste Co., Ltd..
Wrght, George M
Wrght, Inc., en T...
W. T. M. Co
Wurts-Dundas, Mure
Wyomng Centra ssocaton
Y.
Yorkshre Creamery Co
York Ice Mk Co
Young, oward S
Young, ames ., estate of
Z.
Zakon, Wam
Zeerbach, Isadore
Zeerbach, Theresa
Znn, rthur
Znn, Martn
11291
11291
35128
15563
2050
18518
18619
32015
2266
11298
14707
24851
12164
/ 8778
13093
26518
/ 9965
1 20546
/ 15114
34274
18348
18000
4976
5450
2028
883
2789
3444
10
10
22
17
4
11
11
21
4
1(1
15
18
12
11
17
S
11
16

5
1 state ta decson nonacquesoence reates to second ssue of decson
state ta decson.
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INCOM T RULINGS. P RT L
R NU CT O 1928.
SU TITL . G N R L PRO ISIONS.
P RT I. R T S O T .
S CTION 11. NORM L T ON
INDI IDU LS
rtce 14: Who s a ctzen. -23-5089
T. D.4316
INCOM T .
n ct to nmend the naturazaton aws n respect of postng
notces of pettons for ctzenshp, and for other purposes.
Tkeast|by Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Rtvenue and Others Concerned:
Reference s made to the ct entted n ct reatve to the
naturazaton and ctzenshp of marred women, approved Sep-
tember 22, 1922 (Pubc, No. 346, S ty-seventh Congress, . R.
12022), and the amendment thereto entted n ct to amend the
aw reatve to the ctzenshp and naturazaton of marred women,
and for other purposes, approved uy 3, 1930 (Pubc, No. 508,
Seventy-frst Congress, . R. 10960). Whe not nterna-revenue
measures, these cts were pubshed as Treasury decsons (T. D.
3406, C. . 1-2, 42, and T. D. 4301, C. . I -2, 89, respectvey),
for the nformaton and gudance of revenue offcers and others
concerned n determnng the ctzenshp under the edera ncome
ta cts of mercan-born women who have marred aens and of
foregn-born women who have marred mercan ctzens.
The ct approved September 22, 1922, as amended, was further
amended by the appended ct entted, n ct to amend the
naturazaton aws n respect of postng notces of pettons for
ctzenshp, and for other purposes, approved March 3, 1931 (Pub-
c. No. 829, Seventy-frst Congress, . R. 10672), whch s aso
pubshed for the nformaton and gudance of revenue offcers and
others concerned.
Davd urnet,
Commssoner of Interna Revenue.
pproved May 26, 1931.
. W. Meon,
Secretary of the Treasury.
(99)
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11, rt. 14.
100
. R. 10672. PU LIC, NO. 829 S NTY- IRST CONGR SS.
n ct to amend the naturazaton aws n respect of postng
notces of pettons for ctzenshp, and for other purposes.
e t enacted by the Senate and ouse of Representatves of the Unted
States of merca n Congress assembed, That secton 5 of the Naturazaton
ct of une 29, 1906, as amended, s amended to read as foows:
Sec. 5. The cerk of the court sha, f the pettoner requests t at the tme
of fng the petton for ctzenshp, ssue a subpoena for the wtnesses named
by such pettoner to appear upon the day set for the fna hearng, but n
case such wtnesses can not be produced upon the fna hearng other wtnesses
may be summoned upon notce to the ureau of Naturazaton n such manner
and at such tme as the Commssoner of Naturazaton, wth the approva
of the Secretary of Labor, may by reguaton prescrbe.
Sec. 2. So much of secton 6 of such ct, as amended, as reads and n no
case sha fna acton be had upon a petton unt at east 90 days have eapsed
after fng and postng the notce of such petton s amended to read as
foows: and n no case sha fna acton be had upon a petton unt at
east 90 days have eapsed after fng of such petton.
Sec. 3. (a) ny person, born n the Unted States, who had estabshed
permanent resdence n a foregn country pror to anuary 1, 1917, and who
has heretofore ost hs Unted States ctzenshp by becomng naturazed under
the aws of such foregn country, may, f egbe to ctzenshp and f, pror
to the enactment of ths ct, he has been admtted to the Unted States for
permanent resdence, be naturazed upon fu and compete compance wth
a of the requrements of the naturazaton aws, wth the foowng e ceptons:
(1) The 5-year perod of resdence wthn the Unted States sha not be
requred
(2) The decaraton of ntenton may be made at any tme after admsson
to the Unted States, and the petton may be fed at any tme after the
e praton of s months foowng the decaraton of ntenton
(3) If there s attached to the petton, at the tme of fng, a certfcate
from a naturazaton e amner statng that the pettoner has appeared before
hm for e amnaton, the petton may be heard at any tme after fng.
(b) fter naturazaton such person sh have the same ctzenshp status
as mmedatey precedng the oss of Unted States ctzenshp.
Sec. 4. (a) Secton 3 of the ct entted n ct reatve to the naturazaton
and ctzenshp of marred women, approved September 22, 1922, as amended,
s amended to read as foows:
Sec. 3. (a) woman ctzen of the Unted States sha not cease to be a
ctzen of the Unted States by reason of her marrage after ths secton, as
amended, takes effect, uness she makes a forma renuncaton of her ctzen-
shp before a court havng |ursdcton over naturazaton of aens.
(b) ny woman who before ths secton, as amended, takes effect, has
ost her Unted States ctzenshp by resdence abroad after marrage to an
aen or by marrage to an aen negbe to ctzenshp may, f she has not
acqured any other natonaty by affrmatve act, be naturazed n the manner
prescrbed n secton 4 of ths ct, as amended. ny woman who was a
ctzen of the Unted States at brth sha not be dened naturazaton under
secton 4 on account of her race.
(c) No woman sha be entted to naturazaton under secton 4 of ths
ct, as amended, f her Unted States ctzenshp orgnated soey by reason
of her marrage to a ctzen of the Unted States or by reason of the acquston
of Unted States ctzenshp by her husband.
(b) Secton 5 of such ct of September 22, 1922, s repeaed.
pproved March 3, 1931.
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101 22(a), rt. 51.
P RT II. COMPUT TIONS O N T INCOM .
S CTION 22(a). GROSS INCOM : G N R L
D INITION.
rtce 51: What ncuded n gross ncome. -19-5052
I. T. 2569
R NU CT O 1928.
In the case of shares of stock sod between dvdend dates there
s no dstncton between common and preferred stock under the
provson of artce 51 of Reguatons 74, the entre amount of the
dvdend beng ncome to the vendee.
dvce s requested reatve to the treatment under artce 51 of
Reguatons 74 of dvdends on preferred stock whch s sod between
dvdend dates. That artce reads n part as foows:
In the case of stock sod between dvdend dates, the entre amount of the
dvdend s ncome to the vendee and must be reported n hs gross ncome
when the dvdend becomes due and payabe. The amount advanced by the
vendee to the vendor n contempaton of the ne t dvdend payment s an
nvestment of capta and may not be camed as a deducton from gross
ncome.
It s noted that no dstncton s made n the above-quoted pro-
vsons of the reguatons between preferred stock and common stock,
and that n actua practce new ssues of preferred stock are often
sod at a specfed prce pus the amount of the dvdend appcabe
to the porton of the perod whch has e pred up to the date of the
sae. The queston presented s whether, n the case of preferred
stock, such porton of the dvdend for the partcuar perod may not
be treated as a charge aganst the ne t dvdend nstead of beng
treated as a part of the cost of the stock.
The provson of artce 51 of Reguatons 74, referred to, s based
on the premse that a dvdend can not be recognzed as such unt
t comes nto e stence by means of the necessary corporate acton.
(See G. C. M. 5180, C. . II-2, 110, and the court decsons theren
cted.) s stated n that memorandum, the obgaton of a corpo-
raton or ts board of drectors to decare a dvdend can not be
treated as the dvdend tsef.
ttenton s aso caed to the provson contaned n secton 113
of the Revenue ct of 1928 to the effect that n the case of such stock
purchased subsequent to March 1,1913, the bass on whch to compute
gan or oss to resut from ts subsequent sae or other dsposton
s the cost of the stock. though the purchaser of stock may have
every reason to e pect the fu amount of the reguar dvdend to be
pad after the stock s purchased, the prce pad for the stock s the
cost of the stock to hm, and by the e press provsons of the statute
he s entted to use such cost as the bass on whch to compute gan
or oss resutng from ts subsequent sae. The treatment as a
charge aganst the ne t dvdend of a porton of the cost of the stock
woud have the effect of reducng the bass on whch to compute
the gan or oss from the sae of the stock, whch woud resut n an
ncrease n the amount of ncome sub|ect to both the norma ta and
the surta or n the amount of ncome sub|ect to ta as capta gan
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22 (c), rt. 104.
102
under secton 101 n case the stock s hed for a perod of more than
two years. It foows that such treatment woud be n drect confct
wth the other provsons of the statute.
It s hed, therefore, that n the case of shares of stock sod between
dvdend dates there s no dstncton between common and preferred
stock under the provsons of artce 51 of Reguatons 74, the entre
amount of the dvdend beng ncome to the vendee.
S CTION 22(b). GROSS INCOM : CLUSIONS
ROM GROSS INCOM .
rtce 83: Gfts and bequests.
R NU CT O 1928.
ssgnment of moneys to become due n the future. (See Ct. D.
272, page 186.)
S CTION 22(c). GROSS INCOM : IN NTORI S.
rtce 104: Inventores at market. -18-5043
G.C.M. 9401
R NU CTS O 1918, 1921, 1924, 1926, ND 1928.
Purchased or produced goods n the nventory of a manufacturer
In a form saabe on the open market on the nventory date
shoud be vaued at the current hd prces prevang n the
open market for ke goods on that date. ny such goods whch
have been moved nto process to a further state of manufacture,
but whch have not reached a form saabe on the opeu market,
shoud be vaued at the current bd prces prevang on the
nventory date for goods of the precedng saabe form pus
the necessary abor and burden attachng up to the state n whch
the goods are found on the nventory date. The reproductve
cost method s entrey approprate as to goods n process whch
have not reached a form saabe on the open market between the
tme of the orgna purchase of the raw matera and the nven-
tory date, and as to goods n process or fnshed goods where
there are no open market quotatons therefor.
n opnon s requested whether a manufacturer, n appyng the
cost or market, whchever s ower method of vaung ts nven-
tory of pupwood, s requred to use the open market prce of pup-
wood wth respect to that porton of the nventory purchased n the
open market, and the so-caed reproductve cost method wth respect
to that porton produced from ts own woodands, or whether t
shoud be aowed to use the open market prce of pupwood n the
entre nventory, regardess of whether purchased or produced.
The ta payer s a manufacturer of paper and paper products.
porton of the wood pup whch t manufactures s made from
wood purchased n the open market at the prevang current prce
per cord. The greater porton of ts wood pup s made from wood
cut from ts own tmber tracts and conveyed under the ta payer s
supervson to ts pup or paper ms. The ta payer cams that
under artce 104 of Reguatons 74, t s entted to appy the open
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103
22(c), rt. 104.
market prces on cut pupwood (whch s a saabe artce) preva-
ng on the nventory date to the vauaton of the entre amount of
cut pupwood on hand or n process on December 31, 19 , rrespec-
tve of the fact that the greater part thereof was produced by tsef
from ts own woodands.
rtce 104 of Reguatons 74 provdes n part as foows:
bt. 104. Inventores at market. Under ordnary crcumstances and for
norma goods In an nventory, market means the current bd prce pre-
vang t the date of the Inventory for the partcuar merchandse n the
voume n whch usuay purchased by the ta payer, and s appcabe n the
cases
(a) Of goods purchased and on hand, and
(b) Of basc eements of cost (materas, abor, and burden) n goods n
process of manufacture and n fnshed goods on hand .
There s no dspute that under artce 104 cut pupwood purchased
by the ta payer n the open market and on hand on December 31,
19 , shoud be vaued at the current bd prces for cut pupwood
prevang n the open market on that date. The prncpa queston
m ths case concerns the manner of arrvng at market vauaton
of cut pupwood whch the ta payer produced from ts own tmber
tracts and whch t had on hand as such on December 31, 19 , or n
process of manufacture nto wood pup. Ths atter cass of goods
s referred to herenafter as produced goods, that s, cut pupwood
whch came nto e stence as nventorabe merchandse as a part
of the manufacturng process of the ta payer n the producton of
wood pup.
Two vews have been advanced reatve to the determnaton of
vauatons at market under the above anguage of artce 104 of
Reguatons 74, and the same anguage of precedng reguatons,
n the prcng of produced goods n the nventores of manufac-
turers. One vew s to the effect that the reguatons requre the
vauaton of goods at varous stages of manufacture, n the nven-
tory of a manufacturer, at the current bd prces prevang on the
nventory date for goods smar to the form n whch the manu-
facturer purchases hs raw matera, to whch there s to be added
a vauaton, at the current bd prces prevang on the nventory
date, of the necessary abor and burden connected wth the goods
to brng them to the stage of manufacture n whch they are found
on the nventory date. The market vauaton resutng there-
from s a reproductve vaue representng the estmated cost on the
nventory date of repacng through manufacture the specfc goods
n the nventory on the nventory date.
Wth respect to the ta payer s produced goods n the nstant case,
t s necessary under ths vew to go back to the ta payer s standng
tmber n order to set up a raw matera market prce, and to
use the market for standng tmber on the nventory date for that
porton of the orgna standng tmber acqured, whch s repre-
sented by the ta payer s produced cut pupwood on hand or n proc-
ess, and to add thereto the current market prces on the nventory
date of abor, suppes, and burden connected therewth to construct
the so-caed reproductve market prce therefor. In the process of
the change n form from standng tmber nto the ta payer s fnshed
product, there s at east one stage at whch the goods come nto the
72109 31 8
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22(c), rt. 104.
104
form of a merchandsabe artce ordnary saabe n the open
market, . e., cut pupwood. On the nventory date, December 31,
19 , a porton of the ta payer s produced pupwood rested n a
merchandsabe form as cut pupwood, a porton was n process of
change from that form nto a further state of manufacture, and st
another porton of such produced goods was n the ta payer s n-
m the open market for cut pupwood as a saabe artce of merchan-
dse are dsregarded.
The so-caed market prces deveoped on the reproductve cost
bass n ths case for the ta payer s produced cut pupwood, under
the vew set forth n the precedng paragraph, are understood by ths
offce to be substantay hgher than the current bd prces for cut
pupwood n the open market on the nventory date.
The other vew s that artce 104 of Reguatons 74 does not ntend
to provde for a but-up or theoretca market vaue to a manufac-
turer, as dstngushed from a trader, nor to provde for a dstnc-
ton between the market vaue of goods produced by the manu-
facturer and those purchased by hm. That s to say, that pur-
chased or produced goods n the nventory of a manufacturer n a
form saabe on the open market on the nventory date shoud be
vaued at the current bd prces prevang n the open market for
ke goods on that date, and that any such goods whch have been
moved nto process to a further state of manufacture but whch
have not reached a form saabe on the open market shoud be vaued
at the current bd prces prevang on tne nventory date for goods
of the precedng saabe form, pus the necessary abor and burden
attachng up to the state n whch the goods are found on the nven-
tory date. Under ths vew ony such goods as have not reached a
form saabe on the open market between the tme of the orgna
purchase of the raw matera and the nventory date shoud be
vaued on the bass of the so-caed reproductve cost, or estmated
cost of repacement through manufacture of the specfc goods on the
nventory date, ncudng aso goods n process or fnshed goods for
whch there are no open market quotatons on the nventory date.
In the ordnary sense of the term, market vaue s regarded as
representng the prce at whch t may be e pected that an artce can
be purchased or sod under ordnary crcumstances. Ths s usuay
not at a reproductve cost to a partcuar manufacturer as dstn-
gushed from some other manufacturer or trader, but at market
prces (e ceptng of course frm saes contract prces wherever ap-
pcabe) whch woud ordnary equa reproductve cost ony by ac-
cdent or under e traordnary crcumstances. To regard reproduc-
tve cost as the market prce seems somewhat straned when the
term market s vewed n ts ordnary sense.
The prncpa argument n support of usng reproductve cost
as representng market seems to be that t s not the practce of the
manufacturer to buy goods of the type whch he has n process of
manufacture or merchandse of the type of hs fnshed goods, nor
s t hs practce (n vew of hs trade contracts and workng organ-
zaton) to cease operatons on a ow market. Ths assumes that
the manufacturer s e pected to contnue to operate on a ow market
ether unt the market rghts tsef or unt he becomes nsovent.
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105
22(c), rt. 104.
In consderng the soundness of ths argument t s we to re-
gard the theory back of the cost or market, whchever s ower,
bass of nventory vauatons. refy stated, the theory s based
on the commerca and accountng practce of statng ncome con-
servatvey, or, stated otherwse, f market s beow cost at the end
of the year the ta payer s permtted to use market and reduce hs
ncome for that year. Under ths system t s, of course, recognzed
that the market may rght tsef n a succeedng perod wth the
resut that the e pected Toss may not actuay be sustaned and that
ncome n the ater perod w be ncreased correspondngy when
compared wth the actua cost and sae prce.
Measured by ths test the queston suggests tsef why a manu-
facturer shoud n certan nstances be requred to state hs ncome
on the bass of determnng hs market by reproductve cost whe
the trader uses market quotatons. If reproductve cost s hgher
than the market quotatons wth respect to produced goods, t does
not seem proper or ogca to assume that the manufacturer w be
abe to se at or above reproductve cost nstead of at the market
prces any more than that a trader w be abe to se at a proft
where hs market s beow cost, and yet the trader s gven the
beneft of the ower market quotatons. Where reproductve cost
s ower than market quotatons wth respect to produced goods,
the manufacturer s aowed reproductve cost, athough under the
genera theory of nventoryng on a cost or market bass, whch-
ever s ower, t seems that he woud be e pected to se at market
and not at reproductve cost. s to purchased goods, the manu-
facturer s paced on the same bass as the trader n that he s
requred to use current bd prces and s not hed to reproductve
cost f hgher than market, or gven reproductve cost f ower than
market.
The economc and ogca dstncton between usng one system
for nventoryng a manufacturer s produced goods and another for
hs purchased goods s dffcut to see. In other words, where the
market s beow reproductve cost for produced goods t s dffcut
to reason why reproductve cost shoud be used on the assumpton
that the market w rght tsef, but on purchased goods of the same
knd market quotatons shoud be used on the assumpton that con-
dtons w not mprove.
rtce 104 of Reguatons 74 states that market means the
current bd prce prevang at the nventory date for the partcuar
merchandse n the form usuay purchased by the ta payer and s
appcabe n the cases (a) of goods purchased and on hand, and
(b) of basc eements of cost (materas, abor, and burden)
n goods n process of manufacture and n fnshed goods on
hand. There s no dspute under paragraph (a) of artce 104 as
to goods actuay purchased and on hand, for n such case market
s regarded as beng the current bd prce, whether the purchase s
by a manufacturer or a trader. The dffcuty grows out of the
meanng of market when apped to produced goods, because para-
graph (b) of artce 104 states that the current bd prces of the
basc eements of cost (materas, abor, and burden) are to be
used, and the dfference of opnon arses out of the meanng of the
words basc eements of cost. Under one vew at east the words
basc eements of cost are not used to mpy that reproductve
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22(c), rt. 105.
106
cost sha be used as market vaue, but are used merey as descrp-
tve of the basc eements n goods n process of manufacture from
one form of saabe merchandse nto another.
nother argument n support of the frst vew heren ndcated
pertans to the anguage market means the current bd prce pre-
vang at the date of the nventory for the partcuar merchandse
n the voume n whch usuay purchased by the ta payer. Ths
s taken to mean that market s appcabe ony to the partcuar
merchandse purchased and not that produced, e cept as to the
nta raw matera. s opposed to ths s the vew that the regu-
atons merey ntend to state that consderaton must be gven to the
voume n whch a manufacturer woud be e pected to purchase f
repacng ether purchased or produced goods.
It s the opnon of ths offce that of the two vews above ndcated,
the second vew reaches the better resut and s the vew whch shoud
be adopted by the ureau. That s to say, artce 104 does not ntend
to provde for a but-up or theoretca market vaue to a manufac-
turer, as dstngushed from a trader, nor to provde for a dstncton
between the market vaue of goods produced by the manufacturer and
those purchased by hm that purchased or produced goods n the n-
ventory of a manufacturer n a form saabe on the open market on
the nventory date shoud be vaued at the current bd prces preva-
ng n the open market for ke goods on that date and that any such
goods whch have been moved nto process to a further state of
manufacture, but whch have not reached a form saabe on the open
market, shoud be vaued at the current bd prces prevang on the
nventory date for goods of the precedng saabe form pus the
necessary abor and burden attachng up to the state n whch the
goods are found on the nventory date. The reproductve cost
method s entrey approprate as to goods n process whch have not
reached a form saabe on the open market between the tme of the
orgna purchase of the raw matera and the nventory date, and
as to goods n process or fnshed goods where there are no open
market quotatons therefor.
The ta payer referred to heren shoud be permtted to appy the
open market prce of pupwood to ts entre nventory on December
31, 19 , rrespectve of whether the partcuar unt was purchased
or produced by t.
C. M. Charest,
Genera Counse, ureau of Interna- Revenue.
rtce 105: Inventores by deaers n -14 5005
securtes. I. T. 2564
R NU CT O 1928.
Whether a bank may nventory securtes at cost or market,
whchever s ower, s contngent upon ts compance wth the pro-
vsons of artce 105 of Reguatons 74 as to ts cassfcaton as a
deaer n securtes.
dvce s requested whether a banks may nventory securtes
wth no restrctons as to whether the bank reguary engaged n
the purchase of securtes and ther resae to customers as requred
by artce 105 of Reguatons 74.
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107
23(b), rt. 141.
Suggeston has been made that the case of arrman Natona
ank v. Commssoner (43 ed. (2d), 950) operates to aow a
banks to nventory ther securtes. Wth ths suggeston ths offce
can not agree. It s ceary apparent from readng the opnon of
the crcut court of appeas n that case that the queston nvoved
was purey one of fact and that the court dd not decde as a genera
proposton that a banks are entted to nventory ther securtes.
Snce the case was decded on a queston of fact, no appea was
taken. ccordngy, the decson n that case shoud not be regarded
as a controng precedent n the dsposton of other cases of banks
seekng to nventory ther securtes. The adopton by a bank of
the nventory vauaton method of cost or market, whchever s
ower, for ncome ta purposes, s contngent upon ts compance
wth the provsons of artce 105 of Reguatons 74 as to ts cass-
fcaton as a deaer n securtes. In other words, the bank must
be reguary engaged n the purchase of securtes and ther resae
to customers n order to be entted to use the nventory method
of computng ncome. If such method s empoyed the nventores
may be taken on one of three bases, namey, (a) at cost (b) at cost
or market, whchever s ower or (c) at market vaue. Whatever
bass s adopted, however, must be adhered to n subsequent years,
uness permsson to change the bass s secured from the Com-
mssoner.
S CTION 23(b). D DUCTIONS ROM GROSS
INCOM : INT R ST.
rtce 141: Interest. -8-4944
G. C. M. 9094
R NU CT O 1028.
The State of Massachusetts does not recognze contracts between
husband and wfe or ndebtedness arsng therefrom. ccordngy,
a husband resdng n that State s not entted to a deducton for
amounts desgnated as nterest and pad upon a supposed obgaton
to hs wfe.
n opnon s requested whether under the Massachusetts aw s
entted to deduct from gross ncome the nterest on money oaned to
hm by hs wfe.
The ta payer, , s engaged n a busness formery conducted by
a corporaton, a of the stock of whch had been owned by and hs
wfe. In order to carry on hs busness states that he borrowed
a doars from hs wfe and ssued to her hs nterest-bearng note for
the amount borrowed. On hs ncome ta return for the ta abe
vear 1928, deducted from hs gross ncome the amount represent-
ng the nterest pad hs wfe on money oaned to hm. Ths deduc-
ton was dsaowed on the ground that under the Massachusetts
aw a husband and wfe can not enter nto a contract wth one
another. The queston submtted to ths offce for opnon s whether
the deducton was propery dsaowed.
The appcabe provsons of the Massachusetts Statutes (Gen.
Laws Mass., ch. 209, secton 2) read:
marred woman may make contracts, ora and wrtten, seaed and unseaed,
n the same manner as If she were soe, e cept that she sha not be authorzed
hereby to make contracts wth her husband.
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23(c), rt. 151.
108
That a promssory note or other contract for the payment of
money oaned by a wfe to her husband s absoutey vod has been
repeatedy hed by the Supreme Court of Massachusetts. Ingham
v. Whte, 4 en, 412 owe v. Torrey, 135 Mass., 87 ne v. ges-
ton, 140 Mass., 202, 4 N. ., 573 Whtney v. Cosson, 138 Mass., 49
assett v. assett, 112 Mass., 99 Leavtt v. Wntman, 234 Mass., 248,
125 N. ., 390 Gahm v. Gahm, 243 Mass., 374, 137 N. ., 876.)
In Woodward v. Spurr (141 Mass., 283, 6 N. ., 521), cted wth
approva by the Massachusetts Supreme Court n many recent cases,
t was hed that a wfe was not entted to prove, aganst the estate
of her husband n nsovency, a cam for money oaned by her to
hm from her separate estate and used by hm n hs busness, and for
whch she hed hs promssory note, notwthstandng St. 1884, ch.
293, provdng for proof of equtabe abtes aganst nsovent
estates.
In Gahm v. Gahm, supra, the Supreme udca Court, by Chef
ustce Rugg, sad:
The common-aw dsabtes of marred women as to the makng of contracts
have been removed by statute so that they now can contract and sue and be
sued n the same manner as f snge, sub|ect, however, to the mtaton that
contracts and suts between husband and wfe are not permssbe but stand
on the same footng as heretofore. promssory note or other con-
tract for the payment of money ent by the wfe to the husband s absoutey
vod. It s a nuty. It can not be enforced aganst the husband.
It s apparent, from the foregong authortes, that the aw of Mas-
sachusetts s frmy setted upon ths pont. Inasmuch as the note
s of no ega consequence, the presumpton s that the husband heren
may use the money as hs own. ( acobs v. ester, 113 Mass., 157.)
The State of Massachusetts recognzes no ndebtedness and, where
no ndebtedness e sts, there s no abty to pay nterest.
It s the opnon of ths offce, therefore, for the reasons above
stated, that the deducton taken by for nterest pad on the note
ssued to hs wfe was propery dsaowed.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
S CTION 23(c). D DUCTIONS ROM GROSS
INCOM : T S G N R LLY.
rtce 151: Ta es. --4889
G. C. M. 7408
R NU CT O 1928.
The gasone and motor fue ta mposed by the State of New
Me co s deductbe for edera ncome ta purposes by the con-
sumer who pays t. If, however, such ta s added to or made a
part of the busness e pense of such consumer, t can not be
deducted separatey by hm as a ta .
n opnon s requested whether the gasone and motor fue ta
mposed by the State of New Me co s deductbe for edera
ncome ta purposes by the deaer or by the consumer.
The gasone and motor fue ta of the State of New Me co s
mposed n accordance wth the provsons of chapter 175, Laws of
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109
23(c), rt. 151.
New Me co, 1921, as amended by chapter 14, Laws of New Me co,
1927, and chapters 29 and 96, Laws of New Me co, 1929.
Secton 3 of chapter 175, Laws of New Me co, 1921, as amended
by secton 1 of chapter 14, Laws of New Me co, 1927, and secton 1
of chapter 29, Laws of New Me co, 1929 (approved March 7, 1929),
provdes:
Secton 1. There s hereby eved and mposed an e cse ta of 5 cents per
gaon upon the use of a gasone and motor fue used n ths State for any
purpose provded that n the coecton of such ta a deducton sha be aowed
of the amount of the e cse ta pad n ths State by dstrbutors or deaers
upon the sae of the gasone so used.
Secton 1 of chapter 96, Laws of New Me co, 1929, provdes that
on or before the 15th day of each caendar month every dstrbutor
and/or reta deaer n gasone or motor fue sha render to the
State comptroer a statement settng forth the number of gaons of
gasone or motor fue refned, manufactured, compounded, pro-
duced, receved, used, or sod n the State by such dstrbutor or
reta deaer, and that such report must be accompaned by the
amount of e cse ta es provded by aw upon gasone or motor fue
so sod or used n the State, e cept gasone and motor fue sod n
purey nterstate commerce saes and e cept gasone and motor
fue purchased by such dstrbutor or reta deaer from other censed
dstrbutors n the State who have pad or are abe for the e cse
ta es thereon. The term dstrbutor of gasone s defned to
mean a person engaged n the busness of seng gasone or motor
fue n the State from refneres, tank farms, tank cars, recevng
tanks, or statons or n or from tanks, barres, drums, or other con-
taners n quanttes e ceedng 56 gaons n any one sae to the
deaer e cept persons engaged n seng e cusvey n nterstate
commerce. The term reta deaer n gasone s defned to mean
a person other than a dstrbutor of gasone who ses gasone or
motor fue n the State n quanttes ess than 56 gaons.
Secton 23(c) of the Revenue ct of 1928 provdes that n com-
putng net ncome there sha be aowed as a deducton ta es pad
or accrued wthn the ta abe year, wth certan e ceptons not here
matera. rtce 151 of Reguatons 74, promugated under the
Revenue ct of 1928, provdes that n genera ta es are deductbe
ony by the person upon whom they are mposed.
rom the provsons of the sectons of the aws of New Me co
quoted above, t appears that t s the purpose to mpose the ta
upon the consumer or user of gasone and motor fue. It s hed,
therefore, n accordance wth secton 23(c) of the Revenue ct of
1928 and artce 151 of Reguatons 74. that the gasone and motor
fue ta mposed by the State of New Me co s deductbe for ed-
era ncome ta purposes by the consumer who pays t. If, how-
ever, such ta s added to or made a part of the busness e pense of
such consumer, t can not be deducted separatey by hm as a ta .
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
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23(c), rt. 161.
110
rtce 151: Ta es. -2- 893
G. C. M. 8936
R NU CT O 1928.
The gasone and motor fue ta mposed by the State of
Lousana under the provsons of act No. 0 of the e tra sesson
of 1928 s deductbe for edera ncome ta purposes by the con-
sumer who pays t. If, however, the ta s added to or made a
part of the busness e pense of such consumer, t can not be de-
ducted by hm separatey as a ta .
n opnon s requested as to the deductbty for edera ncome
ta purposes of the ta mposed by the State of Lousana on gaso-
ne and motor fue.
The gasone and motor fue ta of the State of Lousana s m-
posed n accordance wth the provsons of act No. 6 of the e tra
sesson of 1928, enacted under authorty of paragraph , secton 22,
of rtce I of the consttuton of 1921, as amended.
Paragraph , secton 22, of rtce I of the consttuton of 1921,
as amended, authorzed the egsature to evy, and to provde for
the coecton of, a ta , not to e ceed 4 cents per gaon, on gasone
and motor fue sod wthn the State.
ct No. 6 of the e tra sesson of 1928, enacted under authorty of
the above consttutona provson, s entted :
n act to provde revenues for the pubc hghways of the State of Lous-
ana by evyng a ta of 4 cents per gaon on a gasone or motor fue sod,
used or consumed n the State of Lousana for domestc consumpton, as
authorzed by paragraph , secton 22, rtce I, of the Consttuton of
Lousana, of 1921, as amended .
Secton 1 of the act provdes:
That there s hereby eved a ta of four cents (4tf) per gaon
on a gasone, or motor fue, sod, used or consumed n the State of Lousana
for domestc consumpton, to be coected as herenafter set forth.

that an aowance of 3 per cent of the tota gaonage receved
durng every caendar month sha be made and deducted by the deaer to
cover hs or ther osses n handng such motor vehce fue and that a refund
sha bo made to sad deaer for the a pad on a motor vehce fue whch
after such payment sha be ost or destroyed by fre, ghtnng, food, tornado,
wndstorm, e poson or other accdenta or provdenta cause.
Secton 2 of the act provdes:
The aforesad ta of 4 cents per gaon sha be coectbe from a persons,
frms, corporatons or assocatons of persons, engaged as deaers n the
handng, sae or dstrbuton of such products wthn the State of Lousana,
the method of coecton to be as prescrbed n secton 4 of ths act. The term
deaer as used n ths act s defned to mean any person, frm, corporaton
cr assocaton of persons, who produces, refnes, manufactures, bends or com-
pounds gasone or motor fue for sae to the |obber or consumer, or to the
persons, frms, corporatons, or assocatons of persons who, n turn, se to the
|obber or consumer. The term deaer s further defned to mean the person,
frm, corporaton or assocaton of persons who mports such gasone or motor
fue from any other State or foregn country for dstrbuton, sae, or use n
the State of Lousana. On a gasone or motor fue mported from other
States and used by hm, the deaer as thus defned sha pay the ta on the
amount so mported and used, the same as f t had been sod for domestc
consumpton.
Secton 4 of the act provdes that wthn 20 days after the e pra-
ton of each monthy perod every deaer engaged n the handng,
sae, or dstrbuton of gasone or motor fue for consumpton wthn
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I
23(c), rt. 151.
the State sha fe wth the supervsor of pubc accounts a state-
ment settng forth the number of gaons of each of the casses of
fues enumerated n the act that were sod to persons wthn the
State, or used by the deaer, and sha remt to the supervsor a ta
of 4 cents per gaon on a gasone or motor fue sod or used
by hm.
Secton 6 of the act provdes:
It Is the purpose of ths act to centraze the coecton of the ta heren
authorzed In the hands of those who orgnay dspose of gasone or motor
fue for dstrbuton and consumpton wthn the State. ut n no case sha
there be a dupcaton of the coecton of the ta authorzed provded, that
any gasone or motor fue sod by a deaer wthn ths State to a |obber
theren, whch s ater e ported beyond the borders of ths State sha not be
abe to the ta named In secton 1 of ths act and provded further, that
such ta havng been coected from the |obber by the deaers at the tme of
the shpment, the |obber may fe wth the deaer, monthy, a statement show-
ng the quantty e ported beyond the borders of ths State, propery supported
by ocean bs of adng or other authentc evdence, and the deaer sha be
authorzed to refund the amount of such ta to the |obber and to deduct the
amount thereof n makng the ne t monthy return to the supervsor of pubc
accounts provded, that the provsons of ths secton sha not appy to shp-
ments movng from deaers In ths State to e port statons handng gasone
e cusvey for e port.
In State v. Lberty O Co., Ltd. (154 La., 267, 97 So., 438), the
court had under consderaton act No. 81 of 1921. whch mposed a
ta on saes of gasone to be pad by deaers. The Supreme Court
of Lousana hed that act No. 81 was a cense ta on the deaers
and nvad under secton 21 of rtce of the consttuton of 1921.
The court n dscussng ths consttutona provson sad:
It was pany not the ntenton of the framers of the consttuton
that the consttutona provson shoud be used as the bass for the mposton
of a cense ta upon o deaers aready sub|ect to the payment of a cense
ta under the aw, but t was ther evdent purpose to pace the burden of ths
specfc ta aton upon the utmate consumer, the benefcary of the roads and
hghways to whch the proceeds of the ta are to be devoted by the consttu-
ton tsef. The consttutona mandate operates as a restrcton upon the
egsatve power to mpose any other ta , and n any other manner, than s
theren provded. ct No. 81 of 1921 s therefore nvad, nu, and vod.
It may be observed that the egsature recognzed the nvadty of the
statute, and enacted act No. 137 of 1922 to conform to the consttutona man-
date, and by ts secton 14 specfcay repeaed act 81 of 1921 n toto.
Secton 23(c) of the Revenue ct of 1928 provdes that n com-
putng net ncome there sha be aowed as deductons ta es pad
or accrued wthn the ta abe year, wth certan e ceptons not here
matera. rtce 151 of Reguatons 74, promugated under the
Revenue ct of 1928, provdes that n genera ta es are deductbe
ony by the person upon whom they are mposed.
The Supreme Court of Lousana has hed that secton 21 of
rtce of the consttuton of 1921 contempated that the burden
of the gasone ta shoud be paced on the utmate consumer and
operated as a restrcton on the power of the egsature to mpose
any other ta . The consttutona provson under consderaton n
that case s substantay smar to paragraph ,secton 22, of rtce
I of the consttuton of 1921, as amended, under whch authorty
act No. 6 of the e tra sesson of 1928 was enacted. The court aso
hed that act No. 137 of 1922, whch s substantay smar to act
No. 6 of the e tra sesson of 1928, was n conformty wth the const-
tutona mandate.
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23(c), rt. 151.
112
It s hed, therefore, n accordance wth the provsons of secton
23(c) of the Revenue ct of 1928 and artce 151 of Reguatons 74,
that the gasone and motor fue ta mposed by the State of
Lousana under the provsons of act No. 6 of the e tra sesson of
1928 s deductbe for edera ncome ta purposes by the consumer
who pays t. If, however, the ta s added to or made a part of the
busness e pense of such consumer, t can not be deducted by hm
separatey as a ta .
C. M. Chaeest,
Genera Counse, ureau of Interna Revenue.
rtce 151: Ta es. -3-4902
G. C. M. 8933
R NU CTS O 1928 ND 1028.
The aufbrngung der ndustrebeastung (Dawesabgabe) mposed
n Germany s a ta wthn the meanng of secton 214(a)3, Reve-
nue ct of 1926, and secton 23(c), Revenue ct of 1928. The
krchensteuer mposed n Germany s not a ta wthn the meanng
of secton 214(a)3, Revenue ct of 1926, and secton 23(c), Reve-
nue ct of 1928.
n opnon s requested as to whether the krchensteuer and the
aufbrngung der ndustrebeastung mposed n Germany are ta es
wthn the meanng of that term as used n secton 214(a) 3, Revenue
ct of 1926, and secton 23(c), Revenue ct of 1928.
The krchensteuer s dependent n some respects upon the enkom-
mensteuer, and the aufbrngung der ndustrebeastung s dependent
n some respects upon the vermogensteuer hence, a four eves
requre consderaton.
(1) The enkommensteuergesetz No. 3 (R. G. . I. S. 189) ays
the enkommensteuer (ncome ta ) upon, nter aa, a the ncome of
ndvduas resdent n the Rech, and upon the ncome derved from
specfed sources n the Rech bv nonresdent ndvduas.
(2) The vermogensteuergesetz No. 2 (R. G. . I. S. 233) ays the
vermogensteuer (fortune, net worth, or property ta ) upon, nter
aa, the net worth of each German resdent (rrespectve of the
ocaton of the assets) and upon the net worth of assets empoyed
for busness purposes and ocated wthn the Rech beongng to
nonresdents.
(3) The gesetz zur aufbrngung der ndustrebeastung (R. G.
. II. S. 269) ays the aufbrngung der ndustrebeastung (Dawe-
sabgabe) upon a busness enterprses, ndustra, commerca, bank-
ng, or otherwse, n proporton to the vaue of ther assets as
apprased for the vermogensteuer. The purpose of the evy s to
produce the nterest and amortzaton payments for the ndustra
debentures e ecuted by the argest German ndustres, pursuant to
the aw reatng to the ndustra charge (ndustrebeastungsgesetz,
R. G. . II. S. 257), whch, n turn, was to make effectua the Dawes
pan, requrng the ssuance of ndustra debentures to the amount
of 5,000,000,000 god marks.
The Dawesabgabe s assessed and coected by the oca ta offcers
appea aganst an assessment es to the Supreme Court of ppeas n
Ta aton t s e pressy decared to be a ta wthn the meanng of
the genera ta aw, ayng down the steps to be taken to enforce,
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113
23 (c), rt. 151.
ta payer s remedes, etc. Coectons are, however, remtted, not to
the German treasury but to the ank fur deutsche Industre Obga-
ton, pursuant to the Dawes pan.
(4) The krchensteuer (church ta ) s coected pursuant to Ger-
man Consttuton, artce 137:
There Is no State church.
The regous organzatons whch are corporate bodes under the aw have
the rght to evy ta es, based on the cv ta sts, n conformty wth the
awfu ta provsons of the country.
The church and ta ng authortes cooperate n determnng and
decreeng the ta the ta ng authortes n a arge measure coect
the ta ts payment s not vountary but compusory abty to
ta ceases f the ta payer eaves a recognzed regous communty
wthout |onng another n such event, abty becomes e tnct at
the end of the current church ta year, however, not earer than
three months. (Prussan aw, November 30,1920, No. 2.)
The ta payer n the nstant case s a nonresdent aen, beng a
ctzen of Germany and a resdent of Prussa. e s a member of a
recognzed regous communty. The ta payer has ncome both
from sources wthn and wthout the Unted States. y |ont acton
of the church and ta ng authortes pursuant to the Prussan statute
he became abe to and pad the krchensteuer, whch was mposed
upon hs ncome as determned for the purposes of the enkommen-
cteuer. e aso became abe to and pad the aufbrngung der ndus-
trebeastung (Dawesabgabe).
The words ta es and ta aton are words n very common
and famar use, the meanng and effect of whch are not ordnary
open to serous queston, but, ke most other words n our anguage,
ther scope and appcaton vary accordng to the nature of the
sub|ect under dscusson and the crcumstances under whch they are
used. (Des Mones Unon Ry. Go. v. Chcago Great Western Ry. Co.,
188 Iowa, 1019, 177 N. W., 90.) ence, three defntons w suffce:
ta , says Webster s Dctonary, s a rate or sum of money
assessed on the person or property of a ctzen by Government for the use of the
Naton or State. Ta es are burdens or charges mposed by the egsature
upon persons or property to rase money for pubc purposes. (Loan ssoca-
ton v. Topeka, 20 Wa., 655.)
Ta es are the enforced proportona contrbuton of persons and property,
eved by the authorty of the State for the support of the Government, and for
a pubc needs. ( orda Centra Pennsuar Raroad Co. v. Reynods,
183 U. S., 471, at 475.)
ta s an enforced contrbuton for the payment of pubc e penses.
It s ad by some rue of apportonment accordng to whch the persons or
property ta ed share the pubc burden, and whether ta aton operates upon a
wthn the State, or upon those of a gven cass or ocaty, ts essenta nature
s the same. The power of segregaton for ta ng purposes has everyday Uus-
traton n the e perences of oca communtes, the members of whch, by reason
of ther membershp, or the owners of property wthn the bounds of the potca
subdvson, are compeed to bear the burdens both of the successes and of the
faures of oca admnstraton. ( ouck v. Ltte Rver Dranage
Dstrct, 239 T . S., 254, at 265.) Itacs supped.
War, f not a natona pocy n tsef, s the nstrument of natona
pocy. The e actons of the vctor are therefore necessary, from
ts standpont, for a pubc purpose. rom the standpont of the
vanqushed, the e actons of the vctor are the resut, or the conse-
quences, of a natona pocy. When, therefore, the vanqushed has,
n order to secure peace, obgated tsef as a soveregn State by treaty
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23(c), rt. 151.
114
to pay reparaton, ndemnty, ransom, or other sums by whatever
name caed, the payment of those sums s necessary for a pubc
purpose. The acceptance by a defeated naton of peace, upon onerous
terms, s of necessty tsef the choce of the natona pocy certany
the choce s ndsputabe after the peace treates have been ratfed.
It resuts that ta aton of ts ctzens by the defeated State to pay
reparaton, ndemnty, etc., s ta aton n ts cassc sense.
The partcuar form of the ndustra charge, and of the Dawes-
abgabe, nether changes nor obscures the fact that, through them,
Germany s ayng and coectng ta es for a pubc purpose. The
crcumstance that the funds coected are transmtted not to the Ger-
man treasury but to the ank fur deutsche Industre Obgaton, n
no way aters the matter the fact remans that the funds are assessed
and coected as ta es, and are pad n dscharge of pubc and
natona obgatons. Payment to the ank fur deutsche Industre
Obgaton s merey a coecton devce, e acted by the vctors for
ther greater securty the rea character of the e actons woud not
be changed n the sghtest f the funds were routed to and out of
the German treasury.
Sectons 214(a)3, Revenue ct of 1926, and 23(c), Revenue ct of
1928, appear to use the term ta es n ts ordnary meanng the
meanng customary connoted by the use of the term wthn the
Unted States. or these reasons ths offce s of the opnon that the
aufbrngung der ndustrebeastung (Dawesabgabe) s wthn the
meanng of that term as used n those provsons of aw and that the
ta payer s entted to a deducton of such ta es to the e tent pro-
vded n secton 214(b) of the Revenue ct of 1926 and secton
213(a) of the Revenue ct of 1928.
It s otherwse, however, wth the krchensteuer. The crcum-
stances (1) that the Germans characterstcay speak of t as ta
(2) that provson s made for the coecton and enforcement thereof
by aw (3) that the ta ng authortes assess and coect t and (4)
that the payment thereof s not vountary, are not decsve. Its
essenta character conssts n ts beng a charge ad by a partcuar
regous organzaton for the support of that organzaton, and ts
actvtes, n the coecton of whch the State ends the ad of ts ta
offcas and ts ta ng system. The devce s not unknown n the
Unted States. (Genera Statutes of Connectcut (1918), tte 32,
chapter 189, secton 3561.) Such a charge, both under the German
aw and under the mercan aw, s not for a pubc purpose. The
State generay e empts the property of such regous organzatons
from ta es so aso t may gve them ndrect encouragement by end-
ng the ad of ts ta ng authortes and system to the rasng of funds
requste for ther support. The regous organzaton here n ques-
ton was not an ntegra part of ether the German Government or
of any of ts consttuent States.
It seems cear that Congress n ts use of the term ta es n
secton 214(a)3, Revenue ct of 1926, and secton 23(c), Revenue
ct of 1928, dd not ntend to ncude such charges as the krchen-
steuer. Rather t ntended these to be ncuded wthn the meanng
of contrbutons to or for the use of any
corporaton organzed and operated e cusvey for re-
gous purposes wthn the meanng of secton
214 (a) 10, Revenue ct of 1926, and secton 23 (n), Revenue ct of
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115
23(c), rt. 151.
1928. ( ut see secton 213 of the Revenue ct of 1928, secton
214(b) of the Revenue ct of 1926, artce 1051 of Reguatons 74,
nd artce 325 of Reguatons 69 reatve to the mtaton upon
the deducton of such contrbutons.) or these reasons ths offce s
of the opnon that the krchensteuer s not wthn the meanng of
the term ta es as used n secton 214(a)3, Revenue ct of 1926,
and secton 23(c), Revenue ct of 1928.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
rtce 151: Ta es. -19-5053
I. T. 2570
R NU CT OP 1928 ND PRIOR R NU CTS.
The fees pad by a corporaton under secton 170 of the Oho
Genera Code, n connecton wth an amendment of ts charter
authorzng an ncrease n ts capta stock, are deductbe as ta es
under secton 23(c) of the Revenue ct of 1928 and correspondng
provsons of pror Revenue cts.
rung s requested whether fees pad by a corporaton under
secton 176 of the Oho Genera Code, n connecton wth an amend-
ment of ts charter authorzng an ncrease n capta stock, are
deductbe as ta es.
The secton of the Oho Genera Code above referred to reads n
part as foows:
Sbo. 176. ees to be coected oy secretary of state. The secretary of state
sha charge and coect the foowng fees for offca servces:

2. or fng certfcate of ncrease of capta stock of a corporaton, f the
ncrease Is 10,000 or under, 10 f the ncrease s over 10,000, one-tenth of 1
per cent upon the proposed ncrease of capta.

9. or fng an amendment to artces of ncorporaton, 20 cents for each
hundred words, but In no case ess than 5.

Secton 270 of the Oho Genera Code reads n part as foows:
Sec. 270. udtor sha coect ega tcarravts. moneys pad nto the
State treasury, the dsposton of whch s not otherwse provded for by aw,
sha be credted by the audtor of state to the genera revenue fund.
The above-quoted provsons of secton 270 make t unnecessary for
secton 176 of the Oho Genera Code to state the ob|ect for whch
the fee thus provded for n that secton s mposed. In shey v.
Ryan (49 Oho St., 504, 31 N. ., 721) the pantff nsttuted sut
to prevent the secretary of state from payng the fee charged for
fng artces of agreement of ncorporaton nto the State treasury.
It was camed by the pantff that the statute was vod because t
mposed a ta but dd not state the ob|ect for whch the ta was
mposed. The court sad:
It s not necessary that the ob|ect shoud be stated n the very
statute mposng the ta . It Is suffcent, we apprehend, f the ob|ect dstncty
appear from the statute, read n connecton wth some other provson found
esewhere n the statutes of the State and, f the rasng of a fund for genera
revenue purposes had been e pressed n secton 148a as amended, the purpose
of the e acton woud have been no more defntey stated than t s by readng
that secton n connecton wth secton 181a.
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523(c), rt. 151.
116
The two sectons cted n the court s opnon are sectons n pror
aws of the State of Oho correspondng to sectons 176 and 2 0 of
the Oho Genera Code. The fees pad by a corporaton to the secre-
tary of state n Oho because of an ncrease n ts capta stock are
pad by the secretary of state nto the genera revenue fund. Such
fees.therefore, are ta es deductbe as ta es under secton 23(c) of
the Revenue ct of 1928 and the correspondng provsons of pror
Revenue cts. (See aso r-Way ectrc ppance Corporaton v.
rcher, 279 ed., 878, and G. C. M. 597 , C. . -2, 168.)
rtce 151: Ta es. -19-5054
I. T.2571
R NU CT O 1928.
The nterna combuston- engne fues ta (gasone ta ) mposed
by the State of Mane s deductbe, for edera ncome ta pur-
poses, by the consumer who pays t and to whom t s not re-
funded. If, however, the ta s added to or made a part of the
busness e pense of such consumer, t can not be deducted sepa-
ratey by hm as a ta .
rung s requested n regard to the deductbty for edera
ncome ta purposes, of the nterna combuston engne fues ta
(gasone ta ) mposed by the aw of the State of Mane.
The nterna combuston engne fues ta of the State of Mane
s mposed n accordance wth the provsons of chapter 12 of the
Revsed Statutes of Mane, 1930. The pertnent sectons of sad
chapter read as foows:
Sec. 79. Terms defned. The terms used n sectons 79 to 89 sha
be construed as foows: Interna combuston engne sha mean any engne
operated by e poson or quck burnng theren of gasone, benzo, or other
product e cept kerosene. Interna combuston engne fue sha mean motor
fue commony caed and known as gasone, benzo, or other product e cept
kerosene and crude o to be used n the operaton of an nterna combuston
engne. Dstrbutor sha mean any person, assocaton of persons, frm or
corporaton, wherever resdent or ocated, who mports or causes to be Im-
ported for sae or for hs or ts own use (wth the e cepton herenafter set
forth) any nterna combuston engne fues as heren defned for use n ths
State after t roaches ths State and aso any person, assocaton of persons,
frm or corporaton who produces, refnes, manufactures or compounds nterna
combuston engne fues as heren defned wthn the State and aso any per-
son, assocaton of persons, frm or corporaton who purchases n tank car ots
ether wthn or wthout the State nterna combuston engne fues, as heren
defned, for the purpose of resae wthn the State.
Sec. 80. cse ta of If cents S cents of ta on fues used for motor boats,
agrcutura tractors, statonary engnes, or arts to be refunded. There
s hereby eved and mposed an e cse ta of 4 cents per gaon upon sad
nterna combuston engne fues sod wthn ths State and for the uses de-
fned n these sectons, e ceptng, however, such nterna combuston engne
fues n such form and under such crcumstances as sha precude the coec-
ton of ths ta from the dstrbutor by reason of the provsons of the aws of
the Unted States, or sod whoy for e portaton from the State, provded that
3 cents of the ta so pad and no more, upon such nterna combuston engne
fues sod for e cusve use n motor boats, tractors used for agrcutura pur-
poses not operatng on pubc ways or n such vehces as run ony on ras or
tracks, or sod for use n statonary engnes, or sod for use n the mechanca
or ndustra arts, sha be refunded as herenafter provded.

Sec. 82. ues dstrbuted to branch agences sub|ect to ta .
nterna combuston engne fues as defned n secton 79 dstrbuted by the
dstrbutors to ther branch agences throughout the State sha be deemed to
have been sod and sha be sub|ect to the requrements of sectons 79 to 89 n
every respect.
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117
t 23(c), rt. 151.
Sec. 83. Dstrbutor entted to coect 4 cents addtona. ach
dstrbutor payng or becomng abe to pay the ta mposed by sectons 79 to
89 sha be entted to charge and coect 4 cents per gaon ony as a part of the
seng prce of the nterna combuston engne fues sub|ect to the ta .

Sec. 89. Provson for refund of three-fourths of ta coected n certan
nstances procedure for obtanng refund tme mt for fng appcaton for
refund. ny person, frm, or corporaton who sha buy and use any
nterna combuston engne fue as denned n sectons 79 to 89 for the purpose
of operatng or propeng motor boats, tractors used for agrcutura purposes
not operatng on pubc ways, or In such vehces as run ony on ras or tracks,
or n statonary engnes, or n the mechanca or ndustra arts, or for any
other commerca use e cept n motor vehces operated or ntended to be
operated upon any of the pubc hghways of the State of Mane, and who sha
have pad any ta on nterna combuston engne fue eved or drected to be
pad as provded by sectons 79 to 89, ether drecty by the coecton of such
ta by the vendor from such consumer, or ndrecty by addng the amount
of such ta to the prce of such fue and pad by such consumer, sha be rem-
bursed and repad to the e tent of three-fourths of the amount of such ta
pad by hm upon presentng to the State audtor an affdavt accompaned by
the orgna nvoces showng such purchases, whch affdavt sha be verfed
by the oath of such affant, and sha state the tota amount of such fue so
purchased and used by such consumer other than n motor vehces operated
or ntended to be operated upon any of the pubc hghways of the State, and
the governor and counc, upon the presentaton of such affdavt and such
vouchers, approved by the State audtor, sha cause to be repad to such
consumer from the ta es coected on nterna combuston engne fues three-
fourths of the sad ta es so pad by such consumer on fues purchased and
used, other than for motor vehces as aforesad provded, that appcatons
for refunds as provded heren must be fed wth the State audtor wthn s
months from the date of purchase or nvoce.
Secton 23(c) of the evenue ct of 1928 provdes that n com-
putng net ncome there sha be aowed as deductons a ta es
pad or accrued wthn the ta abe year, wth certan e ceptons not
here matera. rtce 151 of Reguatons 74, promugated under
the Revenue ct of 1928, provdes that n genera ta es are deductbe
ony by the person upon whom they are mposed.
It appears from the foregong quoted sectons of chapter 12 of
the Revsed Statutes of Mane, 1930, that the purpose of the statute
s to mpose the ta upon the consumers of nterna combuston
engne fues. It s hed, therefore, n accordance wth secton 23(c)
of the Revenue ct of 1928 and artce 151 of Reguatons 74, that
the nterna combuston engne fues ta mposed by the State of
Mane s deductbe n the edera ncome ta return of the consumer
who pays t and to whom t s not refunded. If, however, the ta
s added to or made a part of the busness e pense of such consumer,
t can not be deducted by hm separatey as a ta .
rtce 151: Ta es. -24-5102
G. C. M. 9234
R NU CT O 1928.
Ony one-haf of the Oregon ta upon rea estate s mposed
upon one of the tenants by the entrety n the sense contempated
by secton 23(c) of the Revenue ct of 1928 and artce 151 of
Reguatons 74, the other one-haf beng mposed upon the other
tenant and, correspondngy, ony one-haf thereof s deductbe
by one of the tenants n hs or her separate return.
n opnon s requested regardng ta es on rea estate n Oregon
whch s owned by husband and wfe as tenants by the entrety.
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23(c), rt. 151. 118
In Oregon and may be owned by husband and wfe as tenants
by the entrety. owever, the marred women s acts have aboshed
the rght of the husband to the e cusve en|oyment of the usufruct
of an estate hed by the entrety and t therefore has been hed that
the rents and profts of and owned by the entrety, beng persona
property, s the common property of the husband and wfe, each
ownng one-haf thereof. (Ganoe v. Ohmart, 121 Or., 116, 254
Pac, 203.)
rtce 151 of Reguatons 74 provdes that n genera ta es are
deductbe ony by the person upon whom they are mposed. The
test of the person upon whom a ta s mposed s not determned
by the person who n the frst nstance may be charged by aw wth
the ta and forced by aw to pay t. In determnng the person
upon whom the ta on rea estate s mposed, t s necessary to con-
sder the nature of the ta , and the person whom the aw utmatey
charges wth the ta n actons between severa persons charged wth
and made abe to the ta and the one who has pad the ta , or be-
tween severa persons ownng nterests n the rea estate and the
one of them who has been assessed for and charged wth the ta
and who has pad t.
The ordnary ta on rea estate s eved upon the sum as a unt
of a the ega nterests n the rea estate t s an annua ta and
s customary regarded as the contrbuton whch the and and
those ownng nterests theren must pay to the Government for the
protecton whch the Government has gven durng that year.
rom the standpont of ta aton, freehod nterests are consdered
rather than easehod nterests, . e., ta es are assessed aganst and
made payabe by the essor of rea estate, rather than the essee.
The aw charges the cost of such annua protecton to the person
who gets the annua beneft of the and so protected. So the aw
ordnary casts the burden of ta es on rea estate on the mortgagor
and not on the mortgagee on the fe tenant and not on the re-
manderman. s two |ont tenants or two tenants n common woud
each get one-haf of the profts of the rea property hed |onty or
n common, such |ont tenants and tenants n common woud be
chargeabe wth one-haf the ta es on the property hed by them
|onty or n common.
ppyng the prncpes above outned to the nstant case, t s
the opnon of ths offce that, n vew of the fact that n Oregon each
spouse n a tenancy by the entrety s entted to one-haf the fruts
and profts of the and, each spouse has mposed upon hm or her
one-haf the ta es eved upon the and as a whoe. ach can cer-
tany force contrbuton n an accountng from the other, f he s
compeed to pay, n ke manner as n the case of a |ont obgatons.
(Schme v. Dckson, 129 Ind., 139, 28 N. ., 540 urey v. urey,
148 Mass., 444, 19 N. ., 545 Davdson v. Waace, 53 Mss., 475
Thee v. Thee, 57 N. . q., 98, 40 t., 446 Mc dams v. oney,
20 R. L, 351, 39 t., 189.)
It s, therefore, the opnon of ths offce that ony one-haf of the
Oregon ta upon rea estate s mposed upon one of the tenants by
the entrety of such Oregon rea estate n the sense contempated by
secton 23(c) of the Revenue ct of 1928 and artce 151 or Regua-
tons 74, the other one-haf beng mposed upon the other tenant
and accordngy ony one-haf thereof s deductbe by one of the
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119
23(c), rt. 151.
tenants n hs separate return. Of course, such one-haf s not de-
ductbe by such tenant uness the requrements of the statute respect-
ng pad or accrued are aso satsfed.
C. M. Chakest,
Genera Counse, ureau of Interna Revenue.
ImcL 151: Ta es. -25-5111
I. T. 2578
R NU CT O 1928.
The Supreme Court of the State of Oregon has hed Invad and
unconsttutona chapter 429 of the Genera Laws of Oregon, 1929,
whch mposes a ta on the ncome derved from ntangbes by
natura persons and fducares.
ed, to aow as a fna deducton for 1930 the amount of ta es
pad on ncome from ntangbes and to treat such amount as n-
come when refunded n case the ta s hed to be unconsttutona
by the Unted States Supreme Court woud not be warranted.
Inqury s made reatve to the deducton for ncome ta purposes
of amounts pad to the State of Oregon on ncome derved from
ntangbes.
s the matter now stands, the Supreme Court of the State of
Oregon has hed that chapter 429 of the Genera Laws of Oregon,
1929, whch mposes a ta on the ncome derved from ntangbes
by natura persons and fducares, s nvad, as t s n confct
wth the provsons of the fourteenth amendment of the Consttu-
ton of the Unted States, whch guarantees equa protecton of aws.
The decson referred to was rendered n the case of Redfed v.
sher (292 Pac, 813), October 24, 1930. On the same date the
supreme court of the State reached the same concuson n ernan v.
Norbad (292 Pac, 821) and Mer v. Norbad (292 Pac, 822).
It s contended that there can be no queston but that when pad
these ta es consttuted an aowabe deducton under secton 23(c)
of the Revenue ct of 1928, and that ther status can not be sad to
have defntey changed as a resut of the decson of Red-fed v.
sher, supra. It s further contended as foows:
No one coud truthfuy say at December 31, 1930, or at any subse-
quent date unt the Supreme Court of the Unted States has ether passed upon
ths matter or refused to accept |ursdcton, that the Oregon ntangbes act
of 1929 was unconsttutona. Unt ths can be sad t consttutes an aowabe
deducton for edera ta purposes under the e press wordng of secton 23(c).
It s mantaned that even f ths act s utmatey hed to be unconsttutona
the ta pad thereunder must be aowed as a deducton durng the caendar
year 1930 and the amount returnabe to the ta payer ncuded as ncome durng
the year when and f receved.
Ths offce has prevousy taken the poston n Soctor s Memo-
randum 4683 (C. . -, 59) that nhertance ta es pad under the
aw of another State (New ampshre), whch has been decared by
the supreme court of that State to be unconsttutona, were not
deductbe. In ths connecton see Php C. rovm et a. v. Comms-
soner (10 . T. ., 1122). The oard of Ta ppeas has hed
n Inand Products Co. v. Commssoner (10 . T. ., 235) that
amounts vountary pad as beverage ta es n error of aw are not
deductbe from gross ncome. Ths decson of the oard was
72109 81 9
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23 (c), rt. 153.
120
affrmed by the Crcut Court of ppeas for the Second Crcut n
Inand Products Co. v. ar (31 ed. (2d), 867). smar con-
cuson was reached by the oard n Lehgh aey Coa Saes Co. v.
Commassontr (15 . T. ., 1401, C. . III-2, 30) wth respect
to ta mposed by the State of Inos, whch was hed to be uncon-
sttutona by the State supreme court and vod ab nto. In that
decson the oard used the foowng anguage:
That beng true, t foows nevtaby and n conformty wth our
decsons above cted, that the amounts so pad and deducted formed a part
of the pettoner s ta abe ncome n the years n whch the unwarranted
deductons were made, on whch t there was, n fact and n aw, due an
ncome ta . The pettoner pad a ess amount of edera ta es n those years
than t egay owed, and amended returns or addtona assessments were
avaabe to correct the error but the fact that State tone were erroneousy
pad n those years does not render them ta abe ncome n a subsequent year
n whch they were refunded. Itacs supped.
The genera rue s that an unconsttutona statute, though havng
the form and name of aw, s n reaty no aw, but s whoy vod,
and n ega contempaton s as noperatve as f t had never been
passed. (Norton v. Sheby County, 118 U. S., 425 at page 442, and
untngton v. Worthen, 120 U. S., 97. See aso 6 R. C. L., Const-
tutona Law, secton 117.)
In vew of the foregong, ths offce s of the opnon that to aow
as a fna deducton for 1930 the amount of ta es pad on ncome
from ntangbes, and to treat such amount as ncome when refunded
n case the ta s hed to be unconsttutona by the Unted States
Supreme Court, woud not be warranted. Whe from an account-
ng vewpont ths mght be a smpe way of dsposng of the ques-
ton, from a ega vewpont there seems to be no doubt that an un-
consttutona ta s absoutey vod and, therefore, can not be de-
ducted as a ta under secton 23(c) of the Revenue ct of 1928.
urthermore, as staed n Lehgh aey Coa Saes Co., supra, the
fact that State ta es were erroneousy pad n one year does not
render them ta abe ncome n the subsequent year n whch they
are refunded. The coector of nterna revenue for the State of
Oregon has been advsed to permt ta payers of that State to fe
ncome ta returns n whch the ntangbes ta has been camed as
a deducton, pendng a decson by the Unted States Supreme
Court. Ths w hod n abeyance the fna audt of returns n such
cases unt that trbuna dsposes of the queston, e cept where t s
necessary to protect the Government s nterests due to the runnng
of the statute of mtatons aganst assessment.
rtce 153: Ta es for oca benefts. -21-5072
( so Secton 23 (k), rtce 202.) G. C. M. 9461
R NU CT O 1928 ND PRIOR CTS.
Genera Counse s Memorandum 5589 (C. . II-, 8 ), wth
respect to the treatment of assessments aganst oca benefts, s
revoked n vew of the decson of the oard of Ta ppeas n the
ease of . M. abbe Son Co. v. Commssoner (19 . T. ., 612).
In vew of the decson of the oard of Ta ppeas n the case of
. M. ubbe Son Co. v. Commssoner of Interna Revenue, now
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121
23(k), rt. 202.
on appea n the Unted States Crcut Court of ppeas for the
ghth Crcut, t has become necessary to reconsder Genera Coun-
se s Memorandum 5589, whch s n confct wth the oard s
decson.
It was hed n Genera Counse s Memorandum 5589 that where
assessments are pad for oca benefts, such as street, sdewak, and
other ke mprovements, whch are not owned by the abuttng prop-
erty owners, and the property whch s benefted thereby s beng
used by the ta payer n hs trade or busness, the amount assessed
shoud be aocated between the and and the budng thereon n
proporton to the vauaton of each, and that the part of the e pend-
ture whch s attrbutabe to the budng may be recovered through
deprecaton aowances spread over the fe of the budng, but
that the part of the assessment whch s attrbutabe to the and,
beng consdered as a part of the cost or other bass of the and, may
not be recovered through deprecaton aowances. It was aso hed
that no dstncton shoud be made between speca assessments for
oca benefts eved on the bass of the vauaton of the property
benefted and assessments eved on a front-foot bass.
The oard of Ta ppeas n the case of . M. ubbe Son
Co. v. Commssoner stated t was the oard s opnon that owner-
shp of the mprovement must be estabshed, snce the ony purpose
for whch such deductons for deprecaton are authorzed s the
unta ed recovery of capta nvestments n wastng assets used for
ncome purposes. The oard was of the opnon that the statutory
provson of secton 214(a)8 of the Revenue ct of 1924 contem-
pates the ta -free return ony of the cost of assets n whch the
ta payer camng thereunder has a capta nvestment and whch
n some way contrbute to the gross ncome from whch deductons
for deprecaton are aowabe and that n such use or by the passage
of tme or operaton of aw are e hausted. The concuson of the
decson was that there s no bass n aw for the recovery of assess-
ments for oca benefts by ratabe annua deductons measured by
the deprecaton annuay sustaned by the pubc mprovement.
In vew of the nconsstency between the decson of the oard
of Ta ppeas and Genera Counse s Memorandum 5589, ths
offce, after reconsderaton of the entre queston, s of the opnon
that Genera Counse s Memorandum 5589 shoud be and the same
s hereby revoked.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
S CTION 23(k). D DUCTIONS ROM GROSS
INCOM : D PR CI TION.
rtce 202: Deprecabe property.
R NU CT O 1928.
Revocaton of Genera Counse s Memorandum 5589 (C. . I-1,
83), regardng treatment of assessments for street and ke mprove-
ments. (See G. C. M. 9461, page 120.)
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23(n), rt. 261.
122
S CTION 23(n). D DUCTIONS ROM GROSS INCOM :
C RIT L ND OT R CONTRI UTIONS.
rtce 261: Contrbutons or gfts by nd- -5-4919
vduas. I. T. 2559
R NU CT O 1928.
The ta payer named a unversty as the benefcary n hs
ad|usted compensaton certfcate, and by means of devery
thereof and of a etter sought to transfer the certfcate to the
unversty.
ed, by the provsons of the ct under whch the ad|usted
servce certfcate was ssued the ta payer s ncapabe of dvestng
hmsef of the property or nterest evdenced by the certfcate
pror to the maturty thereof. e s not entted to any deducton
therefor as a contrbuton n computng hs net ncome.
rung s requested whether a Word War veteran who turned
hs ad|usted servce certfcate over to a unversty may deduct the
face vaue of the certfcate as a contrbuton n hs return for
the year n whch the certfcate was transferred. The ta payer n
the nstant case transferred hs certfcate by means of a etter n the
foowng terms:
In vew of my oyaty to and affecton for my unversty, and desrng to
repay n some part the benefts I have receved from her, and to assst her In
e tendng smar benefts to others, I have named the unversty as benefcary
n my ad|usted compensaton certfcate, so that f I de before the certfcate
becomes payabe, t w be pad to the unversty. I am advsed that under the
provsons of the Word War Compensaton ct, under whch ths certfcate
was ssued, I can not assgn the certfcate, and t w be pad to me when t
becomes due, f I am st ave. It s, however, my desre and ntenton to gve
the proceeds of the certfcate to the unversty, and f I shoud be ave when t
becomes payabe, I w do so. I ncose the certfcate herewth.
Under secton 501 of the Word War d|usted Compensaton ct
(43 Stat., 125), as amended (44 Stat., 828), the amount of the face
vaue of the certfcate s payabe (1) to the veteran 20 years after
the date of the certfcate, or (2) upon hs death pror to the e pra-
ton of that perod, to the benefcary named, e cept that f there s
no benefcary, the amount sha be pad to the veteran s estate.
Secton 503 of the Word War d|usted Compensaton ct, as
amended, provdes, n part, as foows:
Sec. 503. No certfcate ssued or rght conferred under the provsons of
ths tte sha, e cept ns provded n secton 502, be negotabe or assgnabe
or serve as securty for a oan. ny negotaton, assgnment, or oan made n
voaton of any provson of ths secton sha be hed vod.
The e cepton provded n secton 502 deas soey wth the con-
dtons under whch the certfcate may be used as securty for a oan,
and does not reate to an assgnment under other crcumstances.
Webster s New Internatona Dctonary, 1930 edton, defnes
assgn, as used n aw, as foows:
To transfer or pass over property to another, whether for the beneft of the
assgnee or of the assgnor s credtors, or n furtherance of some trust to make
an assgnment.
It s hed that the provsons of the ct under whch the ad|usted
servce certfcate was ssued are such as to make the veteran n-
capabe of dvestng hmsef of the property or nterest evdenced by
the certfcate pror to the maturty of the certfcate, whch s 20
years after the date of ts ssuance. The ta payer can not assgn
the face vaue of hs certfcate or any porton of such vaue hence
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123
25, rt. 295.
the communcaton to the unversty ncosng the certfcate s vod
as a ega transfer or assgnment of the property named n the
certfcate.
Inasmuch as the ta payer has not dvested hmsef of the property
rght n the certfcate by hs acton, he s not entted to any deduc-
ton therefor as a contrbuton n hs return for the caendar year
1928.
S CTION 23(q). D DUCTIONS ROM GROSS
INCOM : P NSION TRUSTS.
rtce 271: Payments to empoyees penson -16-5029
trusts. T.I). 4310
INCOM T .
rtce 271 of Reguatons 74 amended.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
The s th paragraph of artce 271 of Reguatons 74 s hereby
amended to read as foows:
The rght to a deducton under secton 23 (q) w be recognzed n cases
where the penson trust may not be perpetua, provded the trust s of such
a character as to evdence good fath on the part of the empoyer actuay to
pay the amounts trusteed for empoyees penson purposes. owever, shoud
any porton of the funds of a penson trust revert to the possesson, ownershp,
or contro of the empoyer by reason of the termnaton of the trust or other-
wse, such amount (e cept to the e tent that t represents a payment to the
penson trust made by the empoyer n accordance wth the penson pan and
pursuant to paragraph (a) or (b) of ths artce, and not theretofore aowed
as a deducton to the empoyer) sha be returned as ncome by the empoyer
for the ta abe year n whch t so reverts, uness pror to the cose of such
year It sha be rerusteed for the beneft of empoyees under provsons sats-
factory to the Commssoner.
Davd urnet, Commssoner.
pproved pr 10, 1931.
. W. Meon,
Secretary of the Treasury.
S CTION 25. CR DITS O INDI IDU L
C INST N T INCOM .
rtce 295: Date determnng e empton. -18-5044
I. T. 2568
R NU CT O 1928.
Method of computng the persona e empton n the case of a
husband and wfe who became separated (urng the year and
had the status of snge persons at the cose of the year. Mme-
ograph 3800 (C. . I -1, 119) e paned.
dvce s requested n connecton wth Mmeograph 3800, rea-
tve to the persona e empton to be aowed n the audt of edera
ncome ta returns n the case of a husband and wfe who became
separated durng the year and had the status of snge persons at
the cose of the year. Inqury s made whether n such case the
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25, rt. 295.
124
e amnng offcer shoud ask for evdence of an agreement between
husband and wfe respectng the cam of the husband for more
than one-haf of the proportonate part of the 3,500 e empton for
the perod durng whch he was vng wth hs wfe.
Mmeograph 3800 was desgned to amend Mmeograph 3288 (C. .
I -1, 40) so as to provde that n a cases where one spouse ded
durng the ta abe year the survvng spouse s entted to fu
credts accordng to hs or her status at the cose of the ta abe year,
and that n such a case the persona e empton shoud not be
prorated.
In Mmeograph 3288 t was provded that where an ndvdua
des durng the ta abe year the survvng spouse s entted to fu
credts accordng to hs or her status at the cose of the ta abe
year f the deceased spouse s a ta payer (that s, an ndvdua n
whose behaf a return was requred to be fed), and that f the
deceased spouse s not a ta payer, the persona e empton of the sur-
vvng spouse must be prorated. The amendment to Mmeograph
3288 above ndcated was made necessary by the rung announced
n Genera Counse s Memorandum 6275 (C. . III-1, 86), n
whch t was hed that secton 25(e) 3 of the Revenue ct of 1928,
whch provdes that n case of an ndvdua who des durng the
ta abe year the persona e empton sha be determned by bs
status at the tme of hs death, s e cusve n ts terms and can not
be apped n con|uncton wth secton 25(e)2 of that ct, whch
provdes for an apportonment of the e empton where there s a
change n the status of the ta payer durng the year. Mmeograph
3800 was ntended to nterpret secton 25(e)3 n accordance wth
the rung announced n Genera Counse s Memorandum 6275, and
was not ntended to otherwse change the provsons of Mmeograph
3288 (e cept as to amounts).
In cases where the status of a ta payer changes durng the ta abe
year through separaton and not through the death of hs or her
spouse, the persona e empton s requred to be prorated n accord-
ance wth secton 25(e)2 of the Revenue ct of 1928. In such a
case a husband and wfe who separated durng the year and have
the status of snge persons at the cose of the ta abe year are each
entted to a persona e empton whch bears the same rato to
1,500 as the number of months durng whch he or she was snge
bears to 12 months, and n addton they are entted |onty to a
persona e empton whch bears the same rato to 3,500 as the
number of months durng whch they were marred and vng
together bears to 12 months. ach s entted to one-haf of ths
prorated |ont persona e empton. owever, the fu amount of
the prorated |ont persona e empton may be camed by ether
or dvded between them as they see ft. If one spouse cams more
than one-haf of the prorated |ont persona e empton, a statement
shoud be obtaned from such spouse to the effect that the other
spouse ether s not requred to fe a return or does not cam more
than the remander of the prorated |ont persona e empton. The
statement shoud be checked wth the return of the other spouse
for the purpose of verfcaton. In the event the two spouses do not
agree respectng the dvson between them of the prorated |ont
persona e empton, each shoud be aowed one-haf of such
e empton.
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125 31, rt. 311.
P RT III. CR DITS G INST T .
S CTION 31. RN D INCOM CR DIT.
rtce 311: arned ncome credt. -17-5034
Ct. D. 321
INCOM T R NU CT O 1028 D CISION O COURT.
aened Income Credt Trust.
trust s not an ndvdua wtn the meanng of secton 31(b)
of the Revenue ct of 1928 and a fducary who pays an ncome ta
on ncome receved by hm as trustee s not entted to the earned
ncome credt provded theren.
Unted States Crcut Court ok ppeas, ghth Crcut.
. . en, Coector of Interna Revenue at Omaha, ebr., appeant, v. dgar
M. Morsman, |r., Trustee, etc., appeee.
ppea from the Dstrct Court of the Unted States for the Dstrct of Nebraska.
ebruary 17, 1931.
opnon.
enyon, Crcut udge, devered the opnon of the court.
Ths acton was brought by appeee aganst the coector of Interna revenue
at Omaha, Nebr., to recover 6.65, wth nterest, camed to have been Iegay
coected by appeant as a part of an ncome ta for the ta abe year 1928.
ppeee was trustee of funds and property under the terms of a certan nstru-
ment of uy 9, 1926, the ncome of whch was to accumuate for a perod of
fve years, and thereafter durng the e stence of the trust the ncome was to be
dstrbuted to certan benefcares. The trust nstrument s not before us.
The petton charged that appeee as trustee fed an ncome ta return for
the year 1928 coverng net Income of 3,922.50 from the property of whch he
was trustee, whch showed the norma ta to be 26.60, on whch appeee
camed a credt of 6.65, beng 25 per centum of the ta on earned net Income
that ths was dsaowed that under duress he pad sad sum and now seeks
to recover It back. The case was submtted to the tra court on demurrer to
the petton, whch was overrued. ppeant stood thereon and |udgment was
entered n favor of appeee. The amount s sma, but the prncpe nvoved
s mportant and far-reachng.
The acton arses under secton 31 of the Revenue ct of 1928 (45 Stat. L.,
ch. 852, pp. 791, 804), whch provdes n part as foows:
Sec 31.
(1) arned ncome means wages, saares, professona fees, and other
amounts receved as compensaton for persona servces actuay rendered,
.
(2) arned Income deductons means such deductons as are aowed by
secton 23 for the purpose of computng net ncome, and are propery aocabe
to or chargeabe aganst earned ncome.
(3) arned net Income means the e cess of the amount of the earned
ncome over the sum of the earned ncome deductons. If the ta payer s net
ncome s not more than 5,000, hs entre net ncome sha be consdered to
be earned net ncome, and If hs net ncome s more than 5,000, hs earned
net ncome sha not be consdered to be ess than 5,000. In no case sha
the earned net ncome be consdered to be more than 30,000.
(b) oconce of credt. In the case of an ndvdua the ta sha be
credted wth 25 per centum of the amount of ta whch woud be payabe
f hs earned net Income consttuted hs entre net ncome: hut n no case
sha the credt aowed under ths subsecton e ceed 2. per centum of hs
norma ta pus 25 per centum of the surta whch woud be payabe C hs
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31, rt. 311.
126
earned net ncome consttuted hs entre net ncome. Ths credt sha be In
addton to a other credts aganst the ta .
The queston at ssue s, whether under subdvson (b) of sad secton 31
appeee was entted to deduct the 6.05 as a credt on the ta upon earned
net ncome.
The ntent of the statute orgnay, as appears from the report of the Ways
and Means Commttee (Report No. 179, S ty-eghth Congress), was to take
care of the sma ta payer, such as the farmer and the merchant, whose
ncome s derved n part from persona servces and n part from capta. It
s evdent that earned ncome s not necessary wages, saares, or profes-
sona fees, but any amount of ncome up to 5,000 s to be consdered as the
ta payer s earned ncome regardess of the source from whch t may arse.
The phrase therefore earned net ncome s somethng of a msnomer. Sub-
dvson (b) of secton 31 aows ths 25 per centum credt on the ta n the
case of an ndvdua.
ppeant cams that the ta s one aganst the trust estate and that a
trust s not an ndvdua.
ppeee concedng that the ct aows a credt on the ta ou earned ncome
ony to ndvduas, nssts that the ta s aganst the trustee and that the
trustee s an ndvdua. It s necessary to set out some of the provsons of
the Revenue ct of 1928 (45 Stat, 791), whch we do n note hereto.1
ppeee s contenton s that a fducary who pays an ncome ta on ncome
receved by hm as trustee s an ndvdua wthn the meanng of secton
31(b) of the Revenue ct of 1928 that the Revenue ct separates ndvduas
and corporatons n ts ta ng scheme, and that a fducary must be the one or
the other, and hence must be an ndvdua. The term fducary under secton
701 of the ct ncudes a trustee, guardan, etc., or any person actng n any
fducary capacty for any person. Person under the same secton means
an ndvdua, a trust or estate, a partnershp, or a corporaton. So a
fducary may be a corporaton or a partnershp. The contenton that a
1 S C. 4. Speca Casses of Ta payers.
The appcaton of the Genera Provsons and of Suppements to D, ncusve, to each
of the foowng speca casses of ta payers, sha be sub|ect to the e ceptons and add-
tona provsons found In the suppement appcabe to such cass, as foows:
(a) states and trusts and the benefcares thereof Suppement .
Sec. 161. Imposton op Ta .
(a) ppcaton of a . The ta es mposed by ths tte upon ndvduas sha appy to
the Income of estates or of any knd of property hed n trust, ncudng

(b) Computaton- and payment. The ta sha be computed upon the net ncome of the
estate or trust, and sha be pad by the fducary, e cept as provded In secton 166
(reatng to revocabe trusts) and secton 167 (reatng to ncome for beneft of the
grantor). or return made by benefcary, see secton 143.
Sue. 162. Net Income.
The net Income of the estate or trust sha be computed n the same manner and on the
same bass as n the case of an ndvdua, e cept that
(a) There sha be aowed as a deducton, etc.
Sec 163. Credts ganst Net Income.
(a) Credts of estate or trust. or the purpose of the norma ta the estate or trust
sha be aowed the same persona e empton as s aowed to a snge person nnder
secton 25(c).
Sec. 701. Defntons.
(a) When used n ths ct
(1) The term person means an ndvdua, a trust or estate, a partnershp, or a
corporaton.

(5) The term fducary nreans a guardan, trustee, e ecutor, admnstrator, recever,
conservator, or any person actng In any fducary capacty for any person.

(13) The term ta payer means any person sub|ect to a ta mposed by ths ct
Sec. 143. ducary Returns.
(a) Requrement of return. very fducary (e cept a recever apponted by authorty
of aw n possesson of part ony of the property of an Indvdua) sha make under oath
a return for any of the foowng ndvduas, estates or trusts for whch he acts, statng
specfcay the tems of gross Income thereof and the deductons and credts aowed under
ths tte

(c) Law appcabe to fducares. ny fducary requred to make a return under ths
tte sha be sub|ect to a the provsons of aw whch appy to ndvduas.
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127
31, rt. 311,
fducary must be an ndvdua s unsound t may be an Indvdua or t may
e somethng ese. ppeee refers to secton 51 as cassfyng fducares as
ndvduas. Ths secton reates to ndvdua returns for payment of ncome
ta . Subdvson (d) thereof does specfy fducares, but refers to secton 143
for returns to be made by the fducary. Subdvson (c) of secton 143 here-
tofore set out provdes that the fducary n makng returns under ths tte
s sub|ect to the provsons of aw whch appy to ndvduas. We are sats-
fed ths provson reates entrey to the returns and has no bearng on the
queston at Issue here. It s true the ct separates ndvduas from corpora-
tons n the assessment of ncome ta es, but t goes further and provdes for
speca casses of ta payers, among whch are estates and trusts. Throughout
the ct the phrase ta payer other than a corporaton s used. Secton 117
uses t n connecton wth capta osses and secton 101 n speakng of ta es
n case of capta net gan. Secton 4 paces estates and trusts n a defnte
and separate cass of ta payers from that of an ndvdua. It s true that a
trust under the ct s a person, and a person s a ta payer. Therefore a trust
s a ta payer, and under subdvson 3 of secton 31(a) has an earned net
ncome, but t s to be noted that whe subdvsons (1) and (3) of secton
31(a) use the term ta payer, subdvson (b) n aowng the credt uses the
term ndvdua. Secton 701, defnng person, as an ndvdua, a trust
or estate, draws a dstncton between an ndvdua and a trust. Secton 143
dstngushes between ndvduas and estates or trusts. Under secton 13 of
the ct there s mposed a ta upon the net ncome of every corporaton.
corporaton s a ta payer, but t s not an ndvdua. If a corporaton here
were the fducary coud t be camed that the corporaton was an ndvdua
under subdvson (b) of secton 31 The ogc of appeee woud put hm n
the poston of so urgng.
It woud have been an easy matter for Congress, f t had ntended that the
credt provded under subdvson (b) of secton 31 shoud be e tended to trusts
or trustees, to have sad so. It woud have used n subdvson (b) the term
ta payer as t does n subdvson (a). Congress dd not do so. It woud
appear that the term ndvdua n secton 31(b) was carefuy and desgn-
edy used to carry out the purpose Congress had n mnd. It s not n our
power to enarge the scope of the word ndvdua so used, to cover trusts,
estates, partnershps and corporatons. Why there shoud have been a credt
for ta on earned ncome n case of an ndvdua and not of a trust we do not
know. It s obvous throughout the ct that ndvduas consttute one cass
of ta payers, corporatons another, and estates and trusts a speca cass under
secton 4. ven f here t shoud be hed that the trustee were an ndvdua
under secton 31(b) t woud not be decsve of ths case as t must further
appear that the ta was aganst the trustee and not aganst the trust. Sub-
dvson (a) of secton 161 mposes the same ta upon the ncome of estates or
property hed n trust as mposed upon ndvduas, and provdes for the ta
beng computed upon the net ncome of the estate or trust, and that t sha
be pad by the fducary wth certan e ceptons not mportant here. e s
actng n payng the ta n a fducary reatonshp and hs stuaton Is not
dfferent from that of an e ecutor payng the ta es aganst an estate. We are
satsfed the ta s one mposed on the ncome of the trust and s not a ta
mposed upon the trustee, and a trust s not an ndvdua under secton 31(b).
Where a seres of statutes have been enacted, as they have wth reaton to
the dffcut and ntrcate queston of ncome ta es, an argument for amost any
theory of constructon can be but up under them, and courts can of course
construe words and phrases theren to cover matters whch Congress perhaps
never had contempated, but t s the duty of courts to construe the statutes so
as to arrve at the ntenton of Congress, as gathered from the statutes them-
seves, and not to nduge n specuaton as to what dfferent phrases n a statute
mght possby be hed to mean. Whe a very persuasve argument s presented
by counse for appeee, we beeve that subdvson (b) of secton 31 does not
cover the stuaton here presented, and that appeee was not entted to take a
credt of 25 per centum of the ta accrung on the net ncome of the trust.
If the statute were ambguous and we were n doubt as to the queston there
are certan consderatons whch tend strongy to support appeant s theory.
Subdvson (b) of secton 31 s substantay the same as subdvson (b) of
secton 209 of the ta aton statute of 1924 ( 43 Stat. L.. 264). The dfference
whch s sght s unmportant. It s aso practcay the same as subdvson
(b), secton 209, chapter 27 of the Revenue ct of 1926 (44 Stat. L., 20).
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41, rt. 321.
128
The provson of the ct of 1924 was the frst appearance of ths credt
provson n the statutes. Ths secton n each of the three Revenue cts of
1924, 1926, and 1928 provdes that the earned net ncome ta credt sha be
aowed n the case of an ndvdua. The Interna Revenue ureau nter-
preted ths provson n the ct of 1924 as aowng the earned ncome credt
ony to ndvdua ta payers and not to estates and trusts. Ths rung s as
foows: Snce the earned ncome credt provded by secton 209 of the Revenue
ct of 1924 s aowed ony to ndvdua ta payers, estates and trusts are not
entted to such credt. Interna Revenue Cumuatve uetn I -1, page 14,
L T. 2137.
The Treasury Department n admnsterng the cts of 1924, 1926, and 1928
has foowed ths nterpretaton of the statute. ence we are presented wth
a stuaton where the ureau n charge of the admnstraton of the statute
has gven the provson theren n queston here a certan nterpretaton, and
snce that tme Congress has twce reenacted substantay the same provson.
It s setted aw that where there s ambguty n a statute weght w be gven
to the nterpretaton and constructon of the same by the department charged
wth ts admnstraton, and where the statute s reenacted wthout sub-
stanta change t amounts to a egsatve recognton of such constructon.
We quote from Natona Lead Co. v. Unted States (252 U. S., 140, 145-146,
and 146-147), as foows:
rom dwards v. Darby (12 Wheat., 206) to acobs v. Prchard (223 U. S.,
200) t has been the setted aw that when uncertanty or ambguty, such
as we have here, s found n a statute great weght w be gven to the
contemporaneous constructon by department offcas, who were caed upon
to act under the aw and to carry ts provsons nto effect especay where
such constructon has been ong contnued, as t was n ths case for amost
40 years before the petton was fed.

The reenactng of the drawback provson four tmes, wthout substan-
ta change, whe ths method of determnng what shoud be pad under t
was beng constanty empoyed, amounts to an mped egsatve recognton
and approva of the e ecutve constructon of the statute, for
Congress s presumed to have egsated wth knowedge of such an estabshed
usage of an e ecutve department of the Government.
( chwezer v. Mager, 297 ., 334 T. D. 3577, C. . III-, 500 Unted States
v. O. ok ro 204 U. S., 143 Unted States v. Cereocdo ermanos y
Compana, 209 U. S., 337.)
Of course a departmenta constructon of a statute s not controng on a
court, but nevertheess courts gve weght to the same. (Red Wng Matng
Co. v. WUcuts, 15 . (2d), 626 T. D. 3980, C. . I-1, 225 Unted States v.
, 120 U. S., 169 aeobs v. Prchard, 223 U. S., 200.
In the case of Washngton Loan Trust Co. v. Commssoner (13 U. S.
. T. ., 575), the oard of Ta ppeas n passng on secton 209 of the
Revenue ct of 1924 hed that a fducary fng a return for the estate of
an ndvdua s not entted to the earned ncome credt provded by secton 209
wth respect to an ncome not n e cess of 5,000. We are forced to the con-
cuson that the earned tra court was n error n not sustanng the demurrer
of appeant to the petton of appeee, and the |udgment s reversed and the
case remanded for further proceedngs n harmony wth ths opnon.
Reversed and remanded.
P RT I . CCOUNTING P RIODS ND M T ODS O CCOUNTING.
S CTION 41. G N R L UL .
rtce 321: Computaton of net ncome - r-4910
I. T. 2556
R NU CT O 1928.
The foowng rates of e change are accepted by the ureau of
Interna Revenue as the current or market rates of e change pre-
vang as of December 81, 1930:
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129
41, rt. 321.
Country or cty.
Monetary unt.
aue In
terras of
Unted
States
money.
Country or cty.
Monetary unt.
I wchosovaka.
Denmark
ngand.
nand
ermany
reece
ungary
Netherands
Norway
Poand
Pernea
Rumana
Span.
Svreen
Schng...
ega
Lev
rone
rone
Pound
Markka
ranc
Rechsmark
Drachma...
Pengo
Lra
Guder
rone
Zoty
scudo
Leu
Peseta
rona
0. 140875
. 130671
. 007169
.029658
.267323
4. 855980
.025160
.039272
.238196
.012946
. 174997
. 40262 )
.267355
. 112125
. 044841
. 005948
. 104926
. 267951
Swtzerand.
Yugosava.
ongkong..
Chna
Chna
Chna
Inda
apan
Sngapore...
Canada
Cuba
Me co
rgentna..
rgentna..
raz ,
Che
Uruguay
Coomba...
ranc
Dnar
Doar
Shangha tne..
Me can doar.
Yuan doar
Rupee.
Yen
Doar
Doar
Peso.._
Peso
Peso (god)
Peso (paper)...
Mres
Peso
Peso
Peso
ktce 321: Computaton of net ncome. -21-5073
G. C. M. 9210
R NU CT O 1928.
Treatment for Income ta purposes of amounts receved from
awards for osses ncurred durng the Word War.
The opnon of ths offce s requested reatve to the amount of
ta abe ncome derved by a ta payer (usng the cash recepts and
dsbursements method of accountng) for the ta abe year 1928, from
payments receved n that year pursuant to the Settement of War
Cams ct, n respect of an award of the M ed Cams Comms-
son. The prncpes appcabe may frst be consdered.
I.
W T P RT O T MOUNTS P Y L IN R SP CT O T W RD CON-
STITUT S INCOM .
(a) Interest: or reasons too ancent to requre dscusson, a
nterest payabe n respect of the awards consttutes ncome. There
are at east three dfferent knds of nterest payabe n respect of the
awards:
(1) The nterest deat wth n secton 2(c), Settement of War
Cams ct of 1928, approved March 10,1928 (45 Stat., 254), namey,
smpe nterest at the rate of 5 per centum per annum upon the
amounts payabe under subsecton (b) and remanng unpad be-
nnng anuary 1, 1928, unt pad.
(2) The nterest wth whch secton 2(b), Settement of War
Cams ct, s concerned, . e., nterest n accordance wth an award
of the M ed Cams Commsson (accrung before anuary 1, 1928)
as dstngushed from the prncpa of an award of the M ed Cams
Commsson.
(3) Interest whch, by an award of the M ed Cams Commsson
tsef, was made a part of the prncpa of the award. (It s neces-
sary to refer to and e amne the cam fed wth, and the award made
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41, rt. 321. 130
by, the M ed Cams Commsson n order to ascertan whether any
nterest s ncuded n the prncpa of the award.)
(b) Portons (of the prncpa of an award of the M ed Cams
Commsson) whch consttute ncome.
s ndcated n (a) 8, supra, a tems of nterest ncuded n the
prncpa of an award consttute ncome. ust as t s necessary
to e amne the record n the case of each award to dscover what,
f any, part of the prncpa of the award represents nterest and,
hence, ncome, so t s necessary to e amne the record n the case
of each award to dscover what each part of the prncpa of the
award represents, and s made n respect of. The awards are com-
pensatory n character n the same way as the awards made n em-
nent doman proceedngs, or as the |udgments entered n cv suts
respectng ost or damaged property. The fundamenta ueston at
a tmes s therefore: What was the award (prncpa of the award)
or porton of the award, made n respect of
or e ampe, n the case of a credt or an account recevabe ts
status must be consdered as of the moment of sezure n order to
ascertan whether the tems contaned an eement of capta (n the
ncome ta sense), so that n computng ncome n respect thereof
aowance can be made for the return to the ta payer of hs capta
theren (. e., measured by hs bass for determnng gan or oss,
there havng been a dsposton of the tem n queston through
destructon or sezure and an amount reazed therefrom by
vrtue of the payments n respect of the award). To a ta payer
usng the cash recepts and dsbursements method of accountng, the
credts and accounts recevabe woud ordnary contan no capta
eements. Of course, t s qute possbe to have a credt or account
recevabe whch, n any event, w consst soey of capta tems,
as n the case of a oan. No genera rue can be stated coverng
a cases other than the rue that each credt or account recev-
abe must be anayzed n the ght of the transacton out of whch
t arose, and upon the bass of that anayss a determnaton made
of ts capta character as of the date of sezure or destructon. If
the tem or property n respect of whch the award was made had, as
of the moment of ts sezure or destructon, no capta eement, the
amount of the award made n respect thereof w n a cases con-
sttute ncome. Thus, the prncpa of an award made n respect of
the unpad saary of a ta payer usng the recepts method of account-
ng w aways consttute ncome n ts entrety.
Whether the property be physca and tangbe, or whether t be
ntangbe, as credts or accounts recevabe, f t has, at the moment
of sezure or destructon, a capta eement, there must be a determ-
naton of gan or oss. The bass of such property must be deter-
mned and gan or oss computed accordngy n precsey the same
way as f the award were the proceeds of a vountary sae. ( the
provsons of the Revenue cts are appcabe n ths connecton,
specfcay Suppement Computaton of Net Income, Revenue
ct of 1928.) If the property as of the tme of ts sezure or
destructon contaned capta eements and, hence, had a bass, that
bass- must be reduced by a deductons prescrbed by aw. (See
generay secton 111(b), Revenue ct of 1928.) Deductons for
deprecaton, depeton, obsoescence, bad debts, and osses, as we
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131
41, rt. 321.
as a other approprate deductons, are to be taken nto account as
we as any recovery through nsurance, ndemnty, and act of the
German Government or any other person. dstncton, however,
s to be made between a deducton for osses and for bad debts and
other deductons.
In the case of deductons for osses and bad debts, the bass s not
to be ad|usted or reduced merey because such deductons were aow-
abe n the approprate pror ta abe years, but s nevertheess to be
ad|usted and reduced n a cases e cept where (1) such deducton
was nether camed nor aowed, and (2) the statute of mtatons
now precudes the ta payer from dervng any beneft from the
present aowance of the deducton n the approprate ta abe year.
Wth ths e cepton, the bass s to be reduced by the amount of a
aowabe deductons propery chargeabe to capta account even
though such deductons have not yet been aowed.
II.
TIM T W IC T INCOM L M NTS IN OL D IN T W RDS R
R TURN L ND T L S INCOM .
Where the ta payer uses the cash recepts and dsbursements
method of accountng, a ncome n respect of the award s, of
course, returnabe and ta abe as ncome n the ta abe year n whch
receved. Payments under secton 2(c), Settement or War Cams
ct, are earmarked and, consttutng ncome n ther entrety, are
returnabe and ta abe as ncome n the year n whch receved.
The amounts payabe under secton 2(b), Settement of War Cams
ct, ordnary nvove three eements: (1) Interest upon the prn-
cpa of the award n accordance wth the award,, accrung before
anuary 1, 1928 (2) nterest ncuded n the prncpa of the award
but representng compensaton for the use of the amount of the
recovery n respect of the property sezed or destroyed (nterest
from the date of sezure or destructon to the date of the entry of
the award) and (3) the amount awarded as compensaton for the
roperty sezed or destroyed. ements (2) and (3) are conso-
ated by the award nto the prncpa of the award and eements
(1), (2), and (3) are consodated by the provsons of the Sette-
ment of War Cams ct nto the amount payabe under secton 2(b),
Settement of War Cams ct. The dstnct treatment of the sev-
era eements by the awards and by the Settement of War Cams
ct, and the ancent ma m that equaty s equty constran to
the concuson that each payment under secton 2(b) s to be re-
garded as rataby consstng of a payment on account of each of the
three eements. Ratabe parts of each payment under secton 2(b),
Settement of War Cams ct, are, therefore, to be regarded as
payments on account of eements (1) and (2), and, snce payments
on account of eements (1) and (2) consttute ta abe ncome, the
amount of such ratabe parts s returnabe and ta abe as ncome n
the year n whch receved.
payment on account of eement (3 s on account of compensa-
ton for the property n respect of wnch the award was made.
ratabe part of each payment under secton 2(b). Settement of War
Cams ct, s accordngy to be regarded as a payment on account
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41, rt. 321.
132
thereof. No ncome s reazed as respects eement (3) unt there
has been a recovery of the capta, f any, nvoved. When the aggre-
gate of the ratabe parts of a payments attrbutabe to eement
(3) equas the amount of capta to be returned, a subsequent pay-
ments, or parts thereof, attrbutabe to eement (3) w consttute
ta abe ncome n the year of recept.
s respects amounts deducted from each payment under secton
2(e), Settement of War Cams ct (one-haf of 1 per centum as
rembursement for e penses ncurred by the Unted States), the
amount deducted s nvaraby brought nto account n the ta abe
year n whch the sum from whch deducted s brought nto account.
When deducted from sums representng pure ncome tems, techn-
cay the amount deducted s to be regarded as e pense when de-
ducted from sums representng capta tems, techncay the amount
deducted s to be regarded as reducng the proceeds recovered.
To ustrate, a ta payer, who reguary empoys the cash recepts
and dsbursements method of accountng, receved an award from
the M ed Cams Commsson n respect of a factory sezed and
destroyed. The prncpa of the award was n the amount of
100,000a doars, representng 80,000a doars compensaton for the
factory (eement (3) above), and nterest n the amount of 20,000a|
doars on that sum from anuary 1, 1918, to the date of the entry
of the award (eement (2) above). The nterest on the prncpa of
the award n accordance wth the award, accrung before anuary 1,
1928, was 25,000a doars (eement (1) above), makng the tota
amount payabe under secton 2(b), Settement of War Cams ct,
125,000a doars. The ta payer receved durng the ta abe year
1928, pursuant to secton 2(b), Settement of War Cams ct, pay-
ments aggregatng 79,848.75a doars (80,250a doars mnus 401.25a
doars, the admnstratve charge prescrbed by secton 2(e), Set-
tement of War Cams ct), but receved durng the ta abe year
1928 no payment pursuant to secton 2(c), Settement of War Cams
ct.
doars.
ggregate amount receved n 1928 79,848. 75
ement (1) :
ttrbutabe to nterest upon the prncpa of the award, accrung
before anuary 1, 1928
or 20 Per cent of 79,848.75 115,969. 75
125,000
ement (2) :
ttrbutabe to Interest ncuded n the prncpa of the award
20 000
y O . or 16 per cent of 79,848.75 112,775.80
ement (3) :
ttrbutabe to the amount awarded as compensaton for the
factory
80 000
or 64 per cent of 79,848.75 51,103.20
1 Consttutes ta abe ncome for the ta abe year 1928.
2 If ths amount does not e ceed the bass, or capta to be returned, no part of It
consttutes ta abe ncome for the ta abe year 1928. To the e tent ths amount does
e ceed the bass, or capta to be returned, the e cess consttutes ta abe Income for the
ta abe year 1928.
Note. The admnstratve charge prescrbed by secton 2(e), Settement of War Cams
ct, havng been brought nto the foregong computaton, t s not. of course, to be agan
brought nto the computaton of ta abe net ncome, ether as e penses or otherwse.
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133
42, rt. 332.
Where a ta payer s the hoder of severa awards of the M ed
Cams Commsson, each payment, pursuant to secton 2(b), Sette-
ment of War Cams ct, s, of course, to be rataby apportoned
between the severa awards.
Where the award s made or pad to the estate of the person whose
property was sezed or destroyed (that person beng now deceased),
obvousy the bass for computng gan or oss s ordnary the far
market vaue of the cam at the date of the death of the decedent.
The prncpes appcabe n these cases do not appear to requre
restatement here.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
S CTION 42. P RIOD IN W IC IT MS O
GROSS INCOM INCLUD D.
rtce 332: Income not reduced to possesson. -21-5074
G. C. M. 9466
R NU CT O 1928.
The ncome receved from payments made to a ta payer under
sectons 2 and 4, Settement of War Cams ct, s to be accounted
for, for ncome ta purposes, n the year n whch the payment
s actuay avaabe to the camant.
n opnon s requested whether amounts of ncome nvoved n
amounts payabe under secton 2(b), Settement of War Cams
ct, approved March 10, 1928 (45 Stat., 254), are ta abe to a ta -
payer usng the accrua method of accountng n the ta abe year
n whch March 10, 1928, fas, and whether amounts of ncome
nvoved n amounts payabe under secton 2(c), Settement of
War Cams ct, are ta abe to such a ta payer n the ta abe year
n whch March 10, 1928, fas (as to amounts accrued durng the
ta abe year n whch March 10, 192S, fas) and currenty there-
after (as to amounts accrung after the ta abe year n whch March
10. 1928, fas).
The cardna prncpe upon whch the accrua system of keepng
accounts s based s that pecunary obgatons payabe to or by the
propretor are treated as f dscharged when ncurred Unted /States
v. mercan Can Co., 280 U. S., 412, Ct. D. 164, C. . I -1, 292).
The obgatons contempated are uncondtona obgatons Lucas
v. North Te as Lumber Co., 281 U. S., 11, Ct. D. 169, C. . I -1.
294). The ob|ect of the system s, of course, an accurate refecton
of the true state of affars, and, as respects the use of the system for
ncome or ncome ta purposes, an accurate refecton of the true
ncome. ence, the proprety of an entry n a partcuar year may
depend upon the reevance of that tem to the partcuar year s
busness Unted States v. nderson, 269 T . S., 422, T. D. 3839.
C. . -, 179) t may depend upon the tem beng a f ed amount
defntey payabe, athough debtum n praesent. sovendum n
futuro ( mercan Natona Co. v. Unted States, 274 IT. S.. 9 , T. T).
4099, C. . I-2, 193) t may depend, even though the obgaton
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134
be uncondtona and have a substanta measure of reevance to the
year s transactons, upon the reasonabe predcabty of the amount
of the obgaton, or the tme of ts qudaton, or the tme of ts
dscharge (Lucas v. mercan Code Co., 280 U. S., 445, Ct. D. 168,
C. . I -1,314).
Thus, whe the accrua system s grounded upon the prncpe
that pecunary obgatons payabe to or by the propretor are to
be treated as f dscharged when ncurred, that prncpe s not an
nvarabe unversa. The bass of the prncpe s nether a fcton
nor an hypothess, but a fact, namey, that normay mercante and
busness obgatons w be dscharged n due course. When, there-
fore, the pecunary obgatons n queston are not at a ordnary
mercante and busness obgatons but hghy e traordnary and
anomaous, f not unque, the hasc prncpe upon whch the accrua
system fundamentay proceeds s not necessary appcabe. If
the obgaton n queston es whoy outsde a ordnary busness
and mercante deangs, the obgaton es outsde the mercante
and busness e perence from whch s derved the prncpe upon
whch the accrua system proceeds.
Such are the obgatons arsng from an nternatona cam, such
as the cams aganst Germany n respect of the acts of that Govern-
ment durng the ate war. s respects such cams, the owner of
property sezed or destroyed by Germany became possessed at the
very moment of the sezure or destructon of a spes recuperand,
whch consttuted property n hs hands. Notwthstandng ths
rght of property representng the possbty of an eventua recoup-
ment, the fact of sezure or destructon by Germany estabshes the
aowabty of a oss n the year of sezure or destructon (Unted
States v. S. S. Whte Denta Manufacturng Co. of Pennsyvana,
274 U. S., 398, T. D. 4059, C. . I-2, 198). The Supreme Court
there sad:
It woud requre a hgh degree of optmsm to dscern n the sezure
of enemy property by the German Government n 1918 more than a remote
hope of utmate savage from the wreck of the war. The ta ng ct does
not requre the ta payer to be an ncorrgbe optmst
It was none the ess a deductbe oss then, athough ater the
German Government bound tsef to repay and an award was made by the
M ed Cams Commsson whch may resut n a recovery.
Subsequent events have brought and are brngng the spes recupe-
rand to fruton as actua recoveres. They are:
1. The treaty of peace and subsequent treates and conventons es-
tabshng the abtv of Germany, and ts obgatons to repay
2. The creaton of the M ed Cams Commsson, and the entry of
awards by t, estabshng the abty of Germany n specfc cases
3. The estabshment of the Dawes pan and the acton of the
Unted States n respect thereof
4. On March 10, 1928, the enactment nto aw of the Settement of
War Cams ct, the creaton thereunder of the German speca de-
post account, and the admnstraton thereof, under whch substan-
ta amounts have been and are beng pad to award hoders of the
M ed Cams Commsson
5. The Young pan and the agreement of une 23, 1930, between
the Unted States and Germany, and other treates, conventons, and
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42, rt. 332.
agreements ookng toward the eventua qudaton of the obga-
tons of Germany.
Ths sequence of events represents the gradua progress from the
mere hope of recovery to the actuaty of parta recovery. Cer-
tany, not unt the enactment of the Settement of War Cams ct
coud the e pectaton of recovery be sad to resembe n any way that
e pectaton wth whch busness and mercante men regard ordnary
busness and mercante obgatons.
It s beeved that, even after the enactment of the Settement of
War Cams ct, the creaton and settng up of the German speca
depost account, and the admnstraton thereof, the obgaton of
Germany to pay the awards of the M ed Cams Commsson acks
suffcent resembance to ordnary mercante and busness obgatons
to brng the obgatons of Germany wthn the scope of the prncpe
upon whch the accrua system fundamentay proceeds. Whe the
amount of the obgaton and the abty of Germany to pay t
were f ed by the Settement of War Cams ct, or had been f ed
ong pror thereto, the Settement of War Cams ct by no means
f ed mmedatey or utmatey the tme of payment of the obga-
ton. The ct e pressy dscamed any responsbty on the part
of the Unted States for payment, and made the German speca de-
post account the soe source of payment to the award hoders. s-
sgnment of awards by award hoders was forbdden, thus precudng
both a market for them and a market prce. y force of the ct,
the greater part of the sezed German property theretofore hed as
securty for the payment of the cams aganst Germany was re-
eased. urther, and ths s the mportant fact, the ct (n secton
4) estabshed a compe system of prorty of payment (wth spec-
fed reserves to cover then unknown factors), and (n secton 4)
specfed and authorzed the amounts to be deposted n the fund
and out of whch aone payments mght be made. The estmated
tme for payment to the varous camants entted under secton 4
s shown by the foowng statement:
Tota tme requred Tears.
To pay 80 per cent to mercan camants, together wth Interest thereon
and nterest on deferred payments 6
To pay baance due mercan camants (20 per cent), aen property
owners (20 per cent), and owners of shps, patents, and rado staton
(50 per cent) 125,128,000 wth nterest 18
To pay off 25,000,000 unaocated nterest fund, wthout nterest 2
rom and after September 1, 1928 26
Senate Report No. 273, Seventeth Congress, frst sesson, Commttee on
nance, settement of war cams b of 1928, page 37.
The Cass III camants (those entted under secton 4(c) 5, Set-
tement of War Cams ct, to appro matey 80 per cent of that
porton of ther cam as s wthn secton 2(b)), under ths estmate,
mght e pect payment wthn s years. These camants, under
ths estmate, mght e pect payment n fu (under secton 4(c) (5),
(9), and (10)) wthn 26 years. Subsequent events nstead of
reducng ths estmate have ncreased t, so that t s now estmated
72109 31 10
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136
that 33 years w be requred before the ast of those payments are
made n fu.
There s no support n any ad|udcated case for the proposton
that the f ed amount of an uncondtona obgaton (the assgn-
ment of whch s prohbted by aw) to pay, partay or n toto, 25
years hence, or at a remote tme n the future, or at an uncertan
tme n the future, or by parta payments e tendng over 25 or 33
years, more or ess, may propery be presenty treated as f presenty
dscharged under an accrua system of keepng accounts. Certany,
t can not be sad that the treatment of such a pecunary obgaton
as f presenty dscharged propery refects ncome, nor can t be
sad that such a system s contempated by the Revenue cts, ether
for the computaton of ncome or for the computaton of deductons.
(Cf. Lucas v. mercan Code Co., cted supra.)
In the opnon of ths offce, the ncome s to be accounted for, for
ncome ta purposes, n the year n whch the payment s actuay
avaabe to the camant under the prncpes of Reguatons 74,
artces 332 and 333. cearer refecton of ncome s obtaned by
brngng t nto account then, rather than at any other tme. It s
true that the Secretary of the Treasury, n the admnstraton of the
German speca depost account, frequenty advses camants n
advance of antcpated payments, but the advce s based upon the
e stng state of the German speca depost account and other
crcumstances, and by no means consttutes a concusve determna-
ton that the payments w be made. Under the Settement of War
Cams ct the dutes of the Secretary of the Treasury necessary
nvove matters of |udgment, and dscretonary powers are gven
hm approprate to the performance of these dutes. ence, t can
not be sad that payment s certan unt t has been duy authorzed
and the amounts nvoved are avaabe to the camants. The resut
s, n the opnon of ths offce, that the amount of ncome refected
n the payments here nvoved s to be accounted for by a ta payer
usng the accrua method of accountng at precsey the same tme as
a ta payer usng the cash recepts and dsbursements method of
accountng. Ths resut may seem anomaous, but t s not unque,
and the anomay arses from the whoy e traordnary character
of the obgatons n queston.
The further probem remans as to the proper method of deter-
mnng what part of the amount receved consttutes ncome. These
rncpes, as respects a ta payer usng the cash recepts and ds-
ursements method of accountng, are, t s beeved, fuy stated
n Genera Counse s Memorandum 9210 (see page 129), and, under
the vew here taken, the prncpes appcabe to a ta payer usng
the cash recepts and dsbursements method of accountng are fuy
appcabe to a ta payer usng the accrua method of accountng,
and need not be repeated.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
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44, rt. 355.
S CTION 44. INST LLM NT SIS.
rtce 355: Gan or oss upon dsposton of -13-4995
nstament obgatons. G. C. M. 9114
( so Secton 113, rtce 596 Secton 162,
rtce 863.)
R NU CT O 1928.
Durng 1924, sod shares of stock and receved n cash 132.44
doars and notes aggregatng 211.84 doars, payabe as foows:
1925, 45 doars 1928, 45 doars 1929, 45a doars 1930, 45
doars and 1931, 31.84 doars. The sae was treated as a cosed
transacton n 1924. ded pr , 1928, at whch tme the notes
due n 1928 and thereafter, havng a face vaue of 166.84 doars,
were unpad. The estate ta return ncuded the unpad notes at
ther face vaue of 166.84 doars.
ed, nasmuch as the transacton, under the Revenue ct of
1924, was a deferred payment sae not on the nstament bass and
was treated as a cosed transacton n 1924, t foows that the
notes do not consttute nstament obgatons as the term s
used n secton 44(d) of the Revenue ct of 1928. The transfer of
the notes to the decedent s estate s governed by the provsons
of artce 863 of Reguatons 74. In accordance wth the prov-
sons of secton 113(a)5 of the Revenue ct of 1928, the bass of
the notes to the decedent s estate s the far market vaue of such
notes at the tme of the decedent s death.
Durng 1924, sod to et a. y shares of stock n the M Company
for 344.28a doars, whch resuted n a proft of 233.24a doars.
receved n cash 132.44a doars and notes aggregatng 211.84a doars,
payabe as foows:
Doars.
1930 45
1931 31.84
Doars.
1925 45
1928 45
1929 45
The sae was treated as a cosed transacton n 1924 and n determn-
ng the proft the notes were consdered as havng a far market
vaue of 50 per cent of ther face vaue, thus deferrng the reportng
of the baance of the proft unt the notes were pad. ded
pr , 1928, at whch tme the notes due n 1928 and thereafter,
havng a face vaue of 166.84a doars, were unpad. These notes
had been put up as coatera wth a bank to whch was heavy
ndebted. bout three months after hs death, the bank apped
the notes at face vaue wthout recourse as payment on the debts of
the deceased. The estate ta return ncuded the unpad notes at
ther face vaue of 166.84a doars.
Secton 44(d) of the Revenue ct of 1928 provdes as foows:
Gan or oss upon dsposton of nstament obgatons. If an nstament
obgaton s satsfed at other than ts face vaue or dstrbuted, transmtted,
sod, or otherwse dsposed of, gan or oss sha resut to the e tent of the
dfference between the bass of the obgaton and (1) n the case of satsfacton
at other than face vaue or a sae or e change the amount reazed, or (2)
n case of a dstrbuton, transmsson, or dsposton otherwse than by sae
or e change the far market vaue of the obgaton at the tme of such ds-
trbuton, transmsson, or dsposton. The bass of the obgaton sha be
the e cess of the face vaue of the obgaton over an amount equa to the
ncome whch woud be returnabe were the obgaton satsfed n fu.
In I. T. 2515 (C. . I -1,125) the headnote reads as foows:
The deeedent ded subsequent to the enactment of the Revenue ct of 1928,
ownng nstament obgatons receved n connecton wth the sae of rea
estate, the proft from whch he had eected to report on the nstament bass
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44, rt. 355.
138
and on whch he had reported ony a porton of the proft to be reazed. Upon bs
death the nstament obgatons were transmtted to the e ecutor of hs estate.
ed, the provsons of secton 44(d) of the Revenue ct of 1928 are ap-
pcabe to the transmsson of the nstament obgatons upon the death of
the decedent. The gan or oss resutng from the transmsson of the nsta-
ment obgatons, computed n accordance wth the method prescrbed n the
foregong secton, shoud be ncuded n the decedent s return for the ta abe
year n whch hs death occurred.
Whether the notes n the nstant case may be consdered as n-
stament obgatons wthn the meanng of secton 44(d), quoted
above, and whether the rung contaned n I. T. 2515, supra, s app-
cabe depend upon an nterpretaton of the term nstament ob-
gatons as the term s used n secton 44(d). The Senate Com-
mttee on nance, n ts report dated May 1, 1928, page 24, stated
as foows wth reference to secton 44(d) :
Gan or oss upon dsposton of nstament oogatom. Subsecton (d)
contans new provsons of aw to prevent evason of ta es n connecton wth
the transmsson of nstament obgatons upon death, ther dstrbuton by
way of qudatng or other dvdends, or ther dsposton by way of gft, or
n connecton wth smar transactons. The stuatons above specfed ord-
nary do not gve rse to gan and yet at the same tme t s urged that they
permt the recpent to obtan a greaty ncreased bass hs hands for the
property receved, e cept n the case of gfts. It therefore seems desrabe
to carfy the matter. The nstament bass accords the ta payer the prvege
of deferrng the reportng at the tme of sae of the gan reazed, unt such
tme as the deferred cash payments are made. To prevent the evason the
subsecton termnates the prvege of onger deferrng the proft f the seer
at any tme transmts, dstrbutes, or dsposes of the nstament obgatons
and compes the seer at that tme to report the deferred profts. The sub-
secton aso modfes the genera rue provded n subsecton (a) for the ascer-
tanment of the percentage of proft n the deferred payments, n those cases
n whch the obgatons are satsfed at other than ther face vaue or are sod
or e changed. The modfcaton permts a compensatng reducton In the
percentage of proft n ease the obgatons are satsfed at ess than ther face
vaue, or are sod or e changed at ess than face vaue.
rom the foregong, t appears that the term nstament obga-
tons as used n secton 44(d) contempates an evdence of ndebted-
ness of a purchaser acqured by a seer n connecton wth the sae of
property, the ncome from whch s reported on the nstament
bass. In the nstant case, under the Revenue ct of 1924 the trans-
acton was ceary a deferred payment sae of persona property not
on the nstament bass and was treated as a competed transacton
n 1924. It s concuded, therefore, that the notes n the nstant case
do not consttute nstament obgatons as that term s used n
secton 44(d). It foows that the rung contaned n I. T. 2515
pertanng to the dsposton of nstament obgatons s not app-
cabe to the nstant case. (Cf. I. T. 2547, C. . I -2, 120.)
The transfer of the notes to the decedent s estate s governed by
the provsons of artce 863 of Reguatons 74, wheren t s stated:
No ta abe ncome s reazed from the passage of property to the
e ecutor or admnstrator on the death of the decedent, even though It may
have apprecated n vaue snce the decedent acqured t.
In accordance wth the provsons of secton 113(a) 5 of the Reve-
nue ct of 1928, the bass of the notes to the decedent s estate s the
far market vaue of such notes at the tme of decedent s death. It
s apparent from the foregong that the notes n the nstant case
had a far market vaue equa to ther face.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
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51, rt. 381.
P RT . R TURNS ND P YM NT O T .
S CTION 51. INDI IDU L R TURNS.
rtce 381: Indvdua returns. -2-4894
Mn. 3853
Dscontnuance of procedure outned n Mmeograph 3723, reat-
ng to communty property returns fed for 1927 and subsequent
years.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C, December 22, 1930.
To Coectors of Interna Revenue, Interna Revenue gents n
Charge, and Others Concerned:
Reference s made to Mmeograph 3723 (C. . III-1, 89), dated
pr 6, 1929, reatng to ncome ta returns requred to be fed for
1927 and subsequent ta abe years by husband and wfe domced
n the communty property States.
In that mmeograph t was stated that the poston of the ureau
was that communty ncome can not be dvded for ncome ta pur-
poses, but must be returned, and the ta n respect thereof pad, by
the spouse (usuay the husband) havng under the aws of the
State the management and contro thereof. It was further stated
that pendng fna ad|udcaton n court of ths queston husband
and wfe domced n rzona, Idaho, Lousana, Nevada, New Me -
co, Te as, and Washngton mght each thereafter n renderng
orgna separate returns report one-haf of the ncome whch smu-
taneousy wth ts recept becomes communty property. The audt
of returns fed upon the so-caed communty property bass for
1927 and subsequent ta abe years was governed by certan rues
enumerated n that mmeograph and desgnated as paragraphs (a)
to (m), ncusve. The purpose of the procedure outned was to
hod n abeyance the fna audt of returns n those cases where
separate returns were fed by husband and wfe contrary to the
poston of the ureau, and, n so far as possbe, to protect the
nterests of both the Government and the ta payer unt the queston
coud be fnay ad|udcated.
Under date of November 24, 1930, the Supreme Court of the
Unted States rendered t decsons n the cases of Poe v. Seaborn
Ct. D. 259, C. . I -2, 202 , GoodeU v. och Ct. D. 262, C. .
I -2, 199 , opkns v. acon Ct. D. 260, C. . I -2, 201 , and
ender v. Pfa|f Ct. D. 261, C. . I -2, 200 , and hed that hus-
band and wfe domced n the States of Washngton, rzona,
Te as, and Lousana, respectvey, were entted to fe separate
ncome ta returns and each report theren one-haf the communty
ncome. The rung ad down by the Supreme Court beng adverse
to the Government s contenton that the communty ncome was
ta abe to the spouse who has the management and contro of the
communty property, t s necessary to dscontnue the procedure
outned n Mmeograph 3723, n so far as t reates to returns fed
n those communty property States affected. In the decsons re-
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51, rt. 381.
140
ferred to t was ponted out that under the State aws the wfe had
a present vested rght n the communty property equa to that of
the husband, and that one-haf of the communty ncome was, there-
fore, the ncome of the wfe, whch mght be ta ed to her. s the
wfe s nterest n communty property under the aws of the States
of Idaho, Nevada, and New Me co s kewse vested, t foows
that the above-mentoned decsons of the Supreme Court are equay
appcabe to ta payers domced n those States. The queston of
the rght of husband and wfe to fe separate returns n whch the
communty ncome s dvded havng been fnay ad|udcated n the
four cases referred to above, and the queston beng thus setted as
to a communty property States e cept Caforna, the audt of
ncome ta returns fed on the communty property bass shoud now
be competed as e pedtousy as possbe, effect beng gven to the
Supreme Court decsons.
Wth respect to the audt of returns fed by ta payers n Ca-
forna, no change w be made n the e stng procedure at ths
tme, n vew of the fact that there s now pendng before the Su-
preme Court the case of U. S. v. Macom, whch nvoves the ques-
ton as to the rght of husband and wfe under the aws of Caforna
each to report n separate returns one-haf of the communty ncome
under an amendment to the Cv Code of Caforna n effect uy
29, 1927, and desgnated as secton 161(a). (See I. T. 2457, C. .
III-1, 89.)
Reatve to the e tenson of the perod of mtaton upon refunds
and assessments n the case of communty property returns fed for
the ta abe years 1927 and 1928, whch s provded by . . Res. 340.
approved by the Presdent une 16, 1930, see Mmeograph 3815
C. . I -2, 148 .
ueres regardng ths mmeograph or procedure n connecton
therewth w be drected to IT: : CW.
Davd urnet, Commssoner.
rtce 381: Indvdua returns, -9-4955
Mm.3859
Caforna communty property ncome ta returns 1927 and
subsequent years.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C, ebruary 9, 1931.
Coectors of Interna Revenue, Interna Revenue gents n Charge,
and Others Concerned:
Reference s made to Mmeograph 3853 (see on page 139), dated
December 22, 1930, provdng for the dscontnuance of the procedure
outned n Mmeograph 3723 (C. . III-1, 89) n respect of com-
munty property ncome ta returns fed for 1927 and subsequent
years.
It was provded n Mmeograph 3853 that the audt of ncome ta
returns fed for 1927 and subsequent years on the communty prop-
erty ncome bass by husband and wfe domced n the States of
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141
51, rt. 381.
rzona, Idaho, Lousana, Nevada, New Me co, Te as, and Wash-
ngton shoud be competed as e pedtousy as possbe, effect beng
gven to the decsons of the Supreme Court of the Unted States
n the test cases from the States of Washngton, rzona, Te as, and
Lousana. It was aso provded that wth respect to the audt of
returns fed by ta payers n Caforna, no change woud be made n
the procedure provded by Mmeograph 3723 pendng the decson
of the Supreme Court n the case of U. S. v. Macom, whch n-
voved the queston as to the rght of husband and wfe under the
aws of Caforna each to report n separate returns one-haf of the
communty ncome under an amendment to the Cv Code of Ca-
forna n effect uy 29, 1927, and desgnated as secton 161(a).
Under date of anuary 19, 1931, the Supreme Court rendered a
decson n the Macom case, hodng n effect that husband and
wfe domced n Caforna may each report n separate returns
one-haf of the communty property ncome receved by them. Ths
decson s appcabe to ncome from communty property acqured
on and after uy 29, 1927, and to saares, wages, and fees earned
on and after that date whch consttute communty property. The
decson s not appcabe to ncome from property acqured pror
to uy 29, 1927, nor to saares, wages, fees, and other compensaton
earned pror to that date, (See I. T. 2457, C. . III-1, 89.) c-
cordngy, the procedure outned n Mmeograph 3723 w be ds-
contnued n the handng of communty property ncome ta returns
fed by husband and wfe domced n Caforna for 1927 and sub-
sequent years, and the audt of such returns shoud be competed as
e pedtousy as possbe, effect beng gven to the Supreme Court
decson n the Macom case.
In those cases n whch |ont returns were fed by husband and
wfe, such returns w be audted n accordance wth the poston
whch the ureau has consstenty taken foowng the rue adopted
by the Crcut Court of ppeas for the fth Crcut n the case of
Rose v. Grant (39 ed. (2d), 340), that s, where husband and wfe
fed a |ont ncome ta return, they may not after the end of the
fng perod fe amended separate returns. (See I. T. 2535, C. .
I -1, 125.)
Correspondence and nqures regardng ths mmeograph shoud
refer to the number, and to the symbos IT: : CW.
Davd urnet, Commssoner.
rtce 381: Indvdua returns. -23-5100
Mm. 3879
ncome credt n cases of separate returns on the
communty property ncome bass.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C, May 28, 1931.
Coectors of Interna Revenue, Interna Revenue gents n Charge,
and Others Concerned:
Reference s made to Mmeograph 3853 (see on page 139) and
Mmeograph 3859, dated ebruary 9, 1931 (see on page 140) ad-
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52, rt. 391.
142
vsng those concerned of the decsons of the Supreme Court of the
Unted States n the communty property ncome test cases from
the States of rzona, Caforna, Lousana, Te as, and Washng-
ton, and provdng for the competon of the audt n accordance
wth those decsons of returns fed on the communty property
ncome bass by ta payers domced n a communty property
States, ncudng Idaho, Nevada, and New Me co.
The earned ncome credt of the wfe n communty ncome cases
w be determned n accordance wth the decson of the Crcut
Court of ppeas for the fth Crcut n the case of McLarry v.
Commssoner (30 ed. (2d), 789), that s, where husband and wfe
render separate ncome ta returns on the communty ncome bass,
the wfe may wthn the mtatons provded n secton 209 (a) 3 of
the Revenue ct of 1926 and secton 31(a)3 of the Revenue ct of
1928, treat as earned ncome one-haf of the saares, wages, and
other ncome of the husband whch consttutes ncome receved for
persona servces actuay rendered by hm. The provsons of I. T.
Mmeograph 3283 (C. . I -1, 14) and any other rungs and
nstructons reatng to the earned ncome credt of the wfe n such
cases are hereby modfed to the e tent that they are nconsstent
wth the opnon of the court n the McLarry case.
Correspondence and nqures regardng ths mmeograph shoud
refer to the number, and to the symbos IT: : CW.
Davd urnet, Commssoner.
S CTION 52. CORPOR TION R TURNS.
rtce 391: Corporaton returns. -16-5023
I. T. 2566
R NU CT O 1928.
In the nstant ease the two corporatons consttuted, for ncome
ta purposes, two separate and dstnct ta abe enttes and the
return of the new corporaton may not ncude any porton of the
resuts of the operaton of the propertes n 1929 pror to the tme
the propertes were taken over by t. or the perod of 1929 dur-
ng whch the recever of the N Company operated the propertes,
the recever must fe a return as requred by secton 52(a) of the
Revenue ct of 1928.
rung s requested whether the M Company, whch has taken
over the propertes of the N Company, shoud fe a return for the
fu caendar year 1929, ncudng theren the resuts of the oper-
atons of the propertes before and after the acquston of such
propertes by the M Company.
It appears that the N Company was for a number of years n the
hands of a recever. Certfcates were ssued by the recever to those
persons who were hoders of bonds ssued by the N Company. In
an acton brought by the bondhoders commttee aganst the N Com-
pany these certfcates were hed by the court to consttute a vad
and e stng en upon the property, premses, rghts, nterests, and
franchses of the defendant. ccordng to a pan for termnatng
recevershp and for reorganzaton t was provded:
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143
52, rt, 391.
The commttee, through ts nomnee, havng bd n the property, on confrma-
ton of the sae, proposes to organze one raroad corporaton wth a capta
of v shares of nonpar common stock, to whch t s proposed to assgn the bd
so that a conveyance may be made drecty to the corporaton.
The stock corporaton aw of .the State of R provdes, wth ref-
erence to a corporaton created for the purposes for whch the M
Company was created, that there sha be fed n the offces where
certfcates of ncorporaton are requred by aw to be fed, a certf-
cate whch sha be entted and ndorsed certfcate of reorganza-
ton . The same secton, n stng the rghts and powers
resutng from the fng of such certfcate, grants no new rghts,
prveges, or franchses to the reorganzed corporaton, but nstead
provdes:
Such corporaton sha be vested wth and be entted to e ercse and en|oy,
a the rghts, prveges, and franchses, whch at the tme of such sae beonged
to, and were vested n, the corporaton ast ownng the property sod, or ts
recever, and sha be sub|ect to a the dutes mposed by aw on that
corporaton.
Under the stock corporaton aw of the State of R the reorganzed
corporaton s abe for the same obgatons that the recever woud
have been abe for.
Ths offce s advsed that the stockhoders and bondhoders of the
N Company and the M Company are not the same and that the
purpose of the pan as contempated by the statute was to take care
of the hoders of recever s certfcates and to scae down the ab-
tes of the corporaton. It s urged that the pan ceary shows the
property was purchased ony n order to carry out a reorganzaton
under the State of R statute.
Secton 52(a) of the Revenue ct of 1928 provdes n part:
Requrement. very corporaton sub|ect to ta aton under ths tte sha
make a return, statng specfcay the tems of ts gross ncome and the deduc-
tons and credts aowed by ths tte. In cases where recevers,
are operatng the property or busness of corporatons, such recevers,
sha make returns for such corporatons n the same manner and form as
corporatons are requred to make returns. ny ta due on the bass of such
returns made by recevers, sha be coected n the same manner as f
coected from the corporatons of whose busness or property they have custody
and contro.
It appears from the foregong that the N Company and the M
Company were ncorporated under the aws of the State of R that
both the od and the new corporaton were vested under the aws of
the State of R wth practcay the same, f not dentcay the same,
rghts, prveges, and franchses that they were both sub|ect to the
same dutes mposed by aw and that the new corporaton took over
and s operatng the propertes whch had been operated by the od
corporaton. owever, the new corporaton does not have the same
stockhoders that the od corporaton had. The purpose of reorgan-
zaton was to reduce the abtes of the corporaton and to take
care of the hoders of recever s certfcates. It s not shown that the
stockhoders of the od corporaton receved any stock of the new
corporaton n the reorganzaton.
The ony queston presented n ths case s whether more than one
ncome ta return s requred for the caendar year 1929.
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52, rt. 391.
144
In Soctor s Memorandum 4947 (C. . -2, 120) the con-
cuson was reached that where by reason of the e praton of the
charter of a corporaton t became necessary to organze a new cor-
poraton under the aws of the same State wth the same corporate
powers and the same stockhoders as the od corporaton, the new
corporaton consttuted a contnuaton of the od one, and that ony
one ncome ta return was requred of the two corporatons for the
year of rencorporaton. That concuson was based n part on
Wess v. Steam (266 U. S., 242) and Marr v. Unted States (268
U. S., 536). owever, t w be noted n the nstant case that even
though the corporate powers of the od and new corporatons were
the same and that bot were formed under the aws of the same
State, the stockhoders n the two corporatons were not the same.
The ta payer contends that n a reorganzaton under the above-
quoted provsons of the stock corporaton aw of the State of R
the od corporate enterprse contnues n the reorganzed corpora-
ton, and that any change n the dentty s merey forma. Wth
ths poston ths offce can not agree. In Schurz v. Cook (110 N. Y.,
443, 18 N. ., 113, affrmed by the Unted States Supreme Court, 148
U. S., 397) the Court of ppeas of New York had for consdera-
ton a corporaton organzed under chapter 430 of the Laws of
New York, 1874, whch contans substantay the same provsons
as the stock corporaton aw of the State of R, here under con-
sderaton. The court n answerng the argument that the New
York statute of 1874 smpy contnued or revved the franchses
of the od corporaton under the same charter and wth the same
rghts hed by the former company sad:
We thnk It aso pan that, under the reorganzaton acts above mentoned,
when the purchasers at the forecosure sae undertake to reorganze under
those acts, and for that purpose to fe n the secretary s offce a certfcate,
upon the tng of whch they become a body potc and corporate, the cor-
poraton thus formed s a new and an entrey dfferent one from that whose
property and franchses the purchasers may have bought under the fore-
cosure proceedngs. It s true that the corporaton about to be formed by
the fng of the certfcate has by force of the statute when formed a the
rghts, franchses, powers, prveges, and mmuntes whch were possessed
before such sae by the corporaton whose property waa sod but that does
not make the corporaton the same by any means. The rght to be a cor-
poraton, whch the od corporaton had, was not mortgaged and was not
sod, and dd not pass to the purchasers and they ony obtan such a rght
upon fng the certfcate mentoned and then they obtan t by drect grant
from the State, and not n any degree by the sae and purchase of the fran-
chses, etc., of the od corporaton.
It s hed, therefore, that the two corporatons consttute, for
ncome ta purposes, two separate and dstnct ta abe enttes and
that the return of the M Company may not ncude any porton
of the resuts of the operatons of the propertes n 1929 pror to
the tme the propertes were taken over and operated by t. or the
perod of 1929 durng whch the recever of the N Company oper-
ated the propertes, the recever must fe a return as requred by
secton 52(a) of the Revenue ct of 1928.
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145
53, rt. 401.
S CTION 53. TIM ND PL C OR
ILING R TURNS.
mc 401: Tme for fng returns. -10 4963
G.C. M.9091
R NU CT O 1928.
ed, that where the books and records of the varous companes
nvoved n ths case are kept by one company at ts offce, such
offce may be consdered to be the prncpa offce of the companes
and ther ncome ta returns may be fed wth the coector of
the dstrct n whch such offce s ocated.
n opnon s requested as to the proper pace for fng the sep-
arate ncome ta returns of the severa companes here nvoved.
The M Company owns from 94 to 100 per cent of the stock n
appro matey 300 companes that are ocated throughout the Unted
States. It appears that the ma|orty of the companes were organ-
zed under the aws of the State of R. owever, n some States the
State aw s such that a oca charter s requred. The M Company
aso owns the stock of the O Company, whch s ncorporated under
the aws of the State of S. The O Company s offces are ocated
n the cty of T, State of S. It s empoyed by the M Company to
manage the severa companes. These companes have offces n the
varous ctes n whch they do busness. Wth reference to the
records of the companes, , the representatve of the O Company,
states:
The fu records of each of the companes are kept at ths offce and ony
n those cases where the State aw requres otherwse are any of the records
kept n the oca offce. Ony copes of the weeky reports that are trans-
mtted to ths offce, from whch reports a entres are made n the edgers
and books of record, are kept at the oca offces.
The ncome ta returns for a of the companes are prepared n
the cty of T offce by the empoyees of the managng company.
Secton 53(b)2 of the Revenue ct of 1928, n so far as appcabe,
reads:
(2) Corporatons. Returns of corporatons sha be made to the coector of
the dstrct n whch s ocated the prncpa pace of busness or prncpa
offce or agency of the corporaton, .
The nstructons that accompany corporaton ncome ta return,
orm 1120- , among other thngs, contan the foowng:
47. The return must be fed on or before the 15th day of the thrd month
foowng the cose of the fsca year wth the coector of nterna revenue for
the dstrct n whch the corporaton s prncpa offce s ocated.
It has been hed that a corporaton s prncpa offce and prn-
cpa pace of busness may be ocated n dfferent |ursdctons.
(In re Tygarts Rver Coa Co., 203 ed., 178.) The prncpa
offce of a corporaton s where the books of the corporaton are
kept. (Rosse ros, et a. v. Contnenta Coa Corp., 235 ed.,
343, 356.)
The anguage used n secton 53(b)2 of the Revenue ct of 1928
s pan and unambguous. The provson that returns of corpo-
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55, rt. 421.
146
ratons sha be made to the coector of the dstrct n whch s
ocated the prncpa pace of busness or prncpa offce s n the
aternatve. No doubt Congress reazed that the prncpa offce
of a corporaton mght be ocated n one dstrct and the prncpa
pace of busness mght be ocated n another dstrct. Prnted
nstructon No. 47, herenbefore referred to, advses that the corpo-
raton must fe ts return wth the coector n the dstrct n whch
the prncpa offce s ocated.
The Rosze case hods the prncpa offce to be where the books
of the corporaton are kept. Secton 53(b)2 gves a corporaton the
prvege of fng ts return wth the coector of the dstrct n
whch s ocated the prncpa offce.
It s, therefore, the opnon of ths offce that the prncpa offce
of the severa companes here nvoved s n the cty of T, where the
books of the companes are kept, and that the separate ncome ta
returns of the severa companes may be fed n the dstrct n whch
the cty of T s ocated.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
S CTION 55. PU LICITY O R TURNS.
rtce 421: Inspecton of returns. -24 5109
T. D. 4317
mendng Treasury Decson 3856, as amended, to permt nspec-
ton of returns by benefcares, and by State offcers for State
ncome ta purposes.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
Treasury Decson 3856 (C. . -, 106), as amended by Treasury
Decsons 4187 (C. . II-2, 161), 4264 (C. . III-1, 93), and 429 1
(C. . I -1, 127) (beng reguatons prescrbed by the Secretary of
the Treasury and approved by the Presdent, appcabe to the nspec-
ton of returns under the Revenue ct of 1928 and pror Revenue
cts), s further amended by changng paragraphs 3, 5, 6, 7, 8, and 9
thereof to read as foows:
3. Informaton returns and other wrtten statements fed wth the Comms-
soner of Interna Revenue desgned to be suppementa to or to become a part
of ta returns sha be sub|ect to the same rues and reguatons as to nspecton
as are the ta returns themseves.
5. The return of an ndvdua sha be open to nspecton (a) by the person
who made the return, or by hs duy consttuted attorney n fact (b) f the
maker of the return has ded, by the admnstrator, e ecutor, or trustee of hs
estate, or by the duy consttuted attorney n fact of such admnstrator, e ecutor,
or trustee (c) n the dscreton of the Commssoner of Interna Revenue, by
any her at aw, ne t of kn, or benefcary under the w, of such deceased
person, upon a showng that such her at aw, ne t of kn, or benefcary has
n matera nterest whch w be affected by nformaton contaned n the return,
or by the duy consttuted attorney n fact of such her at aw, ne t of kn.
or benefcary and (d) n the dscreton of the Commssoner of Interna Reve-
nue, and at such tme and n such manner us the Commssoner may prescrbe
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147
56, rt. 421.
for the Inspecton, by an offcer of any State havng a aw mposng an ncome
ta upon the ndvdua, upon wrtten appcaton sgned by the governor of such
State nnder the sea of the State, desgnatng the offcer to make the nspecton
and showng that the nspecton s soey for State ncome ta purposes.
6. |ont return of a husband and wfe sha be open to nspecton (a) by
ether spouse for whom the return was made, upon satsfactory evdence of such
reatonshp beng furnshed, or by hs or her duy consttuted attorney n fact
b) f ether spouse has ded, by the admnstrator, e ecutor, or trustee of hs
or her estate, or by the duy consttuted attorney n fact of such admnstrator,
e ecutor, or trustee (c) n the dscreton of the Commssoner of Interna
evenne, by any her at aw, ne t of kn, or benefcary under the w, of such
deceased spouse, upon a showng that such her at aw, ne t of kn, or benefcary
has a matera nterest whch w be affected by nformaton contaned n the
return, or by the duy consttuted attorney n fact of such her at aw, ne t of
kn, or benefcary and (d) n the dscreton of the Commssoner of Interna
evenue, and at such tme and n such manner as the Commssoner may pre-
scrbe for the nspecton, by an offcer of any State havng a aw mposng an
ncome ta upon ether spouse, upon wrtten appcaton sgned by the governor
of such State under the sea of the State, desgnatng the offcer to make the
nspecton and showng that the nspecton s soey for State ncome ta
purposes.
7. The return of a partnershp sha be open to nspecton (a) by any nd-
vdua who was a member of such partnershp durng any part of the tme
covered by the return upon satsfactory evdence of such fact beng furnshed, or
by bs duy consttuted attorney n fact (b) f a member of such partnershp
durng any part of the tme covered by the return has ded, by the admnstrator,
e ecutor, or trustee of hs estate, or by the duy consttuted attorney n fact
f such admnstrator, e ecutor, or trustee (c) n the dscreton of the Com-
mssoner of Interna Revenue, by any her at aw, ne t of kn, or benefcary
under the w, of such deceased person, upon a showng that such her at aw,
ne t of kn, or benefcary has a matera nterest whch w be affected by
nformaton contaned n the return, or by the duy consttuted attorney In fact
of such her at aw, ne t of kn, or benefcary and (d) n the dscreton of the
Commssoner of Interna Revenue, and at such tme and n such manner as the
Commssoner may prescrbe for the nspecton, by an offcer of any State havng
a aw mposng an ncome ta upon the partnershp or upon any member thereof
n respect of ncome therefrom, upon wrtten appcaton sgned by the governor
of such State under the sea of the State, desgnatng the offcer to make the
nspecton and showng that the nspecton s soey for State ncome ta
purposes.
8. The return of an estate sha be open to nspecton (a) by the admnstra-
tor, e ecutor, or trustee of such estate, or by hs duy consttuted attorney n
fact (b) n the dscreton of the Commssoner of Interna Revenue, by any
her at aw, ne t of kn, or benefcary under the w, of the deceased person
for whose estate the return s made, upon a showng of matera nterest whch
w he affected by nformaton contaned n the return, or by the duy const-
tuted attorney n fact of such her at aw, ne t of kn, or benefcary and (c)
u the dscreton of the Commssoner of Interna Revenue, and at such tme and
n such manner as the Commssoner may prescrbe for the nspecton, by an
offcer of any State havng a aw mposng an ncome ta upon the estate or
upon any benefcary of the estate n respect of ncome therefrom, upon wrtten
appcaton sgned by the governor of such State under the sea of the State,
desgnatng the offcer to make the nspecton and showng that the nspecton
s soey for State ncome ta purposes.
9. The return of a trust sha be open to nspecton (a) by the trustee or
trustees, onty or severay, or the duy consttuted attorney n fact of such
trustee or trustees (b) by any ndvdua who was a benefcary of such
trust durng any part of the tme covered by the return, upon satsfactory ev-
dence of such fact beng furnshed, or by hs duy consttuted attorney n fact
(e) f any ndvdua who was a benefcary of such trust durng any part of the
tme covered by the return has ded, by the admnstrator, e ecutor, or trustee
of hs estate, or by the duy consttuted attorney n fact of such admnstrator,
e ecutor, or trustee (d) n the dscreton of the Commssoner of Interna
Revenue, by any her at aw, ne t of kn, or benefcary under the w, of
such deceased person, upon a showng that such her at aw, ne t of kn, or
benefcary has a matera nterest whch w be affected by nformaton con-
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101, rt. 501.
148
taned n the return, or by the duy consttuted attorney n fact of such her
at aw, ne t of kn, or benefcary and (e) n the dscreton of the Commssoaer
of Interna Revenue, and at such tme and n such manner as the Commssoner
may prescrbe for the nspecton, by an offcer of any State havng a aw
mposng an ncome ta upon the trust or upon any benefcary of the trust n
respect of ncome therefrom, upon wrtten appcaton sgned by the governor
of such State under the sea of the State, desgnatng the offcer to make the
nspecton and showng that the nspecton s soey for State ncome ta
purposes.
. W. Meon,
Secretary of the Treasu y.
pproved une 9, 1931.
erbert oover,
The Whte ouse.
CUTI ORD R INSP CTION O INCOM T R TURNS.
Pursuant to the provsons of secton 257(a) of the Revenue ct of
1926 and secton 55 of the Revenue ct of 1928, It f hereby ordered
that returns may be open to nspecton by State offcers for State
ncome ta purposes and by benefcares under a w, n accordance
and upon compance wth the amendment, bearng even date here-
wth, to the rues and reguatons prescrbed by the Secretary of the
Treasury and approved by the Presdent, bearng date of pr 13,
1926, as amended.
erbert oover.
The Whte ouse, une 9, 1931.
SU TITL C SUPPL M NT L PRO ISIONS.
suppement a. rates of ta .
S CTION 101. C PIT L N T G INS
ND LOSS S.
rtce 501: Defnton and ustraton of -16-5030
capta net gan. T. D. 431-2
ncome ta .
Defnton and ustraton of capta not gan. rtce 501 of
Reguatons 74 amended.
Treasury Department,
Offce of Commssoner of Intf.hna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
rtce 501. Reguatons 74, s hereby amended by the emnaton
of te ne t to the ast paragraph thereof, and the substtuton there-
for of a paragraph readng ah foows:
Snce the credt aowed an ndvdua by secton 31 n respect of earned n-
come sha not e ceed 25 per cent of hs norma ta pus 25 per cent of the
surta whch woud be payabe f bs earned Income consttuted hs entre net
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149 103, rt. 530.
come, no credt under secton 31 may be camed by a ta payer whose entre
gross ncome conssts of capta gan and who eects to be ta ed nnder
secton 101.
Davd ubnet,
Commssoner of Interna Revenue.
pproved pr 10, 1931.
. W. Mb on,
Secretary of the Treasury.
S CTION 103. MPTIONS ROM T ON
CORPOR TIONS.
rtce 530: Soca cubs. -4911
I. T. 2557
R NU CT O 1828 ND PRIOR R NU CTS.
Where the board of governors of a soca cub s granted author-
ty under the cub s by-aws to dstrbute equay to those members
hodng partcpatng certfcates any funds whch may be ava-
abe for the purpose from tme to tme, after reservng such funds
aa are suffcent n ther |udgment to provde for the needs of the
cub, the organzaton s not entted to e empton from edera
ncome ta aton under secton 103(9) of the Revenue ct of 1928
and the correspondng secton of pror Revenue cts.
rung s requested reatve to the cam for e empton of the M
Cub from edera ncome ta aton under secton 103(9) of the
Revenue ct of 1928.
The organzaton was ncorporated under the aws of the State
of R n 1915 for the promoton of soca ntercourse and furnshng
means of entertanment, amusement, recreaton, en|oyment, and pas-
tme for ts members and others to whom the board of governors may
accord any of the prveges of membershp. The cub s not per-
mtted to ssue stock but ssues partcpatng membershp certfcates.
Most of the members of the cub have subscrbed for one of these
certfcates and some of the members have subscrbed for severa of
the certfcates. The dues of members hodng partcpatng certf-
cates are ess than the dues of nonpartcpatng members and n the
event of qudaton of the cub the e cess of the assets over the
abtes w accrue to the beneft of the partcpatng members.
The cub owns the entre stock of the O Corporaton, whch cor-
poraton hods tte to the rea estate used by the cub. The n-
come of the cub s derved from dues, proceeds from the sae of
tobacco and cards, the use of the bowng and bard rooms, room
rent, and dstrbutons receved from the O Corporaton. The owners
of partcpatng membershp certfcates are entted to partcpate
equay, accordng to the number of certfcates hed by them, n the
net proceeds from the sae of a property whch the cub may acqure.
The property and affars of the cub are managed by 24 partcpat-
ng members, known as the board of governors. Ths board has the
power among other thngs, to dstrbute among the hoders of the
partcpatng certfcates such net funds as may be avaabe for the
purpose from tme to tme, after reservng suffcent funds whch
n ther |udgment are necessary to provde for the needs of the
cub.
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103, rt. 632.
150
Secton 103(9) of the Revenue ct of 1928 and the correspondng
secton of pror Revenue cts provde e empton from ncome ta a-
ton to cubs organzed and operated e cusvey for peasure, recre-
aton, and other nonproftabe purposes, no part of the net earnngs
of whch nures to the beneft of any prvate sharehoder. The
e empton granted by ths secton of the aw appes to soca and
recreaton cubs whch are supported by membershp dues, fees, and
assessments.
Snce, under the by-aws, the board of governors may dstrbute
avaabe funds ony to the hoders of partcpatng certfcates, t s
evdent that the net earnngs of the cub nure to the beneft of par-
tcpatng members. It s apparent, therefore, that the cub does
not meet the requrements ncdent to e empton under the secton
of the statute mentoned above.
ccordngy, t s hed that the organzaton s not entted to
e empton from edera ncome ta aton under secton 103(9) of the
Revenue ct of 1928 and the correspondng secton of pror Revenue
cts.
rtce 532: armers cooperatve marketng -7-4935
and purchasng assocatons, and corpora- G. C. M. 8619
tons organzed to fnance crop operatons.
R NU CT O 1928.
Corporaton engaged In marketng budng materas on co-
operatve bass s not organzed and operated for purpose of
marketng products of farmers, frut growers, or others engaged
n ke occupatons, under secton 103(12), Revenue ct of 1928.
n opnon s requested whether the M Company s e empt from
ta aton under secton 103(12) of the Revenue ct of 1928.
The M Company was ncorporated November , 1928, under the
aws of the State of R. of the outstandng capta stock of the
organzaton s owned by members who market budng materas
through the organzaton and who are engaged n the umber bus-
ness n Y County. The purposes of the organzaton, as stated n
the artces of ncorporaton, are:
The ob|ects and purposes of the assocaton and the genera nature of the
busness to be transacted by t are: uyng, acqurng, ownng, hodng, se-
ng, assgnng, transferrng, conveyng, e changng, and deang n a and
every knd of budng materas, both at whoesae and at reta, ncudng
specfcay the purchase of any of snd materas from stockhoder members
of ths assocaton .
Secton 103(12) of the Revenue ct of 1928 e empts from edera
ncome ta the foowng:
(12) armers , frut growers , or ke assocatons organzed and operated
on a cooperatve bass (a) for the purpose of marketng the products of mem-
bers or other producers, and turnng back to them the proceeds of saes, ess
the necessary marketng e penses, on the bass of ether the quantty or the
vaue of the products furnshed by them, .
It w be noted that the above-quoted secton e empts farmers ,
frut growers , or ke assocatons under specfed condtons. It s
a we recognzed rue of statutory constructon that where genera
words foow the enumeraton of partcuar casses of persons or
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151
113, rt. 599.
thngs, the genera words w be construed as appcabe ony to
persons or thngs of the same genera nature or cass as those
specfcay enumerated. ppyng ths rue to the statute under
consderaton, t foows that the term ke assocatons by reason
of ts assocaton wth the words farmers and frut growers
must be modfed and mted by those words. In harmony wth
ths rue of statutory constructon, t s evdent that secton 103(12)
of the Revenue ct of 1928, and the correspondng sectons of pror
Revenue cts, were desgned to e empt from edera ncome ta
cooperatve organzatons organzed and operated for the purpose
of marketng the products or farmers, frut growers, or others en-
gaged n ke occupatons. It s, accordngy, the opnon of ths
offce that an organzaton engaged n marketng budng materas
on a cooperatve bass s not such a cooperatve organzaton as s
contempated by secton 103(12) of the Revenue ct of 1928.
C. M. Cakest,
Genera Counse, ureau of Interna Revenue.
SUPPL M NT . COMPUT TION O N T INCOM .
S CTION 113. SIS OR D T RMINING G IN
OR LOSS.
rtce 596: Property transmtted at death.
R NU CT O 192
ass of notes to the decedent s estate. (See G. C. M. 9114,
page 137.)
rtce 599: Property acqured after December -12-4984
31, 1920, by a corporaton. I. T. 2562
R NU CT O 1928.
In 1928 and , respectvey, transferred certan assets to the
ta payer corporaton n e change for ts entre capta stock. The
assets transferred conssted of certan tems, ncudng suppes, the
cost of whch had been deducted as e pense by and , who had
operated ther busnesses on the cash recepts and dsbursements
bass of accountng. The ta payer keeps ts books on the accrua
bass of accountng and has ncuded the cost of suppy tems to
and n ts openng nventory.
ed, the e change of property for stock n ths case fas wthn
secton 112 (1 ) 5 of the evenue ct of 1928, and the bass of the
property n the hands of the ta payer s the same as t was u the
hands of the transferors, as provded n secton 113(a)8 of the
evenue ct of 1928. The bass of the suppy tems to the ta -
payer was zero, nasmuch as the ndvduas had deducted the cost
of these tems n computng ther ta abe ncome pror to the
transfer.
The M Corporaton was organzed n 1928 and began busness on
September 1, 1928. It was formed for the purpose of takng over
the N Company, a soe propretorshp operated by , and the O
72109 CI 11
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113, rt. 602.
152
Company, a soe propretorshp operated by . The assets of these
two busnesses were transferred to the ta payer corporaton and n
consderaton thereof the ta payer corporaton ssued ts stock to
the ndvduas mentoned n e act proporton to the vaue of the
assets transferred to the corporaton. Immedatey after the e -
change and were n contro of the ta payer corporaton.
The ta payer corporaton keeps ts books and reports ts ncome
on an accrua bass wth nventores, whereas pror to ncorporaton
and kept ther books and reported ther ncome on the cash
recepts and dsbursements bass. Incuded n the assets taken over
by the ta payer corporaton were suppes and parts vaued at
doars. In the computaton of the ncome reported by t for the
perod ended December 31, 1928, the ta payer corporaton ncuded
the suppes and parts n the amount stated n the openng nventory
for that perod. Consequenty, ths amount was ncuded n the
cost of suppes used as reported on the ta payer s return for the
perod ended December 31, 1928. ttenton s nvted to the fact
that snce and had reported ther ncome on the cash recepts
and dsbursements bass, the cost of these tems was prevousy
deducted by them.
The queston presented s whether the suppes and parts shoud
be ncuded n the openng nventory at the vaue of as doars.
Upon the bass of the foregong facts t s evdent that the e -
change of property for stock made by and n 1928 fas wthn
secton 112(b)5 of the evenue ct of 1928. Secton 113(a)8 of
the Revenue ct of 1928, whch reates to property acqured n con-
necton wth a transacton descrbed n secton 112(b) 5 of the statute,
provdes that the bass of the property n the hands of the corpora-
ton sha be the same as t woud be n the hands of the trans-
ferors. Inasmuch as the ndvduas, n accordance wth ther em-
poyment of the cash recepts and dsbursements bass5 deducted the
amounts e pended, aggregatng a doars, n computng ther ta -
abe net ncome pror to the ncorporaton, the bass of the assets
so treated was zero. In compance wth the provsons of secton
113 (a) 8 of the Revenue ct of 1928, t w be necessary for the cor-
poraton to carry these assets on the same bass. It foows that the
amount can not be treated as part of the cost of suppes used by
the corporaton for the perod ended December 31, 1928.
The stuaton here presented s cosey anaogous to the stuaton
consdered by the oard n Gran ng Manufacturng Co. v. Com-
mssoner (14 . T. ., 793), n whch case the oard approved the
Commssoner s contenton and hed, on the authorty of sectons
203(b)4 and 204(a)8 of the Revenue ct of 1924, that the cost of
goods sod by the transferee corporaton n ts frst ta abe year
shoud be computed by usng as an openng nventory the bass of
merchandse n the hands of the ndvduas who transferred the
property to the transferee corporaton n e change for stock.
rtce G02: Stock or securtes acqured n wash saes.
R NU CT OP 1928.
ppcaton of wash saes provsons. (See I. T. 2570, page 164.)
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153
116, rt. 642.
S CTION C. CLUSIONS OM GROSS
INCOM .
btce 642: Income of States. -9-5055
Ct. D. 330
INCOM T R NU CTS O 1926 ND 1928 D CISION O SUPR M
COURT.
empton State Instrumentaty O and Gas Leases of
Unversty Lands of Te as.
Leases of parts of the pubc doman of Te as, set apart by the
egsature for the beneft of the State unversty under a mandate
of the State consttuton whch requres the egsature to dspose
of unversty ands by sae ony, whch n terms grant and ease
for a perod of years the rght to enter on desgnated ands for the
purpose of drng and operatng for petroeum and gas n con-
sderaton of the vaue of a stated fracton of petroeum produced
and gas sod, effect saes to the essees, upon e ecuton of the eases,
of the o and gas n pace. Income derved from the sae of o
and gas produced under such eases s not e empt from the ta as
one mposed by the edera Government on an nstrumentaty of
the State.
Supreme Court of the Unted States.
Group No. 1 O Corporaton v. ama W. osk, Coector of Interna Revenue.
On wrt of certorar to the Crcut Court of ppeas for the fth Crcut.
pr 13, 1931.
OPINION.
Mr. ustce Stone devered the opnon of the court
Pett oner brought sut n the Dstrct Court for Western Te as to recover
edera ncome ta es aeged to have been egay e acted for ts fsca years
1925 to 1928, ncusve. It set up that n those years t receved ncome derved
from the sae of o and gas produced under eases to t by the State of Te as
that these eases were nstrumentates of the State for the deveopment of ts
pubc doman and that pettoner s ncome derved from them was consttu-
tonay mmune from the ta as one mposed by the edera Government on
an nstrumentaty of the State. The dstrct court gave |udgment for pettoner
(38 . (2d). C80), whch the Crcut Court of ppeas for the fth Crcut
reversed, hodng that the mmunty, f any, had been waved by the State by
secton 27. of chapter 83, Laws of 1917, whch provded that rghts acqured
under eases, ncudng the present one, were to be sub|ect to ta aton as s
other property. (41 . (2d), 483.) Ths court granted certorar. (282
U. S., 830, November 24, 1930.)
Pettoner s eases reate to parts of the pubc doman of the State, set apart
by the egsature for the beneft of the State unversty, under a mandate of
the State consttuton of 1876, artce 7, sectons 10-15, ncusve. See Te as
Laws, 1917, chapter 83. In terms they grant and ease for a perod of 10
years, wth renewa prveges, the rght to enter on desgnated ands for the
purpose of drng and operatng for petroeum and gas and to erect and
mantan a necessary structures for the producton, transportaton, and stor-
age of petroeum and gas. The essee or owner of the rghts con-
veyed s requred to pay the State the vaue of one-eghth of the petroeum
produced and of one-tenth of the gas sod. The chaenged ta s measured by
the net profts derved by pettoner from the sae of o and gas produced, after
makng aowed deductons from gross recepts, ncudng the royates pad to
the State.
Secton 12 of artce 7 of the State consttuton, as nterpreted by the hghest
court of the State, requres the egsature to dspose of the unversty ands
by sae ony. (Thesen v. Robson, 117 Te ., 489, 502.) Leases of unversty
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116, rt. 642.
154
ands ke those of pettoner have been hed by that court to be n compance
wth ths provson of the consttuton as present saes to the essees, upon e e-
cuton of the eases, of the o and gas n pace. (Thesen v. Robson, supra.)
In so construng them, the court apped the setted rue of the State wth
respect to o and gas eases. (Te as Co. v. Dougherty, 107 Te ., 226 Stephens
County v. O - Gas Co., 113 Te ., 160 cf. Waggoner state v. Wchta County,
273 U. S., 113.) s was sad n Thesen v. Robson, supra, pages 510, 511:
They (the eases) do not authorze the purchaser to take and use seven-
eghths or any other mere fractona part of the o or gas n the and eased.
The purchaser nstead buys a the o and gas, for a stpuated prce, part of
the prce beng measured by the vaue of a certan fracton of the produced o
and gas, whch s a very dfferent thng from the vaue of that fracton of the
o and gas n pace. The eases convey a the o and gas n grantng the rght
to fnd, produce, and approprate a of them, n consderaton of the paymeut
of stpuated sums and aso the vaue of a stated fracton of the o and gas
produced.
Property sod or otherwse dsposed of by the Government ether State or
Natona, n order to rase revenue for Government purposes, s n a broad
sense a Government nstrumentaty, wth respect to whch nether the property
tsef before sae, nor ts sae by one Government, may be ta ed by the other.
ut t does not foow that the same property n the hands of the buyer, or
hs use or en|oyment of t, or the ncome he derves from t s aso ta mmune.
( 7ch runswck v. Unted States, 276 U. S., 547 orbes v. racey, 94 U. S.,
7G2 Tucker v. erguson, 22 Wa., 527 see Weston v. Chareston, 2 Pet, 449,
468 caze ank v. enno, 8 Wa., 533, 547.) Theoretcay, any ta mposed
ou the buyer wth respect to the purchased property may have some effect on
the prce, and thus remotey and ndrecty affect the seng Government. We
may assume that f the property s sub|ect to ta after sae, the governmenta
seer w generay receve a ess favorabe prce than f t were known n
advance that the property n the hands of ater owners, or even of the buyer
aone, coud not be ta ed.
ut the remote and ndrect effects upon the one Government of such a non-
dscrmnatory ta by the other have never been consdered adequate grounds
for thus adng the one at the e pense of the ta ng power of the other. (See
Wcuts v. unn, 282 U. S., 216. 231 ducatona m Corporaton v. Ward,
282 U. S., 379, decded anuary 12, 1931 Metcaf ddy v. Mtche. 209 U. S.,
514, 523-524 T. D. 3824, C. . -, 218 .) Ths court has consstenty hed
that where property or any nterest n t has competey passed from the Gov-
ernment to the purchaser, he can cam no mmunty from ta aton wth re-
spect to t, merey because t was once Government owned, or because the sae
of t effected some Government purpose. (New runswck v. Unted States,
supra orbes v. racey, supra Tucker v. erguson, supra fee Gromer v.
Standard Dredgng Co., 224 U. S., 362, 371 Choctaw, O. G. R. R. Co. v.
Mackcy. 256 U. S., 531, 537 Centra Pacfc R. R. v. Caforna, 162 U. S.. 91,
125 Raroad Co. v. Penston, IS Wa., 5, 35-37 Weston v. Chareston, supra,
468.)
Property whch has thus passed from ether the Natona or a State Govern-
ment to prvate ownershp becomes a part of the common mass of property
and sub|ect to ts common burdens. Dena to ether Government of the power
to ta t, or ncome derved from t, n order to nsure some remote and ndrect
antecedent beneft to the other, woud be an encroachment on the soveregn
power to ta , not |ustfed by the mped consttutona restrcton. (See
Weston v. Chareston, supra, 468.) The nterest whch passed to pettoner
here as defned by the aws of the State s not dstngushabe from the mnng
cams acqured n ands of the Unted States under ts statutes, whch, together
wth mneras and ores derved from them, were hed sub|ect to State ta aton
n orbes v. Graccy, supra.
True, snce restrcted, aotted, or trba ands of Indans are nstrumentates
of the edera Government, t has been hed that nether eases of the ands
(Indan O Co. v. Okahoma, 240 U. S., 522) nor gross ncome derved from
them (Choetatc, O. G. R. R. Co. v. arrson, 235 U. S., 292 see oward v.
Gpsy O Co., 247 U. S.. 503 Large O Co. v. ocard, 248 U. S., 549 aybrd,
Mnng Co. v. Wer, 271 U. S., 009) nor net Income (Gespe v. Okahoma, 275
U. S., 501), may bo ta ed by a State. ut no case has e tended such mmunty
to property, rea or persona, or ncome derved from Its sae, where t has
passed to the buyer by a competey e ecuted act of sae, wthout restrcton,
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155
116, rt. 643.
and no nterest n t has been retaned for the beneft of the Indans. What-
ever may be the approprate mts of the mmunty, as apped n ths cass
of cases, those mts are ceary e ceeded by that asserted here.
ffrmed.
Mr. ustce Robebts took no part n the consderaton or decson of ths case.
rtce 642: Income of States.
R NU CT O 1928.
Instructons reatve to fng, aowance, and payment of cams
for refund under secton 110(e), Revenue ct of 1928. (See T. D.
4303, page 181.)
rtce 643: Compensaton of State offcers -10-4964
and empoyees. I. T. 2560
R NU CT O 1928.
The servce rendered by the ta payer to the trustees for county
ad to agrcuture n the State of S, the character of whch servce
s carryng on research n the sub|ect of ve stock feedng and the
dssemnaton of agrcutura nformaton n the communty, s
not such as to consttute hm ether an offcer or empoyee of a sub-
dvson of the State engaged n the e ercse of an essenta gov-
ernmenta functon, and hence the ncome derved from that source
s sub|ect to edera ncome ta .
rung s requested whether the compensaton of , pad for
hs servces n agrcutura e tenson work by the trustees for county
ad to agrcuture, s or s not e empt from edera ncome ta .
The ta payer s case has been seected as ustratve of a number
throughout the State who receve ncome for agrcutura e tenson
work. e sgns communcatons as managng drector of the R
County Improvement League and gves hs occupaton n hs return
as Research. Lve stock feedng. Pror to the Smth-Lever ct of
May 8,1914, the R County Improvement League was organzed to do
e tenson work n R County, but snce then ts ony functon has
been to coect funds for the use of the trustees for county ad to
agrcuture.
The aws of the State of S reatng to agrcuture provde for the
creaton n each county, wth certan stated e ceptons, of an unpad
board of trustees to be known as trustees for county ad to agrcu-
ture. They are apponted by the county commssoners to serve for
three years and must be resdents of the county. One of the board of
nne trustees s requred to be a county commssoner, and four, so far
as s possbe, sha be taken from the drectors, chosen at the annua
town meetngs of such ctes and towns as have approprated funds
toward carryng out the provsons of the aws reatng to e tenson
work n agrcuture. Sub|ect to the approva of the county comms-
soners, the trustees annuay appont a competent person, who
may be one of ther own number, to serve wthout compensaton as
trustee of the board.
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156
The trustees are empowered to receve on behaf of the county,
money approprated for the work by the genera court of any county
or by any town, or by the edera Government, and may contro the
e pendture thereof ether soey or n con|uncton wth State or
Unted States representatves, or agents, or bodes created under the
aws of the State or the Unted States. The trustees may enter nto
agreements, arrangements, or undertakngs wth any such bodes re-
atve to e tenson work n agrcuture, home-makng, and country
fe. The trustees are requred to prepare and submt a budget
contanng estmates of the sums requred for carryng on the e ten-
son work to the county commssoners, who are requred to ncude
at east one-haf of such sums as they deem necessary to carry out
such purposes n ther annua estmate of county e penses to be
approprated by the genera court and rased by the annua county
ta evy.
Te trustees are requred to mantan one or more agents or n-
structors n agrcuture, home-makng, and country fe, who sha
meet the resdents of the county for the purpose of teachng and
demonstratng better methods of practcng agrcuture, marketng
farm products, and the ke.
The State of S grcutura Coege has under ts contro the ed-
era and State funds for e tenson work n agrcuture and home
economcs, whch funds are suppemented by funds contrbuted for
smar purposes by countes and other organzatons and by nd-
vduas wthn the State. The coege mantans a dstnct admns-
tratve dvson, known as the e tenson servce, through whch the
funds are admnstered and the e tenson work over the State s
carred on. Saares of county workers out of the edera funds are
pad drecty by check ether from the edera Treasury or from the
treasury of the State of S grcutura Coege, and not through
such organzatons as the R County Improvement League or the
trustees for county ad to agrcuture.
The ta payer has advsed that at the tme he began work for R
County n the e tenson servce he entered nto a verba agreement,
but no wrtten contract, respectng hs saary, e pense account, dutes,
and notce to be gven n case of hs resgnaton.
In accordance wth the provsons of artce 643 of Reguatons
74, reatng to the Revenue ct of 1928, compensaton receved by a
ta payer for servces rendered to a State or a potca subdvson
thereof must be ncuded n gross ncome uness the person receved
such compensaton as an offcer or empoyee of a State or one of ts
potca subdvsons and the servces were rendered n connecton
wth the e ercse of an essenta governmenta functon. n offcer
s a person who occupes a poston n the servce of a State or pot-
ca subdvson, the tenure of whch s contnuous and not temporary
and the dutes of whch are estabshed by aw or reguatons and not
by agreement. n offce s a pubc staton conferred by the appont-
ment of government and embraces the dea of tenure, duraton, emou-
ment, and dutes f ed by aw. The term offcer s one nseparaby
connected wth an offce.
n empoyee s one whose dutes consst n the rendton of pre-
scrbed servces and not the accompshment of specfc ob|ects and
whose servces are contnuous, not occasona or temporary. s ds-
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157
116, rt. 643.
tngushed from an empoyee s the ndependent contractor who has
the rght to the use of ndependent |udgment and dscreton n the
performance of an undertakng and the beraty of acton n regard
thereto whch compares the ndependent contractor more favoraby
wth an empoyer than wth an empoyee. The reatonshp of master
and servant e sts whenever the empoyer retans the rght to drect
not ony what sha be done but how t sha be done. Raroad
Company v. annnff, 15 Wa., 649.)
In vew of the foregong defntons, the ta payer fas to quafy
as an offcer of the county, nasmuch as the tenure and dutes of hs
poston are not estabshed by aw but by agreement. The char-
acter of the work done by the ta payer that s, carryng on research
n the sub|ect of ve stock feedng and the dssemnaton of agrcu-
tura nformaton n the communty ndcates that the ta payer
e ercses ndependence of |udgment and acton to a degree whch s
nconsstent wth the dea of contro that characterzes the reaton-
shp of master and servant. s dutes do not consst n the rend-
ton of prescrbed servces, and he s apparenty free to dspose of
hs tme and of persona efforts accordng to hs peasure. The ta -
payer, therefore, s not an empoyee of the trustees n the sense of
the defnton stated.
It s hed, therefore, that the servce rendered by the ta payer to
the trustees for county ad to agrcuture s not such as to con-
sttute hm ether an offcer or empoyee of a subdvson of the State
engaged n an essenta governmenta functon, and that the ncome
derved from that source s sub|ect to edera ncome ta .
rtce 643: Compensaton of State offcers - 1-4073
and empoyees. G. C. M. 9122
R NU CTS O 1926 ND 1028.
The compensaton of a ta payer receved for servces rendered
In the doube capacty of genera manager and controer of the
harbor department of the cty of R s not e empt from edera
ncome ta n so far as such servces were rendered n connecton
wth actvtes of a propretary chnrncter.
Genera Counse s Memorandum 5150 (C. . II-2, 124) over-
rued.
n opnon s requested wth respect to the abty for ncome
ta es for the years 1927 and 1928 of the compensaton receved by
, the ta payer, from the cty of R as genera manager and controer
of the harbor department of sad cty.
The compensaton receved by the ta payer from the cty of R
was receved for servces rendered n the doube capacty of genera
manager and controer of the harbor department of the cty of R.
Ths offce, n Genera Counse s Memorandum 5150, consdered the
ta abe status of the compensaton receved by the ta payer for the
year 1926, from the cty of R, for servces rendered as controer of
the harbor department, and rendered an opnon to the effect that
the compensaton was e empt from edera ncome ta es.
In 1924 was apponted controer of the harbor department.
Ths appontment was made by the board of harbor commssoners
from the egbe st furnshed by the cv servce commsson. Ths
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116, rt. 643.
158
poston s the e ecutve head of the accountng and fnanca de-
partment. s dutes bore the same reatonshp to the harbor
department as dd those of the controer of the cty of as to the
cty as a whoe, e cept that he answered to the cty controer for
a e pendtures of the harbor department, thereby actng as a check
on the genera manager. Subsequenty, the board of harbor com-
mssoners apponted hm genera manager of the department. e-
fore acceptng, he requested that he be aowed to contnue the dutes
of controer. No segregaton was made of the tme to be devoted
to the dfferent postons, nor was there any saary ad|ustment.
owever, the amount of hs saary was based somewhat on the n-
handng the combned dutes so assumed. The poston requred
hs entre tme and pad a saary of z doars per month. s saary
was pad out of harbor revenue funds, whch were derved from the
busness carred on by the harbor department of the cty of R.
mong the rghts and powers granted to the cty of by ts char-
ter are the foowng:
To acqure, construct, mantan, operate, or se, whether stuated nsde or
outsde the cty or State, any mprovement, servce, busness, utty, enter-
prse, or property whch coud be acqured, constructed, mantaned, operated,
or sod by any person, frm, corporaton, or muncpaty, actng under the
aws of the State of S.
The charter provdes that the board of harbor commssoners sha
have possesson and contro of the entre water front of the cty of
II, and of a the navgabe waters and submerged ands stuated
wthn the boundares of the cty of R, sad waters and ands to be
known as the harbor dstrct. The powers and dutes of the board
of harbor commssoners are set out n the charter, among whch are:
(1) The power and duty to make and enforce a necessary rues
and reguatons governng the use and contro of a navgabe waters
and tdeands wthn the harbor dstrct, and the power to prescrbe
and enforce penates for the voaton of such rues and regua-
tons.
(2) The power and duty to reguate and contro the anchorng,
moorng, towng, and dockng of a vesses and water craft.
(3) The. power and duty to reguate and contro the constructon,
mantenance, operaton, or use of any raroad, wharf, warehouse, or
other utty, structure, mprovement, or appance used n connec-
ton wth, or for the accommodaton and promoton of, commerce,
navgaton, or fshery n the harbor dstrct.
(4) The power and duty to reguate and contro a dredgng or
e cavatng n the harbor dstrct.
(5) The power and duty to f , reguate, and coect rates or
charges for the use of a wharves, warehouses, water craft, ra-
roads, uttes, structures, appances, and other factes owned,
controed, or operated by the cty n connecton wth, or for the
promoton and accommodaton of, commerce, navgaton, and fshery
and e rates or charges for potage and towage.
(6) The power and duty to reguate and contro a pubc servce
and pubc uttes operated n connecton wth, or for the promo-
ton and accommodaton of, commerce, navgaton, or fshery n the
harbor dstrct, and the power to f the proper cense fees to be
creased dut
dscreton as to the manner of
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159
116, rt. 643.
pad to the cty by any person, frm, or corporaton operatng any
such pubc servce utt)7.
(7) The power and duty to acqure, erect, mantan, or operate
a such mprovements, utdtes, water craft, appances, or fac-
tes as t may deem necessary or convenent for the promoton and
accommodaton of commerce, navgaton, and fshery or for use n
connecton therewth, or upon the ands and waters under the con-
tro and management of sad board.
The charter provdes that:
The genera manager of the harbor department, n addton to the powers
aud dutes whch are or may be conferred upon hm as esewhere provded n
ths charter, sha have power, and t sha be hs duty:
(1) To enforce a orders, rues, and reguatons adopted by the board
reatng to reguaton, operaton, and contro
(2) To supervse and manage a constructon and mantenance work au-
thorzed or ordered by the board, and to that end the board sha have power
to deegate to hm such necessary powers and dutes as are by ths charter
conferred upon sad board
(3) To desgnate and assgn berths or andngs for the use of vesses at
any wharf or ke facty controed or operated by the cty, ncudng the
feet of frontage reserved by the cty for pubc purposes, at the duy
estabshed rates or charges for the use of such muncpa wharves and ke
factes, and sub|ect to the rues and reguatons governng the same. very
snch berthng assgnment sha reserve to the cty the rght to use such wharf
or other facty for genera wharf or other purposes when such space s not
requred for the use of the grantee or hoder
(4) To desgnate and assgn space n any warehouse, eevator, or ke
facty operated by the cty, ncudng those ocated on the feet of
frontage reserved by the cty for pubc purposes, at the duy estabshed rates
or charges for the use of such muncpa factes, and sub|ect to the rues
and reguatons governng the same
(5) very such assgnment of a berth or of space n any warehouse, eevator,
or ke facty operated by the cty sha be revocabe by the genera man-
ager, wthout compensaton to the grantee or hoder thereof, upon due notce
to be stated theren, such notce n no case to e ceed one year
(0) Whenever t sha be determned by the board, by order, that certan
parts of the tde or submerged ands theren descrbed n the harbor dstrct
may not be requred at such tme for use for purposes n connecton wth, or
for the promoton and accommodaton of commerce, navgaton, or fshery, the
genera manager sha have power, sub|ect to approva of the board, to grnnt
revocabe permts to use mted portons of such tde or submerged ands for
any and a purposes whch sha not nterfere wth commerce or navgaton,
and are not nconsstent wth the trusts upon whch sad ands are hed by
the cty of R. very such revocabe permt sha prescrbe that t sha be
revocabe, wthout compensaton to the grantee or hoder thereof, upon due
notce to bo stated theren, such notce n no case to e ceed one year
(7) very such assgnment or revocabe permt sha be ssued on prnted
forms, whch sha set forth the terms and condtons thereof.
The charter provdes that a money receved or coected from
or arsng out of the use or operaton of any harbor or port mprove-
ment, facty, or utty owned, controed, or operated by the cty
n, upon, or pertanng to the water front of navgabe waters of sad
cty and a tos, charges, and rentas coected by the harbor
department and a compensatons or fees requred to be pad for
franchses or rghts by aw, ordnance, or order, to the cty for the
operaton of any pubc servce utty upon ands and waters under
the contro and management of the harbor department, sha be de-
posted n the cty treasury to the credt of a fund to be known as
the harbor revenue fund, and sha be kept separate and apart from
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116, rt. 643.
160
other moneys of the cty. It aso provdes that the mone r n sad
harbor revenue fund shoud not be approprated or used for any
purposes e cept: (1) The necessary e penses of conductng the va-
rous actvtes of the harbor department. (2) The acquston, con-
structon, competon, and mantenance of harbor and port mprove-
ments, works, uttes, etc. (3) The payment of prncpa or nterest,
or both, on harbor mprovement bonds. (4) To return and pay nto
the genera fund of the cty, from any surpus money n sad harbor
revenue fund, any sums pad by the cty from funds rased by ta -
aton for the payment of the prncpa or nterest on any muncpa
bonds ssued by the cty for or on account of the harbor mprove-
ment works to whch such revenue fund pertans. (5) or defrayng
the e penses of any penson system appcabe to the empoyees of
the department that sha be estabshed by the cty.
rom the foregong, t appears that the board of commssoners
of the harbor department of the cty of had contro and manage-
ment not ony of the harbor, but aso of varous pubc uttes
operated n connecton therewth, and that the genera manager of
sad department e ercsed sad powers as the agent of sad board.
The queston to be determned s whether the servces for whch
the ta payer receved hs compensaton were servces rendered n
connecton wth the e ercse by the cty of R of an essenta govern-
menta functon.
rom the nformaton furnshed t appears that the cty of R
owned and operated 95 per cent of the sheds and wharves, one 6-story
warehouse, and a bet ne raroad servng the water front and vcn-
ty. It s obvous that the cty of R, through ts harbor department,
was engaged n certan actvtes whch were propretary, rather
than governmenta, n character, and to the e tent that the compensa-
ton pad to the ta payer as genera manager of the harbor depart-
ment vas attrbutabe to servces rendered n connecton wth such
propretary actvtes, t s sub|ect to edera ncome ta . (Smth
Carona, v. Unted States, 199 U. S., 437 State of North Dakota v.
Oson, 33 ed. (2d), 848 S. M. 2232, C. . III-2, 83 Mm. 3838,
C. . 1 -2, 137.)
Wth respect to the servces performed by the ta payer n the
capacty of controer of the harbor department, t appears that the
dutes of the controer were to supervse the accounts of the depart-
ment, the dsbursement of funds, and generay to make a check of the
fsca affars of the department. s herenabove shown, whe the
funds derved from the actvtes of the harbor department were
to be deposted n the cty treasury, they were to be paced to the
credt of a fund to be known as the harbor revenue fund, and were
to be kept separate and apart from the genera funds of the cty.
The ta payer s entre saary was pad from the harbor revenue fund.
Under the crcumstances, t s the opnon of ths offce that a arge
percentage of the ta payer s servces, rendered n the capacty of
controer, was rendered wth respect to propretary as dstngushed
from governmenta actvtes. The fsca affars of prvate corpora-
tons as we as those of a cty engaged n strcty governmenta actv-
tes requre accountng servces and supervson, and when a State,
or a potca subdvson thereof, engages n busness, t sub|ects
tsef to the same rues and reguatons as that cass of persons wth
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161
116, rt. 643.
whch t eects to compete. (South Carona v. Unted States, supra
State of North Dakota v. Oson, supra.)
It does appear, however, that certan of the powers e ercsed by
the harbor department through ts manager are of a governmenta
nature, such as the reguatory powers of genera appcaton, that s,
poce powers, and the powers e ercsed wth respect to the mprove-
ment of the harbor for navgaton purposes. If any part of the
ta payer s compensaton can be aocated to such servces n accord-
ance wth Mmeograph 3838, supra, t s, of course, e empt from
edera ncome ta .
It s, therefore, the opnon of ths offce that the compensaton
receved by the ta payer for hs servces as genera manager and
controer of the harbor department of the cty of R s not e empt
from edera ncome ta n so far as such servces were rendered n
connecton wth actvtes of a propretary character.
Genera Counse s Memorandum 5150, supra, n so far as n confct
herewth, s hereby overrued.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
rtce 643: Compensaton of State offcers -22-5081
and empoyees. I. T. 2575
R NU CT O 1928.
Saares of athetc conches and other empoyees pad by the
students assocaton of the Unversty of the State of R, a cor-
poraton separate and dstnct from the unversty, are sub|ect to
ncome ta .
Inqury s made whether the compensaton of the empoyees of the
students assocaton of the Unversty of the State of R s sub|ect
to edera ncome ta .
In order to stmuate nterest n athetcs and encourage physca
tranng, the students assocaton of the State unversty empoyed
coaches and other ndvduas to drect athetc actvtes of the
student body. The students assocaton s a corporaton separate
and dstnct from the unversty corporaton. The assocaton s
supported by money pad for admsson to athetc contests and
membershp fees pad by student members, and not by State appro-
pratons. The coaches and other empoyees are empoyed and pad
by the students assocaton and are n no sense empoyees of the
State of R.
Under the crcumstances heren stated, t s evdent that no burden
s paced upon the State of R and no power of the State s crpped
or essened by reason of an mposton of edera ncome ta upon
the saares receved bv empoyees of the students assocaton. (Cf.
Mer y. McCaughn, 27 ed. (2d), 128.)
In vew of the foregong, t s hed that the saares receved by
the coaches and other empoyees of the students assocaton of the
State unversty are sub|ect to the edera ncome ta .
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117, rt. 651.
162
S CTION 117. N T LOSS S.
--4890
I. T. 2554
Where the predecessor and successor companes were ncorpo-
rated under the aws of the same State, wth the same purposes and
powers but wth dfferent capta structures, the assets and abtes
beng taken over by the successor, and the predecessor remanng n
e stence for a tme at east contemporaneousy wth the successor,
the successor can not be consdered to be the same ta payer as the
predecessor and a net oss sustaned by the predecessor can not be
deducted by the successor under secton 117, Revenue ct of 1928.
rung s requested whether the M Company, cty of Y, State of
Z, n computng the ta abe net ncome for ts frst ta abe perod, s
entted to take as a deducton a statutory net oss sustaned by the
predecessor company of the same name.
The former M Company, predecessor of the present M Company,
was ncorporated and organzed under the Genera Statutes of the
, State of Z n the year 1915 wth 3(te shares of preferred stock havng
a par vaue of 2.5y doars and 40,2- shares of common stock havng a
par vaue of 2.5y doars. The transfer of ts entre assets, busness,
and good w to the new company, sub|ect to the assumpton by the
new company of a ts abtes of every nature, was, pursuant to a
pan of reorganzaton, approved at a speca meetng of the stock-
hoders hed November , 1928.
t sad meetng the stockhoders (a) approved and adopted sad
pan, (b) authorzed the transfer aforesad, (c) amended ts certf-
cate of ncorporaton so that the duraton of the company was mted
to December , 1 )28, and ts name changed to the N Company, and
(d) authorzed the drectors to wnd up ts busness and dstrbute
the shares of the capta stock of the new company whch shoud be
receved pursuant to the reorganzaton pan to the hoders of ts
preferred stock as a qudatng dvdend n knd.
On the same day, to wt, November , 1928, and foowng the
ad|ournment of the stockhoders speca meetng, the new company
was ncorporated and organzed under the name of the M Company,
wth the same corporate purposes and powers as the od company,
the transfer of the propertes, busness, and good w to and the
assumpton of abtes by the new company was effected, and the
250a snares of the common capta stock of the new company, havng
a par vaue of y doars (e cept .09a shares ssued to .092 drectors
as the nomnees of the od company), were ssued to the od company.
fter November , 1928, the od company was not engaged n
busness. Its abtes of every nature had been assumed by the
new company, whose entre outstandng stock, e cept drectors
quafyng shares, was hed by the od company as ts soe asset.
Pursuant to the reorganzaton pan, these 250a shares wth 50a)
addtona shares subsequenty ssued to the od company as a stock
dvdend were dstrbuted share for share to the hoders of the pre-
ferred stock of the od company as a fna qudatng dvdend,
and a certfcate of the termnaton of the corporate e stence of
the od company e ecuted by a ma|orty of ts drectors settng forth
the facts as to such termnaton and statng the manner n whch
ts affars had been wound up was fed wth the secretary of the
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163
117, rt. 651.
state on the day of ebruary, 1929, n accordance wth the
provsons of the State statutes.
In the reorganzaton on November , 1928, the offcers of the
od company were eected to the same offces n the new company.
The personne of the board of drectors was sghty changed, as
provded n the pan, the changes nvovng emnaton of certan
drectors who had been paced on the former board as representa-
tves of the banks and bankers hodng the company s notes and the
addton of other drectors who had been actve n the reorganzaton
as members of the stockhoders protectve commttees.
Subsequenty, to wt, on anuary , 1929, and for the purpose of
qudatng the company s bonded and foatng ndebtedness and
augmentng ts workng capta, the new company ssued 1,050a
addtona shares of ts authorzed capta stock, the rght to subscrbe
for whch at par evdenced by assgnabe subscrpton warrants had,
pursuant to the reorganzaton pan, been gven to a the stockhoders
of the od company n the rato of 1/ shares of the stock of the new
company to 1 share, preferred or common, of the stock of the od
company.
The ta payer states that the od company n 1928 was n fnanca
dffcutes, and that the purpose of the reorganzaton was to effect
the qudaton of ts bonded and foatng ndebtedness, and to secure
addtona workng capta, and that nothng was accompshed by
the reorganzaton that coud not have been accompshed by an
amendment to the charter of the od company, an ncrease of ts
capta stock, and the sae of the addtona stock. If further states
that there was no break n the contnuty of the enterprse as a gong
busness concern, and that ts reatons wth ts credtors, customers,
and empoyees and the pubc generay contnued wthout any prac-
tca change.
It does not necessary foow from the fact that a predecessor com-
pany and ts successor company were ncorporated under the aws of
the same State, that the successor company s to be regarded as the
same ta abe entty as the predecessor company. (Cf. mercan
rch Co. v. Commssoner, 13 . T. ., 552.) t w be noted, n
the nstant case, that the od M Company e sted (athough t s
stated under a changed name) for some tme after the new M Com-
pany was ncorporated, and took over the busness and assets of the
od company, and that the capta structure of the new company was
materay dfferent from that of the od company. The fact that
the capta structure of the two companes was so dfferent and the
fact that the od company was n e stence, for a tme at east, con-
temporaneousy wth the new company (whch dfferentate ths
case from the case of Wess v. /Steam-, 265 U. S., 242, T. D. 3609, C. .
III-2, 51), n the opnon of ths offce precude the concuson that
the new company was n substance the same company as the od
company or merey a contnuaton of the od company. (Cf. The
Maytag Co. v. Commssoner, 17 . T. ., 182, and cases cted
theren.)
It s hed, therefore, that the new M Company can not be con-
sdered to be the same ta payer by whch the net oss here n queston
was sustaned, and that the new company therefore s not entted to
take that oss as a deducton under secton 117 of the evenue ct of
1928.
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118, rt. 661.
164
S CTION 118. LOSS ON S L O STOC
OR S CURITI S.
rtce G61: Losses n connecton wth sae -23 5090
and repurchase of securtes. I. T. 2576
( so Secton 113, rtce 602.)
R NU CT OP 1928.
The ta payer purchased 10 ots of y shares each of a certan
stock In 1920 and sod 5 ots, each of that amount, durng the year.
Wthn 30 days of the date of each sae there was a correspondng
purchase of a smar ot of the stock. None of the saes made
showed a gan over the bass of the odest ot on hand at the tme
of the sae. In each nstance the dentty of the ot sod can not
be determned.
ed, that no deductbe oss was sustaned and the effect of
secton 113(a) 11 of the Revenue ct of 1928 s to appy the
ndcated oss n each nstance to ncrease the bass of the stock,
the purchase of whch necesstates the dsaowance of the oss
under the wash sae provsons of the ct.
rung s requested reatve to the proper treatment for edera
ncome ta purposes of severa purchases and saes made by a ta -
payer durng the year 1929 of corporate stock of the M Company.
The stock was purchased and sod n ots of y shares each. The
frst purchase was made on anuary 21, 1929, at a cost of 53.30a
doars and the frst sae was made on ebruary 4, 1929, at a prce
of 51.16./ doars. In a, 10 ots of the stock were purchased and 5
ots sod durng the year.
It s hed that as there was a correspondng purchase of a smar
ot of the stock wthn 30 days of the date of each sae, sectons 118
and 113(a) of the Revenue ct of 1928, reatng to wash saes of
stock, arc appcabe. Secton 118 provdes as foows:
Loss on sae of stock or securtes. In the case of any oss camed to have
been sustaned n any sae or other dsposton of shares of stock or securtas
where t appears that wthn 30 days before or after the date of such sae or
other dsposton the ta payer has acqured (otherwse than by bequest or
Inhertance) or has entered nto a contract or opton to acqure substantay
dentca property, and the property so acqured s hed by the ta payer for
any perod after such sae or other dsposton, no deducton for the oss sha
be aowed under secton 23(e)2 of ths tte nor sha such deducton be
aowed under secton 23(f) uness the cam s made by a corporaton, a
deaer n stocks or securtes, and wth respect to a transacton made n the
ordnary course of ts busness. If such acquston or the contract or opton
to acqure s to the e tent of part ony of substantay dentca property,
then ony a proportonate part of the oss sha he dsaowed.
Secton 113 (a) 11 provdes:
Wash saes of stock. If substantay dentca property was acqured after
December 31, 1920, n pace of stock or securtes whch were sod or dsposed
of and n respect of whch oss was not aowed as a deducton under secton
118 of ths ct, or under secton 214(a)5 or 234(a.|4 of the Revenue ct of
1921, the Revenue ct of 1924, or the Revenue ct of 1926, the bass n the
case of the property so acqured sha be the bass n the case of the stock or
securtes so sod or dsposed of, e cet that f the repurchase prce was n
e cess of the sae prce such bass sha be ncreased n the amount of the
dfference, or f the repurchase prce was ess than the sae prce such bass
sha be decreased n the amount of the dfference.
None of the saes made bv the ta payer durng 1929 showed a
gan over the bass of the odest ot on hand at the tme of the sae.
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165
118, rt. 661.
In each nstance the dentty of the ot sod can not be determned.
Inasmuch as there was a correspondng purchase wthn 30 days of
the date of sae n each nstance, no deductbe oss was sustaned
and the effect of the above-quoted provsons of secton 113 (a) 11 s
to appy the ndcated oss n each nstance to ncrease the bass of
the stock, the purchase of whch necesstates the dsaowance of the
oss under the wash sae provsons. (G. C. M. 1210, C. . I-2,
60, and I. T. 2443, C. . II-2, 127.) The usua rue n cases where
the dentty of the ots purchased can not be determned of chargng
the stock sod to the earest purchases of such stock s aso apped.
The foowng computaton shows the varous dates of purchases
and saes of the stock, and the ad|ustments made n respect of each
transacton by reason of the appcaton of the foregong:
ought.
Sod.
1
2
3
4
5
6
7
8
Date of purchase.
Shares.
Cost.
New bass.
Date of sae.
Shares.
Seng
prce.
Loss.

doars.
doars.
65.44
doars.
51.16
doars.
2.14
an. 21,1929
an. 21,1929

53.30
12.14
63.30
eb. 4,1929
eb. 6,1929

53.035
2.405
an. 24,1929

2.405
61. 675
64.08
May 8,1929

41.31
12.77
an. 31,1929
eb. 7,1929
Mar. 22,1929

49.525
49.65
47.65
1 12 77
4a 15
May 29,1929
Sept. 13,1929

34.935
35.50
14.59
14.09
May 3,1929

14. 59
34.275
52.92
une 3,1929
t
14.09
3ft 40
48.865
Sept. 11,1929

44.49
Oct. 6,1929

29.525
1 Indcated Ices shown n coumn S not aowabe as a deducton under wash sae provsons and added
to bass of stock the purchase of whch necesstates the dsaowance of the oss under such provsons.
In the above computaton the sae made on ebruary 4 s matched
wth the frst purchase made on anuary 21, there beng an ndcated
oss of 2.14a doars. Ths amount s, therefore, apped to ncrease
the bass of the second ot purchased on anuary 21, thus showng a
new or ad|usted bass for that ot of 55.44a doars. The ne t sae
took pace on ebruary 5, whch was of the odest ot of stock then
on hand, or the second ot acqured anuary 21, wth an ad|usted bass
of 55.44a doars. s ths ot was sod for 53.035a doars, a oss of
2.405a doars resuted, whch oss s added to the cost of the ot
acqured anuary 24, wth a resutng new bass of 54.08a doars for
that ot. The ne t sae ndcated was on May 8, but as stock had been
purchased on May 3, no oss n respect of ths sae s recognzed.
oowng the prncpe of chargng ths sae to the odest ot of stock
then on hand, or the ot acqured anuary 24, wth an ad|usted bass
of 54.08a doars, a oss of 12.77a: doars s ndcated whch s added
to the cost of the stock acqured May 3, the new bass of the ast ot
thus becomng 52.92a doars.
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119, rt. 672.
166
The ne t sae reported was on May 29, but as a ot of stock -was
acqured on une 3, no oss s aowabe n respect of ths sae. s
the odest ot of stock then on hand was the ot acqured anuary 31,
wth a bass of 49.525a doars, a oss of 14.59a doars s ndcated,
whch s added to the cost of the ot acqured une 3, the bass of that
ot as thus ad|usted beng 48.865a doars. The ast sae ndcated
was on September 13, and as a purchase s shown to have been made
on September 11, no oss s recognzed n respect of that sae. ppy-
ng the proceeds of such sae aganst the earest ot of stock then on
hand, or the ot acqured ebruary 7, wth a bass of 49.65a doars,
a oss of 14.09a doars s ndcated, whch s added to the cost of the
ot acqured September 11, the ad|usted bass of ths ot thus becomng
44.49a doars.
The fve ots of stock st hed by the ta payer wth the date of
acquston and the bass or ad|usted bass, as the case may be, are,
therefore, as foows:
Lot.
Date of acqus-
ton.
ass.
Lot.
Date of acqus-
ton.
ass.
1
2
Mar. 22,1929
May 3,1929
une 3, 1929
z doUan.
47.65
52.92
4
Sept. 11,1929
Oct. 6,1929
doars.
44.49
29.625
3
4S.865
5
S CTION 119. INCOM ROM SOURC S WIT IN
UNIT D ST T S.
rtce G72: Interest. -13-4996
G. C. M. 9156
R NU CTS O 1921, 1024, 1926, ND 1928.
In the Instant case deposts were made n the name of a trustee
and not n the ta payer s name nterest on such deposts was
credted to the account by the depostary remttances were made
by the trustee to the ta payer who ved n ustra the de-
posted funds were not sub|ect to the check of the ta payer and
the ta payer was not engaged n busness n ths country and had
no offce or pace of busness here. The ta payer dd not hod
the depost she dd not seect the depostary, nor had she any
part n handng the funds or the depost upon whch the nterest
was credted.
ed, that the nterest pad to the ta payer does not come wth-
n Ihe purvew of secton 217(a)( ) of the Revenue ct of 1921
and the correspondng secton of the Revenue cts of 1924, 1926,
and 1928. and s propery ta abe to the ta payer as dstrbuted or
dstrbutabe trust ncome from sources wthn the Unted States.
I. T. 1405 (C. . 1-2, 149) foowed.
The ta payer s a nonresdent aen and s the benefcary of two
domestc trusts created n her favor by her parents. The ncome n
queston conssts of nterest receved on money deposted wth the
M Company. The partcuar queston presented s whether the
ncome n queston was receved by the above-named ta payer as
the benefcary of the two trusts or whether t represents nterest
on deposts wth persons earrvng on a bankng busness so as to make
t nonta abe under secton 119(a)( ) of the Revenue ct of
1928 and the correspondng provsons of the pror Revenue cts.
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167
119, rt. 672.
Secton 217 of the Revenue ct of 1921, n so far as pertnent to
the nstant case, reads as foows:
Sec. 217. (a) That n the case of a nonresdent aen ndvdua or of a
ctzen entted to the benefts of secton 262, the foowng tems of gross n-
come sha be treated as ncome from sources wthn the Unted States:
(1) Interest on bonds, notes, or other nterest-bearng obgatons of res-
dents, corporate or otherwse, not ncudng ( ) nterest on deposts wth
persons carryng on the bankng busness pad to persons not engaged n
busness wthn the Unted States and not havng an offce or pace of busness
theren .
Secton 217 of the Revenue ct of 1924, and of the Revenue ct
of 1926, contans the same anguage. Secton 119 of the Revenue
ct of 1928 reads, n part, as foows:
(a) Gross ncome from sources n Unted States. The foowng tems of
gross ncome sha be treated as ncome from sources wthn the Unted States:
(1) Interest. Interest on bonds, notes, or other nterest-bearng obgatons
of resdents, corporate or otherwse, not ncudng
( ) nterest on deposts wth persons carryng on the bankng busness
pa. to persons not engaged n busness wthn the Unted States and not
havng an offce or pace of busness theren .
The deposts n queston were made n the name of the trustee
and not n the ta payer s name nterest on such deposts was
credted to the account by the depostary remttances were made
by the trustee to the ta payer, who ved n ustra the deposted
funds were not sub|ect to the check of the ta payer and the ta -
payer was not engaged n busness n ths country and had no offce
or pace of busness here. The ta payer dd not hod the depost,
she dd not seect the depostary, nor had she any part n handng
the funds or the depost upon whch the nterest was credted.
The words not ncudng ( ) nterest on deposts wth persons
carryng on the bankng busness pad to persons not engaged n
busness wthn the Unted States and not havng an offce or pace
of busness theren were frst nserted n the Revenue ct of 1921,
wth the e press purpose that nterest on deposts n banks n ths
country hed by nonresdent aens who were not dong busness
here shoud not be ncuded n ta abe ncome, so that such pro-
vson woud encourage deposts n mercan banks by nonresdent
aens. Such deposts usuay arse n some busness transacton and
the nserted cause was ntended to further foregn and nternatona
trade.
It s apparent that the deposts n the nstant case were made by
the trustee n the performance of ts dutes, namey, coectng, safe-
guardng, and transmttng the ncome arsng n the Unted States.
It s not beeved that the quoted anguage may be apped to a stua-
ton where the trustee deposts the trust funds n the name of the
trust or trustee and remts therefrom to the ta payer vng abroad,
and where the depost s not hed by or n the name of the ta payer.
Ths same queston was consdered n I. T. 1405 (C. . 1-2, 149),
a case qute smar to the nstant one and arsng under the Revenue
ct of 1921, where a trust was created for a nonresdent aen. The
trustees hed specfc securtes regstered n the names of the trus-
tees as trustees for the aen. They receved ncome therefrom and
deposted t n a bank n ths country n ther names as trustees.
72100 31 12
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119, rt. 672.
168
Interest was credted on such deposts. The trustees n remttng to
the aen benefcary drew on the deposts. Under the terms of the
trust the ncome, whch ncuded the nterest, was to be pad to the
benefcary. Unnvested funds were kewse deposted and nterest
was credted thereon. It was hed that the remttance to the aen
was not a remttance of nterest but of ncome, and that the nterest
was not nterest on deposts pad to persons not engaged n busness
n the Unted States, etc., wthn the meanng of the above-quoted
anguage used n secton 217(a) of the Revenue ct of 1921.
The ta payer contends that the rung n L T. 1405 has been, n
effect, overrued by the decsons n I. T. 1642 (C. . II-, SI) and
I. T. 2067 (C. . III-2, 78) that the rung n I. T. 1405 s n con-
fct wth the rung n ppeas and Revew Memorandum 37
(C. . 2, 172) and that I. T. 1405 s not correcty nterpretatve of
the aw.
In I. T. 1642, aso arsng under the Revenue ct of 1921, the ques-
ton nvoved was whether a nonresdent aen recevng nterest from
bonds of a foregn government and dvdends and nterest from a
foregn corporaton through a domestc trust was requred to report
such ncome, and pay an ncome ta thereon, as ncome from sources
wthn the Unted States. It was hed that, under secton 213(c)
of the Revenue ct of 1921, the nterest on the foregn bonds dd
not ose ts dentty n passng through the hands of the domestc
trust, and was not ncome from sources wthn the Unted States,
and that the same was the case wth regard to the dvdends and
nterest from the foregn corporaton.
In I. T. 2067 ta -e empt muncpa bonds were paced n trust,
and the ncome therefrom dstrbuted by the trustee to the hoders
of muncpa trust certfcates ssued by the company depostng
the bonds. It was hed that the trustee was ony a medum for the
dstrbuton to the benefcares (hoders of the certfcates) of ncome
from muncpa bonds for whch the trustee served as a depostary,
and that the hoders of the certfcates shoud not ncude such ds-
trbutons n ther gross ncome.
The ta payer aso ctes that porton of ppeas and Revew Mem-
orandum 37, supra, whch reads as foows:
f property s hed by trustees for the beneft of benefcares and
the ncome of the trust s to be dstrbuted perodcay, the trustees are not
consdered a ega entty wthn the meanng of the ta ng ct. The ncome
receved by the benefcares n such case may propery be traced through the
trustee drecty to Its source.
In other words, the ta payers contenton s that snce t was rued
n I. T. 1642 and I. T. 2067, and aso n ppeas and Revew Memo-
randum 37, that a trustee s a mere medum or condut through whch
the ncome passes from the source to the benefcary and that such
passage does not change the nature of the ncome, therefore, the
nterest on the depost n queston shoud propery be sad to pass
or be pad to the ta payer, and that, to that e tent, the rung n I. T.
1405 has been modfed f not revoked.
In I. T. 1642 the rea queston nvoved was whether the ncome
from foregn sources ost that status and became ncome from do-
mestc sources when t was pad to the trustee. In I. T. 2067 the
rea queston was whether the ta -e empt status of the ncome was
ost when the ncome from the bonds was pad to a trustee and thence
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169
131, rt. 697.
to the benefcary. The same queston as to source arose n ppeas
and Revew Memorandum 37. It s apparent that none of these three
ast-mentoned rungs had any bearng on the pont decded n I. T.
1405, whch, therefore, shoud be regarded as a controng precedent
n the nstant case.
It s we setted that a cam for e empton from ta aton w
bo strcty construed aganst the camant. ank of Commerce v.
State of Tennessee, 161 U. S., 134 Corne v. Coyne, 192 U. S., 418
e ner v. Coona Trust Co., 275 U. S., 232.) Snce the ta payer
has not ceary and unmstakaby brought hersef wthn the scope
of the paragraph e cudng from gross ncome nterest on deposts,
as above quoted, her cam shoud be dened.
or the foregong reasons, ths offce s of the opnon that the ta -
payer s contenton s not we founded that the nterest n queston
does not come wthn the purvew of the above-quoted sectons of the
varous Revenue cts and that the nterest s propery ta abe
to the ta payer as dstrbuted or dstrbutabe trust ncome from
sources wthn the Unted States.
C. M. Chahest,
Genera Counse, ureau of Interna Revenue.
SUPPL M NT a CR DITS G INPT T .
S CTION 131. T S O OR IGN COUNTRI S
ND POSS SSIONS O UNIT D ST T S.
rtce 697: When credt for ta es may be -22-5082
taken. G. C. M. 9459
R NU CTS O 1924, 1026, ND 1928.
Where a ta payer keeps Is books of account on the accrua
bass a credt for ta es pad to a foregn country must aso be
taken on that bass and the tme of payment of the ta es has n
such case nothng to do wth the tme of credt. ta payer whose
books of account are kept on the cash recepts and dsbursements
bass has the prvege of takng the credt for foregn ta es on
an accrua bass, but f he eects to do so the credt for foregn
ta es wth respect to a subsequent years must be taken upon
the same bass.
n opnon s requested reatve to the nterpretaton to be paced
on secton 131 of the Revenue ct of 1928, and correspondng pro-
vsons of the Revenue cts of 1924 and 1926, reatng to the credt
for ncome, war-profts, or e cess-profts ta pad or accrued durng
the ta abe year to any foregn country or to any possesson of the
Unted States.
The foowng specfc questons are asked:
1. May a ta payer, whose books of account are kept on an accrua bass,
eect to take credt for foregn ta es n the year sad ta es are pad
2. Is the opton under secton 238(c) of the ct of 1924 reopened by the cts
of 1926 and 1928
Secton 131 of the Revenue ct of 1928, n so far as appcabe,
reads as foows:
(a) owance of credt. The ta mposed by ths tte sha be credted
wth:
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131, rt. 697.
170
(1) Ctzen and domestc corporaton. In the case of a ctzen of the Unted
States and of a domestc corporaton, the amount of any ncome, war-profts,
and e cess-profts ta es pad or accrued durng the ta abe year to any foregn
country or to any possesson of the Unted States

(d) Year n chch credt taken. The credts provded for n ths secton
may, at the opton of the ta payer and rrespectve of the method of account-
ng empoyed n keepng hs books, be taken n the year n whch the ta es of
the foregn country or the possesson of the Unted States accrued, sub|ect,
however, to the condtons prescrbed n subsecton (c) of ths secton. If the
ta payer eects to take such credts n the year n whch the ta es of the for-
egn country or the possesson of the Unted States accrued, the credts for
a subsequent years sha be taken upon the same bass.
In consderaton of the questons presented t s necessary to refer to
sectons 222 and 238 of the Revenue ct of 1921, whch provded for
a credt for foregn ta es n the case of a ctzen of the Unted
States or a domestc corporaton, but faed to recognze the nequty
whch mght arse n the case where a ta payer whose books of
account were kept on the cash recepts and dsbursements bass
had a arge ncome from a foregn country for one year but no
ncome, or very tte ncome, for the subsequent year. In such
case the ta payer woud, for e ampe, pay to a foregn government
n 1922 ta es wth respect to ncome for 1921 and such ta es woud
not be a credt aganst mercan ncome ta for the ta abe year
1921, but woud have to be camed as a credt aganst ncome ta
for the ta abe year 1922, whch s pad n 1923. Thus, the purpose
for whch a credt for foregn ta es was created, namey, the
avodance of doube ta aton, woud not be accompshed n those
cases where the ta payer s books of account were kept on the cash
recepts and dsbursements bass. Ths nequty dd not e st where
the ta payer s books of account were kept on the accrua bass, for
accrued foregn ta es for 1921 coud be camed as a credt aganst
accrued Unted States ta es for the same year, thus avodng doube
ta aton. (See ppea of bert D. ewnson, 1 . T. , 1080
Davd . Cunnngham v. Commssoner, 9 . T. , 1050 Wam T.
Rch v. Commssoner, 11 . T. ., 1320 oward ar ood v. Com-
mssoner, 13 . T. ., 149.)
Ths defect n aw was recognzed by Congress n Report No. 179
of the Commttee on Ways and Means, dated ebruary 11, 1924,
page 60, and Report No. 398 of the Commttee on nance, dated
pr 10, 1924, page 27, n whch t s stated as foows:
Secton 222: Ths secton of the e stng aw aows a credt aganst the a
of the amount of ncome, war-profts, and e cess-profts ta pad or accrued to
foregn countres durng the ta abe year of the ta payer. Inasmuch as the
ta aws of most of these countres, ke our own, provde for the payment of
ncome ta es durng the year foowng the year for whch the ta s mposed, It
resuts that n many cases the credt s taken aganst the Unted States ta
for the year foowng the year n whch was earned the ncome on whch
the foregn ta was mposed. Ths defect s remeded by subdvson (c) of
the b, whch provdes that the credt may e taken at the opton of the ta -
payer n the year n whch the ta es of the foregn country accrued.
Consequenty, n the Revenue ct of 1924, Congress nserted a
provson reatng to ndvduas, desgnated as secton 222(c), and
a provson reatng to corporatons, desgnated as secton 238(c), as
foows:
The credts provded for n subdvson (a) of ths secton may, at the opton
of the ta payer and rrespectve of the method of accountng empoyed n keepng
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171 131, rt. 697.
fta books, be taken n the year n whch the ta es of the foregn country or the
possesson of the Unted States accrued, sub|ect, however, to the condtons
prescrbed n subdvson (b) of ths secton. If the ta payer eects to take
such credts n the year n whch the ta es of the foregn country or the posses-
son of the Unted States accrued, the credts for a subsequent years sha be
taken upon the same bass.
Ths provson s substantay the same as secon 131(d) of the
Revenue ct of 1928 whch s quoted above.
Thus, wth respect to the ta abe years arsng under the Revenue
ct of 1924, the Revenue ct of 1926, and the Revenue ct of 1928,
a ta payer, whose books of account were kept on the cash recepts and
dsbursements bass, mght avod doube ta aton by accrung at the
end of the ta abe year the amount of foregn ta es whch are aowed
as a credt aganst Unted States ncome ta .
The frst queston presented s whether a ta payer whose books of
account are ept on an accrua bass may, at hs opton, take credt
for foregn ta es n the year sad ta es are pad. The answer s
that where a ta payer keeps hs books of account on the accrua
bass a credt for ta es pad to a foregn country must aso be taken
on that bass and the tme of payment of the ta es has n such case
nothng to do wth the tme of credt. ( s to ad|ustment of accrued
ta es when the amount pad dffers from the amount accrued, see
secton 131(c) of the Revenue ct of 1928, sectons 222(b) and
238(b) of the Revenue cts of 1924 and 1926.) Where a foregn
ta aw s n effect at the end of the ta abe year there woud be no
dffcuty n accrung the foregn ncome ta credt as at the end of
the ta year, for the reason that at such tme a the events had
occurred whch f the amount of the ta and the abty of the
ta payer to pav t. (See Unted States v. nderson, 269 U. S., 422,
T. D. 3839, C. . -, 179.) In ths connecton t may be stated
that the prevous decsons of the ureau pertanng to the proper
accrua date of ta es whch may be camed as a deducton from the
gross ncome are n genera appcabe to the tme of accrua of for-
egn ta es whch mav be camed as a credt aganst the Unted States
ta es. (See S. M. 4499 , C. . -, 56 G. C. M. 6273, C. . III-
1, 168 G C. M. 6272, C. . III-1, 170 G. C. M. 7514, C. . I -
1, 111 G. C. M. 7190, C. . III-2,113 I. T. 2495, C. . III-2, 98
G. C. M. 6075, C. . III-1, 76 G. C. M. 8553, C. . I -2,109.) U
these decsons foow the rue ad down by the Supreme Court n
Unted States v. nderson, supra. ( s to other accrued tems see
aufman Department Stores, Inc., v. Commssoner of Interna Reve-
nue, 34 ed. (2d), 257, Ct. D. 105, C. . III-2, 319 mnmmn Cast-
ngs Co. v. Routzahn, 31 ed. (2d), 669, T. D. 4215. C. . II-2, 248,
affrmed 282 U. S., 92 Rouss v. owers, 30 ed. (2d), 628, certorar
dened 279 U. S., 853 Unted States v. mercan Can Co., 280 U. S.,
412, Ct. D. 164, C. . I -1, 292.)
It mght be ponted out here that secton 23(c) of the Revenue ct
of 1928, and the correspondng provsons of the Revenue cts of
1924 and 1926, provde that n computng net ncome there sha be
aowed as deductons ta es pad or accrued durng the ta abe year,
e cept so much of the ncome, war-profts, and e cess-profts ta es
mposed by the authorty of any foregn country or possesson of
the Unted States as s aowed as a credt aganst the ta . rom a
ega vewpont as we as for admnstratve reasons t s certany
nadvsabe to attempt to adopt one accrua date for that part of the
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131, rt. 697.
172
foregn ta whch s aowed as a deducton and another accrua
date for that part of the foregn ta whch s aowed as a credt.
It s the opnon of ths offce that the correct rue s to accrue as at
the end of the ta abe year the amount of ta es mposed by a foregn
government upon ncome derved from sources theren, then aow
as a credt under secton 131(a) of the Revenue ct of 1928 the
amount of ta pad thereon to the e tent t does not e ceed the pro-
porton of the ta aganst whch such credt s taken whch the ta -
payer s net ncome from sources wthout the Unted States bears
to hs entre net ncome for the same ta abe year, and aow the
baance of the accrued ta as a deducton under secton 23(c)2.
Reference has been made to Genera Counse s Memorandum 2983
(C. . II-1, 110), reatng to when a credt may be taken for
rtsh ta es where the books of the partnershp, of whch the ta -
payers were members, were kept on the bass of cash recepts and
dsbursements. It s stated that there s no evdence n the anayss
of the case dscussed theren as to what the Genera Counse s opnon
woud be had the books been kept on the accrua bass. In ths con-
necton attenton s drected to Genera Counse s Memorandum 5971
(C. . III-1, 182), aso pertanng to rtsh ta es, wheren t
was hed under the Revenue cts of 1924 and 1926 that
rtsh ncome ta assessabe for the rtsh year of assessment, pr 6-
pr 5, on the average ncome of three years endng on that day of the year
mmedatey precedng the year of assessment on whch the accounts of the
sad trade have been usuay made up, s propery accruabe as at the end
of the thrd year n the average, and where the ta for the rtsh year of
assessment s based on the ncome of the precedng year, the ta accrues as
at the end of such precedng year.
It w be noted from a readng of Genera Counse s Memorandum
5971, referred to, that Genera Counse s Memorandum 2983, supra,
was specfcay revoked n so far as t was n confct therewth.
though the Revenue cts of 1924, 1926, and 1928 contan a pro-
vson (. e., sectons 222(c) and 238(c) of the Revenue cts of 1924
and 1926 and secton 131(d) of the Revenue ct of 1928) the effect
of whch permts a ta payer on the cash bass to take credt for
foregn ta es n the year n whch they accrue, t does not foow
that the above-cted sectons of the Revenue cts permt a ta payer
on the accrua bass to take credt for foregn ta es n the year n
whch they were pad.
Referrng specfcay to the nqury as to whether the opton
under secton 238(c) of the Revenue ct of 1924 was renewed by the
Revenue cts of 1926 and 1928, t s the opnon of ths offce that
a ta payer whose books of account were kept on the cash recepts and
dsbursements bass had, under a three cts and under a years
governed by such cts, the prvege of takng the credt for foregn
ta es on an accrua bass, but f he eected to do so the credt for
foregn ta es wth respect to a subsequent years must be taken
upon the same bass. Usng the anguage of the statute, f the
ta payer eects to take such credts n the year n whch the ta es
of the foregn country or the possesson of the Unted States accrued,
the credts for a subsequent vears sha be taken upon the same
bass. Secton 200(d) of the R. evenue cts of 1924 and 1926 pro-
vdes as foows:
The terms pad or ncurred and pad or accrued sha be construed
accordng to the method of accountng upon the bass of whch the net ncome
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173
148, rt. 811.
s computed under secton 212 or 232. The deductons md credts provded for
n tns tte sha be taken for the ta abe year n whch pad or accrued or
pad or ncurred, dependent upon the method of accountng upon the bass
of whch the not ncome s computed under secton 212 or 2152, uness n order
to ceary refect the ncome the deductons or credts shoud be taken as of a
dfferent perod.
Secton 43 of the Revenue ct of 1928 reads as foows:
The deductons and credts provded for n ths tte sha be taken for the
ta abe year n whch pad or accrued or pad or ncurred, dependent
upon the method of accountng upon the bass of whch the net ncome s com-
puted, uness n order to ceary refect the Income the deductons or credts
souh be taken as of a dfferent perod.

Secton 48(c) of the Revenue ct of 1928 reads as foows:
Te terms pad or ncurred and pad or accrued sha be construed
accordng to the method of accountng upon the bass of whch the net ncome
s computed under ths part.
In vew of the e press provsons of aw referred to above, t
woud be necessary for a ta payer to take credt for foregn ta es
pad for the year n whch pad, f on a cash bass, or for the year
n whch accrued, f on the accrua bass, wth the e cepton that n
the former case he has an opton gven hm under the three Revenue
cts referred to heren to take such credts for the year n whch
accrued. n opton was frst gven the ta payer under the Revenue
ct of 1924. If the ta payer dd not e ercse hs opton whe that
aw was n effect, he coud have e ercsed t durng the years covered
by the Revenue ct of 1926, or f not havng prevousy taken the
beneft of the opton n a precedng year, he mght do so under the
Revenue ct of 1928. owever, f the ta payer has eected n any
year covered by the Revenue cts n queston to take credt for
foregn ta es for the year n whch accrued, when hs books of
account are on the cash bass, he s bound thereafter, regardess of
what year the eecton was made n or under what Revenue ct t
arose. Under no crcumstances w a ta payer who has once made
such eecton, for e ampe under the Revenue ct of 1924, be per-
mtted to abandon ths eecton or choce and take future credts
on a pad bass merey for the reason that a new Revenue ct has
been enacted and has ntervened.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
SUPPL M NT D. R TURNS ND P YM NT O T .
S CTION 148. IN ORM TION T SOURC .
rtce 811: Return of nformaton as to pay- -8-4945
ments of 1,500. I. T. 2560
R NU CTS O 1918, 1921, 1924, 1926, ND 1928.
Returns of nformaton as to renewa commssons on nsurance
premums pad to estates of deceased agents.
rung s requested reatve to the fng of nformaton returns
under secton 148 of the Revenue ct of 1928, n vew of Genera
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149, rt. 831.
174
Counse s Memorandum 8826 C. . I -2, 194 , n whch t was
concuded that renewa commssons on nsurance premums receved
by a trust created under the w of the decedent are ta abe ncome
ony to the e tent that the sums receved after the decedent s death
e ceed the far market vaue of the contract rght at that tme. n
nsurance company has suggested that t be e cused from ncudng
renewa commssons pad to the estates of deceased agents n the
nformaton returns requred to be fed, nasmuch as t has no
means of determnng what porton, f any, of each payment made
n such cases represents ta abe ncome.
Secton 148 of the Revenue ct of 1928 and the correspondng
sectons of pror Revenue cts were ncorporated nto the aw for
the purpose of enabng the Department to reach and mpose a ta
upon certan tems of ncome, the e stence of whch mght other-
wse reman undscosed. The necessty for the enactment s ap-
parent. In vew of ths fact t s not beeved that the Department
may authorze the omsson of such tems from the returns of
nformaton requred to be fed by an nsurance company. Where
the payor has no means of determnng what porton, f any, of each
payment made n the foregong cases represents ta abe ncome, the
requrements of the statute and the reguatons woud appear to be
met by reportng the tota payments made n each ndvdua case.
In such nstances, the ureau suggests that the payor ndcate on
orm 1099, or by an dentfabe accompanyng etter, that the
amounts returned represent the tota payments of renewa com-
mssons made durng the caendar year, wthout attemptng to
determne for the purpose of the returns what porton of such pay-
ments represents a return of capta and what porton represents
ta abe ncome. The nsurance company shoud aso specfy n each
case the name of the decedent whose estate receved the renewa
commssons. The foregong procedure shoud be foowed, how-
ever, ony where the payor has no means of determnng what por-
ton of the renewa commssons represents ta abe ncome.
S CTION 149. IN ORM TION Y CORPOR TIONS.
rtce 831: Return of nformaton as to pay- 1 1917
ments of dvdends. T. D. 4305
INCOM T .
Returns of nformaton as to payments of dvdends to be fed
wth Commssoner mendment to Treasury Decson 4277.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Wash mgton, D. C.
To Coectors of Interna Revenue and Others Concerned:
The ast sentence of the second paragraph of Treasury Decson
4277 (C. . III-2, 140) s hereby amended to read as foows:
These forms, accompaned by etter of transmtta on orm 10 showng
the number of orms 1099 fed therewth, sha be forwarded to the Comms-
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175 162, rt. 862.
soner of Interna Revenue, Sortng Secton, Washngton, D. C, on or before
ebruary 15 of the foowng year.
The ast sentence of the fourth paragraph of Treasury Decson
4277 s hereby amended to read as foows:
The request for the e tenson of tme must be forwarded to the Commssoner
of Interna Revenue, Rues and Reguatons Secton, Washngton, D. C, on or
before the date prescrbed for fng the return.
Davd urnet,
Commssoner of Interna Revenue.
pproved anuary 19, 1931.
. W. Meon,
Secretary of the Treasury.
SUPPL M NT . ST T S ND TRUSTS.
S CTION 162. N T INCOM .
rtce 862: Method of computaton of net --4974
ncome and ta . I. T. 2561
R NU CT O 102 8.
Where, under the aws of Mchgan, testamentary provson or
court order drects payment of the wdow s aowance from In-
come, the aowance s consdered as havng been pad from
ncome and may be taken as a deducton from the gross ncome
of the estate to the e tent that there s ncome from whch to
make such payment. Where the court as approved payment of
the aowance, the aowance, for edera ncome ta purposes,
shoud be consdered as havng been pad from ncome to the
e tent there s ncome of the estate from whch to pay the aow-
ance, even though the order of court does not e pressy drect
payment out of ncome. Payment made to the wdow from corpus
of the estate s not deductbe n determnng net ncome of the
estate.
rung s requested reatve to the computaton for edera
ncome ta purposes of the net ncome of an estate n the process
of admnstraton under the aws of the State of Mchgan, wth
partcuar reference to the deductbty from gross ncome of an
aowance pad to the wdow of the decedent.
Sectons 13794, 13913, and 14525 of the Comped Laws of
Mchgan, 1915, read n part as foows:
(13794) Sec. 22. the estate of the testator, rea and persona, sha be
abe to be dsposed of for the payment of hs debts, and tha e penses of
admnsterng hs estate, and the probate court may make such reasonabe
aowance as may be |udged necessary for the e penses of the mantenance
of the wdow and mnor chdren, or ether, consttutng the famy of the
testator, out of hs estate, durng the progress of the settement of the estate,
bat never for a onger perod than unt ther shares n the estate sha be
assgned to them, nor for more than one year.
(13913) Secton 1. When any person sha de possessed of any persona
estate, or of any rght or nterest theren not awfuy dsposed of by hs ast
w, the same sha be apped and dstrbuted as foows:
2. The wdow and chdren consttutng the famy of the deceased sha
have such reasonabe aowance out of the estate as the probate court sha
|udge necessary for ther mantenance durng the progress of the settement
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162, rt. 862.
176
of the estate, accordng to ther crcumstances, whch, n case of an nsovent
estate, sha not be onger than one year after grantng admnstraton nor
for any tme after the dower and persona estate sha be assgned to the
wdow .
(14525) Sec 2. No deductons or e emptons from such ta n-
hertance ta sha be made for any aowance granted by the order of any
court for the mantenance and support of the wdow or famy of a decedent
pendng the admnstraton of the estate, when there s ncome from such
estate accrung after death, whch s avaabe to pay such aowance, or for a
onger perod than one year, or for a greater amount than s actuay used and
e pended for the mantenance and support of such wdow or famy for one
year.
The queston arses whether or not a wdow s aowance pad by
the estate of a deceased person pursuant to an order of a probate
court s deductbe from the gross ncome of the estate durng the
perod of admnstraton to the e tent that there s ncome from
whch to pay such an aowance. It s noted aso n connecton wth
the above-quoted provsons of the Mchgan aw that the practce
under Mchgan procedure s for the probate |udge to ssue an order
for the payment of the wdow s aowance wth no provsons as to
whether t s to be pad out of ncome or out of prncpa, but that
t s the practce of the audtor genera s department and of the
probate |udges to consder the wdow s aowance as beng pad out of
ncome, to the e tent there s ncome out of whch to pay t.
Whether an aowance pad a wdow durng the admnstraton of
an estate s pad out of the corpus or out of ncome s argey a
queston of fact n each partcuar case. In the case covered by
Offce Decson 829 (C. . 4, 224) an e ecutor of an estate n the
process of admnstraton pad to the wdow of the testator a monthy
aowance. The aowance was pad under an order of the probate
court whch provded that the amount shoud be payabe out of
the persona property and the ncome from the rea estate. The
ncome from the persona property was more than suffcent to pay
the aowance. The ureau hed that nasmuch as the aowance was
pad to the wdow under an order of court, t was propery pad
as contempated by secton 219(c) of the Revenue ct of 1918, and
mght be camed as a deducton n the return of ncome to be fed
by the e ecutor. Cf. uck v. McLaughn, Crcut Court of ppeas,
Nnth Crcut, November 10, 1930. (Not yet reported.)
Secton 219(c) of the Revenue ct of 1918 provdes n part as
foows:
n determnng the net ncome of the estate of any deceased person
durng the perod of admnstraton or settement there may be deducted the
amonnt of any ncome propery pad or credted to any egatee, her or other
benefcary.
Substantay the same provson s contaned n secton 162(c) of
the Revenue ct of 1928.
It s cear from the foregong that n the case of an estate n the
process of admnstraton, where there s a testamentary provson
or court order drectng that the wdow s aowance be pad by the
e ecutor or admnstrator from ncome, the aowance pad pursuant
thereto s to be consdered as havng been pad from ncome and
may be taken as a deducton from the gross ncome of the estate to
the e tent that there s ncome from whch to make such payment.
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177
205, rt, 996.
Where the court has approved the payment of an aowance to the
wdow by an e ecutor or admnstrator, t woud seem that the aow-
ance, for edera ncome ta purposes, shoud be consdered as hav-
ng been pad from ncome to the e tent there s ncome of the
estate from whch to pay the aowance, even though the order of
the court provdng for the aowance does not e pressy drect that
the aowance s to be pad from ncome. It s hed, therefore, that
under such crcumstances the aowance represents ncome prop-
ery pad wthn the meanng of secton 162(c) of the Revenue ct
of 1928, and s deductbe from gross ncome n determnng the net
ncome of the estate.
When such payment s made to the wdow from the corpus of
the estate the amount of such payment s not deductbe by the estate
n computng ts net ncome. ( rtce 863, Reguatons 74.)
rtce 863: Decedent s estate durng admnstraton.
R NU CT O 1028.
Transfer of notes to the decedent s estate. (See G. C. M. 9114,
page 137.)
SUPPL M NT G. INSUR NC COMP NI S.
S CTION 205. N T LOSS S.
rtce 996: Net osses nsurance companes. - 1 1982
T. D. 4309
INCOM T .
Net osses nsurance companes Reguatons 74, amended.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
Reguatons 74 are hereby amended by the addton thereto of
the foowng new matter deang wth net osses of nsurance
companes:
rt. 996. Net osses nsurance companes. In the rase of an nsurance
company sub|ect to the ta mposed by secton 201, the net oss s the
amount by whch gross ncome as denned n secton 202(a) s e ceeded by the
deductons aowed by secton 203 e cudng:
(a) The amount of nterest receved durng the ta abe year aowed as a
deducton under secton 203(a) 1, n e cess of the amount of nterest pad
wthn the ta abe year whch s not deductbe under secton 203(a)8
(fr) The amount receved as dvdends and aowed as a deducton under
secton 203(a)3
(c) The amount aowed as a deducton under secton 203(a)4 on account
of sums hed as a reserve for dvdends and
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272, rt. 1173.
178
(d) The amount aowed as a specfc credt under secton 203(a)9.
In the case of an nsurance company sub|ect to the ta mposed by secton
204, the net oss s the amount by whch gross ncome as defned n secton
204(b) s e ceeded by the deductons aowed by secton 204(c) e cudng:
(a) The amount of nterest earned durng the ta abe year aowed as a
deducton under that part of secton 204(c)8 whch refers to nterest e empt
from ta aton under secton 22(b)4, n e cess of the amount of nterest ac-
crued wthn the ta abe year whch s not deductbe under secton 204(c) 2
n vew of the provsons of secton 23(b)
(6) The amount of nterest aowed as a deducton under that part of
secton 204(c)8 whch refers to nterest aowed as a credt under secton 26
(c) The amount receved as dvdends and aowed as a deducton under
secton 204(c)7 and
(d) The amount aowed as a specfc credt under secton 204(c) 10.
Davd urnet,
Commssoner of Interna Revenue.
pproved March 7, 1931.
Ocden L. Ms,
ctng Secretary of the Treasury.
SUPPL M NT L.-t SS SSM NT ND COLL CTION O D ICI NCI S.
tenson of tme for payment of a defcency. mendment of
artce 1234, Reguatons 69, and artce 1173, Reguatons 74.
Tkeascrt Department,
Offce of Commssoner of Interna Revenue, .
Washngton, I). C.
To Coectors of Interna Revenue and Others Concerned:
The second paragraphs of artce 1234 of Reguatons 69 and
artce 1173 of Reguatons 74 are hereby amended by addng at the
end of each paragraph a new sentence readng as foows:
The Commssoner w not consder an appcaton for an e tenson of tme
for te payment of a defcency uness such appcaton s made on or before
the date prescrbed for payment thereof, us shown by the notce and demand
from the coector.
s so amended, the sad paragraphs read as foows:
n appcaton for an e tenson of tme for the payment of a defcency
shoud be made under oath on orm 1127 and must be accompaned by evdence
showng that undue hardshp to the ta payer woud resut f the e tenson were
refused. The e tenson w not be granted on a genera statement of hardshp,
but n each case there must be furnshed a statement of the specfc facts show-
ng what, f any, fnanca oss or sacrfce w resut f the e tenson s not
grunted. Wherever practcabe a certfed statement of assets and abtes of
the ta payer shoud be submtted. The appcaton, wth the evdence, must
be fed wth the coector, who w at once transmt It to the Commssoner
wth hs recommendatons as to the e tenson. When t s receved by the
Commssoner, t w be e amned mmedatey and, f possbe, wthn 30 days
w be re|ected, approved, or tentatvey approved sub|ect to certan condtons
S CTION 272. PROC DUR I G N R L.
rtce 1173: tenson of tme for payment
of a defcency.
INCOM T .
-23-5091
T. D.4315
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-179
276, rt. 1201.
of whch the ta payer w be mmedatey notfed. The Commssoner w not
consder an appcaton for an e tenson of tme for the payment of a defcency
uness .such appcaton s made on or before the date prescrbed for payment
thereof, as shown by the notce and demand from the coector.
Davd urnet, Commssoner.
pproved May 26, 1931.
. W. Meon,
Secretary of the Treasury.
S CTION 276. P IOD O LIMIT TION UPON SS SS-
M NT ND COLL CTION MPTIONS.
rtce 1201: Perod of mtaton upon assess- -7-4936
ment of ta . Mn. 3857
Instructons governng the e ecuton of consent agreements.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, I). C.
Coectors of Interna Revenue, Interna Revenue gents n Charge,
and Other Offcers and mpoyees Concerned:
ffectve December 31, 1930, no offca or empoyee of the ureau
of Interna Revenue sha request n any manner that consents or
wavers under secton 278(c), Revenue ct of 1926, and secton
276(b), Revenue ct of 1928, be fed wth the ureau, e tendng
or further e tendng the statute of mtatons on assessment of
defcences n ncome or profts ta . egnnng December 31, 1930,
suc consents or wavers w be e ecuted ony at the wrtten request
of the ta payer where t appears that, athough the ta payer has
used ordnary dgence, the case can not be adequatey presented
and consdered wthn the statutory perod of mtaton propery
appcabe thereto.
Offcers and empoyees of the ureau sha pan ther work so
that the ta abty may be determned wthn the perod of m-
taton on the makng of assessments provded by the statute or
statutes appcabe to the specfc case.
e stng procedura nstructons are hereby modfed to brng
the same n conformty wth the foregong. Nothng herenabove
contaned s ntended to affect n any manner the vadty or ega
status of such consents or wavers submtted to the ureau pror
to December 31, 1930. _
ueres regardng ths mmeograph shoud refer to the number
thereof and to the symbos IT: : CW.
Davd urnet, Commssoner.
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322, rt. 1251.
180
SUPPL M NT O. O RP YM NTS.
S CTION 322. R UNDS ND CR DITS.
rtce 1251: uthorty for abatement, credt,
and refund of ta .
-24-5103
Ct. D. 347
ncome ta revenue acts op 1026 and 1928 decson of court.
Refund Commssoner s uthorty ddtona Ta Due but
arbed from ssessment.
Upon consderaton of a cam for refund the utmate queston
presented by the cam s whether the ta payer has overpad hs
ta and the Commssoner has the power to redetermne the entre
ta abty of the ta payer. Where therefore after the statutory
perod for assessment of an addtona ta as e pred he deter-
mnes that a refund Is aowabe on the grounds asserted n the
cam but that the correct computaton by reason of other tems
resuts n an addtona ta whch s barred from assessment, the
ta payer s not entted to a refund, secton 284(a) of the Revenue
ct of 1926 and secton 322(a) of the Revenue ct of 1928 mtng
refunds to overpayments.
Unted States Crcut Court cp ppeas, Tenth Crcut.
dgar Percy Lec-s and Rchard . Cooper, as Trustees under the W of
rthur rancs Thomas Cooper, Deceased, appeants, v. Marsha S. Reynods,
Indvduay and as Coector of Interna Revenue, appeee.
Phps, Crcut udge, devered the opnon of the court.
Ths s an acton at aw brought by dgar Percy Lews and Rchard .
Cooper, as trustees under the w of rthur rancs Thomas Cooper, deceased,
to recover 7,297.16 aeged to have been wrongfuy coected as edera ncome
ta assessed aganst the estate of Cooper for 1920.
On ebruary IS, 1921, the admnstrator of such estate fed an ncome ta
return for the perod from anuary 1 to December 12, 1920 a fna settement of
the estate havng been made on the atter date. In such return, deductons
were camed on account of the foowng e pendtures made by the admnstra-
tor : ttorney s fees, 20,750 State nhertance ta , . 16,870 pubshng notces,
67.52 probate court fees, 20 and premum on admnstrator s bond, 105.55.
persona e empton of 1,000 was camed and the norma ta on the frst
4,000 was computed at 4 per cent.
On November 24, 1925, the Commssoner determned the ta upon such
return. e dsaowed a of such deductons e cept the tem of attorney s
fees. e determned that Cooper, deceased, was a nonresdent aen of Great
rtan and Ireand at the tme of hs death and, therefore, dsaowed the
e empton of 1,000 and computed the ta on the frst 4,000 at 8 per cent.
e assessed a defcency ta of 7,297.16. On March 21, 1926, the trustees pad
such defcency assessment under protest.
On uy 27, 1926. the trustees fed a cam for refund of 7,297.16, based on
the dsaowance of such deductons and e empton and the computaton of the
norma ta at 8 per cent nstead of 4 per cent
etter from the Commssoner to the trustees, dated May 18, 1929, stated
that the payment of 20,750 for attorney s fees was not aowabe as a deducton
from ncome, and set forth a corrected computaton of the ta . In such
computaton, the Commssoner aowed the amount pad as nhertance ta
as a deducton, aowed the persona e empton of 1,000 and computed the
norma ta at 4 per cent. Such computaton showed a tota ta abty of
21,946.96, and the ta therefore assessed and pad as 20,379.77. Such etter
further stated:
Snce the correct computaton resuts n an addtona ta as ndcnted
above whch s barred from assessment by the statute of mtatons your cam
w be re|ected on the ne t schedue to be approved by the Commssoner.
March 17, 1931.
OPINION.
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181
322, rt. 1254.
The tra court hed that the cam for refund was propery dened and
entered a |udgment accordngy. The trustees have appeaed.
Counse for the trustees contend that the Commssoner was wthout authorty
to redetermne and reassess the tu after the statute of mtatons had run
aganst the assessment, and that he was restrcted n hs consderaton of the
cam for refund, at the tme of hs decson, to a determnaton of whether the
trustees were entted to deductons of the specfc tems set up n the cam
for refund.
Counse for the coector contend that the Commssoner had the power, upon
consderaton of the cam for refund, to reconsder the entre assessment and
to determne whether or not the trustees had overpad the ta .
Secton 284(a) of the Revenue ct of 1026 (44 Stat, 66), secton 1065, Tte
26, U. S. C. ., In part provdes:
(a) Where there has been an overpayment of any ncome, war-profts, or
e cess-profts ta mposed by ths ct ( ebruary 20, 1920), the ct entted
n ct to provde revenue, equaze dutes, and encourage the ndustres of
the Unted States, and for other purposes, approved ugust 5, 1909, the ct
entted n ct to reduce tarff dutes and to provde revenue for the Govern-
ment, and for other purposes, approved October 3, 1913, the Revenue ct of
1010, the Revenue ct of 1917, the Revenue ct of 1918, the Revenue ct
of 1921, or the Revenue ct of 1924, or any such ct as amended, the amount:
of such overpayment sha, e cept as provded n subdvson (d), be credted
aganst any ncome, war-profts, or e cess-profts ta or nstament thereof
then due from the ta payer, and any baance of such e cess sha be refufded
mmedatey to the ta payer.
Secton 322 (a) and (b) of the Revenue ct of 1928 ( 45 Stat, 801), secton
2322, Tte 20, U. S. C. ., n part provdes:
(a) uthorzaton. Where there has been an overpayment of any ta m-
posed by ths tte, the amount of such overpayment sha be credted aganst
:uy ncome, war-profts, or e cess-profts ta or nstament thereof then due
from the ta payer, and any baance sha be refunded mmedatey to the
ta payer.
(b) Lmtaton on aowance (1) Perod of mtaton. No such credt or
refund sha be aowed or made after two years from the tme the ta was
pad, uness before the e praton of such perod a cam therefor s fed by
the ta payer.
The above-quoted provsons ceary mt refunds to overpayments. It fo-
ows that the utmate queston presented for decson, upon a cam for refund,
Is whether the ta payer has overpad hs ta . Ths nvoves a redetermnaton
of the entre ta abty. Whe no new assessment can be made, after the
bar of the statute has faen, the ta payer, nevertheess, s not entted to a
refund uness he has overpad hs ta .
The acton to recover on a cam for refund s n the nature of an acton for
money had and receved, and t s ncumbent upon the camant to show that
the Unted States has money whch beongs to hm. (Champ Sprng Co. v.
Unted States (C. C. . 8), 47 ed. (2d), 1 Ct D. 323, page 446, ths uetn .)
Snce, n the nstant case, the trustees had not overpad the ta , the cam
for refund was propery dened.
udgment affrmed.
rtce 1254: Cams for refund by ta payers. -2-4900
( so Secton 116, rtce 642.) T. D. 4303
INCOM T .
Refunds under secton 116(e) of the Revenue ct of 1928.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
Secton 116(e) of the Revenue ct of 1928 provdes as foows:
(e) rdges to be acqured by State or potca subdvson. Whenever any
State or potca subdvson thereof, n pursuance of a contract to whch t s
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322, rt. 1254.
182
not a party entered nto before the enactment of ths ct, Is to acqure a
brdge
(1) If by the terms of such contract the ta mposed by ths tte s to be
pad out of the proceeds from the operaton of such brdge pror to any dvson
of such proceeds, and f, but for the mposton of the ta mposed by ths tte,
a part of such proceeds for the ta abe year woud accrue drecty to or for
the use of or woud be apped for the beneft of such State or potca sub-
dvson, then a ta upon the net ncome from the operaton of such brdge sha
be eved, assessed, coected, and pad n the manner and at the rates prescrbed
n ths tte, but there sha be refunded to such State or potca subdvson
(under rues and reguatons to be prescrbed by the Commssoner wth the
approva of the Secretary) an amount whch bears the same reaton to the
amount of the ta as the amount whch (but for the mposton of the ta
mposed by ths tte) woud have accrued drecty to or for the use of or woud
be apped for the beneft of such State or potca subdvson, bears to the
amount of the net ncome from the operaton of such brdge for such ta abe
year. No such refund sha be made uness the entre amount of the refund
s to be apped n part payment for the acquston of suc brdge.
(2) If by the terms of such contract no part of the proceeds from the opera-
ton of the brdge for the ta abe year woud, rrespectve of the ta mposed
by ths tte, accrue drecty to or for the use of or be apped for the beneft
of such State or potca subdvson, then the ta upon the net ncome from
the operaton of such brdge sha be eved, assessed, coected, and pad n the
manner and at the rates prescrbed n ths tte.
Pursuant to authorty contaned n secton G(e) quoted above,
the foowng rues and reguatons reatve to the fng, aowance,
and payment of cams for refund under that secton are hereby
estabshed for the gudance of ta payers and States or potca
subdvsons thereof concerned:
(1) ny State or potca subdvson thereof camng a refund under the
provsons of secton 116(c) of the Revenue ct of 1928 of an amount equa to
a or a porton of any ncome ta eved, assessed, coected, and pad n the
manner and at the raes prescrbe n Tte I of that ct, sha fe a cam
therefor on orm 843 (to whch there sha be attached as e hbts the matter
herenafter prescrbed) wth the coector of nterna revenue for the dstrct
n whch the ta was pad, whch cam sha be e ecuted on behaf of such
State or potca subdvson thereof by the treasurer or other fsca offcer
thereof and sha contan
(a) statement of the name of the ta payer, of the amount of ta eved,
assessed, coected, and pad for the ta abe year or perod n respect of whch
the cam s made, and the amount of refund thereby sought,
(b) fu statement of the facts consdered by the camant suffcent to
entte t to receve the refund, ncudng copes of a contracts and/or other
documents bearng on the case, and a statement that the cam s submtted
under the provsons of secton 116(e) of the Revenue ct of 1928,
(c) showng whch w estabsh to the satsfacton of the Commssoner
that the fsca offcer presentng the cam has authorty to receve the amount
of the refund on behaf of the State or potca subdvson whch he assumes
to represent and to appy wthout deay the entre amount of such refund n
part payment for the acquston of such brdge, ncudng copes of the aws,
ordnances, or smar enactments consdered by the camant suffcent to
estabsh ts authorty to receve the refund and so to appy t, together wth
a statement that such fsca offcer w receve and mmedatey so appy the
tntre amount of the refund,
(d) n affdavt made by or on behaf of the ta payer, whch affdavt sha
state that the ta payer thereby |ons wth and concurs n the request of the
State or potca subdvson thereof that a refund of an amount equa to a
or a porton of the ta prevousy pad by such ta payer be made to such State
or potca subdvson, that the ta payer agrees to receve the amount refunded
from the State or potca subdvson to whch t s pad and mmedatey
to appy the entre amount of such refund n part payment for the acquston
of such brdge, and that f for any reason the contract whch s the bass of
the cam for refund s not fuy e ecuted and performed the ta payer w
repay to the Unted States upon ts demand the entre amount of the refund
wth nterest at 6 per cent per annum from the date the refund s made wthout
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183
606, rt. 1301.
seekng or camng the beneft of any statute of mtatons whch pror thereto
may have run aganst the Unted States.
(2) No refund sha be made of any amount n e cess of the amount of the
ta eved, assessed, coected, and pad by the ta payer for any ta abe year
or perod. separate cam sha be made n respect of eac separate ta abe
year or perod. If by the terms of the contract on whch the cam s based two
or more States or potca subdvsons of a State or States are entted to
acqure the brdge, the cam for refund n respect of each separate ta abe
year or perod must be made onty by the States or potca subdvsons
thereof so entted. The amount refunded under secton 116(e) of the Revenue
ct of 1928 and ths Treasury decson Is not consdered an overpayment wthn
the meanng of secton 614 of the Revenue ct of 1028, reatng to nterest
on overpayments, and no nterest sha be aowed or pad upon the amount
of the refund.
(3) check or voucher n payment of a cam for refund aowed under
secton 116(e) of the Revenue ct of 1928 w be drawn In the name of the
fsca offcer or offcers havng authorty, as estabshed under paragraph (1) (c)
hereof, to receve the same, and w contan an e press provson that t s
ssued for the soe purpose and sub|ect to the condtons prescrbed n secton
116(e) of the Revenue ct of 1928 and ths Treasury decson.
Davd urnet,
Commssoner of Interna Revenue.
pproved anuary 7, 1931.
. W. Meon,
Secret ary of the Treasury.
TITL I . DMINISTR TI PRO ISIONS.
S CTION 606. CLOSING GR M NTS.
rtce 1301: Cosng agreements reatng to ta -26-5119
abty n respect of nterna-revenue ta es. G. C. M. 9552
R NU CT O 1928.
The fng of a cam for refund s an act or fact whch must be
consdered n the ght of a the crcumstances n order to
ascertan whether t ceary mpes a change of mnd on the
part of the ta payer subsequent to the tme the offer to enter nto
a cosng agreement was made. Genera Counse s Memorandum
6423 (C. . III-2, 149) modfed.
dvce has been requested whether the concuson reached n
Genera Counse s Memorandum 6423, to the effect that the fng
of a cam for refund may not, even nferentay, be consdered
as a wthdrawa of an offer to enter nto a cosng agreement under
secton 606 of the Revenue ct of 1928, shodd be modfed n the
ght of the facts and crcumstances e stng n the nstant case.
The queston s rased n connecton wth the fng by the M
Company of a cam for refund of 11a doars, ncome ta es, whch
t s aeged were overpad by that company for the ta abe year
1927. revenue agent s report of a fed e amnaton dscosed an
addtona ta of 10a doars, whch wth nterest of doars
totaed 11a doars. The revenue agent had dsaowed an tem of
fe nsurance premums n the amount of 7:.08a- doars whch he
72109 31 13
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606, rt. 1301.
184
thought had been camed as a deducton. The changes made by
the revenue agent were e paned to certan offcers of the corpora-
ton, who assented thereto and e ecuted orm 866 on November ,
1929, agreeng that the prncpa amount of the abty of the
corporaton was 2,183a doars, or 10a doars n e cess of the 2,173a
doars shown on the return.
The queston presented s whether the offer to enter nto a cosng
agreement was revoked or wthdrawn before t was sgned by the
Commssoner and approved by the Secretary of the Treasury, or
the Under Secretary. orm 866 s desgned to serve as an agree-
ment between the ta payer and the Government under the provsons
of secton 606 of the T evenue ct of 1928. cept n the case of
the reopenng or modfcaton of cosng agreements whch s specf-
cay governed by secton 606(b) (not here appcabe), the usua
rues governng contracts appear to be appcabe to cosng agree-
ments. The e ecuton and submsson of orm 866 by the ta payer
merey amount to an offer by the ta payer to enter nto an agreement
on the terms stated theren. Such offer may, however, be revoked
at any tme pror to acceptance. Wston on Contracts, voume 1,
secton 55, states the appcabe rues governng revocaton as foows:
even though a defnte tme n whch acceptance may he made, s
named n such an offer, the offeror may, nevertheess, revoke hs offer wthn
that perod. nd even though the offer e pressy states that t sha not be
wthdrawn, nevertheess, t may be. What communcaton amounts to a
revocaton s a queston of constructon. ny statement whch ceary mpes
unwngness to contract accordng to the terms of the offer s suffcent,
though the word revoke s not used.
On ebruary , 1930, the ta payer addressed a etter to the Com-
mssoner referrng to the above-mentoned ad|ustment. The etter
ponted out that the ad|ustment had been made on the assumpton
that fe nsurance premums had been deducted as an e pense that
a subsequent e amnaton dscosed that the premums had not n
fact been deducted and stated that the dscosure had been caed
to the attenton of the revenue agent, who had agreed that hs ad|ust-
ment was erroneous. The Commssoner s offce, n acknowedgng
recept thereof, by a form etter dated ebruary , 1930, nformed
the ta payer that carefu consderaton woud be gven to hs com-
muncaton and that he woud be further advsed reatve thereto
at the earest practcabe date.
On March , 1930, the ta payer fed wth the coector a cam
for refund of a doars, or the amount of the defcency resutng
from the ad|ustment made. The reason gven n support of the
cam for refund was n substance a restatement of the contents of
the above-mentoned etter, a copy of whch was attached to the
cam for refund. When the Commssoner sgned the submtted
cosng agreement on March , 1930, he dd not know of the above
correspondence or cam for refund.
Nether the etter cang the Commssoner s attenton to the er-
ror nor the subsequent cam for refund e pressy stated that the
offer to cose was revoked or wthdrawn. In the absence of the
use of the word revoke or some synonymous e presson, the ques-
ton arses whether those communcatons cearv mpy unwng-
ness to contract accordng to the terms of the offer. The fact that
the Commssoner was not personay aware of the e stence of ether
communcaton at the tme the cosng agreement was sgned and
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185
606, rt, 1301.
approved s mmatera. oth had been prevousy receved by hs
agents, and, therefore, constructvey receved by the Commssoner,
before the offer was accepted. (Wston on Contracts, voume 1,
secton 89.)
The etter n queston ceary mpes the ta payer s dssatsfac-
ton wth the orgna proposa, and hs assumpton that the error
woud be corrected as a matter of course. urthermore, the form
etter by whch the Commssoner acknowedged the recept of the
ta payer s etter, and advsed hm that hs communcaton woud
be consdered, conveys the mpresson that the ta payer s etter was
nterpreted as a demand for the ndcated correcton. Under such
crcumstances, the etter n queston shoud be construed as a wth-
drawa of the ta payer s offer to enter nto a cosng agreement
n accordance wth the terms of hs pendng offer.
In addton to the above-mentoned ndcaton of revocaton or
wthdrawa, the ta payer fed a cam for refund and attached
thereto a copy of the etter dscussed above. cam for refund s
a forma document that serves two purposes under the Revenue cts.
It demands repayment of an aeged overpayment of ta es. It aso
serves to e tend the statutory perod for refundng ta es overpad.
s ether of these purposes may account for the fng of a cam for
refund, t may n some cases prove dffcut to determne whether
ts fng was ntended ony to to the statute of mtatons on re-
funds or (n a case where no offer to enter nto a cosng agree-
ment had been submtted) as a demand for mmedate consdera-
ton and repayment. If t may reasonaby be credted to ether
purpose, there s no such cear mpcaton of wthdrawa as the aw
requres to effect the revocaton of an offer.
s a cam for refund s ntrnscay susceptbe to severa con-
structons, recourse must be had to other facts or acts to ascertan ts
true sgnfcance. or e ampe, n a case where an offer to enter
nto a cosng agreement s based on a proposed determnaton whch
nvoves a refund, and the statutory perod for makng refunds s
about to e pre, t may be necessary that a cam for refund be fed
to gve the Commssoner suffcent tme to consder the offer. In
such a case the cam woud be suppementa to (rather than ncon-
sstent wth) an offer to cose. gan, where an offer to enter nto
a cosng agreement resuts from the tentatve adopton of one theory
foowng a controversy nvovng severa theores, whch woud
reach very dfferent resuts, a cam for refund may be necessary to
protect a supposed rght to refund whe the settement offer s beng
consdered by the Commssoner.
If, on the other hand, as n the nstant case, there s tte or no
controversy at the tme the offer s made, and there s adequate tme
for consderaton of the offer by the Commssoner wthn the statu-
tory perod, t seems that the fng of the cam for refund carres
a cear mpcaton that the orgna offer s revoked or wthdrawn,
f pror acts had not aready requred that concuson.
In other words, the fng of a cam for refund s an act or fact
whch must be consdered n the ght of a the crcumstances n
order to ascertan whether t ceary mpes a change of mnd on
the part of the ta payer subsequent to the tme the offer to enter
nto a cosng agreement was made. ccordngy, Genera Counse s
Memorandum 6423, n so far as t hods that the fng of a cam
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611.
186
for refund can not, even nferentay, be consdered a wthdrawa
of a pror offer, s modfed.
It foows n the nstant case that there s no agreement n e st-
ence coverng the ta payer s abty for the year n queston. Tho
ta payer wthdrew or revoked hs orgna offer before t was sgned
by the Commssoner and approved by the Secretary of the Treas-
ury, or the Under Secretary.
C. M. Charest,
Genera Counse, weav, of Interna Revenue.
S CTION 608. CT O PIR TION O P RIOD
O LIMIT TION G INST T P Y R.
Secton 608. - M:912
I. T. 2558
R NU CT O 1928.
Secton 608(b)2 of the Revenue ct of 1928 appes to cams
re|ected after the enactment of the Revenue ct of 1928 ony.
greements to suspend the runnng of the statute of mtatons for
fng sut on any re|ected cam w not be entered nto by the
Commssoner of Interna Revenue unt appro matey one year
before the e praton of the statutory perod of mtaton for fng
sut.
I. T. 2489 (C. . III-2, 151) s revoked.
S CTION 611. COLL CTIONS ST Y D Y
CL IM IN T M NT.
Secton 611. I -4-4913
( so Secton 22(b), rtce 83.) Ct. D. 272
INCOM T R ND CT O 1928 D CISION O COURT.
1. Sut Coecton Lmtaton Cam fob batement.
Secton 611 of the Revenue ct of 1928 wthdraws the statute of
mtatons upon coecton as a ground for the recovery back of a
ta pad under the condtons theren stated. Coecton of a ta
has been stayed wthn the meanng of that secton where any de-
ay as resuted from the fng of a cam for abatement.
2. Income ssgnment of uture Income adty.
n assgnment of moneys to become due n the future s not
vad at aw and the attempted transfer havng been made wthout
a vauabe consderaton can not e aded by a court of equty
so as to become good n equty. The future ncome accordngy
s ta abe to the assgnor.
Dstrct Court op the Unted States for the Northern Dstrct of Oho,
astern Dvson.
ohn, . Parker, pantff, v. C. . Routsahn, Coector of Interna Revenue,
Ceveand, Oho, defendant.
October 28,1930.
opnon.
West, Dstrct udge: Whether the ta pad n November, 1928, more than
four years after coecton was barred by the statute, fas wthn secton 611,
Revenue ct 1928, s a queston about whch so much has been wrtten recenty
that t seems unnecessary to do more than state that the court hods that t
does. Ths vew seems to be requred by the weght of present authorty. See
Nor. m. Creamery Co. v. Wcuts (38 . (2d), 483), where the decsons are
coected.
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187
611.
There s one pont n whch ths case dffers from most of those, rnd I do not
fnd that t has been decded. Parker s cam n abatement was re|ected on
December 17, 1923, about three months before the statute barred coecton of
the ta . The fng and pendency of ths cam dd not operate to cause coec-
ton to be deayed unt after the bar of the statute had faen. Why the matter
dd not receve attenton durng the three months perod s not known It woud
seem that the ta ng authortes had ampe tme to act. condton to the
appcaton of secton 611 s that the coecton of the ta was stayed. Can the
court say that Congress ntended a stay or deay suffcenty ong to cause the
statute to run aganst the ta Consderng that the purpose of secton 611
was to prevent refunds where no overpayments had actuay been made, and the
opnon prevaent pror to owers v. New York bany Lghterage Co. (273
U. S., 346 T. D. 4009, C. . I-1, 268 ), that dstrant woud e n respect of a
barred cams, whether the statute had run because of a pendng cam n
abatement or because of neggence of the coector, I fnd no reason for thnk-
ng that the sprt or reason of ths aw e tends beyond ts etter but rather
the contrary. ( . 8. v. arenhot, 206 T S., 226, 229 . 8. v. reeman, 3 ow.,
556.)
Pantff s second contenton s that n 1906 Mr. Parker assgned hs nterest
n the funds of Nyc and hs renewa commssons thereafter accrung, and
that when coected they were not ta abe as hs ncome.
It Is not necessary to decde whether the assgnment of future ncome for a
vauabe consderaton eaves the assgnor sub|ect to the ncome ta , as the
Government cams. I thnk that Mr. Parker beng an agent for an nsurance
company and as such entted to receve a monthy bonus dependent upon hs
ength of servce and the amount of nsurance he had wrtten n prevous years,
out of a fund n the hands of hs company, and aso to renewa commssons,
vz, a percentage of renewa premums pad on poces whch he had secured,
had an nterest whch was assgnabe, even though hs rghts were contngent
and to be en|oyed n the future. e had much more than a mere possbty of
future gan. I thnk ths s true even of renewa commssons not earned
when the assgnment was made, ncudng those accrung wth respect to poces
wrtten afterwards. They grew out of hs agency contract, under whch he
acted n securng the busness and whch f ed the commssons. (In re Wrght,
157 ed., 644 (2 C. C. .) nevas v. auvet, 82 Me., 458 Wston on Con-
tracts, sec. 414 Rod|ket v. ndrews 74 O. S., 104 Unon Trust Co. v. ukeey,
150 ed., 510 (6 C. C. .).)
The assgnment, beng of moneys to become due n the future, was not good
at aw, but f effectve at a, operated as an equtabe assgnment. nd the
queston Is whether t can take effect as such or w be aded n equty.
The soe consderaton for the assgnment to Mr. Parker, as e pressed n the
document tsef, whch was evdenty prepared wth care, was natura ove and
affecton.
The genera rue s stated n Wston on Contracts, secton 217, that equty
w not specfcay enforce or otherwse ad the covenantee of a vountary
covenant, but w eave hm to hs remedy at aw, e cept n certan cases not
necessary to menton, asde from 1. gratutous decaraton of trust wthout
transmutaton of possesson and cases of e ecutory gft whch the courts
torture nto cases of contract n order to enforce the gft.
Ths sub|ect s treated at many paces n Storys q. urs.
the genera rue seems not estabshed that the court w not
e ecute a vountary contract, but w wthhod assstance from a vounteer,
whether he seeks to have the beneft of a contract, or a covenant or a sette-
ment. (Sec. 793b.)
The same rue s apped to mperfect gfts, not testamentary, nter
vvos, to mperfect vountary assgnments of debts and other property, etc.
and many ustratons are found n secton 793a. See aso secton 706. Story
says that the doctrne whch once prevaed, that equty woud recognze a
mertorous consderaton, where provson was sought to be made for wfe or
chdren, was ater dened and the rue cted from secton 793a frmy
estabshed.
To the same effect s 1 Pomeroy s q. urs., secton 383, where the rue s
apped to contracts under sea and mportng consderaton:
qnty, dsregardng such form and ookng at the reaty, aways requres
an actua consderaton, and permts the want of t to be shown, notwth-
standng the sea, and appes ths doctrne to covenants, settements, and
e ecutory agreements of every descrpton.
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611-1
188
nd see 3 Pomeroy s q. ur., seeton 1293 rokaw v. rokaw (41 N. . q.,
215).
The assgnment can not be supported on the theory of a gratutous decara-
ton of trust. It stands or fas as a transfer. ( anders an p, 45 O. S.,
108.) The court, at page 116, quote from the eadng ngsh ease of ntrobus
v. Smt (12 es. r., 39) :
There s no case n whch a party has been compeed to perfect a gft,
whch, n the mode of makng t, he has eft Imperfect. There s oetw
pcntcntw as ong as t s ncompete.
Mr. Parker, hs wfe, and the nsurance company recognzed ths assgnment.
Subsequent to ts e ecuton n 1906, accordng to the agreed statement of facts
made by the partes, the nsurance company pad Mrs. Parker the Nyc bonus
and renewa commssons thereafter determned to be due to ohn . Parker.
The payments for 1918 were not returned by hm but were returned by her
and ta ed aganst her. nd the addtona assessment arose from ths fact.
Dd the faure of Mr. Parker to revoke the mperfect transfer of hs future
ncome, and ts contnued recognton by a concerned, affect the stuaton
from an ncome ta standpont The stpuaton of the partes that the pay-
ments to the wfe were of moneys thereafter determned to be due to her
husband does not hep the pantff s case, to say the east, for f such moneys
were due to ohn . Parker, they were ta abe as hs ncome.
ut asde from the effect of ths stpuaton, I thnk the future payments
and earnngs of Mr. Parker contnued to be ta abe to hm, notwthstandng
they were pad to hs wfe. or f the attempted transfer was Imperfect and
coud not be aded by a court of equty so as to become good n equty, the
resut was that Mr. Parker coud have revoked t at any tme and demanded
payment from the nsurance company under hs contract. The fact that he
dd not e ercse hs power of revocaton but permtted the ncome to be pad
to hs wfe, does not affect the stuaton, for as to ta aton, t s the e stence
of the power and not ts e ercse whch contros.
In the recent case of Corss v. owers, decded pr 28, 1930 Ct. D. 188,
C. . I -1, 254 , Mr. ustce omes says:
The ncome that s sub|ect to a man s unfettered command and that he s
free to en|oy at hs own opton may be ta ed to hm as hs ncome, whether
he sees ft to en|oy t or not
Whe that case deat wth ncome from a fund paced n the hands of
trustees, and the consttutona rght to appy the provsons of secton 219(g)
of the Revenue ct of 1924, that where te grantor of a trust has power to
revest n hmsef tte to the corpus, the ncome sha be ta ed to hm, I see
no reason why the court s reasonng does not appy here. It s true that no
such statute s now reed on by the Government, nor s ths Income derved
from a trust fund. ut the stuaton s not dfferent n prncpe. Secton
210, Revenae ct 1918, mposed an ncome ta upon Mr. Parker s net ncome.
ecause hs attempted pror transfer was not based on a vauabe consderaton,
he retaned power to revoke t, as effectve f he had wshed to use t, as the
power of the grantor over the corpus of the trust fund, wth whch the Supreme
Court deat n the Corss case. The resut of the e stence of the power to
command the ncome, by changng or aboshng the trust In one case, and by
revokng the assgnment, or as caed n Wston, secton 440, the revocabe
agency n the other, s that such ncome s ta abe to the one possessed of
the power, whether he uses t or not.
In a case qute smar, Mtche v. ocers (15 . (2d), 287, 289 ( 2 C. C. .)
T. D. 3982, C. . I-1, 244 ), t s sad:
It seems to us enough that the pantff retaned the power to resume hs
tte to the profts when he chose.
Ths assgnment was e ecuted many years before the enactment of the
present system of ncome ta aws, and there was, of course, no thought of
defraudng the revenue n the mnd ether of Mr. Parker or hs wfe.
It s aso true that there was a ong perod between the bar of the statute
and the enactment of the Revenue ct of 1928 durng whch payment coud
not have been enforced. So that pantff naturay regards ths as a hard
case. ut f the concusons reached are correct, t was not ony permssbe
but the duty of the Government to proceed to coect ths defcency, for n
no other way can the w of Congress be e ecuted.
Pantff s petton w be dsmssed at her costs.
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189
611.
Secton 611. -9-4956
Ct. D. 285
ncome ta revenue act of 1928 decson of supreme court.
1. Sut Coecton Lmtaton adty of ssessment..
n amount of ta on ncome for the year 1916 not assessed
wthn the 3-year perod of mtaton prescrbed by secton 9 of
the Revenue ct of 1916 but assessed n 1921 before the enactment
of the Revenue ct of 1921 and wthn the 5-year perod prescrbed
by secton 250(d) of the Revenue ct of 1921 s vad under the
provsons of the atter subdvson and s assessed wthn the
perod of mtaton propery appcabe thereto, as requred by
secton 611 of the Revenue ct of 1928, whch wthdraws the statute
of mtatons upon coecton as a ground for the recovery of a ta
pad under the condtons theren stated.
2. Same Cam for batement adty.
cam for abatement of a ta fed n 1921 before the enact-
ment of the Revenue ct of 1921 s not ega under secton 250(d)
of that ct and there s no statutory prohbton of the fng of
the same. Nor Is a ta payer who obtans by the fng of a cam
n abatement a deay In the coecton of a ta n a poston to
contest ts egaty.
3. udgment ffrmed.
The |udgment of the Court of Cams (37 ed. (2d), 763)
affrmed.
Supreme Coubt of the Unted States.
Percva . Magee, pettoner, v. The Unted States.
On wrt of certorar to the Court of Cams.
anuary 26, 1931.
OPINION.
Mr. Chef ustce ughes devered the opnon of the court.
The pettoner fed hs ncome ta return for 1916 n ebruary, 1917. In
October, 1921, the Commssoner of Interna Revenue assessed an addtona ta .
and n November, 1921, the pettoner fed a cam n abatement. In 1924, the
Commssoner aowed the cam n abatement for a porton of the amount
camed and re|ected t as to the resdue, whch the pettoner then pad, upon the
coector s demand. In December, 1927, the pettoner fed a cam for refund,
whch was re|ected, whereupon ths sut was brought n the Court of Cams
n December, 1928, to recover the amount pad. The court dsmssed the acton,
appyng secton 611 of the Revenue ct of 1928 (ch. 852, 45 Stat., 791, 875)
(37 ed. (2d), 763). Ths court granted a wrt of certorar. (281 U. S., 713.)
The questons presented wth respect to the constructon and vadty of
secton 611 are the same as those consdered n Graham v. oodce, decded
ts fay. (282 U. S., 409 Ct D. 287, page 191, ths uetn .) The pettoner
contends, however, that ths secton does not appy to hs case, upon the ground
that the ta was not assessed wthn the 3-year perod of mtaton prescrbed
by secton 9(a) of the Revenue ct of 1916 (ch. 463, 39 Stat., 756, 763). The
Court of Cams hed that the assessment was vad under the provsons of
secton 250(d) of the ct of 1921 ( ct of November 23, 1921, ch. 136. 42 Stat.,
227, 26- ). We thnk the court was rght n construng ths statute as ap-
pcabe to the assessment, athough prevousy made, and hence that the ta
was assessed wthn the perod of mtaton propery appcabe thereto, as
requred by secton 611 of the Revenue ct of 1928.
The pettoner aso nssts that hs cam n abatement was ega under
secton 250(d) of the Revenue ct of 1921. We do not fnd that there was any
statutory prohbton of the fng of a cam n abatement n the crcumstances
here shown. The ta payer benefted by the cam and s not n a poston to
contest ts egaty. Compare Unted States v. The ohn arth Co. (279 U. S.,
370, 376 Ct. D. 65, C. . III-1, 189 ), orshem ros. Dry Goods Co.. Ltd., v.
Unted States (280 U. S., 453, 464 Ct. D. 167. C. . I -1. 260 ). The case
fas wthn secton 611 of the Revenue ct of 1928 and ths precudes recovery.
udgment affrmed.
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611.1
190
Secton 611. - -4957
Ct. D. 286
D R L T S R NU CT O 1928 D CISION O SUPR M COURT.
1. SUIT CoT CTION LIMIT TION CL IM OR T M NT P Y-
M NT Under ond Payment or Ta Guaranteed by Depost.
Where a bond n connecton wth n cam for abatement s gven
by a ta payer after the statutory perod for coecton, to secure-
payment of a ta assessed before une 2, 1924, wthn the perod of
mtaton propery appcabe thereto or where a ta payer, to ob-
tan tme for payment of a ta , assessed before une 2, 1924, wthn
the perod of mtaton propery appcabe thereto, whe con-
sderaton s gven to ts cam for abatement, makes a depost n
a bank after the e praton of the statutory perod for coecton
as a guarantee of payment of the ta n controversy, by vrtue of
whch the bank agrees to pay the amount of such ta upon fna
determnaton by the Commssoner, and subsequenty n the former
case the ta payer makes payment pursuant to the terms of the
bond and n the atter case the ta payer makes payment of the ta
and obtans a reease of the depost, secton O of the Revenue
ct of 1928 bars a recovery of the amount so pad pursuant to the
terms of the bond or the amount so pad pursuant to the guarantee.
Secton 1106(a) of the Revenue ct of 3926, whch was n effect at
the tme of the coecton, does not affect the operaton of secton
611.
2. udgment ffrmed and udgments Reversed.
The |udgment of the Court of Cams n Mascot O Co. v.
Unted States (42 ed. (2d), 309 Ct. D. 198, C. . I -2, 242 )
affrmed. The |udgment of the Court of Cams n The Unted
States v. Wyman, Partrdge f Co, (41 ed. (2d), 886) reversed.
The |udgment of the Crcut Court of ppeas for the Thrd Cr-
cut n D. . ener, Coector, v. re Coa d Coke Co. (42 ed.
(2d), 214) reversed.
Supreme Court of the Unted States.
400. Mascot O Co., Inc., pettoner, v. The Unted States.
On wrt of certorar to the Court of Cams.
416. The Unted States, pettoner, . Wyman, Partrdge Co., a Corporaton.
On wrt of certorar to the Court of Cams.
508. D. . ener, Coector of Interna Revenue for the Ttoenty-thrd Ds-
trct of Pennsyvana, pettoner v. re Coa Coke Co.
On wrt of certorar to the Unted States Crcut Court of ppeas for the Thrd Crcut.
anuary 26, 1931.
OPINION.
Mr. Chef ustce ughes devered the opnon of the court.
These actons were brought to recover the amount of ta es aeged to have
been egay coected after the e praton of the statutory perod of mta-
ton. The Government ressts recovery under secton 611 of the Revenue
ct of 1928 (ch. 852, 45 Stat., 791, 875). In No. 400, Mascot O Co., Inc., v.
The Unted States, the Government was successfu. (42 ed. (2d), 309.)
In No. 416, The Unted States v. Wyman, Partrdge Co. (41 ed. (2d),
880), and n No. 508, 7). . ener, Coector of Interna Revenue, etc, v.
re Coa Coke Co. (42 ed. (2d), 214), the decsons beow were n favor
of the pantffs. Ths court granted wrts of certorar. (282 U. S., 832.)
In No. 400, Mascot O Co., Inc., v. The Unted States, the ta payer had
made a depost n escrow wth a bank to cover the amount of the ta , but,
when the coector demanded payment, t was made by the ta payer under
protest and not from the depost In No. 508, D. . ener, Coector of
Interna Revenue, etc., v. rc Coa Coke Co.. a bond had been gven to
secure payment of the ta . The makng of the depost n the former case
and the gvng of the bond n the atter, were after the statute of mtatons
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191
611.
had run, but the pettoner n each case nssts that the statute had not thereby
been waved.
We may ay that queston asde, for f there was no waver these two cases,
together wth No. 416, The Unted States v. Wyman, Partrdge d Co., nvove
the same crcumstances as those decded ths day n Graham v. Goodce (282
U. S., 409 Ct. P. 287, beow ), save that coectons were made whe
secton 1106(a) of the Revenue ct of 1926 (eh. 27, 44 Stat., 9, 113) was n
force. That secton was repeaed, as of the date of ts passage, by secton 612
of the Revenue ct of 1928. (45 Stat., 875.) It s not necessary to attempt
to resove the questons rased by the ambguous anguage of ths secton, as
we are of the opnon that, from any pont of vew, t does not protect the pet-
toners from the operaton of secton 611 of the Revenue ct of 1928. t the
tme the ta es were coected, there was no abty on the part of the
twttoners, but ths was aso true n the case of the pettoners n Graham v.
Goodce, supra. The Congress had consttutona authorty n the crcum-
stances set forth n secton 611 of the Revenue ct of 1928 to cure the defect
n admnstraton whch had resuted n the coecton of the ta after the
statute of mtatons had run and to deny recovery to the ta payers for the
amount pad. The fact that secton 1106(a) of the Revenue ct of 1926 was
n effect at the tme of the coecton s a dstncton whch does not affect
the resut.
No. 400. Mascot O Co., Inc., v. The Unted States, |udgment affrmed.
No. 416, The Unted States v. Wtman, Partrdge d Co., |udgment reversed.
No. 508, D. . etner, Coector of Interna Revenue, etc, v. re Coa Coke
Co., |udgment reversed.
Secton 611. -9-4958
Ct. D. 287
INCOM T R NU CT OP 1928 D CISION O SUPR M COURT.
1. Sut ( oectton Lmtaton Cam for batement Credt
or Overpayment Consttutonaty Repea.
Secton 611 of the Revenue ct of 1928 wthdraws the statute of
mtatons upon coecton as a ground for the recovery of a ta
pad under the condtons theren stated, even though the ta was
pad nvountary, even though sut was commenced before that
ct was passed, whether the cam n abatement fed was re|ected
before or after the e praton of the statutory perod of mtaton
for coecton and whether sut s brought aganst a coector
ndvduay or aganst the Unted States. The secton operates
retroactvey and s not mted to those cases where cam for
refund shoud be fed after ts enactment. It refers not ony to
admnstratve proceedngs but governs aso where the rght to
refund s asserted n |udca proceedngs. The word stay Is
not mted to a mandatory stay but coecton of a ta has been
stayed wthn the meanng of that secton where actua vountary
deay has resuted from the fng of a cam for abatement.
credt of an overpayment s a payment wthn the meanng
of the secton. s so construed the secton s consttutona.
Secton 611 was not repeaed on the same day that t was
enacted by secton 3 of the ct of May 29, 1928 (chapter 901, 45
Stat., 986, 996).
2. udgments ffrmed.
The |udgments of the Crcut Courts of ppeas n Graham and
oster v. Goodce (35 ed. (2d), 586) Dane Itecvcs, Inc., v.
nderson (43 ed. (2d), 679 Ct. D. 231, C. . I -2, 160 ) Laura
. ennngs, as ecutr , v. nderson (43 ed. (2d), 083) and
Wrght d Tayor, Inc., v. Lucas (45 ed. (2d), 75) the |udgment
of the Dstrct Court n astern qutes Corporaton v. Unted
States (42 ed. (2d), 235) and the |udgments of the Court of
Cams n Oak Worsted Ms v. Unted States (38 ed. (2d),
699 Ct. D. 176, C. . I -1. 343 ) Taft Wooen Co. v. Unted
States (38 ed. (2d), 704) Second Natona ank of Saanaw.
Trustee, v. Unted States (40 ed. (2d). 129) and oston Pressed
Meta Co. v. Unted States (42 ed. (2d). 312 Ct. D. 200, C. .
I -2, 156 ) affrmed.
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611. 192
Supremb Coubt of the Unted States.
R. . Graham and . . oster, Copartner dong busness under the frm name
of Me rancs O Co., pettoners, v. Re . Ooodee, former OoTector
of Interna Revenue, etc.
On wrt of certorar to the Unted States Crcut Court of ppeas for the Nnth Crcut.
Oak Worsted Ms, pettoner, v. The Unted States.
On wrt of certorar to the Court of Cams.
Taf Wooen Co., pettoner, v. The Unted States.
On wrt of certorar to the Court of Cams.
Second Natona ank of Sagnaw, Trustee, pettoner, v. The Unted States.
On wrt of certorar to the Court of Cams.
oston Pressed Meta Co., pettoner, v. The Unted States.
On wrt of certorar to the Court of Cams.
Dane Reeves, Inc., pettoner, v. Chares W. nderson, Indvduay and as
Coector of Interna Revenue, etc.
On wrt of certorar to the Unted States Crcut Court of ppeas for the Second Crcut.
Laura . ennngs, as ecutr , etc., pettoner, v. Chares W. nderson,
Indvduay and as Coector of Interna Revenue, etc.
On wrt of certorar to the Unted States Crcut Court of ppeas for the Second Crcut.
Wrght Tayor, Inc., pettoners, v. Robert . Lucas, Coector of Interna
Revenue, etc.
On wrt of certorar to the Unted States Crcut Court of ppeas for the S th Crcut.
astern qutes Corporaton, pettoner, v. The Unted States.
On wrt of certorar to the Unted States Crcut Court of ppeas for the rst Crcut
anuary 26, 1931.
OPINION.
Mr. Chef ustce tches devered the opnon of the court.
These cases nvove the queston of the effect and vadty of secton 611.
wch s to be read n connecton wth secton 607, of the Revenue ct of 192s
(oh. 852, 45 Stat., 791, 874, 875).
No. 36, Graham et a. v. Ooodee, s typca of ths group of cases. On
March 22. 1918, pettoners ted ther partnershp ncome and e cess-profts
ta returns for the year 1917 and pad the ta es thereby shown to be due.
ddtona ta es were assessed by the Commssoner of Interna Revenue n
anuary, 1920. The pettoners fed a cam for the abatement of ths assess-
ment on ebruary 11, 1920, and the Commssoner re|ected the cam on De-
cember 27, 1922. Under secton 250(d) of the Revenue ct of 1921 (ch. 136.
1 These sectons are as foows :
Sec. 607. ffect of e praton of perod of mtaton aganst Unted State . ny ta
(or any Interest, penaty, addtona anrount, or addton to such ta ) assessed or pad
(whether before or after the enactment of ths ct) after the e praton of the perod of
mtaton propery appcabe thereto sha be consdered an overpayment and sha be
credted or refunded to the ta payer f cam therefor s fed wthn the perod of mta-
ton for tng such cam.
Seo. 611. Coectons stayed by cam n abatement. If any nterna revenue ta (or
any nterest, penaty, addtona amount, or addton to such ta ) was, wthn the perod
of mtaton propery appcabe thereto, assessed pror to une 2, 1924. and f a cam
n abatement was fed, wth or wthout bond, and If the coecton of any part thereof
was stayed, then the payment of such part (made before or wthn one year after the
enactment of ths ct) ha not be consdered as an overpayment under the provsons of
secton 607, reatng to payments made after the e praton of the perod of mtaton on
assessment and coecton.
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193
6U.
42 Stat, 227, 265), the 5-year perod for the coecton of the ta es for 1917
e pred on March 22, 1923. The coector served notce and demand for pay-
ment on November 19, 1924, threatenng dstrant, and on November 29. 1924,
and December 3, 1924, the pettoners pad the addtona ta es under protest.
On September 25, 1925, they fed a cam for refund upon the ground that the
ta es were coected after the statute of mtatons had run. The cam was
re|ected by the Commssoner on anuary 13, 1926, and ths sut to recover
the money pad was brought on December 23, 1927. n the Dstrct Court of the
Unted States for the Southern Dstrct of Caforna. The |udgment entered
n favor of the pettoners by the dstrct court was reversed by the Crcut
Court of ppeas for the Nnth Crcut (35 ed. (2d), 586). Ths court granted
a wrt of certorar. (281 U. S.. 708.)
There are varatons n the other cases, but the determnng features are the
-.ne. cam n abatement was fed and coecton was deayed the coec-
ton was made after the statute of mtatons had run, and before the enactment,
of the ct of 1928. In some of the cases, the sut to recover the amount pad
was brought after, and n other cases before, the ct of 1928 became a aw on
May 29, 1928. The suts were ether n the Court of Cams aganst the Unted
States, or n the Dstrct Courts of the Unted States aganst the coector,
ether ndvduay or offcay, or n both capactes. In a these cases the
decsons beow were n favor of the Government and wrts of certorar were
ssued by ths court.3 The contentons presented are, n substance, that sectons
607 and 611 of the Revenue ct of 1928 do not appy retroactvey that ther
provsons are not appcabe to payments made under duress that the stay
contempated by secton 611 s not a mere vountary deay n coectng the ta
that these sectons were ntended to contro admnstratve acton ony and not
to affect |udca proceedngs that secton 611 shoud not be construed to appy
to a persona acton aganst the coector to recover ta es egay coected:
that secton 611 was-repeaed by the ct of May 29, 1928 (ch. 901, secton 3,
45 Stat., 986. 996) that secton 250(d) of the Revenue ct of 1921 e tngushed
the abty for ta es upon the e praton of the 5-year perod specfed that
the Congress havng e tngushed the abty had no power under the ffth
amendment of the Consttuton to revve t and that, f secton 611 s construed
to authorze the coecton of the ta n the crcumstances shown, t further
voates the ffth amendment because the statute s unreasonabe and arbtrary.
rst. s to the constructon of the statute: Secton 607 provdes that a ta
assessed or pad after the e praton of the perod of mtaton appcabe
thereto sha be consdered an overpayment and sha be credted or refunded
to the ta payer, f cam therefor s duy fed. Secton 611 enacts a quafca-
ton by provdng that n stated crcumstances the payment of the ta sha
not be consdered an overpayment under the provsons of secton 607. These
crcumstances are (a) an assessment of the ta wthn the tme appcabe
thereto and before une 2, 1924, (b) the fng of a cam n abatement, (c) the
stay of the coecton of any part of the ta , and (d) the payment of such part
of the ta before, or wthn one year after, the enactment of the ct of 1928.
The occason for ths egsaton, and the genera purpose of the Congress
n enactng t, are apparent. The Revenue ct of 1918, by secton 250(d) (ch.
18, 40 Stat., 1057, 1083), provded that no sut or proceedng for the co-
ecton of ta es shoud be begem after the e praton of fve years after the
date when the return was due or was made. Ths provson apped ony to
ta es assessed under that ct. Secton 250(d) of the Revenue ct of 1921
(ch. 136. 42 Stat., 227. 265) prescrbed the same perod of mtaton for co-
ecton by sut or proceedng, and the provson was made appcabe to the
Court of Cams: No. 104. Oak Worsted Ms v. Unted States (36 ed. (2d). 529: 38
ed. (2d), 699 (Ct. D. 151, C. . I -1, 326 ) No. 105, Ta/t Wooen Co. v. Unted States
(38 ed. (2d), 704) No. 323, Second Natona ank of Sagnaw v. Unted States (40
ed. (2d), 129) No. 337. oston Pressed Meta Co. v. Unted States (42 ed. (2d), 312
Ct. D. 200, C. . I -2. 1561).
Crcut Court of ppeas for the Second Crcut: No. 46. , Reeves v. nderson (43 ed.
(2d). 679 (Ct. D. 231, C. . I -2, 160 ) dstrct court, tub now. Rega Coa Co. v.
totcers (37 ed. (2d). 373 Ct. D. 133, C. . III-2, 162 ) Mo. 529, emmas v. nderson
(43 ed. (2d), 683).
Crcut Court of ppeas for the S th Crcut: No. 565. Wrnht d Tavor. Inc., v. Lucas
mot yet reported, D. C. : ed. (2d). 328 Ct. D. 106, C. . II 2, 153 ).
n No. 519, astern qutes Corporaton v. Unted States, there had beeu no hearng In
the Crcut Court of ppeas for the rst Crcut when the wrt of certorar was granted,
Md the opnon of the dstrct court s not yet reported.
281 U. 8.. 717 282 U. S., 824, 825, 832, 833. 834.
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611.1.
194
coecton of ta es both under that ct and under pror ncome, e cess-profts, or
war-profts ta cts, the fve years runnng from the date of the fng of
the return. The Treasury Department rued that ths mtaton apped ony
to |udca proceedngs and not to coecton by dstrant, the common method
of enforcng payment. Secton 1106(a) of the Revenue ct of 1926 (ch. 27, 44
Stat., 9, 113) provded that the statute of mtatons shoud not ony operate
to bar the remedy but shoud e tngush the abty, but that no credt
or refund n respect of such ta shoud be aowed uness the ta payer had
overpad the ta . In owers v. . eto York bany ghterage Co. (273
U. S., 346 (decded ebruary 21, 1927) T. D. 4009, C. . I-1, 268 ) ths
court hed that the perod of mtaton f ed by secton 250(d) of the Revenue
ct of 1921 dd appy to coecton by dstrant proceedngs. It thus appeared
that many of the coectons theretofore made had been barred by the statute,
and suts were brought to recover the moneys pad. In many cases cams
n abatement had been fed and proceedngs for coecton had been deayed
unt the cams had been acted upon, and thereupon the ta es had been co-
ected despte the fact that the statute of mtatons had run. Large amounts
had been pad nto the Treasury n ths way, and t was the purpose of the
Congress that payments made n the crcumstances descrbed n secton 611
of the Revenue ct of 1928 shoud not be refunded
The pettoners urge that secton 611, read In ts reaton to secton 607, was
Intended to appy ony prospectvey, that s, to acton to be taken by the
Treasury Department on refund cams fed after the enactment of the ct.
Stress s ad upon the anguage of secton 607 that a payment made after the
e praton of the perod of mtaton sha be consdered an overpayment
and sha be credted or refunded f cam therefor s fed. ut secton
611 was manfesty ntended to operate retroactvey accordng to ts terms.
That s, t e pressy apped to nterna revenue ta es whch had been assessed
pror to une 2, 1924, and wthn the perod of mtaton appcabe to the
assessment. The secton apped to ta es, so assessed, whch had been pad
before the enactment of the ct of 1928, as we as to those whch woud be
pad wthn one year thereafter. The provson was appcabe to such pay-
ments athough the perod of mtaton on assessment and coecton had
e pred when the payments were made and the provson of secton 611 reated
to such payments ony when a cam n abatement had been fed and coecton
had been stayed. The words of secton 607 dd appy to future acton as to
credts and refunds by requrng recognton of the rght of the ta payer, as
stated n the secton, to have a return of the moneys pad, but that rght, under
41. T. 1446 (C. . 1-2, uy-December, 1922, pace 218). See Statute v. Unted States,
decded anuary 5, 1031 (282 U. S., 270 Ct. D. 274, page 414, ths uetn 1).
See To acay s v. Unted States (61 C. Cs., 363, reversed on confesson of error
March 12, 1927, 273 U. S., 781 IT. I). 3805, C. . -, 322 ).
Secton O as It appeared n the b ntroduced n the ouse of Representatves pro-
vded not ony for the retenton of the moneys pad, but aso that, n smar crcumstances,
amounts not yet p,d mght be coected wthn a year after the new enactment. The
Commttee on Ways and Means n ts report on the b stated:
Secton 611: Coectons n cases n whch cams n abatement were fed. Pror to the
enactment of the Revenue ct of 1924 t was the admnstratve practce to arses Imme-
datey addtona ta es determned to be due. Upon the assessment, ta payers were fre-
quenty permtted to e cams n abatement wth the coector and thus deay the coec-
ton unt the catnr n abatement coud be acted upon. If ths practce had not been
foowed, undue hardshp undoubtedy woud have been mposed upon the ta payer. It
was supposed that there was no mtaton upon the coecton by dstrant of the amount
utmatey determned to be due. owever, the Supreme Court has recenty hed n a
cuse n whch the perod for assessment e pred pror to the enactment of the 1924 ct,
that the perod for coecton was mted to fve years from the date on whch the return
was fed. Decsons upon cams n abatement are beng made every day. mounts have
been pad, are beng pad, by the. ta payer even though the statute of mtatons may
have run. ceptonay arge amounts are nvoved. ccordngy, t s of utmost m-
portance to provde that the payments aready made shoud not be refunded. In order
to prevent nequaty, t s aso provded that the amounts not |et pad may be coected
wthn a year after the enactment of the new ct. Your commttee apprecates the fact
tat ths provson w probaby be sub|ected to severe crtcsm by some of the ta payers
affected. owever, t must be borne n mnd that the provson authorzes the retenton
and coecton ony of amounts propery due and merey wthdraws the defense of the
statute of mtatons. If t s determned that the amount pad s n e cess of the proper
ta abty, computed wthout regard to the statute of mtatons, such e cess w con-
sttute an overpayment whch may be refunded or credted as n the case of any other
overpayment. (Seventeth Congress, frst sesson, . R. Rep. No. 2, page 34.)
The nance Commttee of the Senate opposed the provson of secton 611 (Seventeth
Congress, frst sesson, S. Itep. 960, page 42). In conference, an arvndment was adopted
(Seventeth Congress, frst sesson. II. R. Rep. No. 1882, pages 6. 7, 22, 23), wth the
resut that secton 611 was enacted n ts present form that s, wth the provson
emnated as to the coecton of amounts not yet pad.
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195
611.
secton 611, was not to e st when the payments had been made n the crcum-
stances there descrbed. It was the crcumstances n whch the ta had been
pad, and not the tme of fng the cam for a refund of the money, that
secton 611 made determnatve and t woud be Inconsstent wth the
pan ntendment of that secton to say that ta payers shoud be dened a
refund n those crcumstances ony where ther cams for refund were made
after the enactment, but not f they had been made before. The words of
secton 607, f a cam for refund s fed wthn the perod of mtaton for
fng such cam, estabshed the approprate condton that a cam for refund
shoud be duy fed, but do not requre the constructon that the scheme of the
statute, whch embraced the Important prohbton of secton 611, shoud be
mted to those cases where cams for refund shoud be fed after the statute
was enacted.
We are aso of the opnon that the statute embraces nvountary payments.
The argument of the pettoners ponts to the provson of secton 611 whch
made t appcabe not ony to payments before the enactment but to those wthn
one year thereafter. It s sad that the atter must be vountary payments, and
that the Treasury Department so construed the statute, as the statute dd not
purport to authorze coectons after the perod of mtaton had e pred.
ut the statute aso apped to payments whch had been made n the past.
The concern of the Congress ay wth the fact that payments had been made
after the statute of mtatons had run and wth the partcuar stuaton of
ta payers where cams n abatement had been fed and the coecton stayed.
Secton 611 was to prevent refundng the money f coecton had thus been
postponed. That stuaton e sted where, after the e praton of the perod of
mtaton, payment had been compeed, and the statute made no e cepton of
such payments. The practce of coectng ta es by dstrant, and the mstaken
vew of the aw that the statute of mtatons had not barred coecton n
that manner, had e posed the Treasury to demands whch t was the ntenton
of the egsaton to defeat.
Pettoners contend that the stay to whch secton 611 referred was not smpy
a vountary deay n enforcng payment. Stay Is sad to be a term of art,
wth a meanng opposed to a mere vountary postponement of acton. There
woud be much force n the pont, f the word coud be taken out of ts par-
tcuar settng. stay compeed, rather than vountary granted, woud be
ether under a |udca order or by vrtue of statutory compuson. Secton
3224 of the Revsed Statutes (U. S. C, Tte 26, secton 154) provdes that
no sut for the purpose of restranng the assessment or coecton of any ta
sha be mantaned n any court. (See Graham v. du Pont, 262 U. S., 234. 2r 4,
255 Ct D. 33, G. . II-, 226 .) Statutory provsons for stay of coecton
were mted n appcaton. (See Revenue ct of 1918, secton 214(a) 12(a)
secton 234(a) 14(a). Unted States v. arth, 279 U. S., 370 Ct. D. 65, C. .
III-1, 189 .)s There was no mandatory stay, that s, n the absence of agree-
ment, wthout bond. ut secton 611 e pressy apped where a cam n abate-
ment was fed wth or wthout bond. The word stay can not therefore be
taken to be mted to a mandatory stay. It s sad, however, that the words
wthout bond were nserted In order to Incude those cases where there was
a contractua stay, as In cases where the Government had been protected by a
depost of money n escrow, or by a depost n bank as a guarantee of payment,
or by other forms of bndng agreements, where bonds were not fed. Such
cases were e ceptona, and to confne the statute to such nstances woud
be to mt t so narrowy as to gnore ts apparent purpose. In the case of a
ta payer, beeved to be sovent, who had fed a cam n abatement, the post-
ponement of coecton woud normay take pace wthout agreement. It s
urged that f the statute s apped to vountary deays, the cause as to stay s
surpusage. If so, such a constructon woud be preferabe to one that woud
make the statute vrtuay noperatve. ut the cause s not Inapproprate,
as t s descrptve of the stuaton whch foowed the fng of the cam n
abatement. It s true that the statutes and reguatons reatng to the fng
of such cams dd not requre that there must be a postponement of coecton
pendng decson. The coector was st put to hs duty of due dgence, but
e had authorty to postpone the coecton pendng the determnaton of the
T Mmeograph 33 O, uy 27, 1928 (O. It. II-2, pages 82. 85).
sSee aso ct of October 3. 1917 (oh. 63, tacton 205(h). 40 Stnt.. 305) Revenue ct
of f)24 (ch. 234, secton 279(a). 43 Stat., 300) Revenue ct of 1920 (cu. 27. secton
279(f). 44 Stat., 60 Revenue ct of 1928 (ch. 852. secton 273(f), (g), (u), 45 Stat.,
836),
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611.
196
cam, uness e beeved that such acton woud |eopardze the utmate
recovery. Such postponement, on the assumpton that the statute or regua-
tons dd not bar proceedngs for coecton by dstrant, created the stua-
ton to whch secton 611 was drected. The vew that the word stay was
ntended to embrace ths vountary deay s supported by the statements n
the reports of the commttees n the ouse of Representatves and the Senate.1
In most of the cases now under revew, t appears that the cam n abate-
ment was re|ected after the e praton of the perod of mtaton for coecton.
In No. 36, Graham v. Ooodcc, however, the cam n abatement was re|ected
n December, 1922, and the perod of mtaton dd not e pre unt March,
1923. It s urged, that, for ths reason, that case fas outsde the purvew
of secton 611. The statute makes no such e cepton, and we are not war-
ranted n mpyng one. The cam n abatement had been fed and was pend-
ng for neary three years. There s room for the nference that had t not
been for ths deay, the ta woud have been coected before the statute
ran. The ta was coected ater and the statute, by ts terms, s appcabe.
It s further nssted on behaf of the pettoners that sectons 607 and 611
reate soey to admnstratve acton and not to |udca proceedngs. In
support of ths argument, an eaborate anayss of the Revenue cts s pre-
sented n order to estabsh the meanng of the statutory words credt and
refund and overpaymentand the aptness of ther reference to admns-
tratve proceedngs. It s not necessary to revew ths anayss, for there
can be no doubt that these words do have approprate reference to acton
n the course of admnstraton. ut t does not foow that by the use of
these words the statute s mted to such acton. There s no bass for the
suggeston that there were questons nvoved of such a character as to make
t approprate to submt them to the e cusve |udgment of the Comms-
soner. The queston was not as to the merts of the ta but smpy as to
the e stence of certan facts of tme and procedure. These facts were matters
of record, easy ascertaned and defnte n character. It woud be anomaous
that the rght of the ta payer to obtan a refund from the Department, to
whch he was under obgaton to resort (R. S. 3226, U. S. C, Tte 26, secton
156), shoud be dened, whe the rght to recover by sut the same amount
under e acty the same crcumstances shoud reman unaffected. In the at-
tempt to e pan ths anomay, t s sad that the provson was nserted
because of a dstrust of admnstratve refunds. ut secton 611 contans
no e cepton as to |udca proceedngs, and ts prohbton Is one whch can
be enforced appropratey by the courts when the ta payer demands reef
by sut. We are brought back to the fundamenta purpose of the statute,
and we are unabe to concude that t estabshed one rue for the Department
and another for the courts. We thnk that t was ntended to prevent refunds
n the crcumstances stated and not merey a partcuar way of gettng the
money from the Treasury that the effect of the provson was to deny a
rght to recover the amount pad and that the provson governs equay
wherever the rght s asserted.
In ths vew, t s not matera whether the sut was brought by the ta payer
before or after secton 611 was enacted. The vadty of the statute wth respect
to ts effect upon e stng causes of acton s a dstnct queston. So far as the
constructon of the statute s concerned, t s apparent that the mere pendency
of the sut was not made a crteron of the rght to recover. Nor s there any
warrant for makng a dstncton n ths respect between suts whch had been
brought aganst the coector ndvduay and those pendng aganst the Unted
States.
There s aso a contenton that secton 611 does not appy when the ta was
pad by the credt of the amount of an overpayment for another ta abe year.
ut the appcaton of a credt aganst an assessment at a tme when coecton
was barred must be regarded as an erroneous coecton, and we see no reason
for takng such a case out of the statute.
Second. s to the queston of repea: It s nssted that secton 611 was
repeaed on the same day that t was enacted. Ths effect s ascrbed to secton
R. S. ecton 3220: Treasury Department Reguatons No. 14, revsed, page 14 Regu-
atons No. 33, artce 201 Reguatons No. 45, artce 1032 Reguatons No. 62, artce
1032 : Reguatons No. 65. artce 1281.
10 See note 6. supra.
compare ung Yue Tng v. Unted ttates (149 . S.. 698, 714, 715) Unted States v.
naheuek (250 . S., 328, 331) parte akettc Corporaton (279 U. S., 438, 452).
See Revenue ct of 1928, secton 710 (45 Stat., 882).
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611.
3 of the ct of May 29,1928 (ch. 901, 45 Stat., 986, 996). That secton amended
secton 3220 of the Revsed Statutes, whch contaned provsons as to the
refundng of ta es erroneousy or egay coected. Secton 3220 has been
amended by secton 1111 of the Revenue ct of 1926 (43 Stat., 115) so as to
e cept the cases provded for n sectons 284 and 319 of the atter ct, whch
paced mtatons on credts and refunds. Secton 619(b) of the Revenue ct
of 1928 ( 45 Stat., 878) amended secton 3220 by strkng out ths e cepton and
nsertng n eu thereof e cept as otherwse provded by aw n the case of
ncome, war-profts, e cess-profts, estate and gft ta es. The amendment
made by secton 3 of chapter 901 of the ct of May 29, 1928 (45 Stat., 996),
omtted ths e cepton, and hence, t s contended, repeaed secton 611 of the
Revenue ct of 1928. The Revenue ct was approved May 29, 1928, 8 a. m.
(45 Stat., 883). The hour of the approva of chapter 901 of the same date does
not appear. Secton 3 of the atter ct does not e pressy repea secton 611
of the Revenue ct of 1928, and the queston s whether there s repea by
mpcaton. The famar prncpe that repea w not be mped uness
there s a postve repugnancy between the provsons of the new aw and those
of the od, has most approprate appcaton, as stated by Mr. ustce Story,
to the nterpretaton of aws for the coecton of revenue (Wood v. Unted
States, 16 Pet., 342, 363), and the presumpton aganst such an ntenton to
repea s strongest when the two acts are passed not ony at the same sesson
but on the same day. ( eats v. ae, 4 ow., 37, 53 Rodgers v. Unted States,
185 U. S., 83, 89.) In the present nstance, there s no rreconcabe confct
between the two provsons. Secton 611 estabshed a speca rue for a
partcuar stuaton In order to embody a pocy deberatey adopted by the
Congress, and there s no ground for concudng that contemporaneousy wth
that enactment the pocy was abandoned and the enactment repeaed-
(Rodgers v. Unted States, supra Washngton v. Mer, 235 U. S., 422, 428.)
Thrd. s to the vaMty of secton 611: Ths s not a case of an attempt
retroactvey to create a abty n reaton to a transacton as to whch no
abty had prevousy attached. There s no queston here as to the org-
na abty of the ta payers. The ta was a vad one, and the fact that
the ta payers had been ndebted to the Government for the amount whch was
subsequenty coected s not now open to dspute. Deay n coecton had
foowed upon the ta payers request for consderaton of ther cam that the
ta shoud be abated, and, n the mstaken beef on the part of the admns-
tratve authortes that the statute of mtatons dd not bar coecton by
the approprate proceedng of dstrant, the deay had been contnued unt
after the statute had run. On the dscovery of the mstake, as ponted out
by the decson of ths court, the Congress sought to prevent a refund of the
amount thus coected. The queston s whether these crcumstances remove
the case from the operaton of the genera rue that t s not consstent wth
due process to take away from a prvate party a rght to recover the amount
that s due when the ct s passed. (Steamshp Company v. offe, 2 Wa.,
450, 457, 458 ttor v. Tacoma, 228 U. S., 148, 156 orbes oat Une v. oard
of Commssoners, 258 U. S., 338, 340.)
Ths rue s we ustrated by the case of orbes oat Lne v. oard of
Commssoners, supra, where the sut was brought to recover tos unawfuy
coected for passage through the ock of a State cana. The passage was free
under the aw as t stood at the tme, and the subsequent egsaton of the
State whch attempted to vadate the ega coecton was hed to be n voa-
ton of the fourteenth amendment. The court sad that the egsature n
1919 coud not compe pantff to pay for a passage made n 1917 wthout
promse of reward any more effectvey than t coud have made a man pay
See aso mth v. The Peope (47 N. T., 330, 339) : Cty of rmngham v. Southern
press Co. (184 a., 529, 538) Mc arand v. The ank (4 rk.. 410. 417) Thomp-
on v. oard of Supervsors (111 Ca.. 553. 550) ope v. The Mayor (72 Oa 246. 251)
utchnson v. Sef (153 111., 542, 549. 550) : State v. oard of Commssoners (177 Ind.,
595, 691) ckerson v. Ctv of Ues Mones (137 Iowa. 452. 489) Mayor v. German-
mercan re Insurance Co. (132 Md., 380, 385) Commonweath v. untey (156 Mass.,
236. 239) : tate v. rchbad (43 Mnn., 328. 330, 331) Wasrr v. ordan (124 N. C.
OSS. 087, 688) Commonweath v. Cty of Pnttsrr (240 Pa.. 4GS) : Toen Schoo Dntrct
v. choo Dstrct No. 2 (72 t.. 451. 454. 455
See Mchos . Coodge (274 U. S.. 531 T. D. 4072. C. . I-2. 351 ) odgett v.
Ioden (278 . 8., 142 (T. D. 4117. C. . II-1, 324 I ntermycr v. nderson (276 U. 8.,
440 (T. I) 4167, C. . II-1. 326 ) : Cooper v. Unted State (280 I . S.. 409. 412 Ct. D.
103, C. . I -1, 272 ). Compare Stockdae v. Insurance Companes C- O Wa., 323. 331)
Wagner v. atmore (239 C. S., 207, 210. 217) orbes oat Lne v. oard of Conmts-
fhners (258 U. 8., 338, 339).
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611.
198
a baker for a gratutous depost of ros. ut whe the egsature coud
not n such a case retroactvey create a abty, the court recognzed that
there s a cass of cases n whch defects In the admnstraton of the aw
may be cured by subsequent egsaton wthout encroachng upon consttu-
tona rght, athough e stng causes of acton may thus be defeated.
In Unted States v. enszen rf Co. (206 U. S., 370), t appeared that after
the Phppne Isands had come under the mtary contro of the Unted States,
the Presdent had ssued an order estabshng a system of tarff dutes whch
were eved on goods comng nto the sands whether from the Unted States
or other countres. The tarff was n force when the treaty of peace was ratfed
and was subsequenty contnued, wth modfcatons. The Presdent, as Com-
mander-n-Chef, had authorty to Impose tarff dutes pror to the ratfcaton
of the treaty, but not thereafter. ccordngy, those who had been compeed
to pay such dutes after the ratfcaton, and before the Congress estabshed
the tarff, were entted to recover the amounts pad.1 Subsequenty, the Con-
gress passed an ct purportng to ratfy and confrm the coecton of such
dutes. Ths court uphed the statute, as aganst the cam under the ffth
amendment, statng that the contenton gnored the fact that when the goods
were brought nto the Phppne Isands, there was a tarff n e stence
under whch dutes were e acted n the name of the Unted States, and that
Congress had power to ratfy the coecton. Wth respect to the effect of the
ct of Congress upon e stng causes of acton, the court observed (d., page
387) that the mere commencement of the sut dd not change the nature of
the rght or operate to deprve the Government of the power to enact curatve
statutes, whch, f the actons had not been brought, woud have been unques-
tonaby vad.
nother ustraton s found n Taco v. orbes (228 U. S.. 549). Suts had
been brought to make the Governor Genera of the Phppne Isands personay
answerabe n damages for the deportaton of a Chnese person resdent n the
Phppnes, and after the brngng of the sut the Phppne Legsature had
passed an act purportng to ratfy the Governor Genera s acton. Referrng
to the doubt that naturay woud occur whether, f a rght of acton had vested
prevousy, t coud be taken away by such a statute, the court sad that t
generay s recognzed that n cases ke the present, where the act orgnay
purports to be done n the name and by the authorty of the state, a defect
n that authorty may be cured by a subsequent adopton of the act.
The doctrne of the enszen case, supra, was eft unquestoned n MacLeod v.
Unted States (229 U. S., 416, 434, 435 (where the appcaton of the ct of
Congress wth respect to Phppne dutes was mted so as to carry out ts
true ntent)) and was defntey apped n the case of Rafferty v. Smth, eU
f Co., Ltd. (257 U. S.. 226, 232). Ta es on the vaue of e ports from the
Phppne Isands had been coected under a Phppne act whe dutes on such
e ports were forbdden by an ct of Congress. The ta payers had recovered
|udgments for resttuton n March, 192(1. The Congress, by ct of une 5,
1920 (ch. 253, 41 Stat., 1015, 1025), confrmed the coectons. The court hed
that the enactment was wthn the power of Congress, and the fact that the
ta payers had recovered udgments for the amounts coected gave them no
hgher rghts than those possessed by the ta payers n the enszen case.
(See aso Charotte arbor rf Northern Raway Co. v. Wees, 260 U. S., 8. 11,
12 odges v. Snyder, 261 U. S., 600, 603. 604.) In orbes oat Lne v. oard
of Commssoners, supra, the enszen and Rafferty cases were nvoked wthout
success the court e pressed the vew that a ta may be mposed n respect
of past benefts and that n those cases the prncpe of ratfcaton was not
necessary nvoved, ctng Wagner v. atmore (239 U. S., 207, 216, 217) and
Stockdae v. tantc Insurance Co. (20 Wa., 323).
It s apparent, as the resut of the decsons, that a dstncton s made be-
tween a hare attempt of the egsature retroactvey to create abtes for
transactons whch, fuy consummated n the past, are deemed to eave no
ground for egsatve nterventon, and the case of a curatve statute apty
desgned to remedy mstakes and defects n the admnstraton of govern-
ment where the remedy can be apped wthout n|ustce. Where the asserted
vested rght, not beng nked to any substanta equty, arses from the ms-
take of offcers purportng to admnster the aw In the name of the Govern-
8ee T e Lma v. dwr (1R2 . S., 1) Doo/e/ v. Unted States (182 T7. S.. 222)
DooUft . Unted States (s: U. S., 151) ourteen Damond Rnps (183 U. S., 170).
Lncon v. nted State Warner, arnes f Co., Ltd., v. Unted States (197 U. 8.,
419 202 . 8.. 484).
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199
611.
meat, the egsature s not prevented from curng the defect n admnstra-
ton smpy because the effect may be to destroy causes of acton whch woud
otherwse e st. The power s necessary, that government may not be de-
feated by omssons or naccuraces n the e ercse of functons necessary to
ts admnstraton. (Charotte arbor Northern Rahcay Co. v. Wees,
supra.) Ths prncpe covers the present case. The pettoners had been
ndebted to the Government for the amount whch was subsequenty co-
ected. They had asked for a revew of the assessment and coecton was
postponed. The Treasury Department had mstakeny assumed that the stat-
ute of mtatons dd not appy to dstrant proceedngs and before the ms-
take was dscovered the perod of mtaton had e pred. The Congress
coud correct ths defect n admnstraton wthout voatng any substanta
equty, and ths was accompshed by secton 611 of the evenue ct of 1928.
avng reached ths concuson, t s not necessary to consder the authorty
of the Congress to wthdraw the consent of the Unted States to be sued.
(See Unted States v. enszen Co., supra, at page 391.) The argument of
the Government n ths respect s not adequate to dspose of the controversy.
Some of the present suts were brought aganst the coector ndvduay and
were based upon the rght to recover as aganst hm by reason of hs ega
acts. Such an acton s persona and not aganst the Unted States. (Sage
v. Unted States, 250 U. S., 33, 37 Smetanka v. Indana Stee Co., 257 U. S.,
1, 4, 5 Ct, D. 17, C. . 5, 251 .) If the Congress dd not have the author-
ty to dea by a curatve statute wth the ta payers asserted substantve rght,
n the crcumstances descrbed, t coud not be concuded that the Congress
coud accompsh the same resut by denyng to the ta payers a remedy both
as aganst the Unted States and aso as aganst the one who commtted the
wrong. (See rnkerhoff- ars Trust t Savngs Co. v. , 281 U. S., 673,
679, 680.)
The ob|ecton to secton 611 upon the ground that t s arbtrary and
caprcous n ts cassfcaton, and hence offends the ffth amendment, s wthout
mert. The broad dscreton of the Congress n the e ercse of ts consttutona
power as to ta aton ( rushaber v. Unon Pacfc Raway Co., 240 U. S., 1,
24-26 vans v. Gore, 253 U. S., 245, 256 IT. D. 3037, C. . 3, 93 arcay d
Co. v. dwards, 267 U. S., 442, 450 T. D. 3691, C. . I -1, 207 ) necessary
e tends to the whoe fed of supervson and contro of the processes of
enforcement. It can not be deemed to be unreasonabe that the Congress n
the present nstance provded for cases n whch a cam n abatement had
been fed and the coecton stayed. In ts seecton the Congress deat wth
an approprate cass and was not bound to ncude others. Nor s the statute
rendered nvad by the provson as to payments made wthn a year after
ts enactment. s aready stated, the Treasury Department dd not construe
secton 611 as authorzng coectons n the future, after the e praton of
the perod of mtaton and f the Congress saw ft to make the statute
appcabe to future vountary payments, t was ceary entted to f a mt
of tme wthn whch t mght be so apped.
In Unted States v. entzen Co. (206 U. S., 370, 38G, 3S7), ths court sad: ut
u It be conceded that the cam to a return of the money pad In dscharge of the e acted
dutes was n a sense a vested rght, t n prncpe, as we have aready observed, woud be
but the character of rght referred to by ent In hs Commentares, where, n treatng of
the vadty of statutes retroactvey operatng on certan casses of rghts, It s sad
(voume 2, pages 415, 416) : The ega rghts affected In those cases by the statutes were
deemed to nave been vested sub|ect to the equty e stng aganst them, and whch the
statutes recognzed and enforced. (Goshen v. Stonngton, 4 Connectcut, 209 Wknson
v Leond, 2 Peters, 627 Langdon v. Strong, 2 ermont, 234 Watson v. Mercer, 8 Peters,
88 3 Story s Comm. on the Consttuton, 267.)
u s the aw stood before ater statutes a coector was abe personay for dutes
nnstadngy coected. If the person charged gave notce, at the tme, of hs Intenton to
sue, and warnng not to pay over the amount to the Treasury. ( ott v. Scartuout, 10
Pet., 137.) ut, after an ct of Congress had requred coectors to pay over such monevs,
t wag hed, aganst the dssent of Mr. ustce Story, that the persona abty was gone.
(Cory v. Curts, 3 ow., 236.) Later statutes, however, recognze suts aganst coectors
n such cases, and the pantff contends that they shoud be construed to create a new
statutory abty attached to the offce and passng to successors, as was hed In ths
case, the forma defendant beng saved from harm hy the Unted States. Ths however,
s not the anguage of the stntutes and hardy can be reconced wth the decson of ths
court n Sage v. Unted States (250 U. S., 33) and other cases to whch we sha refer.
In Patton v. rady (184 . S., 608), a sut aganst a coector begun after the
P|asage of ths statute, t was hed that It coud be revved aganst hs e ecutr , whch
snows agan that the acton s persona as aso does the fact that the coector may be
hed abe for nterest. (Smetanka v. Indana Stee Co., 257 U. S., 1, 4, 5.)
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701, rt. 1314.
200
In some of the cases under revew, t s nssted that secton 611 does not.
precude the recovery of nterest, upon the ground that the nterest had not
been assessed and therefore ay outsde the prohbton of the statute. ut t
does not appear that there was any statutory requrement that nterest as
such shoud be assessed, and the vad dena of the rght to recover the prn-
cpa shoud be deemed to appy aso to the nterest
udgments affrmed.
TITL . G N R L PRO ISIONS.
S CTION 701. D INITIONS.
rtce 1314: ssocaton dstngushed from -20-5062
trust. I. T. 2572
R NU CT O 1928.
nder the facts n ths case, where the eements of busness,
of contro by the benefcares, and of quas corporate organzaton
n genera are a present n a f ed nvestment trust, the trust con-
sttutes an assocaton.
n opnon s requested wtn reference to the ta abe status of a
certan nvestment trust.
The trust nstrument, whch s dated as of ebruary , 1931, pro-
vdes that the M Company sha purchase so-caed stock-unts,
to be deposted wth the N Company n trust for the bearers of
certfcates of nterest n the trust. ach stock-unt conssts of
shares of stock n 35 corporatons, desgnated by the trust deed as
consttuent companes, the number of shares n each corpora-
ton varyng from 2 to 20. Upon the vestng n the trustee of ega
tte to these stocks, the trustee ssues certfcates for 72.7y trust
shares to the depostor for each stock-unt so deposted, and the
depostor ses the trust certfcates, whch are negotabe by mere
devery, to the nvestng pubc.
The bearer of certfcates for 72.7 / trust shares, or even mutpes
thereof, may secure pro es to vote the stocks n the stock-unts
represented by hs trust certfcates, and he may at any tme sur-
render hs trust certfcates and receve such stock-unts n spece
from the trustee, thereby severng the bearer s connecton wth the
trust. cept as above provded, the trustee must vote the stocks
as the depostor may drect, the depostor to drect such votng
n the nterests of the benefcares. The owner of ess than 72.7 /
trust shares has nether the rght to vote the stocks nor to wth-
draw them, but may surrender hs trust certfcates and receve
n cash the vaue of hs proportonate part of the trust property.
If the qudaton vaue of a stock-unt sha at any tme become
equa to, or greater than, 1.7 doars per trust share, the depostor
may requre the trustee, by pubcaton and/or bv ma, to notfy
the bearers of trust certfcates of that fact so tnat they may, f
they desre, surrender ther trust certfcates and reaze on the
ncrease n vaue of ther shares.
The trustee s to se a shares of stock, subscrpton rghts, secur-
tes, etc., receved by way of dvdends on the deposted property,
wth the e cepton of common stock receved by way of stock dv-
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701, rt. 1314.
dends or upon a recassfcaton or e change. Such saes are to take
pace not ater than 60 days after the recept of the property by the
trustee, but, sub|ect to ths e cepton, the trustee has absoute dscre-
ton when to make the saes, wth the purpose of obtanng the
hghest prce reasonaby obtanabe therefor .
The net proceeds of such saes are to be credted to the dstrbuton
fund.
Common stocks receved by way of stock dvdends, or by way
of recassfcaton, change n number, etc., of the shares of deposted
stocks, are to be retaned as part of the stock-unts. If the corpora-
tons n queston gve the trustee any opton wth respect to such
recassfcaton or e change, the trustee sha e ercse such opton
n such manner as t, n ts soe dscreton, may determne. In the
event of a pan for the merger of any consttuent company nto
another company, whch pan resuts n the formaton of a protec-
tve commttee to hod, temporary, the shares of stock affected,
the trustee s to depost such shares wth the commttee f the
ma|orty of the outstandng shares n such consttuent company have
been deposted wth the commttee. If the trustee s unabe to
determne whether or not a ma|orty of the shares have been so
deposted, the trustee has absoute dscreton to determne ts course
of acton.
In case the depostor, desrng to purchase the stock of any constt-
uent company for the purpose of depostng addtona stock-unts
wth the trustee, s unabe to buy the stock on the market for a perod
of at east 10 days, the trustee must se the stock of such company
aready hed by t, the net proceeds to be credted to the dstrbuton
fund.
The dstrbuton fund, whch ncudes cash dvdends receved
on the deposted stocks and the net proceeds of such saes of stocks,
subscrpton rghts, etc., as the trust nstrument authorzes to be sod,
s to be dstrbuted semannuay to the bearers of trust certfcates.
In accordance wth rtce II, the ndenture may be amended
at any tme wth the approva of the trustee and by the vote of the
bearers of certfcates representng not ess than 66 per cent of the
trust shares outstandng at the tme taken, as herenafter n rtce
III provded. The trust s to termnate September , 1936,
but t may be termnated at any tme n accordance wth the
provsons and requrements of rtce III.
rtce III provdes that the depostor or the bearers of
certfcates representng not ess than 25 per cent of the trust
shares may at any tme notfy the trustee that t or they de-
sre the trustee to ca a meetng of the bearers of certfcates for the
purpose of consderng the termnaton or the amendment of the n-
denture. The trustee s thereupon requred to ca such a meetng
( provded n the case of an amendment, the amendment s one
permtted by the provsons hereof and the approva of the trus-
tee has been gven ), at whch meetng every certfcate
hoder s entted to one vote for each trust share represented by hs
certfcate. otes may be gven n person or by pro y. The depos-
tor and the trustee may attend the meetng, but sha have no vote.
The bearers of certfcates representng not ess than 66 per cent
of the trust shares outstandng must be present at such meetng n
person or by pro y n order to consttute a quorum, but otherwse
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701, rt. 1314.
202
the certfcate hoders at such meetng may adopt ther own rues
of procedure. The depostor or any certfcate hoder may sub-
mt to the meetng any proposed termnaton or amendment of
or to the ndenture, the substance of whch sha have been nd-
cated n the notce of the meetng and request that a vote be taken
upon the same. Mnutes of a proceedngs sha be made and
entered n books to be provded by the trustee.
It s not specfcay stated what percentage of the vote w be
requred n order to termnate the trust, or whether or not the con-
sent of the trustee w aso be necessary to effect such termnaton.
It seems cear, however, that the consent of the trustee s not neces-
sary, and that the certfcate hoders may provde at the meetng
what percentage of the vote s necessary to accompsh the term-
naton. s aready noted, rtce II provdes that the ndenture
may be amended at any tme wth the approva of the trustee
and by the vote of the bearers of certfcates representng not ess
than 66 per cent of the trust shares outstandng at the tme
taken, as herenafter n rtce III provded. Wth respect to
amendment, therefore, t s specfcay stated that the consent of
the trustee must be obtaned, together wth the vote of 66 per
cent of the trust shares.
In sharp contrast to the amendment provsons, rtce I states
n postve terms that the trust may be termnated at any tme n
accordance wth the provsons and requrements of rtce III.
s rtce III does not provde that ether the consent of the trustee
or depostor or the consent of any f ed percentage of the hoders of
trust shares must be obtaned n order to termnate the trust, but does
provde for meetngs to consder termnaton, and further provdes
that nether the trustee nor the depostor sha vote at such meetngs,
and that the benefcares may adopt ther own rues of procedure,
t foows that the consent of the depostor or trustee s not requred
for termnaton, and, snce the percentage of vote requred to pass a
moton s a rue of procedure, t aso foows that the benefcares
at such meetng may determne what per cent of the vote of the trust
shares s necessary n order to termnate the trust. That the consent
of the trustee or depostor s not necessary to effect a termnaton of
the trust s further shown by the fact that rtce III, after provd-
ng that the depostor, or the benefcares of 25 per cent of the trust
shares, may notfy the trustee to ca a meetng to consder termna-
ton or amendment, states:
( ) The trustee (provded n the ca.se of an amendment, the amendment s
one permtted by the provsons hereof and the approva of the trustee
has been gven) sha thereupon ca a meetng . Itacs supped.
If t had been ntended to requre the consent of ether the trustee
or the depostor to effect a termnaton of the trust, certanv the
parenthetca provso above quoted woud not have been specfcay
confned to the case of an amendment, but woud have made the ca-
ng of a meetng for the purpose of consderng termnaton of the
trust contngent, kewse, upon the approva of the trustee and/or
depostor. urthermore, as each certfcate hoder ndvduay has
the rght, at any tme, wthout the consent of the trustee: or depostor,
to sever hs own connecton wth the trust, t s reasonabe to suppose
that a vote of any consderabe percentage of the trust shares to
termnate the trust as a whoe woud be effectve wthout the consent
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203
701, rt. 1314.
of the trustee, snce such certfcate hoders coud n any event brng
the trust to a cose wth respect to a arge porton of the trust prop-
erty smpy by e ercsng ther ndvdua rghts as certfcate hoders.
Secton 7 of rtce III provdes that the depostor may recommend
to the trustee that any of the stocks be emnated from the stock-
unts, whereupon the trustee s requred to ca a meetng of the bear-
ers of trust certfcates. If 60 per cent of the bearers who are
present at sad meetng n person or by pro y sha vote to emnate
shares of stock of any consttuent company, the trustee s requred to
se such stock and credt the net proceeds to the dstrbuton fund.
It s not specfcay stated n the nstrument whether or not the cer-
tfcate hoders may substtute some other stock for an emnated
stock. owever, t s cear that a vote of 66 per cent of the trust
shares, together wth the consent of the trustee, w amend the
trust, and ths power to amend woud of course ncude the power
to substtute the securtes, and for that matter to emnate securtes
wthout frst obtanng any recommendaton from the depostor to
that effect. Moreover, t s stated that securtes may be substtuted.
The porton of the statement referred to reads as foows:
The trust permts the emnaton of securtes under two cond-
tons : rst, that they are unavaabe for ready purchase and. therefore, new
unts can not be made dentca wth od unts wthout emnaton and, second,
emnaton by vote of 60 per cent of the hoders of trust certfcates attendng
a meetng. There s a provson for the substtuton of securtes by vote of
per cent of aU certfcate hoders. Itacs supped.
urthermore, emnaton and substtuton of securtes coud be
consent of nether the depostor nor the trustee woud be essenta
uness t were desred to retan them as managers of the new trust.
The trust nstrument provdes that t s the ntenton to create
a trust and not to create a partnershp, bament, or assocaton. It
s further provded that the bearers of certfcates sha n no event
be personay responsbe for any debts, and that a those deang
wth the trustee sha ook ony to the deposted property for sats-
facton of cams. The death or ncapacty of a bearer does not ter-
mnate the trust or entte hs ega representatve to cam an ac-
countng or to nsttute partton proceedngs, and each certfcate
hoder e pressy waves any ega rght he mght otherwse have to
compe the trustee to account, e cept to the e tent provded by the
ndenture.
In the opnon of ths offce the trust n the nstant case does not
fa wthn the anguage of artce 1314 of Reguatons 74, provdng
that:
Where trustees merey hod property for the coecton of the ncome and ts
dstrbuton among the benefcares of the trust, and are not engaged ether
by themseves or In connecton wth the benefcares, n the carryng on of
any busness, and the benefcares have no contro over the trust, athough
ther consent may be requred for the fng of a vacancy among the trustees
or for a modfcaton of the terms of the trust, no assocaton e sts .
On the contrary, the trustee, n con|uncton wth the benefcares,
and wth the depostor actng for the benefcares, s carryng on
a busness enterprse n quas corporate form, and n addton, the
benefcares have postve contro of the trust.
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701, rt. 1314.
204
Consderng the contro eement frst, t appears that not ony
may each benefcary ndvduay wthdraw from the trust at any
tme, but that aso the benefcares, n meetng assembed, may, by
any percentage of the vote agreed upon at such meetng, termnate
the trust as a whoe. In the case of Rochester Theatre Trust state
(16 . T. ., 1275), the trust agreement provded n rtce I,
paragraph 2, that the trust mght be termnated at any tme subse-
quent to two years from the date of the nstrument by a ma|orty
vote of the benefcares. The opnon states:
we are of the opnon that substanta contro was vested
n the sharehoders under the provsons of rtce I, paragraph 2, of the
decaraton of trust . Cf. In rc ssocated Trust (222 ed.,
1012) Smson v. pstcn (262 ed., 823).
The power to termnate the trust at any tme s a power of such
magntude as to be equvaent to amost any number of esser powers
frequenty ponted to as beng suffcent to consttute contro. Once
the trust s termnated, there s nothng to prevent the benefcares,
at the same meetng, from creatng a new trust wth dfferent pro-
vsons, to be managed by a dfferent trustee and a dfferent depos-
tor. Therefore, the power to termnate n effect embraces the power
to amend, together wth the power to remove the trustee and/or
depostor and to appont others. The provson n the ndenture
that the consent of the trustee must be obtaned for amendment w
protect the present trustee aganst beng forced to admnster a trust
contanng amendments of whch he does not approve, but t does
not prevent the benefcares from n effect brngng about any
amendments desred by them through the devce of termnatng the
nstant trust and creatng a new one wth a dfferent trustee.
In the case of ssocated Trust (222 ed., 1012) t was hed that
a certan trust was an unncorporated company wthn the mean-
ng of the ankruptcy ct. The court sad:
The absoute powers of termnaton and amendment gve the certfcate hod-
ers the utmate contro of the busness of the trust whenever they
choose to take that power nto ther hands. They have not yet done so but
the character of the organzaton s to be gauged rather by the powers of the
certfcate hoders, than by the e tent to whch those powers have as yet been
e ercsed. The anaogy between the organzaton and a corporaton
s apparent. The certfcate hoders ceary possess many of the most character-
stc powers of stockhoders.
In Smson v. psten (2(2 ed.. 823) t was hed that the power
to amend consttuted contro, and the same concuson was reached
n McCamey v. owter OU Co. et . (Te as) (241 S. W., 689),
the court kewse statng that the artces of assocaton must be
ooked to to determne the queston of power of the sharehoders
to contro the acton of the trustees, even though the power s never
e ercsed. Offce Decson 407 (C. . 2, 11) aso states that t s
mmatera whether the contro vested n benefcares by a trust
agreement s n fact used by the benefcares.
s stated above, the power to termnate s n effect equvaent not
ony to the power to amend, but aso to the power to remove the
trustee and depostor and to appont others. Ths atter power has
aso frequenty been regarded as suffcent to consttute contro of
the trust. It was stated n Soctor s Memorandum 4104 (C. .
I -2, 8) that the power to remove the trustees at any tme and to
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205
701, rt. 1314.
appont others consttutes a greater degree of contro than the power
to eect trustees at perodca ntervas, and the power to eect trus-
tees at perodca ntervas s e pressy mentoned n the reguatons
as beng postve contro. rtce 1314 states that:
If, however, the benefcares have postve contro over the trust,
whether through the rght perodcay to eect trustees or otherwse, an asso-
caton e sts wthn the meanng of secton 701.
Wrghtngton on ssocatons (2d ed., 68) consders that the
power to remove the trustees at any tme unquestonaby consttutes
contro, whereas he doubts whether or not the mere power to eect
at reguar ntervas shoud be deemed contro. In aorrbower v.
Whte (21 ed. (2d), 82, affrmed. Whte v. ornhower, 27 ed.
(2d), 777), the Unted States Dstrct Court for the Dstrct of
Massachusetts sad:
The echt case dd not overrue the Crocker case, but hed that
three Massachusetts trusts whch were there concerned were assocatons wthn
the defntons of the ta ng cts. In each of them, however, the benefcares
had the supreme contro, as they coud remove the trustees.
though the crcut court of appeas n the same case sad that a
trust carryng on busness n quas corporate form s an assocaton
even n the absence of contro by the benefcares, t n no way dened
that the power to remove trustees at any tme and substtute others
consttuted contro.
In the nstant case, the benefcares, wthout the necessty of re-
course to ther power of termnaton, may aso, wth the consent of
the trustee, amend the trust by a two-thrds vote, and, wth the recom-
mendaton of the depostor, they may, by a three-ffths vote, emnate
any stock from the stock-unts.
In vew of the foregong, t s the opnon of ths offce that the
benefcares have postve contro of the trust, and, under the regua-
tons, ths feature s aone suffcent to cassfy the concern as an
assocaton.
owever, n addton to the eement of contro, t s the opnon of
ths offce that the trustee and the benefcares, together wth the
depostor actng for the benefcares, are assocated for the purpose
of carryng on a busness enterprse. The trustee does not, n the
anguage of artce 1314 of the reguatons, merey hod property
for the coecton of the ncome and ts dstrbuton among the bene-
fcares, but, together wth the depostor and the benefcares, s
carryng on a busness enterprse. ven n the case of f ed nvest-
ment trusts where no power of substtuton of securtes s gven, and
where stocks may be emnated ony n case of faure of dvdends,
recassfcaton, merger, and the ke, an mportant purpose of the
trust s to reaze on e pected ncreases n vaue of corpus when the
trust termnates and the provsons n those trusts permttng any
benefcary to wthdraw at w and receve hs proporton of the trust
property, or ts vaue n money, pace each benefcary n a poston
to watch the market and reaze gans by wthdrawng from the trust
at a favorabe tme, and then to purchase trust shares agan when
the stock market suffers a reacton. In other words, each benefcary
may take advantage of fundamenta changes n the market, and st
secure the safety of dversfcaton of nvestment through assocaton
wth the other benefcares.
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701, rt. 1314.
206
urthermore, n the echt Trust n echt v. Maey (265 U. S..
144 T. D. 3595, C. . III-, 489 ), the court hed that a trust, whch
merey owned and managed an offce budng as an nvestment, was
carryng on busness, though no purchases and saes of corpus were
nvoved, the court evdenty consderng that the functons of man-
agement were suffcent to consttute a busness. There s therefore
ground for argument that the managera dutes nvoved n the
ordnary f ed nvestment trust are suffcent to consttute a busness,
rrespectve of any proft-seekng purpose wth respect to ncrease of
vaue n trust corpus. In armar Coa Co. v. ener (34 ed. (2d),
725) the Crcut Court of ppeas, Thrd Crcut, dscussed at ength
the prncpes underyng what consttutes the dong of busness for
ca||ta stock ta purposes and reached the concuson that:
when a corporaton s organzed for one defnte purpose, the ut-
mate ob|ect of whch s profts, and t engages n the busness of effectuatng
that purpose and then stops the busness by reason of sae, ease, or other acton,
and thereafter smpy hangs on, n a corporate sense, recevng and dstrbutng
the avas of ts reorganzed affars, t s not dong busness. On the other
hand a corporaton, organzed for a defnte though mted busness purpose
nvovng profts, that pursues actvtes to carry out that purpose, no matter
how few or sma they may be, s carryng on or dong busness wthn the
meanng of the statute. We sha appy these tests to the facts of the cases
under consderaton.

Was the pantff carryng on or dong busness Certany t was
dong somethng. Whe t never mned and sod coa, t hed coa ands, a thng
t orgnay dd wthn ts corporate powers and the specfc thng t evdenty
was organzed to do. It does not appear that t acqured and hed the Indanoa
stock and the coa ands n trust, or otherwse than for proft It admtted
that from ts Pttsburgh property t receved profts n the form of rentas. In
ownng the stock of Indanoa and votng t and hodng the rea estate the
pantff was pursung the ends for whch t was organzed, wthout dmnuton
of or change n ts actvtes, whch, though few and sma, were none the ess
busness actvtes.
The Supreme Court dened certorar n the armor Coa Co.
case (50 S. Ct., 159). Under the theory outned n that case as to
what consttutes the dong of busness, there s ground for argung
that even the most rgd nvestment trust s engaged n busness.
Such a trust s organzed for a defnte though mted purpose
nvovng profts, and t engages n the busness of effectuatng
that purpose. It s not, n other words, an organzaton orgnay
created for some purpose whch t has now abandoned, but s a
concern whch s dong what t was organzed to do. See, aso,
dwards v. Che Copper Co. (270 U. S., 452, T. D. 3857, C. . -,
410), another capta stock ta case, where the Supreme Court sad
that The e empton when not engaged n busness ordnary
woud seem pretty neary equvaent to when not pursung the ends
for whch the corporaton was organzed, n the cases where the
end s proft. (See generay ok et a. v. McCaughn, 42 ed. (2d),
G16 L. C. Morgan et a., Trustees of Marsh oundaton, v. Nauts
(not reported) Gardner Pafrey, Trustees of Samue ammond
Rea state Trust, v. Unted States, 43 ed. (2d), 450, affrmed on
ebruary 19, 1931, by Crcut Court of ppeas, rst Crcut Sears,
Roebuck t Co., mpoyees Savngs and Proft Sharng Penson
und, v. Commsswn-er, 45 ed. (2d), 506. See, aso, the dctonary
defntons of assocatons quoted and approved by the Supreme
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207
701, rt. 1314.
Court n echt v. Maey, supra, whch do not menton busness, and
by the Crcut Court of ppeas n Pckerng v. yea-N ohos Co.,
21 ed. (2d), 501, T. D. 4096, C. . I-2, 314, certorar dened, 276
U. S., 617, whch do not requre the carryng on of busness.)
There are addtona proft-seekng features n the nstant case,
for e ampe, the provsons whch permt the emnaton and sub-
sttuton of securtes for any purpose the cause gvng the depos-
tor dscretonary power to notfy the benefcares whenever the
vaue of stock-unts rses to 1.7a doars per trust share (apparenty
wth the purpose of remndng the benefcares of any opportuntes
to reaze on possbtes of proft takng whch may occur before
the termnaton of the trust) and the snort term (5/2 years), for
vaue, and then se out.
The nstant trust, moreover, paces much more contro n the
benefcares and, n genera, has a greater degree of quas corporate
form than ordnary f ed nvestment trusts. In the typca f ed
nvestment trust, each benefcary has the power to sever hs connec-
ton wth the trust at any tme and take out hs share of the prop-
erty, ether n spece or n cash, but the benefcares have no contro
n an assocated capacty. There s no provson, n other words,
whereby they may assembe n a meetng, adopt tber own rues of
procedure, and termnate, or otherwse contro the trust as a whoe,
by the vote of a ma|orty, or some other percentage of the trust
shares. provson for bndng a the members of a group at a
reguary caed and duy attended meetng, by a vote not unanmous,
s one of the typca features of an assocaton. (See G. C. M. 7475,
C. . I -1, 177, and cases cted theren.) Such a provson gves
to the benefcares an organzed capacty to act, thereby emphaszng
the fact that the trust s an assocaton under artce 1312 of Regu-
atons 74 (provdng that assocatons ncude a organzatons whch
act or do busness n an organzed capacty) as we as under the
artce of the reguatons whch deas specfcay wth the dstnc-
ton between trusts and assocatons (artce 1314).
Other quas corporate features, whch are typca of neary a
f ed nvestment trusts, aso are present n the nstant case. The
benefca nterest s dvded nto shares, for whch transferabe
certfcates are ssued. The affars are managed by the trustee and
the depostor for the beneft of sharehoders who are entted to the
ncome wthout sharng actvey n the management. Causes are
nserted, desgned to free the benefcares and the managers from
persona abty, and there are other causes ntended to protect
the N Company from the characterstc abty of a trustee to ac-
count to the benefcares.
On the facts presented, t s the opnon of ths offce that the ee-
ments of busness, of contro by the benefcares, and of quas cor-
porate organzaton n genera, are a present n tne nstant case, and
that, under the doctrne of such cases as echt v. MaTey, supra
Pckerng v. yea Nchos Co., supra and Gardner tf- Pafrey.
Trustees of Samue ammond. Rea state Trust, v. Unted States,
Mpra, as we as under the Treasury reguatons, the trust consttutes
an assocaton.
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703.
208
S CTION 703. D DUCTION O ST T ND
IN RIT NC T S R TRO CTI .
-24-5104
G. C. M. 9490
R NU CT O 1928.
The trustees of a resduary estate consstng of both reaty and
personaty devsed and bequeathed n trust for others are devsees
and egatees wthn the meanng of secton 703 of the Revenue ct
of 1928, and may, under the crcumstances of the nstant case, cam
as a deducton the fu sum of the estate ta pad from ncome
ta abe to the trust as an entty.
n opnon s requested whether addtona edera estate ta es
pad n 1922 by the trustees of testator s resduary estate after the
e ec utr had been dscharged are, n whoe or n part, deductbe by
the trustees under secton 703 of the Revenue ct of 1928.
ded on uy , 1919, eavng a w n whch , hs wdow, was
apponted e ecutr . She was dscharged as e ecutr and the ad-
mnstraton of the estate was cosed on May , 1920.
The w of the decedent, after makng certan specfc bequests,
gave, devsed, and bequeathed a the rest, resdue, and remander of
the estate to and the M Company as trustees. One-fourth of the
ncome of the trust was to be dstrbuted perodcay to the wdow
durng her fetme not more than one-fourth of the ncome was to
be used for the care, educaton, and support of the testator s chdren
unt the youngest survvng chd shoud reach the age of 30 years
and the remander of the ncome was to be accumuated and added
to the corpus of the trust. If the youngest survvng chd of the
testator shoud arrve at the age of 30 years wthn tre fetme of
the wdow, then one-fourth of the estate was to be dstrbuted to the
chdren of the testator or the survvng ssue of any deceased chd.
On the death of the wdow, provded the youngest chd of the testa-
tor had reached the age of 30, the entre estate was to be dvded
among the survvng chdren or survvng ssue of any deceased
chd. If the youngest survvng chd had not reached the age of
30 at the deat of the wdow, the estate was to be dstrbuted to the
survvng chdren or ther ssue when the youngest chd reached
that age.
Subsequent to the dscharge of the e ecutr on May , 1920, the
Commssoner of Interna Revenue assessed aganst the estate add-
tona edera estate ta n the amount of on doars. Ths ta was
pad by the M Company as trustee on December , 1922. It ap-
pears that no deducton for ths ta was camed ether n the
orgna return of the trust or by any of the benefcares thereof
and that no cam n abatement was fed. Such a deducton has,
however, been camed by the trustees n a cam for refund fed
on behaf of the trust on anuary , 1927. Ths addtona edera
estate ta s stated to have been pad by the trustees out of that
part of the ncome of the resduary trust estate accumuated for
future dstrbuton.
It s contended that under secton 703 of the Revenue ct of 1928
the tota amount of the addtona edera estate ta doars)
shoud be aowed as a deducton on the return, orm 1040, fed
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209
703.
by the trustees coverng the undstrbuted one-haf of the ncome
ta abe to the trust as an entty. It s contended that the trust
estate fas wthn the meanng of the terms devsee, egatee,
or benefcary as used n secton 703 of the Revenue ct
of 1928, whch s retroactve and provdes, n so far as s here ree-
vant, as foows:
(a) In determnng the net ncome of an her, devsee, egatee, dstrbutee,
or benefcary (herenafter n ths secton referred to as benefcary ) or of
an estate for any ta abe year, under the Revenue ct of 1026 or any pror
Revenue ct, the amount of estate, nhertance, egacy, or successon ta es pad
or accrued wthn such ta abe year sha be aowed as a deducton as foows:
(1) If the deducton has been camed by the estate, but not by the bene-
fcary, t sha be aowed to the estate
(2) If the deducton has been camed by the benefcary, but not by the
estate, t sha be aowed to the benefcary
(3) If the deducton has been camed by the estate and aso by the bene-
fcary, t sha be aowed to the estate (and not to the benefcary) f the
ta was actuay pad by the ega representatve of the estate to the ta ng
authortes of the |ursdcton mposng the ta : and t sha be aowed to the
benefcary (and not to the estate) f the ta was actuay pad by the benef-
cary to such ta ng authortes
(4) If the deducton has not been camed by the estate nor by the benef-
cary, t sha be aowed as a deducton ony to the person (ether the estate
or the benefcary) by whom the ta was pad to such ta ng authortes, and
ony f a cam for refund or credt s fed wthn the perod of mtaton
propery appcabe thereto
(5) Notwthstandng the provsons of paragraphs (1), (2), (3), and (4) of
ths subsecton, f the cam of the deducton by the estate s barred by the
statute of mtatons, but such cam by the benefcary s not so barred, the
deducton sha be aowed to the benefcary, and f such cam by the bene-
fcary s barred by the statute of mtatons, but such cam by the estate
s not so barred, the deducton sha be aowed to the estate.
(b) s used n ths secton, the term camed menus camed
(1) In the return or
(2) In a cam n abatement fed n respect of an assessment made on or
before une 2, 1924.
The report of the Senate Commttee on nance (Report 960, page
44) wth respect to secton 703 of the 1928 ct states as foows:
Secton 214(a)3 of the Revenue ct of 1926 and correspondng provsons of
pror Revenue cts permt a deducton, from gross ncome n computng the
net ncome sub|ect to ta , for ta es pad or accrued durng the ta abe year.
Obvousy ths provson appes ony to ta es mposed upon the ta payer, and
does not permt the deducton of ta es pad by a vounteer. traordnary
dffcuty has been encountered n appyng ths deducton n the case of estate,
nhertance, egacy, and successon ta es, mposed by a State, Terrtory, or a
foregn country. These ta es are usuay pad by the e ecutor of the estate.
Under the reguatons of the Department the deducton was aowed the estate,
n computng ts ncome ta , f the ta was consdered as an estate ta , and
was aowed as a deducton to the benefcary f the ta was consdered to be
an nhertance, egacy, or successon ta . s a resut of recent Supreme Court
decsons ( eth v. ohnson and Unted States v. Mtche), redetermnatons of
the deductons camed by the estate or by the benefcary w be necessary
uness the stuaton s remeded by retroactve egsaton. Consequenty, the
ouse b nserted secton 703 n the b, the genera effect of whch w be to
ratfy what the ta payers have done and to prescrbe specfc rues for future
acton.
The report of the conference commttee, representng the ouse and
the Senate, states (Report 1882, page 24) :
mendment No. 210: The ouse b contaned retroactve provsons remov-
ng the uncertanty of the present aw as to the deductbty, n computng net
ncome, of amounts pad as estate, nhertance, successon, or egacy ta es, and
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703.
210
vadated the deductons camed n the return of the ta payer, and provded
for the case where the deducton was camed by both the estate and the bene-
fcary and the case where nether camed t. The Senate amendment adopts the
provsons of the ouse b and e tends them to cases where the deducton
was camed by a cam n abatement, and n order to make t certan that the
deducton w be aowed ether to the estate or to the benefcary n any
event, the Senate amendment aows the deducton to the estate f the bene-
fcary s barred from fng a cam for refund by the statute of mtatons,
and vce versa. Ths provson does not permt the fng of a cam for refund,
however, f the perod of mtaton has e pred and the ouse recedes.
It s evdent, both from the conte t of secton 703, tsef, and from
the commttee reports, that the ntenton of Congress was to enact
remeda egsaton of the most bera character egsaton whch
woud tend to do away wth admnstratve dffcutes n determn-
ng the precse character of the ta es n queston, and whch woud
emnate tgaton, or greaty reduce t, wth respect thereto. In
the anguage of the commttee reports, the genera pan for effectng
ths resut was to make t certan that the deducton w be aowed
ether to the estate or to the benefcary n any event (sub|ect to
the statute of mtatons), by prescrbng rues whch woud tend
to ratfy what the ta payers have done. It s a famar canon
of statutory constructon that remeda egsaton of ths character
shoud be beray construed.
In the nstant case, the resduary estate, consstng of both reaty
and personaty, was devsed and bequeathed to trustees n trust for
others. s the frst sentence of secton 703 mts the appcabty
of the secton to the determnaton of net ncome of an her, devsee,
egatee, dstrbutee, or benefcary (herenafter n ths secton
referred to as benefcary ) or of an estate, the frst queston s
whether or not the trustees n the nstant case may propery be
desgnated ether as hers, devsees, egatees, dstrbutees, bene-
fcares, or as an estate.
The egsatve hstory and the conte t of secton 703 make t
abundanty cear that the term estate, as used n secton 703,
refers to the decedent s estate n the technca sense that s, to the
estate admnstered by the e ecutor or admnstrator and not to the
estate ater managed by testamentary trustees. ven where the
decedent s e ecutors and hs testamentary trustees are the same per-
sons, the great weght of authorty s that they act n separate and
dstnct capactes. (See Lochman v. Rey, 95 N. Y., 64.) Ths
s shown by the fact, among others, that the mercan probate courts
(ncudng n that term orphan s courts, courts of ordnary, surro-
gates, prerogatve courts, regsters, etc. see 1 Woerner, dmnstra-
ton, 3d ed., 483), whch have been created prncpay for the pur-
pose of handng the estates of decedents, ordnary have no power
to compe an accountng between a testamentary trustee and a bene-
fcary, or otherwse to take |ursdcton of such trusts, even though
the same person occupes both offces. (1 Woerner, supra, 517, 518.)
Unt dstrbuton of the decedent s estate, a person who s both
e ecutor and testamentary trustee acts as e ecutor thereafter, he
acts as trustee. (Woerner, supra.) In short, the word estate n
secton 703 has substantay the same meanng as estates of de-
ceased persons durng the perod of admnstraton or settement
n secton 161 (a)3, 1928 ct. (See artce 343 of Reguatons 45
to 69, ncusve artce 863 of Reguatons 74: St. Mary s ospta
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211
703.
v. Perry, 152 Ca., 338, 92 Pac, 864 Logan s state, 131 N. Y., 456,
30N. ., 485.)
s t s cear the trustees are not the estate referred to n secton
703, the queston resoves tsef nto whether they may be termed
hers, devsees, egatees, dstrbutees, or benefcares. In ther com-
mon ega meanngs, the term her refers -to a person who, under
the aws of descent, takes rea estate of one dyng ntestate dev-
see means one to whom rea property s eft by the w of a
decedent egatee refers to one takng persona property under a
w dstrbutee means one takng persona property or an ntes-
tate and benefcary refers to a person for whose beneft a trust
s created, that s, to a cestu que trust. s used for the frst tme
n the second ne of secton 703(a), the term benefcary appears
to refer prmary to the cestu que trust of a testamentary trust, but
wherever the word appears ater n secton 703 t s used as a generc
term to ncude hers, devsees, egatees, dstrbutees, and/or testa-
mentary cestus que trust.
Snce, n the nstant case, the trustees acqured both reaty and
personaty by w, t s obvous that f they are ncuded wthn any
of the terms defned above they consttute devsees and egatees,
rather than hers, dstrbutees, or benefcares. The queston whether
they are devsees and egatees depends upon whether those terms as
used n secton 703 refer, n the case of a testamentary trust, to the
trustees, who secure the ega tte to the property, or to the cestus
que trust, who secure the equtabe tte.
In construng ws, the courts have sometmes had occason to
determne whether the term egatee, as used by a testator, refers
to the testamentary trustees, or to the cestus que trust. Thus, n
Logan s state (131 N. Y., 456, 30 N. ., 485) a testator, after gvng
s egaces, bequeathed 8,000 to hs e ecutors, to be hed n trust
for the use and beneft of hs sster durng her fe, and to be dvded
between her two daughters at her death, and then drected that the
resdue of hs estate shoud be dvded among the egatees men-
toned n ths my w, share and share ake.
The surrogate hed that the three cestus que trust of the testa-
mentary trust were egatees, and that consequenty the resdue
shoud be dvded nto nne equa shares, and one share gven to each
of the cestus. The supreme court hed that ony the fe benefcary
of the trust was a egatee, and that therefore the resdue shoud be
dvded nto seven shares, the sster s two daughters to take nothng.
The court of appeas, whch s the court of fna resort n New York,
hed that the e ecutors, n ther capacty as trustees, consttuted one
egatee, and that consequenty the resdue shoud be dvded nto
seven equa shares, one of whch shoud be gven to the trustees and
hed by them on the same trust as the egacy for 8,000. The court
sad:
In a strct ega sense the e ecutors sre the egatees to whom the
moneys dsposed of by the ffth cause . e., the 8,000 are gven. Under
our statutes the entre estate n the property bequeathed s vested n them,
for the tme beng, for the purposes of the trust. They take |onty or as
one person, and not n severaty. It s reasonabe to assume that
when the testator speaks of the egatees mentoned n ths my
w, he had reference to the persons n whom the mmedate tte to the
egaces gven were vested by ts prevous provsons.
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703.
212
In Lamar v. arrs (121 Ga., 285, 48 S. ., 932) a testator be-
queathed shares of stock to a trustee n trust for hs daughter (the
trustee aso beng one of the e ecutors of the w), and n another
tem the e ecutors were drected to hod the stocks, together wth
other shares dsposed of by the w, unt a desgnated tme, n the
meantme payng the dvdends to each of sad egatees annuay.
The court sad:
The soe queston s whether the terra egatee
s used n ts technca sense, and means the trustee n whom the ega tte
was vested, or had reference to the benefcary of the trust or, to state the
queston dfferenty, whether t s the duty of the e ecutors to pay the dv-
dends arsng from these stocks drecty to Mrs. arrs, or whether Lamar,
as e ecutor, may pay them to hmsef as trustee, e actng therefrom com-
mssons for hmsef n both capactes. The court beow hed that the
e ecutor must pay the dvdends to Mrs. arrs drecty, and wth ths vew
we agree. It s an eementary prncpe that n the constructon of ws
the prmary ob|ect s to ascertan the ntenton of the testator.
The court then quotes other portons of the w showng that
the terms egatees and chdren were used by the testator as
synonymous e pressons.
In Crawford v. Mound Grove Cemetery hs t (218 111., 399, 75
N. ., 998), a w provded that the resdue shoud be sod and
the proceeds pad to the egatees herenbefore named n specfed
proportons. The court hed that the testamentary trustees (rather
than the cestus que trust) were egatees wthn ths cause. See
aso Locknan v. ttey, supra.
rom the foregong cases, t appears that n construng ws the
testamentary trustees are often regarded as techncay consttutng
the egatees, but that f the testator uses the term to refer to the
cestus que trust the courts w gve effect to hs ntent. The same
reasonng s, of course, appcabe to the queston of whether, n a
devse of and, the devsee s the testamentary trustee or the
cestu que trust. The same reasonng kewse appes to the con-
structon of a statute, e cept that the ntent of the egsature, rather
than the ntent of a testator, s the governng factor.
amnng secton 703, one s frst struck by the fact that f, n
the case of testamentary trusts, the terms devsee and egatee
are construed as referrng to the trustees rather than to the cestus
que trust, the cestus que trust are nevertheess specfcay ncuded
n the statute under the term benefcary a term whch t-
eray descrbes ther status. Consequenty, an nterpretaton that
cestus que trust are not devsees or egatees and that trustees are,
woud not have the effect of denyng reef to cestus que trust n
any stuaton where they woud otherwse be entted to reef. On
the other hand, an nterpretaton that testamentary trustees can not
consttute devsees or egatees under secton 703 woud sometmes
resut, as n the nstant case, n denyng the deducton to anyone
at a, when otherwse the trustees woud be n a poston to cam
t, thereby defeatng the domnant purpose of Congress to grant
the deducton to some one whenever the statute of mtatons
permts.
These are, strong arguments for the vew that testamentary trus-
tees may be egatees or devsees under secton 703. partcuary when
t s remembered that uness there s somethng to show a contrary
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213
703.
ntenton testamentary trustees do teray consttute egatees and/or
devsees. Indeed, n the eary aw of trusts the testamentary trus-
tee, rather than the cestu que trust, must aways have been regarded
as beng the egatee or devsee, because ony the trustee was con-
sdered to have -property rghts n the trust corpus, the cestu que
trust havng mere rghts n personam aganst the trustee. Under
the modern theory of trusts the cestu que trust s usuay regarded
as havng an equtabe property rght n the corpus tsef, but the
trustee has an undenabe ega property rght n such corpus, and
therefore, uness somethng n the statute ndcates a contrary nten-
ton, both trustees and benefcares mght we be regarded as con-
sttutng egatees or devsees the trustee beng a devsee or egatee
of the ega tte and the cestu que trust beng a devsee or egatee
of the equtabe tte.
In vew of the foregong, t s the opnon of ths offce that the
trustees n the nstant case are devsees and egatees wthn the
meanng of secton 703, and the ne t queston s, therefore, whether
they are otherwse entted to the deducton under that secton.
It s evdent that they can not quafy under secton 703 (a),
(a)2, or (a)3, because t s admtted that they dd not cam the
deducton n ther ncome ta returns or n cams n abatement,
and ony cams of that nature w satsfy the requrements of those
subdvsons. See secton 703(b) of the statute and Russet Wofe,
ecutor, v. Commssoner (15 . T. ., 835, C. . III-2, 57).
Secton 703(a)4, however, provdes that f the deducton has not
been camed by the estate nor by the benefcary, t sha be aowed
as a deducton ony to the person (ether the estate or the bene-
fcary) by whom the ta was pad to such ta ng authortes, and
ony f a cam for refund or credt s fed wthn the perod of
mtaton properv appcabe thereto. s the deducton has not
been camed (that s, has not been camed n the ncome ta
return or n a cam n abatement) ether by decedent s estate or by
the trustees, the trustees appear to satsfy ths subdvson, provded
ther cam for refund was fed wthn the proper perod. Such
cam was fed on anuary , 1927, and, accordng to the coector s
statement on the back of the cam, the trust ta es for 1922 were
pad between une and December, 1923. On the evdence, therefore,
the cam was fed wthn the 4-year perod of mtaton provded
n secton 284 (b) of the Revenue ct of 1926. It s the opnon
of ths offce that the provsons of secton 703(a)4 are appcabe to
the trustees (or, to speak accuratey, to the trust as a ta abe entty)
wth respect to the edera estate ta pad n 1922.
The ne t queston s whether the trust s entted to deduct the
whoe payment or ony some porton of t. The edera estate ta
s based on the decedent s estate as a whoe, and not merey on the
porton receved by the trustees, and t s arguabe that rrespectve
of the amount pad by a partcuar benefcary, he may n no event
deduct more than hs proportonate share of the ta . What that
proporton s mght be determned by comparng the vaue of the
property receved by a partcuar benefcary wth the vaue of the
decedent s entre estate. smar theory, f apped to such State
nhertance ta es as are measured by the benefcary s reatonshp
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8703.
214
to the decedent, and by the amount of property receved by the
benefcary, woud resut n hodng that a benefcary may not deduct
more than the amount of nhertance ta pad or accrued wth respect
to the very property acqured by hm from the decedent.
It s beeved that the deducton shoud not be mted under the
crcumstances of the nstant case to any sum ess than the tota
amount pad. The trustees n fact pad the whoe sum, and pad t
from ncome ta abe to the trust as an entty. They state n pos-
tve terms n ther bref that no one ese s camng a deducton
for any part of ths sum, or s n a poston to make such a cam.
owever, a smar resut woud not necessary foow f other
benefcares were camng deductons for the same ta , or were n
a poston to cam such deductons.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
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215 203, rt. 1574.
INCOM T RULINGS. P RT II.
R NU CT O 1926.
TITL II. INCOM T .
P RT I. G N R L PRO ISIONS.
S CTION 203. R COGNITION O G IN OR LOSS
ROM S L S ND C NG S.
rtce 1572: changes of property. -20-5063
( so Secton 214(a)4, 5, 6, rtce 141.) I.T.2573
R NU CT O 1926 ND PRIOR R NU CTS.
In vew of the Commssoner s acquescence n the decson of the
oard of Ta ppeas n the case of W. . artman Co. v. Com-
mssoner (20 . T. ., 302, page 27, ths uetn), t s hed that no
gan or oss s recognzed from the tradng n of trucks and passen-
ger cars used for busness purposes on new trucks and passenger cars
to be used for ke purposes.
I. T. 2356 (C. . I-1, 168) affrmed.
I. T. 2419 (C. . II-1, 231) and Mmeograph 3641 (C. . II-1,
86) revoked.
rtce 1574: changes n connecton wth 1 1914
corporate reorganzatons. G. C. M. 8991
R NU CT O 1926.
Under the crcumstances n ths case the entre gan reazed
by the common stockhoders of the M Company who partcpated
n the transacton wth the N Company shoud be treated as
ta abe ncome for the year 1927, the year n whch the transac-
ton occurred.
. n opnon s requested whether there shoud be a recognton of
gan from the e change n 1927, by certan ta payers, of common
stock of the M Company, for bonds and shares of stock of the N
Company.
On December , 1926, a wrtten agreement was entered nto
between the P Company and the Company (actng for stockhoders
hodng 55 per cent of the outstandng common stock of the R Com-
pany), as partes of the frst part, and the O Company, as party of
the second part, to effect a reorganzaton and consodaton of ther
hodngs, whe preservng ther contro of and proportonate nter-
ests n the aggregate property to be ncuded n the consodaton and,
pursuant to sad genera pan of reorganzaton and consodaton,
to organze a new corporaton under the aws of the State of Y, to be
caed the N Company, for the purpose of consodatng sad proper-
72109 31 15
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216
tes and nterests now owned and controed by the respectve partes
hereto. It was rected that n order to more satsfactory carry
out sad genera pan of reorganzaton and consodaton, t s neces-
sary that the M Company, a State of Y corporaton, be organzed
pursuant to a pror pan of reorganzaton to whch such State of Y
corporaton and the e stng R Company sha both be partes.
Itacs supped.
It was agreed that sad representatves of the common stockhoders
of the R Company woud cause that company to transfer a of ts
assets, sub|ect to ts abtes, to a new State of Y company (the M
Company), n e change for a of the stock of the M Company. The
stock of the M Company was to consst of the same number of shares
of frst preferred, partcpatng preferred, and common stock, wth
the same rghts and preferences as the R Company then had out-
standng. The M Company was organzed on or about ebruary ,
1927, accordng to the agreement, wth capta stock consstng of
frst preferred stock, 4,500a doars partcpatng preferred stock,
1,260a doars and common stock 200y shares a of whch was
ssued to the R Company n e change for a of that company s assets.
The R Company upon the recept of such stock dstrbuted the same
to ts stockhoders share for share.
fter provdng for sad pror pan of reorganzaton the agree-
ment mentoned provded for the genera pan of reorganzaton
and consodaton, by whch the partes of the frst part (the P
Company and the Company) were to cause a new corporaton
to be organzed under the aws of the State of Y under the name of
the N Company, to whch sad partes of the frst part woud cause
to be devered not ess than 55 per cent of the common stock of the
M Company n e change for stock and securtes on the foowng
bass: or each 10 shares of common stock of the M Company a
prncpa amount of debentures of the N Company of the market
vaue of .15a doars, 1 share of the second preferred stock, nonvotng,
and 1 share of cass common stock, votng, of the N Company.
The agreement dd not provde for the acquston by the N Company
of any of the frst preferred or any of the partcpatng preferred
stocks of the M Company.
The O Company on ts part agreed that pursuant to sad genera
pan of reorganzaton and consodaton and as a substantay s-
mutaneous transacton wth the acquston of the M Company com-
mon stock by sad N Company, the O Company w take the neces-
sary corporate acton to transfer to the N Company a of ts hod-
ngs of securtes or the cash proceeds of any such secur-
tes as may be sod pror to such transfer n e change for
the ssuance to the O Company of three tmes the number of shares
of cass common stock of the N Company, whch w be ssued
and outstandng mmedatey after the acquston of not ess than
55 per cent of the common stock of the M Company.
It was further agreed that pursuant to sad genera pan of re-
organzaton and consodaton the partes of the frst part (the P
Company and the Company) woud by a substantay smutane-
ous transacton transfer to the O Company the cass common
(votng) stock of the N Company receved by them, n e change for
such ratabe proporton of new cass (nonvotng) and cass
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203, rt. 1574.
(votng) stock of the O Company as woud equa a one-thrd n-
crease n the amount of sad cass and cass stock of the
0 Company over the amount outstandng pror to such e change.
The N Company was duy ncorporated. On ebruary , 1927,
n pursuance of the above contract t ssued
6 per cent debenture bonds, par vaue 2,850a doars
2d preferred stock (nonvotng) 13.5 / shares
Cass common stock (votng) Oy shares
The N Company had a arger authorzed capta structure, but the
foregong represents the entre amount of stocks and securtes ssued
n pursuance of the contract whch has been descrbed. The P Com-
pany and the Company caused the transfer to the N Company of
55 per cent of the outstandng common stock of the M Company n
e change for sad debenture bonds, a of the nonvotng second pre-
ferred stock, and 27.5y shares of sad cass common stock.
Smutaneousy, the O Company transferred a of ts assets, consst-
ng of a dversfed st of corporate stocks, to the N Company n
e change for the remanng 82.5y shares of cass common stock
(votng) of the N Company. urther, n a transacton ntended to
be smutaneous, the P Company and the Company turned over
the 27.5y shares of cass common stock of the N Company re-
ceved by them to the O Company n e change for 237.5y shares of
cass nonvotng common stock and 134y shares of cass
votng common stock of the atter company.
Upon the competon of the transacton wth the N Company, the
entre ssued votng common stock of sad corporaton was owned by
the O Company, whe the debenture bonds and the second preferred
stock (nonvotng) of the N Company were owned by the persons rep-
resented by the P Company and the Company, who dd not own
any votng stock n the N Company, but dd own one-thrd of the
cass nonvotng common stock and one-thrd of the cass
votng common stock of the O Company.
ach common stockhoder of the M Company who partcpated n
the e change receved from the N Company for each share of com-
mon stock of the former company the foowng:
(1) 6 per cent debenture bond, par vaue .015a doars, market
vaue .Oa doars.
(2) One-tenth of a share of second preferred stock, par vaue .Oa
doars, market vaue .008a doars.
(3) .002// shares of cass common stock, no par vaue.
The vaue of the .002y shares of cass common stock of the
Company s ndcated by the fact that t was mmedatey e changed
for the foowng from the O Company:
(1) .00173y shares cass common stock, havng a market vaue
of .002a doars and,
(2) .00095 / shares cass common stock, havng a market vaue
of .0035a doars.
Upon the competon of the e changes the tota consderaton re-
ceved by sad common stockhoders of the M Company for each
share of common stock of that company amounted to .0235a doars,
and the queston s whether the gan reazed on such e change
shoud be recognzed as ta abe gan.
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203, rt. 1574.
218
Secton 203 of the Revenue ct of 1926 provdes n part as foows:
(a) Upon the sae or e change of property the entre amount of the gan or
oss, determned under secton 202, sha be recognzed, e cept as herenafter
provded n ths secton.
(b) (1)
(2) No gan or oss sha be recognzed f stock or securtes n a corporaton
a party to a reorganzaton are, n pursuance of the pan of reorganzaton, e -
changed soey for stock or securtes n such corporaton or In another
corporaton a party to the reorganzaton.
(3) No gan or oss sha be recognzed f a corporaton a party to a re-
organzaton e changes property, n pursuance of the pan of reorganzaton,
soey for stock or securtes n another corporaton a party to the
reorganzaton.
(4) No gan or oss sha be recognzed f property Is transferred to a
corporaton by one or more persons soey n e change for stock or securtes
n sueh corporaton, and mmedatey after the e change such person or per-
sons are n contro of the corporaton but n the case of an e change by two
or more persons ths paragraph sha appy ony f the amount of the stock
and securtes receved by each s substantay n proporton to hs nterest
n the property pror to the e change.

(h) s used n ths secton and sectons 201 and 204
(1) The term reorganzaton means ( ) a merger or consodaton (n-
cudng the acquston by one corporaton of at east a ma|orty of the votng
stock and at east a ma|orty of the tota number of shares of a other casses
of stock of another corporaton, or substantay a the propertes of another
corporaton), or ( ) a transfer by a corporaton of a or a part of ts assets
to another corporaton f mmedatey after the transfer the transferor or ts
stockhoders or both are n contro of the corporaton to whch the assets are
transferred, or (C) a recaptazaton, or (D) a mere change n dentty, form,
or pace of organzaton, however effected.
The transfer of a of the assets of the R Company to the M Com-
pany for a of the atter s preferred and common stock consttuted
a reorganzaton wthn the meanng of secton 203(h) 1( ) above,
on whch no gan or oss was recognzabe by vrtue of secton 203(b)3.
The M Company was a party to ths reorganzaton. That com-
any s partcpaton n the pan set forth n the contract of Decem-
3r , 1926, ceased at ths pont. Thereafter t was a group of the
common stockhoders of the M Company, ownng at east 55 per
cent of ts common stock, who partcpated n the organzaton of the
N Company. y ts e change wth the sad common stockhoders,
the N Company acqured at east 55 per cent of the common stock of
the M Company, but dd not acqure anv part of the two casses of
preferred stock of the atter company tnen ssued and outstandng,
and, therefore, there was no reorganzaton as between these two new
corporatons wthn the meanng of secton 203(h) 1( ). The N
Company, because t acqured a the assets of the atter company.
owever, the e change of 55 per cent of the common stock of the
M Company by common stockhoders of that company was an e -
change of stock of a corporaton not a party to the atter reorganza-
ton for stocks and securtes of the N Company, one of the partes
to the atter reorganzaton, and accordngy the e change does not
quafy as a transacton on whch the accountng for gan shoud be
deferred under secton 203(b) 2 of the Revenue ct of 1926.
It has been urged that the common stock of the M Company
whch was transferred to the T Company may be vewed as prop-
erty transferred to the atter company wthn the meanng of
reorganzaton wth the O
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219
204, rt. 1599.
secton 203(b)4 of the evenue ct of 1926. Under ths vew the
hoders of 55 per cent of the common stock of the M company woud
be treated as puttng ther common stock as property nto the N
Company, and the 0 Company as puttng n ts assets (stocks of
other corporatons) soey n e change for stock and securtes of the
N Company. Secton 203(b) 4 requres, however, that the two or
more persons who convey property to a corporaton sha mmedatey
after the e change be n contro of the corporaton. The word con-
tro as used n secton 203 s denned n subdvson () thereof as
meanng the owmershp of at east 80 per centum of the votng
stock and at east 80 per centum of the tota number of shares of a
other casses of stock of the corporaton. Itacs supped.
In the case at hand, upon the competon of the transacton wth
the N Company a of the cass votng common stock was owned
by the O Company, whe that company owned no part of the non-
votng second preferred stock. The transferors of common stock
of the M Company had no ownershp of the cass votng com-
mon stock of the N Company but owned a of the nonvotng second
preferred stock of that corporaton. Snce nether one of the partes
to the transacton owned as much as 80 per cent of both casses of the
ssued stock of the N Company upon the competon of the transac-
ton, t s the opnon of ths offce that the e change can not be cass-
fed as one made nonta abe under secton 203(b) 4 of the Revenue
ct of 1926.
Under the crcumstances of ths case, the entre gan reazed by
the common stockhoders of the M Company who partcpated n
ths transacton wth the N Company shoud be treated as ta abe
ncome for the year 1927, the year n whch the transacton occurred.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
S CTION 204. SIS OR D T RMINING G IN OR
LOSS, D PL TION, ND D PR CI TION.
rtce 1599: Stock or securtes dstrbuted -6-4926
n reorganzaton. G. C. M. 8751
R NU CT O 1926.
Where, pursuant to a pan of reorganzaton, there was a dstr-
buton of stock and bonds to the stockhoders of the od companes
and/or to a commttee representng those stockhoders, and then
a sae by those stockhoders through ther commttee of a porton
of the stock and bonds prevousy receved by them, the gan or
oss derved by each stockhoder must be determned by comparng
the amount of cash receved by hm from the sae of a porton of
hs stock and bonds wth the bass of that porton determned
pursuant to artce 1599 of Reguatons 69, as amended by Treasury
Decson 4144 (C. . II-1, 55), and further amended by Treasury
Decson 4274 (C. . III-2, 240).
n opnon s requested reatve to the gan derved or oss sus-
taned from a sae of stock and bonds receved pursuant to a pan of
reorganzaton.
It appears that the M Company and the N Company were conso-
dated nto the O Company on May , 1927. Pursuant to the pan of
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204, rt. 1599.
220
reorganzaton, a of the pants, propertes, assets, busness, and
good w of the M Company and the N Company were transferred
to the O Company n consderaton of the ssuance and devery to
the stockhoders of the M Company and the N Company of 5y2 per
cent snkng fund god debenture bonds havng a face vaue of do-
ars and y shares of no par vaue common stock (the entre ssued
capta stock) of the O Company. Under the pan of reorganzaton,
64 per cent of the stock and bonds of the O Company was to be de-
vered to the stockhoders of the M Company and 36 per cent was to
be devered to the stockhoders of the a Company, n proporton to
the respectve stock hodngs of each member of those groups. The
reorganzaton was approved at a meetng of the stockhoders of both
od companes hed on May , 1927, and was mmedatey thereafter
carred nto effect.
Thereafter and on May , 1927, the former stockhoders of the
M Company and the N Company met and e ecuted an agreement
whereby certan of ther members were apponted a commttee repre-
sentng a stockhoders and were authorzed to se for not ess than
95 per cent of the face vaue the entre bond ssue whch had been
receved pursuant to the reorganzaton |ust competed. In the
same agreement the commttee was authorzed to se one-seventh, or
.143y shares, of the capta stock of the O Company prevousy re-
ceved by the former stockhoders of the M Company and the N
Company at not ess than z doars per share. t the drecton of
the commttee a snge bond n the amount of doars was there-
after ssued to bearer and was sod by the commttee to bankers at
95 per cent of ts face vaue pus accrued nterest. Two stock cer-
tfcates were thereafter ssued by the O Company to each of the
former stockhoders of the M Company and the N Company. One
certfcate for one-seventh of the amount of stock of the O Company
each stockhoder was entted to receve was devered to the com-
mttee to be sod pursuant to the agreement of May , 1927, and a
second certfcate for s -sevenths of the amount of stock of the O
Company each was entted to receve was devered drecty to each
stockhoder. The commttee thereafter sod one-seventh of the stock
of the O Company to varous ndvduas and dstrbuted the pro-
ceeds of the saes of stock and bonds to the former stockhoders of
the M Company and the N Company.
It s suggested that the reorganzaton and the sae of the bonds
and one-seventh of the stock of the O Company n effect consttuted
a snge transacton wheren the stockhoders of the od companes
receved not ony stock of the O Company but aso cash, and that
ta abe ncome s mputabe to the stockhoders of the od companes
on account of the recept of such cash, ether on the theory that
they receved stock and cash n e change for ther stock n the od
companes or that the cash dstrbuton had the effect of a ta abe
dvdend.
It s cear, however, that there occurred n the nstant case frst
a compete reorganzaton and dstrbuton of stock and bonds of
the new company to the stockhoders of the od companes and/or
to a commttee representng those stockhoders, and then a sae by
those stockhoders through ther commttee of a porton of the stock
and bonds prevousy receved by them. In ths connecton t must
be noted that no cash at any tme was receved by the stockhoders
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221
206, rt. 1622.
of the od companes from the O Company drecty or ndrecty.
On the contrary, nothng was ssued by the O Company e cept, ts
own stock and bonds, and they were ssued to the former stock-
hoders of the od companes n ther due proportons. No cash was
receved e cept as consderaton for the entre bond ssue and one-
seventh of the stock ssue when and as sod by the commttee repre-
sentng the stockhoders. Pror to that tme the stock and bonds of
the O Company had been ether actuay or constructvey receved
by the former stockhoders of the od companes and had assumed
abass determnabe under the provsons of artce 1599 of Regua-
ton 69, as amended by Treasury Decson 4144 (C. . II-1, 55),
and further amended by Treasury Decson 4274 (C. . III-2, 240).
The gan derved or oss sustaned by each stockhoder must be deter-
mned by comparng the amount of cash receved by hm from the
sae of a porton of hs stock and bonds wth the bass of that porton
determned as above ndcated.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
S CTION 205. IN NTORI S.
rtce 1614: Inventores at market.
R NU CT O 1926.
Goods purchased n the open market and goods produced from
own property. (See G. C. M. 9401, page 102.)
S CTION 206. N T LOSS S.
rtce 1622: Cam for aowance of net oss. -2-4895
Ct. D. 2C7
INCOM T R NU CT O 1926 D CISION O COURT.
Deducton ffated Corporatons Net Loss efore ffa-
ton.
net oss n 1926, as defned by secton 206 of the Revenue ct
of 1926. of a corporaton wthout an affated status n that year,
whch had no net ncome n 1927, when t was affated wth an-
other corporaton wthn the meanng of secton 240 of that ct,
may not be deducted n determnng the consodated net ncome of
the corporatons for the atter year.
Dstrct Cout of the Unted States for the Northern Dstrct of Georga,
tanta Dvson.
Wooford Reaty Co., Inc., pantff, v. . T. Rose, Coector of Interna Revenue,
defendant.
November 14, 1930.
OPINION.
Sbey, udge: Wooford Reaty Co. sues to recover as an overpayment n-
come ta pad on a consodated return for tsef and Pedmont Savngs Co.
for the year 1927. genera demurrer s nterposed. The petton and e -
hbts show these facts: Pedmont Savngs Co., pror to 1927, was not so aff-
ated wth pantff as to permt consodated returns. The separate returns
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206, rt. 1625.
222
of Pedmont Savngs Co. for 1925 and 1920 showed net osses. The conso-
dated return for 1927 showed a sma net oss for the Pedmont Savngs
Co., whch was taken off the net ncome shown for Wooford Reaty Co. n
f ng the consodated ta . y an amendment of the consodated return
there were sought to be brought forward as addtona deductons the net
osses of the Pedmont Savngs Co. for 1925 and 1926, whch woud have can-
ceed the net ncome for 1927 of Wooford Reaty Co. The correctness of the
dena of these deductons s the whoe queston here.
Secton 240 of the Revenue ct of 1926 permts affated corporatons to
make consodated returns for any ta abe year under reguatons pre-
scrbed by the Commssoner. The Reguatons 69, secton 632 and foowng,
dea wth consodated returns, but make no e press provson about carryng
forward prevous separate net osses. Secton 634, reatng to changes of
ownershp durng the year, rather ndcates a purpose to e cude from the
consodated return a separate busness. Secton 635, reed on by pantff,
whe t requres the separate deductons for each corporaton to be stated,
says nothng about what they sha Incude. Ordnary the deductons are the
same that woud be shown for each corporaton on a separate return. Regua-
ton rtce 1622, whch deas wth carryng forward a net oss for deducton
the foowng year, says: It shoud be notced, however, that a net oss for a
precedng year may not be consdered n computng a net oss for a succeed-
ng year. Ths s a far nterpretaton of the anguage of the Revenue ct of
1926, secton 206(b), on the pont. Snce, therefore, Pedmont Savngs Co.
made no net ncome n 1927, but a net oss, these prevous net osses woud not
be consdered n a separate return. In permttng consodated returns where
one corporaton substantay owns the other, Congress apparenty desred to
recognze that the busness mght a be |usty consdered that of the parent
company and ts profts and osses deat wth accordngy for the ta abe
year. Layng emphass on the quoted words, and confnng the perod of con-
sodated accountng to the perod of actuay affated busness, w effectu-
ate ths ntent. Reguaton rtce 634 even carres t nto fractons of a
year. To permt a money-earnng corporaton to take credt for net osses of
another corporaton whch t has subsequenty bought woud not be n ne
wth, but antagonstc to, the ntent of and the reasons for the aw. Whether
the net osses for 1925 and 1926 woud have been avaabe f a net ncome had
been shown by the Pedmont Savngs Co. after affaton n 1927 need not be
here decded. The petton sets forth no cause of acton and w be dsmssed.
rtce 1C25: Net osses of partnershps, estates - 4981
and trusts, and nsurance companes. T. D. 4308
INCOM T .
Net osses Insurance companes artce 1603 of Reguatons
62 and artce 1625 of Reguatons 65 and 69, amended.
Treasuky Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
rtce 1603 of Reguatons 62 and artce 1625 of Reguatons 65
and 69 are hereby amended by the addton thereto of the foowng:
In the case of an nsurance company sub|ect to the ta mposed by secton
243, the net oss s the amount by whch gross ncome as defned n sec-
ton 244(a) s e ceeded by the deductons aowed by secton 245 e cudng:
(a) The amount of nterest receved durng the ta abe year aowed as a
deducton under secton 245(a) 1, n e cess of the amount of nterest pad
wthn the ta abe year whch s not deductbe under secton 245(a)8
(6) The amount receved as dvdends and aowed as a deducton under
secton 245(a)3
(o) The amount aowed as a deducton under secton 245(a)4 on account
of sums hed as a reserve for dvdends and
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223
208, rt. 1 351.
d) The amount aowed as a specfc credt under secton 245(a)9.
In the, case of an nsurance company sub|ect to the ta mposed by secton
246, the net oss s the amount by whch gross Income as defned n secton
240(b) 1 Is e ceeded by the deductons aowed by secton 247 e cudng:
(a) The amount of nterest earned durng the ta abe year aowed as a
deducton under that part of secton 247(a)7 whch refers to nterest e empt
from ta aton under secton 213(b)4, n e cess of the amount of nterest
accrued wthn the ta abe year whch s not deductbe under secton 247(a)2
n vew of the provsons of secton 234(a)2
(6) The amount of nterest aowed as a deducton under that part of
secton 247(a)7 whch refers to nterest aowed as a credt under secton 23(5
(o) The amount receved as dvdends and aowed as a deducton under
secton 247(a)6 and
(d) The amount aowed as a specfc credt under secton 247(a)9.
Davd urnet,
Commssoner of Interna Revenue.
pproved March 7, 1931.
Ogden L. Ms,
ctng Secretary of the Treasury.
S CTION 208. C PIT L G INS ND LOSS S.
rtce 1651: Defnton and ustraton of --4975
capta net gan. Ct. D. 294
INCOM T R NU CTS O 1921, 1924, ND 1926 D CISION O COURT.
Capta ssets Royates O Lease.
Proft derved from the sae of royates payabe n knd under
a ease of o property s ta abe as ordnary ncome at the rates
prescrbed by sectons 210 and 211 of the Revenue cts of 1921,
1924, and 1926, and s not capta gan from the sae of capta
assets wthn the meanng of secton 206 of the Revenue ct of
1921 and secton 208 of the Revenue cts of 1924 and 1926, sub|ect
to the mted rate of ta aton provded n those sectons.
Unted States Cbcut Coubt of ppeas, Tenth Crcut.
. C. e ander, Coector of Interna Revenue, appeant, v. Seene Waker
ng, appeee.
ce C. e ander, Coector of Interna Revenue, appeant, v. nna Ruzek,
appeee.
ppeas from the Dstrct Court of the Unted States for the Western Dstrct of Okahoma.
anuary 2, 1931.
OPINION.
McDebmott, Crcut udge, devered the opnon of the court.
These four appeas present the same queston: The ta payers own royaty
nterests under ordnary o and gas eases durng the ta abe years, they
receved ther contract share of the o produced and have sod t are the pro-
ceeds of such saes ta abe as ordnary ncome, or are they ta abe as capta
gans arsng from the saes of capta assets hed by the ta payers for more
than two years The tra court hed to the atter vew, and the coector
has appeaed.
eene Waker ng fed three suts aganst the coector, one to recover
ta es pad by her for the year 1925, one for the year 1926, and one for the year
1927. She aeged that the ta es so pad arose out of the sae of o and gns
produced from three tracts of and, on whch ands and the o and gas so
G
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224
produced, her rght was acqured for proft more than two years pror to
anuary 1,1925 that such o was not a part of her stock In trade, nor was t
hed by her prmary for sae n the course of her trade or busness that the
o and gas was produced n the course of deveopment under three eases
the pantff and/or her husband owned two of the tracts of and, and she and
her husband were the essors, the pantff ownng, durng the ta abe years,
one-haf of the one-eghth royaty nterest theren the thrd tract was owned
by one Schroeder and/or hs wfe, and they were the essors, the pantff
havng acqured, .n 1920, one-thrteenth of the essor s one-eghth nterest
theren. These eases are n substance the same, and grant, et and ease, for
the perod of fve years or as ong thereafter as o or gas s produced therefrom,
the and descrbed for the soe and ony purpose of mnng and operatng for
o and gas and purposes ncdenta thereto. In consderaton whereof, the
essee agreed to dever to the credt of the essor, free of cost, n the ppe
ne to whch he may connect hs wes, the equa one-eghth part of a o
produced and saved from the eased premses. cash renta was stpuated
for gas used off the premses there are other covenants unmportant here
the royaty rght s wthout burden or obgaton upon pantff s part. The
pantff then aeges that the coector whoy computed her ta n conformty
wth sectons 210 and 211 of the Revenue cts of 1924 and 1926, and dened
to her the eecton of payng the 12 per cent of the capta net gan provded
by secton 208. She fed a cam for refund of the dfference n ta , and upon
ts dsaowance, brngs these suts. Pantff s reeomputaton of the ta s
attached to her petton, whch dscoses that she returned the fu sae prce
of o sod, and deducted therefrom not the cost to her, or the March 1, 1913,
vaue of the capta asset aeged to have been sod, but deducted 27 2 per cent
of the sae prce as depeton.
genera demurrer to the petton was fed n one of the cases, argued
and overrued. nswers by way of genera denas were fed and the cases
were submtted on stpuatons whch the tra court treated as admttng the
aegatons of the pettons. The stpuatons ony admt that the ta es were
assessed under sectons 210 and 211, and that f they are egay cacuabe
under secton 208, there was an overpayment In sums stated. The stpuatons do
not admt the ncome arose as aeged. These records are careessy prepared
the coector fed genera denas wthout admttng the ctzenshp of pantff,
hs own offca capacty, the ownershp of the royaty Interests, or the sources
of the ncome. The cases were tred on stpuatons whch cover none of the
essenta facts e cept the amount recoverabe. ut snce the tra court and
the partes treat the aegatons of the pettons as admtted, and snce t s
mportant that the aw be determned, we take the pettons as true.
In No. 306, nna Ruzek had owned the and from whch the o was produced
snce 1905, and she was the essor under a ease substantay dentca wth
those above descrbed. She sues to recover ta es pad for the year 1923, and
her case s governed by the correspondng sectons of the ct of 1921. In her
case, a demurrer was fed and overrued an answer was fed and the same
stpuaton made as above set out.
Pror to 1921 gan reazed from the sae of capta assets was treated as
a other ncome, and sub|ect to the same ta rates. The ta rates were hgh
n the upper surta brackets, and the gan from such saes often reached nto
such brackets. ecause of such hgh rates, saes were not made and busness
was stagnatng. ccordngy the Ways and Means Commttee reported ont
secton 206 of the Revenue ct of 1921 (secton 208 n the cts of 1924 and
1926) to reeve ths stuaton, and n e panaton thereof stated:
The sae of farms, mnera propertes, and other capta assets s now
serousy retarded by the fact that gans and profts earned over a seres of
years are under the present aw ta ed as a ump sum (and the amount of
surta greaty enhanced thereby) n the year In whch the proft s reazed.
Many such saes, wth ther possbe proft takng and consequent ncrease of
the ta revenue, have been bocked by ths feature of the present aw. In
order to permt such transactons to go forward wthout fear of a prohbtve
ta , the proposed b, n secton 206, adds a new secton (207) to the ncome
ta , provdng that where the net gan derved from the sae or other dspos-
ton of capta assets woud, under the ordnary procedure, be sub|ected to an
ncome ta n e cess of 15 per cent, the ta upon capta net gan sha be
mted to that rate. It s beeved that the passage of ths provson woud
materay ncrease the revenue, not ony because t woud stmuate proft-
takng transactons but because the mtaton of 15 per cent s aso apped
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208, rt. 1651.
to capta osses. Under present condtons there are key to be more osses
than gans.
Secton 208(a) provdes that the term capta gan means ta abe gan
from the sae or e change of capta assets and
The term capta assets means property hed by the ta payer for more
tt n two years (whether or not connected wth hs trade or busness), but does
not ncude stock n trade of the ta payer or other property of a knd whch
woud propery be ncuded n the nventory of the ta payer f on hand at the
cose of the ta abe year, or property hed by the ta payer prmary for sae
n the course of hs trade or busness.
Secton 208(b) provdes that
In the case of any ta payer (other than a corporaton) who for any ta abe
year derves a capta net gan, there sha (at the eecton of the ta payer)
be eved, coected and pad, n eu of the ta es mposed by sectons 210 and
211 of ths tte, a ta determned as foows: parta ta sha frst be
computed upon the bass of the ordnary net ncome at the rates and n the
manner provded n sectons 210 and 211, and the tota ta sha be ths amount
pus 12 per centum of the capta net gan.
Secton 210 provdes for the evy of the norma ta on Income, and 211 for
the evy of the surta . Secton 214 authorzes the aowance of certan deduc-
tons from ncome, and ncuded theren s the foowng:
In the case of mnes, o and gas wes, other natura deposts, and tmber,
a reasonabe aowance for depeton and for deprecaton of mprovements,
accordng to the pecuar condtons n each case such reasonabe aowance
n a cases to be made under rues and reguatons to be prescrbed by the
Commssoner, wth the approva of the Secretary. In the case of eases the
deducton aowed by ths paragraph sha be equtaby apportoned between the
essor and the essee.
Secton 204(c) provdes that the bass upon whch depeton s to be aowed
sha be the same as s provded for the purpose of determnng gan or oss
upon sae, wth certan e ceptons n 192G the secton was amended by pro-
vdng that n case of o or gas wes the aowance for depeton sha be 27
per cent of the gross ncome, but not to e ceed 50 per cent of the net ncome
from the property, nor be ess than t woud be f computed wthout reference
to ths paragraph.
The poston of the pantffs s that the o whch they sod was property
whch they had hed for more than two years, and thus s wthn the defnton
of capta assets n secton 208. nd that, n truth and fact, the o s a
part of the substance of the and and s mted n amount, and when they
se t, even n nstaments, they are partng wth a part of ther capta. The
coector asserts that the moneys reazed by a royaty owner from the opera-
ton of an o property s ordnary ncome, and not wthn ether the etter or
the sprt of the e cepton contaned n secton 208 that the pantffs dd
not own the o unt t was reduced to possesson, whch took pace wthn the
2-year perod f ed by the statute that pror to reducton to possesson, a they
owned was an ncorporea rght to reduce to possesson, whch rght was not
sod durng the ta abe year, and the sae of whch pantffs do not aege
was the source of the ncome. The coector further contends that the returns
of the pantffs do not dscose ether the cost or vaue of the propertes sod,
and thus do not dscose a capta gan and furthermore that the pantffs
deducted 27 per cent, as a depeton aowance, whch s a proper deducton
from ncome but not from a capta gan. The coector further asserts that, by
bndng anaoges, the queston has been determned by the Supreme Court of
the Unted States.
Pantffs rey argey upon the two decsons of the oard of Ta ppeas
upon whch the tra court rested ts opnon. The frst s Murphy v. Comms-
soner (9 . T. ., 610). Murphy owned and n rkansas, upon whch he
made dvers o and gas eases. In addton to the one-eghth royaty reserved
n the eases he receved a cash consderaton, or bonus, of 52,062.70 for ther
e ecuton. e then transferred, by warranty deed, an undvded one-haf
nterest n and to a of the o, gas and other mneras under hs and,
sub|ect to the outstandng eases, the deed rectng an ntenton to convey one-
haf of the one-eghth royaty to come to the essors n the eases above
descrbed. or ths transfer he receved 12,925. Murphy camed that both
sums shoud be ta ed as capta gan under secton 206 of the Revenue ct of
1921. The oard hed that the bonus was not capta gan, foowng erg v.
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208, rt. 1651.
226
Commssoner (6 . T. ., 1287), but hed that the consderaton receved for
the warranty deed was a capta gan. Ths decson ends no support to the
cam of pantffs, for Murphy sod outrght one-haf of hs reserved royaty,
whch represented the andowner s pr6perty rght n the o and gas. In the
cases at bar, the ta payers retan that property rght, and the ncome n ques-
ton s ther return for the use thereof. The dstncton s smar to that
between the proceeds from the sae of a farm and the proceeds from a renta
on shares.
The other case reed on s Reynods v. Commssoner (10 . T. ., 651).
The facts are dentca wth the Murphy case and the decson the same. The
oard of Ta ppeas has however decded the precse queston here nvoved,
snce the decson of the court beow. The case s erguson v. Commssoner
(20 . T. ., 130). The ta payer owned the and and receved a bonus for the
e ecuton of o eases n the years 1922, 1923, and 1924. Durng each of those
years, and n 1925, he receved a arge ncome from the rentas and royates
reserved n such eases. The oard referred to ts pror decsons, and the
decsons of the Supreme Court hereafter dscussed, and hed that nether the
ncome from royaty reserved nor the cash bonus was a capta gan wthn the
ntendment of secton 206. The Court of ppeas of the fth Crcut reversed
ths decson as to the bonus, but affrmed t as to the queston here nvoved,
the royates from operatons. ( erguson v. Commssoner (C. C. . 5), 45 P.
(2d), 573), decded December 13, 1930.
The pettons aege that the ncome arose from the sae of o and gas
produced whch had been owned by them for more than two years. Pan-
tffs dd own the and, or mnera rghts theren, for more than two years but
dd they own the o thereunder unt t was reduced to possesson, whch was
wthn two years The answer must be found n the decsons of the Supreme
Court of Okahoma. oe v. Seaborn (282 U. S., 101 Ct. D. 259, C. . I -2,
202 ), Crooks v. arre on (282 U S., 55 Ct. D. 271, page 469, ths uetn ),
both decded November 24, 1930. The Okahoma decsons are In compete
harmony wth, and rey for ther authorty upon, the decson of the Supreme
Court of the Unted States n Oho O Co. v. Indana (177 U. S., 190). The
eadng Okahoma case s that of Rch v. Donaghcy (71 Oka., 204, 177 P., S6,
3 . L. R., 352), n whch the Supreme Court of Okahoma denned the rghts
of andowners to o and gas underneath ther and. The court sad, n part:
y vrtue of such ownershp they had, on account of the vagrant and
fugtve nature of the substances, consttutng a sort of subterranean ferae
naturae, no absoute rght or tte to the o or gas whch mght
permeate the strata underyng the surface of ther and, as n the case of coa
or other sod mneras f ed n, and formng a part of, the so tsef .
ut wth respect to such o and gas, they had certan rghts desgnated by
the same courts as a quafed ownershp thereof, but whch may be more
accuratey stated as e cusve rght, sub|ect to egsatve contro aganst waste
and the ke, to erect structures on the surface of ther and, and e pore there-
for by drng wes through the underyng strata, and to take therefrom
and reduce to possesson, and thus acqure absoute tte as persona property
to such as mght be found and obtaned thereby. Ths rght s the proper
sub|ect of sae, and may be granted or reserved. The rght so
granted or reserved, and hed separate and apart from the possesson of the
and tsef, s an ncorporea heredtament or more specfcay, as desgnated
n the ancent rench, a proft a prendre, anaogous to a proft to hunt and
fsh on the and of another.
Turnng then to the rghts granted under a ease smar to the ones here
nvoved, the court sad:
In other words, t was a grant of the e cusve rght, for the tme specfed,
to take a the o and gas that coud be found by drng wes upon the par-
tcuar tract of and, wth the accompanyng ncdenta rght to occupy so
much of the surface as requred to do those thngs necessary to the dscovery
of and for the en|oyment of the prncpa rght so to take o or gas. No more
nor greater rght, e cept perhaps as to duraton, wth respect to o and gas,
coud be granted. though there had been n terms a purported conveyance
of a the o and gas n the pace, yet, by reason of the nature of these sub-
stances, no tte thereto or estate theren woud have vested, but ony the
rght to search for and reduce to possesson such as mght be found and
when reduced to possesson, not merey dscovered, tte thereto and an estate
theren as corporea property woud vest.
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208, rt. 1651.
In Carter v. Rector (88 Ok., 12, 210 P., 1035) the queston was whether a
bonus of 300,000 pad for a ease on producng property was ncome, or a
capta gan, under the Okahoma ncome ta aw. The court hed t was
ncome whch dd not arse from converson of a capta asset that a con-
verson or sae of o or gas can ony be accompshed when n pace, by the
sae of the and contanng t. To the same effect, on the same facts, see
Carter v. McCauey (97 Ok., 255, 225 P., 527).
Rch v. Donaghey has been repeatedy foowed n Okahoma Dunap v.
ackson (92 Ok., 246, 219, P. 314), D v. Rockwe (94 Ok., 25, 220, P. 620),
and by the ghth Crcut Court of ppeas In an Okahoma case, Prddy v.
Thompson (204 ., 955). nd t s n accord wth the decsons of the Supreme
Court of the Unted States n Oho O Co. v. Indana, supra Lndsey v.
atura Carbonc Gas Co. (220 U. S., 61) Okahoma v. ansas Nat. Gas Co.
(221 U. S., 229), and Was v. Mdand Carbon Co. (254 U. S., 300). The
Oho O Co. case s the eadng case on ths sub|ect the dstncton between
o and gas and coa or ore s dscussed, and the court thus concudes as to
the rghts of surface owners to o or gas underneath ther and:
Wthout pausng to wegh the reasonng of the opnons of the Indana
court n order to ascertan whether they, n every respect, harmonze, t s
apparent that the cases n queston, n accord wth the rue of genera aw,
sette the rue of property n the State of Indana, to be as foows. though
n vrtue of hs propretorshp the owner of the surface may bore wes for
the purpose of e tractng natura gas and o, unt these substances are
actuay reduced by hm to possesson, he has no tte whatever to them as
owner. That s, he has the e cusve rght on hs own and to seek to acqure
them, but they do not become hs property unt the effort has resuted n
domnon and contro by actua possesson.
The Supreme Court of Caforna has recenty e pored the same queston
and reached a concuson n accord wth Rch v. Donaghey and Oho O Co.
v. Indana. Stevenot v. ssocated O Co. et ah. decded December 13, 1930
andn Petroeum Co. v. The Superor Court, decded November 29, 1930. The
Supreme Court of ansas foows Oho O Co. v. Indana, and n eport v.
arrson (123 an., 310, 255, P. 52) hed that
The ordnary and ega meanng of the word royaty, as apped to an
e stng o and gas ease, s the compensaton provded n the ease for the
prvege of drng and producng o and gas, and conssts of a share n
the o and gas produced. It does not ncude a perpetua nterest n the o
and gas n the ground.
uthortes mght be mutped, but Rch v. Donaghey e hausts the pror
Okahoma decsons Oho O Co. v. Indana ctes many authortes then e st-
ng, and n the Stevenot and andn cases, the Caforna Supreme Court has
gathered the recent cases from o-producng States. urther ctaton here
woud dupcate work aready we done.
rom these authortes the concuson s cear that the pantffs dd not own
the o before t was reduced to possesson ther ownershp of the o arose
wthn the 2-year mtaton of the statute, and they are not entted to e ercse
the eecton afforded by secton 206 of the Revenue ct of 1921, or by secton
208 of the 1924 and 1926 cts. It s true that, through ownershp of the and,
they owned a property nterest n the o and gas, the rght to search for and
approprate ceary defned n the above cases and apty descrbed by udge
Phps n hs dssentng opnon n Leydg v. Commssoner (C. C. . 10) (43 .
(2d), 494), as a speces of ncorporea heredtament. ut ths rght was not
sod, as was done n the Murphy and Reynods cases, supra, but retaned. Pan-
tffs argue that, by the makng of a ease, they n effect sod ther rght to
e pore for a consderaton payabe n nstaments, |ust as much as one who ses
hs royaty Interest for a present consderaton. ut the dfference Is that
between an outrght sae and a ease for a term. andowner has the ncor-
porea rght to search for and take descrbed In the authortes cted. e can
e ercse that rght n person, or through another on such terms as are agreeabe
to hm and hs essee. ut n ether event he e ercses hs rght. e can se
the rght, n whch event he has parted forever wth t. Royaty s compensa-
ton for an e ercse of the rght. gan, the dfference s between the sae of
a farm and a contract transferrng the rght to use t for a term. urthermore,
the cases of pantffs are founded on the sae of o and gas, and not the sae
of a rght to e pore.
Whe the queston presented seems not to bo dffcut on prncpe, the case
of erguson v. Commssoner, supra, s the ony case drecty In pont. but there
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208, rt. 1651.
228
are other cases whch present cose anaoges. Under the ct of une 28, 1906,
whch deat wth the Osage Trbe of Indans, the mnera rghts were reserved
for the use of the trbe, but the ncome therefrom was dstrbutabe to the
ndvdua members of the trbe. In Work v. oser (261 U. S., 352), the ques-
ton arose whether the bonuses pad for o eases shoud be treated as property
reserved for the use of the trbe, or as ncome therefrom. The queston was
thus presented of whether a bonus was a sae of mnera rghts, or ncome from
the use of those rghts. The Supreme Court hed, sub|ect to condtons not
pertnent here, that the ndvdua Indan coud requre a dstrbuton of these
bonuses, and sad:
The bonus whch was the resut of bddng for desrabe and proftabe o
and gas eases secured for the members of the Osage Trbe te |ust vaue of
the use of ther property whch the f ng of royates n advance by the Pres-
dent was not adapted to gve them. It was n effect a suppement to the
royates aready determned. It was reay part of the royaty or renta n a
ump sum or down payment. We do not see how t can be cassfed as any-
thng ese. It was ncome from the use of the mnera resources of the and.
Of course, t nvoved a consumpton and reducton of the mnera vaue of the
and, but so does a royaty. Ths s an nevtabe characterstc of Income from
the product of the mne. What was ntended to be dstrbuted to the members
of the trbe was the ncome from the mnera deposts n ther ands, and the
bonus was part of that. Doubtess Congress had n mnd reguar annua or
quartery equa payments when t used the word royates and dd not antc-
pate such arge down payments. ut n the une pected event, we must decde
under what head the bonus s to be treated, whether as capta or ncome, and
t seems cear to us that, n vew of the entre statute, t s more apty descrbed
by the atter term.
gan, the ghth Crcut Court of ppeas and the Court of ppeas of the
Dstrct of Coumba have hed that the cash consderaton or bonus receved n
consderaton of the e ecuton of an o ease s not a capta gan wthn sec-
ton 208. Certorar was dened n both cases. ( urkett v. Commssoner, 31
. (2d), 667, 280 U. S., 565 erg v. Commssoner, 33 . (2d), 641, 280 U. S.,
598 Ct. D. 97, C. . I1I-2, 280 .) The Court of ppeas of the fth Crcut
hed to the contrary, n erguson v. Commssoner, supra, wthout referrng to
the erg and urkett cases. The erguson case s dstngushabe because, as the
court hed n the opnon, t s setted aw n Te as that an o and gas ease
vests a fee tte n the mneras themseves. ut counse for pantffs, n
the cases at bar, does not queston the soundness of the rue announced n the
erg and urkett cases and f that rue be sound, whch we are not caed
upon to decde, certany no ratona dstncton can be drawn between that part
of the consderaton for a ease whch s pad n advance and that part whch s
pad n nstaments. oth are parts of the consderaton for a mted grant of
the owner s ncorporea rght n and to the o underneath hs and. That the
bonus s pad n cash, and the subsequent renta n o ready convertbe nto
cash, s a dstncton wthout a dfference. The cash consderaton pad n
advance has more, f anythng, of the aspect of a sae of a capta asset, than
does the revenue derved from operatons.
Pertnent and persuasve authorty s found n the ne of cases decded by
the Supreme Court of the Unted States, deang wth the operaton of mnes
of mneras n pace, such as ron or coa. ere agan, the cases are stronger
aganst pantffs, for the rghts of the surface owner to ore n pace are more
tangbe than hs rght to fugacous mneras. The Supreme Court has deat
wth neary a the aspects of such mnng operatons, and has steadfasty de-
cned to treat them as conversons of capta assets. In Stratton s Independ-
ence v. owbert (231 U. S., 399) the ta payer mned god-bearng ore from
beneath ts own ands. The vaue of the ore recovered, ess the cost of re-
covery, was treated as ncome under the Corporaton Ta ct (36 Stat, 11,
112, ch. 6). The ta payer sued to recover the ta , camng that by ts mnng
operatons t smpy converted capta represented by rea estate nto capta
represented by cash, and such converson dd not resut n ncome that mnng
of ore necessary resuted n a waste of the estate that f ts proft be treated
as ncome, t shoud be offset by a charge to deprecaton of the vaue of the
ore n pace that the en|oyment of ts assets and the wastng thereof pre-
ceded par passu. ut the court hed at page 417:
Wo have no dffcuty, therefore, n concudng that the proceeds of ores
mned by a corporaton from ts own premses are to be taken as a part of the
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229
208, rt. 1651.
gross ncome of such corporaton. Congress no doubt contempated that such
corporatons, amongst others, were dong busness wth a wastng capta, and
for such wastage they made due provson n decarng that from the gross n-
come there shoud be deducted (nter aa) a osses actuay sustaned wthn
the year, Incudng a reasonabe aowance for deprecaton of property, f
any, etc.
Stanton v. atc Mnng Co. (240 T . S., 103) nvoved the ncome ta aw of
1913. The court approved of the doctrne of the Stratton case, and hed that
the proceeds from mnng operatons the vaue of the ore ess the cost of
recovery was ncome, and that the ta was not a property ta because the
statutory aowance for deprecaton mght be nadequate.
Ton a n bach v. Sargent Land Co. (242 U. S., 503) nvoved the corporaton
ta aw. The ta payer owned arge tracts of and under mnng eases, the
usua term of whch was 50 years, and receved arge sums as royates. The
coector treated such royates as ncome and made no aowance for depeton.
The court of appeas hed that the eases were such n name ony, and were
n fact conveyances of the ore n pace that the royates were not ncome, but
mere conversons of capta. The Supreme Court reversed the case t hed
that under the decsons of Mnnesota the royates from mnng eases con-
sttute rents and profts from the and, the compensaton pad by the essee for
the prveges granted by the ease. Independenty of Mnnesota aw, the court
hed, at page 521:
We thnk that the payments made by the essees to the corporatons now
before the court were not n substance the proceeds of an outrght sae of
mnng property, but, n vew of the terms of these nstruments, were n fact
rents or royates to be pad upon enterng nto the premses and dscoverng,
deveopng and removng the mnera resources thereof, and as such must be
hed now as then, to come fary wthn the term ncome as ntended to be
reached and ta ed under the terms of the Corporaton Ta ct.
In Unted States v. wabk Mnng Co. (247 U. S., 116), under the corpora-
ton ta aw, the essee undertook to deduct from ts gross ncome, the vaue
of the ore n pace. Ths was hed to be erroneous, -snce the ease dd not
convey the ore n pace. The case of Lynch v. worth-Stepvens Co. (2(57
U. 8., 364 T. D. 3690, O. . I -1, 162 ) arose under the ncome ta aw of
1916, whch authorzed a deducton from ncome of a reasonabe aowance
for depeton of mnng propertes. The court hed that whe the mnng
ease dd not pass tte to the ore n pace, t dd convey a property nterest
whch was sub|ect to e hauston, and to whch the depeton aowance was
appcabe. The court, n substance, approved of the rung of the coector n
the present nstance, that s, treatng the proceeds from mnng operatons as
ordnary Income, aowng a deducton for.depeton to care for the waste of
the estate.
Pantffs dstngush these decsons of the Supreme Court of the Unted
States because the royates were payabe n cash Instead of n knd. The
Supreme Court rests ts decsons on no such narrow ground, and n the
Stratton case, no cash renta was nvoved. What dfference n the quaty of
the transacton e sts on account of the medum n whch the renta s pad
andowner who rents hs farm on shares shoud not be treated dfferenty
than one who rents for cash. It s true that most of these cases deat wth
the Corporaton Ta ct, as ponted out n the erguson case, supra but the
e cse eved by that ct was measured by ncome, and not by the sae prce
of propertes owned. nd as we read these decsons, they hod that the proft
from mnng operatons s ncome from the use of, as dstngushed from a sae
of, a capta asset
Secton 206 of the ct of 1921 and secton 208 of the cts of 1924 and 1926
appy ony where there has been a converson of capta assets by a sae or
e change. ut the Supreme Court has estabshed the rue that the revenues
derved from mnng royates do not arse from a converson of capta assets.
No reason appears why an e cepton shoud be made where the mneras happen
to be o and gas.
It foows that the udgments appeaed from are erroneous. Snce the cases
were tred on stpuatons, there s no occason for a new tra. ( owbert v.
Penrose (C. C. . 10), 38 . (2d), 577, and cases theren cted.) The |udg-
ments are reversed n a of the cases, and the tra court drected to enter
|udgments for the defendant
Reversed.
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213(a), rt. U.
230
S CTION 209. RN D INCOM .
rtce 1662: Defntons and mtatons. -7-5035
L T. 2567
R NU CT O 1926.
The decson n the case of red C. Sanborn (19 . T. .,
495), n whch t was hed that a genera nsurance agent was en-
tted to treat as earned net ncome 20,000 whch he receved
as commssons on a poces wrtten n hs terrtory, even though
such poces were wrtten by hs subagents, shoud be foowed
n cases where the facts are smar.
Inqury s made whether the decson of the oard of Ta ppeas
n the case of red C. Sanborn (19 . T. ., 495) shoud be foowed
n smar cases.
The oard of Ta ppeas hed, n the case referred to above,
that a genera nsurance agent was entted to treat as earned net
ncome 20,000 whch he receved as commssons on a poces
wrtten n hs terrtory, even though such poces were wrtten by
hs subagents. Nonacquescence n the oard decson was pubshed
n Cumuatve uetn I -2, 83. petton for revew of the
oard s decson was fed wth the Crcut Court of ppeas for the
rst Crcut, but upon further consderaton was dsmssed on
October 28, 1930.
The decson by the Unted States oard of Ta ppeas n the
case of red C. Sanborn shoud, therefore, be foowed n cases where
the facts are smar. The nonacquescence of the Commssoner
n that decson, appearng n Cumuatve uetn I -2, 83, s wth-
drawn.
P RT II. INDI IDU LS.
S CTION 213(a). GROSS INCOM D IN D:
INCLUSIONS.
rtce 44: Sae of rea property nvovng -22-5083
deferred payments. Ct. D. 341
ncome ta revenue act of 1926 decson of court.
Instament Sae Property Inta Payments Mort-
gage ssumed by Purchaser.
In the sae of mortgaged rea property the assumpton of the
mortgage by the purchaser s property other than evdences of
ndebtedness of the purchaser wthn the meanng of secton
212(d) of the Revenue ct of 1926 and the assumed mortgage s a
part of the nta payments wthn the meanng of that sub-
dvson to the e tent that the amount thereof e ceeds the bass to
the vendor of the property sod. Where such e cess pus the
amount of the cash receved durng the ta abe perod n whch
the sae was made e ceeds one-fourth of the purchase prce the
sae s not one on the nstament pan wthn the meanng of that
subdvson and the ncome therefrom may not be returned on the
nstament pan bass.
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231
213(a), rt. 44.
Unted States CrRcrrrr Couut of ppeas, S th Crcut.
Robert . Lucas, Coeotor of Interna Revenue for the Dstrct of entucky,
appeant, v. . . Schneder, Trustee of the state of agby- otce Drug Co.,
ankrupt, appeee.
ppea from the Unted States Dstrct Court for the Western Dstrct of entucky.
March 6, 1931.
OPINION.
cks, Crcut udge: agby- owe Drug Co., heren caed the ta payer, was
a entucky corporaton engaged at Lousve from 1904 to 1926 n the manu-
facture and sae of drugs at whoesae. Subsequent to March 1, 1913, and
before the ta abe year 1925 the ta payer acqured certan rea estate wth
mprovements at 626 Man Street, Lousve, at an aggregate cost of 69,460.46.
Pror to 1925 t took deductons n ts ncome ta returns for deprecaton of
sad property n the amount of 15,263, eavng an undeprecated baance of
154.197.46. In the ta abe year 1924 the ta payer e ecuted two mortgages
upon the property and receved thereon 90,000 upon the frst and 2,000 upon
the second. In the ta abe year 1925 t sod the property for 155,000, whch
was pad as foows:
Cash (pad n 1925) 13,066.27
Commsson on sae 4, 300.00
State and county ta es (pad by purchaser) 568.48
Transfer ta es (pad by purchaser) 65.25
Second mortgage notes, e tendng over perod of 5 years 45,000. 00
rst mortgage notes, assumed by purchaser 90, 000.00
Second mortgage notes, assumed by purchaser 2, 000.00
Tota seng prce 155,000.00
The proft reazed or to be reazed from the sae was 84,842.04, computed
as foows:
Tota seng prce 155,000. 00
Less cost of property, ncudng mprovements 69, 460.46
Less deprecaton 15,263.00
54,197.46
Seng e pense 15,960. 50
70,157. 96
84,842.04
In ts ta return for the year 1925 the ta payer as a part of ts gross ncome
ncuded as proft from the sae of the rea estate the sum of 60,123.78. Ths
resuted n a ta abty of 1,279.56, whch was pad by appeee Schneder,
trustee n bankruptcy, the ta payer havng been ad|udcated a bankrupt on
pr 14, 1926. ppeee nssts that the ncuson of the aforesad sum of
60,123.78 n the return for 1925 was erroneous that a the payment the ta -
payer receved that year upon the sae of the rea estate was the 13,066.27
above ndcated that ths payment dd not e ceed one-fourth of the purchase
prce and that the ta payer shoud therefore have made ts 1925 return under
secton 212(d) of the Revenue ct of 1926 retroactvey apped (U. S. C, Tte
26, secton 953, subsecton d, secton 953(a)) caed the nstament pan bass,
and that when so made ts ta abe ncome for 1925 woud amount to ony
19,091.44 that t had therefore overstated ts ta abe net ncome on the entre
year s busness to the amount of 41,032.32 and had shown a proft of 11,841.22
when t had n fact sustaned a oss of 29,191.12 that t had therefore overpad
ts ta es and was entted to recover the sad payment of 1,279.56 and nterest.
Respondent nssts that the ta payer s not entted to have ts ta abe ncome
for the year 1925 on the sae of sad rea estate computed upon the nstament
pan bass but that the entre proft of 84,842.04 shoud have been ncuded n
ts return for that year.
72109 31 16
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213(a), rt. 44.
232
The queston for decson s, whether the sae of the property was an nsta-
ment sae wthn the meanng of sad secton 212(d). Ths queston s made
to depend by the statute upon whether the nta payments e ceed one-fourth
of the purchase prce. If they do not t waa an nstament sae otherwse t
was not. It s necessary therefore to determne what s meant by the purchase
prce and the nta payments. The purchase prce s unquestoned t
was 155,000. Inta payments are defned n the statute as foows:
s used n ths subdvson the term nta payments means the payments
receved n cash or property other than evdences of ndebtedness of the pur-
chaser durng the ta abe perod n whch the sae or other dsposton was
made.
The statute recognzed the common method of makng payments n ether
cash or property, or both, and provded that nta payments mght be n ether
or both but e cuded evdences of ndebtedness of the purchaser durng the
ta abe perod n whch the sae was made from the nta pay-
ments. Secton 212(d) has reference to the ndebtedness of the purchaser to
the seer. It deas wth no other reatonshp. It has nothng to say touchng
mortgages or mortgagees or evdence of ndebtedness to mortgagees. It s a
revenue measure deang wth the return of a ta payer who has made a sae of
property (n ths case of rea estate) upon the nstament payment pan and
e cudes evdences of ndebtedness by reason of the deferred nstament pay-
ments because to have ncuded such evdences n the nta payments woud
have defeated the purpose of the nstament pan of return.
other property receved by the seer from the purchaser as a
payment durng the ta abe perod n whch the sae was made must be
ncuded n the nta payments. (See more v. Gommr., 15 . T. ., 1210,
1212.) Was the assumpton of the mortgages by the purchaser property
to be ncuded |ust as was cash n hand We thnk t was. It was one of the
chef consderatons for the sae. It was not a promse to pay the seer t
was a promse to the seer to pay the mortgagee. Its effect n equty was to
reeve the seer of any drect abty. s between seer and purchaser t
consttuted the seer the surety and the purchaser the prncpa debtor to the
mortgagee. Under the aw of entucky (Gray v. Gam., 166 y., 194, 196)
the purchaser s abe personay to the mortgagee. (See Unon Mut. Lfe Ins.
Co. v. artford, 143 U. S., 187, 190.) We thnk the promse couped wth the
cash payment was a suffcent consderaton for the sae. There was, of course,
the possbty of defaut by the purchaser n fang to pay the mortgage debts,
n whch case the seer woud have been obged to respond, but the resutant
cause of acton by the seer aganst the purchaser woud not be for money
due upon the sae but for damages for breach of contract. Ths obgaton
of the purchaser to pay the mortgage debts was undoubtedy the property
of the seer.
The term property standng aone ncudes everythng that s the sub-
|ect of ownershp. It s a nomen generassmum e tendng to every speces
of vauabe rght and nterest . (Scranton v. Wheeer, 179 U. S., 141,
170.)
Contract rghts stand hgh n the scae of property rghts. The seer acqured
the beneft of the purchaser s obgaton and there s nothng to ndcate that
t was worth ess than the amount nvoved. The ta payer had a rght to
offset the purchaser s prmary obgaton aganst hs own secondary abty
and treat the 92,000 as ncome to the e tent that t e ceeded the bass to hm.
It was derved from deangs n property.
y vrtue of hs authorty under secton 1101 of the Revenue ct of 1926
the Commssoner on ugust 28, 1926, promugated Interna Revenue Reguatons
No. 69 and by artce 44 thereof e cuded the mortgages from the nta pay-
ments. Regardess of whether ths was a vad reguaton, t was accepted
by the oard of Ta ppeas as egay and equtaby sound when apped to
the facts of the partcuar cases comng before the oard. (See Darada R. R.
Co., 5 . T. ., 905, 908 Watson v. Comtnr., 20 . T. ., 270, 272 see aso
Pachcro Creek Orchard Co., 12 . T. .. 1358 and . W. MeWUams, 15 . T. .,
329.) ut n none of these cases dd the mortgages e ceed the bass to the
vendor of the property sod. The case n hand presents a dfferent stuaton.
ere the mortgages dd e ceed the bass to the vendor n the sum of 37,-
802.54 and the stuaton s controed by the ast paragraph of artce 44 as
amended by Treasury Decson No. 4255, whch provdes that
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233
213(b), rt. 87.
In the sae of mortgaged property the amount of the mortgage, whether
the property s merey taken sub|ect to the mortgage or whether the mortgage
s assumed by the purchaser to the e tent t does not e ceed the bass to
the vendor of the property sod sha not be consdered as a part of the
nta payments
provded artce 44 as thus amended s a vad reguaton. We see no reason for
questonng ts vadty n ths case. It adds nothng to nta payments
whch may not be added under the statute. We thnk the effect of t was to
refect more ceary the rea meanng of the statute and to requre the ncome
to be returned durng the ta abe perod n whch t was receved.
The aforesad amount of 37,802.54 added to the cash payment of 13,066.27
aggregates more than one-fourth of the purchase prce of 155,000, even ds-
regardng the tems of ta es and of commssons, and the ta payer s there-
fore not entted to the beneft of secton 212(d) as found by the dstrct
|udge. It had not overpad ts ta es and was therefore not entted to recover.
Reversed.
S CTION 213(b). GROSS INCOM D IN D:
CLUSIONS.
rtce 87: Income of States. -4-4915
Ct.D.273
ncome ta revenue acts of 1924 and 1928 decson of court.
Income empton mpoyee of State Independent Contrao-
Toa Governmenta uncton.
Income receved by a ta payer as a member of a partnershp
professonay empoyed under a contract wth the prothonotary of
a county wth the approva of the county court and county comms-
soners, whch contract aone f es the measure of ts responsbty,
by whch t agrees to nde under the Russe system the |udgments
and other matters requred by aw to be entered upon the |udgment
docket n the prothonotary s offce for a perod of years, dong the
work n accordance wth varous orders of court, wth regard to the
keepng of ndces n the prothonotary s offce and under the super-
vson and to the satsfacton of the prothonotary, s not e empt
from ncome ta under secton 213(b)7 of the Revenue cts of
1924 and 1926, the status of the partnershp beng that of an nde-
pendent contractor and the ta payer s not an empoyee of a pot-
ca subdvson of a State. Nor s such ta Imposed upon an
agency of a State government and therefore prohbted.
Unted States Dstrct Court, Western Dstrct op Pennsyvana.
R. C. Russe v. D. . Sener, Coector of Interna Revenue for the Twenty-
thrd Dstrct of Pennsyvana.
November 21, 1930.
OPINION.
Schoonmaker, udge: Ths s an acton to recover ncome ta es aeged to
have been egay coected from the pantff. |ury tra was waved.
rom the peadngs and proofs the court fnds the foowng facts:
ndngs of act.
Durng the years 1924 to 1927, ncusve, the pantff was a partner In the
frm of Russe Inde Co., composed of hmsef, . P. Russe, . C. Russe,
and R. . Dodds. Durng the years stated he receved from sad partnershp
certan ncomes attrbutabe to the e ecuton of certan contracts between the
partnershp and oca authortes of certan countes n the States of Pennsy-
vana, New ersey, and West rgna. These contracts were a of a smar
knd and character to that between the copartnershp and the prothonotary of
egheny County, Pa., a copy of whch s attached to the pantff s statement
of cam n ths case.
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213(b), rt. 87.
234
y ths contract, the Russe Inde Co. agreed to nde , under the Russe
system, the |udgments and other matters requred by aw to be entered upon
the |udgment docket n the prothonotary s offce for a perod of ve years, dong
the work n accordance wth varous orders of court, n regard to the keepng
of ndces n the prothonotary s offce, and- under the supervson and to the
satsfacton of the prothonotary and of the nde commttee of the ar ssos-
aton of egheny County.
Ths contract was approved by the court of egheny County and aso by
the county commssoners, and provded for the payment of the contract prce
for dong the work by the county.
The amount of ncome ta durng the years nvoved attrbutabe to the
pantffs share of ncome of the Russe Inde Co. arsng from these varous
nde ng contracts was 14,498.69 and the varous sums aggregatng ths
amount were pad by the pantff to the defendant as coector of Interna
revenue for the twenty-thrd dstrct of Pennsyvana, as foows: 1925,
3,609.72 1925, 3,082.88 1926, 3,761.75 and 1927, 4,044.34.
The pantff ncuded n hs ncome-ta returns for these years, as a part
of hs ta abe ncome, the severa amounts earned by the Russe Inde Co. on
the varous nde ng contracts durng the ta years nvoved.
In the year 1928, the pantff and the Russe Inde Co. fed amended n-
come-ta returns for the years nvoved here and omtted from gross ncome
a sums receved on the varous nde ng contracts on September 17, 1928, and
fed a cam for refundment for the sums sued for n ths acton, whch cam
was whoy re|ected by the Commssoner of Interna Revenue.
Concusons of Law.
rom these facts we concude as a matter of aw that the pantff s not
entted to recover, and that the defendant s moton for |udgment n hs favor
must be granted. Let an order for |udgment be submtted accordngy.
DISCUSSION.
There s no dspute n ths case over the amount of the ta nvoved. The
ssue s soey one of the ega rght of the defendant to coect the ta at-
trbutabe to Income derved by the Russe Inde Co. on ts contracts wth
varous countes n Pennsyvana, New ersey, and West rgna, to nde cer-
tan of ther pubc records.
The pantff contends (1) that as a partner of the frm of the Russe Inde
Co., he Is an empoyee of the severa countes havng contracts wth the Russe
Inde Co. and (2) that, f not such an empoyee, hs compensaton derved
from the performance of these varous county contracts s so ntmatey con-
nected wth the e ercse of the soveregn powers of the State that ta aton
by the edera Government consttutes a drect nterference by the edera
Government wth a State government.
We must hod aganst the pantff n both these contentons. e Is not an
empoyee of any of the countes wth whch the Russe Inde Co. s under
contract for nde ng work. The Russe Inde Co. s engaged n a prvate
enterprse, . e., the seng of the Russe system of nde ng records, and as
an ncdent to ther busness, agreed wth the countes nvoved to nde ther
pubc records from day to day under the Russe system for a perod of years.
The company takes on ths work purey as an ndependent contractor. There
s no actua empoyment of the partners of ths frm personay and ndvd-
uay to do ths nde ng work. Durng the ta years nvoved ths company
carred on ts nde ng work n some 20 or more countes n 3 dfferent States.
It woud have been physcay mpossbe for the partners to have personay
served a the countes. Nether the frm nor ts partners were empoyed under
the drecton of any pubc statute drectng the empoyment by contract of
Iersons, or otherwse, to nde the pubc record the statutes merey requre
the prothonotary to keep an nde to the |udgment docket.
The soe measure of responsbty of the Russe Inde Co., therefore, s
provded for and f ed by contract. Whatever may be the provson- of any
pubc statute, nothng can be asked of the Russe company but compance
wth ts contract. That company has no offca status nor duty as a drecty
empoyed offca.
The sampe contract attached to the statement of cam and offered In evdence
ceary ndcates that the undertakng of the Russe company was one of a
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235
214(a), rt. 107.
technca or professona character. It rectes frst the estabshment of the
Russe system of nde ng the |udgment docket n the prothonotary s offce and
then the fndng by the county commssoners, county controer, and prothono-
tary of the county, as we as the nde commttee of the county bar assoca-
ton, that the nde ng servce under the Russe system s of such e pert
nature as to requre the seecton of the Russe Inde Co. to do the nde ng
for the contract perod. of whch ceary ndcates that the Russe com-
pany was engaged n a professona enterprse of an e pert nature and that the
company contracted, n the course of ts reguar busness as nde ng e perts,
to furnsh such e pert servce. The contract s not unke a contract to se
and dever a commodty.
Nor can we hod wth the pantff that hs ncome derved from the earnngs
of the Russe Inde Co. through the e ecuton of ts contracts wth varous
countes n Pennsyvana, New ersey, and West rgna, s so ntmatey con-
nected wth the e ercse of the soveregn powers of those States that to ta that
ncome woud amount to a drect nterference by the Unted States wth the
government of the States themseves. To ta the ncome derved from these
contracts, as the ncome of a persons engaged n prvate enterprse for proft
s ta ed, woud certany not mpar n any substanta manner the abty of
the Russe Inde Co. to dscharge ts contractua obgatons to the countes
concerned nor woud t mpar n any substanta manner the abty of the
countes to procure the servces of prvate ndvduas to do ts nde ng
work.
Under the authorty of Metcaf ddy v. Mtche (269 U. S., 514 T. D.
3824, C. . -, 218 ) we therefore concude that the ta coected from the
pantff was not egay e acted, and that he can not recover n ths case. It
mght be noted that the prncpes announced n Metcaf ddy v. Mtche,
supra, were recenty reaffrmed by the Supreme Court n Lucas v. Reed (50 S.
C, 532 (May 5,1930)), and n Lucas v. oward (280 U. S., 526), n per curam
opnons reversng the Thrd and fth Crcut Courts of ppeas on the au-
thorty of Metcaf d ddy v. Mtche. It mght be noted aso that ar v.
Matthews (29 ed. (2d), 892), cted by pantff as sustanng hs case, was ap-
parenty overrued n the case of Lucas v. oward, supra, as the fth Crcut
Court of ppeas rued the oward case on the authorty of ts own pror
decson n the case of ar v. Matthews, supra.
rtce 88: Compensaton of State offcers and empoyees.
Genera manager and controer of a cty harbor department.
(See G. C. M. 9122, page 157.)
S CTION 214 (a) 1. D DUCTIONS LLOW D INDI-
IDU LS: USIN SS P NS S.
INCOM T R NU CTS OP 1921, 1924, ND 1926 D CISION O COURT.
1. Income Compensaton foe Servces Dvdend cessve
Where a corporaton pays to an offcer an e cessve saary, the
Commssoner or the oard of Ta ppeas may dsaow the e cess
n determnng the ta of the corporaton, and such dsaowance
does not decde that the e cess was pad as dvdends so as to
render that queston res ad|udcata between the Government and
such offcer as respects hs ndvdua ta abty.
2. Same.
Where an e cessve saary s pad by a corporaton to an offcer,
who s a stockhoder, and t does not correspond or bear a cose
R NU CT OP 1926.
rtce 107: Treatment of e cessve compen-
saton.
-23-5092
Ct. D. 344
Saary.
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214(a), rt. 107.
236
reatonshp to Ls stock hodngs, and the e cess s dsaowed n
f ng the ta abty of the corporaton, such e cess w not be
regarded as a dvdend n the hands of the stockhoder, where the
evdence shows that the saary was n fact pad and receved as
saary for servces and not as a dvdend.
3. Same urden of Pboof.
Where an e cessve saary s pad by a corporaton to an offcer,
who s a stockhoder, and the e cess s dsaowed n f ng the ta
abty of the corporaton and the stockhoder n hs ndvdua
ta return reports the saary as saary and pays the ta accord-
ngy and then fes a sut aganst the Unted States to recover a
part of the ta on the ground that the e cess shoud have been
reported by hm as a dvdend, then, even f the evdence shows
that the saary corresponds to hs stock hodngs and does not
dsprove that the e cess s a dvdend, st the burden s on the
pantff to show how much of hs saary was dsaowed and s not
carred by proof that the combned saares of four offcers, ncud-
ng the pantff, aggregated a certan amount and that a gven
ump sum was dsaowed.
Dstrct Court of the Unted States fob the Macon Dvson of the Mdde
Dstrct of Georga.
. S. one v. Unted Stater.
anuary 31, 1931.
OPINION.
Sut to recover e cess payment of Income ta . Tra to the court. udgment
for defendant.
Deaver, ascom S, udge: rom the evdence submtted are made the foow-
ng fndngs of fact:
1. The pantff, . S. one, s a resdent of the mdde dstrct of Georga.
2. The amount nvoved n ths sut s ess than 10,000.
3. In 1923, 1925, and 1920, the Oconee rck Te Co. was a corporaton
and ts offcers were the pantff, . S. one, and hs three sons, arry, . .,
and usse one, . S. one beng presdent, arry one genera manngcr
of pant No. 1, . . one secretary and treasurer, and Russe one genera
manager of pant No. 2.
4. The capta stock of sad corporaton conssted of 400 shares. In 1923
. S. one owned 201 shares, arry one 60 shares, . . one 60 shares.
Russe one 59 shares, and R. W. atcher 20 shares. In 1925 and 1920, . S.
one owned 206 shares, arry one 65 shares, . . one 65 shares, and Russe
one 64 shares.
5. or the year 1923 the ta return of the corporaton showed saares pad
to ts offcers as foows: . S. one, 20,000 arry one, 15,000 . . one,
15,000 Russe one, 15,000 a tota of 65,000. The Commssoner deter-
mned that the tota of the saares was e cessve by 25,000 and so notfed the
ta payer n a 60-day etter. n appea was then taken to the oard of Ta
ppeas and then the corporaton and the Commssoner stpuated that 60,000
woud be aowed and 5,000 dsaowed. Whereupon the oard of Ta ppeas
made the foowng decson:
Under wrtten stpuaton, sgned hy counse for the partes n the above-
entted proceedng and fed wth the oard on anuary 26, 1929, t s ordered
and decded that there s a defcency for the caendar year 1923 n the
amount of 1,107.25.
The ta thus determned was pad by the corporaton.
6. or the year 1025, the return of the corporaton showed saares pad to
ts offcers as foows: . S. one, 30,000 arry one, 15,000 . . one,
15,000 Russe one, 15,000 a tota of 75,000. The Commssoner at frst
determned that the tota of the saares was e cessve by 35,000. Later by
agreement wth the ta payer, approved by the Secretary of the Treasury, the
Commssoner aowed a deducton of 62,500 and dsaowed 12,500. The ta
thus determned was pad by the corporaton.
7. or the year 1926, the return of the corporaton showed saares pad to
ts offcers as foows: . S. one, 30,000 arry one, 15,000 . . one,
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237
214(a), rt. 107.
15,000 usse one, 15,000 a tota of 75,000. The Commssoner at frst
determned that the tota of the saares was e cessve by 35,000. Later by
agreement wth the ta payer, approved by the Secretary of the Treasury, the
Commssoner aowed a deducton of 62,500 and dsaowed 12,500. The ta
thus determned was pad by the corporaton.
8. or each of the years 1923, 1925, and 1926, the pantff, . S. one, n hs
ndvdua ta return reported the saary receved by hm from the corporaton
as saary and pad the ta accordngy.
9. The saares pad to the offcers dd not correspond or bear a cose
reatonshp to the stock hodngs of the offcers.
10. The saares were pad by the corporaton and receved by the offcers as
saares for servces and not as a dvdend or dstrbuton of earnngs.
11. ven If the pantff were otherwse entted to recover, the evdence ds-
coses no defnte data from whch to compute the amount of the recovery.
Of the foregong fndngs of fact ony the ast three need be dscussed.
The evdence as to the number of shares owned by each offcer and the
amount of saary pad to each offcer s undsputed, and, from a comparson
of the fgures, It appears that there s no cose reatonshp between the
saares and the stock hodngs. Moreover, the pantff, who was presdent and
who by authorty of the corporaton f ed the saares, testfed that he dd
not f them upon the bass of stock ownershp.
If a the stock of a corporaton s hed by members of a famy who are
ts offcers and the corporaton dstrbutes to those offcers most of ts earnngs
n the form of e cessve saares, t mght be reasonabe, n the absence of
other evdence, to concude that the corporaton made such payments under
the name of saares In order to essen ts ncome ta when they were not n
fact saares but were n part a dstrbuton of earnngs n the nature of dv-
dends. ut such an nference can not support a fndng of fact n favor of the
pantff, when the pantff s own evdence s to the contrary. In ths case,
the corporaton on ts books carred the payments to offcers as saares, and
n ts ta return reported them as saares. The pantff, n hs ndvdua ta
return, reported the payments to hm as saary. e took the poston before
the Commssoner and the oard of Ta ppeas that the payments were
saares and that the saares were n fact reasonabe. nd even now he test-
fed consstenty that he f ed the saares not because of stock ownershp but
because he thought the servces were worth the amount pad. Pantff s
ora and documentary evdence s n substance that the saares were actuay
pad and receved as saares and not as dvdends.
In vew of the evdence, the effect of pantff s contenton must be that f
pantff s saary was determned by the Commssoner or the oard of Ta
ppeas to be e cessve so far as the corporaton was concerned and was ds-
aowed n part, then the pantff pso facto s entted to report as dvdends
the part so dsaowed, even though actuay pad and receved as saary. ut
even f that were true, pantff n order to recover woud st have to show how
much of hs saary was dsaowed and not smpy how much of the tota
saares of four offcers was dsaowed.
arnngs of a corporaton dstrbuted to ts stockhoders though not n e act
proporton to the stock owned may n certan crcumstances be regarded as
dvdends for ta purposes. (See secton 201, Revenue ct 1926 Reguatons
74, artce 127 adey v. Commssoner, 36 . (2d), 543 Ct, D. 153, C. . I -1,
266 .) ut f a payment to a stockhoder who s an offcer s n part saary
and n part dvdend and the dvdend does not correspond e acty to the
amount of stock owned, then the burden s on the pantff to show how much
was saary and how much dvdend. The Commssoner n determnng the
amount of the corporaton ta decded that the tota saares of four offcers
were e cessve by a certan amount, but he dd not determne how much of the
saary pad to pantff shoud be aowed and how much dsaowed. The corpo-
raton, through ts offcers one of whom was pantff, agreed wth the Com-
mssoner upon the determnaton of the ta abty, whch agreement nvoved
the dsaowance of a ump sum from the tota saares of four offcers. In so
dong they may have rendered pantff s case dffcut of proof but dd not
render proof unnecessary.
CONCLUSIONS O L W.
1. Where a corporaton pays to an offcer an e cessve saary, the Comms-
soner or the oard of Ta ppeas may dsaow the e cess n determnng the
ta of the corporaton, and such dsaowunce does not decde that the e cess
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214(a)4, 5, 6, rt. 141. 238
was pad as dvdends so as to render that queston res ad|udcata between the
Government and such offcer as respects hs ndvdua ta abty.
2. Where an e cessve saary s pad by a corporaton to an offcer, who s
a stockhoder, and t does not correspond or bear a cose reatonshp to hs
stock hodngs, and the e cess s dsaowed n f ng the ta abty of the
corporaton, such e cess w not be regarded as a dvdend n the bands of the
stockhoder, where the evdence shows fhat the saary was n fact pad and
receved as saary for servces and not as a dvdend.
3. Where an e cessve saary s pad by a corporaton to an offcer, who s
a stockhoder, and the e cess s dsaowed n f ng the ta abty of the
corporaton and the stockhoder n hs ndvdua ta return reports the saary
as saary and pays the ta accordngy and then fes a sut aganst the Unted
States to recover a part of the ta on the ground that the e cess shoud have
been reported by hm as a dvdend, then, even f the evdence shows that the
saary corresponds to hs stock hodngs and does not dsprove that the e cess
s a dvdend, st the burden s on the pantff to show how much of hs
saary was dsaowed and s not carred by proof that the combned saares of
four offcers, ncudng the pantff, aggregated a certan amount and that a
gven ump sum was dsaowed.
S CTION 214 (a) 3. D DUCTIONS LLOW D
INDI IDU LS: T S.
rtce 131: Ta es.
R NU CT O 1026.
rchensteuer and the aufbrngung der ndustrebeastung
(Dawesabgabe). (See G. C. M. 8933, page 112.)
rtce 131: Ta es.
R NU CT O 1926.
ees pad by a corporaton to the secretary of state n Oho n
connecton wth an amendment of ts charter. (See I. T. 2570,
page 115.)
rtce 133: Ta es for oca benefts.
R NU CT O 1926.
Revocaton of Genera Counse s Memorandum 5589 (C. . III-1,
83), regardng treatment of assessments for street and ke mprove-
ments. (See G. C. M. 9461, page 120.)
S CTION 214(a)4, 5, ND 6. D DUCTIONS
LLOW D INDI IDU LS: LOSS S.
rtce 141: Losses. -7-4937
G. C. M. 9087
R NU CT O 1926.
Certan property acqured by prft pror to March 1, 1913,
was used by the ta payer as her resdence unt vacated n 1925,
when t was paced wth a rea estate frm prmary for sae. The
ta payer reazed that a sae coud ony be made at a oss. ed,
the oss sustaned from the sae of the property n 1927 was not
ncurred n a transacton entered nto for proft and t s not deduct-
be under secton 214(a)5, Revenue ct of 1926.
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239
214(a)4, 5, 6, rt. 141.
n opnon s requested whether the ta payer s entted to a
deducton n the amount of 5.4.76a doars, representng a oss on the
sae of property once used by the ta payer as a resdence.
The property n queston was acqured by the ta payer as a gft
pror to March 1, 1913, and from that tme unt 1925 was used by
her as a resdence. It appears that the ta payer desred smaer
vng quarters and for some years pror to 1925 she had endeavored
to se her home. In 1925 she vacated the property and t was
paced wth a rea estate frm prmary for the purpose of sae.
The ta payer reazed at the tme she sted the property for sae
that t woud be amost mpossbe to ease t at a far renta, and
the efforts of the agent, as we as the ta payer, were concentrated
on an outrght sae. It s stated, however, that had a proper op-
portunty presented tsef, the ta payer woud have eased the
property. The ta payer s representatve states that after attemptng
to se the property for an amount appro matng ts March 1, 1913,
vaue, the ta payer decded that the property shoud be sod at
whatever prce t woud brng. The sae was consummated n
1927.
The contenton on behaf of the ta payer s that such a sae s a
transacton entered nto for proft, and that the oss arsng there-
from s deductbe for ncome ta purposes. Ths case s governed
by secton 214(a)5 of the evenue ct of 1926, whch provdes:
(a) In computng net ncome there sha be aowed as deductons:

(5) Losses sustaned durng the ta abe year and not compensated for by
nsurance or otherwse, f ncurred n any transacton entered nto for proft,
though not connected wth the trade or busness .
rtce 141 of Reguatons 69, n so far as appcabe, provdes:
Losses. Losses sustaned durng the ta abe year and not compensated for
by nsurance or otherwse are fuy deductbe f

(b) Incurred n any transacton entered nto for proft, .
The oard of Ta ppeas n the case of oseph . Cuman, |r.,
v. Commssoner (16 . T. ., 991, C. . I -1, 13) hed, where a
ta payer purchased a resdence n 1909 and used t as such unt
1920, when t was offered for rent or sae, and the property was
rented n pr, 1922, and sod n ugust, 1923, that the ta payer was
entted to deduct the oss arsng on account of ths sae. mong
other thngs the oard sad:
The decson cted above ener v. TndZc appears to support
ths contenton. The use of property to produce revenue s there characterzed
as a transacton entered nto for proft.
In the case of TP. . Moses v. Commssoner (21 . T. ., 226)
the oard, n refusng to aow a deductbe oss on the sae of res-
dence property, sad:
In the present case there was no appropraton of the property to renta
purposes between the tme the pettoner fnay moved out of the house and
the tme when t was sod.
Indeed, athough t s unnecessary to do so, the case mght be stated
more strongy aganst the pettoner because the evdence ndcates that the
oss resuted not from a transacton entered nto for proft, but from the fact
that the pettoner e pended consderabe money on a house to sut hs own
purposes and convenence, and after vng n the house unt he no onger had
any use for t, found that he was unabe to se t for what he had nvested n
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214(a) 4, 5, 6, rt. 141.
240
t. The Revenue ct aows hm no deducton to offset the amount whch
he pad for ths purpose.
The eadng case on the queston nvoved s that of ener v.
Tnde (276 U. S., 582, T. D. 4212, C. . TI-2, 272). Ths case
s controed by secton 214(a)5 of the Revenue ct or 1918, whch
s dentca wth that porton of secton 214(a)5 of the Revenue ct
of 1926 herenbefore quoted. In the Tnde case the ta payer owned
certan property whch he used as a resdence unt 1901. In that
year he eased the property and contnued so to ease t unt 1921,
when the property was sod at a oss. The court hed:
ut the fndngs ampy support the vew of the court of appeas that the
purpose to use the property as a resdence of the ta payer came to an end
when t was eased n 1901, and that from that date unt t was sod 19
years ater t was devoted e cusvey to the producton of a proft n the form
of net rentas. It s not questoned that f n 1901 the property had been
purchased for that use or nherted and so used the oss mght have been de-
ducted, but t s sad, as the dstrct court hed, that the ony transacton
entered nto wth respect to the property was the purchase of the and and the
erecton of the house, regardess of the use whch mght afterwards be made
of t, and that these acts dd not appear to be a transacton entered nto for
proft.
ut the words any transacton as used n subsecton (a)5 are not a
technca phrase or one of art They must therefore be taken n ther usua
sense and, so taken, they are, we thnk, broad enough to embrace at east any
acton or busness operaton, such as that wth whch we are now concerned,
by whch property prevousy acqured s devoted e cusvey to the producton
of ta abe ncome. We can perceve no reason why they shoud not be so
taken uness that constructon s nconsstent wth the purpose or wth par-
tcuar provsons of the ct. Secton 214, read as a whoe, dscoses pany a
genera purpose to permt deductons of capta osses wherever the capta
nvestment s used to produce ta abe ncome, and the ncuson of the present
deducton n those descrbed n subsecton (a)5 woud seem to be entrey
harmonous wth that purpose.
In the above-quoted e cerpt from the Tnde case, the Supreme
Court ponts out that the words any transacton are to be taken
n ther usua sense. In that case any transacton was hed to
ncude a busness operaton wheren property prevousy acqured
as a resdence was devoted to the producton of a ta abe ncome, . e.,
rentng the property. Wth reference to secton 214 of the Revenue
ct of 1918, the court dscussed the ntent and purpose of that sec-
ton. It was ponted out that secton 214 n ts entrety dscosed a
genera purpose to permt deductons of osses f the capta nvested
was used to produce ta abe ncome.
The ony transacton nvoved n ths case was the sae of the
property. Pror to the sae and at the tme the property was sod,
the ta payer reazed that there was no hope of makng a proft on
the sae of the property and decded to se the property for what-
ever amount t woud brng. Surey t coud not be sad under cr-
cumstances such as these that the ta payer had entered nto a trans-
acton for proft. On the contrary, t seems more apparent that the
transacton was entered nto to dspose of property for whch the
ta payer no onger had any use not a transacton entered nto to
produce a ta abe ncome, but a transacton entered nto wth the
reazaton that t woud resut n a oss. If, n a transacton smar
to the one here nvoved, t s apparent that no proft s to be reazed,
then t can not propery be sad that the transacton has been entered
nto for proft. (Cf. Phps Lee Godsborowgh v. Comrndssoner, 46
ed. (2d), 432, decded anuary 13, 1931, affrmng 18 . T. ., 181.)
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241
214(a)7, rt. 152.
Ths woud seem to be entrey harmonous wth the purpose e -
pressed n secton 214(a) 5 of the Revenue ct of 1918, as nter-
preted by the Supreme Court n the Tnde case, and the correspond-
ng secton of the Revenue ct of 1926.
Ths offce s not unmndfu of the case of Larkn v. Gage (28
ed. (2d), 78). In that case the court hed:
The abandonment of the North Street home, and dgent efforts
put forth to rent or se the same, satsfactory shows that the former res-
denta property was to become and dd become a busness transacton for gan
n a commerca sense.
Under the decson rendered n the Larkn case, a resdence ac-
qured by a ta payer for persona use may be transformed nto a
u transacton entered nto for proft by the abandonment of the
property and offerng to rent t, provded the property s subse-
quenty sod. Ths decson woud requre the aowance of a oss
even though the ta payer reazed at the tme of the abandonment
that t woud be mpossbe to rent the property, and that the n-
tended sae coud be consummated ony at a oss. It s not beeved
that such an nterpretaton of secton 214(a)5 was ever ntended by
Congress, nor s t beeved that the decson of the Supreme Court
n the Tnde case s appcabe to the Larkn case or the nstant case:
It shoud be remembered that n the Tnde case the resdence had
been abandoned as such and used n the producton of ta abe ncome
for many years. The court was not consderng the queston of
abandonment of a resdence and an outrght sae whch woud resut
n the oss. In the nstant case the property was never used n the
producton of ta abe ncome. ccordngy, ths offce s of the
opnon that the deducton camed s not aowabe under secton
214(a)5 of the Revenue ct of 1926.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
rtce 141: Losses.
R NU CT O 1928.
Tradng n of trucks and passenger cars used for busness purposes
on new trucks and passenger cars to be used for ke purposes. (See
L T. 2573, page 215.)
S CTION 214(a)7. D DUCTIONS LLOW D
INDI IDU LS: D D TS.
rtce 152: ampes of bad debts. - 8-5045
Ct. D. 325
INCOM T R NU CT O 1926 D CISION O SUPR M COURT.
Deducton ad Debt Loss Indorsees Labty Dscharged
by Note.
Where an ndorser of another s note, keepng hs books on the
bass of cash recepts and dsbursements, gves to the hoder n the
ta abe year hs note n settement of hs abty as Indorser,
recevng and destroyng the od note, the amount of the ndorser s
note s not deductbe from gross ncome as a bad debt or a oss
n the ta abe year under secton 214 of the Revenue ct of 1926,
no payment on the note havng been made In that year.
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214(a)8, rt. 162.
242
SUP M COU T O T UNIT D ST T S. No. 351. OCTO R T RM, 1930.
. ames ckert, pettoner, v. Davd urnet, Commssoner of Interna Revenue.
On wrt of certorar to the Unted States Crcut Court of ppeas for te Second Crcut.
pr 13, 1931.
Mr. ustce omes devered the opnon of the court.
The Commssoner of Interna Revenue determned that there was a defct
of 3,378.89 n the pettoner s ncome ta for the year 1925 under the Revenue
ct of 1924. The pettoner camed a deducton from ncome of 22,400 as a
bad debt. The deducton was dsaowed by the Commssoner, by the oard
of Ta ppeas, and, n revew, by the Crcut Court of ppeas for the
Second Crcut. (42 . (2d), 158.) wrt of certorar was aowed by ths
court.
The pettoner s ta return was on the cash bass. The facts of the trans-
acton concerned were that the pettoner and hs partner were |ont ndorsers
of notes ssued by a corporaton that they had formed. There remaned due
upon these notes 44,800, that the corporaton was unabe to pay. In 1925 the
pettoner and hs partner n settement of ther abty made a |ont note for
that sum to the bank that hed the corporaton s paper, receved the od notes,
marked pad, and destroyed them. The pettoner cams the rght to deduct
haf that sum as a debt ascertaned to be worthess and charged off wthn
the ta abe year under the Revenue ct of 1920 (ch. 27, secton 214(a)7 44
Stat. 9, 27).
It seems to us that the crcut court of appeas suffcenty answered ths
Contenton by remarkng that the debt was worthess when acqured. There
was nothng to charge off. The pettoner treats the case as one of an Invest-
ment that ater turns out to be bad. ut n fact t was the satsfacton of an
e stng obgaton of the pettoners, havng, t may be, the consequence of a
momentary transfer of the od notes to the pettoner n order that they mght
be destroyed. It s very pan we thnk that the words of the statute can not
be taken to ncude a case of that knd. We do not perceve that the case s
bettered by the fact that some of the orgna notes years before were gven for
property turned over to the corporaton by the partnershp that formed t.
or the purpose of a return upon a cash bass there was no oss n 1925. s
happy stated by the oard of Ta ppeas, the pettoner merey e changed
hs note under whch he was prmary abe for the corporaton s notes under
whch he was secondary abe, wthout any outay of cash or property havng
a cash vaue. deducton may be permssbe n the ta abe year n whch
the pettoner pays cash. The pettoner says that t was defntey ascertaned
n 1925 that the pettoner woud sustan the osses n queston. So t was,
f the pettoner utmatey pays hs note. So was the tu consdered n Unted
States v. Mtche (271 U. S., 9, 12 T. D. 3805, C. . -, 233 ), but t coud not
be deducted unt t was pad.
udgment affrmed.
S CTION 214(a)8. D DUCTIONS LLOW D INDI-
IDU LS: D PR CI TION.
rtce 162: Deprecabe property.
R NU CT O 1926.
Revocaton of Genera Counse s Memorandum 5589 (C. . III-1,
83), regardng treatment of assessments for street and ke mprove-
ments. (See G. C. M. 9461, page 120.)
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219, rt. 342.
S CTION 217. N T INCOM O NONR SID NT
LI N INDI IDU LS.
rtce 318: Interest.
R NU CT OP 1926.
Interest on bank depost credted to trustee. (See G. C. M. 9156,
page 166.)
S CTION 219. ST T S ND TRUSTS.
rtce 342: Method of computaton of net -14-5007
ncome and ta . G. C. M. 9086
R NU CT O 1926.
Where the ta payer, under Pennsyvana aws, eected to take
aganst hs wfe s w by camng curtesy, the estate beng admn-
stered from the wfe s death on October , 1026, unt October,
1927, whereupon a porton of the corpus was dstrbuted to the ta -
payer and a cash representng ncome was dstrbuted, the ta -
payer recevng one-thrd of the dstrbuted ncome, he shoud have
ncuded such ncome n hs return for 1927 under secton 219(b)3,
Revenue ct of 1926.
n opnon s requested whether ncome dstrbuted by the estate
of durng admnstraton and receved by n 1927 s ta abe to
or whether the ncome n queston shoud be consdered as dstr-
buton of corpus and ta abe to the estate.
, the ta payer, husband of , who ded October , 1926, was
gven a one-thrd fe nterest n the estate of by the provsons
of her w. The ta payer, however, n accordance wth the prvege
accorded by the aws of the State of Pennsyvana, eected to take
aganst the w, camng hs curtesy rght, thereby becomng en-
tted to a one-thrd share of the estate outrght. The estate was n
the process of admnstraton from date of death of the deceased,
October , 1926, unt October, 1927, after whch a trust whch had
been created by the w started to operate. When admnstraton
of the estate was cosed n October, 1927, a cash representng n-
come arsng durng the perod of admnstraton was dstrbuted to
the nterested partes and the corpus was dvded and dstrbuted
one-thrd to the ta payer and the other two-thrds n trust for the
chdren.
The ta payer s share of the dstrbuted ncome from the estate was
8.523k doars dvdends and other ncome of doars.
The ta payer contends that, snce he eected to receve hs share
of the corpus of the estate outrght, he was not chargeabe wth any
amount of so-caed ncome receved from the estate durng the year
1927.
The Income Ta Unt contends that, nasmuch as the ncome was
actuay dstrbuted to the ta payer n the year 1927 and not added
to the corpus, and the estate was fnay cosed n 1927, the ta payer
takng hs one-thrd share, the ncome so dstrbuted n the amount of
8.523a doars dvdends and other ncome of doars s ta abe to
hm and the deducton s aowabe to the estate.
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244
It appears that the ncome n queston was receved by the ta payer
durng the perod when the estate of was n process of admns-
traton.
Under the aws of Pennsyvana (secton 23, Ws act of 1917,
Laws of 1917, page 410 Purdon s Dgest, 13th edton, page 9233),
when any person sha de testate, eavng a survvng spouse who
sha eect to take aganst the w, such survvng spouse sna be en-
tted to such nterests n the rea and persona estate of the deceased
spouse as he or she woud have been entted to had the testator ded
ntestate.
The ta payer, by eectng to take aganst the w of hs deceased
wfe, became entted to a thrd nterest outrght n the rea and per-
sona estate of the wfe. (Intestate act of 1917, Laws of 1917, page
429, secton 1(b) Purdon s Dgest, 13th edton, page 8592.) e
had, thus, a rght to one-thrd of the corpus of the estate and ut-
matey to one-thrd of the ncome arsng therefrom. e coud not
demand payment ether of corpus, consstng, as t dd, many of
securtes, or of the ncome therefrom unt the e praton of the tme
aowed by the aw of Pennsyvana n whch to sette an estate of a
decedent. The e ecutors were entted under the aw n Pennsy-
vana to possesson of persona property and to the ncome arsng
therefrom durng admnstraton but such tte was not a fu ega
tte. s the Supreme Court sad n the case of rewster v. Gage
(280 U. S., 327, Ct. D. 148, C. . I -1, 274):
Upon the death of the owner, tte to hs rea estate passes to hs hers or
devsees. dfferent rue appes to persona property. Tte to t does
not vest at once n hers or egatees. (Unted States v. ones, 236 U. S., 106,
112.) ut mmedatey upon the death of the owner there vests n each of
them the rght to hs dstrbutve share of so much as sha reman after proper
admnstraton and the rght to have t devered upon entry of the decree of
dstrbuton. (Sanders v. Soutter, 136 N. Y., 97 a v. a, 49 Conn., 52
Cook v. McDowe, 52 N. . ., 351.) Upon acceptance of the trust there vests
n the admnstrators or e ecutors, as of the date of the death, tte to a
persona property beongng to the estate t s taken, not for themseves, but
n the rght of others for the proper admnstraton of the estate and for
dstrbuton of the resdue. The decree of dstrbuton confers no new rght
t merey dentfes the property remanng, evdences rght of possesson n
the hers or egatees and requres the admnstrators or e ecutors to dever
t to them. The ega tte so gven reates back to the date of the death.
( oster v. fed, 20 Pck., 67. 70 Wager v. Wager, 89 N. Y., 161, 166 Thomp-
son v. Thomas, 30 Mss., 152, 158.)
Pettoner s rght ater to have hs share of the resdue vested mmedatey
upon testator s death. t that tme pettoner became enrched by ts worth
whch was drecty reated to and woud ncrease or decne correspondngy
wth the vaue of the property.
The ta payer was entted to one-thrd of the net ncome arsng
from the estate, or f hs one-thrd of the estate had been set asde
for hm then he was entted to the net ncome arsng from that
one-thrd. Ths ncome was pad to ta payer, as ncome, n 1927.
Such payment was reported n the fducary return of the estate of
as havng been pad to ta payer as ncome n 1927. It s unm-
portant whether ths was pad ether durng the process of admns-
traton or when the estate was fnay setted.
Secton 219(b)3 of the Revenue ct of 1926 reads as foows:
(3) In the case of ncome receved by estates of deceased persons durng
the perod of admnstraton or settement of the estate, and n the case of
ncome whch, n the dscreton of the fducary, may be ether dstrbuted to
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223, rt. 401.
the benefcary or accumuated, there sha be aowed as an addtona deduc-
ton n computng the net ncome of the estate or trust the amount of the
ncome of the estate or trust for ts ta abe year whch s propery pad or cred-
ted durng such year to any egatee, her, or benefcary, but the amount so
aowed as a deducton sha be ncuded In computng the net ncome, of the
egatee, her, or benefcary.
Ta payer was an her of the wfe under the aws of Pennsyvana,
she havng techncay ded ntestate so far as concerns one-thrd of
her estate. s an her he was entted to receve from the e ecutors
hs one-thrd of the estate pus any ncome arsng therefrom dur-
ng the perod ntervenng between the death of the wfe and the
date of the devery to hm of such one-thrd. ny such payment of
ncome to hm was propery pad wthn the ntendment of the
secton of the 1926 ct quoted a ove. If the ncome n queston was
pad to ta payer durng the process of settement, such payment s,
nevertheess, propery made, nasmuch as the e ecutors or admn-
strators of an estate may, durng admnstraton and before fna
audt, settement, and dscharge, pay to hers and egatees amounts
deemed to be due them, whether of corpus or of ncome, such pay-
ments beng, of course, at the rsk and on the persona responsbty
of the e ecutors or admnstrators ( ducares act of 1917, Laws of
1917, page 447, secton 49(b)). The ta payer shoud have ncuded
such ncome n hs gross ncome for 1927. (See Irwn v. Gavt, 268
U. S., 161, T. D. 3710, C. . I -1,123 O. D. 967, C. . 5, 186 G. C,
M. 900, C. . -2, 181.)
C. M. Charest,
Genera Counse, ureau of Interna Revenue,
S CTION 222. CR DIT OR T S IN C S
O INDI IDU LS.
rtce 387: When credt for ta es may be taken.
R NU CT O 1926.
ass of credt where books are kept on accrua bass. ecton
where books are kept on the cash recepts and dsbursements bass.
(See G. C. M. 9459, page 169.)
S CTION 223. INDI IDU L R TURNS.
rtce 401: Indvdua returns. -22-5084
G. CM.9422
R NU CT O 1026.
Income whch s determned to be communty ncome under the
aws of Caforna reatng to communty property s not changed
nto separate ncome by vrtue of the enactment n 1929 of secton
2419 of the Cv Code of Caforna reatng to partnershp
property.
The foowng questons reatng to communty property n the
State of Caforna have been presented:
(1 Whether ncome from a partnershp s communty ncome
(2) The manner n whch such ncome shoud be reported by
husband and wfe domced n Caforna.
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246
The frst queston s occasoned by the enactment n 1929 of sec-
ton 2419 of the Cv Code of Caforna, whch provdes n part
that a partner s rght n specfc partnershp property s not com-
munty property. The second queston s occasoned by a statement
made by the oard of Ta ppeas n ts decson n the case of
Genn M. arrngton and Lester W. MacDonad v. Commssoner
(21 . T. ., 260), to the effect that n the case of a partnershp
between husband and wfe each was ta abe on hs or her dstrbu-
tve share under the provsons of secton 218 of the Revenue cts
of 1924 and 1926, whch provdes that ndvduas carryng on
busness n partnershp sha be abe for ncome ta ony n ther
ndvdua capacty, and that the communty property aws are,
therefore, not matera.
The questons referred to above w be dscussed n the order that
they appear.
The Cv Code of Caforna provdes:
Sec. 161a. Interests n communty property. The respectve nterests of the
husband and wfe In communty property durng contnuance of the marrage
reaton are present, e stng and equa nterests under the management and
contro of the husband as s provded n sectons 172 and 172a of the cv
code. Ths secton sha be construed as defnng the respectve Interests and
rghts of husband and wfe n communty property.
Sec. 162. Separate property of the cfe. property of the wfe, owned by
her before marrage, and that acqured afterwards by gft, bequest, devse, or
descent, wth the rents, ssues, and profts thereof, s her separate property.
The wfe may, wthout the consent of her husband, convey her separate
property.
Sec. 163. Separate property of the husband. property owned by the
husband before marrage, and that acqured afterwards by gft, bequest, devse,
or descent, wth the rents, ssues, and profts thereof, s hs separate property.
Sec. 164. Communty property. other property acqured after marrage
by ether husband or wfe, or both, ncudng rea property stuated n ths
State, and persona property wherever stuated, heretofore or hereafter ac-
qured whe domced esewhere, whch woud not have been the separate
property of ether f acqured whe domced n ths State, s communty
property.
Whether n any partcuar case property s separate or communty
and whether the ncome therefrom s separate or communty must be
determned by the provsons of the aws of the State of Caforna
and the decsons nterpretng them. These statutes provde that
property whch ether spouse acqured before marrage or acqured
afterwards by gft, bequest, devse, or descent, wth the rents, ssues,
and profts thereof, s the separate property of such spouse and that
a other property acqured after marrage by ether spouse or both
s communty property. y the terms of the statute the rents, ssues,
and profts of the separate property reman separate property. It
s a fundamenta prncpe ot the communty system that the ncrease
and profts of, and from, communty property fa nto the com-
munty. (Wnchester v. Wnchester, 175 Ca., 391, 165 Pac, 965.)
It s aso one of the fundamenta prncpes of the communty prop-
erty system that whatever s ganed by the to or taent or ether
spouse beongs to the communty (In re Pepper s state, 158 Ca.,
619, 112 Pac, 62), athough derved soey from the efforts of the
husband ( ay v. ay, 165 Ca., 469, 132 Pac, 1040) or the wfe.
(Moore v. Cranda, 205 ed., 689: Wren v. Wren, 100 Cab, 276, 34
Pac, 775.)
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223, rt. 401.
Wth respect to whether the ncome from a partnershp s to be
apportoned between the communty and separate property, t has
been hed that nasmuch as the ncome from a partnershp between
the husband and a thrd party was n part attrbutabe to hs sep-
arate capta and n part to hs persona abor or effort, such part
of the proft as accrues from the use of capta s separate property
and such part as s due to the persona actvty, abty, or capacty
of the husband s communty property. (Perera v. Perera, 156
Ca., 1, 103 Pac, 488 McDu|f v. McDuff, 48 Ca. ., 175, 191 Pac,
957 In re God s state, 170 Ca., G21, 151 Pac, 12.) The prncpe
stated n Perera v. Perera, supra, s that the nterest of the hus-
band n the capta of the partnershp as t was at the tme of hs
marrage s the husband s separate property, and the queston rea-
tve to the part of the subsequent profts arsng from the use of
the capta and the part arsng from the persona actvty, abty,
or capacty of the husband s to be determned by the court from
the crcumstances appearng n the case that whatever accrues from
the atter source s communty property and that the remanng
profts must be cassed as separate property.
In the case of ucker v. ar (32 ec. (2d), 222), nvovng a
partnershp between a husband and a thrd party, arsng under the
statutes of the State of Washngton, t s stated that The mere
fact that the enterprse was carred on n the frm name s mma-
tera. There s no achemy n the term partnershp or n the
reaton t mports, and contrbutons of communty funds to a
|ont or partnershp enterprse are not pso facto converted nto
separate property. We are concerned wth the status of property
nvested, not wth the form n whch t was hed.
Secton 158 of the Cv Code of Caforna reads as foows:
Sec. 158. ngand and wfe may make contracts. ther husband or wfe
may enter nto any engagement or transacton wth the other, or wth any
other person, respectng property, whch ether mght f unmarred sub|ect,
n transactons between themseves, to the genera rues whch contro the
actons of persons occupyng confdenta reatons wth each other, as defned
by the tte on trusts.
In I. T. 1744 (C. . II-2, 179) the genera queston of whether
a husband and wfe domced n Caforna coud enter nto a vad
partnershp was carefuy consdered and the concuson was reached
that such an agreement was permssbe. partnershp agreement
s ceary wthn the purvew of secton 158, supra, and t foows
that the profts derved from a vad partnershp between husband
and wfe may be separate ncome and not communty ncome.
Mc ay on Communty Property (2d ed.), page 590, contans the
foowng statement:
The statutes conferrng on the wfe the fu power of a feme soe to enter
nto contracts wth her husband or a thrd person and the court decsons
woud seem to eave no reasonabe doubt that n rzona, Caforna, Nevada,
and New Me co, the wfe may enter nto a partnershp wth her husband.
Ther agreement to enter nto such a partnershp woud oave the husband s
rght to eam a dvson of the property or the profts dfferenty from that
agreed upon. Itacs supped.
In the case of L. 8. Cobb (9 . T. ., 547, C. . II-1, 7) the
oard recognzed a partnershp between husband and wfe n Ca-
72109 31 17
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248
forna and treated the wfe s dstrbutve share of the partnershp
earnngs as her separate property and not ta abe to the husband.
(See aso the cases of . C. uscke, 10 . T. ., 1345, C. . II-2,
6, and Chares rown, 13 . T. ., 981, C. . TII-1, 6.) In the
Chares rown case the oard stated that t had n pror decsons
revewed the statutes and decsons of Caforna and hed that
n that State husband and wfe coud enter nto a contract of part-
nershp and carry on busness as such and that the nterests of each
was that one s separate property and the ncome therefrom was re-
turnabe by and ta abe to reach ndvdua accordng to hs or her
nterest.
It appears that n 1929 the Legsature of Caforna adopted the
unform partnershp act, whch contans a provson that a partner s
rght n specfc partnershp property s not communty property and
that the ta payer s concerned as to the effect of ths provson on
the genera aws reatng to communty propertv. The provson
referred to s secton 2419 of the Cv Code or Caforna, and reads
as foows:
(1) partner s eoowner wth hs partners of specfc partnershp property
hodng as a tenant n partnershp.
(2) The ncdents of ths tenancy are such that:

(e) partner s rght n specfc partnershp property s not sub|ect to
dower, curtesy, or aowances to wdows, hers, or ne t of kn, and s not
communty property. New secton added une 19, 1929 Stats. 1929, chapter
804.
Ths offce s unabe to fnd any court decsons whch construe ths
provson of the code. owever, ths offce s of the opnon that
ncome whch s determned to be communty ncome under the
aws of Caforna reatng to communty property s not changed
nto separate ncome by vrtue of that secton.
Wth respect to the second queston, as to the manner n whch
ncome derved from a partnershp shoud be reported bv a husband
and wfe domced n Caforna, the Supreme Court of the Unted
States n the case of Unted States v. Rabbns (269 U. S., 315, T. D.
3817, C. . -, 188) hed, under the Revenue ct of 1918, that
nasmuch as the wfe under the aws that then e sted had a mere
e pectancy n the communty property the ncome therefrom mght
be ta ed whoy to the husband. That decson of the Supreme
Court governs wth respect to the ta aton of the communty ncome
receved pror to uy 29, 1927, on whch date secton 161(a) became
effectve. The Supreme Court of Caforna n the case of Stewart
v. Stewart (269 Pac, 439), decded uy 18, 1929, hed that secton
161(a), whatever effect t may have upon communty property
acqured subsequent to ts effectve date, can not n any manner reate
to or govern the ownershp of property acqured pror thereto. (See
I. T. 2457, C. . III-1, 89.)
The Supreme Court of the Unted States n the case of Unted
States v. Macom (51 S. Ct., 184), decded anuary 19, 1931, hed
n effect that under secton 161(a) a husband and wfe domced n
Caforna may each report n separate returns one-haf of the com-
munty ncome n renderng edera ncome ta returns. In Mmeo-
graph 3859 (see on page 140) t was hed that that decson s app-
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223, rt. 401.
cabe to ncome from communty property acqured on and after
uy 29, 1927, and to saares, wages, and fees earned on or after
that date whch consttute communty property. It was aso hed
that the decson was not appcabe to ncome from property
acqured pror to uy 29, 1927, nor to saares, wages, fees, and
other compensaton earned pror to that date. It foows, therefore,
that ncome whch under the aws of Caforna consttutes com-
munty ncome s ta abe to the husband f earned pror to uy 29,
1927, or f receved from communty property acqured pror to that
date. urthermore, ncome from communty property acqured on
and after uy 29, 1927, and communty ncome n the form of
saares, wages, and fees earned on and after that date may be dvded
and ta ed to each spouse f so reported n orgna separate returns.
In ths connecton the ta payer cas attenton to a statement made
by the oard of Ta ppeas n the case of Genn M. arrngton
and Lester W. MacDonad, v. Commssoner, supra. The oard hed
that the husband and wfe were partners for the years 1925 and
1926 and each was ta abe on hs or her dstrbutve share of the
partnershp ncome under the provsons of secton 218 of the
evenue cts of 1924 and 1926 whch provdes that Indvduas
carryng on busness n partnershp sha be abe for ncome ta
ony n ther ndvdua capacty. The oard aso stated that
Whether, under Caforna aws, a wfe s partnershp profts be-
come communty property, or whether they reman her own separate
property s mmatera n ths nstance. In ths case the oard
was deang wth a partnershp between husband and wfe and t
found that a vad partnershp e sted. The oard concuded that
each was ta abe on hs or her respectve nterest n the partnershp.
Ths s n effect the same concuson reached by the oard n the
cases of L. S. Cobb, supra, . C. usche, supra, and Chares rown,
supra, wheren the oard hed that each of the partners was ta abe
on hs or her respectve nterest on the theory that the nterest of
each from such partnershp was that one s separate ncome. Ths
offce beeves that ths theory, rather than the theory advanced by
the oard n the arrngton case, s correct and supports the resut
reached n these cases. The Supreme Court of the Unted States
n the two decsons referred to has ad down the rues for ta ng
communty ncome n Caforna, and t foows that there must be
a determnaton whether such ncome s communty ncome. It s
cear, of course, that the rue announced reatve to cases nvovng
a partnershp between husband and wfe has no appcaton to cases
nvovng a partnershp between one of the spouses and a thrd party.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
rtce 401: Indvdua returns.
R NU CT O 1926.
arned ncome credt n cases of separate returns on the com
munty property ncome bass. (See Mm. 3879, page 141.)
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240, rt. 633. 250
rtce 401: Indvdua returns.
R NU CT O 1926.
Instructons reatng to communty property returns. (See Mm.
3853, page 139.)
rtce 401: Indvdua returns.
R NU CT O 1926.
m
Instructons reatng to Caforna communty property returns.
(See Mm. 3859, page 140.)
P RT IIL CORPOR TIONS.
S CTION 231. CONDITION L ND OT R
MPTIONS O CORPOR TIONS.
rtce 520: Soca cubs.
R NU CT O 1926.
Dstrbuton of cub s funds to hoders of partcpatng certfcates.
(See L T. 2557, page 149.)
S CTION 238. CR DIT OR T S IN C S
O CORPOR TIONS.
rtce 611: Credt for foregn ta es.
R NU CT O 1026.
ass of credt where books are kept on accrua bass. ecton
where books are kept on the cash recepts and dsbursements bass.
(See G. C. M. 9459, page 169.)
S CTION 240. CONSOLID T D R TURNS O
CORPOR TIONS.
rtce 633: When corporatons are affated. -5-4920
G. C. M. 8982
R NU CTS O 1924 ND 1926.
Where an Indvdua owns a of the stock of one corporaton and
he and that corporaton own 95 per cent of the stock of a second
corporaton, a suffcent percentage of the stock of the two corpora-
tons s owned by the same nterests wthn the meanng of
secton 240 of the Revenue ct of 1926 to consttute an affaton.
Genera Counse s Memorandum 2780 (C. . II-1, 175) over-
rued n so far as nconsstent herewth.
n opnon s requested reatve to the affated status of two
corporatons, desgnated as corporatons and .
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240, rt. 633.
The case nvoves the queston of affaton, and the soe ssue s
whether corporatons and are affated wthn the meanng of
secton 240(d) of the Revenue ct of 1926 under the foowng cr-
cumstances: In the year 1926. C, an ndvdua, owned 100 per cent
of the stock of corporaton . e aso owned 60 per cent of the
stock of corporaton . Thrty-fve per cent of the stock of corpora-
ton was owned by corporaton and the remanng 5 per cent of
the stock of corporaton was owned by outsde nterests.
The stock ownershp n the two corporatons s tabuated as
foows:
Corpora-
ton .
Corpora-
ton .
Per cent.
100
0
Per cent.
60
35
100
95
Secton 240(d) of the Revenue ct of 1926 provdes, so far as s
here matera, that two or more domestc corporatons sha be
deemed to be affated (2) f at east 95 per centum of
the stock of two or more corporatons s owned by the same n-
terests.
Strcty speakng, at east 95 per cent of the stock of the two corpo-
ratons n ths case was owned by C and corporaton , though the
atter dd not, and from the nature of corporate organzaton coud
not, own any of the stock of ts own ssue. The query s whether
corporaton and ts soe stockhoder consttute the same nter-
ests, wthn the meanng of the aw.
Corporaton was vested wth the fu ega and equtabe tte to
the stock t hed n corporaton . Whe ts soe stockhoder was
not the owner of such stock, he nevertheess had an nterest theren
whch of necessty was n some character a benefca nterest. In
speakng of a stockhoder s reaton to the assets of a corporaton,
the Supreme Court n sner v. Macomber (252 U. S., 189, T. D.
3010, C. .3,25) sad:
Certany the nterest of the stockhoder s a capta nterest, and hs certf-
cates of stock are but the evdence of t They state the number of shares
to whch he s entted and ndcate ther par vaue and how the stock may be
transferred. They show that he or hs assgnors, mmedate or remote, have
contrbuted capta to the enterprse, that he s entted to a correspondng n-
terest proportonate to the whoe, entted to have the property and busness
of the company devoted durng the corporate e stence to attanment of the
common ob|ects, entted to vote at stockhoders meetngs, to receve dvdends
out of the corporaton s profts f and when decared, and, n the event of
qudaton, to receve a proportonate share of the net assets, f any, reman-
ng after payng credtors. Short of qudaton, or unt dvdend decared,
he has no rght to wthdraw any part of ether capta or profts from the
common enterprse on the contrary, hs nterest pertans not to any part,
dvsbe or ndvsbe, but to the entre assets, busness, and affars of the
company. Nor s t the nterest of an owner n the assets themseves, snce
the corporaton has fu tte, ega and equtabe, to the whoe.
Itacs supped.
In other words, a busness corporaton s the embodment of a
busness enterprse. The corporaton s nterest n the admnstraton
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240, rt. 633.
252
of the assets of the enterprse s to earn profts for ts stockhoders,
and f the enterprse s termnated the corporaton, after payng
credtors, must dstrbute to the stockhoders the remanng net
assets. There can not be a snge operaton of the corporaton, sub-
|ect to the payment of credtors, whch does not nure to the beneft
of the stockhoders. Ordnary there are many stockhoders n such
an enterprse, so that t s mpractcabe to recognze n each stock-
hoder a separate ega or equtabe tte n specfc assets of the
enterprse. ccordngy, the ega doctrne has resuted that the
corporaton s the fu owner of the tte to such assets unt the tme
of dstrbuton, but the fact of the rght n the stockhoders to such
dstrbuton estabshes ther nterest n a of the corporate assets.
corporaton s ownershp s, therefore, for the beneft of ts stock-
hoders.
In Genera Counse s Memorandum 2780 the foowng anguage
was used and reed upon:
(2) Ths offce s unabe to fnd any authorty for consderng the so-caed
ndrect ownershp of stock under the consodated returns provsons of
the 1924 ct. Possby that theory may have had some vaue n appyng such
terras as contros through cosey affated nterests n the former cts. No
doubt where one owns stock n a corporaton whch n turn owns stock In a
second corporaton, he may be sad to have an nterest n such stock of the
second, for, as was sad n the case of sner v. Macomber (252 U. S., 189
T. D. 3010, C. . 3, 25 ), the nterest of a stockhoder pertans, not to
any part dvsbe or ndvsbe, but to the entre assets, busness and affars
of the company. Itacs supped.
In the cases before the courts the ureau has advanced benefca
ownershp as the fundamenta test of whether affaton shoud or
shoud not be granted. In other words, f the stock ownershp,
ether drect or ndrect, s such that the utmate burden of the ta
woud fa upon the same persons, regardess of whether the corpora-
tons fed a consodated return or separate returns, affaton shoud
be conceded. In ths connecton see Montana Mercante Co. v.
Rasmusson (28 ed. (2d), 916) Commssoner v. doph rsch c
Co., Inc. (30 ed. (2d), 645, Ct. D. 60, C. . III-1, 267) and Ice
Servce Co. v. Commssoner (30 ed. (2d), 230). ppyng ths
test to the nstant case, affaton must, of course, be granted, because
the ta utmatey fas on C n ether event.
Ceary the foregong poston of the ureau before the courts
s nconsstent wth the above-quoted anguage from Genera Coun-
se s Memorandum 2780, supra.
Under the crcumstances of ths case, ths offce s of the opnon
that at east 95 per cent of the stock of corporatons and n
1926 was owned by the same nterests wthn the meanng of secton
240(d) of the Revenue ct of 1926. To the e tent that Genera
Counse s Memorandum 2780 s nconsstent herewth t s hereby
overrued. There s no vad reason, n appyng the provsons of
secton 240 of the Revenue ct of 1926, why one of the corporatons
owned by the same nterests shoud not at the same tme const-
tute a part of the same nterests.
ccordngy, t s the opnon of ths offce that corporatons
and shoud be affated for the ta abe year 1926.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
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253
246 and 247, rt. 693.
S CTIONS 246 ND 247. T S ON INSUR NC
COMP NI S.
Tc 693: Deductons aowed nsurance -15-5014
companes. G. C. M. 9333
R NU CT O 1926.
In the case of nsurance companes sub|ect to the ta mposed
by secton 246 of the Revenue ct of 1926, the cost of furnture
and f tures, ncudng the cost of furnture and f tures prev-
ousy charged off as an e pense, shoud be captazed as of the
date of acquston and deprecaton aowed thereon on the bass
of such cost and the perod of the usefu fe of the asset from the
date of acquston, sub|ect to the mtaton that no deprecaton
s aowabe upon any tem, the cost of whch has prevousy been
deducted as an e pense, when any addtona ta es resutng from
the subsequent captazaton of such cost are barred by the
statute of mtatons.
The foowng questons have been presented n connecton wth
the speca provsons for computng gross ncome and net ncome
of nsurance companes (other than fe or mutua nsurance com-
panes) prescrbed by the Revenue ct of 1926:
(1) Does the pecuar wordng of the statute defnng e penses
ncurred permt the deducton by nsurance companes of e pend-
tures for furnture and f tures n the year of the e pendture
(2) Shoud the cost of furnture and f tures not recovered by
deprecaton, obsoescence, or aowed as a deducton from gross
ncome for any year be captazed for the amount of the unrecov-
ered cost and deprecaton aowed thereon on the bass of the
remanng fe
(3) Shoud the cost of furnture and f tures heretofore aowed
as a deducton, as we as e pendtures for those tems n the year
under consderaton at any partcuar tme, be captazed and de-
precaton aowed thereon on the bass of the remanng fe
The pertnent provsons of the Revenue ct of 1926 are as
foows:
Sec. 246. (a) In eu of the ta Imposed by secton 230, there sha be eved,
coected, and pad for each ta abe year upon the net ncome of every nsurance
company (other than a fe or mutua nsurance company) a ta as foows:

(b) In the case of an nsurance company sub|ect to the ta Imposed by ths
secton
(1) The term gross ncome means the combned gross amount earned
durng the ta abe year, from nvestment ncome and from underwrtng Income
as provded n ths subdvson, computed on the bass of the underwrtng
and nvestment e hbt of the annua statement approved by the Natona
Conventon of Insurance Commssoners
(2) The term net ncome means the gross ncome as defned n para-
graph (1) of ths subdvson ess the deductons aowed by secton 247

(7) The term e penses ncurred means a e penses shown on the annua
statement approved by the Natona Conventon of Insurance Commssoners,
and sha be computed as foows:
To a e penses pad durng the ta abe year add e penses unpad at the
end of the ta abe year and deduct e penses unpad at the end of the pre-
cedng ta abe year. or the purpose of computng the net ncome sub|ect to
the ta mposed by ths secton there sha be deducted from e penses ncurred
as defned n ths paragraph a e penses ncurred whch are not aowed as
deductons by secton 247.
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246 and 247, rt. 693.
254
Sec. 247. (a) In computng the net ncome of an Insurance company sub|ect
to the ta mposed by secton 246 there sha be aowed as deductons:

(8) reasonabe aowance for the e hauston, wear and tear of property,
as provded n paragraph (7) of subdvson (a) of secton 234 .
It s apparent from the foregong that Congress has, for the pur-
pose of determnng the gross ncome of nsurance companes, other
than fe or mutua nsurance companes, adopted as a bass the
method foowed by such companes n makng ther annua reports
to the varous State nsurance commssoners. owever, t s equay
apparent from a readng of secton 246(b) 7 that t was not ntended
that ths practce shoud be foowed n determnng the net ncome
of such companes. On the contrary, Congress has e pressy pro-
vded n the ast sentence of that secton that ony such tems as
are deductbe under secton 247 sha be deducted as e penses
ncurred n determnng the net ncome of such companes.
readng of secton 247 w dscose that Congress has n that
secton ncorporated by reference a number of the deducton pro-
vsons of secton 234 appcabe to corporatons n genera. mong
these s the deducton for deprecaton authorzed by secton
234 (a)7. Certany, ths adopton by reference of the provsons of
the aw reatng to ordnary corporatons does not |ustfy the nfer-
ence that Congress ntended to dfferentate n ths partcuar be-
tween nsurance companes ta abe under secton 246 on the one
hand and corporatons ta abe under secton 230 on the other. On
the contrary, t must be assumed that Congress ntended by ths
acton to treat nsurance companes ta abe under secton 246 n
the same manner as corporatons ta abe under secton 230 are
treated n so far as deprecaton deductons are concerned.
Speakng wth respect to the treatment by nsurance companes of
e pendtures for furnture and f tures, Gover and Wghtman n
ther work Lfe Insurance ccountng state on page 42 as foows:
rom a study of the conventon bank t woud appear mandatory to charge
off at once through e pense a e pendtures for furnture and f tures.
Some companes restate these tems, however, n the nonedger assets but ths
does not hep them n so far as the net surpus s concerned for the reason that
a such amounts must be deducted as nonadmtted assets.
The queston mght be rased as to the correctness and |ustce of requrng
a company to charge to e pense a of ts e pendtures for furnture and f -
tures. Such e pendtures are ordnary regarded as nvestments and charged
to the assets. ven n bankng practce t s permssbe and the amost un-
versa practce to ncude the deprecated vaue of furnture and f tures n the
assets.
Mather, n hs work Lfe Insurance ccountng, page 52, speak-
ng wth respect to the same matter, says:
urnture, f tures, and safes. (Item 30 n dsbursements statement.) It
has been ponted out above that the asset vaue of furnture s not admtted when
t comes to preparng the annua statement, even f carred as a edger asset.
Consequenty, e pendture on these Items, nstead of beng a capta outay,
as n an ordnary busness, may be cassfed as a current e pense.
It s apparent from the foregong that nsurance companes do
charge off as an e pense the cost of furnture and f tures n the
year n whch the e penses are ncurred. owever, t s aso ap-
parent that ths practce s not sanctoned by the genera rues of
good accountng, but was adopted to conform to the requrements
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255 246 and 247, rt. 693.
of the varous State nsurance commssoners. The reasons for ths
requrement are obvous, but are nether persuasve nor controng
n the admnstraton or the edera revenue aws. Ths s so for
the reason that State nsurance commssoners are concerned wth the
fnanca condton of nsurance companes, whereas n the admn-
straton of the edera revenue aws the ureau s concerned wth
determnng what part of the gross ncome of such companes shoud
propery be treated as net ncome for the purpose of ta aton.
Unted States v. oston Insurance Co., 269 U. S., 197, C. . -,
301.) urthermore, the oard of Ta ppeas has repeatedy hed
that a ta payer has no opton to treat e pense tems as capta or
capta e pendtures as ordnary and necessary busness e penses.
(Cnton G. dgar v. Commssoner, 10 . T. ., 110, C. . II-2,
12, and cases cted.)
or reasons appearng n the foregong, ths offce s of the opnon
that there s nothng n secton 246 or 247 whch requres nsurance
companes sub|ect to the ta mposed by secton 246 to deduct as
e penses ncurred the cost of furnture and f tures n the year
n whch such e penses were ncurred. It s further the opnon
of ths offce that n the case of such nsurance companes the cost
of furnture and f tures, ncudng the cost of furnture and f tures
prevousy charged off as an e pense, shoud be captazed as of
the date of acquston and deprecaton aowed thereon on the bass
of such cost and the perod of the usefu fe of the asset from the
date of acquston, sub|ect to ths mtaton, that no deprecaton
s aowabe upon any tem, the cost of whch has prevousy been
deducted as an e pense, when any addtona ta es resutng from
the subsequent captazaton of such cost are barred by the statute
of mtatons. Ths atter mtaton s based upon the prncpe
of estoppe arsng from acceptance of benefts and fnds support
n the foowng cases and many others:
Whte Oak Coa Co. v. U. S. (C. C. .) (15 ed. (2), 474, cer-
torar dened, 273 U. S., 756) Iumes Constructon Co. v. Phadepha
Casuaty Co. (32 R. L, 246, 79 t., 1) ector v. Mann (225 Mo.,
228, 124 S. W., 1109) tchson, Topeka Santa e Raway Co.
v. U. S. (58 Ct. CI., 583, 592) Waker v. amo oods Co. (C. C.
(16 ed. (2d), 694, certorar dened 274 U. S., 741 T. D. 3984, C. .
T-, 274 ) Schoey v. Rew (23 Wa., 331, 350, 352) Utermehe v.
Norment (197 U. S., 40) Danes v. Tearney (102 U. S., 415, 421)
ooth sheres Co. v. Industra Commsson of Wsconsn et a. (271
U. S., 208, 211) ne v. Morse (218 U. S., 493, 511) Grand Rapds
Indana Raway Co. v. Osborn (193 U. S., 17, 29) remont
County v. Warner (7 Idaho, 367, 63 Pac, 106) Green v. Lancaster
County (61 Neb., 473, 85 N. W., 439) e v. Town of TeUowhead
(80 III., 208) rthur v. Israe (15 Coo., 147, 25 Pac, 81) tch-
cock v. Dambury N. R. Co. (25 Conn., 516) Duff v. Wynkoop (74
Pa., 300) aze v. Lyden (51 an., 233, 32 Pac, 898) Deford v.
Mercer (24 Iowa, 118) WUmvore v. Stater (137 Ind., 127, 34 N. .,
357) Tracy v. Roberts (88 Me., 310, 34 t., 68) orbes v. eyes
(193 Mass., 38, 78 N. ., 733) Norwood v. Lasster (132 N. C, 52,
43 S. ., 509) Dmond v. Manhem (61 Mnn., 178, 63 N. W., 495):
Proctor v. Nance (220 Mo., 104,119 S. W., 409) Robertson v. radford
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273 and 274, rt. 1233.
256
(73 a., 116) St. Lous, etc., R. Co. v. ots (52 ed., 627) en
v. Coorado Centra R. Co. (22 Coo., 238, 43 Pac., 1015) artshorn
v. Potroff (89 111., 509) oand v. SpeU (144 Ind., 561, 42 N. .,
1014) ansas Cty Southern Ry. Go. v. Second Street Improvement
Co. (256 Mo., 386, 166 S. W., 296) Matter ofWoosey (95 N. Y.,
135) Waker v. Muvean (76 111., 18) artsve O M v. U. S.
(60 Ct. CI., 712, 724, 725, affrmed n 271 U. S., 43) Lousve
Nashve R. Co. v. U. S. (57 Ct. CI., 268, affrmed n 267 U. S., 395)
nd Mng Co. v. U. S. (64 Ct. CI., 396, 404) U. S. v. ustce
(14 Wa., 535, 548, 549) Mason v. U. S. (17 Wa., 67, 73, affrmng
6 Ct. CI., 57) Pooe ngneerng Machne Co. v. U. S. (57 Ct.
CI., 232,234).
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
P RT I . DMINISTR TI PRO ISIONS.
S CTION 256. IN ORM TION T SOURC .
rtce 1071: Return of nformaton as to payments of
1,500.
R NU CT O 1926.
Payments of renewa commssons to estates of deceased agents.
(See I. T. 2560, page 173.)
P RT . P YM NT, COLL CTION, ND R UND O T ND
P N LTI S.
S CTIONS 273 ND 274. D ICI NCY IN T .
rtce 1233: Coecton of a defcency. -9-4959
G. C. M. 8980
R NU CT O 1926.
n e tenson of tme was granted the ta payer for payment of
a defcency n ncome ta for 1924 n accordance wth secton
274(k) of the Revenue ct of 1926. surety bond wth the M
Company as surety was furnshed. The ta payer dd not make
payment n accordance wth the terms of the e tenson granted
and the surety company pad the baance.
ed, there Is no authorty for reeasng or returnng the bond
fed n ths case. owever, If the ureau s satsfed that the
ta and nterest and/or penaty covered by the bond have been
pad, the surety may be so advsed.
n opnon s requested reatve to the request of the M Company,
surety on the bond of , for e ecuton of a form submtted reeas-
ng the surety from further ta abty on the bond.
The above-mentoned bond was furnshed the Commssoner n
accordance wth the provsons of secton 274 (k) of the Revenue
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257
277 and 278, rt. 1271.
ct of 1926 n connecton wth an e tenson of tme granted by
the Commssoner for the payment of a defcency n ncome ta for
the year 1924. On the faure of the ta payer to pay the ast nsta-
ment of the defcency n ta the M Company, as surety, pad the
baance of the defcency wth nterest, and submtted a form of re-
ease readng as foows:
now a Men by these Presents:
That , Coector of Interna Revenue , n consderaton of the
payment by the M Company, a corporaton under the aws of the State
of , of the sum of doars, recept of whch s hereby acknow-
edged, do hereby reease, acqut, e onerate and dscharge the sad M Company,
Its successors and assgns, from a actons, suts, cams, damages, and
abtes whatsoever, that t, the sad M Company, has ncurred by reason
of havng made and e ecuted the certan bond No. upon the day
of , 1929, n the sum of doars, on behaf of one the sad bond
so e ecuted by the sad M Company, and a ts condtons and covenants
havng been fuy carred out and performed, the same s hereby surrendered
and canceed.
Ths offce s of the opnon that, even where payments by a prn-
cpa or a surety satsfy the abty under a bond, there s no prov-
son of aw authorzng the Commssoner or a coector to return
the bond or to ssue to a prncpa or surety a certfcate of reease
therefrom, and that, accordngy, there s no authorty for the e ecu-
ton of the form submtted by the surety n the nstant case, pur-
portng to reease the surety from further abty under the bond
furnshed by t. (See 4 Op. tty. Gen., 312 7 Op. tty. Gen., 62
33 Op. tty. Gen., 441.) The bond, therefore, shoud be retaned
n the fes of the ureau. owever, f the ureau s satsfed that
the ta payer and/or the surety n ths case have pad the amounts
of the ta and nterest and/or penaty covered by the bond, n accord-
ance wth the terms of the e tenson granted, the coector or the
ureau may so advse the surety.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
rtce 1234: tenson of tme for payment of a defcency.
R NU CT O 1926
mendment of artce 1234, Reguatons 69. (See T. D. 4315,
page 178.)
S CTIONS 277 ND 278. P RIOD O LIMIT TION UPON
SS SSM NT ND COLL CTION O T .
fnc 1271: Perod of mtaton upon assessment of ta .
R NU CT O 1926.
Instructons governng the e ecuton of consent agreements. (See
Mm. 3857, page 179.)
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277 and 278, rt. 1271.
258
htce 1271: Perod of mtaton upon assess-
ment of ta .
-10- 965
Ct. D. 292
INCOM T R NU CTS O 1918, 1921, ND 1926 D CISION O SUPR M
COURT.
1. ssessment Lmtaton Computaton of Pebod.
In reckonng the perod of mtaton after the date when the
return was due or was made wthn whch a ta must be
assessed as provded by secton 250(d) of the evenue ct of
1918 or the perod of mtaton after the return was fed
wthn whch a ta must be assessed as provded by secton
250(d) of the Revenue ct of 1921 and secton 277(a)2, 3 of the
Revenue ct of 1926, the day on whch the return was due or
was made n the one case and the day on whch the return was
fed n the other shoud be e cuded from the computaton.
2. udgment Reversed.
udgment of the Unted States Crcut Court of ppeas for
the fth Crcut (36 ed. (2d), 49) reversed.
SUP M COU T 01 T UNIT D ST T S. No. 53. OCTO R T RM, 1930.
Davd urnet, Commssoner of Interna Revenue-, pettoner, v. Wngham
Loan TrUst Go.
On wrt of certorar to the Unted States Crcut Court of ppeas for the fth Crcut.
Mr. ustce omes devered the opnon of the court
Ths case came before the crcut court of appeas upon a short queston.
Returns for ta es for the fsca year 1920 and the fsca year 1921 were fed
respectvey on March 15, 1921, and March 15, 1922. ssessments for both years
were made on March 15,1926. The queston s whether the assessments were too
ate under the statutes by whch they were governed. The earer one fe under
the Revenue ct of 1918 (ch. 18, secton 250(d), 40 Stat, 1057, 1083), whch re-
qures the amount of ta due to be assessed wthn fve years after the return
was due or was made. That for 1921 was governed by Revenue ct of 1921
(ch. 136, secton 250(d), 42 Stat., 227, 265), whch requres the assessment to be
wthn four years after the return was fed. oth acts are affrmed n Reve-
nue ct of ( ebruary 26) 1926 (ch. 27, secton 277(a)2, 3, 44 Stat, 9, 58). The
crcut court of appeas hed that the assessments were too ate. (36 . (2d),
49.) wrt of certorar was granted by ths court. (281 U. S., 710.)
The argument that prevaed wth the crcut court of appeas and that s
pressed for the respondent s that a ta payer s entted to the most favorabe
constructon of ta ng cts, that there s a dstncton between a mtaton
runnng from a day and one from an event, and that f the words quoted are
taken teray the part of the day after the return was fed must be part of
the four or fve years. We are seekng a measure of tme, and therefore we
have to transate the event nto the anguage of tme and when, as here, there
s no speca reason for beng more precse, the day s the unt, because peope
generay measure perods of more than one day by days, months, or years.
When we say four years after the return was fed by common usage we
thnk of four years after the day on whch the return was fed and t woud
seem that Congress was foowng common usage. The earer ct read after
the return was due or was made. The return was not due before the end of
the day for fng. y secton 250(d) of the Revenue cts of 1918 and 1921
no suts sha be begun after the e praton of fve years after the date when
such return was fed, obvousy treatng the date and the fng as markng
the same startng pont and date equay pany meanng the year and day
of the month. The genera rue was ad down ong ago n anguage quoted
from Chef ustce rouson (Corne v. Mouton, 3 Deno, 12), When te perod
anuary 26, 1931.
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259 277 and 278, rt. 1271.
for dong an act Is to be reckoned from the makng of a contract, or the happen-
ng of any other event, the day on whch the event happened may be regarded as
an entrety, or a pont of tme and so may be e cuded from the computaton.
(Sheets v. Sedon, 2 Wa., 177 Owensboro v. Owensboro Water Wor cs Co.,
243 U. S., 166, 171 ems v. Leonard, 118 Mass., 502, and many more cases.)
The cton that a day has no parts s a fguratve recognton of the fact that
peope do not troube themseves wthout reason about a ncer dvson of tme.
udgment reversed.
rtce 1271: Perod of mtaton upon assess- -24-5105
ment of ta . G. C. M. 9541
R NU CT O 1926.
The runnng of the statutory perod for makng an assessment
of any defcency n ta s suspended where a 60-day etter s maed
to the ta payer, and, where no appea s taken to the oard of Ta
ppeas, the Commssoner may, wthn the perod so suspended,
ssue a second 60-day etter notfyng the ta payer of any add-
tona defcency not ncuded n the orgna notce.
The ta payer fed a return for the ta abe year 1927 on March 15,
1928. No waver havng been gven, the 3-year perod of mtaton
on assessment as prescrbed n secton 277 (a) 1 of the Revenue ct
of 1926 e pred, uness suspended from runnng by the mang of
a 60-day etter, on March 15, 1931. Under date of ebruary 28,
1931, a 60-day etter was maed to the ta payer, showng a def-
cency n ta of 1.77a doars. It has snce been determned that
the defcency n ta was understated by the amount of 1.08a doars,
the amount of the tota defcency beng 2.85a doars. No appea
has been taken to the oard and t s now too ate for the ta payer
to take such acton. The Income Ta Unt presents the foowng
questons:
L Inasmuch as the ta payer has faed to fe an appea wthn the perod
provded by secton 274(a), may a second notce of defcency be maed to the
ta payer wthn 120 days from ebruary 28, 1931, and woud such a notce have
the effect of further e tendng the statutory perod of mtaton aganst assess-
ment prescrbed n secton 277(a)1
2. Under the crcumstances, may a |eopardy assessment be made as provded
n secton 279 (a) and (e)
efore consderng these questons, t seems desrabe to state n a
bref way the genera scheme of the statute reatng to the assessment
and coecton of defcences. Under secton 274(a) of the Revenue
ct of 1926, the Commssoner s prohbted from assessng or coect-
ng any defcency n ta unt notce of such defcency s furnshed
to the ta payer and for 60 days thereafter, or f an appea s taken to
the oard wthn such 60-day perod, unt the decson of the oard
becomes fna, e cept as otherwse provded n that secton. One of
the e ceptons s that f the Commssoner beeves that assessment or
coecton w be |eopardzed by deay he may mmedatey assess
such defcency as provded n secton 279.
|eopardy assessment s one made at a tme when the Comms-
soner s prohbted from makng a reguar assessment and where the
deay that woud be occasoned by compance wth the provsons of
secton 274(a) prevous to assessng the ta woud |eopardze the
coecton thereof. Where, as here, more than 60 days have eapsed
from the tme, of the mang of the notce to the ta payer and no
appea has been taken to the oard, no |eopardy can e st wthn the
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277 and 278, rt. 1271.
260
meanng of the statute as to the defcency of whch the ta payer was
so notfed. In such a case the defcency, notce of whch has been
maed to the ta payer, sha be assessed, and sha be pad upon
notce and demand from the coector, as provded n secton 274(c)
of the Revenue ct of 1926. ny addtona amount due, of whch
the ta payer was not notfed, consttutes an addtona defcency for
the purpose of the procedura provsons and must be assessed and
coected sub|ect to the same provsons and mtatons as n the case
of the defcency of whch the ta payer was orgnay notfed. The
questons propounded then narrow to the snge queston of whether
the runnng of the perod of mtaton on assessment s suspended
after the mang of a statutory notce of a defcency as to any add-
tona defcency not ncuded m such notce.
Secton 277(b) of the Revenue ct of 1926 as amended by secton
504 of the Revenue ct of 1928 provdes as foows:
(b) The runnng of the statute of mtatons on the makng of
assessments n respect of any defcency, sha (after the mang of
a notce under subdvson (a) of secton 274) be suspended for the perod
durng whch the Commssoner Is prohbted from makng the assessment
and for 60 days thereafter. Itacs supped.
Under the above secton, the mang of a notce under secton
274(a) suspends the runnng of the perod of mtaton on the
makng of assessments n respect of any defcency.
There s no e cepton made to ths rue, nor do the procedura pro-
vsons of the statute contempate that any e cepton shoud be
made. The term defcency and the effect of a notce under
subdvson (a) of secton 274 are pany defned n the statute.
The notce gven to the ta payer, even though not n the subse-
quenty determned amount of 2.85a doars, suspended the runnng
of the perod of mtaton on the assessment of any defcency
n ta . The notce set n moton the prohbton perod referred to
n secton 277(b) aganst the makng of an assessment, and there-
after the Commssoner coud ony proceed sub|ect to the restrctons
prescrbed n secton 274. mong the restrctons so prescrbed s
that, f an appea s taken to the oard the Commssoner sha have
no rght to determne any addtona defcency. owever, n that
event the oard has |ursdcton to redetermne the correct defcency
even f greater than the amount set forth n the notce, or to deter-
mne whether any addtona amount shoud be assessed f cam
therefor s asserted by the Commssoner. If no appea s taken to
the oard, ony the amount of the defcency of whch the ta payer
was notfed may be assessed, but n such a case the Commssoner s
not precuded from gvng the ta payer notce of any addtona
amount not ncuded n the orgna notce.
In vew of the foregong, t s the opnon of ths offce that under
the facts rected, the perod of mtaton on the assessment of any
defcency n ta due from the nstant ta payer for the ta abe year
1927 w not e pre unt uy 13, 1931 (three years and 120 days
from the date the return was fed), and that the ta payer shoud be
notfed pror to the sad date of any addtona defcency not n-
cuded n the orgna notce maed under date of ebruary 28, 1931.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
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261
280, rt. 1291.
rtce 1272: Perod of mtaton upon coecton of ta .
R NU CT O 1926.
Retroactve effect of secton 277(b), Revenue ct of 1926. (See
Ct. D. 279, page 274.)
S CTION 280. CL IMS G INST TR NS-
RR D SS TS.
rtce 1291: Cams n cases of transferred -15-5015
assets. G. C. M. 9252
R NU CT O 1026.
The effect of the e tngushment of a transferee s abty Is to
reduce the transferor s abty by the amount actuay pad by the
transferee. ny payment made by a transferee s to that e tent a
payment of transferor s ta abty, and the amount of any such
payment, whether coected by dstrant, by vountary payment, or
by way of compromse, shoud be credted aganst any outstandng
ta due from the transferor. compromse does not affect the
abty of other transferees or that of the transferor other than to
dmnsh the amount of the ta by the amount of the compromse.
n opnon s requested on the foowng questons:
(1) Does the acceptance of an offer n compromse coverng the
abty of a transferee aso compromse the abty of the transferor
so as to e tngush sad abty, even though the offer whch was
accepted does not ncude any menton of the transferor s abty
(2) If the transferor s abty s not e tngushed thereby, shoud
the entre amount offered by the transferee and accepted by the
ureau be credted aganst the outstandng ta of the transferor
(3) In a case where there are severa transferees and an offer n
compromse s accepted from one of them, does the compromse
e tngush ther abtes, or shoud the amount accepted be credted
aganst ther abtes
rst. The abty of a transferee s a secondary abty. It s
not a abty for a ta , strcty consdered, but a abty to pay
the transferor s ta . Ths abty s based on, and s measured by,
the assets of the transferor whch the transferee has receved.
The theory s that, the transferee beng n possesson of assets
whch mght or shoud have been devoted to payng the transferor s
ta , the transferee must be hed abe to pay a or part of trans-
feror s ta , but that such payment must not e ceed the vaue of the
assets receved by the transferee. Snce, then, the transferor s
abty s to pay a ta , a abty whch contnues t the ta s
pad or compromsed, and the transferee s abty s a mted
abty to pay n the transferor s stead up to the e tent of the
assets receved, the abty of the transferor and that of the trans-
feree each arsng n a dfferent way do not stand on a common
ground. Whatever the transferee pays on account of hs abty
s to that e tent a payment of a transferor s ta abty. (See
eUand v. Wknson, 33 ed. (2d), 961, Ct. D. 53, C. . III-1,
116.) ccordngy, the effect of the e tngushment of a trans-
feree s abty s to reduce the transferor s abty by the amount
actuay pad by the transferee. The baance of the transferor s
ta abty woud contnue outstandng, and may be coected from
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280, rt. 1291.
262
other transferees or from the transferor shoud the atter be found
to have funds appcabe to the payment of such baance.
Second. The answer to the second queston s contaned n the
answer to the frst queston. ny payment made by a transferee s
to that e tent a payment of transferor s ta abty, and the amount
of any such payment, whether coected by dstrant, by vountary
payment, or by way of compromse, shoud be credted aganst any
outstandng ta due from the transferor.
Thrd. The abty of a transferee arses because he has receved
assets of the transferor whch shoud have been apped n satsfac-
ton of the ta . (See G. C. M. 6343, C. . III-2, 220 Unted
States v. oss Pedhe utomobe Co. et a., 285 ed., 410, af-
frmed oss v. Unted States, 290 ed., 167 G. C. M. 2408, C. .
I-2, 95 Unted States v. Pann et a., 23 ed. (2d), 714, T. D. 4216,
C. . II-2, 228 Unted States v. araU et a., 16 ed. (2d), 328,
T. D. 4008, C. . I-1, 267.) compromse presupposes nsovency
of the transferee or nabty to pay the abty. (Compare G. C.
M. 659, C. . -2, 79.) Such compromse does not affect the a-
bty of other transferees or that of the transferor other than to
dmnsh the amount of the ta by the amount of the compromse.
When a transferee receves assets from the transferor, whether as
stockhoder or as dstrbutee of an estate, or by gft, or otherwse,
he receves the assets, not as a member of a group but as an ndvd-
ua, so that hs ensung abty s ndvdua. Ths abty of a
transferee can be no greater than the vaue of the transferor s assets
receved by hm. It foows that a compromse of the abty of
one transferee coud never ncrease, but mght tend to dmnsh, the
abty of the other transferees by reducng the amount of the trans-
feror s outstandng ta . Unt such ta s pad, however, each trans-
feree contnues to be abe for the payment of the transferor s ta
to the e tent of the vaue of the assets receved, on the theory that
such assets are charged wth a trust n favor of the Unted States.
(See G. C. M. 2408, supra.)
In Grand Rapds Natona ank v. Commssoner (15 . T. .,
1166, C. . III-2, 20) the oard of Ta ppeas hed that each
transferee was abe to the e tent of the assets ne had receved and
not merey for a pro rata part of the ta of the dstrbutor. Ths case
was foowed n nne G. Phps et a. v. Commssoner (15 . T. .,
1218), where the oard hed that any one of severa transferees of
the assets of a corporaton was abe for the unpad ta of the
corporaton to the e tent of the amount receved by the transferee
on qudaton.
The decson of the oard n the Phps case was uphed by
the Unted States Crcut Court of ppeas, Second Crcut, n
PhUps et a. v. Conwhsoner (42 ed. (2d), 177, Ct. D. 211, C. .
I -2, 253), certorar granted on appcaton of ta payer, October
20, 1930. In hodng that each transferee was abe for the trans-
feror s ta to the e tent of the amount receved by such transferee
from the transferor, the court sad:
There remans the queston of the e tent of the appeants abty. They
contend that t s mted to ther decedent s pro rata share of the corpora-
ton s ta , whe the Commssoner contends that each stockhoder s severay
abe up to the amount of the qudsng dvdend he receved. The Com-
mssoner s contenton s correct. artctt v. Drew (57 N. Y., 587) s pre-
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263
280, rt. 1291.
csey n pont. Ths was an acton In the nature of a credtor s b brought
by a |udgment credtor of a New ersey corporaton, after the return of
an e ecuton unsatsfed, to reach money dstrbuted by the corporaton to
Drew, a arge stockhoder and a resdent of New York. Drew contended
that the sut coud not be mantaned aganst hm aone, but a stockhoders
must be brought n to the end that each mght contrbute hs proporton to
the payment of the pantffs debt. The court re|ected ths contenton,
sayng:
It s a very pan proposton that the stock and property of
every corporaton Is to be regarded as a trust fund for the payment of ts
debts, and ts credtors have a en and the rght to prorty of payment over
any stockhoder. (2 Story q. ur., sec. 1252.) Where stock and property
has been dvded between stockhoders before a the debts of the corporaton
have been dscharged, f any one stockhoder s compeed to pay more than
hs far share of any unpad debt he may resort to hs assocates for equtabe
contrbuton but wth that proceedng the credtor has nothng to do, uness
he chooses to ntervene to sette equtes that may e st between hs debtors.
(Page 589 of 57 N. Y.)
u Tne defendant, Drew, s found to be In possesson of the
assets of the dssoved or Insovent corporaton more than suffcent to pay
the pantff her demand, and the aw requres that he shoud pay t. (Page
591 of 57 N. Y.)
Ths case was foowed n astngs v. Drew (76 N. Y., 9) and Snger v.
utchnson (183 111., 60G, 56 N. ., 388, 75 m. St. Rep., 133). (See, aso,
mbrough v. Daves, 104 Mss., 722, 61 So., 697 Wams v. Commerca Nat.
ank, 49 Or., 492, 90 P., 1012, 91 P., 443, 11 L. R. . (N. S.), 857 etcher,
Corporatons, sec. 5060 and sec. 4127, where t s sad that the weght of
authorty s n accord.) The artett case was cted wth approva n atch v.
Dana (101 . S., 205, 212, 25 L. d., 885), whch aowed recovery by a credtor
from a snge stockhoder of the atter s unpad stock subscrpton, for whch no
ca had been made by the corporaton, aganst defendant s ob|ecton that a
stockhoders shoud be |oned.
It Is true that by cross b the stockhoder who s sued may brng n other
stockhoders and obtan contrbuton. ( etcher, Id., sec. 4102.) Ths s a
matter of procedure to avod a mutpcty of suts and do compete |ustce
between a the partes concerned. ut the e tent of the defendant s abty
to the credtor s not dmnshed by the fact that defendant may have a rght
of contrbuton, whch, for convenence, may be enforced n the credtor s sut
rather than n an ndependent acton. Ths s demonstrated beyond queston,
to our mnds, by appeants concesson that, f other stockhoders are nsovent
or beyond the |ursdcton, the credtor need not pursue them, and the abty
of stockhoders who are partes w be correspondngy ncreased beyond ther
pro rata shares of the credtor s cam. The abty of one who receves
corporate assets mpressed wth a trust for payment of corporate debts e tends
to the fu vaue of such assets. That there may be rghts of contrbuton f
those assets are taken from hm does not dmnsh hs abty nor concern the
credtor. (See atch v. Dana, 101 U. S., 205, 214, 25 L. d., 885 Marsh v.
urrouohs, 1 Woods, 463, 468, ed. Cas. No. 9112.) If Unted States v. rm-
strong (26 . (2d), 227) (C. C. . 8) can be thought contrary to ths concu-
son, we can not yed to t.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
rtce 1291: Cams n cases of transferred -16-5024
assets. G. C. M. 9162
R NU CT O 1920.
Nether the estate of a decedent nor the egatees under hs w
are abe for the denquency penaty on account of the decedent s
faure to fe a return.
n opnon s requested whether the estate of or the egatees
under hs w, as transferees of the estate, are abe for a penaty
72109 31 18
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280, rt. 1291.
264
asserted on account of s faure to fe an ncome ta return for
the caendar year 1926.
It appears that had a ta abe net ncome durng the year 1926,
but dd not fe an ncome ta return for that year. e ded n 1928
and hs estate has been setted. In 1930 a return for the caendar
year 1926 was prepared by a deputy coector n accordance wth the
provsons of secton 3176 of the Revsed Statutes. Ths return was
amended by the Commssoner pursuant to the same secton of the
Revsed Statutes, whch aso vests n the Commssoner authorty
ether to make a return or amend any return made by a coector or
deputy coector. The amended return fed by the Commssoner
showed a ta due and a penaty for denquency. 30-day etter was
ssued n whch t was proposed to make a transferee assessment
aganst the egatees for the ta and penaty. In December, 1930, the
aforesad egatees fed a protest aganst the coecton of the de-
nquency penaty, t beng ther contenton that the penaty dd not
survve , and that nether the estate of nor they as transferees of
sad estate were abe for the penaty.
In Law Opnon 1091 (C. . 1-1, 422) t was hed that the 5 per
cent penaty for faure to pay transportaton ta es was a persona
punshment, and that the penaty abated on the death of the ta -
payer. Law Opnon 1091 was supported by ampe precedent, as w
be noted from the authortes cted theren. The resut reached n
the opnon was based upon the theory that actons on pena statutes
were actons e decto, and abated on the death of a tort-feasor.
Ths offce s of the opnon that the denquency penaty under con-
sderaton s governed by the prncpes announced n Law Opnon
1091 that s, the penaty abated on the death of , and that hs
estate was not abe therefor. avng reached the concuson that
the estate was not abe for the penaty, t necessary foows that
the egatees under the w of are not abe for the penaty.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
rtce 1291: Cams n cases of transferred -25-5112
assets. - Ct. D. 350
ncome ta revenue act of 1926 decson of supreme court.
1. Transferee Labty Consttutonaty.
Secton 280(a) of the Revenue ct of 1926, whch provdes a
summary procedure for coecton of the ta mposed upon a ta -
payer from a transferee of hs property, s consttutona and s
appcabe where the transfer of assets upon whch the transferee s
abty s based occurred pror to the enactment of that ct.
2. Same tent of Labty.
transferee of property of a ta payer s severay abe for
the ta mposed upon the ta payer to the e tent of the assets
receved by hm and other transferees need not be |oned n a
proceedng aganst hm to enforce that abUty.
3. Same) Lmtaton.
summary proceedng by the Unted States as provded by sec-
ton 280(a) 1 of the Revenue ct of 1926 to enforce aganst a
stockhoder hs abty for the ta as a transferee s not barred
by a State statute of mtatons on suts aganst stockhoders.
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265
280, rt. 1291.
Supreme Comer of the Unted States. No. 465. October Tebm, 1930.
nne O. Phps et a., pettoners, v. Commssoner of Interna Revenue.
On certorar to the Unted States Crcut Court of ppeas for the Second Crcut.
I May 25, 1931.
Mr. ustce randos devered the opnon of the court.
In 1919, the Coombe Garment Co., a Pennsyvana corporaton, dstrbuted
a of ts assets among ts stockhoders, and then dssoved. Thereafter the
Commssoner of Interna Revenue made defcency assessments aganst t for
ncome and profts tares for the years 1918 and 1919. sma part of these
assessments was coected, eavng an unpad baance of 9,306.36. I. L. Phps,
of New York Cty, had owned one-fourth of the company s stock and had
receved 17,139.61 as hs dstrbutve dvdend. Pursuant to secton 280(a) 1
of the Revenue ct of 1926 (ch. 27, 44 Stat., 9, 61), the Commssoner sent due
notce that he proposed to assess aganst, and coect from, Phps the entre
remanng amount of the defcences. No notce of such defcences was sent
to any of the other transferees, and no sut or proceedngs for coecton was
nsttuted aganst them. Upon petton by Phps e ecutors for a redeter-
mnaton, the oard of Ta ppeas hed that the estate was abe for the
fu amount. (15 . T. ., 1218.) Its order was affrmed by the Unted States
Crcut Court of ppeas for the Second Crcut. (42 . (2d), 177.) ecause
of confct n the decsons of the ower courts1 a wrt of certorar was granted.
(282 U. S., 828.)
Stockhoders who have receved the assets of a dssoved corporaton may
confessedy be compeed, n an approprate proceedng, to dscharge unpad
corporate ta es. Compare Perce v. Unted States (255 U. S., 398). efore the
enactment of secton 280(a)1, such payment by the stockhoders coud be en-
forced ony by b n equty or acton at aw.2 Secton 280(a) provdes that
the abty of the transferee for such ta es may be enforced n the same
manner as that of any denquent ta payer.
The procedure prescrbed for coecton of the ta from a stockhoder Is thus
the same as that now foowed when payment s sought drecty from the cor-
porate ta payer. Ths procedure s now generay known, and some parts of t
w ater be consdered n deta. s apped drecty to the ta payer, ts
Compare Owcnsboro Dtcher f Grader Co. v. Lev s (18 . (2d), 798) Md-Contnent
Petroeum Corporaton v. e ander (35 . (2d). 43) : Routzahn v. Tyroer (36 . (2d),
208). Sec aso eUand v. Wknson (33 . (2d), 961 Ct. D. 63, C. . III-1, 116 )
Cappen v. Commssoner (14 . T. ., 1269).
Such proceedngs to obtan payment of corporate Income and profts ta es from
stockhoders or other transferees have been frequenty brought. (See Unted States v.
Uc atton, 266 ed.. 602 T. D. 3043. C. . 3, 283 Updke v. Unted States, 8 . (2d),
913 T. D. 3815, C. . -, 312 , certorar dened, 271 U. S., 661 Unted States v.
Capps Mfg. Co., 9 . (2d), 79, affrmed 15 . (2d). 528 Unted States v. ara, 16 .
(2d). 328 T. D. 4008, C. . -1, 267 : Unted States v. ausner, 25 . (2d), 608
Unted States v. rmstrong, 26 . (2d), 227 Unted States v. arbutt. 27 . (2d), 1000,
modfed 35 . (2d), 924 Unted States v. Pann, 23 . (2d), 714, affrmed 44 . (2d),
321 T. D. 4216. C. . II-2, 228). Compare Unted States v. oss ct Peake utomobe
Co., 285 ed., 410, affrmed 290 ed., 167 T. D. 3525, C. . II-2, 1951 Dreyfuss Dry
Goods Co. v. Lnes, 18 . (2d), 611, reversed 24 . (2d), 29 T. D. 4039. C. . I-2,
264 Unted States v. Snook, 24 . (2d), 844, reversed sub. nom. ustn v. Unted
States, 28 . (2d), 677 Unted States v. Updke, 25 . (2d), 746, affrmed 32 . (2d), 1.
281 U. S.t 489 Ct. D. 192, C. . I -1, 228 Peope s Industra Lfe Ins. Co. v. Unted
States, 29 . (2d), 650.)
Where the transferee took property sub|ect to the ta en of the Unted States, the
en coud be enforced by summary proceedngs. ( ev. Stat., sectons 3185-3205 Mans-
fed v. cesor Refnng Co., 135 U. S., 326, 336 ackock v. Unted States, 208 U. S.,
75, 87.) Or by an acton n equty. (Rev. Stat., 3207.) (Compare 26 U. S. C. sec-
tons 115, 136 eycard v. Unted States, 2 . (2d), 467 T. D. 3663, C. . I -1, 247
In re Gover-McConne Co.. 9 . (2d), 683, 686. See aso Unted States v. Capta Cty
Dary Co., 252 ed., 900, 604 Unted States v. oar, 27 . (2d), 250, 251, certorar
dened 278 U. S., 634.)
The abty, at aw or In equty, of a transferee of property of a ta payer n
respect of the ta Imposed any pror ncome, e cess-profts or war
profts ta ct sha be assessed, coected, and pad n the same manner as
a defcency n a ta mposed by ths tte (ncudng the provsons n case of a denquency
n payment after notce and demand, the provsons authorzng dstrant and proceedngs
n court for coecton, and the provsons prohbtng cams and suts for refunds).
(44 Stat., 61.) Ths remedy Is n addton to proceedngs to enforce the ta en or actons
at aw and n equty. ( ct of ebruary 26, 1926. ch. 27, secton 1122(b), 44 Stat., 9,
121 ct of May 29, 1928, ch. 852, secton 617(b), 45 Stat., 791, 877. Compare Unted
States v. Greenfed Tap De Corp., 27 . (2d), 933 T. D. 4196. C. . II-2, 170
Unted States v. Updke, 23 . (2d), 746, 747, affrmed 32 . (2d), , 4. 281 U. S., 489.)
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280, rt. 1291.
266
consttutonaty s not now assaed. Compare Od Coony Trust Co. v. Com-
mssoner (279 U. S., 716 Ct. D. 80, C. . III-2, 222 ). ut t s contended
that to appy t to stockhoder transferees voates severa consttutona guar-
antees that addtona obstaces are encountered f t s apped to transfers
made before the enactment of secton 280(a) 1 that the specfc abty here
sought to be enforced s governed by the aw of Pennsyvana and burred by ts
statute of mtatons and that, n no event, can the stockhoder be hed abe
for more than hs pro rata share of the unpad corporate ta .
rst. The contenton many urged s that the summary procedure per-
mtted by the secton voates the Consttuton because t does not provde for
a |udca determnaton of the transferee s abty at the outset. The argu-
ment s that such abty (e cept where a en had attached before the transfer)
s dependent upon questons of aw and fact whch have heretofore been ad-
|udcated by courts that to confer upon the Commssoner power to determne
these questons n the frst nstance, offends aganst the prncpe of the sepa-
raton of the powers and that the nherent dena of due process s not saved
by the provsons for deferred revew n a sut to recover ta es pad, or, In
the aternatve, for an mmedate appea to the oard of Ta ppeas wth
the rght to revew ts determnaton n the courts, because there are mtatons
and condtons n ether method of |udca revew.
Secton 280(a) 1 provdes the Unted States wth a new remedy for en-
forcng the e stng abty at aw or n equty. The quoted words are
empoyed n the statute to descrbe the knd of abty to whch the new
remedy s to be apped and to defne the e tent of such abty. The ob-
gaton to be enforced s the abty Tor the ta . Russe v. Unted- States,
278 U. S., 181, 186 T. D. 4260, C. . III-1, 206 Unted States v. Updke, 281
U. S., 489, 493 494.) The proceedng s one to coect the revenue. That Con-
gross deemed the secton necessary n order to. make the ta -coectng system
more effectve, s estabshed not ony by the fact of enactment but aso by the
reports of the commttees.
The rght of the Unted States to coect ts nterna revenue by summary
admnstratve proceedngs has ong been setted.6 Where, as here, adequate
opportunty s afforded for a ater |udca determnaton of the ega rghts,
summary proceedngs to secure prompt performance of pecunary obgatons
to the Government have been consstenty sustaned. (Compare Cheatham v.
Unted States, 92 U. S., 85, 88-89 Sprnger v. Unted States, 102 U. S., 586, 594
agar v. Recamaton Dstrct No. 108, 111 U. S., 701, 708-709.) Property
rghts must yed provsonay to governmenta need. Thus, whe protecton
of fe and berty from admnstratve acton aeged to be ega, may be
obtaned prompty by the wrt of habeas corpus (Unted States v. Woo an, 245
U. S., 552 Ng ung o v. Whte, 259 U. S., 276), the statutory prohbton
of any sut for the purpose of restranng the assessment or coecton of any
ta postpones redress for the aeged nvason of property rghts f the e ac-
ton s made under coor of ther offces by revenue offcers charged wth the
4 Conference report to accompany n. R. 1 ( ouse Report No. . .50, S ty-nnth Confess,
frst sesson, ebruary 22, 1926, page 44) states that the secton makes the procedure
for the coecton of the amount of the abty of transferees conform to the procedure
for the coecton of ta es for procedura purposes the transferee s treated
as a ta payer woud be treated. Compare ouse Report No. 2, Seventeth Congress,
frst sessfon, December 7. 1927, pages 31-32 : Secton 280 of the 1926 ct as proved a
very effectve and necessary method of stoppng ta evason through the varous favorte
methods recognzed by everyone pror to the 1926 ct. The enforcement of the abty
through court process had been neffectve and the amount of revenue ost through maa
fde transfers or through corporae dstrbuton of assets was admttedy arge.
c Cheatham v. Unted State (92 IT. S.. 85, 89) State Raroad Ta Cases (92 TT. 8.,
575, 6151 Sprnger v. Unted States (102 U. S., 580. 5931: Dodge v. Osborn (240 U. S.
118. 120) Graham v. du Pont (262 U. S., 234. 255). The earest edera e cse ta
cts contaned provsons for sut, or evy by dstrant and sae. ( . g., ct of March
3, 1791, ch. 15, secton 23, 1 Stat., 199, 204 ct of December 21, 1814 oh. 15, secton
5, 3 Stat., 152, 154 ct of anuary 9, 1815, ch. 21, secton 26, 3 Stat., 164, 173 ct
of anuary IS. 1815 ch. 22, secton 5. 3 Stat., ISO, 182 d., ch. 23, secton 9, 3 Stat..
186, 188.) Smary, a ta en on ands and chattes was eary ntroduced. ( ct of
uy 22, 1813, ch. 16, secton 19, 3 Stat.. 22. 30 ct of anuary 9, 1815, ch. 21, secton
24 3 Stat., 104, 172. Compare ct of March 3, 1815, ch. 100, sectons 12-15, 3 Stat.,
239, 24 .)
or the ancent ngsh practce of summary sezure of the property of a debtor of a
Crown debtor, by means of an Immedate e tent n the second degree, see West, The Law
and Practce of tents, chapters 1-3. 24 Chttv, Laws of the Prerogatve of the Crown,
page s 261, 303-307: Prce, Laws and Course of the chequer. Chapter I Robertson
Cv Proceedngs y and ganst the Crown, Chapter III, pages 203-204, 206-207. a
to the adopton of the wrt n ths country, see ackctt v. msdem (56 t., 201, 206-2071.
Compare Mccn v. nderson (95 U. S., 41).
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267
280, rt. 1291.
genera authorty to assess and coect the revenue. (Snyder v. Marks, 109
U. S., 189 Dodge v. Osborn, 240 U. S.t 118 Graham v. du Pont, 262 U. S., 234
T. D. 3486, C. . II-, 226 .) Ths prohbton of n|unctve reef s app-
cabe n the case of summary proceedngs aganst a transferee. ( ct of May
29, 1928, eh. 852, secton 604, 45 Stat., 791, 873.) Proceedngs more summary
In character than that provded n secton 280, and nvovng ess drecty the
obgaton of the ta payer, were sustaned n Murray s Lessee v. oooken Land
Improvement Co. (18 ow., 272). It s urged that the decson n the Murray
case was based upon the pecuar reatonshp of a coector of revenue to hs
government. The underyng prncpe n that case was not such reaton, but
the need of the government prompty to secure ts revenues.
Where ony property rghts are nvoved, mere postponement of the |udca
Inqury Is not a dena of due process, f the opportunty gven for the ut-
mate |udca determnaton of the abty s adequate. Sprnger v. Unted
States, 102 U. S., 586, 593 Scottsh Unon Natona Insurance Co. v. owand,
196 U. S., 611, 631.) Deay n the |udca determnaton of property rghts s
not uncommon where t s essenta that governmenta needs be mmedatey
satsfed. or the protecton of pubc heath, a State may order the summary
destructon of property by admnstratve authortes wthout antecedent notce
or hearng. (Compare North mercan Cod Storage Co. v. Chcago, 211 U. S.,
306 utchnson v. aMosta, 227 U. S., 303 dams v. Mcaukee, 228 T . S.,
572, 584.) ecause of the pubc necessty, the property of ctzens may be
summary sezed n war tme. (Centra Unon Trust Co. v. Garvan, 254 U. S.,
554, 566 Stoehr v. Waace, 255 U. S., 239, 245 Unted States v. Pftsch, 256
C. S., 547, 553. Compare Mer v. Unted States, 11 Wa., 268, 296 Interna-
tona Paper Co. v. Unted States, 283 U. S., Russan ounteer feet Corpo-
raton v. Unted States, 283 U. S., .) nd at any tme, the Unted States
may acqure property by emnent doman, wthout payng, or determnng the
amount of the compensaton before the takng. (Compare oh v. Unted
States, 91 U. S., 367, 375 Unted States v. ones, 109 U. S., 513, 518 Crozer
v. red. rupp ktengeseschaft, 224 U. S., 290, 306.7)
The procedure provded n secton 280(a) 1 satsfes the requrements of due
process because two aternatve methods of eventua |udca revew are ava-
abe to the transferee. e may contest hs abty by brngng an acton,
ether aganst the Unted States or the coector, to recover the amount pad.
Ths remedy s avaabe where the transferee does not appea from the de-
termnaton of the Commssoner, and the atter makes an assessment and
enforces payment by dstrant or where the transferee vountary pays the
ta and s thereafter dened admnstratve reef. (Compare Unted States v.
mery, rd, Thayer Reaty Co., 237 U. S., 28, 31: Wckwre v. Renccke. 275
U. S., 101, 105 T. D. 4126, C. . II-1, 316 Wamsport Wre Rope Co. v.
Unted States, 277 U. S., 551, 560 T. D. 4172, C. . II-2, 323 .) Or the
transferee may ava hmsef of the provsons for mmedate redetermnaton
of the abty by the oard of Ta ppeas, snce a provsons governng
ths mode of revew are made appcabe by secton 280. (Compare Routzahn v.
Tyroer, 36 . (2d), 208, 209.) Thus wthn 60 days after the Commssoner
determnes that the transferee s abe for an unpad defcency, and gves due
notce thereof, the atter may fe a petton wth the oard of Ta ppeas.
( ct of ebruary 26, 1926, eh. 27, secton 274(a), 44 Stat, 9, 55 ct of May
29, 1928, ch. 852, secton 272(a), 45 Stat., 791, 852.) orma notce of the ta
abty s thus gven the Commssoner s requred to answer and there s
a compete hearng de novo accordng to the rues of evdence appcabe n
Revsed Statutes, secton 3224. There Is no substanta rea aton of ths prncpe
n the provson that whe an appea s pendng before the oard of Ta ppeas, no
proceedng by dstrant may be taken, and, notwthstandng Revsed Statutes, secton
3224. such proceedng may be en|oned. ( ct of ebruary 26, 1926, ch. 27, secton 274(a),
44 8tat., 9, 55 ct of May 29. 1928, ch. 852, secton 272(a), 45 Stat., 791, 852
Peeress Wooen Ms v. Rose, 28 . (2d). 661.) or even n such case, f the Com-
mssoner beeves the assessment or coecton of the ta w be endangered by deay, ho
may make an Immedate |eopardy assessment and coect by dstrant uness the ta payer
fes a bond. ( ct of ebruary 26, 1926, ch. 27, secton 279, 44 Stat., 9, 59 ct of
May 29, 1928, ch. 852, secton 273. 45 Stat., 791, 854 Sakoff v. McCaughn, 24 . (2d),
434 T. D. 4140, C. . II-1. 140 .) Compare urnet v. Chcago Raway qupment Co.
282 U. S., 295, 303 Ct. D. 276, page 323, ths uetn ). The paramount rght of the
Unted States to requre mmedate payment, or surety therefor, s not dmnshed.
The same rue s apped to emnent doman proceedngs by a State. (Stcect v.
Reche, 159 U. 8., 380 ackus v. ort Street Unon Depot Co., 169 T . S.. 557 U ffam
v. Parker, 188 U. S., 491 ragg v. Weaver, 251 U. S.. 57. 62 ays v. Port of Seatte,
251 U. S., 233, 238 osn Manufacturng Co. v. Provdence, 262 U. S., 666, 677.)
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280, rt. 1291.
268
courts of equty of the Dstrct of Coumba. ( ct of May 29, 1928, ch. 852,
secton 601, 45 Stat., 791, 872. Compare Internatona andng Machne Co. v.
Commssoner, 37 . (2d), 660.) Ths remedy may be had before payment,
wthout gvng bond (uness the Commssoner n hs dscreton deems a
eopardy assessment necessary). The transferee has the rght to a premnarr
e amnaton of books, papers, and other evdence of the ta payer and the
burden of proof s on the Commssoner to show that the appeant s abe
as a transferee of property, though not to show that the ta payer was abe
for the ta . ( ct of May 29, 1928, ch. 852, secton 602, 45 Stat., 791, 873. )
revew by the crcut court of appeas of an adverse determnaton may be
had an assessment and coecton meanwhe may be stayed by gvng a bond
to secure payment. ( ct of ebruary 26, 1926, ch. 27, secton 1001, 44 Stat.,
9, 109 ct of May 29, 1928, ch. 852, secton 603, 45 Stat., 791, 873.) There may-
be a further revew by ths court on certorar. These provsons ampy pro-
tect the transferee aganst mproper admnstratve acton. (Compare ur-
wtz v. North, 271 U. S., 40.)
It s argued that such revew by the oard of Ta ppeas and crcut court
of appeas s consttutonay nadequate because of the condtons and m-
tatons mposed. Specfc ob|ecton s made to the provson that coecton
w not be stayed whe the case s pendng before the crcut court of appeas,
uness a bond Is fed and aso to the rue under whch the oard s fndngs of
fact are treated by that court as fna f there s any evdence to support them.
s to the frst of these ob|ectons, t has aready been shown that the rght of
the Unted States to e act mmedate payment and to reegate the ta payer to
a sut for recovery, s paramount. The prvege of deayng payment pendng
mmedate |udca revew, by fng a bond, was granted by the soveregn as a
matter of grace soey for the convenence of the ta payer. Nor Is the second
ob|ecton of weght. It has ong been setted that determnatons of fact for
ordnary admnstratve purposes are not sub|ect to revew. ( ohnson v. Drew,
171 U. S., 93, 99 Pubc Cearng ouse v. Coyne, 194 T . S., 497, 508 Unted
States v. u Toy, 198 U. S., 253, 263 Red C O Co. v. North Carona, 222
U. S., 380, 394 Mutua m Co. v. Industra Commsson, 236 U. S., 230, 246.
Compare Wamsport Wre Rope Co. v. Unted States, 277 U. S., 551, 560
T. D. 4172, C. . II-2, 323 .) Save as there may be an e cepton for ssues
presentng cams of consttutona rght, such admnstratve fndngs on
ssues of fact are accepted by the court as concusve f the evdence was
egay suffcent to sustan them and there was no Irreguarty n the pro-
ceedngs. (Rcetz v. Mchgan, 188 T . S., 505, 507 Leberman v. an De Carr,
199 U. S., 552, 562 Dougas v. Nobe, 261 U. S., 165, 167 Tagg ros, d More-
head v. Unted States, 280 U. S., 420, 443. ) The adequacy of the scope of
revew offered by the Revenue ct of 1926 n the case of a defcency determned
drecty aganst the ta payer was assumed n Od Coony Trust Co. v. Com-
mssoner (279 U. S., 716 Ct. D. 80, C. . III-2, 222 ) and ths procedure
s now thoroughy estabshed.11 uestons of fact nvoved n proceedngs
aganst transferees are no dfferent or more compe than those often
8 It a asserted that these atter provsons, added by the Revenue ct of 1928, coud not
render vad an assessment vod under secton 280 of the 1926 ct. ut as the ob|ecton
reates ony to the remedy and the hearng before the oard was not hed unt November.
1928, that Is, after the 1928 ct was n effect, any aeged defect was cured.
very . Commssoner (22 . (2d). 8, 7 T. D. 4116, C. . II-1, 155 ) Geo. eek
d Sons Co. v. ar (26 . (2d), 540. 542) shoff v. Commssoner (27 . (2d), 91. 92)
Conkn-Zoone-Looms Co. v. Commssoner (29 . (2d). 698, 700) . O. Robchau Co.
v. Commssoner (32 . (2d), 780, 781) Menrath rokerage Co. v. Commssoner (35 .
(2d), 614, 616). The further ob|ecton that ths mode of revew may deprve the ta -
payer of a ury tra contrary to the seventh amendment, s unfounded. ven n the
aternatve acton to recover ta es aeged to have been Iegay coected, the rght to
a |ury s not to be found In the seventh amendment but merey
arses by Impcaton from the provsons of secton 3226, Revsed Statutes, whch has
reference to a sut at aw. (Wckere v. Renecke, 275 U. S., 101, 105 T. D. 4126,
C. . II-1. 316 .)
10 See Wamsport Wre Rope Co. v. Unted States (277 IT. S., 551, 562), note 7
Russe v. Unted States (278 U. S., 181, 186-187) Od Coony Trust Co. v. Commssoner
(279 T . S., 716, 721).
Compare Davs v. Massachusetts (167 T . S., 43, 48) Gundtng v. Chcago (177 T . S.,
183, 187) seher v. Sr. Lou (194 U. S., 361, 371).
y November 1, 1930, 644 pettons for revew under the Revenue ct of 1926 had
been decded by the varous crcut courts of appeas, and 671 pettons were pendng. Soe
statement of the charman of the oard of Ta ppeas In hearng before the Subcom-
mttee of ouse Commttee on ppropratons, Seventy-frst Congress, thrd sesson,
anuary 7, 1931, pages 19, 26.
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269
280, rt. 1291.
encountered In determnng the drect abty of a ta payer. The aternatve
|udca revew provded s adequate n both cases.
Second. It s urged by amc curae that the method of assessment and coec-
ton permtted by secton 280(a) can not be apped where, as n the case at bar,
the transfer of assets, upon whch the transferee s abty s based, occurred
pror to the enactment of the Revenue ct of 1926 and. moreover, that f
apped retroactvey to such transfer, the secton woud be unconsttutona.
The power of Congress to provde an addtona remedy for the enforcement
of e stng abtes s cear. (Compare Graham oster v. Ooodce, 282
U. S., 409, 427 Ct D. 287, page 191, ths uetn .) It s cear aso that Congress
ntended that the secton shoud be avaabe for enforcng the abty of a
transferee n respect to ta es mposed by any pror ncome, e cess-
profts, or war-profts ta ct, rrespectve of the tme at whch the transfer
was made. The need for a more effectve and e pedent remedy was not mted
to abtes of transferees thereafter arsng. To have so mted the operaton
of the secton woud, at east as to earer cts, have serousy mpared the
vaue of the new remedy.
Thrd. It s contended that secton 280(a) s nvad because the abty at
aw or n equty of a transferee s dependent upon the aw of the State of ncor-
poraton, and that thus the secton mpropery deegates the edera ta ng
power to the State egsatures and, further, that the ta abty of the trans-
feree, as thus assessed and coected, voates the consttutona requrement of
unformty because dfferences n State aws may affect such abty. The
e tent and ncdence of edera ta es not Infrequenty are affected by dffer-
ences n State aws but such varatons do not nvadate the consttutona
prohbtons aganst deegaton of the ta ng power or the requrement of geo-
graphca unformty. ( orda v. Meon, 273 U. S., 12, 17 Crooks v. arreson,
282 U. 8., 55 Poe v. Seaborn, 282 U. S., 101, 117 Ct. D. 259, C. . I -2, 202 .
Compare ead Money Cases, 112 U. S., 580, 594 Cark Dstng Co. v. Western
Maryand Raway Co., 242 U. S., 311, 327.) We have, therefore, no occason to
decde whether the rght of the Unted States to foow transferred assets s
mted by any State aws.
ourth. It s contended that summary proceedngs by the Unted States to
enforce the abty for the ta s barred by the s months statute of mta-
tons on suts aganst stockhoders provded by the Pennsyvana statute. (Laws
1874, ch. 32, secton 15 Penn. Stat. (1920), secton 5728.) The Unted States
s not bound by State statutes of mtaton uness Congress provdes that It
sha be. (Unted States v. Nashve, Chattanooga St. Lous Ry. Co., 118
U. S., 120 Chesapeake d Deaware Cana Co., 250 U. S., 123, 125 . I. du Pont
De Nemours Co. v. Davs, 264 U. S., 456, 462.) The detaed mtaton perods
specfed n secton 280 evdence the ntenton that they aone sha be appcabe
to the proceedngs theren authorzed.
fth. It s contended that even f pettoners are abe, the amount deter-
mned s e cessve and that the fndngs of the oard of Ta ppeas n the
present case are nsuffcent to support an assessment of the entre baance
of the defcences. It s frst urged that the estate of Phps can be assessed
ony for Its pro rata share of the defcency, accordng to the rato whch the
stock hed by hm bore to the tota outstandng stock of the corporate ta payer
at the tme of dssouton. The argument s that the edera equty rues
requre that a stockhoders be brought n as necessary partes and be pro-
Compare Lonsdae v. Commssoner (32 . (2d), 537 Ct. D. 93, C. . III-2, 237 )
ooser Casuaty Co. v. Commssoner (32 . (2d), 940) acobs v. Commssoner (34 .
(2d), 233 ICt. D. 128. C. . III-2, 403 ) O Meara v. Commssoner (34 P. (2d), 390)
Insurance f Tte Guarantee Co. v. Commssoner (36 . (2d), 842 Ct. D. 1 5, C. .
I -1, 279 ) Penney Long, Inc., v. Commssoner (39 . (2d), 849) ardc Stee
Products Corporaton v. Commssoner (40 . (2d), 412).
There s no suggeston n the commttee reports on the 1926 ct that secton 280 was
to be so mted. contrary Intenton Is perhaps Indcated by subdvson (b)(2), whch
provded that where the perod of mtaton for assessment aganst the ta payer e pred
before the enactment of ths ct but assessment aganst the ta payer was made wthn
such perod the Commssoner shoud have s years n whch to make an assessment
aganst the transferee, provded he coud do so wthn one year after the enactment of
the 1926 ct. Moreover, n a cases, an addtona perod of one year after the e pra-
ton of the perod for assessng the ta payer, was gven. (Compare II. R. Rept. No.
356. S ty-nnth Congress, frst sesson. ebruary 22, 1926, page 44.) Subdvson (c)
provdes that In the case of corporatons whch had been dssoved, the perod for assess-
ment of the transferee was to be the same as If such termnaton of e stence had not
occurred. These provsons ceary contempated a dssouton and transfer of assets
pror to the passage of the ct. (Compare Unted States v. Updke, 281 U. S., 489, 494.)
In the case at bar, two assessments aganst the corporate ta payer had been made pror
to 1926.
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282, rt. 1293.
270
portonatey sub|ected to abty. We t s permssbe for a respondent to
brng n other stockhoders or transferees by a crossb, ths procedure s
founded upon the desre not to burden the courts wth a mutpcty of suts.
(Compare atch . Dana, 101 U. S., 205, 211.) Such rue of convenence s not
appcabe n summary admnstratve proceedngs ke that provded by secton
280(a) 1. One who receves corporate assets upon dssouton s severay abe,
to the e tent of assets receved, for the payment of ta es of the corporaton
and other stockhoders or transferees need not be |oned. Non|onder can not
affect or dmnsh the severa abty of the stockhoder or transferee sued.
(Compare enton v. mercan Natona ank, 276 ed., 368 ) The ndvdua
severa abty of Phps may be fuy enforced by the Unted States n the
present proceedng. Whatever the pettoners rghts to contrbuton may be
aganst other stockhoders who have aso receved shares of the dstrbuted
assets, the Government s not requred, n coectng ts revenue, to marsha the
assets of a dssoved corporaton so as to ad|ust the rghts of the varous
stockhoders. There s nothng n secton 280 to ndcate that Congress ntended
to mt the procedure n ths way. nd any such requrement woud serousy
mpar the effcency of the summary method provded.
Pettoners assert aso that the fndng of the oard that the tota assets of
the corporaton, amountng to 68,588.35, were pad to ts stockhoders between
uy 25, 1919, and September 27, 1919, s nsuffcent to support the assessment
aganst the estate of the entre remanng defcency of 9,306.36. The argument
s that there may have been severa dstrbutons wthn ths perod that
snce there was no fndng as to the e stence of other credtors, t must be
assumed that unt the assets bad been depeted beow the amount due for
ta es, the corporaton was sovent and that thus the stockhoder-transferees
dd not become abe unt the fna 9,306.36 of assets was dstrbuted. ence
t s camed that Phps abty for the ta s mted to a pro rata share
of the assets fnay dstrbuted that s, to one quarter of the unpad defcency.
ut the pan mport of the fndngs s that there was a snge dstrbuton
whch took severa months to compete and there s no queston that the entre
assets were thereby dstrbuted. Moreover, such argument, urged for the frst
tme here, comes too ate. or whe the burden was on the Commssoner to
prove before the oard that Phps was abe as a transferee, the facts n the
case at bar were stpuated and t was agreed that the date of compete qu-
daton was September 27, 1919, by whch tme pettoners decedent had receved
hs fu share of the dstrbuted assets. Snce t was stpuated that the fna
transfers of assets were wthout consderaton that they competey e hausted
the corporate assets that the baance of the defcences, assessed aganst the
corporaton, remans unpad and that the dstrbutve dvdend receved by
Phps was n e cess of the remanng ta abty, the burden restng upon
the Commssoner was sustaned.
ffrmed.
S CTION 282. N RUPTCY ND R C I RS IPS.
rtce 1293: ankruptcy and recevershps. -6-4927
G. C. M. 8488
R NU CT O 1926.
Under the ct of March 1, 1879, no ta es shoud be assessed
aganst the trustees n bankruptcy of a partnershp whch con-
ducted an ordnaTy bankng busness, f t s shown to the satsfac-
ton of the Commssoner that the assets avaabe for the pay-
ment of partnershp debts are nsuffcent for the fu payment of
a the depostors. In the absence of such showng the trustees
n bankruptcy are sub|ect to ta .
Compare quty Rues 25, 39, 42 Watson v. Natona Lfe Trust Co. (162 ed.. 7).
enton v. mercan Natona ank (276 ed., 368) McWams v. cesor Coat Co.
(298 od., 884). (Compare Unted States v. oss Peake utomobe Co., 285 ed.. 410.
affrmed 290 ed., 167 Capps Manufacturng Co. v. Unted States, 15 . (2d), 528 T. D.
972, C. . I-1, 264 Pann v. Unted Staes, 44 . (2d) 321 Ct D. 309. page 411, ths
uetn. See aso dams v. Perryman d Co., 202 a., 469 Snger v. utchnson, 183 111.,
606, 620 mbrough v. Davcs, 104 Mss., 722 artett v. Drew, 57 N. Y., 587.)
wa| conceded beow that f the other stockhoders are nsovent, or absent from
the ursdcton, or can not be ascertaned, they need not be |oned. (Compare ennedv
v 1, ,on 2 Ya - 498v 506 Second Natona ank of re v. Oeorger, 246 ed., 517,
520 Unted States v. rmstrong, 26 . (2d), 227 233.)
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271 - 282. tt. 1293.
n opnon s requested reatve to the case of the bankrupt part-
nershp of M Co. for the year 1927.
M Co. was a genera copartnershp, organzed under the aws
of Te as n 1907, whch had carred on the ordnary transactons of a
bank of dscount and depost at the ctes of R and S, Te as, up to
the tme of ts ad|udcaton n bankruptcy. Upon the death of ,
who was one of the partners as we as casher of the bank at the
cty of R, the bank was cosed at both paces, and n the same month
the survvng partners e ecuted a genera assgnment for the bene-
ft of ther credtors. Upon the petton of credtors the court
ad|udged the partnershp and the survvng members of the partner-
shp |onty and severay bankrupt, e cept as to the ndvdua
property of , deceased. (The estate of s beng admnstered n
the Te as probate courts.) The bankruptcy proceedngs are beng
handed as one case, the docket number beng No. , and there s
one set of trustees.
The partners of M Co. and the nterest each hed n the partner-
shp are as foows:
-er cent.
65
C 10
D 10
(deceased) 15
return on orm 1040 for the ta abe year 1927 was fed by the
trustees on March 11, 1928, showng a net ncome of 92.45a doars.
No ta was computed on ths return and none was pad at the tme
the return was fed. Ta es n the amount of 13a doars and nterest
n the amount of doars were assessed aganst the trustees n
bankruptcy, n accordance wth secton 282 of the Revenue ct of
1926. Ths assessment appears on the uy, 1929, st. n addtona
ta of Z doars, together wth nterest n the amount of .37a
doars, was assessed under the provsons of the same secton and
ths assessment appears on the March, 1930, st.
The ncome on whch the assessment for 1927 was based was com-
osed prncpay of the proft derved from the sae of rea estate
eongng to and hs wfe as communty property a sma amount
conssted of dvdends and rent from ndvdua property of and
another sma amount represented nterest receved from partner-
shp notes.
The trustees n bankruptcy state that they have not been carryng
on the busness of the bankrupts, but have been marshang and ds-
trbutng the assets under the drecton and contro of the bank-
ruptcy court. They contend that the partnershp comes wthn the
purvew of secton 22 of the ct of March 1, 1879 (20 Stat., 351,
U. S. C, Tte 12, secton 570), e emptng nsovent banks from ta ,
and that, accordngy, no ta s due for the year 1927.
In addton to the queston of whether the provsons of secton
22 of the ct of March 1, 1879, supra, are appcabe to the nstant
case, advce s requested whether the ncome receved by trustees n
bankruptcy s, n genera, sub|ect to ncome ta , and f so, what
ncome ta returns shoud be fed.
In Te as, by operaton of aw, a partnershp s dssoved by the
death of any of ts members. n agreement tacng the partnershp
out of ths rue must be shown dstncty by satsfactory evdence.
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282, rt. 1293.
272
( ottwtz v. e ander, 34 Te as, 689 tget v. D. Suvan Co.
(Te as), 79 S. W., 333.) In the absence of evdence takng the
nstant case out of the genera rue above ad down, t must be con-
cuded that the partnershp of M Co. was dssoved by the death
of . owever, dssoved partnershp contnues n force n
ega contempaton for the purpose of wndng up ts affars unt
a fu settement has been had and a outstandng abtes have
been met. Roberts v. Nunn (Te as), 169 S. W., 1086.) The death
of dd not precude the partnershp from beng ad|udcated bank-
rupt. s stated n Meek v. eezer (28 ed. (2d), 343, certorar
dened, 278 U. S., 651) :
Secton 5(a) of the ankruptcy ct provdes that a partnershp, dur-
ng the contnuaton of the partnershp busness, or after ts dssouton and
before the fna settement thereof, may be ad|udged a bankrupt.
The death of a partner usuay dssoves a partnershp, uness there s a pro-
vson n the partnershp agreement to the contrary. ut the Congress, know-
ng ths fact, dd not e cept a partnershp, dssoved by the death of a partner,
from the genera provson of secton 5(a). The ct treats a partnershp as
a ega entty, regardess of the ndvdua rghts of the partners. Secton
5(f) provdes that the net proceeds of the partnershp property sha be
approprated to the payment of the partnershp debts, and the net proceeds
of the ndvdua estate of each partner to the payment of hs ndvdua debts.
fter the ndvdua estates of the deceased partners have been admnstered
n the orphans court, the surpus, f any, may be turned over to the bankruptcy
court and apped to the partnershp debts. The manfest purpose
of the ankruptcy ct s to ncude wthn ts operaton partnershps dssoved
by the death of a partner, and we see no reason why ths purpose shoud not
have ts fu effect.
It s the opnon of ths offce that the ncome receved by the
trustees n bankruptcy from the bankrupt partnershp estate and
from the bankrupt ndvduas estates s n genera sub|ect to ncome
ta .
though the proceedngs wth respect to the bankrupt partner-
shp, M Co., and the three bankrupt partners are beng handed
n the bankruptcy court as one case under one docket number, t s
the opnon of ths offce that, from the standpont of the Revenue
cts, the bankruptcy proceedngs n the nstant case nvove four
separate trusts and that, accordngy, four returns shoud have been
fed by the trustees n bankruptcy one for each of the three bank-
rupt partners and one for the bankrupt partnershp. The return
for the estate of the bankrupt partner shoud have been on orm
1040 or orm 1040- . (O. D. 174, C. . 1, 175.) The return for the
bankrupt partnershp estate, n the opnon of ths offce, shoud
have been on orm 1065. (Cf. artce 424, Reguatons 69.) (It
may be ponted out n ths connecton that the trustees n bankruptcy
are requred by secton 5(d) of the ankruptcy ct to keep separate
accounts of the partnershp property and of the property beongng
to the ndvdua partners.)
The ncome of the bankrupt partnershp derved from partnershp
property and reported on orm 1065 shoud be reported by the
trustees as dstrbuted: 65 per cent to themseves as trustees n bank-
ruptcy of 10 per cent to themseves as trustees n bankruptcy of
C 10 per cent to themseves as trustees n bankruptcy of
D and 15 per cent to the estate of , deceased (whch estate, as
prevousy stated, s beng admnstered n the Te as probate courts).
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273
282, rt. 1293.
The amounts so reported as dstrbuted to themseves as trustees n
bankruptcy of , C, and D shoud be ncuded n the ncome reported
by them on orm 1040 or orm 1040- as trustees for these three
bankrupt ndvduas. ny ta es due shoud be assessed aganst
the trustees n ther offca capacty.
The unt nqures, however, whether the provsons of the ct
approved March 1, 1879 (20 Stat., 351), are appcabe to the nstant
case. Ths ct (12 U. S. C. ., secton 570) provdes as foows:
Sec. 570. Insovent hanks as e empt from ta . Whenever and after any
bank has ceased to do busness by reason of nsovency or bankruptcy, no ta
sha be assessed or coected, or pad nto the Treasury of the Unted States,
on account of such bank, whch sha dmnsh the assets thereof necessary for
the fu payment of a ts depostors and such ta sha be abated from such
natona banks as are found by the Comptroer of the Currency to be Insovent
and the Commssoner of Interna Revenue, when the facts sha so appear to
hm, s authorzed to remt so much of sad ta aganst nsovent State and
savngs banks as sha be found to affect the cams of ther depostors.
(March 1, 1879, ch. 125, secton 22, 20 Stat., 351 March 3, 1883, ch. 121, secton
1, 22 Stat, 488.)
In determnng what s to be consdered a bank wthn the
meanng of the ct approved March 1, 1879, reference may be made
to R. S. 3407 (12 U. S. C. ., secton 561), whch defnes the terms
bank and banker as foows:
Sec. 561. ank and banker defned. very Incorporated or other bank, and
every person, frm, or company havng a pace of busness where credts are
opened by the depost or coecton of money or currency, sub|ect to be pad or
remtted upon draft, check, or order, or where money s advanced or oaned
on stocks, bonds, buon, bs of e change, or promssory notes, or where
stocks, bonds, buon, bs of e change, or promssory notes are receved for
dscount or for sae, sha be regarded as a bank or as a banker.
The partnershp, M Co., was ceary a bank wthn the mean-
ng of R. S. 3407. The fact that t was a partnershp rather than
a corporaton s wthout sgnfcance. The organzaton of prvate
unncorporated banks (such as the partnershp here under consdera-
ton) was not prohbted n Te as pror to the ad|udcaton n bank-
ruptcy, nor were such banks made the sub|ect of State supervson.
(Cf. nnotated Revsed Cv Statutes of the State of Te as, Re-
vson of 1925, oume I, artce 541, et seq.) The fact that M Co.,
whch was ad|udcated bankrupt, dd not operate under State super-
vson or reguaton does not |ustfy denyng t cassfcaton as a
bank. In vew of the above, t s the opnon of ths offce that M
Co. was a bank wthn the meanng of the ct approved March 1,
1879, supra.
It was ceary the ntenton of the ct of March 1, 1879, to reeve
banks whch have ceased to do busness by reason of nsovency or
bankruptcy from the payment of ta es whch woud dmnsh the
assets thereof necessary for the payment of ts depostors. s stated
n ackson, Recever, v. Unted States (20 Ct. CI., 298) :
The ct of 1879, dvested of words not necessary to the consderaton of ths
case, provdes that when a bank has stopped busness because of nsovency
no ta sha be pad nto the Treasury whch sha dmnsh the assets neces-
sary for the fu payment of a s depostors, and such ta sha be abated
from nsovent banks. No ambguty appears n the statute the ta es not
to be pad are those ony whch sha dmnsh assets necessary to pay depos-
tors and the word such n the concudng cause reates to the defnton
of the precedng cause, that s to those ta es, and to those ony, whose pay-
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283.
274
ment w dmnsh the depostors fund. Ths nterpretaton of the ct has
aready been, n effect, gven t n ohnston s case, where the court says
(p. 172):
The ct of March 3, 1879, now under consderaton, was passed for the
undoubted purpose of reevng depostors n natona banks from the payment
of certan ta es not assessed upon them, but upon the banks of whch they
are ony customers ta es whch, under the pree stng aw, they woud nd-
recty be obged to pay when a bank s so nsovent that a ts capta s
gone, and t has nothng eft wth whch to pay ta es e cept the money of ts
depostors. These semannua ta es are assessed aganst natona banks n
ther corporate capacty, upon ther capta and busness, n consderaton of
the franchse and benefts whch the Government grants to them, and for
other reasons. They are e pected to come out of the profts of the bank, and
thus, reducng the dvdends of the stockhoders, they are a ta upon the
propretors of the nsttuton.
It was ceary the ntenton of the statute to reeve the nnocent customers
of the bank, between whom and the Government there were no reatons of
ta payer and ta recever, and not to reeve the owners of the nsttuton
from ther |ust abtes.
avng n mnd the purpose of the ct of March 1, 1879, the
fact that a partnershp s not an entty for the purpose of assessng
ncome ta es, and the fact that the assets of the ndvdua bankrupt
partners after the satsfacton of ther ndvdua debts are ava-
abe for the payment of partnershp cams (ncudng the cams
of the bank s depostors), t s the opnon of ths offce that t s
proper to hod under the ct that no ta es shoud be assessed
aganst the trustees n bankruptcy n the nstant case f the trustees
n bankruptcy show, to the satsfacton of the Commssoner, that
the assets avaabe for the payment of partnershp debts ncud-
ng the partnershp assets, the assets of the partners avaabe for
the payment of partnershp debts, and the amounts, f any, receved
or recevabe from the probate court whch s admnsterng the
estate of and avaabe for the payment of partnershp debts
are nsuffcent for the fu payment of a the depostors of M
Co. (Cf. I. T. 2264, C. . -, 100.) In the absence of such
showng, the ncome receved by the trustees n bankruptcy w,
of course, be sub|ect to ta under the genera consderatons stated
above.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
S CTION 283. T S UND PRIOR CTS.
Secton 283. -7-4938
( so Sectons 277 and 278, rtce 1272.) Ct. D. 279
INCOM ND C SS PRO ITS T S R NU CT O 192ft D CISION O
supreme court.
1. Wavers ecuted efore the Revenue ct of 1021 Com-
mssoner s uthorty.
consent n wrtng wavng the perod of mtaton for assess-
ment of ta due for 1917, athough e ecuted by the ta payer
before the enactment of the Revenue ct of 1921 and not e ecuted
by the Commssoner unt 1922, s operatve to e tend the perod
for coecton of the ta even though the waver dd not make
e press reference to coecton.
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275 283.
2. Waves adty ecuted fter Perod of Statute.
consent In wrtng by a ta payer to wave the statute of
mtatons operatng aganst the coecton of a ta s vad and
bndng upon such ta payer even when the waver s e ecuted after
the e praton of the statutory perod.
3. Coecton Lmtaton Waver ppea to oard of Ta
ppeas.
Where a vad assessment was made before une 3, 1924, and was
not pad n fu before that date, and between the effectve dates
of the Revenue cts of 1924 and 1926 the Commssoner fnay
determned the amount of the defcency, from whch the ta payer
appeaed to the oard of Ta ppeas before the enactment of the
Revenue ct of 1926, whch appea was pendng at the tme of the
enactment of the atter ct, secton 283(f) of the Revenue ct of
1926 s appcabe, wth the effect that the statutory perod for
coecton as e tended by a waver s suspended n accordance wth
secton 277(b) of that ct for the perod durng whch the Com-
mssoner s prohbted from begnnng dstrant or proceedngs n
court and for 60 days thereafter.
4. Decson ffrmed.
The decson of the crcut court of appeas (38 ed. (2d), 425)
affrmed.
Supreme Court of the Unted States. No. 115. October Term, 1930.
W. P. rown Sons Lumber Co., pettoner, v. Davd urnet, Commssoner
of Interna Revenue.
On certorar to the Unted States Crcut Court of ppeas for the S th Crcut
anuary 5, 1931.
Mr. ustce randes devered the opnon of the court.
On pr 1,1918, W. P. rown Sons Lumber Co. fed ts ncome and profts
ta return for the year 1917. The ta thereon was duy pad. On March 6,
1923, the ureau of Interna Revenue duy maed to the ta payer notce of a
defcency. tmey appea was taken to the Commssoner, who had mean-
whe, n March, 1923, made a |eopardy assessment. On March 27, 1923, the
ta payer fed a cam for abatement On une 4, 1924, ths cam and the
appea were sent by the Income Ta Unt to the Commttee on ppeas and
Revew.1 On October 28, 1925, the Commssoner duy maed to the ta payer
notce of hs determnaton, the cam for abatement beng aowed n part and
re|ected n part. On November 18, 1925, the ta payer appeaed to the oard
of Ta ppeas for a redetermnaton of the defcency. There the partes
stpuated the amount of the addtona ta , and submtted the queston whether
t was barred by the statute of mtatons. The oard hed that t was not
(13 . T. ., 1425) and ts decson was affrmed by the crcut court of appeas
(38 . (2d), 425). Ths court granted a wrt of certorar, the brefs and
arguments to be mted to the queston of the vadty and effect of the
wavers. (281 U. S., 718.)
The |eopardy assessment was ceary made n tme. The return was fed
pr , 1918 the assessment was made n March, 1923. y secton 250(d)
of the Revenue ct of November 23, 1921 (ch. 136, 42 Stat, 227, 265), a
perod of fve years from the fng of the return was aowed for assessment
(see Stange v. Unted States, No. 23, decded ths day Ct D. 274, page 414 ths
uetn ). Moreover, whe there was under the ct of 1917 a mtaton of
three years on the perod for assessment the ta payer had duy e ecuted and
fed on December 13, 1920, before the three years e pred, a waver whch e -
tended the perod for assessment to pr 1, 1924. Ths waver was vad even
1 See Wamsnort Wre Rope Co. v. Unted States (277 U. S., 551, 563, note T. D. 4172,
C. . II-2, 323 ).
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283.
276
though e ecuted by the ta payer before the ct of 1921 and not e ecuted by the
Commssoner unt 1922. ( ken v. urnet, No. 69, decded ths day Ct. D.
275, page 417, ths uetn .) The orgna etter advsng the ta payer of the
defcency, the ntradepartmenta appea therefrom, the |eopardy assessment,
and the cam for abatement were a made n 1923 wthn the e tended perod.
The soe queston for dscusson s whether the rght of coecton has
been barred under secton 250(d) of the Revenue ct of 1921, whch mposed
a 5-year mtaton on coecton. (See Stange v. Unted States, supra.) No
payment has been made on account of the addtona ta and no proceed-
ng for coecton has been taken, ether by sut or by dstrant. Uness e -
tended by waver, the perod aowed for coecton e pred pr 1, 1923.
Three wavers were gven. The frst was e ecuted by the ta payer and fed
wth the ureau December 13, 1920 was approved by the Commssoner on
December 2, 1922 and e pred pr 1, 1924. The second was e ecuted by
both the ta payer and the Commssoner on December 10, 1923, and e pred
by ts terms one year from ts date. The thrd was e ecuted by the ta payer
and the Commssoner on October 25, 1924 and t was n terms decared to be
n effect for a perod of one year after the e praton of the statutory
perod of mtaton wthn whch assessments of ta es may be made for the
year or years mentoned, or the statutory perod of mtatons as e tended
by secton 277(b) of the Revenue ct of 1924, or by any wavers aready on fe
wth the ureau. three wavers were effectve n e tendng the perod
for coecton. The frst was vad athough e ecuted by the ta payer before the
ct of 1921 and not e ecuted by the Commssoner unt 1922, and operatve
even though t dd not make e press reference to coecton. ( ken v. urnet,
No. 69, decded ths day.) The second was vad because gven wthn the
perod as e tended by the frst. The thrd was vad because gven wthn
the perod as e tended by the second. Moreover, both were vad athough gven
after fve years from the date of the fng of the return.4 (See Stange v.
Unted States, No. 23 urnet v. Chcago Raway qupment Co., No. 231,
both decded ths day.) In terms, both covered coecton. The thrd had not
e pred when the appea was taken to the oard of Ta ppeas on November
18, 1925.
Whether the rght of coecton became barred thereafter depends upon the
constructon to be gven to the appcabe statutes. The ta payer contends
that the rght of coecton was barred on December 10, 1925, that s 22 days
after the appea to the oard of Ta ppeas had been taken, athough ths
appea was then pendng wthout havng been heard, and ndeed coud not have
Iteen heard under the practce of the oard. (See rue 15, 1 . T. ., 1289
rues 24-25, 7 . T. ., 1361-1362.) esdes the ct of 1921, provsons of the
Revenue ct of 1924 and of the Revenue ct of 1926 are reed upon. The argu-
ment s that despte the appea to the oard, the Commssoner was at a
tmes at berty to enforce payment of the ta as assessed by the |eopardy
assessment or as ater reduced that hence, coecton was barred on December
10, 1925, by secton 250(d) of the 1921 ct and that there was nothng In
ether the Revenue ct of une 2, 1924 (ch. 234, 43 St., 253), or the Revenue
ct of ebruary 26, 1926 (ch. 27, 44 Stat., 9), whch kept ave the rght of
coecton. The oard of Ta ppeas rested ts decson on provsons of the
There was doubt whether the 1916 and 1917 cts requred the Commssoner both to
dscover the error In the return and to make an addtona assessment, or merey to make
dscovery, wthn three years. Revenue ct of 1916 (ch. 463. secton 14(a), 39 Stat.,
7r6, 772), Incorporated by reference nto Revenue ct of 1917 (ch. 63, secton 206(c), 40
Sat., 300, 305). t that tme, the Commssoner thought t suffcent that he dscover
the error wthn the three years. See Reguatons 33 (Rev. ed. 1918), artce 233.
Compare ot Natona ank v. UI (218 ed., 600, 602) : Unted States v. Nashvhe,
O. t St. L. y. (249 ed., 678, 682) : Du Pont v. Graham (283 ed., 300, 302, reversed
ou other grounds, 262 T . S., 234). Secton 250(d) of the 1921 ct e tended ths perod
for assessment to fve years (compare Unted States v. Chcago d . I. y., 298 ed.,
779 T. D. 3591, C. . I -1, 322 ), but provded that the tme run from the fng of the
return.
3 Ths waver was unmted n tme but e pred pr 1, 1924, under a departmenta
rung promugated pr 11, 1923 (Mm. 3085. I. R. C. . II-, 174). (See feen v.
Unted State/), No. 69, decded ths day, note 1.)
1 Inasmuch as the second and thrd wavers were n themseves suffcent to e tend the
perod for coecton, the frst waver may be dsregarded n ths connecton, as was done
by the ower court. (See 38 . (2d), 428.)
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277
283.
1924 ct the crcut court of appeas on those and aso on the 1926 ct.
Ony the atter ct need be consdered.
Secton 283(f) of the Revenue ct of 1926 (44 Stat, 64) provded:
If any defcency n any 1916-1921 ncome or profts ta es was
assessed before une 3, 1924, but was not pad n fu before that date, and f
the Commssoner after une 2, 1924, but before the enactment of ths ct
fnay determned the amount of the defcency, and f the person abe for
such ta appeaed before the enactment of ths ct to the oard and the appea
s pendng before the oard at the tme of the enactment of ths ct, the oard
sha have |ursdcton of the appea. In a such cases the powers, dutes,
rghts, and prveges of the Commssoner and of the person who has brought
the appea, and the |ursdcton of the oard and of the courts, sha be deter-
mned In the same manner as provded n subdvson (e) of ths
secton
Ths secton s appcabe to the case at bar. The defcency was assessed
n March, 1923 and hence before une 3, 1924, and was not pad. On
October 28, 1925, between the effectve dates of the 1924 and the 1926 cts, the
Commssoner fnay determned the amount of the defcency and on Novem-
ber 18, 1925, aso pror to the enactment of the 1926 ct, the ta payer appeaed
to the oard of Ta ppeas. One effect of the secton was to confrm the
|ursdcton of the oard. nother effect was to make appcabe to the case
at bar secton 274(a) and secton 277(b) of the 1926 ct. Secton 274(a)
provded that no dstrant or proceedng n court for the coecton of the de-
fcency sha be made, begun, or prosecuted f a petton has been
fed wth the oard of Ta ppeas , unt the decson of the oard has
become fna. nd secton 277(b) provded that the runnng of the statute
1 It reed upon G. L, Ramsey v. Commssoner (11 . T. ., 345), where t had hed
that on a |eopardy assessment whch had been n ade wthn the 5-year perod as e tended
by n vad waver, the Commssoner had, under secton 278(d) of the Revenue ct of
1924. s years after the assessment wthn whch to commence proceedngs for coecton,
even though the partes had agreed n the waver for a dfferent perod for coecton.
The oard hed further that there was nothng n secton 278(d) of the Revenue ct of
1926 whch restrcted ths perod to that mentoned In the waver.
Somewhat smar provsons reatng to ke cases under pror estate and gft ta
statutes were enacted at the same tme. (See Revenue ct of 1926, ch. 27, secton 318
(d), (e), and (f), 44 Stat., 9, 82-83 De Sabch v. Commssoner, 4 . T. ., 445.)
7 though some doubt was e pressed n ppea o Reynods d Reynods Co. (1. . T. .,
275). the oard of Ta ppeas very eary took ursdcton n these cases. ( ppea of
oseph Oarneau Co., Inc., 1 . T. ., 75 ppea of Ormsby Mc nyht Mtche, 1 ft. T. .,
143 ppea of oston Structura Stee Co., 1 . T. ., 602 ppea of uffao Sag Co.,
1 . T. .. 749. Compare ppea of Termna Wne Co., 1 . T. .. 697.) oowng the
ct of 1926, the oard has unformy hed that secton 283(f) confrmed ts |ursdcton.
(See ppea of Covert Gear Co., 4 . T. ., 1025 ppea of zabeth W. Stranahan,
4 . T. ., 1141: ppea of ce a earng Co., 5 . T. ., 484 ppea of Sater
Ms, Inc., 5 . T. ., 971 ppea of Ocean ccdent d Guarantee Corp., 6 . T. .,
1045 Reance Mfg. Co. v. Commssoner, 7 . T. ., 583.) Such was ceary the egsa-
tve purpose of the secton. See hearngs before the Commttee on Wavs and Means on
revenue revson of 1925, S ty-nnth Congress, frst sesson, page 898, et scq., par-
teuary the statement of the oard charman, Chares D. ame, page 923 . Rep. No.
1, d., December 7, 1925, page 13 Sen. Rep. No. 52, d., anuary 16, 1926, page 32
conference report, . Rep. No. 356, d., ebruary 22, 1926, pages 46-47.
Subdvson (f) of secton 283 refers to subdvson (e). That secton provdes that
the stuaton deat wth theren shoud be treated as though a defcency notce had
been sent under secton 274(a), and that the ta sha be coected and pad n the
same manner and sub|ect to the same provsons and mtatons as n the
case of a defcencv Imposed by the 1926 ct , e cept as otherwse provded n secton
277, and n certan sectons reatng to nterest and |eopardy coecton, whch are here
Immatera. (44 Stat., 64.) Defcences under the 1926 ct were governed by sectons
273, 274, and 275 (44 Stat., 55-57). Secton 273, defnng the term, and secton 275,
provdng for addtons n the case of neggence, fraud, etc., are not here appcabe.
Secton 274(a) s quoted n the te t. Secton 277(a) reated to the perods for assess-
ment and coecton generay and reenacted the 5-year mtaton on the coecton of
1917 ta es. It was quafed by secton 277(b), quoted n the te t. Secton 283(f)
was, n addton, mted by secton 283( ), whch prohbted an appea to the crcut
court of appeas If the hearng before the oard had been hed pror to the enactment
of the 1926 ct. (. ar v. ffurran, 24 . (2d), 390 ar v. endrcks, 24 . (2d),
819 Power t ro. v. Commssoner, 27 . (2d), 116.) In the case at bar, the hearng
was hed on pr 26, 1928. so, secton 284(d) (44 Stat., 67), whch Imposed restrc-
tons on the aowance of refunds and credts after an appea had been taken to the
oard of Ta ppeas, was made nappcabe to cases under secton 283(f). Compare
urnet v. Chcago Raway qupment Co., No. 231, decded ths day, note 8 Ct. D.
276, page 323, ths uetn .
44 Stat., 55. Notwthstandng the prohbton n R. S. 3224, such sut or dstrant
Sroceedng may, by e press provson n secton 274(a), be en|oned. (Peeress Wooen
Ms v. Rose, 28 . (2d), 661.)
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283.
278
of mtatons on the begnnng of dstrant or a proceedng n court for co-
ecton, n respect of any defcency, sha be suspended for the
perod durng whch the Commssoner s prohbted from begnnng
dstrant or a proceedng n court, and for 60 days thereafter. That perod
st contnues, as there s not yet a fna determnaton of the oard.11 The
ta payer concedes that secton 283(f) of the 1926 ct confrmed the |ursdcton
of the oard of Ta ppeas n the present case, but contends that t dd not
operate to e tend the perod for coecton unt after a fna determnaton.
rst. It s argued that secton 283(f) can not be nterpreted as e tendng
the tme for the coecton of the ta because of secton 1000. The atter
secton amended the 1924 ct by provdng that where the oard found that
the ta was barred by the statute of mtatons, ts decson shoud be that there
was no defcency. Ths secton was nserted to confrm the |ursdcton of the
oard n makng fna dsposton of a defcency aready barred.13 It contans
nothng whch affects the speca |ursdcton conferred by secton 283(f).
Second. It s argued that nether secton 277(b), whch suspended the run-
nng of the statute, nor secton 283(f), whch ncorporated the former, nd-
cate that secton 277(b) was to be gven a retroactve effect. The argument
s unsound. Subdvson (f) of secton 283 shows that t was the ntenton of
Congress to appy the provsons of secton 277(b) to cases ke that at bar.
Snce n such cases the assessment (before une 3, 1924), the fna determna-
ton and the appea to the oard (after une 2, 1924), must e pressy have
occurred pror to the enactment of the 1926 ct, the reference to secton 277(b)
contaned n secton 283(f) necessary meant that n these cases the former
secton was to be apped retroactvey.
Thrd. The ta payer rees aso upon secton 278(e) of the 1926 ct, whch
prohbted coecton, n the absence of a waver pror to that ct, f at the
date of ts enactment the ta was aready barred. The argument s that snce
the ast waver by ts terms e pred on December 10, 1925, that s, pror to the
effectve date of the 1926 ct, ths secton bars coecton. That nterpretaton
s not correct. s was sad by the court beow: The authorty for e tendng
the tme for coecton under the facts of the case at bar s found In secton
283(f), and not n secton 278. If we are to accept pettoner s conten-
ton that secton 278(e) s nconsstent wth the nterpretaton we have gven
secton 283(f), we must necessary hod that secton 278(e) n effect nufes
the cear provsons of secton 283(f). Not ony s there nothng n the statute
to warrant ths nterpretaton, but the nterreaton of secton 278(e) and secton
283(f) makes the contrary cear. (38 . (2d), 431.)
ourth, t s argued that nasmuch as the Commssoner was not prohbted
from makng coecton between November 18, 1925, the date of the appea, and
44 Stat., 58-59.
Secton 274(h) (44 Stat., 56) provded that the decson of the oard shoud become
fna accordng to the rues set out n secton 1005. That secton provdes that fnaty
sha be gven 30 days after the ssuance of the mandate of ths court, n case of an
affrmance or dsmssa, or upon correcton n case of a modfcaton or reversa. 44
Stat., I 26 U. S. C, secton 1228.)
44 Stat., 105, 107. Ths secton was a genera amendment to Tte I of the
Revenue ct of 1924. n entre new secton, secton 906, was, nter aa, thereby
added to the 1924 ct, of whch subdvson (e) s reed upon by respondent.
13 See hearngs before Commttee on Ways and Means on revenue revson of 1926,
supra, note 7, page 849, et seq., 900-902. The oard had eary decded that t had
|ursdcton n such cases under secton 900 of the 1924 ct. ( ppea of Natona
Refnng Co., 1 . T. ., 236.) Compare note 12, supra.
See note 8, supra.
u Ths secton sha not authorze the coecton of a ta
(1) f at the tme of the enactment of ths ct such coecton was barred
uness pror to the enactment of ths ct the Commssoner and the ta payer agreed n
wrtng thereto, or (2) contrary to the provsons of subdvson (a) of secton 274 of
ths ct. (44 Stat., 59.)
s was ponted out beow the atter part of secton 278(e), whch prohbts co-
ecton contrary to secton 274(a), quoted supra page 5, recognzes and reenforces the
prohbton aganst coecton whe a case s pendng before the oard. See note 9,
supra. Snce ths same subsecton 274(a) s ncorporated n secton 283(f), supra note
8, t seen-s cear from ths nterreaton that secton 278(e) was not ntended to mt
secton 283(f), and that the suspenson of the statute gven by ecton 277(b) s
appcabe to the Instant case. (See 38 . (2d), 431.)
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279
284, rt. 1301.
ebruary 26, 1926, the effectve date of the 1826 ct, and snce the perod for
coecton, as e tended by the wavers, e pred December 10, 1925, secton 277(b)
does not ad the Commssoner, because the statute had run before that secton
coud cause t to be suspended. ttenton s caed to another secton of the 1926
ct, secton 283(1), whch provded that n the case of any ta mposed by a
pror ct there sha be added to the perod of suspenson gven by secton
2T7(b), any perod pror to the ct of 1926 durng whch the Commssoner was
prohbted from begnnng dstrant or proceedng n court.18 The argument s
that ths secton ndcates that secton 274(a) and secton 277(b) are not to be
apped retroactvey that ony the perod, f any, obtaned under secton 283(1)
can be added to the wavers and that snce the Commssoner was not prohbted
from coectng pror to the e praton of the ast waver, secton 283(1) s n-
appcabe. Secton 283(1) e pressy provdes that the tme theren granted
sha be n addton to the perod of suspenson provded for n subdvson (b)
of secton 277. It undoubtedy had reference to those cases n whch a cam
for abatement, accompaned by a bond, had been fed and coecton stayed be-
tween the 1924 ct and 1926 ct. It can not mt the appcaton to the case
at bar of secton 274(a) and secton 277(b), as secton 283(f) drects. Ths
argument of the ta payer s aso unsound.
ffrmed.
S CTION 284. CR DITS ND R UNDS.
rtce 1301: uthorty for abatement, credt, -12 4985
and refund of ta . G. C. M. 9147
R NU CT O 1926.
When a recevershp case s pendng n a Unted States dstrct
court and that court has assumed |ursdcton over a the proper-
tes of the nsovent, and where the recever has been duy advsed
of the amount of an nterna revenue ta due, the order, |udgment,
or decree of such court n respect to the payment of the ta s
a suffcent determnaton of a vad and subsstng ta abty at
the effectve date of such order, |udgment, or decree. Where the
recever actng under the court s order pad to the Unted States
the fu amount drected by the court to be pad n satsfacton
of the Government s demand, the ureau, havng accepted the
payment so made, s n no poston to deny the authorty and
|ursdcton of the court n the premses.
The ta payer, by ts recever, fed on uy , 1929, a cam for
the refund of doars pad uy , 1926, pursuant to a decree of
a Unted States dstrct court, n satsfacton of the corporaton s
ta abty for the year 1917. The bass of the cam s that the 15
doars was pad after the e praton of fve years from pr 1,
The fng of the cam for abatement of the |eopardy assessment dd not operate as
a stay of coecton. The cam fed n the present case, under secton 252 of the 1921
ct (42 Stat., 268) and . S. 3228 as amended by secton 1316 of that ct (42 Stat.,
314), was apparenty not accompaned by a bond. Under such crcumstances the fng
of the cam woud not have prevented coecton f the Commssoner had beeved that
coecton of the ta was eopardzed. (See Reguatons 33 (1918 ed.), artce 261
Reguatons 45. artce 1032 Reguatons 62, artce 1032 cf. Unted States v. urden,
Smth t Co., 33 . (2d), 229. 230.) Pror to the decson n owers v. | . Y. bany
Lghterage Co. (273 U. S., 346 T. D. 4009, C. . I-1, 268 ), t was, however, the
common practce to postpone coecton upon the fng of a cam for abatement f there
was no doubt as to the ta payer s sovency. (See . Rep. No. 2, Seventeth Congress,
frst sesson, December 7, 1927, page 34.)
w44 Stat., 66.
See secton 279 of the Revenue ct of 1924 (ch. 234, 43 Stat.. 253, 300). Compare
secton 283 (b) and (c) of the 1926 ct. These sectons confrmed the |ursdcton of
the oard n case In whch an assessment had been made and an appea taken, or In
whch the 60-day perod had not e pred before the 1926 ct. Compare Pans uyng
and Settng ss n v. Commssoner (5 . T. ., 1147, 1153). In such cases a |eopardy
assessment and cam for abatement, accompaned by a bond and provdng for a stay
of coecton, between the 1924 and 1926 cts, woud have been possbe, and secton
283(1) woud have apped.
72109 31 19
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284, rt. 1301.
280
1918, the date on whch the return for 1917 was fed, and conse-
uenty the statute of mtatons barred any coecton of the ta
or that year.
In the ureau etter of re|ecton of the cam addressed to the
recever of the ta payer under date of October , 1929, the reasons
for the adverse acton were gven and the poston was taken that
the amount asked for was not refundabe. The recever, however,
s of the opnon that the case comes wthn the purvew of the
statute of mtatons affectng 1917 ta es, and that the amount pad
n 1926 n satsfacton of the ta abty for that year shoud be
refunded. The opnon of ths offce concernng the matter has been
requested.
The ta payer fed ts return for 1917 on pr 1, 1918, and the
amount of ta dscosed on the return was pad n une, 1918. On
March , 1923, an addtona ta for 1917 amountng to 45.67a do-
ars was assessed on the Commssoner s speca ncome ta st of
March, 1923, and on pr , 1923, a cam n abatement of the entre
addtona assessment was fed.
Pror to the assessment of the addtona ta a sut had been begun
n the Unted States dstrct court by the O Company aganst the M
Company, resutng n the appontment of temporary recevers for
the defendant. On May , 1922, permanent recevers were ap-
ponted by the court. Ths recevershp has not been termnated.
In the order of the court appontng permanent recevers they
were authorzed, among other thngs
to contnue, manage, operate, and conduct the busness of the defendant unt
the further order of ths court, to make such payments and ds-
bursements as may be needfu or proper for the preservaton of the propertes
of the defendant, ncudng the payment of debts entted to prorty and
to defend, compromse, ad|ust, or otherwse dspose of any or a
suts, actons, or proceedngs nsttuted aganst them as recevers or aganst
the defendant .
The order of appontment further ordered that
a credtors, stockhoders, and other persons be en|oned from nsttutng or
prosecutng or contnung the prosecuton of any acton or suts at aw or
In equty, or under any statute, aganst the defendant, and from evyng any
|udgment, e ecuton, or other process upon or aganst any of the propertes
of the defendant, or from takng or attemptng to take nto ther possesson
the property or any part of the property of the defendant .
Such was the status of affars when the addtona ta was assessed
n March, 1923.
Under the authorzed powers of the recevers t appears that they
coud have satsfed the demand of the coector for the payment of
the addtona ta . Instead, however, as aready ndcated, a cam
n abatement of the fu amount of the assessment of addtona
ta appears to have been presented on pr , 1923 after the ast
day of the 5-vear perod foowng the date on whch the return
for 1917 was fed.
On pr , 1923, the Unted States dstrct attorney, actng for
and on behaf of the Government, fed wth the recevers the forma
proof of cam coverng the fu amount of the addtona ta . On
une , 1923, an over assessment for 1918, amountng to 8.67a) do-
ars, was credted by the coector aganst the tota of the add-
tona assessment for 1917, reducng the amount thereof to 37#
doars. Some tme after the appcaton of the overassessment
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281
284, rt. 1301.
for 1918, the Unted States dstrct attorney fed wth the recevers
an amended proof of cam coverng ths baance. On une ,
1926, the court ordered, ad|udged, and decreed that the recever
shoud pay to the Unted States as a prorty payment the sum
of 15a doars
n fu settement and satsfacton of any and a cams of the Unted States
aganst the M Company and/or the recever thereof, for or on account of any
ncome, corporaton, or e cess profts ta es.
Payment of ths amount was made by the recever on uy , 1926.
The cam for refund covers the amount so pad.
The poston of the ureau, as stated n ts etter of October
, 1929, s that the 15 doars receved by the Unted States pur-
suant to an order of the court s not refundabe. Ths poston ap-
pears to be a correct and tenabe one.
n ndorsement on the face of the amended return for 1917, fed
on une , 1918, shows that due notce was gven to the ta payer
on March , 1923, of ts ncreased ta abty for 1917, athough
the forma assessment was not made unt three days ater. Ths
notce of the amount of the ta abty for 1917 was a devery
of an account (secton 250, genera corporaton aw of New York)
and was suffcent to put the recevers on notce of the addtona
amount of ta due for the year 1917.
Under the genera corporaton aw of New York permanent re-
cevers, under the contro of the court (secton 276), are gven fu
authorty to sette a matters and accounts between the corporaton
for whch they act and ts debtors or credtors (secton 239-8), and
are requred to dstrbute the proceeds of ther trust among a
those who sha have e hbted ther cams as credtors debts to
the Unted States or due under any aw of the Unted States beng
gven prorty (secton 261).
It s true that the forma proof of cam was not fed wth
the court n the recevershp proceedngs unt after the 5-year pe-
rod mmedatey foowng the date on whch the return for 1917
was fed had e pred. Ths forma proof of cam, as ater w
be seen, was not essenta to preserve any rght the Unted States
may have had n respect of the ta . The recevers were fuy ad-
vsed wthn the 5-year perod of the amount due as a ta for 1917,
and even from the standpont of the New York State aw the ac-
count of the Unted States for the addtona ta found due had
been e hbted to the recevers.
In ths case the Unted States dstrct court had contro, through
the permanent recevers apponted by t, of a the property beong-
ng to the ta payer t had en|oned the nsttutng or prosecutng of
any acton or sut at aw or n equty, or under any statute,
aganst the defendant and had en|oned the takng, or attempted
takng, of any of the ta payer s property by evy of e ecuton
or other process. The nterna revenue offcas were, therefore,
entted to rey upon the order of the court for the payment by
the recevers of the addtona ta assessed, so ong at east as the
recevershp contnued. The recevers were fuy acquanted wth
the amount camed by the Unted States as addtona ta for
the year 1917 and ths knowedge was ganed pror to the e praton
of the 5-year perod for coecton.
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284, rt. 1301.
282
In the case known as In re Chander Motors of New ngand,
Inc., ankrupt (17 ed. (2d), 998, T. D. 4054, C. . I-2, 267), t
Under the Revenue ct of 1921 (secton 250(d)) No sut or proceedng
for the coecton of ths ta coud be begun after the e praton of fve
years after the date when such return was fed. Ths statute bars any pro-
ceedng n court for the coecton of the ta after the specfed perod has run.
The proof of cam woud be such a proceedng. If t were necessary for the
Government to fe proof of cam, ts rght s barred, uness the statute was
toed by the bankruptcy of the ta payer. It s, however, perfecty we setted
that the Government s not obged to fe a proof of cam for ta es. (17. S. v.
yffcs, 286 ., 683 In re shand mery d Corundu-m Co., 229 ., 829, and cases
cted Coer on ankruptcy, 13th d., p. 1446, note 41, coectng cases.) It s
the duty of the trustee under ankruptcy ct (secton 64a) to pay a ta es
egay due upon ther beug caed to hs attenton.
(See aso U. S. v. OM-ahoma, 261 U. S., 253 Lews, Trustee, v.
U. S., 92 U. S.. 618, 622: ed et a. v. U. S., 9 Pet, 182 Spokane
County v. U. S., 279 U. S., 80 eyward v. U. S., 2 ed. (2d), 467
Cty of Daas v. Menezes, 16 ed. (2d) 779, and cases cted theren.)
It seems cear that when a recevershp case s pendng n a Unted
States dstrct court and that court has assumed |ursdcton over a
the propertes of the nsovent, and where the recever, whose every
act s under the supervson or the appontng court, has been duy
advsed of the amount of an nterna revenue ta due, the order,
|udgment, or decree of such court n respect of the payment of the
ta s a suffcent determnaton of a vad and subsstng ta abty
at the effectve date of such order, |udgment, or decree. So, too,
where the recever actng under the court s order, as was done n
the nstant case, pad to the Unted States the fu amount drected
by the court to be pad n satsfacton of the Government s demand,
ths ureau, havng accepted the payment so made, s n no poston
to deny the authorty and |ursdcton of the court n the premses.
The case of McCar v. ahtead (59 W. L. ., 6), decded by the
Court of ppeas of the Dstrct of Coumba on December 1, 1930,
s not n pont for the reason that n that case the prncpa queston
nvoved was as to the vadty of a set-off of an award aowed by
the Secretary of the Interor aganst an aeged ta abty. The
Comptroer Genera of the Unted States made the set-off and the
vadty of the Government s cam wth respect to the aeged ta
abty was not consdered or determned by the court n whch
the recevershp proceedngs were had, as was done n the nstant
case.
In the ght of the foregong, t s the opnon of ths offce that
the re|ecton of the cam for refund was proper and shoud not be
ddtona ta due but barred from assessment. (See Ct. D. 347,
page 180.)
s sad:
C. M. Chaeest,
Genera Counse, ureau of Interna Revenue.
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283
284, rt. 1305.
rtce 1305: Lmtatons upon the credtng -10-49CC
and refundng of ta es pad. Ct. D. 290
INCOM T ND CTS O 1921 ND 1926 D CISION O SUPR M
COURT.
Credt of Overpayment Lmtaton When Credt s owed.
credt of an overpayment s aowed wthn the meanng of
secton 252 of the Revenue ct of 1921 and secton 284(b) of the
Revenue ct of 1926 on the date when the Commssoner sgns the
schedue of refunds and credts certfed to hm by the coector
authorzng the dsbursement cerk of the Treasury to pay the
amounts shown to be refundabe accordngy, the perod n whch
a cam for refund coud be fed ran from that date.
Supreme Court of the Unted States.
The Unted States, pettoner, v. Swft Co.
On wrt of certorar to the Court of Cams.
ebruary 2, 1931.
OPINION.
Mr. ustce Roberts devered the opnon of the court.
Ths was an acton by respondent for the recovery of the amount of an
admtted overpayment of ncome and war profts ta es for the ta abe year
1917, wth Interest.
In ts return for 1917 respondent ncuded the vaue of stock dvdends
receved. ebruary 28, 1923, t fed a cam for refund, aegng that the
dvdends n queston shoud have been aocated to other years than 1917.
The cam was re|ected. Subsequenty ths court decded that stock dvdends
dd not consttute ncome, as defned by the s teenth amendment. ( sner v.
Maeomber, 252 U. S., 189 T. D. 3010, C. . 3, 25 ). September 3, 1927,
respondent fed a second cam for refund, whch t desgnated as an amended
cam, and theren for the frst tme asserted that the dvdends dd not con-
sttute ta abe ncome. The Commssoner of Interna Revenue determned
that the atter cam was barred by the statute of mtatons and re|ected t.
The respondent s poston s that the second cam shoud be construed
as an amendment of the frst but, f not, then, treatng the second as an
orgna cam, t was fed wthn the tme requred by aw and shoud have
been aowed. The Court of Cams overrued respondent s frst contenton,
but hed wth t upon ts second, and entered |udgment n ts favor. Upon
the petton of the Unted States ths court granted a wrt of certorar.
If the Court of Cams was rght n ts dsposton of respondent s second
contenton we need not troube ourseves wth respect to the frst. It s
admtted that f the ater cam for refund was fed n tme the respondent
shoud recover. The sums of whch a refund s sought were not pad n
cash, but conssted of a credt of an amount overpad for other ta abe years.
Whether the cam was fed n due tme depends, therefore, upon a deter-
mnaton of the date when the credt was aowed wthn the meanng of
the statutes. Secton 252 of the Revenue ct of 1921 (42 Stat., 268) contans
the foowng provson:
That f. upon e amnaton of any return of ncome made pursuant to
the Revenue ct of 1917, t appears that an amount of
Income, war-profts or e cess-profts ta has been pad n e cess of that prop-
ery due, then, notwthstandng the provsons of secton 3228 of the Revsed
Statutes, the amount of the e cess sha be credted aganst any ncome, war-
profts or e cess-profts ta es, or nstament thereof, when due from the ta -
payer under any other return, and any baance of such e cess sha be m-
medatey refunded to the ta payer: Provded, That no such credt or refund
sha be aowed or made after fve years from the date when the return was
due. uness before the e praton of such fve years a cam therefor s fed
by the ta payer: .
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284, rt. 1305.
284
The appcabe porton of secton 284(b) of the Revenue ct of 1926
(44 Stat., 60) foows:
No such credt or refund sha be aowed or made after four
years from the tme the ta was pad n the case of a ta mposed by any
pror ct, uness before the e praton of such perod a cam therefor s
fed by the ta payer .
Under the quoted statutes the respondent was requred to fe Its cam
wthn four years from the date of the aowance of the credt The pettoner
asserts that the credt was aowed on ebruary 9, 1923, when the Com-
mssoner certfed the overassessment to the coector. The respondent nssts
that t was when the Commssoner sgned the schedue of refunds and credts
as reported by the coector on September 6, 1923. The earer date s more
than four years from the fng of the cam, and the ater one s wthn sad
perod.
The ssue thus rased w be resoved by determnng what act consttuted
the aowance of the credt. Proper decson requres an understandng of the
procedure foowed n such cases.
The record dscoses that the practce of the ureau was n the frst nstance
to e amne the ta payer s return and f t dscosed an overassessment to
prepare for the Commssoner a so-caed certfcate of overassessment, whch
when certfed by the deputy commssoner went to the Commssoner. When
the Commssoner had accumuated a number of such certfcates wth respect
to ta payers n a snge coecton dstrct, a form caed a schedue of over-
assessments was prepared, one ne on such schedue deang wth each ta -
payer s account for the ta abe year n queston. On ths schedue was noted
the overassessment of the ta payer and banks were eft for further entres
by the coector of the dstrct. To t was attached a subsdary schedue,
caed a schedue of refunds and credts, on whch the coector shoud make
report of hs actons pursuant to the schedue of overussessments, and these
two schedues, together wth the ndvdua certfcates of overassessment,
were forwarded to the coector. On the schedue of overassessments were
certan prnted Instructons as foows:
The severa amounts heren noted as reducton of ta abty are hereby
approved and aowed.
You w mmedatey check the tems heren aganst the accounts of te
severa ta payers and determne whether the severa amounts n whch the
ta abty has been reduced shoud be abated n whoe or n part and make
such abatement as may be warranted by the condton of the ta payer s
account for the year nvoved.
If any part of the ta s found to be an overpayment, you w e amne
a accounts of the ta payer for subsequent perods and appy such overpayment
as a credt aganst the ta owng (f any) on the ta payer s account for subse-
quent perods. (Ths appes to ncome, war-profts and e cess-profts ta es
ony.)
The baance (f any) of the overpayment sha be entered n coumn 12
and paced upon a schedue of refunds ( orm 7777 ) and an approprate
memorandum made upon the ta payer s account.
You w thereupon compete and certfy ths schedue and Schedue 7777
and return three copes of each to the Commssoner of Interna Revenue at
Washngton, makng the approprate entres n your accounts.
The Commssoner, when he forwarded these papers to the coector, had
no way of knowng whether the overassessment woud brng about an abate-
ment of ta es theretofore assessed and unpad, or woud resut n an overpay-
ment by the ta payer. Ths coud ony be ascertaned by the coector from the
books and records kept by hm. Moreover, after the coector ascertaned
whether an overpayment resuted, he woud have to determne from hs books
and records the further queston whether such overpayment shoud be apped as
u credt on ta es due or, n the absence of any ta es due, ought to be refunded.
When the coector had competed hs nvestgaton and fed n the nforma-
ton as to abatement, overpayment, credt, and refund on the schedue of
assessments, and the subsdary schedue of refunds and credts, he certfed
the correctness of these schedues and returned them, together wth the certf-
cates of overassessment, to the ureau n Washngton. There the schedue
and certfcate were e amned by the deputy commssoner, checked by hm to
ascertan whether they were correct, and forwarded by hm to the Comms-
soner of Interna Revenue for acton. On the bass of hs deputy s certfcate
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284, rt. 1305.
the Commssoner woud certfy the schedue of refunds, thus drectng the ds-
bursng cerk of the Treasury to draw checks for refunds shown on the schedue
and checks for the nterest, If any, on such refunds and on credts. Meantme
the amounts shown on the schedue wth respect to each ta payer s account had
been coped on the certfcate of overassessment of that ta payer, and when
checks had been prepared for refunds and nterest, f any, the certfcate of
overassessment, together wth the checks, were sent to the coector, to be by
hm maed to the ta payer. The frst offca notfcaton whch the ta payer
receved as to how hs account had been handed wth respect to abatement,
credt, refund, and nterest was the certfcate of overassessment whch ac-
companed the check for the payment due hm, f any. If there were no pay-
ment due hm he receved a certfcate of overassessment wth the amount of
the credt whch had been aowed hm noted upon t. It s true that ths
certfcate of overassessment stated that credt woud be gven, refund woud
be made, etc., whereas the credt had aready been gven and the refund check
accompaned the certfcate when t reached the ta payer, but we do not thnk
ths affects the queston of the date of aowance.
One of three dates may possby be consdered the date of the aowance of
the credt that on whch the Commssoner forwarded the schedue of over-
assessments to the coector, that on whch the coector fnshed hs cacuatons
and entered the amount of the credt n the ta payer s account, or that on
whch the Commssoner approved the schedue of credts and refunds. The
pettoner nssts upon the frst and respondent tpon the ast as the date of
aowance of the credt aternatvey the Unted States says that f the frst be
not the date of the aowance the ntermedate one s.
In Orard Trust Co. v. Unted States (270 U. S., 163 T. D. 3919, C. . -2,
209 ), ths court, after advertng to the above-mentoned procedure, sad:
We can not concur, however, n the vew of the Treasury Department that
the date of the aowance of the cam as ntended by the statute s the date
when the Commssoner frst decdes that there has been an overassessment
and sends upon a proper form hs decson to the coector of nterna revenue,
who made the coecton and keeps the account wth the ta payer .
In the same case t was aso sa:
The Commssoner of Interna evenue s the fna |udge n the admns-
tratve branch of the Government to decde that an overassessment has been
made and that a refund or credt shoud be granted, and when he has made
that decson fnay, he has aowed the cam for the refund or credt of the
ta es pad wthn the meanng of the secton.
It s conceded that the quoted anguage appes to the present case, but pe-
ttoner ponts out that t was used n a case n whch ony the date of aow-
ance of a refund was nvoved. It s urged that as respects the aowance of a
credt t was dctum that concedng ts correctness wth respect to the date
of aowance of a refund, dfferent consderatons appy wth respect to a credt.
The pettoner argues that as was stated n the Grard Trust Co. case the ast
sgnfcant act done by the Commssoner s to authorze the refund, that beng
n fact made by the drawng of a check by a cerk and the mang of a check
by the coector, whereas n the case of a credt the ast act of authorzaton
s the forwTardng of the schedue of overassessments to the coector, who
then does the mere mnstera act of makng the necessary cacuatons and
ascertanng and enterng the proper amount of the credt on hs books and
on the schedue of refunds and credts whch s to be returned to the Com-
mssoner. It nssts that when the schedue of refunds and credts s re-
turned to the Commssoner he does authorze the drawng of checks for
refunds, but does nothng whatever wth respect to the credts shown on the
schedue, merey fng t for reference. There s evdence, however, that the
subordnates of the Commssoner cheek the cacuatons shown on the sched-
ues when they are returned to the urer.u that the deputy commssoner
certfes the correctness of the schedue to the Commssoner and that the
omca record of the credt s the schedue approved by the Commssoner and
fed n hs offce. Moreover, the fna act so far as the ta payer Is con-
cerned s the recept from the coector of the certfcate showng how the
overassessment has been apped.
When he e ecutes the schedue of overassessments the Commssoner has no
knowedge as to what the coector s account wth the ta payer shows. e
does not know whether the overassessment w be entrey used up n abate-
ments, or whether, f an overpayment s shown, t w have to be apportoned
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284, rt. 1305.
286
party as a credt and party as a refund. It Is true that the Commssoner s
drectons to the coector are that the atter sha e amne the accounts and
make the proper aocatons, and t s true that the coector s acton n so
dong s mnstera. ut after that cerca work Is performed the practce
requres the return to the Commssoner of a statement or schedue of the
aocatons, the approva of that schedue by hm, and the mang of the
certfcate of overassessment, e ecuted on hs behaf, to the ta payer. There
s nothng n the record to ndcate that the Commssoner mght not order
correctons to be made n the accounts of the ta payer pror to the mang of
ths certfcate. The proofs do not dscose that he has not n practce done so.
s the soe dscreton and authorty to aow a credt rests wth the Com-
mssoner, we thnk that, n the ght of the procedure above outned, hs
approva of the schedue of credts and refunds must be taken to be the fna
e ercse of that dscreton and the aowance of the credt. Ths constructon
of the ct brngs about unformty n admnstraton, as t makes the aowance
of credts and refunds smutaneous.
It resuts that even though the second cam for refund fed by the respond-
ent be treated not as an amendment of ts orgna cam of 1923, but as
a new and Independent cam, t was fed wthn four years of the payment
of the ta , snce that payment must be taken to have occurred on the date of
the aowance of the credt by the Commssoner s sgnature approvng the
schedue of refunds and credts. Such approva was gven as respects the
credt to respondent on September 6, 1923, whch was wthn four years of
the date of the fng of the second cam.
The vews heren e pressed make t unnecessary to decde whether the
ater cam may propery be consdered an amendment of the orgna cam
for refund.
The |udgment of the Court of Cams s affrmed.
rtce 1305: Lmtatons upon the credtng -13-4997
and refundng of ta es pad. Ct. D. 303
INCOM T R NU CT O 1926 D CISION O COURT.
Sut ursdcton ppea to oabd of Ta ppeas.
Where the Commssoner has maed to a ta payer a notce of
defcency under subdvson of secton 274 of the Revenue ct
of 192f nnd the ta payer after the enactment of that ct fes
a petton wth the oard of Ta ppeas, whch thereafter, upon
stpuaton of the partes, enters an order of fna determnaton,
secton 284(d) of that ct bars a sut to recover any part of the
ta pad for the ta abe year n respect of whch the Comms-
soner determned the defcency, even though t was assessed by
reason of a provson of a Revenue ct that was decared uncon-
sttutona by a decson of the Supreme Court rendered after the
oard s order and the appea to the oard was on an ssue entrey
unreated to the queston of consttutonaty decded by the court.
Court of Cams of the Unted States. No. -432.
The ankers Reserve Lfe Co. v. The Unted States.
December 1, 1930.
opnon.
Wams, udge, devered the opnon of the court
The pantff brngs ths sut to recover 19,474.58, ncome ta es pad for
the year 1923, together wth nterest thereon.
The averments n pantff s petton, matera to the ssue rased by the
demurrer, are substantay as foows:
That sad company s and at a tmes snce the enactment of the Revenue
ct of 1921 (42 Stat, 227), approved November 23, 1921, has been a fe
nsurance company wthn the meanng of that ct
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287
284, rt. 1305.
Sec. 245. (a) That n the case of a fe nsurance company the term net
ncome means the gross ncome ess
(1) The amount of nterest receved durng the ta abe year whch under
paragraph (4) of subdvson (b) of secton 213 s e empt from ta aton under
ths tte
(2) n amount equa to the e cess, f any, over the deducton specfed
n paragraph (1) of ths subdvson, of 4 per centum of the mean of the
reserve funds requred by aw and hed at the begnnng and end of the
ta abe year, pus (n case of fe nsurance companes ssung poces cover-
ng fe, heath, and accdent nsurance combned n one pocy ssued on the
weeky premum payment pan, contnung for fe and not sub|ect to can-
ceaton) 4 per centum of the mean of such reserve funds (not requred by
aw) hed at the begnnng and end of the ta abe year, as the Commssoner
fnds to be necessary for the protecton of the hoders of such poces ony
and under the nterpretaton gven to the sad ct by the Commssoner of
Interna Revenue, and the appcaton thereof as so nterpreted, ths company
was assessed on a tota net ncome of 219,478.17 for the year 1923, the ta on
whch amount at the rate of 12 per cent amounted to the sum of 27,434.77.
That ncuded n and treated as a part of the company s gross ncome for
the year 1923 was the Interest receved by t from ts ta -e empt securtes,
whch amounted to 417,605.46.
That the mean reserve of the company s funds for the year 1923 was
11,248,641.38, 4 per cent of whch sum was 449,945.66.
That n accordance wth the provsons of sad ct, and the nterpretaton
gven thereto by the Commssoner of Interna Revenue, there was added to
and treated as a part of the company s gross ncome, the ncome receved by
t from ts ta -e empt securtes.
That there was pad by the company to the Unted States on ts orgna
assessment for the year 1923 the aggregate sum of 22,821.52, as foows:
That subsequent thereto the Commssoner of Interna Revenue ad|usted
the sad assessment to the e tent that there was added to the above assess-
ment the sum of 2,358.96, whch was pad by the company to the defendant
pr, 1928, makng the tota ta pad by the company to the defendant
25,180.48.
That on the 4th day of une, 1928, the Supreme Court of the Unted States
n a decson rendered by t n an acton between the Natona Lfe Insurance
Co. and the Unted States hed that under secton 245(a)2 of the Revenue ct
of 1921, a fe nsurance company was entted to deduct from ts gross ncome
4 per cent of the mean of ts reserve, whereas under sad secton, as con-
strued by the Commssoner of Interna Revenue, the abty of ths and
other nsurance companes smary stuated, 4 per cent of the mean of the
reserve funds hed by ths company were dmnshed by sad constructon
to the e tent of the nterest receved by t on ts ta -e empt securtes, thus
causng an assessment to be made aganst t for the year 1923 n the tota
amount of 25,180.48.
That the Commssoner of Interna Revenue on November 1, 1926, made a
defcency assessment of 4,613.25 aganst the company, whch defcency assess-
ment reated soey to the renta vaue of an offce budng whch the company
was erectng durng the year 1923 that the company contested the correctness
of the sad defcency assessment and appeaed to the Unted States oard of
Ta ppeas that the charman of the defendant s speca advsory commttee
of the ureau of Interna Revenue agreed that the soe queston at ssue on
the sad appea was the deducton of ta es and other e penses wth respect
to rea estate owned by the company and the ncuson n ncome of the renta
vaue of the space occuped that the contentons of the company were
stpuated to be correct by the defendant s Commssoner of Interna Revenue,
and on or about March 7, 1928, a stpuaton was sgned by the defendant s
Commssoner of Interna Revenue and the company and fed wth the Unted
States oard of Ta ppeas, In whch stpuaton t was agreed that the
correct defcency assessment was 1,929.73 wth nterest, whch assessment
was on ncome derved soey from the renta on the sad offce budng that
Mar. 12, 1924
une 13, 1924
Sept 13, 1924
Dec. 15, 1924
5, 705.38
5, 705. 38
5, 705. 38
5, 705. 38
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284, rt. 1305.
288
the Unted States oard of Ta ppeas entered an order of record deter-
mnng the defcency assessment as so stpuated that there was never a
tra or hearng of any character before the Unted States oard of Ta
ppeas, and the sad appea before the oard of Ta ppeas had nothng
whatever to do wth any ssue reatng to a ta or assessment on ta -e empt
securtes that f the defendant s Commssoner of Interna Revenue had
taken the same poston before the company took the appea to the oard
of Ta ppeas whch he took after the appea was fed there woud have
been no dspute and therefore no appea to the oard of Ta ppeas, and
the company s cam for refund woud have been aowed by the Commssoner
of Interna Revenue under the decson of the Supreme Court n the Natona
Lfe Insurance Co. case.
That subsequent to the decson of the Supreme Court n the sad Natona
Lfe Insurance Co. case, on, to wt, ugust 10, 1928, the defendant requested the
company to sgn an agreement cosng ts cam for the year 1923 that the
company refused to sgn the sad agreement.
That on une 12, 1928, the company fed a petton wth the defendant for
refund of ta es n the sum of 19,474.58, whch cam was made up as foows:
Three-fourths of the reguar ta pad une, September, and December, 1924,
whch amounts to 17,115.62 addtona ta pad pr, 1928, 2,358.96 tota,
19,474.58.
That on September 11, 1928, the defendant s Commssoner of Interna Reve-
nue re|ected the company s sad cam for refund, for the reason that under
the provsons of the Revenue ct of 1926, the Commssoner of Interna Reve-
nue s prohbted from reconsderaton of a case whch has been cosed upon
order of the Unted States oard of Ta ppeas.
No part of the sum of 19,474.58 pad to the defendant as aforesad has been
repad to the company, and the whoe of sad sum, wth nterest from date each
payment was made, remans due and owng.
That on ugust 16. 1929, the Commssoner of Interna Revenue, by etter,
decned to reconsder the prevous acton of the defendant on petton of the
company for sad refund.
That there s due the pantff the sum of 19,474.58, for whch t prays
|udgment.
The defendant demurs to the petton on the ground that the facts set forth
theren do not consttute a cause of acton aganst the Unted States, and that
ths court s wthout |ursdcton to hear and determne the sut.
The defendant contends that pantff s rght to brng ths sut s barred by
the provsons of the Revenue ct of 1926, the pertnent sectons of whch are
as foows:
Sec. 284. (d) (44 Stat., 67.) If the Commssoner has maed to the ta -
payer a notce of defcency under subdvson (a) of secton 274 and f the
ta payer after the enactment of ths ct fes a petton wth the oard of Ta
ppeas wthn the tme prescrbed n such subdvson, no credt or refund n
respect of the ta for the ta abe year n respect of whch the Commssoner
has determned the defcency sha be aowed or made and no sut by the ta -
payer for the recovery of any part of such ta sha be nsttuted n any court
(wth certan e ceptons not here present).
Sec. 1003. (a) (44 Stat., 110.) The Crcut Courts of ppeas and the Court
of ppeas of the Dstrct of Coumba sha have e cusve |ursdcton to
revew the decsons of the oard (e cept as provded n secton 239 of the
udca Code, as amended) and the |udgment of any such court sha be fna,
e cept that t sha be sub|ect to revew by the Supreme Court of the Unted
States upon certorar, n the manner provded In secton 240 of the udca
Code, a.s amended.
(b) Upon such revew, such courts sha have power to affrm or, f the dec-
son of the oard s not n accordance wth aw, to modfy or to reverse the
decson of the oard, wth or wthout remandng the case for a rehearng, as
|ustce may requre.
The pertnent provsons of secton 1005 (44 Stat, 110), reatve to the date
on whch the oard s decson becomes fna, read as foows:
(a) The decson of the oard sha become fna
(1) Upon the e praton of the tme aowed for fng a petton for revew,
f no such petton has been duy fed wthn such tme .
It s the poston of the defendant that the pantff havng, after the enact-
ment of the Revenue ct of 1926, and pursuant to the provsons thereof, fed
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289
284, rt. 1305.
ts appea wth the oard of Ta ppeas as to a defcency n ta asserted by
the Commssoner of Interna Revenue for the caendar year 1923, Is precuded,
under the provsons of secton 284(d) of the sud ct, after the decson of
the sad oard has become fna, from brngng ths -sut and that the court s
wthout |ursdcton to hear and determne the same.
The pantff n support of the suffcency of ts petton heren contends that
secton 245(a) of the Revenue ct of 1921, under the provsons of whch the
ta es n queston were assessed, havng been decared by the Supreme Court
to be unconsttutona to the e tent that t authorzed an assessment aganst
fe Insurance companes on the ncome from ther ta -e empt securtes, the
assessment and coecton of the ta es pantff seeks to recover were nu and
vod. It s urged that there was no aw under whch the ta n queston coud
be mposed and that the acts of the Commssoner of Interna Revenue n deter-
mnng, assessng, and coectng the ta were nu and vod that the fng
by the pantff of ts petton wth the oard of Ta ppeas does not precude
t from sung for the recovery of ta es assessed and coected under an uncon-
sttutona aw.
The pantff further contends that ts appea to the oard of Ta ppeas
was on an ssue entrey unreated to the queston of the consttutonaty of
secton 245(a) of the Revenue ct of 1921, and that t has not had ts day
n court (the oard of Ta ppeas not beng a court), to tgate ts rght
to recover the ta taken from t by the defendant under an unconsttutona
ct of Congress. The pantff urges that to hod t precuded from brngng
ts sut because of the fng of ts appea wth the oard of Ta ppeas on
a matter entrey dstnct from the queston n ssue n ths case woud be
denyng the pantff ts day n court and takng ts money wthout the tne
process of aw guaranteed by the ffth amendment to the Consttuton.
When the pantff receved the etter from the Commssoner of Interna
Revenue assertng a defcency assessment aganst t for the year 1923, the
statutes afforded t two methods of procedure by whch the correctness of the
Commssoner s determnaton as to the defcency, and a other questons n
reaton to the pantffs ta abty for the year coud be fuy ad|udcated
and determned. (1) It coud pay the defcency assessment, fe a proper cam
for refund, and nsttute a sut n ths court, or the dstrct court of the Unted
States, for the recovery of the amount of the defcency and aso of any part
or a of the ta es pad for the year, or (2) t coud refuse to pay the amount
of the defcency assessment and fe an appea wth the oard of Ta ppeas,
by whch oard the vadty of the defcency assessment coud be determned,
together wth any other cams t cared to assert as to the overpayment of ts
ta es for the year nvoved.
ther method of procedure the pantff mght choose woud afford t a forum
n whch every queston n connecton wth ts ta abty for the year coud
he udcay determned. ther method afforded the pantff ts day n court
Subdvson (e) of secton 284 of the Revenue ct of 1926 provdes:
If the oard fnds that there s no defcency and further fnds that the
ta payer has made an overpayment of ta n respect of the ta abe year n
respect of whch the Commssoner determned the defcency, the oard sha
have |ursdcton to determne the amount of such overpayment, and such
amount sha, when the decson of the oard has become fna, be credted
or refunded to the ta payer as provded n subdvson (a).
Under ths provson of the statutes, the oard of Ta ppeas Is vested
wth fu authorty, when a case has been brought before t on appea from
a defcency assessment by the Commssoner, to decde a questons, both as
to defcences and overpayments, that can arse between a ta payer and the
Government n reaton to the ta abty for the year or years In queston.
(Oho tee oundry Co. v. Unted State , 69 C. Cs., 158.)
Under the 1924 Revenue ct no drect |udca revew of proceedngs before
the oard of Ta ppeas was provded, both the ta payer and the Govern-
ment, however, havng the rght to test the correctness of the oard s acton
n any court of competent |ursdcton. Ths procedure was changed n the
1926 Revenue ct and a drect |udca revew of the oard s decson was
substtuted, and the oard s |ursdcton was enarged to enabe t to consder
defcences beyond those shown n the Commssoner s notce, f the Com-
mssoner made such a cam at or before the hearng, secton 274(e). and
aso to determne that the ta payer not ony dd not owe the ta but had
overpad, secton 284(e).
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284, rt. 1305.
290
avng thus enarged the |ursdcton of the oard and provded for a
revew of ts proceedngs by the Crcut Court of ppeas and the Crcut
Court of the Dstrct of Coumba, and of the Supreme Court upon certorar,
the 1926 Revenue ct n secton 284(d), In respect to ttose cases where the
ta payer after recept of a defcency notce under subdvson 274(a), fes
an appea wth the oard of Ta ppeas, makes the decson of the oard
concusve and fna, and provdes that no credt or refund n respect of the
ta for the yenr n whch the Commssoner as determned the defcency
sha be aowed or made, and no sut by the ta payer for the recovery of
any part of such ta sha be nsttuted In any court.
The pantff In ths case eected, upon the recept of the defcency assess-
ment notce, to take ts controversy wth the Commssoner of Interna
Revenue as to ts ta abty for the year 1926 to the oard of Ta ppeas.
Ths oard, wth the rght of a |udca revew of ts decson, granted by
the statutes, afforded the pantff a forum wth fu authorty and |urs-
dcton n whch t coud have a |udca determnaton as to every queston
nvoved n ts ta abty for the year n queston. (Od Coony Trust Co.
ct a. v. Commssoner of Interna Revenue, 279 U. S., 716 Ct. D. 80, C. . III-2,
222 nde/ et a, v. Rener, 38 ed. (2d), 489 Ct. D. 156, C. . I -1 356 ,)
The fact that the precse queston presented here was not consdered and deter-
mned by the oard s not matera. The pantff had the undoubted rght by
proper aegatons n ts petton to set up ts cam for an overpayment before
the oard and to rase the queston of the vadty of any part of ts ta es before
the oard and carry such queston on to the courts had t seen ft to do so.
Not havng avaed tsef of the opportunty to tgate ts rght to a refund
of the ta es assessed aganst t under secton 245(a) of the Revenue ct
of 1921, n the forum of ts own seecton, whch had ampe authorty to deter-
mne the same, t can not be heard to say t has been dened ts day n court.
Secton 1000, Tte , of the Revenue ct of 1926, amendng secton 907(a),
Tte I , of the Revenue ct of 1924, provdes that notce and opportunty
to be heard sha be gven by the oard to the ta payer and the Comms-
soner and that a decson sha be made as qucky as practcabe. The same
secton, amendng secton 906(d) of the Revenue ct of 1924, provdes that
the decson of the oard sha be hed to be rendered upon the date that an
order specfyng the amount of the defcency s entered n the records of the
oard. The oard rendered ts decson n ths case and entered the neces-
sary order specfyng the amount of the defcency. that the aw requres
s that the oard sha gve the ta payer a notce and an opportunty to be
heard. tra or hearng s not compusory.
It s not aeged or shown n ths case that the pantff was not afforded
an opportunty to be heard. The sgnng and fng wth the oard of a stp-
uaton agreeng to the amount of the defcency s, n a respects, the equva-
ent of a hearng, and the entry by the oard upon such stpuaton of Its dec-
son satsfes the requrements of the statute. Moreover, we fa to fnd n the
statute any requrement, when a of the matters n controversy have been
agreed to by stpuaton, that the oard s requred to have a tra or a hearng
n the case.
The pantff n the nstant case sought, n ankers Reserve Lfe Co. v.
Unted States, No. 08, decded by ths court une 16, 1930 Ct. D. 209,
C. . I -2, 257 , to mantan sut for the recovery, for the year 1924, of
dentca ta es wth those here nvoved, despte the fact that t had entered
nto an agreement n wrtng wth the Commssoner, wth the approva of
the Secretary of the Treasury, under the provsons of secton 1106(b) of the
Revenue ct of 1926, whch secton provdes that f after a determnaton and
assessment n any case the ta payer has pad n whoe any ta based on snch
determnaton and assessment, and an agreement s made n wrtng between
the ta payer and the Commssoner, wth the approva of the Secretary of the
Treasury, that such determnaton and assessment sha be fna and concu-
sve (e cept upon a showng of fraud, mafeasance, or msrepresentaton of fact
materay affectng the determnaton and assessment thus made), the case
sha not be reopened, or the determnaton and assessment modfed by any
offcer, empoyee, or agent of the Unted States, and no sut, acton, or pro-
ceedng to annu, modfy, or set asde such determnaton or assessment sha
be entertaned by any court of the Unted States.
It was there contended that the decson of the Supreme Court n Natona
Lfe Insurance Co.. supra, hodng secton 245(a)2 of the Revenue ct of 1921
unconsttutona, nufed secton 1100(b) of the Revenue ct of 1926, n-
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291
284, rt. 1305.
vovng fna settement agreements between the Commssoner and ta payers
and that snce sad secton 245(a)2 was unconsttutona, there was no aw n
e stence whch authorzed the assessment of the ta , and snce there was no
aw under whch the ta coud be mposed, the money pad by t was not n
ega contempaton a ta , the agreement sgned by the ta payer and the Com-
mssoner, wth the approva of the Secretary of the Treasury, was never
bndng In so far as t reated to payments made of a ta computed under
secton 245(a) of the 1921 ct.
The court, hodng pantff coud not mantan ts sut, sad:
We thnk t s pan, n vew of the agreement entered nto between the
pantff and the Commssoner wth the approva of the Secretary of the
Treasury, that under ths secton ths court s wthout |ursdcton to entertan
ths sut. The sut s brought for the e press purpose of settng asde the
determnaton and assessment by the Commssoner and to recover the amount
pad as ta and nterest for the caendar year 1924. Ths s prohbted by
the postve provsons of secton 1106(b) and ths court has no authorty to
gnore the provsons of that secton. Congress as authorty to prescrbe
the condtons upon whch the Unted States may be sued. It has done so n
anguage that s too cear to admt of doubt and under the we-estabshed
prncpe that one who nsttutes a sut aganst the Unted States must brng
the case wthn the authorty of some ct of Congress, or the court can not
e ercse |ursdcton over t, pantff s precuded from mantanng ths acton.
etna Lfe Insurance Co. v. aton, decded by the court for the dstrct of
Connectcut on pr 9, 1930 Ct. D. 178, C. . I -1, 245 .) There s no show-
ng of fraud, mafeasance, or msrepresentaton of fact materay affectng
the determnaton or assessment made n ths case, and the pantff s n no
dfferent stuaton than t woud be f the sut were barred by the statute of
mtaton. In such a case the egaty of the assessment and coecton woud
be of no assstance to pantff.
It s manfest from the reports of commttees of the Senate and the ouse of
Representatves upon the amendments carred n the Revenue ct of 1926, to
the Revenue ct of 1924, n reference to the enarged |ursdcton and change
n the procedure before the oard of Ta ppeas, that t was the purpose of
Congress not ony to provde for a |udca revew of the decsons of the oard
bat to make such decsons fna and concusve both as to the Government
and the ta payer.
The report of the Commttee on nance of the Senate, S ty-nnth Congress,
frst sesson, says:
t s accordngy proposed n secton 284(d) of the b that the
ta payer s rght to cam and sue for a refund sha be barred ony f he takes
the case to the oard, ttus preservng to hm the opton of payng the ta
and then proceedng before the Department and the courts to recover any
e cess payments by a cam or sut for refund.
ut f he does eect to fe a petton wth the oard hs entre ta a-
bty for the year n queston (e cept n case of fraud) s fnay and com-
petey setted by the decson of the oard when t has become fna .
The duty of the Commssoner to assess the defcency thus determned s
mandatory, and no matter how mertorous a cam for abatement of the assess-
ment or for refund he can not entertan t, nor can sut be mantaned aganst
the Unted States or the coector. naty s the end sought to be attaned
by these provsons of the b .
Secton 284(d) gves effect to the ntent of Congress to attan fnaty to
proceedngs nsttuted before the oard of Ta ppeas by barrng the rght
of a ta payer who takes hs case there to brng sut for refund of any part
of the ta es pad for the year for whch the appea s taken to the oard.
The decson of the Supreme Court n Natona Lfe Insurance case, hodng
unconsttutona the statute under whch the ta es n queston were assessed
and coected, n no way affects the vadty of secton 284(d), whch n pan
and unequvoca anguage bars the pantff from brngng ths sut. ( ankers
Reserve Lfe Co. v. Unted States, supra.)
The court Is wthout |ursdcton to hear and determne the case, and there-
fore the defendant s demurrer to the petton s sustaned and the petton s
dsmssed.
It s so ordered.
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1002. 292
TITL . O RD O T PP LS.
S CTION 1002. NU .
-23-5093
Ct. D. 343
INCOM T R NU CT O 1926 D CISION O SUPR M COURT.
enue ursdcton Revew of oard s Decson.
Under secton 1002(d) of the Revenue ct of 1926 the rght
of choce of venue, by agreement between the Commssoner and
the ta payer, for revew of a decson of the oard of Ta ppeas
s restrcted, wthout the consent of the court, to the Court of
ppeas of the Dstrct of Coumba and the crcut court of appeas
for the crcut whch coud have entertaned the petton for
revew under subdvson (a), (b), or (c) of that secton.
Supreme Court of the Unted States. No. 549. October Term, 1930.
Nash- reyer Motor Co., formery Troy Motor Saes Co., pettoner, v. Davd
urnet, Commssoner of Interna Revenue.
On wrt of certorar to the Unted States Crcut Court of ppeas for the Second Crcut.
May 18, 1931.
Mr. ustce Stone devered the opnon of the court.
Pettoner, a Deaware corporaton havng ts prncpa offce n Caforna,
fed edera ncome and profts ta returns for ts fsca years 1920 and 1921
wth the coector of nterna revenue for ts dstrct n that State. oow-
ng a decson of the oard of Ta ppeas whch uphed respondent s deter-
mnaton of ta defcences aganst pettoner for both years (14 . T. ., 546),
pettoner and respondent entered nto an agreement, stated to be pursuant to
secton 1002 1 of the Revenue ct of 1926 (44 Stat., 110), that the decson of
the oard mght be revewed by the Court of ppeas for the Second Crcut.
The pettoner for revew n that court rected that the partes had so agreed.
The court of appeas, of ts own moton, dsmssed the petton for nck of
|ursdcton (42 . (2d), 192), on the authorty of Massachusetts re Marne
Ins. Co. v. Commssoner (42 . (2d), 189), n whch t had hed that secton
1002(d) permts the partes to choose ony between the Court of ppeas of
the Dstrct of Coumba and the court of appeas for any crcut n whch there
s some ground for sayng that venue mght e under subdvsons (a), (b), or
(c). Ths court granted certorar (282 U. S.. 835) anuary 5, 1931, the Govern-
ment acquescng because of the mportance of the queston and the confct of
the decson beow wth one of the Court of ppeas for the rst Crcut, where.
1 The Revenue ct of 1926 reads In part:
Sec 1001. (a) The decson of the oard of Ta ppeas may be re-
vewed by a crcut court of appeas, or the Court of ppeas of the Dstrct of Coum-
Sec. 1002. Such decson may be revewed
(a) In the case of an Indvdua, by the crcut court of appeas for the crcut whereof
he Is an nhabtant, or f not an nhabtant of any crcut, then by the Court of ppeas of
the Dstrct of Coumba.
(b) In the case of a person (other than an ndvdua), e cept as provded n sub-
dvson (c), by the crcut court of appeas for the crcut n whch Is ocated the offce
of the coector to whom such person made the return, or In case such person made no
return, then by the Court of ppeas of the Dstrct of Coumba.
(c) In the case of a corporaton whch had no prncpa pace of busness or prncpa
offce or agency n the Unted States, then by the Court of ppeas of the Dstrct of
Coumba.
(d) In the case of an agreement between the Commssoner and the ta payer, then
by the crcut court of appeas for the crcut, or the Court of ppeas of the Dstrct of
Coumba, as stpuated In such agreement.
ursdcton.
Sec. 1003. (a) The Crcut Courts of ppeas and the Court of ppeas of the Ds-
trct of Coumba sha have e cusve |ursdcton to revew the decsons of the
oard,
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293
1113, rt. 1351.
however, the pont was nether dscussed (Smmons Co. v. Commssoner, 33
P. (2d), 75) nor rased In the petton for certorar, whch was dened (280
U. S., 588).
Pettoner contends that under (d) the partes may stpuate for revew n
any crcut court of appeas. In vew of the rue of the statutes that venue of
the edera courts generay turns upon the geographca ocaton of the partes
and Is never wthn ther e cusve contro, t woud requre pan anguage
n ts statute to support an unmted choce. ut the words of (d) the
crcut court of appeas for the crcut seem to refer, not to the court of
appeas for any crcut, but to some partcuar crcut court of appeas prev-
ousy descrbed, necessary that one whch coud have entertaned the petton,
under (a), (b), or (c), n the absence of an agreement under (d). Ony such
a constructon comports wth the statement of the ouse Commttee on Ways
and Means, that the provsons now n secton 1002 prevent undue
burden upon those crcuts embracng States n whch a vast number of cor-
poratons are organzed. ( ouse reports, S ty-nnth Congress, frst sesson,
voume 1, Report No. 1, page 19.) n unmted choce mght overburden a
crcut court of appeas, whose docket was aready overcrowded, wth pettons
for revew wth respect to whch t coud have had no venue under the other
subdvsons of secton 1002.
The Senate Commttee on nance, n proposng the addton of (d) to sec-
ton 1002, stated that the purpose was to permt partes to stpuate
the court to whch the revew w be taken, n order that any doubt as to the
proper court may be removed . (Senate reports, S ty-nnth Con-
gress, frst sesson, voume 1, Report No. 52, page 36.) See aso, to the same
effect, the conference report n ouse reports, supra (Report No. 3o6. page 54).
Whatever souton (d) may afford for the dffcutes In those cases when
doubts arse as to the proper crcut for revew under (a), (b), or (c), here
pettoner had Its prncpa offce n Caforna and fed ts return there, so that
under (b) the venue coud propery be ad ony n the Court of ppeas for
the Nnth Crcut. ence the partes rght of choce by stpuaton under (d)
was restrcted to that court or the Court of ppeas of the Dstrct of Coumba.
Secton 1003(a) confers |ursdcton to revew decsons of the oard of
Ta ppeas on crcut courts of appeas and the Court of ppeas of the
Dstrct of Coumba. Secton 1002 Is entted enue. ven f the effect
of ths dstncton s to defne venue but not to restrct the |ursdcton of the
court beow. It was not bound to e ercse |ursdcton n the face of (d), whch
authorzed the partes to contro the venue ony by stpuaton conformng to
ts terms. (See ansas OUy Ry. Co. v. Unted States, 282 U. S., 760, decded
ebruary 24, 1931.) The restrcton on the power of the partes to stpuate
as to venue woud be meanngess f they coud wave t wthout the consent
of the court.
TITL L G N R L DMINISTR TI PRO ISIONS.
S CTION 1113. LIMIT TIONS UPON SUITS ND
PROC DINGS Y T T P Y R.
Sut ursdcton Cam fob Refund.
court s wthout |ursdcton of a sut for the recovery of a ta
aeged to have been egay coected where no cam for refund
of the ta has been fed wth the Commssoner.
The Court of ppeas for the Second Crcut has twce assumed |ursdcton In cases
ke the present one, wthout dscusson. ( reyock Ms v. Commssoner, 31 . (2d),
C55 Ct D. 98, C. . III-2, 253 ower v. Commssoner, 42 . (2d), 837.) In the
atter case, certorar was dened, but revew was not sought on the queston of venue.
(282 D. S., 897. anuary 12, 1931.) The ony other case dscussng the queston accords
wth the present. ( prng Canyon Coa Co. v. Commssoner, 38 . (2d), 764 (C. C. . 8).)
ffrmed.
rtce 1351: Suts for recovery of ta es errone-
ousy coected.
-2-4896
Ct. D. 268
D R L T S D CISION O COURT.
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1113, rt. 1351.
294
Court of Cams op the Unted States. No. -514.
The Pacfc Mutua Lfe Insurance Co. of Caforna v. The Unted States.
December 1, 1930.
OPINION.
Whabt, udge, devered the opnon of the court.
The pantff n ths acton s seekng the recovery of ncome ta es assessed
and coected under the provsons of the Revenue ct of 1921 for the caen-
dar years of 1921 and 1922, aggregatng the sum of 37,969.68, together wth
nterest on 17,635.07 from December 6, 1922, and on 20,334.61 from December
5, 1923.
The petton was fed December 3, 1929, and the |ursdcton of ths court
Is nvoked under the provson of paragraph twenteth of secton 24 of the
udca Code, as amended, reenacted by secton 1122(c) of the Revenue ct
of 1926, t beng aeged (paragraph II) that the ta es here sought to be
recovered were erroneousy or egay assessed and coected under the
nterna revenue aws, the coector of nterna revenue by whom such ta es
were coected not beng n offce as coector of nterna revenue at ths tme.
The petton further dscoses (paragraph I) that ts fna return for the
caendar year 1921 was fed une 7, 1922, the amount of the ta es shown
thereon and assessed by the Commssoner of Interna Revenue beng 104,-
556.99, whch ta was duy pad by pantff n four nstaments, the ast of
whch was on December 6, 1922, and ts fna return for the caendar year
1922 was fed on une 9, 1923, the amount of ta shown thereon and assessed
by the Commssoner of Interna Revenue beng 158,121.30, whch ta was
duy pad by pantff n four equa nstaments of 39,530.32, the ast of
whch was on December 5, 1923.
The petton shows no cam for refund was ever fed by pantff coverng
ether of sad years and that ths acton was brought on December 3, 1929,
more than fve years after the payment of ta es for the caendar years 1921
and 1922, respectvey. s the bass of the recovery here sought, pantff
rees upon the decson of the Supreme Court of the Unted States n the
case of the Natona Lfe Insurance Co. v. Unted States (277 U. S., 508 T. D.
4206, C. . 1I-2, 296 ), wheren that court hed that fe nsurance companes
were entted under the provsons of secton 245(a)2 of the Revenue ct of
1921 to deduct the fu 4 per cent of the mean of ther reserve funds requred
to be mantaned by aw, and that n so far as sad secton attempted to
dmnsh sad 4 per cent by the amount of ta -e empt nterest receved durng
the ta year, sad secton was unconsttutona and vod.
The defendant has nterposed a demurrer whch rases the queston of
|ursdcton of ths court.
It s apparent from an e amnaton of paragraph twenteth of secton 24
of the udca Code, as amended, and reenacted by secton 1122(c) of the
Revenue ct of 1926, that ths secton appes ony to the dstrct courts and
has no appcaton to the |ursdcton of ths court. efore the amendment
( ct of ebruary 24, 1925), suts coud ony be brought for the erroneous or
ega coecton of ta es by the coector of nterna revenue whe he was
n offce, and the courts have repeatedy hed that t was a persona acton.
(Smetanka v. Indana Stee Co., 257 U. S., 1 Ct. D. 17, C. . 5, 251 .) Suts
coud not be brought aganst the Unted States n the dstrct courts where
t was aeged that the coector of nterna revenue had erroneousy or
egay assessed or coected ta es. Of course, no sut coud be mantaned
n the Court of Cams aganst the coector. Ths court has ony |ursdc-
ton of cases where the Government s defendant. The ob|ect of ths amend-
ment was to gve the dstrct courts concurrent |ursdcton wth the Court
of Cams to try cases aganst the Unted States where ta es had been errone-
ousy or egay assessed or coected by the coector, after he had ceased
to be the coector at the tme the sut was nsttuted. owever, we ony
refer to ths pont because ths ssue as been rased. We do not ay par-
tcuar stress on t. The man pont on whch ths case must, devove, and
the controng pont n the case, s that no cam for refund was ever fed
wth the Commssoner of Interna Revenue. There s no aegaton n the
compant that a cam for refund was ever fed. It has been repeatedy
hed by the courts that n order to gve |ursdcton t s essenta that a cam
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1113, rt. 1351.
for refund sha have been fed, and the omsson of an aegaton that a
cam has been made s fata. (Davs v. Unted States, 67 C. Cs., 643, and
cases cted.) It s apparent from an e amnaton of the petton that no
cam for refund was fed, and the bar of the statute of mtatons havng
faen no cam can be fed. The court has no |ursdcton. The demurrer
s sustaned and the petton dsmssed. It s so ordered.
rtce 1351: Suts for recovery of ta es errone- -13-4998
ousy coected. Ct. D. 304
D R L T S R NU CT O 1926 D CISION O COURT.
Sut Cam fo| Refund.
Secton 3226 of the Revsed Statutes as amended by secton
1113(a) of the Revenue ct of 1926 requres a cam for refund
or credt to be fed wth the Commssoner as a condton precedent
to the brngng of a sut for the recovery of an nterna revenue
ta aeged to have been egay assessed or coected and the
statement of a cam n such a sut does not set forth a cause of
acton f t fas to aege the fng of a cam for refund or credt
as requred by that secton.
Dstrct Court of the Unted States fob the Western Dstrct of
Pennsyvana.
Wtn. . rday Co., Inc., a Corporaton, t/ettoner, v. The Unted States
of merca.
ebruary 2, 1931.
opnon.
Mc cab, .: Ths s an acton to recover part of an overpayment of ta es
by pantff, ta payer, to defendant. The case s before us on defendant s
demurrer to pantffs petton.
The facts aeged n the petton are to be deemed true n consderaton of
the queston now before us. Pantff, March 15, 1920, fed ts ncome and
profts ta return for the caendar year 1919, whch showed a ta due from
pantff of 24,494.27, whch t pad n 1920. The Commssoner of Interna
Revenue, after an audt of pantff s books and accounts by hm, found that
pantff, for the year 1919, had overpad 22,952.16 ta es. ebruary 16, 1924,
the Commssoner of Interna Revenue sgned a schedue of overpayment and
overassessment for the year 1919, whch ncuded the overpayment and over-
assessment above, aganst pantff, and drected the coector of nterna reve-
nue at Pttsburgh to credt sad amount on any ta es due from pantff. The
coector of nterna revenue at Pttsburgh credted pantff wth the payment
of 10,351.71, beng the anouDt of an addtona assessment aganst pantff
for the year 1917, whch, both partes admtted, was barred by the statute of
mtatons.
The sut n ths case was brought pr 24, 1930, to recover 10,000 of the
above amount. Defendant, n support of ts demurrer, aeges that the state-
ment of cam does not set forth a cause of acton because t fas to aege
that a cam for refund was fed for the recovery of ths aeged overpayment
for the year 1919, and contans no statement of any e ecutve acton whatso-
ever as havng been ether apped for or obtaned n regard to the aeged
overpayment of 10,351.71. Pantff cams that no cam for refund was
necessary.
The appcabe statutes are secton 1111 of the Revenue ct of 1926, amendng
secton 3220 of the Revsed Statutes, whch s the same as secton 1014 of the
Revenue ct of 1924, whch reads:
cept as otherwse provded n sectons 284 and 319 of the Revenue ct
of 1926 the Commssoner of Interna Revenue, sub|ect to reguatons prescrbed
by the Secretary of the Treasury, s authorzed to remt, refund, and pay back
a ta es erroneousy or egay assessed or coected, a penates coected
72109 31 20
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296
wthout authorty, and a ta es that appear to be un|usty assessed or e cessve
n amount, or n any manner wrongfuy coected aso to repay to any coector
or deputy coector the fu amount of such sums of money as may be recovered
aganst hm n any court, for any nterna revenue ta es coected by hm, wth
the cost and e penses of sut aso a damages and costs recovered aganst any
assessor, assstant assessor, coector, deputy coector, agent, or nspector, n
any sut brought aganst hm by reason of anythng done n the due performance
of hs offca duty, and sha make report to Congress at the begnnng of each
reguar sesson of Congress of a transactons under ths secton.
Secton 1113(a) of the Revenue ct of 1926 reenacts secton 3226 of the
Revsed Statutes, and the same secton s contaned n the Revenue ct of
1924. s amended t reads:
No sut or proceedng sha be mantaned n any court for the recovery of
an nterna revenue ta aeged to have been erroneousy or egay assessed
or coected, or of any penaty camed to have been coected wthout author-
ty, or of any sum aeged to have been e cessve or n any manner wrong-
fuy coected unt a cam for refund or credt has been duy fed wth
the Commssoner of Interna Revenue, accordng to the provsons of aw
n that regard, and the reguatons of the Secretary of the Treasury estab-
shed n pursuance thereof but such sut or proceedng may be mantaned,
whether or not such ta , penaty, or sum has been pad under protest or
duress. No such sut or proceedng sha be begun before the e praton of
s months from the date of fng such cam uness the Commssoner renders
a decson thereon wthn that tme, nor after the e praton of fve years
from the date of the payment of such ta . penaty, or sum, uness such sut
or proceedng s begun wthn two years after the dsaowance of the part of
such cam to whch such sut or proceedng reates. The Commssoner sha
wthn 90 days after any such dsaowance notfy the ta payer thereof by
ma.
In Rtter v. Unted States (28 ed. (2d), 265, 267 (C. C. . 3) T. D. 4234,
C. . II-2, 212 ) udge Davs, n speakng for the court, sad:
ut the soveregn Government may not be sued, e cept upon ts consent,
and then ony upon the condtons under whch t has consented to be sued,
even though they be purey forma. (Cheatham v. Unted States, 92 U. S.,
85, 23 L. d., 561 ngs County Savngs Insttuton v. ar, 116 U. S., 200.
6 S. Ct 353, 29 L. d., 657 Rock Isand, rkansas Lousana Raroad Co.
v. Unted States, 254 U. S., 141, 41 S. Ct, 55, 65 L. d., 188 Ct. D. 2, C. . 4,
342 atmore Oho R. R. Co. v. Unted States, 260 U. S., 565, 43 S. Ct..
169, 67 L. d.. 406 T. D. 3430, C. . II-, 312 Unted States v. Rchards
(C. C. .), 27 . (2d), 284 T. D. 4232, C, . II-2, 326 .)
In Tucker v. e ander (15 ed. (2d), 356 (C. C. . 8) T. D. 3973, C. .
I-1, 287 ), Crcut udge Stone sad:
Ths s a sut aganst the Government n connecton wth the mposton
and coecton of the genera revenue, whch s a prme governmenta functon
such character of actons can be mantaned ony when permtted by the sov-
eregn and ony upon the condtons mposed by the soveregn. Such char-
acter of acton s permtted by the statute but certan condtons are requred
ss a condton precedent thereto. One of these condtons s that a cam for
refund sha frst be made to the Commssoner of Interna Revenue and a
perod of s months aowed for hs determnaton thereof. The evdent pur-
poses and ob|ects of ths condton are to afford the Commssoner an oppor-
tunty to correct errors made by ns offce and to spare the partes and the
courts the burden of tgaton n respect thereto.
In Tucker v. e ander (275 U. S., 22S, 231), the Supreme Court, speakng by
Mr. ustce Stone, sad:
Ltera compance wth statutory requrements that a cam or appea be
fed wth the Commssoner before sut s brought for a ta refund may be
nssted upon by the defendant, whether the coector or the Unted States.
( ngs County Savngs Insttuton v. ar, 116 U. S., 200 Maryand Casuaty
Co. v. Unted States, 251 U. S., 342, 353, 354 Nchos v. Unted States, 7 Wa.,
122, 130.)
Ths sut s for the recovery of an nterna revenue ta aeged to have been
egay assessed and coected. It s aso a sut to recover a sum of money
wrongfuy coected. Under the statute as construed above, a cam for refund
was a condton precedent to the brngng of sut.
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1113, rt. 1351.
Pantff reed upon the nterpretaton of the above ct n the case of Peer-
ens Paper o Mfg. Co. v. Routzahn, Coector of Interna Revenue (22 ed.
(2d), 459) (D. C. N. D. Oho, N. D.) by udge ones. In an opnon by Dstrct
udge West of the same court, n the case of enkns Steamshp Co. v. Routzahn,
Coector of Interna Revenue, dated September 8, 1930 (not yet reported) Ct.
D. 258, C. . I -2, 267 , udge West seemngy s of the opnon that udge
ones dd not ntend to hod n the Peeress case that a cam for refund was
not necessary, as a cam for refund had been made n that case. udge West
sad:
I can not agree that where a refund has been msapped on an ostensbe
abty for a ta or penaty appearng on the books, a sut to recover s not for
a ta or penaty aeged to have been coected egay or wthout authorty
or that such an acton s not controed by secton 3226. That queston s pre-
sented n the nstant case but n the Peeress case, where the requrements of
the secton had been comped wth by the ta payer, t coud not arse so as to
ca for decson. In rady v. . 8. (24 . (2d), 205), the Peeress decson s
cted to the pont that a refund can not propery be apped on a ta the coec-
ton of whch was then barred by the statute, whch, as I have prevousy sad,
I thnk was the rea queston ad|udcated.
The demurrer of the defendant s sustaned.
rtce 1351: Suts for recovery of ta es errone- -14-5008
ousy coected. Ct D. 310
D L T S R IS D T TCT S D CISION O SUPR M COURT.
Sut Lmtaton Commencement of 2-Year Perod upon Ds-
aowance of Cam for Refund.
The 2-year perod after the dsaowance of a cam, prescrbed
by the Revsed Statutes, 3226, as amended, wthn whch a sut
for the recovery of any nterna revenue ta must be begun com-
mences upon the dsaowance of the cam for refund by the
Commssoner and not upon the gvng notce that the cam has
been dsaowed.
Supreme Court of the Unted States. Nos. 79, 80. October Term, 1930.
79. The Unted States of merca, pettoner, v. Theodore Mche.
80. The Unted States of merca, pettoner, v. Lous reger.
On wrts of certorar to the Uuted States Crcut Court of ppeas for the Second
Crcut.
ebruary 24, 1931.
Mr. ustce uter devered the opnon of the court.
These actons were brought n the Dstrct Court for the Southern Dstrct
of New York. ach respondent sued to recover ncome ta es ncorrecty
determned for 1919 and pad n 1920. On defendant s moton n the nature
of a genera demurrer that court dsmssed. The crcut court of appeas
reversed. (37 . (2d), 38.)
The soe queston s whether the actons were commenced wthn the tme
aowed by Revsed Statutes,, secton 3226, as amended. (26 U. S. C, secton
356.)
In 1924, Mche on ebruary 7, and reger on September 15, fed a cam
for refund. The Commssoner of Interna Revenue by a etter dated ugust
17, 1925, advsed Mche that hs cam woud be re|ected and that the re|ecton
woud offcay appear on the ne t schedue to be approved by hm. The
cam was re|ected September 2. The Commssoner, pr 2, 1925, sent a ke
etter to reger, and hs cam was re|ected pr 20. The Commssoner dd
not gve notce to ether of them that hs cam had been dsaowed or the
date of dsaowance unt une 27, 1928. The suts were subsequenty brought
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1113, rt. 1351.
298
more than two years after the re|ectons and ess than two years after the
notces.
Secton 3226 as amended provdes:
No sut or proceedng sha be mantaned n any court for the recovery of
any nterna revenue ta aeged to have been erroneousy or egay assessed
or coected unt a cam for refund or credt has been duy fed
wth the Commssoner of Interna Revenue. No such sut or pro-
ceedng sha be begun before the e praton of s months from the date of
fng such cam uness the Commssoner renders a decson thereon wthn
that tme, nor after the e praton of fve years from the date of the payment
of such ta uness such sut or proceedng s begun wthn two
years after the dsaowance of the part of such cam to whch such sut or
proceedng reates. The Commssoner sha wthn 90 days after any such
dsaowance notfy the ta payer thereof by ma.
y ths statute the Unted States waved Its soveregn mmunty from sut.
The permsson to sue s condtoned on the fng of a cam and the apse of
s months or the dsaowance of the cam wthn that perod, and s mted
to not more than fve years after payment of the ta uness the cam has been
dsaowed and the acton s commenced wthn two years from the dsaow-
ance.
Nether of these cams was re|ected wthn s months after fng. nd n
each case more than two years eapsed after re|ecton before the Comms-
soner sent notce that the cam had been dsaowed. Nether acton was
commenced wthn fve years after payment of the ta or wthn two years
after dsaowance of the cam. The ta payers contend, and the crcut court
of appeas hed, that the permsson to sue contnues for two years after notce
that the cams had been dsaowed and that therefore these actons were
commenced wthn tme.
s the Commssoner dd not act wthn s months, permsson to sue dd
not depend upon the re|ecton of the cam or upon the gvng of the notce.
y the terms of the statute the perod wthn whch the Government consented
to be sued commenced at the e praton of such s months and contnued un-
nterruptedy through the 5-year perod foowng the date of payment and unt
two years after the dsaowance. Whe the statute decares that the Com-
mssoner wthn n specfed tme sha notfy the ta payer that hs cam has
been dsaowed, t s nowhere stated that the Commssoner s faure to gve
the notce w n any event operate to e tend the tme for brngng sut. n
mpcaton to that effect can not preva aganst the rue e pressy stated. It
s cear that where the Commssoner renders no decson wthn s months
the secton contempates that before commencng hs sut the ta payer w
ascertan by nqury whether the Commssoner has acted. Ths at east sug-
gests that t may be the ntenton of the ct to eave a ke burden upon
camants n a cases.
Provsons n ta aws mtng the tme wthn whch the Unted States may
enforce the payment of ta es by dstrant or sut are to be nterpreted beray
n fnvor of the ta payers. ( owers v. N. Y. bany Co., 273 U. S., 346
T. D. 4009, C. . I-1, 268 Unted, States v. Updke, 281 U. S 489 Ct. D. 192,
C. . I -1, 228 .) ut t Is aso we estabshed that sut may not be man-
taned aganst the Unted States n any case not ceary wthn the terms of
the statute by whch t consents to be sued. ( astern Tramp. Co. v. Unted
States, 272 U. S.. 675. 686 Prce v. Unted States and Of age Indans, 174
U. S., 373, 375-376.) There s nothng n the egsatve hstory of the pro-
vson to ndcate an ntenton that the 2-year perod shoud not commence
upon the dsaowance of the cam or that t shoud be e tended by the faure
of the Commssoner to gve the specfed notce.1
avng regard to the rue of strct constructon to be apped to wavers by
the Unted States of ts soveregn mmunty from sut, the cause reasonaby
may be read merey as a drecton to the Commssoner to send the notce to
camant wthout makng the faure so to do have the effect of enargng the
perod for sung as otherwse defntey prescrbed.
The permsson to each of the pantffs to brng sut e pred two years
after hs cam was dsaowed.
udgments reversed.
1 se a_tecR, Pot No 1137, S ty-serenth Congress, fourth sesson, page 5 ouse eport
No. 175T, S ty-seventh Congress, fourth sesson, page 3.
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299
1114, rt. 1361.
S CTION 1114. P N LTI S.
rtce 1361: Penates. -13-4999
I. T. 2563
R NU CT O 1926.
n assessment was made aganst the ta payer n anuary, 1930,
and remans unpad. The coector has eved upon a depost
standng to the ta payer s credt n a bank. The bank has decned
to honor the warrant of dstrant, camng t s entted to the
amount because of a |udgment t hods. t the tme of dstrant
the bank had not apped the credt toward the e tngushment of
the |udgment debt and had made no attempt to enforce ts |udg-
ment by havng the depost mpounded or sezed under a ega wrt
of e ecuton, and the evy was made on unattached funds.
ed, the bank depost havng aready been eved upon can not
now be apped by the depostary toward the satsfacton of ts
|udgment and the bank s obgated to surrender the money on
depost to the coector.
n assessment was made aganst the ta payer n anuary, 1930,
and remans unpad. The coector has eved upon a depost stand-
ng to the ta payer s credt n a bank. The bank s a |udgment
credtor of the ta payer and has decned so far to honor the warrant
of dstrant, camng that t s entted to the amount on depost
because of the |udgment t hods.
dvce s requested whether the bank has the rght to appy the
funds hed by t toward the satsfacton of ts |udgment aganst
the ta payer, or whether the money shoud be turned over to the
coector.
There s no queston but that under the authorty of secton 3187,
Revsed Statutes, as amended by secton 1016 of the Revenue ct of
1924, a bank account s sub|ect to dstrant. It s equay true that
under secton 1114(e) of the Revenue ct of 1926 a person (and ths
ncudes a bank havng money on depost to the credt of a denquent
ta payer) n possesson of property or rghts to property sub|ect to
dstrant, upon whch a evy has been made, sha, upon demand by
the coector or deputy coector, surrender the same to the dstran-
ng offcer, uness, at the tme of the demand, the property or rght
thereto s hed sub|ect to an attachment or e ecuton under any
|udca process. If surrender be refused, the hoder s made abe
n hs own person and estate to the Unted States n a sum equa to
the vaue of the property or rght not surrendered, but not e ceedng
the amount of the ta (ncudng penates and nterest) for the co-
ecton of whch the evy was made, together wth the costs and
nterest from the date of the evy.
In the nstant case the bank has not made any attempt to enforce
ts |udgment aganst the ta payer by havng the amount on depost
mpounded or sezed under a ega wrt of e ecuton. The depost
was treated as an ordnary one and mght have been checked out by
the ta payer. t the tme the coector dstraned, the bank had not
apped the baance standng to the credt of the ta payer toward the
e tngushment of ts |udgment debt, and the evy by the coector
was made on unattached funds standng to the credt of the den-
quent ta payer.
In vew of the foregong provsons of aw, ths offce s of the
opnon that the bank depost, havng aready been eved upon by
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1114, rt. 1361.
300
the coector, can not now be apped by the depostary toward the
satsfacton of the |udgment debt, the coecton of whch t had
taken no steps to enforce by way of attachment or wrt of e ecuton.
It s concuded, therefore, that the bank s requred to surrender
to the. coector the money on depost, and upon faure to do so t
w become abe to the e tent provded by secton 1114(e) of
the evenue ct of 1928.
rtce 1361: Penates. -23-5094
I. T. 2577
R NU CT O 1926.
Where dstrant was made upon the bunk account of a ta payer
n order to coect an outstandng ta , and t became necessary to
nsttute sut aganst the bank, the amount recovered to satsfy the
|udgment rendered n favor of the Unted States shoud not be
treated as a penaty mposed upon the bank, but shoud be cred-
ted aganst the outstandng ta abty of the ta payer.
In order to coect an outstandng ta abty a dstrant was
made upon the bank account of the ta payer n the M ank on
ugust , 1928, but as the bank refused to honor the evy a sut was
nsttuted aganst t and ts responsbe offcers on December , 1928,
under the provsons of secton 1114(e) of the Revenue ct of 1926.
na |udgment was rendered n favor of the Unted States for
the fu amount of the cam, together wth nterest thereon, on
October , 1930. The |udgment was satsfed n fu, payment hav-
ng been made n the frst nstance to the cerk of the Unted States
dstrct court and by the atter to the coector.
The queston s rased whether the amount recovered n the above-
mentoned sut shoud be credted aganst the ta abty of the N
Company, the ta payer, or treated as a penaty mposed upon and
recovered from the M ank under secton 1114(e) of the Revenue
ct of 1926 because of the bank s faure to honor the coector s
warrant for dstrant.
Secton 1114(e), supra, after decarng that a person hodng prop-
erty sub|ect to dstrant sha surrender the same to the coector or
deputy coector makng the evy thereon (uness the property or
rghts to property at the tme of makng demand are sub|ect to a
|udgment or e ecuton under any |udca process), further provdes
as foows:
ny person who fas or refuses to so surrender any of such prop-
erty or rghts sha be abe n hs own person and estate to the Unted States
n a sum equa to the vaue of the property or rghts not so surrendered, but
not e ceedng the amount of the ta es (ncudng penates and nterest) for
the coecton of whch such evy has been made, together wth costs am
nterest from the date of such evy.
In Senate Report 52, S ty-nnth Congress, the Commttee on
nance, n commentng upon the b, . R. No. 1 (whch, after
amendment, fnay became the Revenue ct of 1926), n e panaton
of the proposed abty to be created by secton 1114(e) of the b
referred to, sad that t s a abty smar to that of an e ecutor
who pays debts before he pays a debt due the Unted States.
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301
1116, rt. 1371.
Ths e panaton ceary ndcates that the abty created by
secton 1114(e) of the Revenue ct of 1926 was ntended to be an
anaogue to that created by secton 3467 of the Revsed Statutes,
whch provdes that any e ecutor, admnstrator, assgnee, or other
person who pays any debt due by the person or estate from whom
or for whch he acts, before he satsfes and pays the debts due the
Unted States from such person or estate, sha become answerabe
n hs own person and estate for the debts so due to the Unted States,
or for so much thereof as may reman due and unpad.
In Unted States v. arnes (31 ed., 705), t was hed, n con-
strung sectons 3466 and 3467 of the Revsed Statutes, that one who
comes nto possesson of propertes beongng to a debtor of the
Unted States becomes a trustee for the Unted States, and that when
he has notce of the debt due the Unted States he can not escape
persona abty for the amount thereof, to the e tent of the assess
comng nto hs hands, f he fas to provde for such debt before
makng dstrbuton to other credtors.
It w be noted that under ths decson the person comng nto
possesson of the assets of the debtor of the Unted States s not
made abe to satsfy the same out of hs own funds uness he has
satsfed debts due other credtors before payng what may be due
the Government. If he shoud satsfy the debt due the Unted
States pror to such a dstrbuton he does not become abe n hs
own person and estate. It s ony when a of the funds beongng to
the Government debtor, comng nto hs possesson have been e -
pended to satsfy debts other than debts due the Unted States that
he personay becomes abe. In short, the statute does not create
a dua monetary abty e stent at one and the same tme.
In the ght of the foregong, t s the opnon of ths offce that
the amount of money coected from the M ank under secton
1114(e) of the Revenue ct of 1926 shoud be credted aganst the
ta abty outstandng aganst the N Company for the year 1917.
Inasmuch as t appears that a sum equa to the fu amount of the
outstandng ta abty, ncudng penaty and nterest, has been
pad to the cerk of the dstrct court, who n turn pad sad amount
to the coector, t s the opnon of ths offce that the coector can not
now coect anythng addtona from the ta payer for the year 1917,
as hs ndebtedness to the Unted States has been satsfed.
S CTION 1116. INT R ST ON R UNDS
ND CR DITS.
rtce 1371: Interest on refunds and credts. -10-4967
Ct. D. 291
INCOM T R NU CTS O 1024 ND 1926 D CISION O SUPR M
COURT.
Interest Credt of Overpayment When Credt s owed.
credt of an overpayment s aowed wthn the meanng of
secton 1019 of the Revenue ct of 1924 and secton 1116 of the
Revenue ct of 1926 on the date when the Commssoner sgns the
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1127.
302
schedue of refunds and credts certfed to ru by the coector
authorzng the dsbursement cerk of the Treasury to pay the
amounts shown to be refundabe accordngy, nterest must be
computed accordng to the statutory provson In force at that
tme.
Supbeme Court of the Unted States.
Pottatown Iron Co. v. Unted States.
On wrt of certorar to the Court of Cams.
ebruary 2, 1931.
opnon.
Mr. ustce Roberts devered the opnon of the court.
Unted States v. Swft Co., No. 56, decded ths day Ct. D. 290, page 283.
ths uetn , contros the decson of ths case.
ere the Commssoner of Interna Revenue, upon audt of pettoner s
ncome and e cess profts ta return for 1918, found an overpayment, and at
the same tme found an underpayment of smar ta es for the years 1916 and
1917. On anuary 22, 1926, he made addtona assessments of the underpay-
ments for 1916 and 1917, and on anuary 29 he approved a schedue of over-
assessments whch embraced the overpayment for the year 1918. The schedue
was transmtted to the coector of the approprate dstrct wth the usua
nstructons and authorty to check the overassessment aganst the ta payer s
account and determne whether the amounts n whch the ta abty had been
reduced shoud be abated n whoe or n part, and f any part of the over-
assessment was found to be an overpayment to appy the same aganst ta e
due, f any, makng the approprate entry n hs accounts.
fter ths had occurred pettoner nqured n wrtng of the coector as to
the status of ts account. e reped by etter dated ebruary 23, 1926, statng
that he had apped the overassessment to cose out the accounts of 1916 and
1917, thus e tngushng the ta payer s abty as shown by hs books. On
ebruary 27, 1926, he returned the schedue of overassessments to the Com-
mssoner together wth the usua subsdary schedue of credts and refunds
showng how he had credted the overassessment and that there remaned a
baance of 1918 ta es refundabe to the ta payer amountng to 21,152.12. On
pr 15, 1926, the Commssoner approved the schedue, thus authorzng the
ssuance of checks coverng the amount to be refunded.
The queston s whether nterest shoud be aowed the pettoner under sec-
ton 1019 of the Revenue ct of 1924 (43 Stat., 346) or under secton 1116 of
the Revenue ct of 1926 (44 Stat., 119). The atter ct took effect ebruary
26, 1926. The Court of Cams hed that the act of the Commssoner n ap-
provng the schedue of refunds and credts and authorzng the ssuance of
checks on pr 15, 1926, consttuted the aowance of the cam for credt, and
that nterest on credts for 1916 and 1917 ta es shoud be cacuated under the
ct of 1926, whch had then become effectve. The pettoner argues that
credt was aowed or taken when the coector, pror to ebruary 26, 1926,
made the entres upon hs books, and that consequenty nterest on the credts
shoud be cacuated under the provsons of the ct of 1924. We hod, n con-
formty wth our decson n No. 56, that the aowance occurred pr 15, 1926,
when the Commssoner fnay acted on the schedue of refunds and credts.
The |udgment s affrmed.
S CTION 1127. N ORC M NT O T LI NS.
R NU CT O 1926.
ffect of Pubc, No. 862, Seventy-frst Congress (26 U. S. C. .,
secton 136, page 524 ths uetn). (See G. C. M. 9453, page 526.)
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303 1211.
TITL II. G N R L PRO ISIONS.
S CTION 1211. S L RI S O ST T ND
MUNICIP L O IC RS.
Secton 1211. -14-5009
Ct. D. 308
ncome ta revenue act of 1926 decson of court.
1. empton State Offcer State mpoyee ttorney for
State Recever.
ttorneys representng recevers apponted by State courts are
not offcers or empoyees of a State or potca subdvson
thereof and the compensaton receved by attorneys for servces
rendered to the recevers s not e empt from ta under secton
1211 of the Revenue ct of 1926.
2. empton Compensaton as Recever Dstrbuted to Co-
partners.
Where a member of a partnershp of attorneys receves compen-
saton for hs servces as a recever apponted by a State court
whch becomes a part of the partnershp ncome and s dstrbuted
among the partners n percentages f ed by the artces of copart-
nershp, such ncome receved by the copartners of the recever s
not e empt from ta under secton 1211 of the Revenue ct of 1926.
3. Decson ffrmed.
The decson of the oard of Ta ppeas (16 . T. ., 1428)
affrmed.
Unted States Crcut Court of ppeas fob the Seventh Crcut. No. 4379.
October Term, 1930, October Sesson, 1930.
arvey . am, pettoner, v. Commssoner of Interna Revenue, respondent.
Petton for revew of decson of Unted States oard of Ta ppeas.
efore schuer, vans, C. .1., and ndey, D. .
December 8, 1930.
vans, C. .: Compant s here made of the rung of the oard of Ta
ppeas (16 . T. ., 1428) sustanng respondent n hs determnaton of pet-
toner s 1922 and 1923 ncome ta es. Controversy arses soey out of pettoner s
asserted e emptons or deductons whch respondent dsaowed. The sums
sought to be deducted were receved as compensaton for servces rendered ether
as a State court recever or as attorney for other State court recevers.
The facts: Pettoner s one of three members of a aw frm engaged n prac-
tcng aw In Indanapos, Ind. Durng the two years In queston hs frm was
apponted by a State court to represent varous recevers named by the same
court to conduct or to qudate certan busnesses whch were fnancay em-
barrassed. One of the frm was aso apponted a recever of a company and for
two years devoted neary a of hs tme to conductng ts busness, for whch
the court aowed hm compensaton as foows 10,000 for 1921, . 20,000 n
1922, and 2,823.59 In 1923. sums pad as compensaton for servces, ether
as recever or as attorneys, came from the corpus of the estates beng admns-
tered by the court n the recevershp proceedngs. The partnershp, upon re-
cevng the compensaton, dstrbuted t among the partners n percentages
f ed by the artces of copartnershp.
Two pertnent statutes are:
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1211.
304
Revenue ct of 1921 (ch. 136, 42 Stat., 227) :
Skc. 213. That for te purposes of ths tte the term gross
ncome
(a) Incudes gans, profts, and ncome derved from saares, wages, or
compensaton for persona servce of whatever knd and whatever
form pad and ncome derved from any source what-
ever.
Revenue ct of 1926 (ch. 27, 44 Stat., 9) :
Sbo. 1211. ny ta es mposed by the Revenue ct of 1924 or pror Revenue
cts upon any ndvdua n respect of amounts receved by hm as compensaton
for persona servces as an offcer or empoyee of any State or potca sub-
dvson thereof (e cept to the e tent that such compensaton s pad by the
Unted States Government drecty or ndrecty), sha, sub|ect to the statu-
tory perod of mtatons propery appcabe thereto, be abated, credted, or
refunded.
Treasury Department Reguatons 62 reads:
rt. 88. Compensaton of State offcers and empoyees. Compensaton pad
ts offcers and empoyees by a State or potca subdvson thereof, ncudng
fees receved by notares pubc commssoned by States and the commssons
of recevers apponted by State courts, s not ta abe. Compensaton receved
for servces rendered to a State or a potca subdvson thereof s ncuded
n gross ncome uness the person receves such compensaton as an offcer or
empoyee of a State or potca subdvson. n offcer s a person who occupes
a poston n the servce of the State or potca subdvson, the tenure of
whch s contnuous and not temporary and the dutes of whch are estabshed
by aw or reguatons and not by agreement. n empoyee s one whose dutes
consst n the rendton of prescrbed servces and not the accompshment
of specfc ob|ects, and whose servces are contnuous, not occasona or tem-
porary.
Revsed Treasury Reguatons 33, artce 30, of the ct of 1916 as amended
by the ct of 1917, reads:
In reportng ther share of partnershp net ncome, the partners w e -
cude such part thereof as may have been receved by the partnershp from
sources e empt from ta under the provsons of secton 4, ct of September 8,
1916, as amended, and whch sha have been ncuded by the partnershp n ts
statement of net ncome dstrbuted to the partners.
Dfference n the status, and n the empoyment, of recevers and recevera
attorneys necesstates separate consderaton of the sums camed by pettoner
to be e empt from ta aton.
ttorneys fees: That attorneys representng State court recevers are not
offcers of a State or potca subdvson thereof s defntey setted by the
decson of Met caf 6 dd| v. Mtche (269 U. S., 514, 520 T. D. 3824, C. .
-, 218 ).
hether they are empoyees of a State or potca subdvson thereof
s a much coser queston. We fee compeed to answer t n the negatve on
the authorty of Metcaf f ddy v. Mtche, supra Lucas, Commssoner, v.
Reed (281 U. S., 699) Commssoner v. oward (280 U. S., 526) ar v. yert
(35 ed. (2d), 326) Lousve R. Co. v. Wson (138 U. S., 501).
In reachng ths concuson, we have gnored the defnton of an empoyee
as appearng n Reguatons 62 above quoted because not satsfed that the
Department coud, by reguaton, mt or restrct the meanng of the word
empoyee as used n secton 1211.
Recevers fees: The dfference n status between a recever apponted by a
State court and attorneys for such recever s recognzed by Treasury Depart-
ment Reguatons 62, artce 88, above quoted. The Department paced recevers
apponted by State courts n the same cass wth notares pubc commssoned
by States and announced that ther compensaton was not sub|ect to edera
ncome ta . In fact, n ths court counse for respondent admtted that the
compensaton pad pettoner s partner for servces rendered as a recever n
the State court was not, n such recever s hands, sub|ect to edera ncome ta .
Respondent contended, however, that such compensaton and no part of t,
was e empt after t had been pad by such recever nto a partnershp fund and
dstrbuted by the partnershp to other members of the frm. In short, whe
admttng that the compensaton receved by eser (a partner) as a State
court recever was e empt, counse contended that t ceased so to be when
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305
1211.
eser turned the money Into the copartnershp and the atter dstrbuted t
among the members thereof.
Pettoner ctes revsed Reguatons33, artce 30, above quoted. Unfortunatey
for hm, ths reguaton apped ony to the 1916 ct as amended n 1917. It
was not thereafter promugated, but n ts pace reguatons, artce 83(b) and
artce 333 of Reguatons 62 of the 1921 ct, appeared. These new reguatons
faed to ncude the e empton to a partner provded for by Treasury Regua-
tons 33, artce 30, of the ct of 1916 as amended n 1917.
consderaton of the statutes eads to two defnte concusons: (a) The
e tent of the e emptons s f ed by and must be determned by the anguage
of the statute whch creates the e empton and (b) the rue of statutory
constructon cang for a strct constructon of e empton provsons of the
Revenue ct must, n ths case, gve way to the obvous purpose of the statute,
whch was to avod certan consttutona provsons, whch, f voated, woud
resut n the defeat of the ct whch eved a ta upon an offcer of a State.
There are two causes n secton 1211 whch can not be overooked n our
efforts to ascertan whether the e empton was to the res, that s, the sum
earned by the offcer, or was persona to sad offcer. The words receved by
hm as compensaton for persona servces as an offcer or empoyee are sg-
nfcant. Congress dd not, by ths ct, merey e empt the amount but the
amount receved by h m and such sums were further mted to compensa-
ton for persona servces.
It woud seem upon prncpe that the fee of a recever s so strcty persona
to hm that, as such fee, t can not be handed over to a partnershp or other
entty. Of course the one recevng t may, after t comes nto hs possesson,
pay t over to whomsoever he sees ft. e may poo hs earnngs, whoy or n
part, wth other ndvduas through means of a partnershp or other agree-
ment. ut It s hs persona funds and not recever s fees whch are thus
pooed or pad over.
It foows, we thnk, that the e empton provded by secton 1211 was per-
sona to the offcer or empoyee who earned the compensaton and was mted
to the money receved by the offcer. Ony the offcers recevng the e empted
compensaton may cam the e empton.
The order of the oard of Ta ppeas s affrmed.
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208, rt. 1651. 306
INCOM T RULINGS. P RT III.
R NU CT O 1924.
TITL II INCOM T .
P RT I. G N R L PRO ISIONS.
S CTION 203. R COGNITION O G IN OR LOSS
ROM S L S ND C NG S.
rtce 1572: changes of property.
R NU CT O 1924.
Tradng n of trucks and passenger cars used for busness purposes
on new trucks and passenger cars to be used for ke purposes. (See
I. T. 2573, page 215.)
S CTION 205. IN NTORI S.
rtce 1614: Inventores at market.
R NU CT O 1924.
Goods purchased n the open market and goods produced from
own property. (See G. C. M. 9401, page 102.)
S CTION 206. N T LOSS S.
rtce 1625: Net osses of partnershps, estates and trusts,
and nsurance companes.
R NU CT O 1924.
mendment of Reguatons 65, artce 1625, pertanng to net
osses of nsurance companes. (See T. D. 4308, page 222.)
S CTION 208. C PIT L G INS ND LOSS S.
rtce 1651: Defnton and ustraton of -3-4904
capta net gan. I. T. 2555
R NU CTS O 1921 ND 1924.
In vew of the Commssoner s acquescence n the decson of the
Unted States oard of Ta ppeas n the ppeas of ohn S.
Phpps et a. (19 . T. ., 1293 whch see on page 52 ). I. T. 2207
(C. . -2, 109) s overrued n so far as t hods that the proft de-
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307
209, rt. 1662.
rved from the sae of rea property owned by rea estate deaers
(and hed for more than two years) does not consttute capta gan
wthn the meanng of secton 206 of the Revenue ct of 1921.
rtce 1651: Defnton and ustraton of capta net gan.
R NU CT O 1024.
Sae of royates payabe n knd under ease of o property. (See
Ct. D. 294, page 223.)
S CTION 209. RN D INCOM .
rce 1661: arned ncome.
R NU CT O 1924.
Modfcaton of Mmeograph 3283 (C. . I -1, 14). (See Mm.
3879, page 141.)
rtce 1662: Defntons and mtatons. -26-5120
Ct. D. 355
1. arned Income Communty Income Separate Returns.
Where husband and wfe render separate ncome ta returns
on the communty ncome bass the wfe s earned Income wthn
the meanng of secton 209(a) 1 of the Revenue ct of 1924 ncudes
one-haf of the amount receved by the husband as compensaton
for persona servces actuay rendered by hm and reported n her
return.
2. Decson Reversed.
The decson of the oard of Ta ppeas (8 . T. ., 1257)
reversed.
Unted States Crcut Court of ppeas for the fth Crcut. No. 5374.
Mrs. the opkns McLorry, pettoner, v. Commssoner of Interna Revenue,
respondent.
Petton for revew of decson of Unted States oard of Ta ppeas for the Dstrct
of Te as.
efore Waker, ryan, and oster, Crcut udges.
ebruary 11, 1929.
OPINION.
Waker, Crcut udge: Pettoner and her husband, both resdents of Te as,
fed separate Income ta returns for the year 1924, the pettoner reportng as
ncome 9,188, whch was one-haf of the earnngs of her husband for persona
servces performed by hm, and n computng her ta n her return she camed
credt on the bass of the entre sum of 9,188 beng earned ncome under the
provson of secton 209 of the Revenue ct of 1924. (43 Stat., 263.) The
Commssoner determned a defcency of ta , as a resut of hodng that pet-
toner s earned ncome was 5,000 nstead of 9,188. The oard of Ta
ppeas sustaned that rung.
It was not questoned, and was not fary open to queston, that the amount
receved n the year 1924 as compensaton for persona servces rendered by
pettoner s husband was ncome of a Te as marta communty n the ncome
of whch pettoner had a vested nterest as dstngushed from an e pectancy,
and that one-haf of that amount was propery returnabe as ncome by the
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213(a), rt. 31.
308
pettoner. (Revenue ct of 1926, secton 1212, 44 Stat, part 2, 130 ernon s
Sayes Statutes of Te as (1914), artce 4622.)
The Revenue ct of 1924 contans the foowng:
Sbo. 209. (a) or the purposes of ths secton
(1) The term earned ncome means wages, saares, professona fees, and
other amounts receved as compensaton for persona servces actuay ren-
dered, but, etc.
(3) If the ta payer s net ncome s not more than 5,000, hs
entre net ncome sha be consdered to be earned net ncome, and f hs net
ncome s more than 5,000, hs earned net ncome sha not be consdered to
be ess than 5,000. In no case sha the earned net ncome be consdered to
be more than 10,000.
(b) In the ease of an ndvdua the ta sha, n addton to the credts
provded n secton 222, be credted wth 25 per centum of the amount of ta
whch woud be payabe f hs earned net ncome consttuted hs entre net
ncome but n no case sha the credt aowed under ths subdvson e ceed
25 per centum of hs ta under secton 210.
Under the rung companed of ony that part of pettoner s net ncome,
5,000, was treated as earned ncome whch the statute requres sha be con-
sdered as earned net ncome, the remander beng treated as other than earned
ncome, though the amount of t was receved as compensaton for persona
servces actuay rendered.
n effect of the statute s to create a dscrmnaton n favor of earned
Income the rate of ta on earned ncome beng made ower than the rate on
other ncome sub|ect to norma ta . The dscrmnaton s between ncome
receved as compensaton for persona servces actuay rendered and ncome
receved from property or nvestments or a source other than persona servces
actuay rendered. There s ground for nferrng that the bass of dscrmna-
ton s dfferences between means whereby ncome s acqured. Certany t
s not pan from the anguage of the statute that for an amount receved as
compensaton for persona servces actuay rendered to be ncuded n earned
ncome such servces must have been actuay rendered by the ta payer, who
was entted to that amount upon the recept of t. s the amount returned
by the pettoner as earned ncome was receved as compensaton for persona
servces actuay rendered t was wthn the anguage of the provson of the
statute statng what earned Income means, though such servces were
rendered by pettoner s husband and not by hersef. In case of doubt as to
the meanng of statutes evyng ta es they are construed most strongy aganst
the Government, and n favor of the ctzen. (Goud v. Goud, 245 U. S., 151
Unted States v. Merram, 263 U. S., 179 T. D. 3535, C. . II-2, 87 .)
resut of the change n the aw effected by the above-quoted statute beng that
earned ncome s ta ed at one rate and other ncome at a hgher rate, and the
anguage used n defnng earned ncome not beng nconsstent wth the e -
stence of an ntenton to ncude n earned ncome an amount receved as com-
pensaton for persona servces actuay rendered, though not by the ta payer,
the ntenton to appy the hgher rate to such ncome s not ceary dscosed.
Though the meanng of the provson as appcabe to the amount n queston
s not free from doubt, we are of opnon that the doubt shoud be resoved n
favor of the ta payer, wth the resut of treatng such amount as earned ncome
sub|ect to the ower ta rate.
The petton s granted, and the order companed of s reversed.
P RT II. INDI IDU LS.
S CTION 213(a). GROSS INCOM D IN D:
INCLUSIONS.
rtce 31: What ncuded n gross ncome.
R NU CT O 1924.
Gan from sae of State and muncpa bonds. (See Ct. D. 280,
page 309.)
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309
213(b), rt. 71.
S CTION 213(b). G OSS INCOM D IN D:
CLUSIONS.
rtce 71: cusons from gross ncome. -7-4939
( so Secton 213(a), rtce 31.) Ct. D. 280
ncome ta revenue act of 1924 decson of supreme court.
1. empton Gan from Sae of State Obgatons.
The edera Government may Impose ncome ta upon proft
from the sae of State and muncpa securtes, at east when
such securtes were not ssued at a dscount.
2. udgment Reversed.
The |udgment of the crcut court of appeas (33 ed. (2d),
29) reversed.
Supreme Court of the Unted Status.
L. It. Wtvuts. as Coector of Interna Revenue for the Dstrct of Mnnesota,
pettoner, v. Chares W. wnn.
On wrt of certorar to the Unted States Crcut Court of ppeas for toe ghth
Crcut.
anuary 5, 1931.
opnon.
Mr. Chef ustce ughes devered the opnon of the court.
The respondent, Chares W. onn, n the years 1919 and 1920 purchased for
cash, as nvestments, bonds ssued by varous countes and ctes n the State
of Mnnesota. In anuary, 1924, he sod these bonds, reazng a net proft of
736.26. Upon ths net proft, ess a net oss of 41.20 suffered by hm on
smar bonds hed ess than two years, the Commssoner of Interna Revenue
determned an addtona ncome ta n the amount of 85.44. The pantff
pad ths amount to the coector, under protest, and camed a refund upon
the ground that the ta was ega because assessed upon ncome from munc-
pa bonds. The cam was re|ected and ths sut was brought aganst the
coector to recover the money pad.
The compant, aegng these facts, charged that the Revenue ct of 1924,
f thus apped, was unconsttutona and vod n that the ta was ad upon
the nstrumentates of States. Demurrer to the compant was overrued by
the dstrct court, and, the defendant havng decned to pead further, |udgment
was entered for the pantff. The |udgment was affrmed by the crcut court
of appeas, and ths court granted a wrt of certorar.
The Revenue ct of 1924 (ch. 234, secton 213, 43 Stat., 253, 267, 268, U. S. C,
Tte 26, secton 954) ceary authorzed the ta . The ct ncuded n the
term gross ncome the gans and profts derved from saes, or deangs
n property, whether rea or persona. (See Irwn v. Oavt, 268 U. S., 161, 166
T. D. 3710, C. . I -1, 123 .) The ct gave an e press e empton to nterest
upon the obgatons of a State, Terrtory or any potca subdvson thereof,
but ths e empton was not e tended to profts reazed on the sae of such
obgatons and the statement of the Government s not chaenged that t has
been the unform practce of the Treasury Department n admnsterng the
edera ncome ta cts to ncude n ta abe ncome the gan derved from
the sae of State and muncpa bonds.
The authorty of the Congress to ay a ta on the proft reazed by an
nvestor from the sae or converson of capta assets n genera s not open to
dspute and Is not dsputed. That s a matter of governmenta pocy and
not of consttutona power. The queston rased here s not because the
securtes sod were capta assets but because they were governmenta n
character.
The queston s further mted by the fact that t does not appear that the
securtes were ssued at a dscount, so that the gan derved coud be con-
sdered to be n eu of nterest. Whatever questons mght arse n cases of
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213(b). rt. 71.
310
that sort are not now before the court. The present case s smpy one of
proft obtaned from purchase and sae, wthout quafcaton by any speca
crcumstances.
The we-estabshed prncpe s nvoked that a ta upon the nstrumentates
of the States s forbdden by the edera Consttuton, the e empton restng
upon necessary mpcaton n order effectvey to mantan our dua system
of government. The famar aphorsm s that as the means and nstru-
mentates empoyed by the Genera Government to carry nto operaton the
powers granted to t are e empt from ta aton by the States, so are those of
the States e empt from ta aton by the Genera Government ( mbrosn v.
Unted States, 187 U. S., 1, 7.) nd a ta upon the obgatons of a State or
of ts potca subdvsons fas wthn the consttutona prohbton as a ta
upon the e ercse of the borrowng power of the State. Poock v. armers
Loan d Trust Co., 157 U. S., 429, 584-586 d., 158 U. S., 601, 618 Natona
Lfe Insurance Co. v. Unted States, 111 D. S., 508, 521 T. D. 4206, C. .
II-2, 296 .)
The mtaton of ths prncpe to ts approprate appcaton Is aso m-
portant to the successfu workng of our governmenta system. The power to
ta s no ess essenta than the power to borrow money, and, n preservng
the atter, t s not necessary to crppe the former by e tendng the consttu-
tona e empton from ta aton to those sub|ects whch fa wthn the genera
appcaton of nondscrmnatory aws, and where no drect burden s ad upon
the governmenta nstrumentaty, and there s ony a remote, f any, nfuence
upon the e ercse of the functons of government. Ths dstncton has had
abundant ustraton. Thus, whe the saary of an offcer of the State can
not be ta ed by the edera Government, the compensaton pad by a State
or a muncpaty to a consutng engneer, who s nether an offcer nor an
empoyee of government, for work on pubc pro|ects, may be sub|ected to a
edera ncome ta . (Meteaf d ddy v. Mtche, 269 U. S., 514, 524 T. D.
3824, C. . -, 218 .) No consttutona mpcatons prohbt a nonds-
crmnatory ta upon the property of an agent of government merey because
t s the property of such an agent and used n the conduct of the agent s
operatons and necessary for the agency. (McCuoch v. Maryand, 4 Wheat.,
316, 436 Raroad Co. v. Penston, 18 Wa., 5. 33 entra Pacfc Raroad Co.
v. Caforna. 162 U. S.. 91, 126 atmore Shpbudng Co. v. atmore, 195
IT. S., 375, 382 Choctaw, Okahoma d Guf Raroad Co. v. Mackey, 256 TIT. S.,
531, 537.) The Congress may ta State banks upon the average amount of
ther deposts, athough deposts of State funds by State offcers are ncuded.
(Manhattan Co. v. ake, 148 U. S.. 412.) oth the Congress and the States
have the power to ta transfers or successons n case of death, and ths power
e tends to the ta aton by a State of bequests to the Unted States, and to
the ta aton by the Congress of bequests to States or ther muncpates.
Unted States v. Perkns. 163 . S., 625: Snyder v. ettman, 190 U. S., 249,
253. 254.)
In the case of the obgatons of a State or of ts potca subdvson, the
sub|ect hed to be e empt from edera ta aton s the prncpa and nterest
of the obgatons. (Poock v. armers Loan d Trust Co.. supra.) These
obgatons consttute the contract made by the State, or by Its potca agency
pursuant to ts authorty, and a ta upon the amounts payabe by the terms of
the contract has therefore been regarded as bearng drecty upon the e ercse
of the borrowng power of the Government. In Weston v. Chareston (2 Pet.,
449. 468, 469), where the ta , ad under an ordnance of the cty counc upon
Unted States stock whch had been ssued for oans made to the Unted States,
was hed nvad, the prncpe was thus stated by Chef ustce Marsha:
The rght to ta the contract to any e tent, when made, must operate upon
the power to borrow before t s e ercsed, and have a sensbe nfuence on
the contract. The e tent of ths nfuence depends on the w of a dstnct
government. To any e tent, however nconsderabe, t s a burden on the
operatons of government . The ta on Government stock s thought
by ths court to be a ta on the contract, a ta on the power to borrow money
on the credt of the Unted States, and consequenty to be repugnant to the
Consttuton. Ths anguage was apped by the court n Poock v. armers
Loan d Trust Co., supra (157 U. S., at p. 586), n hodng nvad edera ta -
aton on the nterest from muncpa securtes.
ut t does not foow, because a ta on the nterest payabe on State and
muncpa bonds s a ta on the bonds and therefore forbdden, that the
Congress can not mpose a nondscrmnatory e cse ta upon the profts derved
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311
213(b), rt. 71.
from the sae of such bonds. The sae of the bonds by ther owners, after they
have been Issued by the State or muncpaty, s a transacton dstnct from the
contracts made by the Government n the bonds themseves, and the profts on
such saes are n a dfferent category of ncome from that of the nterest pay-
abe on the bonds. ecause the ta n queston s descrbed as an ncome
ta and the profts on saes are ncuded n ncome, the dstncton s not
ost between the nature of a ta apped to nterest and that of a ta apped
to gans from saes. The edera ncome ta cts cover ta es of dfferent sorts.
( rushaber v. Unon Pacfc Raroad Co., 240 U. S., 1, 17 Stanton v. atc
Mnng Co., 240 U. S., 103, 114.) The ta upon nterest s eved upon the re-
turn whch comes to the owner of the securty accordng to the provsons of
the obgaton and wthout any further transacton on hs part The ta fas
upon the owner by vrtue of the mere fact of ownershp, regardess of use or
dsposton of the securty. The ta upon profts made upon purchases and
saes s an e cse upon the resut of the combnaton of severa factors, ncud-
ng capta nvestment and, qute generay, some measure of sagacty -the san
may be regarded as the creaton of capta, ndustry and sk. (Ta Com-
mssoner v. Putnam, 227 Mass., 522, 531.)
The ta not beng on the obgatons of the State or muncpaty, or on the
nvestment theren, as such, the queston s whether the ta must nevertheess
be hed to be nvad because saes by nvestors are to be deemed nseparaby
connected wth the e ercse of the borrowng power of the State. When the
Consttuton prohbts States from ayng dutes on mports, the prohbton
not ony e tends to a ta upon the act of mportng, but aso to one upon the
occupaton of the mporter or upon the artces mported. ta on the sae
of an artce, mported ony for sae, s a ta on the artce tsef. ( rown v.
Maryand, 12 Wheat., 419, 444.) Smary, wth respect to edera ta aton of
artces e ported from any State, the consttutona nhbton gves mmunty
to the process of e portaton and to the transactons and documents embraced
n that process. ( arbank v. Unted States, 181 U. S., 283 Unted States v.
vosef, 237 U. S., 1 Thames Mersey Marne Insurance Co. v. Unted States,
237 U. S., 19.) Ony on that constructon can the consttutona safeguard be
mantaned. gan, when the Unted States has assumed dutes wth respect
to Indan ands, a State can not mpose an occupaton or prvege ta on
operatons conducted n or upon such ands by essees who have been consttuted
edera nstrumentates for the purpose of dschargng the Government s
obgaton (Choctaw, Okahoma Ouf Raroad Co. v. arrson, 235 U. S.,
292, 298), or upon the eases themseves or capta stock representng them
Indan Terrtory Iumnatng O Co. v. Okahoma, 240 U. S., 522, 530), or
upon the net ncome of such a essee (Oespe v. Okahoma, 257 U. S., 501,
504). (See, aso, aybrd Mnng Co. v. Wer, 271 U. S., 609, 612.) These cases
are not anaogous to the one under consderaton. If the ta now n queston Is
to be condemned, t must be because of practca consequences and not because
purchases and saes by prvate owners of State and muncpa bonds are a
part of the State s acton n borrowng money. It woud be far-fetched to say
that such purchases and saes are nstrumentates of the State. They are
not transactons made drecty or ndrecty n behaf of the State or n the
course of the performance of any duty of the State. Saes are merey methods
of transferrng tte to the obgaton, that s, the rght to receve performance
of the promse of the State or muncpaty.
That a transfer of Government bonds s not nseparaby connected wth the
e ercse of the Government s borrowng power so as to make the transfer per
se mmune from ta aton s ceary demonstrated by the decsons uphodng
nondscrmnatory ta aton ad upon the transmsson of such securtes upon
the death of the owner. Ths court has decded that a State may ay a transfer
ta upon a egacy athough It conssts entrey of bonds of the Unted States
(Pummer v. Coer, 178 U. S., 115), and that the Congress may ta the trans-
fer of the net assets of a decedent s estate athough muncpa bonds are n-
cuded n determnng the net vaue (Orener v. Leweyn, 258 U. S., 384 T. D.
3326, C. . 1-1, 467 ). In Pummer v. Coer, supra (p. 125), the ta of the
State was sustaned, despte the provson of the ct of Congress under whch
the bonds were ssued that they shoud be e empt from ta aton n any form
by or under State, muncpa, or oca authorty. (Id., pages 134, 135 ct of
uy 14, 1870, ch. 256, secton 1, 16 Stat, 272 Rev. Stat, secton 3701 U. S. C,
Tte 31, sec. 742.) (See, aso, Orr v. Oman, 183 U. S., 278, 289 odgett v.
72109 31 21
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213(b), rt. 71.
312
Sberman, 277 U. S., 1, 12, 13.) nd n Grener v. Letoettpn, upra (p. 387),
the court sad that the estate ta ke the earer egacy or suc-
cesson ta , s a duty or e cse, and not a drect ta ke that on ncome from
muncpa bonds. (Poock v. armers Loan Trust Co., supra.)
Muncpa bonds of a State stand n ths respect n no dfferent poston from
money payabe to t. The transfer upon death s ta abe, whatsoever the
character of the property transferred and to whomsoever the transfer s made.
It foows that n determnng the amount of decedent s net estate muncpa
bonds were propery ncuded. On smar grounds, as the edera Govern-
ment has power to ta transfers of property by gft nter vvos, romey v.
McCaughn (280 U. S-, 124 Ct. D. 140, C. . III-2, 392 ), there woud seem
to be no queston of ts consttutona authorty to ncude n such ta aton
gfts of State or muncpa securtes.
It s urged however, that a edera ta on the profts of saes of such
securtes shoud be deemed, as a practca matter, to ay such a burden on the
e ercse of the State s borrowng power as to make t necessary to deny to
the edera Government the consttutona authorty to Impose the ta . No
facts as to actua consequences are brought to our attenton, ether by the
record or by argument, showng that the ncuson n the edera ta of
profts on saes of State and muncpa bonds casts any apprecabe burden on
the States borrowng power. We are eft to the nadequate gudance of
|udca notce. It may be consdered to be a matter of common knowedge
that the bonds of States and ther muncpates are for the most part pur-
chased for nvestment. ut whe, n the anguage of the ta ct regardng
deductons for osses, the purchase of muncpa bonds for nvestment, as n
the case of other nvestments, may be regarded as entered nto for proft
as dstngushed from mere persona use, t may be doubted whether the
prospect on the part of the ordnary nvestor of obtanng proft on the resae
of such obgatons s so mportant an eement n nducng ther acquston
that a edera ta ad on such profts, n common wth profts derved from
the saes of other property, consttutes any substanta nterference wth the
functons of State governments. Whe the ta s ad on gans, there s
aso a deducton for osses on saes, and whether nvestors n such securtes
woud consder t an advantage f both provsons were emnated s a matter
of mere specuaton. It must be remembered that we are deang, not wth
any e press consttutona restrcton, but ony wth an asserted mpcaton.
The consttutona provsons authorzng the Congress to ay ta es ( rtce
I, secton 8 s teenth amendment) are certany broad enough to cover the
ta n queston, and before we can restrct ther appcaton upon the ground
of a burden cast upon the State s borrowng power, where no ta s ad
upon the contracts made by the State n the e ercse of that power, or upon
the amounts payabe thereunder, but s ad upon the resut of dstnct trans-
actons by prvate owners, t must ceary appear that a substanta burden
upon the borrowng power of the State woud actuay be mposed. ut we
have nothng but asserton and con|ecture. The asserton mght as easy
be made as to the necessty of the compete mmunty of such securtes from
edera ta aton n the case of estate ta es, and, f mere con|ecture were
suffcent as to the possbty of a burden beng cast by the ta on the essenta
authorty of the State, t coud be as ready entertaned n the one case as n
the other. Indeed, the e stence of the ega burden mght be more easy
assumed n the case of the estate ta , where the entre vaue of the securtes,
and not merey gans on saes, are taken nto the reckonng n determnng the
amount of the ta .
There s, however, an outstandng fact, more mportant than any possbe
con|ecture. That fact s found n unform and ong-estabshed practce. Ths
practce ceary ndcates that nether the edera Government nor the States
have found a ta on the profts of the saes of ther securtes to be a burden
on ther power to borrow money. So far as we are advsed, the edera
Government has not at any tme deemed t to be necessary to e empt from
ta aton the profts reazed by owners on the sae of ts obgatons, wth the
e cepton, recenty made, of short-term Treasury bs ssued on a dscount
bass and payabe wthout nterest. Such profts are ncuded n the genera
phrase gans, profts and ncome from saes, or deangs n property, n
the ct under consderaton. nd we understand that under a edera
ncome ta cts, these or smar words have been construed nvaraby by
the admnstratve authortes as ncudng profts derved from the sae of
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313
214(a)3, rt. 133.
State and muncpa bonds. The present case appears to be the frst n whch
the ta In ths respect has been assaed. No State has ever appeared at the
bar of ths court to compan of ths edera ta , and t s not wthout sgnf-
cance that n the present nstance the States of New York and Massachusetts
do appear here as amo curae In defense of the ta .
The hstory of ncome ta egsaton s persuasve, f not controng, upon
the queston of practca effect. (Pummer v. Coer, supra (p. 137, 138).)
efore the power of the Congress to ay the e cse ta n queston can be
dened n the vew that t Imposes a burden upon the States borrowng power,
t must appear that the burden s rea, not magnary substanta, not neg-
gbe. We fnd no bass for that concuson, or any warrant for mpyng a
consttutona restrcton to defeat the ta .
udgment reversed.
rtce 87: Income of States.
R NU CT O 1924.
Member of partnershp empoyed under contract by a county to
nde |udgment docket. (See Ct. D. 273, page 233.)
S CTION 214(a) 1. D DUCTIONS LLOW D INDI-
IDU LS : USIN SS P NS S.
rtce 107: Treatment of e cessve compensaton.
R NU CT O 1924.
cessve saary pad to offcer of a corporaton, who s aso a
stockhoder, evdence showng saary was n fact pad as saary and
not as a dvdend. (See Ct. D. 344, page 235.)
S CTION 214(a)3. D DUCTIONS LLOW D
INDI IDU LS: T S.
rtce 131: Ta es.
R NU CT O 1924.
ees pad by a corporaton to the secretary of state n Oho n con-
necton wth an amendment of ts charter. (See I. T. 2570, page 115.)
rtce 133: Ta es for oca benefts.
R NU CT O 1924.
Revocaton of Genera Counse s Memorandum 5589 (C. . III-1,
83), regardng treatment of assessments for street and ke mprove-
ments. (See . C. M. 9461, page 120.)
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217, rt, 314. 314
S CTION 214(a)4, 5, ND 6. D DUCTIONS LLOW D
INDI IDU LS: LOSS S.
rtce 141: Losses.
R NU CT O 1924.
Tradng n of trucks and passenger cars used for busness purposes
on new trucks and passenger cars to be used for ke purposes. (See
I. T. 2573, page 215.)
S CTION 214(a)8. D DUCTIONS LLOW D INDI-
IDU LS: D PR CI TION.
rtce 162: Deprecabe property.
R NU CT OP 1924.
evocaton of Genera Counse s Memorandum 5589 (C. . III-1,
83), regardng treatment of assessments for street and ke mprove-
ments. (See G. C. M. 9461, page 120.)
S CTION 217. N T INCOM O NONR SID NT
LI N INDI IDU LS.
rtce 314: Loss of resdence by aen. -9-4960
( so Msceaneous.) G.CM. 9064
R NU CT O 1924.
Where a ta payer was a ctzen of the Unted States unt
uy 26, 1924, after whch date she acqured foregn ctzenshp,
she s chargeabe for the year 1924 wth ncome ta upon her n-
come from a sources, receved or accrued from anuary 1, 1924,
to uy 26, 1924, and wth respect to ncome receved or accrued
for the baance of the year, wth ta ony upon her ncome from
sources wthn the Unted States.
property n whch a ta payer possesses any equtabe or
ega nterest s avaabe, to the e tent of such nterest, for the
payment of any ncome ta n respect of the perod such property
has been hed by the en Property Custodan.
n opnon s requested reatve to the ncome ta abty n the
case of . rom the facts submtted, t appears that the ta payer
was born n the cty of R on ebruary , 1879: a ctzen of the
Unted States and that she remaned an mercan ctzen unt
uy 26, 1924, when she acqured German ctzenshp by naturaza-
ton. er father, , ded n the cty of S, Germany, on October .
1910, a ctzen and resdent of Germany, eavng a w whch was
duy admtted to probate n the court at the cty of S on
November , 1910. One-thrd of the estate of the testator was
set asde n trust to provde the ncome and capta n respect of
one-thrd of the testator s estate to whch the testator s ony daughter,
, was entted under the provsons of the w sub|ect to admn-
straton by the trustees.
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315
217, rt. 314.
In 1918, subsequent to the enactment of the Tradng wth the
nemy ct of October 6, 1917, certan securtes deposted wth the
M Company of the cty of R, State of Y, by the trustees of the
state were sezed by the en Property Custodan. Upon pet-
ton addressed to the Department of ustce by the sad trustees,
cam was made for the return of these securtes on the ground that
pror to the sezure the trustees had hed such securtes for the use
and beneft of , daughter of , deceased. The cam has been
aowed by the Presdent.
Inqury s made whether the ncome ta abty of the benefcary,
, may be coected from the property hed by the en Property
Custodan to be returned to the trustees of the above estate. The
ta abty s based on ncome from the foowng sources: (a)
rom property hed by the en Property Custodan whch was
sezed from the trustees and to whch ncome therefrom s entted,
as benefcary under the w of her father, (b) from property
not sequestered by the en Property Custodan but hed by the
trust and (c) from sources outsde the Unted States.
It s stated n the affdavt of C, one of the trustees under the
w, that upon the death of , the estate was dvded nto three
equa parts one-thrd share gong to the wdow, one-thrd share to
the son, and the other one-thrd share beng set asde by the trustees
to provde the ncome and capta n respect thereof to whch the
testator s ony daughter was entted under the provsons of the w.
ffant further states:
The whoe of the securtes and moneys set out n the schedue hereto and
whch were deposted by the N Company wth the M Company as ther agents
n the Unted States formed part of and beonged to the sad admnstraton
account of and those securtes and moneys and/or the securtes and moneys
from whch they orgnated are and at a tmes snce severa years before the
4th ugust, 1914, have been the absoute and unencumbered property of the
admnstraton account of and have as such n accordance wth the terms of
the testator s w beonged to and no other person than the sad D and the
sad can possby have any nterest theren.
Secton 24, Tradng wth the nemy ct. as amended (as amended
by secton 18, Settement of War Cams ct of 1928) (40 Stat. L.,
411, as amended by 42 Stat. L., 1511, as amended by Pubc, No. 122,
Seventeth Congress), provdes :
(a) The en Property Custodan s authorzed to pay a ta es (ncudng
speca assessments), heretofore or hereafter awfuy assessed by any body
potc aganst any money or other property hed by hm or by the Treasurer
of the Unted States under ths ct, and to pay the necessary e penses ncurred
by hm or by any depostary for hm n securng the possesson, coecton, or
contro of any such money or other property, or n protectng or admnsterng
the same. Such ta es and e penses sha be pad out of the money or other
property aganst whch such ta es are assessed or n respect of whch such
e penses are Incurred, or (f such money or other property s nsuffcent) out
of any other money or property hed for the same person, notwthstandng the
fact that a cam may have been fed or sut nsttuted under ths ct.
(b) In the case of ncome, war-profts, e cess-profts, or estate ta es mposed
by any ct of Congress, the amount thereof sha, under reguatons prescrbed
by the Commssoner of Interna Revenue wth the approva of the Secretary
of the Treasury be pad, as far as practcabe, n accordance wth
subsecton (a) of ths secton. Pendng fna determnaton of the ta abty
the en Property Custodan s authorzed to return, n accordance wth the
provsons of ths ct, money or other property n any trust n such amounts
as may be determned, under reguatons prescrbed by the Commssoner of
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217, rt. 314.
316
Interna Revenue wth the approva of the Secretary of the Treasury, to be
consstent wth the prompt payment of the fu amount of the nterna-revenue
ta es.
Treasury Decson 4168 (C. . II-2, 413), rtce II, provdes:
(a) Income or profts ta es. These reguatons are appcabe to any ncome,
war-profts, or e cess-profts ta mposed by any ct of Congress and payabe
by any person whose property s or has been hed by the en Property
Custodan, whether or not such ta s mposed n respect of such property or
n resect of the perod durng whch any of such property has been hed by
the en Property Custodan.

(c) Ctzens of the Unted States. ny property hed by the en Property
Custodan may be returned, pror to any computaton or payment of nterna-
revenue ta es, to any ndvdua who at the tme of the sezure of such property
was a ctzen of the Unted States.
It s to be noted that the property n queston s beng returned
to C, D, and , who were nonresdent aens at the tme of the
sezure of the property, and not to , at that tme a
ctzen of the Unted States.
It s apparent, however, that s wthn the descrpton any
person whose property s or has been hed by the en Property
Custodan. The descrpton ceary ncudes both the ega and
the equtabe owner of property. ccordngy, a property n
whch possessed any equtabe or ega nterest (and to the e tent
to whch she possessed such an nterest) s avaabe for the payment
of any ncome, war-profts, or e cess-profts ta mposed by any
ct of Congress and payabe by her , whether or not
such ta s mposed n respect or such property or n respect of the
perod durng whch any of such property has been hed by the en
Property Custodan. (T. D. 4168, rtce 11(a).)
Inqury s aso made whether the ta on the ncome from anuary
1 to uy 26, 1924, shoud be computed under the aw appcabe to
ctzens of the Unted States, and the ta on the ncome from uy
26 to December 31, 1924, shoud be computed under the aw app-
cabe to nonresdent aens, or whether the ta for the entre year
1924 shoud be computed n accordance wth the aw appcabe to
nonresdent aens.
Nether the Revenue ct of 1924, nor any other Revenue ct,
specfes the mode of ta aton where a ta payer changes hs status
durng the ta abe year from that of a ctzen or resdent to that
of a nonresdent aen or vce versa. Reguatons 65, artce 314,
provde: The status of an aen on the ast day of hs ta abe year
or perod determnes hs abty to ta for such year or perod as
a resdent or nonresdent. To the same effect see Reguatons 69,
artce 314 Reguatons 62, artce 313 and Reguatons 45, artce
314. Where, however, under the Revenue ct of 1921 a ta payer
changed hs status durng the ta abe year from that of a nonres-
dent aen to that of a resdent aen, the oard of Ta ppeas,
n ohn 0. Lee et cd. v. Commssoner (6 . T. ., 1005), refused to
foow the reguatons n ths respect, and hed that ncome receved
by a nonresdent aen from sources wthout the Unted States s not
ta abe even though such person may become a resdent aen subse-
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317
219, rt. 342.
2uent to ts recept and pror to the cose of the ta abe year. The
ommssoner acquesced (C. . I-2, 4).
In vew of that acquescence, the above-quoted sentence, whch had
appeared n pror reguatons, was omtted from artce 1025 of Regu-
atons 74. Snce, so far as here reevant, there was no change n
the aw, the omsson from artce 1025, Reguatons 74, of the sen-
tence here n queston, together wth the Commssoner s acquescence
n Lee et a. v. Commssoner, supra, must be deemed to have the
effect of amendng and revokng the sentence as t appears n pror
reguatons.
Whe for other purposes great dfferences e st between the
status of the ctzen and the status of the resdent aen, n the present
connecton these dfferences appear mmatera. The change n
the status from that of a ctzen to that of a nonresdent aen, or vce
versa, appears therefore to be governed n ths connecton by the
same rue as that appcabe to the change n status from that of a
resdent aen to that of a nonresdent aen, or vce versa.
Ths offce s therefore of the opnon that the ta payer n the
nstant case s sub|ect to ta upon her ncome from a sources
wth respect to a ncome receved or accrued from anuary 1 to
uy 26, 1924, and wth respect to ncome receved or accrued for the
baance of the year s sub|ect to ta ony upon her ncome from
sources wthn the Unted States.
C. M. Charest,
Genera Counse, vreau of Interna Revenue.
rtce 318: Interest.
R NU CT O 1924.
Interest on bank depost credted to trustee. (See G. C. M. 9156,
page 166.)
S CTION 219. ST T S ND TRUSTS.
rtce 342: Method of computaton of net -8-5046
ncome and ta . Ct. D. 326
ncome ta revenue act of 1924 decson of court.
Income enefcary Ta abty state Durng dmnstra-
ton Income Not Deducted by state.
Income of the estate of a decedent durng the perod of ad-
mnstraton whch s propery pad to a benefcary must be
ncuded n computng the net ncome of the benefcary, as
requred by secton 213(a) and secton 219(b)3 of the Revenue
ct of 1924, even though such ncome, though an aowabe deduc-
ton by the estate,.was not camed as a deducton, another aow-
abe deducton, whch was camed, e ceedng the gross ncome
of the estate for the ta abe year.
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219, rt. 342.
318
Unted States Cbcut Court of ppeas fob the bst Cbcut.
Cara . Ltte, pantff, appeant, v. Thomas W. Whte, Coector, defendant,
appeee.
ppea from the Dstrct Court of the Unted States for the Dstrct of Massachusetts.
March 10, 1931.
OPINION.
ngham, .: Ths s an acton at aw to recover a sum pad the defendant
as an addtona ncome ta aeged to have been egay assessed and
coected for the year 1924 n respect to certan ncome of the estate of Davd
P. mba, whch, n accordance wth the terms of hs w, the pantff
had receved n the year 1924, but had faed to ncude n her ndvdua
ta return for that year.
The case was tred before the court, a |ury havng been waved n wrtng,
on an agreed statement of facts. In the dstrct court |udgment was entered
for the defendant, sub|ect to e cepton, and the case s brought here on
appea.
It appears that n 1924 the e ecutor of the estate of Davd P. mba pad
the pantff 20,832.84, whch was her dstrbutve share of the ncome from
the estate and whch she was entted to have pad to her by t, she beng
a egatee under the w of her father. The gross ncome of the estate was
14(5,193.30. The edera estate ta pad by the e ecutor was 146,329.29,
whch aone and apart from other aowabe deductons was greater than
the gross ncome of the estate. In hs ncome ta returns for the year 1924,
the e ecttor deducted the edera estate ta and some other deductbe sums,
but dd not ncude theren the amount of the ncome pad the pantff under
the w. The Commssoner, however, n 1929, n reassessng her ta , ncuded
n the gross ncome of the pantff the amount pad her by the e ecutor and
assessed thereon an addtona ta , whch was pad.
s stated n the pantff s b of e ceptons, the queston at ssue Is the
constructon of cause (3) of subsecton (b) of secton 219 of the Revenue
ct of 1924, and whether or not the pantff s sad share of the ncome of the
estate of sad Davd P. mba was requred by sad cause (3) to be ncuded
n computng the pautff s net ncome for the purpose of the edera ncome
ta .
The pantff s contenton s that she was not requred to Incude n her
ndvdua return her share of the ncome of the estate that was pad her,
because t had not been ncuded n the sum deducted by the e ecutor n hs
return of the ncome of the estate for 1924. The Government contends that,
under the Revenue ct of 1924, the porton of the Income pad to the pan-
tff that year from the estate shoud be ncuded as a part of her ndvdua
gross ncome n ascertanng her ta abe ncome for that year.
In the Revenue ct of 1924 t s provded:
Sec. 213. or the purposes of ths tte, e cept as otherwse provded n
secton 233
(a) The term gross ncome ncudes gans, profts, and ncome derved
from saares, wages, or compensaton for persona servce of what-
ever knd and n whatever form pad, or from professons, vocatons, trades,
busnesses, commerce, or saes, or deangs n property, whether rea or per-
sona, growng out of the ownershp or use of or nterest n such property aso
from nterest, rent, dvdends, securtes, or the transacton of any busness
curred on for gan or proft, or gans or profts and ncome derved from any
source whatever.
(b) The term gross ncome does not ncude the foowng tems, whch
sha be e empt from ta aton under ths tte:
(3) The vaue of property acqured by gft, bequest, devse, or descent
(but the ncome from such property sha be ncuded n gross ncome).
Sec. 219. (a) The (norma and e cess profts) ta mposed by Parts I and
II of ths tte sha appy to the ncome of estates or of any knd of property
hed n trust, ncudng

(3) Income receved by estates of deceased persons durng the perod of
admnstraton or settement of the estate .
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319
231, rt. 520.
(b) cept as otherwse provded In subdvsons (g) and (h), the ta
sha be computed upon the net Income of the estate or trust, and sha be
pad by the fducary. The net ncome of the estate or trust sha be com-
puted n the same manner and on the same bass as provded n secton 212,
e cept that

(3) In the case of ncome receved by estates of deceased persons durng the
perod of admnstraton or settement of the estate, and n the case of ncome
whch, In the dscreton of the fducary, may be ether dstrbuted to the bene-
fcary or accumuated, there sha be aowed as an addtona deducton n
computng the net ncome of the estate or trust the amount of the ncome of
the estate or trust for ts ta abe year whch s propery pad or credted
durng such year to any egatee, her, or benefcary, but the amount (requred
to be) so aowed as a deducton sha be ncuded n computng the net ncome
of the egatee, her, or benefcary.
Secton 213(a), defnng what sha be ncuded n the gross ncome of
ndvduas, s very broad and, after specfyng ncome from varous possbe
sources, t provdes that ncome from any source whatever sha be n-
cuded whe (b)3 of that secton, athough e cudng property acqured
by gft, bequest, devse, or descent, ncudes the ncome from such property.
nd we thnk that (b)3 of secton 219 (whch secton drects how ncome re-
turns for estates and trusts sha be made up, referrng ony ncdentay
to ndvdua ncomes) does not, by nference, make a case where the ncome
gong to a benefcary s not n fact deducted from the ncome of the estate
an e cepton to the above postve provsons of secton 213, but rather en-
forces those provsons by mpedy requrng the fducary to deduct such
ncome n makng up the estate s return and by provdng that the coector
sha aow such deducton and that the amount (requred to be) so aowed
as a deducton sha be ncuded n computng the net ncome of the egatee,
her or benefcarv. s was sad n Rker v. Commssoner of Interna
Revenue (42 ed. (2d), 150, 151 Ct. D. 264, C. . I -2, 366 ), whe the
Revenue ct of 1921 gave the estate permsson to make the deducton, n
1924 Congress changed the aw to make such a deducton compusory.
It beng compusory both for the fducary to cam and the coector to
aow the deducton, the pantff can not escape the pan requrements of
secton 213, suppemented by secton 219(b)3, and shoud have ncuded the
amount receved as ncome from her father s estate n computng her net
Income for 1924.
The |udgment of the dstrct court s affrmed, wth costs to the appeee.
S CTION 222. CR DIT OR T S IN C S
O INDI IDU LS.
rtce 387: When credt for ta es may be taken.
R NU CT O 1924.
ass of credt where books are kept on accrua bass. ecton
where books are kept on the cash recepts and dsbursements bass.
(See G. C. M. 9459, page 169.)
P RT III. CORPOR TIONS.
S CTION 231. CONDITION L ND OT R
MPTIONS O CORPOR TIONS.
rtce 520: Soca cubs.
R NU CT O 1924.
Dstrbuton of cub s funds to hoders of partcpatng certf
cates. (See I. T. 2557, page 149.)
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270, rt. 1204.
320
S CTION 238. CR DIT OR T S IN C S
O CORPOR TIONS.
rtce 611: Credt for foregn ta es.
R NU CT OP 1924.
ass of credt where books are kept on accrua bass. ecton
where books are kept on the cash recepts and dsbursements bass.
(See G. C. M. 9459, page 169.)
S CTION 240. CONSOLID T D R TURNS O
CORPOR TIONS.
rtce 633: When corporatons are affated.
R NU CT O 1024.
Genera Counse s Memorandum 2780 (C. . II-1, 175) over-
rued n so far as nconsstent wth Genera Counse s Memorandum
8982, page 250.)
P RT I . DMINISTR TI PRO ISIONS.
S CTION 256. IN ORM TION T SOURC .
rtce 1071: Return of nformaton as to payments of
1,000.
R NU CT O 1924.
Payments of renewa commssons to estates of deceased agents.
(See I. T. 2560, page 173.)
P RT . P YM NT. COLL CTION, ND R UND O T ND
P N LTI S.
S CTION 270. D T ON W IC T
S LL P ID.
rtce 1204: Lens and enforcement of ta ens -9 1961
by b n equty. Ct. D. 288
D R L T S R IS D ST TUT S D CISION O COURT.
Len Imparment State Legsaton.
recorded and vad eu n favor of the Unted States for a
edera ta can not be mpared by State egsaton e cept as
provded by an ct of Congress, and secton 3186. Revsed Statutes,
as amended, gves no authorty to a State to requre the fng of a
notce of such en wth a desgnated offca as a condton of ts
contnued vadty.
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270, rt. 1204.
Unted States Crcut Court of ppeas, ourth Crcut.
Unted States of merca, appeant, v. ank of Mount ope, a Corporaton,
appeee.
ppea from the Dstrct Court of the Unted States for the Southern Dstrct of West
rgna, at Chareston.
anuary 13, 1931.
OPINION.
NoRT COTT, Crcut udge: Dartmont Coa Co., a West rgna corporaton,
ncurred a abty to the Unted States of merca for ncome ta es for the
year 1920, n the amount of eeven thousand ten doars and one cent
( 11,010.01), whch was duy assessed n ugust, 1928. On October 14, 1926,
the coector of nterna revenue for the dstrct of West rgna fed a notce
of ta en for the amount of ths ta upon the property of the ta payer n
the offce of the cerk of the Dstrct Court of the Unted States for the South-
ern Dstrct of West rgna, at Chareston, n anawha County. On pr 27,
1927, the Legsature of the State of West rgna passed an act authorzng,
among other thngs, the fng by the Unted States of notces of ts ta
ens n the offces of the cerks of the county courts of sad State, pursuant to the
provsons of secton 3186 of the Unted States Revsed Statutes as amended.
y deed of trust, dated anuary 30, 1929, recorded n the offce of the cerk
of the County Court of oone County, W. a., on ebruary 11, 1929, the
Dartmont Coa Co. conveyed to C. . Mahan, |r., trustee, certan of ts rea
estate n trust to secure notes payabe to the ank of Mount ope, the
appeee heren.
The coa company beng subsequenty ad|udcated a bankrupt, an order was
entered on September 3, 1929, by the referee In the bankruptcy proceedngs
hodng the en of the ank of Mount ope under Its deed of trust superor
and pror to the cam of the Unted States for the ncome ta . Upon a
bearng before the Unted States Dstrct Court for revew and reversa,
the referee s order was affrmed. Ths appea s prosecuted from that decson.
Secton 3186, Revsed Statutes, as amended by the ct of ebruary 26, 1925
(43 Stat, 994), reads as foows:
Sec. 3186. That f any person abe to pay any ta negects or refuses
to pay the same after demand, the amount sha be a en n favor of the
Unted States from the tme when the assessment st was receved by the
coector, e cept when otherwse provded, unt pad, wth the nterest, pena-
tes, and costs that may accrue n addton thereto upon a property and rghts
to property beongng to such person: Provded, however, That such en sha
not be vad as aganst any mortgagee, purchaser, or |udgment credtor unt
notce of such en sha be fed by the coector n the offce of the cerk of
the dstrct court of the dstrct wthn whch the property sub|ect to such
en s stuated: Provded further, That whenever any State by approprate
egsaton authorzes the fng of such notce n the offce of the regstrar
or recorder of deeds of the countes of that State, and n the State of Lousana
n the parshes thereof, and n the States of Connectcut, Rhode Isand, and
ermont n the offce of the regstrar or recorder of deeds or town or cty
cerk havng custody of the and records of the towns and ctes, then such
en sha not be vad n that State aganst any mortgagee, purchaser, or
|udgment credtor unt such notce sha be fed n the offce of the regstrar
or recorder of deeds of the county or countes, or parsh or parshes n the
State of Lousana, or n the offce of the regstrar or recorder of deeds or
town or cty cerk havng custody of the and records n the States of Connect-
cut, Rhode Isand, and ermont of the towns or ctes wthn whch the prop-
erty sub|ect to the en s stuated.
The act of pr 27, 1927, of the West rgna Legsature (ch. 56, cts of
Reguar Sesson of 1927), reads as foows:
e t enacted oy the Legsature of West rgna: That a unform aw
reatng to the fng of notces of ens for edera ta es and certfcates for
dschargng such ens be enacted, so as to read as foows:
Secton 1. Pursuant to the authorty of paragraph 3186 of the Unted
States Revsed Statutes, notces of edera ta ens and certfcates ds-
chargng such ens may be fed n the offces of the cerk of the county court
of one or more countes of the State.
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322
Sec. 2. s provded n sad paragraph 3186, no froth ta sha be a vad en
ns aganst any mortgagee, purchaser, or |udgment credtor unt such notce
sha be fed n the offce of the cerk of the county court of the county or
countes wthn whch the property sub|ect to the en s stuated.
Sec. 3. Notces of edera ta ens heretofore fed wth the cerk of a
edera dstrct court or certfed transcrpts thereof may be fed by the co-
ector of nterna revenue of the dstrct n the offce of the cerk of the county
court of one or more countes n ths State: Provded, That such ens hereto-
fore fed wth a cerk of a edera dstrct court sha not contnue vad ens
for more than four months after the takng effect of ths act, as aganst any
mortgagee, purchaser, or |udgment credtor becomng such after the e pra-
ton of such four months, uness such notce or transcrpt sha be fed as above
provded. fter the fng of such notce or a certfed transcrpt thereof wth
the cerk of the county court, foowng the e praton of such four months
perod, the edera ta en sha be vad as aganst mortgagees, purchasers,
or |udgment credtors becomng such subsequent to such fng. If ths sec-
ton sha be hed not authorzed by edera aw, t sha not affect the vadty
of the other sectons of ths act.
Seo. 4. The procedure wth respect to fng and nde ng sha be the same
as that respectng other smar ens so far as appcabe.
Sec. 5. The fee for fng each notce of en sha be 25 cents and for each
dscharge thereof 25 cents.
It s we setted that no State has the power to enact egsaton affectng
edera ta ens, e cept as permtted by an ct of Congress. In Unted States
v. Snyder (149 U. S., 210), Mr. ustce Shras sad:
If the Unted States, proceedng n one of ther own courts, n the coecton
of a ta admtted to be egtmate, can be thwarted by the pea of a State statute
prescrbng that such a ta must be assessed and recorded under State regua-
ton, and mtng the tme wthn whch such ta sha be a en, It woud foow
that the potenta e stence of the Government of the Unted States s at the
mercy of State egsaton.
It was eary defntey setted that the States are prohbted from passng
any act whch sha be repugnant to the aws of the Unted States. In McCu-
och v. Maryand (4 Wheat., 310), Chef ustce Marsha forever setted ths
queston when he sad:
The court has bestowed on ths sub|ect ts most deberate consderaton.
The resut s a convcton that the States have no power, by ta aton or other-
wse, to retard, mpede, burden, or n any manner contro the operatons of the
consttutona aws enacted for Congress to carry nto e ecuton the powers
vested In the Genera Government. Ths s, we thnk, the unavodabe conse-
quence of that supremacy whch the Consttuton has decared.
The Legsature of the State of West rgna ceary had no power to enact
secton 3 of the act of pr 27, 1927, above quoted. Indeed, the egsature
tsef seems to have been aware of ths fact, as s shown n the ast sentence
n secton 3, and that the egsature had no such rght was admtted by counse
for appeee In the argument before ths court. It then foows that f any
authorty e sts to support the contenton of appeee that the Government s en
to reman vad must be recorded as provded n secton 3 of the act of pr
27, 1927, of the West rgna Legsature, t must be found n the ct of
Congress Itsef.
readng of secton 3186, Revsed Statutes, as amended shows that no such
authorty s e pressy gven n the statute, nor n our opnon, can any such
constructon be gven the statute by nference. Secton 3 of the act of pr 27,
1927, of the West rgna Legsature, was never n any way accepted or con-
curred n by the Government of the Unted States. On the contrary, the Com-
mssoner of Interna Revenue by Interna Revenue uetn I, No. 26, on une
27, 1927, e pressy re|ected ths secton n the foowng anguage:
The act of pr 27, 1927, passed by the Legsature of West rgna, effec-
tve from the date of ts enactment, s accepted by the ureau of Interna
Revenue (e cept the provsons of sectons 2 and 3 thereof) as the approprate
egsaton referred to n the second provso of secton 3186, Revsed Statutes,
as amended by the ct of March 4,1913 (37 Stat., 1016), and the ct of ebruary
26, 1925 (43 Stat., 994), authorzng the fng of notces of edern ta ens
wth certan desgnated county or other offcas.
It Is admtted that the en of the Government, when the notce was fed In
the offce of the cerk of the Dstrct Court of the Unted States for the
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323
277 and 278, rt. 1271.
Southern Dstrct of West rgna, n 1926, was a good and vad en, and no
subsequent act of the Legsature of West rgna coud n any way mpar ts
vadty. In Unted States v. Curry (201 ed., 371), udge ose sad:
In that case, as n a others whch have been caed to my attenton or
whch I have mysef found, t has been hed that, when the requrements of
the assessment and the demand have been comped wth, the en of the
Government s superor to that of anyone acqurng any nterests n the property
after the date of demand. The Government s en s unaffected by the fact
that a subsequent ncumbrancer or purchaser became such wthout knowedge
that the Government had any nterest n the property or cam upon t.
See aso ackock v. Unted States (208 U. S., 75) Unted States v. Pacfc
Raroad (1 ed., 97) Unted States v. Turner (28 ed. Cas., 232).
In 1913, Congress of the Unted States granted to the egsatures of the va-
rous States the rght to enact enabng egsaton requrng Government ens, n
order to be vad, to be fed n the offce of the regstrar or the recorder of deeds
of a county wthn whch the property sub|ect to the en s stuated. Such an
ct shoud be strcty construed a favor of the Government. (Unted States v.
Dckson, 15 Pet., 141 Corne v. Coyne, 192 U. S., 418 annba, etc., Raroad
Co. v. Packet Co., 125 IT. S., 260.)
In the case of Unted States v. Dckson, supra, the Supreme Court sad:
ut f there be any doubt as to the proper constructon of ths statute
(and we thnk there s none), then that concuson must be adopted whch s
most advantageous to the nterest of the Government. The statute beng a grant
of a prvege must be construed most strongy n favor of the grantor.
The Legsature of the State of West rgna dd not see ft to ava tsef of
the permsson gven by the ct of Congress to pass the enabng egsaton
unt the year 1927. In the meantme, the Government en In ths case had
been recorded and become vad as aganst the property of the Coa company.
No subsequent act of the Legsature of West rgna coud, of tsef, n any
way affect the vadty of that en. It foows that the acton of the court
beow n decarng the en of the appeee to be pror to that of the Government
was erroneous, and the order of the court beow s reversed.
S CTIONS 277 ND 278. P RIOD O LIMIT TION UPON
SS SSM NT ND COLL CTION O T .
btcb 1271: Perod of mtaton upon assess- -6-4928
ments of ta . Ct. D. 276
INCOM T R NU CT OP 1024 D CISION OP SUPR M COURT.
1. Waves ecuted fter Statutory Perod and ppea to
oard.
consent n wrtng between the Commssoner and a ta payer,
pursuant to secton 278(c) of the Revenue ct of 1924, to the
assessment of a ta after the statutory perod therefor, whch s
gven whe a case nvovng the ta s pendng before the oard
of Ta ppeas and after the e praton of the statutory perod for
assessment s vad.
2. Waver tenson Days etween Defcency Notce and
nat. Determnaton of oard.
Where the Commssoner and a ta payer, pursuant to secton
278(c) of the Revenue ct of 1924, consent n wrtng to the assess-
ment of a ta after the statutory perod therefor, whch consent was
gven after an appea to the oard of Ta ppeas and provdes
that t sha e pre on a specfed date e ceptng that f a defcency
notce s sent and appea taken to the oard the tme for makng
any assessment sha be e tended beyond the specfed date by the
number of days between the date of mang the notce of defcency
and the date of fna decson of the oard, the waver does not
e pre on the specfed dae, the provson reatng to the e ten-
son of the tme for assessment beyond that date beng appcabe.
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277 and 278, rt. 1271.
324
3. Waves Duress.
Where, there beng no determnaton that the rght to coect a
defcency s barred, the Commssoner beeves that t s not barred
and the ta payer, beng nformed by the Commssoner that f a
waver was not gven a |eopardy assessment woud be mode and a
bond requred as a condton of deferrng coecton, at the Com-
mssoner s suggeston e ecutes a consent n wrtng to the assess-
ment of a ta after the statutory perod therefor and s thereby
enabed to have a questons concernng the aeged defcency con-
sdered by the oard of Ta ppeas to whch an appea was
taken before the e ecuton of the waver, the waver s not secured
by duress and therefore noperatve.
4. Decson Reversed.
The decson of the crcut court of appeas (39 ed. (2d), 378)
reversed.
Supreme Court of the Unted States. o. 231. October Term, 1930.
Dand urnet, Commssoner of Interna Revenue, pettoner, v. Chcago Raway
qupment Co.
On wrt of certorar to the Unted States Crcut Court of ppeas for the Seventh
Crcut.
anuary 5, 1931.
Mr. ustce randes devered the opnon of the court.
The Revenue ct of une 2, 1924 (ch. 234, secton 278(c), 43 Stat, 253, 300),
provdes concernng ncome and profts ta es under the Revenue ct of 1918:
Where both the Commssoner and the ta payer have consented n wrtng
to the assessment of the ta after the tme prescrbed n secton 277 for ts
assessment the ta may be assessed at any tme pror to the e praton of the
perod agreed upon.
Secton 277(a)2 (43 Stat, 299) provdes that the ta sha be assessed
wthn fve years after the return was fed, and no proceedng n court for the
coecton of such ta es sha be begun after the e praton of such perod.
Secton 277(b) provdes that f due notce of the determnaton of a defcency
has been maed to the ta payer, and an appea s taken to the oard of Ta
ppeas, the tme for makng the assessment sha be e tended by the num-
ber of days between the date of mang of such notce and the date of the fna
decson by the oard. Secton 278(d) provdes that when assessed wthn
the perod prescrbed by secton 277 or secton 278, such ta may be coected
by dstrant or by a proceedng n court, begun wthn s years after the assess-
ment of the ta . Ths case presents, among others, the queston whether a
waver gven whe the case was pendng before the oard of Ta ppeas but
after the e praton of fve years from the fng of the return tos the statute
of mtatons.
On une 16, 1919, the Chcago Raway qupment Co. fed ts ncome and
profts ta return for 1918. On March 14, 1925, the Commssoner determned
a defcency and gave due notce thereof. On May 6, 1925, the ta payer fed
ts appea wth the oard of Ta ppeas. On December 10, 1925, the ta payer
and the Commssoner e ecuted an agreement whch provded that the tme
for makng any assessment sha reman n effect unt December 31,
1926, and sha then e pre e cept that f a notce of a defcency n ta s sent
to sad ta payer by regstered ma before sad date and f an appea
s fed wth sad oard of Ta ppeas then sad date sha be e tended by
the number of days between the date of mang of sad notce of defcency and
the date of fna decson by sad oard. On uy 28, 1926, the oard con-
frmed, n the man, the Commssoner s determnaton (4 . T. ., 452) but
the crcut court of appeas remanded the case to t for further proceedngs.
(20 . (2d), 10.) Then for the frst tme the defense was made that the def-
cency had been barred by the statute of mtatons. The oard overrued the
ob|ecton (13 . T. ., 471) but ts decson was reversed by the crcut court
of appeas (39 . (2d), 378). Ths court granted a wrt of certorar. (282
U. S., 821.)
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325
277 and 278, rt. 1271.
rst The ta payer contends that the agreement of December 10, 1925, was
noperatve because the Commssoner acked the power to sgn a waver after
an appea from hs determnaton to the oard of Ta ppeas. The argu-
ment s that once such an appea has been fed, the Commssoner s powers
of nvestgaton and determnaton have been e hausted that thereafter hs
duty n makng an assessment pursuant to the oard s order s purey mns-
tera that the waver s n effect an agreement not to pead the statute of
mtatons and that the Commssoner s not authorzed to receve such a
waver. s we sad n Stange v. Unted States, No. 23, decded ths day
Ct D. 274, page 414, ths uetn , the Commssoner s sgnature was requred
purey for admnstratve purposes. (See orshem ros. Co. v. Unted States,
280 . S., 453, 466 Ct. D. 167, C. . I -1, 260 .) There was nothng n ths
requrement whch mts the perod durng whch a waver may be effectvey
gven. (Compare ken v. Commssoner, No. 69, decded ths day Ct. D. 275,
page 417, ths uetn .) Moreover, at the tme ths waver was e ecuted, the
Commssoner was contempatng the makng of a |eopardy assessment, whch
the ta payer desred to avod. The Commssoner was ceary authorzed,
under hs genera admnstratve powers, to accept nstead the waver as a
substtute means of nsurng utmate coecton. (See ken v. Commssoner,
supra.)
Second. The ta payer contends that the waver was noperatve because
the Commssoner acked the power to sgn a waver after the e praton of
the 5-year perod.1 What was sad on ths sub|ect n reference to a waver
under the 1921 ct n Stange v. Unted States, supra, s appcabe aso to the
correspondng provson of the 1924 ct. dfference n phraseoogy s caed
to our attenton but t s wthout sgnfcance. The further argument s
made that n vew of other sectons n the 1924 ct, an nterpretaton of
secton 278(c) whch permtted the gvng of a waver after the e praton
of the fve years, woud ead to absurdtes and nequates whch Congress
coud not have ntended. Reference s made, frst, to secton 278(e) whch,
t Is urged, renders noperatve any waver sgned after the enactment of the
statute where the assessment n queston was aready barred pror thereto.
The Inequaty charged s that the mtaton perod for the assessment of 1918
ta es due under a return fed before une 2, 1919, coud not, under the sug-
gested nterpretaton, be waved after une 2, 1924, but that the correspondng
mtaton for the same ta due under a return fed after une 2, 1919, coud
be so waved. We need not determne whether respondent s correct n assum-
ng that secton 278(e) quafes secton 278(c) n respect to wavers on
assessment of ta es barred pror to une 2, 1924 for even f that secton has
ths effect, no ob|ectonabe nequaty woud resut n permttng a revva of
abty In one case and not n the other. Some arbtrary date must be taken
See oy ora Co. v. Commssoner (29 . (2d), 865) Coumba Iron Works v. rock
(38 . (2d), 816). In these casea the ta payers contenton was sustaned and the
wavers hed Inoperatve.
Respondent aso ctes ecton 278(e) of the Revenue ct of 1926 (ch. 27, 44 Stat.,
9, 69), whch substantay reenacted secton 278(e) of the 1924 ct, and urges that par-
tcuar dscrmnatons woud resut from the combned effect, under certan suggested
Interpretatons, of these two sectons. ut the effect of a ater statute can not authorze
an unntended and undesrabe constructon of an earer ct. Compare Russe v. Unted
States (278 U. S., 181, 188 T. D. 4260, C. . III-1, 206 ).
(e) Ths secton sha not (1) authorze the assessment of a ta f at
the tme of the enactment of ths ct such assessment was barred by the
perod of mtaton then In e stence. (43 Stat., 300.)
1 In the case at bar, the assessment woud not have been barred unt une 16, 1924,
fve years from the date of the return, and after the enactment of the 1924 ct, so that
secton 278(e) Is whoy nappcabe. Respondent offers the case of a ta under an earer
return merey for the purposes of ts argument.
0 Subdvson (e) can not be sad to quafy every other subdvson In secton 278.
Nothng ndcates an ntenton to have It mt the effect of secton 278(a) whch permts
assessment to be made or sut to be brought at any tme In the case of a fase or fraudu-
ent return or a faure o fe any return. Compare Unted States v. Updke (281 U. S.,
489, 495 Ct. D. 192, C. . I -1, 228 ) Unted States v. Lazenby (5 . (2d), 827). Nor
s there any ndcaton that t shoud quafy subsecton (c), whch provdes for the gvng
of wavers. ut see acobs ros. Co. v. Commssoner (19 . T. ., 315), whch nvoved
secton 278(c) and reated sectons of the 1926 ct, supra, note 2. Compare ten r
Mfg. Co. v. Commssoner (18 . T. ., 740) ames omstrom Pano Co. v. Comms-
soner (19 . T. ., 322) Uespe v. Commssoner (20 . T. ., 1068, 1079) Wethere
ros. Co. v. Whte (D. Mass., decded December 3. 1930. U. S. Day, December 30, 1930,
p. 3291). The decson n Russe v. Unted States (278 D. S., 181) nvoved the nter-
pretaton of subdvson (d) whch e tended the perod for coecton wthout any act on
the part of the ta payer. Subdvson (c) s effectve ony If the ta payer vountary
e ecuted a waver.
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277 and 278, rt. 1271.
326
for the Imposton of a perod of mtaton. It may be taken kewse n regard
to ts remova.
ttenton s aso caed to secton 281(e) of the 1924 ct, whch e tended
the tme for makng cams for refund where a waver of assessment had been
fed pror to certan specfed dates, and t s sad thnt secton 278(c), as n-
terpreted, woud, when read wth secton 281(e), resut n a dscrmnaton
aganst those ta payers who had sgned a waver after the statute had run.
The argument s that such ta payers woud st be abe for the ta , but that
no correspondng e tenson of the mtaton on cams for refund woud be
gven. The dates specfed n secton 281(e), however, do not concde wth
the perods of mtaton on assessment and coecton. The purpose of that
secton was merey to e tend the tme for fng cams for refund n partcuar
cases of ta es for the years 1917-1919. There s no necessary reaton between
t and secton 278(c). Moreover, a ta payer who has sgned a waver and
has had the vadty of the aeged defcency determned n the courts, on ap-
pea from the oard s determnaton, has no good ground for compant that
he can not thereafter rase the same queston on a cam for refund.8
Thrd. The ta payer contends that, by ts terms, the waver e pred Decem-
ber 31, 1926. The argument s that snce the appea to the oard of Ta p-
peas had aready been taken, the atter part of the nstrument, reatng to an
e tenson of the tme for assessment equa to the number of days the case woud
be before the oard, s nappcabe. The mmedate ob|ect for whch the
waver was gven was to enabe the case to be determned, wthout respondent
beng obged to pay or to furnsh bond and t must have been assumed that
thereafter the Commssoner woud duy assess and coect the amount of the
defcency. The record reveas that three days before the e ecuton of the
waver, the Soctor of Interna Revenue wrote respondent that as t s m-
possbe at ths tme to determne whether the case w be dsposed of by the
oard pror to the e praton of the perod you are requested to
e ecute the ncosed waver and he stated further that
f the waver were not gven, the Commssoner woud make a |eopardy assess-
ment and requre a bond as a condton of deferrng coecton. Consequenty,
the provsons of the atter part of the waver were ceary ntended to be ap-
pcabe and whe ts anguage perhaps was not as apt as t mght have
been, there s no bass for denyng ts obvous purpose.
ourth. The ta payer contends that the waver was noperatve because
secured by duress. The argument s that whe the Commssoner n December,
192r , mght have made a |eopardy assessment and have enforced coecton, such
acton woud have been ega because the statutory perod had then e pred,
43 Stat., 302, as amended by the ct of March 3, 1025 (ch. 435, 43 Stat., 1115).
. g., for 1917 ta es, wthn ve years after the return was ted for 1918 ta es,
before une 15, 1924 for 1919 ta es, before une 15, 1925. Cams mght be made on or
before pr 1, 1925, for 1917 and 1918 ta es, on or before pr 1, 1928, for 1919 ta es
or f the waver was e tended by a new waver, then respectvey before pr 1, 1926,
or pr 1. 1927 or wthn four years after the ta was pad. (43 Stat., 110. 302,
1115-1116.) (See Reguatons 65, artce 1307.) These provsons foowed a smar
secton n the ct of March 4, 1923 (ch. 27C, 42 Stat.. 1504-1505), deang wth 1917
ta es they were reenacted, to ncude cams for the refund of 1920 and 1 21 ta es, n
secton 284(g) of the Revenue ct of 1926 (ch. 27, 44 Stat., 9, 67). Pror to the enact-
ment of secton 281(e) of the 1924 ct, a cams for refund had to be fed wthn fve
years from te date the return was due, or wthn two years from the date the
ta was pad (R. S secton 3228, as amended by the ct of March 4, 1923, supra).
See Revenue ct of 1918 (ch. 18, secton 252, 40 Stat., 1057, 1085), Revenue ct of
1921 (ch. 136, secton 252, 42 Stat., 227, 208), Revenue ct of 1924 (ch. 234, secton
1012, 43 Stat., 253, 342). Compare secton 1112 of the Revenue ct of 1926 (ch. 27,
44 Stat., 9, 115), Mnnesota Mutua Lfe Ins. Oo. v. Unted States (66 Ct. Cs., 481, 493,
certorar dened, 279 U. 8., 856), O ford an v. Unted tatm (44 . (2d), 253).
The 1926 ct e pressy provded that where an appea had been taken from a defcency
determnaton, no credt or refund coud thereafter be aowed e cept n conformance wth
the decson of the oard. (Secton 284(d), ch. 27, 44 Stat., 9, 67.) nd refund or
credt was aowabe ony If the petton had been fed wth the oard wthn four years
after the ta was pad, or a tmey cam for refund had been made. (Secton 284(e),
44 Stat., 67.) Ths secton was amended bv secton 507 of the 1928 ct (ch. 852, 45
Stat., 871 26 U. 8. C, secton 1005(e)), to make the fng of a c.-m for refund or credt
unnecessary where an appea was taken. On the genera probem of refunds, compare
. R. No. 1, S ty-nnth Congress, frst sesson, December 7, 1925, pages 13-14 hearngs
before the Commttee on Ways and Means ou revenue revson of 1925 d., pages 285-292,
504, 934 ct seq., 981-983 hearngs before the Senate Commttee on nance, on . R. 1,
d., anuary 4, 1926, pages 192-194, 208-209.
The waver was e ecuted on the standard mmeographed form generay used pror to
the mang of a defcency etter. ad t read: f a notce of defcency va
sent before December 31. 1920, there coud be no doubt of ts appcabty
to the appea then pendng. Its meanng, n vew of the crcumstances under whch t
wus gven, Is nevertheess cear.
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327
277 and 278, rt. 1271.
and that a waver procured by such a threat s Ineffectve. Whether or not the
Commssoner woud have been abe to the ta payer for a coecton made as
the resut of a |eopardy assessment n 1925, we need not determne. e ceary
had the power to make such assessment and thereby compe the fng of a cam
for abatement and the gvng of a bond,10 or, f such cam and accompanyng
bond were not fed, to make coecton and reegate respondent to an acton
at aw. In the absence of a determnaton that ths defcency was barred, t
was the Commssoner s duty to proceed to nsure the assessment and coecton
of the ta . t hs suggeston, the ta payer e ecuted the waver. Thereby t
was enabed to have a questons concernng the aeged defcency consdered
by the oard. waver gven under such crcumstances s not Invad. Ths
contenton, whch seems to have been rased for the frst tme n ths court,
s aso unsound.
Reversed.
rtce 1271: Perod of mtaton upon assess- --4976
ments of ta . Ct. D. 295
ncome ta revenue act of 1924 decson of court.
ssessment Lmtaton tenson op ssessment Perod
ppea to the oard of Ta ppeas.
Where the ta payer and the Commssoner consent n wrtng to
e tend the perod wthn whch assessment of the ta for 1919
mght be made as provded for n secton 278(c) of the Revenue
ct of 1924 and a notce of defcency has been maed to the ta -
payer by the Commssoner wthn sad perod as e tended, n
accordance wth secton 274 of that ct, and the ta payer has fed
an appea wth the oard of Ta ppeas wthn the tme pre-
scrbed by secton 274(a), the perod wthn whch an assessment
can be made s e tended both by the e press terms of the waver
and by the provson of secton 277(b) of the Revenue ct of 1924
by the number of days between the date of the mang of such
notce and the date of the fna decson by the oard.
Unted States Crcut Court op ppeas, S th Crcut.
Prce Lucas Cder f negar Co., appeant, v. Robert . Lucas, Coector,
etc., for the Dstrct of entucky, appeee.
ppea from the Dstrct Court for the Western Dstrct of entucky.
anuary 9, 1931.
OPINION.
Denson, Crcut udge: The queston s whether the ncome ta assessment
was made after the e praton of the appcabe perod of mtaton. The
return for 1919 was fed on March 14, 1920 the 5-year perod, as once
e tended, woud e pre March 14, 1926. September 5, 1925, the Commssoner
sent the usua 60-day etter, proposng the defcency assessment now n contro-
versy, and on October 23 the ta payer appeaed to the oard of Ta ppeas
for a redetermnaton. November 4, 1925, waver was e ecuted. The e tenson
provson s n these words: Ths waver of the tme for makng any assess-
ment as aforesad sha reman n effect unt December 31, 1926, and sha
then e pre e cept that f a notce of a defcency n ta s sent to sad ta payer
by regstered ma before sad date and (1) no appea s fed therefrom wth
the Unted States oard of Ta ppeas then sad date sha be e tended 60
Seo Revenue ct of 1924 (ch. 234, secton 274(d) and secton 279(a), 43 Stat., 253,
297, 300).
11 Other wavers were aeged to ho In e stence, and whe they were not produced at
the tra before the oard, It Is evdent thnt In December, 1925, the Commssoner was of
the ODnon that the defcency, aready determned, was not barred. Ths was ceary
stated n the etter to respondent requestng a waver.
72109 31 22
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281, rt. 1307.
328
days, or (2) f an appea s fed wth sad oard then sad date sha be
e tended by the number of days between the date of mang of sad notce
of defcency and the date of fna decson by sad oard. ( anuary 25, 1927,
the oard of Ta ppeas, rectng that the pettoner had moved to dsmss,
thereupon ordered that the moton be granted and the proceedng dsmssed,
and f ed the amount of the defcency at the sum whch had been proposed by
the Commssoner. The order became fna, under the oard s rues, on ebru-
ary 24. On ebruary 26, 1926, the Commssoner made the assessment The
ta payer, the present appeant, pad the ta and brought ths sut to recover.
The appcabe statute s the Revenue ct of 1924. Secton 277(a) f es the
5-year perod, whe (b) provdes that t sha be e tended by 60 days f the
notce of assessment has been gven and there s no appea but that, f an
appea has been fed, then the e tenson s by the number of days between
the dnte of the mang of such notce and the date of the fna decson by the
oard. The etter of ths provson, In statute and n waver, pany e -
tended the perod from and after December 81, 1926, for the number of days
between September 5, 1925, and ebruary 24, 1927, beng 1 year 4 months and
20 days, or unt May 20, 1927. The assessment was therefore n tme.
The appeant concedes ths, as the tera appcaton but contends that
t eads to the sometmes rather absurd resut of e tendng the tme for
assessment months or years after the controversy has been setted by the
oard of Ta ppeas or the Crcut Court of ppeas. It ponts out that
the ct of 1926 specfes that the assessment must be made wthn 60 days
after the end of the appeate proceedngs and that as there was no such
60-day e tenson n the od aw, t must be construed as requrng the assess-
ment to be made before the order of the oard of Ta ppeas becomes fna.
We do not deny the mprobabty that Congress, f ts attenton had been
specfcay attracted, woud have ntended to e tend the assessment power
for such ong tmes as may sometmes deveop under the tera constructon
of 277(b). ppeant s proposed aternatve, that the assessment must be
made on or before the day when the oard of Ta ppeas decson becomes
fna, s perhaps equay mprobabe. t any rate, we fnd no suffcent ust-
fcaton for not nterpretng the statute and the stpuaton as they read.
The |udgment s affrmed.
S CTION 281. CR DITS ND R UNDS.
rtce 1307: Lmtatons upon the credtng and -20-5064
refundng of ta es pad. Ct. D. 334
ncome ta revenue act op 1924 decson of supreme court.
1. Cam for Refund Suffcency.
Where the Commssoner sends the ta payer a etter contanng
a schedue dscosng the computaton of ts ta and showng an
overassessment whch he states can not be aowed n part because
of the provsons of secton 281 of the Revenue ct of 1924 and
after the amendment of that secton notfes the ta payer that an
apparent overassessment can not be aowed uness a waver s
fed on or before une 15, 1925, as provded by the ct of March 3,
1925, amendng secton 281(e) of the Revenue ct of 1924, the
ta payer s e ecuton of the waver, whch was receved and ac-
cepted by the Commssoner, n connecton wth the two commun-
catons from the Commssoner, consttutes the fng of an nforma
cam for refund wthn the meanng of secton 2S(e) of the
Revenue ct of 1924 as amended by the ct of March 3, 1925.
2. Sut Lmtaton Count on ccount Stated.
Upon devery to the ta payer of a certfcate of overassessment
there arses a cause of acton peaded n a count for money due
on account stated whch s not barred by R S. 3226 as amended
athough begun after the perod of mtaton theren specfed.
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329
281. rt. 1307.
Supreme Court of the Unted States. No. 282. October Term, 1930.
omot Teer Co., pettoner, v. The Unted States.
On wrt of certorar to the Court of Cams.
pr 13, 1931.
Mr. ustce uter devered the opnon of the court.
Ths acton was brought to recover the amount of an overpayment of ncome
ta for the year ended anuary 31, 1919, as determned by the Commssoner
of Interna Revenue and shown n hs certfcate, No. 990988, ssued to pantff
May 12, 1927. The Government frst fed a genera traverse. ut ater, assert-
ng ack of authorty on the part of the Commssoner to make the determna-
ton and refund, It fed a countercam for the amount of a check sent pantff
to pay the baance of the refund remanng after deductng a part to pay an
addtona ta assessed aganst t for the year ended anuary 31, 1917. That
ta was then, as t s now conceded, barred by a statute of mtaton. ( owers
v. N. Y. bany Co., 273 U. S., 346 T. D. 4009, C. . I-1, 268 .) On speca
fndngs the court entered udgment dsmssng pantffs compant and the
Government s countercam but gave the atter |udgment for the cost of prnt-
ng the record. (69 C. Cs., 638 39 . (2d). 730.) On pantffs petton we
granted a wrt of certorar. (282 U. S., 823.)
The court found :
Pantff s a corporaton engaged n the busness of seng merchandse at
reta. Its fsca year begns ebruary 1. uy 14, 1919, t fed ts return for
the year ended anuary 31, 1919, reportng an ncome ta of 57,871.16 whch
was pad, one-haf uy 14 and the baance December 13 foowng. Pendng
audt of the return, the Commssoner f ed pantffs tota ta abty for
that year at 225,165.75 and n pr, 1924, made a |eopardy assessment for
167,294.59, the e cess over the amount returned and pad. The pantff
prompty fed a cam for abatement of the fu amount of the addtona
assessment.
November 19, 1924, the ureau sent pantff a etter contanng a schedue
dscosng the computaton of ts ta for the year ended anuary 31, 1919, and
showng a tota overassessment of 178,161.02. rom ths amount there was
deducted 10,866.43 found by the Commssoner to have been erroneousy n-
cuded n pantffs return and pad. The etter stated: Inasmuch as the
provsons of secton 281 of the Revenue ct of 19241 have not been comped
wth (n) regard to the fu amount of the above overassessment, a porton n
the amount of 10,866.43 can not be aowed. In accordance wth that etter,
the Commssoner aowed pantffs cam for abatement.
May 16, 1925, the ureau wrote pantff that an e amnaton of ts ncome
ta return for the year ended anuary 31, 1919, dscosed an apparent over-
assessment, and that t coud not then be aowed uness an ncome and profts
ta waver s fed on or before une 15, 1925, as provded by an ct of Congress
dated March 3, 1925, amendng secton 281(e) of the Revenue ct of 1924
Two waver forms are therefore ncosed n order that you may, f you desre,
SIC. 281 (43 Stat., 301).

(b) cept as provded In subdvsons (e) no such credt or
refund sha be aowed or made after four years from the tme the ta was pad, uness
before the e praton of such four years a cam therefor s fed by the ta payer, .
(e) If the ta payer has, wthn fve years from the tme the return for the ta abe
rear 1917 was due, fed a waver of hs rght to have the ta es due for such ta abe year
determned and assessed wthn fve years after the return was fed, or f he has, on or
before une 15, 1924, fed such a waver n respect of the ta es due for the ta abe year
1918, then such credt or refund reatng to the ta es for the year n respect of whch
the waver was fed sha be aowed or made f cam therefor s fed ether on or before
pr 19, 1925, or wthn four years from the tme the ta was pad.
(f) Ths secton sha not (2) bar from aowance a cam n respect of a
ta for the ta abe year 1919 or 1920, If such cam a fed before the e praton of fve
years after the date the return was due.
et of March 3, 1925 (43 Stat., 1115). added to secton 281(e) :
If the ta payer has, on or before une 15, 1925, fed such a waver n respect of the
ta es due for the ta abe year 1919, then such credt or refund reatng to the ta es for
the ta abe year 1919 sha be aowed or made f cam therefor Is fed ether on or
before pr 1, 19 6, or whn four years from the tme the ta was pad.
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281, rt. 1307.
330
e ecute and forward one of the forms to ths offce. Pantff e ecuted the
waver and May 22, 1925, returned t wth a etter statng: In accordance
wth your request, we ncose you herewth waver. On the foowng day
the waver was receved and accepted n wrtng by the Commssoner.
December 11, 1926, counse for pantff sent the ureau a etter whch
quoted the substance, as above gven, of the etters of November 19, 1924, and
May 16, 1925, and, n reference to the etter of May 22, 1925, sad: Snce that
tme we have heard nothng further from you and there has been no refund
made to the ta payer. ebruary 5, 1927, the head of the audt dvson
approved and recommended for aowance the certfcate of overassessment
No. 990988. The record of the case was checked to determne whether the
pantff had fed a cam for refund pror to the e praton of the appcabe
perod of mtaton. nd t was determned that the documents fed whch
ncuded the audt etter of November 19, 1924, showng how the amount of the
overpayment was ascertaned, the etter of May 16, 1925, furnshng form of
waver, and the pantff s answer of May 22 foowng, ncosng the e ecuted
waver, woud be treated by the ureau as an nforma cam for refund fed
May 23, 1925.
Pantff s etter of May 22, 1925, bears an undated ndorsement: Inferenta
demand for the refund upon bass of the schedue sent ta payer under date
of November 19, 1924, . Rues and Reguatons. Mugan, and an-
other dated pr 4, 1927: pproved by Mr. Mugan and Mr. Sherwood for
schedung as s. O. en.
ebruary 9, 1927, the ureau wrote pantff s counse: n order
that the aowance of the overassessment may be made, you are requested to
fe wth ths offce a cam on the Incosed orm 843 settng forth the bass
uf the ad|ustment . ccordngy pantff e ecuted the form and
thereon stated that the appcaton shoud be aowed for the reasons shown
n the audt etter of November 19, 1924, a copy of whch was attached. nd
ebruary 17, 1927, pantff returned the form wth a etter sayng:
we ncose herewth for fng, cam for refund n the sum of 10,866.43
on orm 843. The cam was receved and fed n the ureau
ebruary 19 the Commssoner aowed the cam and on March 8 approved
and schedued to the coector the certfcate of overassessment.
On the margn of the ureau s record copy appear the foowng certfcatons:
Waver fed May 23, 1925. Informa cam for refund fed May 23, 1925,
wth waver perfected by cam orm 843. (Sgned) O. en, 3/4/27. Cam
for refund fed May 23, 1925, waver fed May 23, 1925. Ths C. of O.
(certfcate of overassessment) approved for schedung as s by W. T. S.
(Sgned) O. Uen, 4/4/27.
The coector credted 9,846.06 aganst the addtona ta assessed for the
year endng anuary 31, 1917. May 12, 1927, the Commssoner caused the
certfcate, showng the deducton made by the coector, to be devered to
pantff wth a check for the baance of the overassessment and nterest,
1,462.99. Pantff ob|ected to the appcaton of any part of the refund aganst
such addtona assessment on the ground that the 1917 ta was barred and
decned to accept the check n fu settement but offered to appy t n parta,
payment of the cam.
The Government, n support of the |udgment beow, nssts that no cam
for refund was fed by pantff pror to pr 1, 1926, the tme permtted by
the ct of March 3, 1925 (43 Stat., 1115), and that therefore the Commssoner
was wthout authorty to aow the cam.
The provson nvoved amends secton 281(e) of the Revenue ct of 1924
(43 Stat., 302). It provdes that f the ta payer has on or before une 15,
3925, fed a waver of hs rght to have the ta due for the ta abe year 1919
determned and assessed wthn fve years after the return was fed, then re-
fund reatng to such ta sha be made f cam therefor s fed on or before
pr 1, 1926. The secton s a part of a ta aw gvng to ta payers oppor-
tunty to secure refund of overpayments that had become barred. Manfesty
t s to be construed beray n favor of the ta payers to gve the reef t
was ntended to provde. (Unted States v. Merram, 263 U. S., 179, 187
T. D. 3535, C. . 11-2, 87 ocers v. N. Y. bany Co., supra, 350 Unted
States v. Udkr, 281 U. S.. 489. 490 Ct. D. 192, C. . I -1, 228 Unted
States v. Mche, 282 U. S., 05G Ct. D. 310, page 297, ths uetn .)
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331
8281, rt. 1307.
Pantff fed ts waver wthn tme and, n consderaton of that, t admt-
tedy secured the rght to cam the refund. ut t dd not wthn the specfed
tme formay make a cam for t. The Government s pont comes down to
the queston whether the waver and the etter transmttng t together wth
what went before amounted to the fng of a cam wthn the meanng of the
statute.
The Commssoner pror to that amendment had fnay determned that n
1919 pantff had overpad ts ta by 10,866.43. That fndng was made upon
a consderaton of the pantff s ta return, ts cam for abatement of the
|eopardy assessment and presumaby n matera detas of ts busness n the
ta abe year. The schedue contaned n the audt etter of November 19, 1924,
showed the manner n whch the ureau had computed the ta . nd the
refund of the ascertaned overpayment was wthhed by the Commssoner soey
because of pantff s ack of compance wth secton 281 as t then stood.
The etter of May 16, 1925, sent soon after secton 281 was amended, un-
mstakaby referred to the overpayment that the Commssoner had found and
reported. That an aowance of credt or refund was mmedatey ntended s
shown by the statement that t coud not then be aowed uness wnver was
fed as provded by the 1925 amendment. Pantff s prompt e ecuton and
return of the waver and the ureau s acceptance of t ceary show that both
consdered the facts aready found and reported a suffcent bass for pantff s
cam. That such was the vew of the Commssoner s fuy confrmed by
the notatons made on the etter transmttng the waver and upon the offce
record of the certfcate.
The queston here s to be dstngushed from that whch woud have arsen
f, contrary to the ta payer s nsstence, the Commssoner had hed that what
was done dd not consttute a fng of a cam. No statute provdes for revew
of the Commssoner s determnatons n favor of ta payers when made wthn
the scope of hs authorty. Such rungs are entted to much weght. In ths
case he had aready found that n 1919 pantff had overpad ts ta n the
amount stated. e needed no addtona nformaton to enabe hm to deter-
mne whether credt or refund shoud then be made. There s no suggeston
that the aowance was Induced by or resuted from fraud or mstake. The
facts found dscose that there was a reasonabe or substanta compance
wth the amendment The Commssoner wthn the tme aowed was advsed
of the grounds on whch pantff s rght to refund rested, and was not msed
or deceved by pantff s faure to fe forma cam and was fuy warranted
n hodng that the waver and earer documents were suffcent. (Tucker v.
e ander, 275 U. S., 228, 231 T. D. 3973, C. . I-1, 287 .)
The Government further contends that, even f the Commssoner s aowance
was authorzed, ths sut s barred by R. S., secton 3226, as amended. (26
U. S. C., secton 156. ) It provdes that no sut for the recovery of any
nterna revenue ta aeged to have been erroneousy coected sha be begun
after fve years from the payment of such ta . The overpayment made was
more than fve years before the compant was fed. Ths case s not wthn
the cause gvng two years after dsaowance because here the cam was
aowed. Pantff peads ts cam n two forms. The frst s based upon the
ssue and devery of the Commssoner s certfcate showng pantff entted
to a refund n the amount specfed. The second aeges an account stated
showng that there s due pantff the amount camed. The acton s not for
the overpayment of the ta n 1919 but s grounded upon the determnaton
evdenced by the certfcate ssued by the Commssoner May 12, 1927. Upon
devery of the certfcate to pantff, there arose the cause of acton on whch
ths sut was brought. (Unted States v. aufman, 96 U. S., 567. 570 Unted
Mates v. Savngs ank, 104 T . S., 728 ank of Oreencastc s Case, 15 C. Cs.,
25.) There s no mert n the contenton that the sut s barred.
udgment reversed.
No sut for the recovery of any nterna revenue ta aeged to have been
erroneousy or Iegay assessed or coected sha be begun after
the e praton of ve years from the date of the payment of such ta uness
such sut s begun wthn two years after the dsaowance of the part of
such cam to whch such sut reates .
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1014 and 1015, rt. 1351. 332
TITL . G N R L DMINISTR TI PRO ISIONS.
S CTIONS 1014 ND 1015. LIMIT TIONS UPON SUITS
ND PROC DINGS Y T T P Y R.
rtce 1351: Suts for recovery of ta es erro- -12-4986
neousy coected. Ct. D. 299
federa ta es revenue act of 1924 decson of court.
1. Sut Lmtaton Cam for Refund Requrement of No-
tce of Re|ecton Dsaowed efore Revenue ct of 1924.
s to a cam for a refund dsaowed pror to the enactment of
the Revenue ct of 1924, secton 1014(a) of that ct does not
requre the Commssoner to gve notce of the dsaowance n
order to start the runnng of the 2-year perod of mtaton upon
the begnnng of a sut prescrbed by that subdvson.
2. Same ffect of Letter Refusng to Reopen Cam.
dsaowance of a cam for refund s not vacated or annued
by a etter nformng the ta payer that hs request for the reopen-
ng of the cam s unwarranted. Such cam s not before the
Commssoner upon ts merts In the nterva between the date of
the dsaowance and the date of such etter.
Unted States Dstrct Court, Dstrct of Connectcut.
Wam bert ckman v. The Unted Sates.
December 31, 1930.
opnon.
Thomas, Dstrct udge: Ths case was tred upon a stpuaton wavng the
|ury. The pantff seeks to recover 1,524.31 ncome ta es pad for the caendar
year 1918.
The case Is here upon an agreed statement of facts as we as some testmony
taken n open court. s the ony ssue nvoved s the appcabty of the
statute of mtatons, ony a very bref reference w be made to the facta.
The pantff fed hs ncome ta return for 1918 dscosng a ta of 1,708.24
whch he pad n 1919. On or about March 11, 1920, he fed hs Income ta
return for the caendar year 1919 showng a net oss n e cess of 9,000. few
days ater an amended ncome ta return for the year 1918 was fed showng
a ta of ony 183.93, after deductng the oss sustaned In 1919. On March
13, 1920, the pantff fed a cam for refund n the sum of 1,524.31, settng
forth that the ta abe net ncome earned durng the year 1918 shoud be set off
aganst the oss sustaned In 1919 under the provsons of secton 204(b) of
the Revenue ct of 1918.
It s agreed that the cam for refund was re|ected on Schedue 899, orm
7800, pubshed by the Commssoner under date of October 25, 1922.
The stpuaton as to the facts, In part, reads:
That the defendant s e hbt marked hbt (dentfed as such for the
purpose of ths stpuaton) s a true and correct copy of the etter to the
pantff by the Commssoner of Interna Revenue .
The stpuaton further provdes that the pantff denes that the etter was
ever maed by the Commssoner or receved by the pantff. Ths etter s
dated November 14, 1922. It was addressed by the Commssoner to the
pantff and reads as foows:
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333 1014 and 1015, rt. 1361-.
IT : P : 1
: 105-C November 14, 1922.
Mr. Wam . ckman,
90 enway,
oston, Mass.
Sb : y etter of May 16, 1922, you were requested to fe evdence necessary
to the competon of your cam for refund of 1,524.31, ndvdua ncome ta
for the year ended December 31, 1918.
On ugust 22, 1922, your attenton was agan caed to ths matter.
Snce no repy has been receved, t s understood that you do not desre to
pursue the matter further.
Your cam s therefore re|ected and re|ecton w offcay appear on the
ne t schedue to be approved by the Commssoner.
Respectfuy,
. . atson,
Deputy Commssoner.
y ,
ead of Dvson.
So far as the record before me dscoses, nothng further seems to have been
done from 1922 unt ebruary, 1926, when the pantff wrote a etter to the
Commssoner of Interna Revenue to the effect that hs cam for refund had
never been acted upon. In repy, he was nformed by the Commssoner that
an e amnaton of the fe dscosed that the cam had been re|ected on
November 14, 1922, for the ack of nformaton requested by etters dated May
16, 1922, and ugust 22, 1922. Some correspondence thereupon foowed and
counse for the camant conferred wth audtors and others n the Interna
Revenue ureau. Wth reference to the merts of the pantffs cam the ast
etter wrtten by the Commssoner was dated anuary 3, 1928, and Incudes
the foowng:
It appears that numerous etters have been maed by the ureau to the
ta payer requestng evdence to support the cam whch was fed and on
November 14, 1922, the ta payer s cam was re|ected.
fter gvng carefu consderaton to the statements made n your etters ths
offce concudes that the request for the reopenng of the cam s unwarranted.
In November, 1922, when the cam for refund was re|ected, the appcabe
statute governng matters of ths knd was secton 1318 of the Revenue ct of
1921. That secton purported to amend secton 3226 of the Revsed Statutes
and ts reevant anguage s as foows:
No such sut or proceedng (to recover ta es egay assessed or errone-
ousy pad) sha be begun before the e praton of s months from the date
of fng such cam uness the Commssoner renders a decson thereon wthn
that tme, nor after the e praton of fve years from the date of the payment of
such ta , penaty or sum.
It w be observed, then, that n 1922 the Revenue ct contaned no provson
for e tendng the perod of mtaton to a date two years removed from the
fna re|ecton of the cam by the Commssoner. The ony mtaton then
e tant was one of fve years from the tme when the ta had been pad. Ths
sut was brought on ebruary 14, 1929, whch s, of course, consderaby more
than fve years after the ta had been pad, and f the provsons n the Revenue
ct of 1921 were to govern, there coud be no queston but that ths sut was
barred.
Secton 1014(a) of the Revenue ct of 1924 reamendert secton 3226 of the
Revsed Statutes so that a sut to recover ta es coud not be brought
after the e praton of fve years from the date of the payment of such
ta , penaty, or sum, uness such sut or proceedng s begun wthn two
years after the dsaowance of the part of such cam to whch such sut
or proceedng reates. The Commssoner sha wthn 90 days after any
such dsaowance notfy the ta payer thereof by ma.
It s, of course, unquestonabe that the pantff has a rght to the benefts
of the provsons of the ct of 1924 n so far as they are propery appcabe
to hs cam. In other words, hs cam for refund s not necessary barred
by the 5-year mtaton whch obtaned In 1922 If two years have not yet
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1014 and 1015, rt. 1351.
334
eapsed snce the re|ecton of hs cam, then sut for the recovery of ths cam
s not barred. That much seems to be conceded by the Government.
ssumng that the provson for gvng notce of re|ecton s mandatory,
was the Commssoner compeed to gve notce of re|ecton to the pantff
In order to start the tong of the statute
It seems to me that even the most cursory refecton must resut n the
concuson that, as to the cams that had been re|ected pror to the enactment
of the statute of 1924, the Commssoner was not requred to gve notce. The
statute requres that the notce be gven wthn nnety (90) days after the
re|ecton. Inasmuch as n 1922 there was no provson whatsoever for the
gvng of notce of re|ecton and nasmuch as the Revenue ct of 1924 was
not then effectve, It s obvous that ths aw woud have requred an utter
mpossbty f t ntended that notce of the re|ecton of cams for refund
must be gven upon a cams determned pror to ts enactment. s we w
not assume that the Congress deberatey egsated an mpossbty, we must
assume that t was not ntended that the provsons wth reaton to the
gvng of notce of dsaowance by the Commssoner had any appcaton
e cept as to the future cams or cams not yet determned. Nor are we to
assume that Congress ntended that the Commssoner of Interna Revenue,
after the enactment of the Revenue ct of 1924, shoud ree amne every
cam that had theretofore been decded n hs offce, and ma notces of
re|ecton upon every cam that had theretofore been decded regardess of
when t had been decded.
It foows, therefore, that as there was no requrement for the mang of a
notce of re|ecton when ths cam was re|ected, and as ths sut was not
brought ether wthn fve years of the payment of the ta or two years from
the tme when the cam was re|ected, that qute apart from a other reasons
ths sut s barred.
The pantff contends that even assumng the re|ecton was orgnay
effectve as of November, 1922, such proceedngs were thereafter had so that
there reay was no fna re|ecton of the cam unt the etter of anuary 3,
1928. I am unabe to take ths vew of the matter. I can not assume that
the Government, when t answers etters of nqury and e tends to ta payers
the courtesy of an nvestgaton nto ts cosed fes, does so at the rsk of
ndefntey proongng the statutory mtaton. To me t s obvous that
the pantff desred to have the Interna Revenue Department reopen ths case
for further consderaton. Instead of curty decnng a further commun-
caton, the Department reassembed ts fes and ree amned the papers for the
purpose of ascertanng whether there was any bass for the request to reopen
the case. It repeatedy and patenty communcated wth the pantff Its
poston to the effect that t dd not regard the facts as warrantng the
reopenng of the case. The concudng anguage of the etter of anuary 3 s
fter gvng carefu consderaton to the statements made n your etters
ths offce concudes that the request for the reopenng of the cam s
unwarranted.
It can not be successfuy camed that ths etter was a fna re|ecton
when, by ts very terms, t notfed the camant that ths request to reopen
the case was unwarranted. The Government consstenty stood by ts re|ec-
ton of 1922, and I fnd no bass for the assumpton that that re|ecton had
been n some way or other vacated or annued, and that durng a those
years the cam of the pantff was before the Commssoner of Interna
Revenue upon ts merts.
udgment s therefore rendered for the defendant and the compant s
dsmssed.
rtce 1351: Suts for recovery of ta es erroneousy
coected.
R NU CT OP 1824.
ffect of dever to ta payer of certfcate of overassessment cn
sut begun after mtaton perod specfed n R. S. 3226, as amended.
(See Ct. D. 334, page 328.)
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335
1019, rt
S CTION 1019. INT R ST ON R UNDS
ND CR DITS.
rtce 1371: Interest on refunds and credts. -10- 968
Ct. D. 293
INCOM T R NU CTS O 1921 ND 1924 D CISION O SUPR M
COURT.
Interest Credt of Overpayment When Credt s owed.
credt of an overpayment Is aowed wthn the meanng of
secton 1324 of the Revenue ct of 1921 and secton 1019 of the
Revenue ct of 1924 on the date when the Commssoner sgns the
schedue of refunds and credts certfed to hm by the coector
authorzng the dsbursement cerk of the Treasury to pay the
amounts shown to be refundabe accordngy, nterest must be
computed accordng to the statutory provson n force at that
tme.
Supreme Court of the Unted States.
Unted States of merca, pettoner, v. oston uck Co.
Unted States of merca, pettoner, v. Iron Cap Copper Co.
On wrts of certorar to the Unted States Crcut Court of ppeas for the rst Crcut.
ebruary 2, 1931.
opnon.
Mr. ustce Roberts devered the opnon of the court.
These cases nvove the same queston as Unted States v. Swft o5 Co., No. 56,
decded ths day Ct. D. 290, page 283, ths uetn , namey, what consttutes
the aowance of a credt to a ta payer who has overpad hs ncome or profts
ta es. The ssue s made on facts somewhat dfferent from those nvoved n
No. 56. It s whether nterest to be pad on the amounts credted to the
ta payers sha be cacuated as provded by secton 1324 of the Revenue ct
of 1921 (42 Stat., 316) or by secton 1019 of the Revenue ct of 1924 (43 Stat.,
346). Interest runs from dfferent perods under these cts. s the aowance
made by the ct of 1924 s more favorabe to the ta payers n these cases, they
camed nterest on ther credts under that ct. The Commssoner awarded
them nterest under the ct of 1921. The date of the aowance of the credts
becomes mportant because we have hed that nterest on refunds and credts
must be computed accordng to the statutory provson n force at the tme of
ther aowance. (Unted States v. Magnoa Petroeum Co., 270 U. S., 160
T. D. 4153, C. . II-1, 287 ar v. rkenstock, 271 U. S., 348 T. D. 4147,
C. . II-1, 189 .)
Upon audt of respondents returns for 1918 t was dscosed that ther ta es
had been overassessed for that year. In March, 1924, the Commssoner
approved schedues whch nformed the coector of the overassessments and
nstructed hm to check the same aganst the ta payers accounts, determne
whether to abate n whoe or n part, determne any overpayment, and appor-
ton the same as between credt and refund. In uy, 1924, the coector com-
peted hs work, as to both ta payers accounts, and e ecuted and forwarded
to the Commssoner schedues of refunds and credts attached to the schedues
of overassessments. The Commssoner paced hs certfcate of approva on the
schedues of refunds and credts on uy 31 and ugust 7. The Revenue ct of
1924 became effectve une 2, 1924. If the credts were aowed after the
effectve date of that statute the respondents are entted to nterest computed
n accordance wth secton 1019 of that ct f before, they are entted to
nterest computed as provded by secton 1324 of the Revenue ct of 1921.
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1019, rt, 137.3
336
The dstrct court hed that the provsons of the 1924 ct apped, and the
crcut court of appeas affrmed ts |udgments. On petton of the Unted
States ths court ssued wrts of certorar n both cases.
In vew of the decson n No. 56, we hod that the Commssoner s approva
of the schedue of refunds and credts consttuted the aowance, and that In-
terest s to be computed as requred by the ct of 1924.
The |udgments are affrmed.
rtce 1371: Interest on refunds and credts.
R NG CT O 1924.
When credt of overpayment s aowed. (See Ct. D. 291, page 301.)
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2, rt. 1503.
INCOM T RULINGS. P RT I .
R NU CT O 1921 OR PRIOR R NU CTS.
TITL I. G N R L D INITIONS.
S CTION 2. G N R L D INITIONS.
-8-4946
G. C M. 9067
The O Company, kommandtgeseschaft auf akten, possesses a
dstnctve artfca name. The aws of Germany gve the ta -
payer the rght to sue and be sued n ts own name. There s a
provson n the by-aws for ts perpetua successon. It s an
entty dstnct from ts ndvdua members or stockhoders. Man-
agement and operaton of the busness rest wth the governng
board and the personay responsbe partners. The stockhoders
eect the members of the governng board, who, wth the personay
responsbe partners, seect any successor for the atter body. The
ta payer e sts under and by vrtue of the aws of Germany and
can Increase ts capta ony upon compance wth the aws of that
country.
ed, that the ta payer shoud be cassfed as a corporaton for
ncome ta purposes.
n opnon s requested whether the O Company shoud be cass-
fed, for ncome ta purposes, as a partnershp or a corporaton.
In 1920 the M Company and the N Company were consodated
auf akten, herenafter referred to as the ta payer.
The soe queston presented s whether the ta payer s entted to
cassfcaton as a partnershp or as a corporaton for edera ncome
ta purposes. The German aw recognzes severa forms of busness
organzatons a desgnated by the term geseschaften, meanng
companes or assocatons. The geseschaften are of three types,
namey: (1) ktengeseschaft (the formaton of akten, whch
means share, wth geseschaft woud seem to ndcate an organza-
ton dentca to a domestc corporaton), (2) oeffenehandesgese-
schaft, whch s a tradng company wth unmted abty for a
members, and (3) kommandtgeseschaft, whch s a tradng com-
pany wth mted abty for one member and an unmted abty
for at east one other member.
The ta payer s by-aws provde for the name, purpose, domce,
and duraton or fe of the company. The capta s rechsmarks
(god marks) dvded nto shares of z marks each. The shares are
payabe to bearer and t s unnecessary to transfer them on the books
of the company n order to change ownershp of the stock. It ap-
pears that transfer agents are unknown n Germany. Dvdend cou-
pons are attached to the shares for the frst 10 years. New shares
can be ssued ony wth the consent of the de generaversammung,
whch s the annua meetng of the stockhoders. The by-aws aso
provde that there sha be (1) personay responsbe partners, (2)
the governng board, and (3) the genera meetng. It does not appear
and adopted the name
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338
how the orgna personay responsbe partners were seected. It s
provded that there sha be a genera meetng at east once a year.
There s permtted 1 vote for each nomna 100 rechsmarks of shares.
t the meetng 9 members of the governng board are eected, each
for a term of one year. In case of the death or resgnaton of a
personay responsbe partner, the successor s eected by a three-
fourths ma|orty vote of the personay responsbe partners, and
the governng board. It s e pressy provded that upon the death,
of one personay responsbe partner hs hers have no rght to
succeed hm n offce. The saary of each personay responsbe part-
ner s agreed upon by the governng board.
fter the aocaton of the ega reserve and the payment of the
stock dvdends, the personay responsbe partners receve as a
bonus, n addton to ther saary 20 per cent of the remanng
Srofts. Provsons are made pertanng to the baance sheets, dv-
ends, and the reserve fund. The baance sheets are audted by the
governng board, whch presents the same at the genera meetng.
The personay responsbe partners carry on the busness as pro-
vded n the ega codes of the statutes and of the busness
reguatons ssued by the governng board. It appears that
n case of a dspute as respects the management of the company,
one personay responsbe partner can appea to the governng
board. The company can be qudated ony wth the consent of a
three-fourths ma|orty of the capta represented at the genera
meetng. Certfed copes of the records of the ower court of the
cty of R show that the stock has been ncreased at varous tmes
pursuant to the German aw and notces of the ncreases have been
pubshed n the Commerca Gazette.
rom a statement furnshed by the cty of S Chamber of Com-
merce, t appears that the term kommandtgeseschaft auf akten,
n the meanng of the Genera Commerca Law Code, contans
certan persona eements. owever, t s ponted out that such an
organzaton contans a the necessary eements of an mercan cor-
poraton, and s consdered as a varety of the aktengeseschaft,
whch corresponds n genera wth an mercan stock corporaton.
It further appears that the kommandtgeseschaft auf akten can
be transferred nto an aktengeseschaft by a vote of the stockhoders
at the genera meetng and or the personay responsbe partners.
rom the evdence presented, t does not appear that there s a
mted abty for one member and an unmted abty for at
east one other member. Whe the abty of the personay re-
sponsbe partners, the members of the governng board, ana the
stockhoders s not specfcay stated, t does appear that the stock
s payabe to bearer, that the members of the governng board are
eected by the stockhoders at the genera meetng, and that they n
turn, wth the cooperaton of the personay responsbe partners, f
vacances created by the death or resgnaton of a personay re-
sponsbe partner, so that the abty of the entre membershp can
be sad to be ony a mted abty. urthermore, there s nothng
n the by-aws of the organzaton to ndcate that ony stockhoders
can quafy as personay responsbe partners or members of the
governng board-
It s we recognzed that under the prncpes of comty a foregn
corporaton w be recognzed as such uness to do so woud be
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2, rt: 1503
contrary to oca aws. The fe n the nstant case does not contan
suffcent evdence to show whether or not the ta payer woud be
consdered as a corporaton under the aws of Germany. owever.
Congress has enacted ncome ta aws to the effect that a foregn
corporaton shoud be ta ed on a certan bass. It s qute obvous
that f a busness concern domced n Germany was dong busness
n the Unted States under a frm name whch mped that t was a
corporaton, but n reaty the concern was a partnershp (as ord-
nary understood n ths country) wthn the meanng of the ta ng
statutes, the concern woud be treated for ncome ta purposes as a
partnershp. Ths woud be true even though t was caed a
corporaton at ts domce.
|ont stock company whch possesses the genera characterstcs
of a corporaton, even though not recognzed as a corporaton but
as a partnershp under the aws of the State where t was organ-
zed, has been hed to be a corporaton n another State for the
purpose of ta aton. (Tde Water Ppe Co., Ltd., v. State oard
of ssessors, 57 N. . L., 516, 27 L. . ., 684.) In the case of the
Lverpoo Insurance Co. v. Massachusetts (10 Wa., 566) the Su-
preme Court of the Unted States was of the opnon that a cor-
poraton created n one State coud operate n another State ony
on the prncpe of comty and wth the consent of the atter State.
In ths case the Lverpoo Insurance Co. was organzed and ts
prncpa pace of busness was n Lverpoo, ngand. Ths com-
pany dd a arge nsurance busness n the State of Massachusetts.
The Lverpoo Insurance Co. contended that, under the aws of
ngand, the company was not recognzed as a corporaton. The
court hed that under the powers of the assocaton the com-
pany possessed many, f not a, of the essenta characterstcs of a
corporaton, whch were deemed essenta to a corporate charter, . e.:
1. It has a dstnctve and artfca name by whch t can make contracts.
2. It has a statutory provson by whch t can sue and be sued n the
name of one of ts offcers as the representatve of the whoe body, whch s
bound by the |udgment rendered n such sut.
3. It has provson for perpetua successon by the transfer and transms-
son of the shares of ts capta stock, whereby new members are ntroduced
n pace of those who de or se out
4. Its e stence as an entty apart from the sharehoders s recognzed by
the act of Parament whch enabes t to sue ts sharehoders and be sued
by them.
The court sad:
The queston before us s whether an assocaton, such as the one we are
consderng, n attemptng to carry on ts busness n a manner whch re-
qures corporate powers under egsatve sancton, can cam, n a |ursdcton
foregn to the one whch gave those powers, that t s ony a partnershp of
ndvduas.
We have no hestaton n hodng that, as the aw of corporatons s under-
stood n ths country, the assocaton s a corporaton, and that the aw of
Massachusetts, whch ony permts t to e ercse ts corporate functon n that
State on the condton of payment of a specfc ta , s no voaton of the
edera Consttuton or of any treaty protected by sad Consttuton.
In the nstant case, the ta payer possesses the attrbutes whch the
Supreme Court hed were necessary to determne that the Lverpoo
Insurance Co. was a corporaton wthn the meanng of the ta ng
aws of the State of Massachusetts. The ta payer possessed a ds-
tnctve artfca name. The aws of Germany gave the ta payer
the rght to sue and be sued n ts own name. There was a provson
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202, rt. 1561.
340
n the by-aws for ts perpetua successon. It was an entty ds-
tnct from ts ndvdua members or stockhoders. Management
and operaton of the busness rested wth the governng board and
the personay responsbe partners. The stockhoders eected the
members of the governng board, who, wth the personay responsbe
partners, seected any successor for the atter body. The company
e sts under and by vrtue of the aws of Germany and can ncrease
ts capta ony upon compance wth the aws of that country. The
nstant ta payer appears to beong to that group of busness organza-
tons descrbed by the Supreme Court n the case of urk- W affgoner
O ssocaton v. opkns, Coector of Interna Revenue (269 IT. S.,
110, T. D. 3790, C. . -, 147):
They have usuay a f ed capta stock dvded nto shares represented
by certfcates transferabe , manage ther affars by a board of drec-
tors governng board and e ecutve offcers the personay responsbe part-
ners and conduct ther busness n the genera form and mode of procedure of
a corporaton. ecause of ths resembance n form and effectveness, these bus-
ness organzatons are sub|ected by the ct to these ta es as corporatons.
Therefore, ths offce s of the opnon that the ta payer shoud
be cassfed as a corporaton for ncome ta purposes.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
rtce 1507: ont ownershp and |ont adventure.
R NU CT O 1917.
greement between mnng company and another company to
fnance a mne and to market the ore. (See Ct. D. 317, page 428.)
TITL II. INCOM T .
P RT I G N R L PRO ISIONS.
S CTION 202. SIS O D T RMINING
G IN OR LOSS.
rtce 1561: ass for determnng gan or oss -15-5016
from sae. Ct. D. 313
( so Secton 214(a) 10, rtce 231 Secton
234, rtce 561.)
INCOM T R NU CT O 1918 D CISION O COURT.
Gan or Loss Sae Unproductve Tmbeband Carryng
Charges.
In the case of unproductve tmber property acqured pror to
March 1,1913, and hed for future operaton, carryng charges from
that date to the date of sae, such as ta es pad, may not be added
to the far market vaue of the property on that date for the
purpose of ascertanng the gan derved or oss sustaned from the
sae of the property under secton 202(a) of the Revenue ct of
1918.
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202, rt. 1561.
Dstrct Court of the Unted States fob the Western Dstrct of
Mchgan, Southern Dvson.
. M. O. Lumber Co., a Corporaton, pantff, v. Unted States of merca,
defendant.
November 29, 1930.
opnon.
Raymond, Dstrct udge: Ths case presents a queston of computaton of
gan derved from sae of and hed for nvestment, and specfcay of the rght
to charge to capta account as addtons to cost amounts pad for ta es over a
perod of years on unproductve tmberands. cept for the fact that the
property here nvoved s tmberand, the probem s not dssmar to that
dscussed and determned adversey to the contentons of pantff n the cases
of Westerfed v. Rafferty (4 . (2d), 590) and raser v. Commssoner of
Interna Revenue (25 . (2d), 653), and ncdentay referred to n the case of
ng musement Co. v Commssoner of Interna Revenue (CC . 6), decded
November 5, 1930. The facts have been stpuated by the partes and n sub-
stance are emboded n fndngs of fact and aw fed herewth. The fndngs
of fact and aw sha become fna uness pantff sha appy to the court
wthn 30 days for eave to offer further proofs of the amount e pended for
cearng out a rght of way n 1914 and 1915 for a raroad and a road. These
sums (of whch proof was not made separatey from amounts pad for ta es)
n the vew of the court, are capta e pendtures whch ncreased the vaue
of the property and are therefore proper addtons to the cost of the property
n determnng the gan. mnatng ths apparenty capta e pendture, the
queston s whether amounts pad for ta es upon unproductve tmberands may
be added to the March 1, 1913, vaue of the property n determnng the gan
or oss from ts sae n 1920. So far as appcabe to ths case the court s
satsfed wth the concusons reached and the reasons gven therefor n the
Westerfed and razer cases (see aso Oswego 8. R. Co. v. Commssoner of
Interna Revenue, 29 . (2d), 487). It remans to be determned whether the
same prncpes are appcabe to tmberands hed for future operatons.
Secton 202(a) of the Revenue ct of 1918 reads:
That for the purpose of ascertanng the gan derved or oss sustaned
from the sae or other dsposton of property, rea, persona, or m ed, the
bass sha be
(1) In the case of property acqured before March 1, 1913, the far market
prce or vaue of such property as of that date .
Secton 234(a)9 s as foows:
(9) In the case of mnes, o and gas wes, other natura deposts, and
tmber, a reasonabe aowance for depeton and for deprecaton of mprove-
ments, accordng to the pecuar condtons n each case, based upon cost
ncudng cost of deveopment not otherwse deducted: Provded, That n the
case of such propertes acqured pror to March 1, 1913, the far market vaue
of the property (or the ta payer s Interest theren) on that date sha be taken
n eu of cost up to that date: Provded further, That n the case of mnes,
o and gas wes, dscovered by the ta payer, on or after March 1, 1913, and
not acqured as the resut of purchase of a proven tract or ease, where the far
market vaue of the property s materay dsproportonate to the cost, the
depeton aowance sha be based upon the far market vaue of the property
at the date of the dscovery, or wthn 30 days thereafter such reasonabe
aowance n a the above cases to be made under rues and reguatons to be
prescrbed by the Commssoner wth the approva of the Secretary. In the case
of eases the deductons aowed by ths paragraph sha be equtaby appor-
toned between the essor and essee
rtce 231, Reguatons 45 of the ureau of Interna Revenue, reads as
foows :
Charges to capta and to e penses n the case of Umber. In the case of a
tmber property hed for future operaton by an owner havng no substanta
ncome- from the property or from other sources, a e pendtures for admns-
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202, rt. 1561.
342
traton, protecton, and other carryng charges pror to producton on a norma
bass sha be charged to capta account after such property s on a norma
producton bass such e pendtures sha be treated as current operatng e -
penses. In case a ta payer, who has a substanta ncome from other sources,
owns a tmber property whch s not yet on a norma producton bass, he may
at hs opton, charge such e pendture wth respect to such tmber property to
capta, or treat them as current operatng e penses, but whchever system s
adopted must be foowed unt permsson to change to the other system s
secured from the Commssoner. In the case of tmber operatons a e pend-
tures pror to producton for pants, mprovements, and equpment, and there-
after a ma|or tems of pant and equpment, sha be charged to capta
account for purposes of deprecaton. fter a tmber operaton has been
deveoped and equpped and has reached ts norma output capacty, the cost of
addtona mnor tems of equpment and the cost of repacement of mnor tems
of worn-out and dscarded pant and equpment may be charged to current
operatng e penses, uness the ta payer eects to wrte off such e pendtures
through charges for deprecaton however, the method adopted must be
foowed consstenty from year to year. ( rtce 231, Reguatons 45, 1920
edton.)
It s franky conceded that the rungs of the Treasury Department as apped
to the facts of ths case have been confctng. The queston prmary s
whether artce 231 above quoted sha be construed to mean that because carry-
ng charges are to be charged to capta account n the determnaton of net
ncome, t foows that they must be added to the cost n determnng .gan
or oss from the sae of property n subsequent years and, f so construed,
whether or not t s contrary to the e press provsons of secton 202(a) and
therefore nvad. It seems to the court that tems e pended for the con-
tnued use and possesson of and and whch add nothng to ts vaue, such
for e ampe, as the cost of admnstraton, saares of offcers, wages of crusers
empoyed to make estmates of vaue, the wages of a custodan to protect from
fre hazards and trespassers, cost of advertsng, attorneys fees n protectng
aganst trespass or estabshng tte as aganst adverse camants, a of whch
are probaby wthn the meanng of carryng charges n proper accountng
practce, are not capta n ther nature and are therefore not proper to be
added to the March 1, 1913, vaue n determnng the gan or oss. No good
reason appears that ta es pad shoud be dfferenty cassfed. There s a
dstnct dfference n tems whch may be aowed n determnng net ncome
under one secton of the statute and those deductbe under another secton
n determnng gan or oss from the sae of property. The bass for the atter
s ceary defned n secton 202(a). The rue there stated s arbtrary and
as apped to most crcumstances arsng thereunder, an naccurate method
of ascertanng e act oss or gan. In actua practce t generay favors the
ta payer, but n any event, the courts may not dea wth the proprety of
such an enactment. Nether may ts provsons be mted by departmenta
reguatons. It was sad n the case of La ee Iron Works v. Unted States
(256 U. S., 377, 392 T. D. 3181, C. . 4, 373 )
Nor can we regard the ct n basng nvested capta upon actua costs
to the e cuson of hgher estmated vaues as productve of arbtrary ds-
crmnatons rasng a doubt about ts consttutonaty under the due process
cause of the ffth amendment. The dffcuty of ad|ustng any system of
ta aton so as to render t precsey equa n ts bearng s proverba, and
such ncety s not even requred of the States under the equa protecton cause,
much ess of Congress under the more genera requrement of due process of
aw n ta aton. Of course t w be understood that Congress has very ampe
authorty to ad|ust ts ncome ta es accordng to ts dscreton, wthn the
bounds of geographca unformty. Courts have no authorty to pass upon
the proprety of ts measures and we dea wth the present crtcsm ony
for the purpose of refutng the contenton, strongy urged, that the ta s so
whoy arbtrary as to amount to confscaton.
It foows that uness pantff sha estabsh the cost of cearng rght of
way as a capta e pendture a |udgment must be entered of no cause of acton.
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343
202, rt, 1561.
rtce 1561: ass for determnng gan or oss
from sae.
-18-5047
Ct. D. 328
INCOM T R NU CT O 1918 D CISION O SUPR M COURT.
L. Gan ob Loss Contngent Intebest Pbopebty.
Where a fund Is created by the drectors of a company, pursuant
to a pan of reorganzaton, to guarantee a certan vaue for co-
atera deposted by a borrower from the company, the subscrbers
to receve any e cess over the amount guaranteed whch mght
be reazed from the admnstraton of the coatera, a sub-
scrber s nterest n the fund s property wthn the meanng of
secton 202(a) of the Revenue ct of 1918.
2. Gan ob Loss aue as of Mabch 1, 1913 ubden of Pboof.
Where n a transacton entered nto for proft a ta payer ac-
qures before March 1, 1913, an nterest n property, t s a pre-
requste to the aowance of a deductbe oss resutng from ts
dsposton that the ta payer prove the far market vaue of the
nterest as of that date n order to determne the bass n ascer-
tanng oss under secton 202(a) 1 of the Revenue ct of 1918.
The presumpton can not be nduged that the cost of the nterest
was the vaue on March 1, 1913.
SUP M C OU T O T UNIT D ST T S. NO. 199. OCTO T RM, 1930.
Davd urnet, Comm oncr of Interna Revenue, pettoner, v. Samue .
ouston.
On wrt of certorar to the Unted States Crcut Court of ppeas for the Thrd Crcut.
Mr. ustce Sutherand devered the opnon of the court.
The queston n ths case arses under secton 214(a) of the Revenue ct
of 1918 (ch. 18, 40 Stat, 1057, 1066, 1067), the pertnent part of whch s as
foows:
Sec. 214. (a) That n computng net ncome there sha be aowed as
deductons:

(5) Losses sustaned durng the ta abe year and not compensated for by
nsurance or otherwse, f ncurre n any transacton entered nto for proft,
The respondent, n makng hs ta return for 1920, camed a oss ncurred
n a transacton entered nto n the year 1906, by whch he acqured certan
rghts of the character, and n the manner, hereafter stated. The Comms-
soner of Interna Revenue dsaowed the cam, and hs determnaton was
sustaned by the oard of Ta ppeas upon the ground that the ta payer
had faed to show the vaue of the rghts as of March 1, 1913. (13 . T. .,
279.) Upon a petton for revew the crcut court of appeas uphed the cam
and reversed the acton of the oard of Ta ppeas. (39 . (2d), 351.)
The foowng are the facts: In 1906, owng to e cessve oans made to
doph Sega, the Rea state Trust Co. of Phadepha cosed ts doors, and a
recever was apponted. Sega had deposted coatera, whch possessed an
uncertan vaue and coud not ready be qudated. pan of reorgan-
zaton was proposed by the recever, whch, among other thngs, contempated
the creaton of a fund of 2,500,000 to be subscrbed by drectors of the com-
pany to guarantee a vaue of 3,000,000 for the Sega coatera desgnated
n the pan, Sega matters. The subscrbers to the fund were to receve
any e cess over the amount of 3,000,000 whch mght be reazed from the
admnstraton of the Sega matters. No mt of tme was put upon the
admnstraton, or upon the fna dsposton, of the assets embraced by the
pr 13, 1931.
72109 31 23
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202, rt. 1561.
344
Sega matters. The pan became effectve and the company resumed bus-
ness on November 1, 1906 and thereafter, and unt December 30, 1920, the
Sega matters were admnstered under the e cusve drecton of the
presdent of the company, who theretofore had been the recever.
The respondent, a drector of the company, was a subscrber to the fund n
the sum of 305,000. t the tme of the subscrpton respondent beeved that
the Sega matters had a potenta vaue whch coud be converted nto a
sum suffcent to repay the subscrbers the amount of ther subscrptons wth,
nterest, and possby some proft. The presdent, then recever, e pressed to
the drectors the same beef.
Incuded n the Sega coatera were certan 1 mns and shares of stock of
the Pennsyvana Sugar Refnng Co. t the tme the subscrptons to the
guarantee fund were made, there was n contempaton the brngng of a sut
n behaf of that company aganst the mercan Sugar Refnng Co. under
the Sherman nttrust ct and the vaue of the Sega matters depended
to some e tent upon the successfu prosecuton of ths sut. In fact, two
suts were brought, one n a edera dstrct court for 10,000,000, and another
n a Stnte court, the atter on the ground that an agent of the mercan
Sugar Refnng Co. had made an agreement n restrant of trade wth SegaL
The tgaton was compromsed n anuary, 1910, upon the devery to the
Rea state Trust Co. by the mercan Sugar Refnng Co. of certan bonds,
among whch were bonds of the Pennsyvana Sugar Refnng Co. In 1912, the
atter were converted nto 7,268 shares of stock n a reorganzaton caed
Pennsyvana Sugar Co. Some queston havng arsen n respect of the rghts
of the subscrbers, on May 5, 1916, a suppementa agreement was made to
the effect that when the 7,268 shares of stock n the Pennsyvana Sugar Co.
were dsposed of, the contrbutors to the guarantee fund shoud receve one-
fourth of the proceeds. These shares, at that tme, and for a perod pror
thereto, consttuted the prncpa unqudated assets of the orgna Sega
matters.
In 1920, the partes concerned havng concuded that the remanng Sega
assets woud not soon ncrease n vaue, the subscrbers entered nto agree-
ments provdng for compete qudaton of the Sega matters, and, there-
upon, for the dstrbuton of one-fourth of the Pennsyvana Sugar Co. stock
to the subscrbers n proporton respectvey to the amounts of ther subscrp-
tons, n fu satsfacton of a agreements reatng thereto. Respondent, ac-
cordngy, receved 222 shares of Pennsyvana Sugar Co. stock, the far market
vaue of whch was 150 per share. Upon that bass, respondent, n 1920, wrote
off hs books a oss of 271,700, a sum arrved at by deductng 33,300, the
vaue of the stock receved, from 305,000, the amount of hs orgna subscrp-
ton. In hs return for 1920 the amount was deducted as a oss.
We assume, for the purpose of the case, that, wthn the meanng of secton
214(a)5, the facts estabsh a transacton entered nto for proft by the sub-
scrbers to the fund of 2,500,000. In ths vew each subscrber acqured an
nterest n the amount whch mght be reazed n e cess of 3,000,000 by the
admnstraton and dsposton of the Sega matters. Such an nterest
fas wthn the meanng of the term property. (See Toonsend v. shepoo
ertzer Co., 212 ed., 97, 101 Samet v. armer s Merchants Nat. ank,
247 ed., 669, 671 Presby v. Smpson, 290 ed., 333, 335.) Tested aone by the
fact that the cost to respondent n 1906 of hs orton of ths nterest was
305,000, and the fact that by the fna settement of 1920, be receved ony
the sum of 33,300, the resut was an actua oss to the e tent of the sum
camed. ut ths s not enough. Secton 202(a) of the Revenue ct of 1918,
supra, provdes:
That for the purpose of ascertanng the gan derved or oss sustaned
from the se or other dsposton of property, rea, persona, or m ed, the
bass sha be
(1) In the ease of property acqured before March 1. 1913, the far market
prce or vaue of such property as of that date .
Under ths provson, t s necessary to consder not ony the cost of the
nterest acqured by respondent n 1906, but aso ts far market prce or vaue
as of March 1, 1913 and whchever of these s found to be the ower must be
taken as the bass for determnng the oss resutng from the fna dsposton
of the property. In other words, the effect of the provson n respect of vaue
on March 1. 1913, s to mt the deductbe oss by that vaue f t be ess
than the orgna cost. Ths s the effect of the pror decsons of ths court.
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345
202, rt. 1561.
(Unted States v. annery, 268 U. S.. 98. 103 T. D. 3703. C. . I -1, 106 , and
cases cted ener v. Tndte, 276 U. S., 582, 587 T. D. 4212, C. . II-2, 272 .
nd see Nchos v. Smth, 35 . (2d), 938, 939 Ct. D. 142, C. . III-2, 278
ock v. Commssoner, 16 . T. ., 425, affrmed 42 . (2d), 1013.)
The burden of proof to estabsh a deductbe oss and the amount of t,
ceary, was upon the respondent. (Renecke v. Spadng, 280 U. S., 227, 233
Ct. D. 154, C. . 1 -1, 305 : Unted States v. nderson, 269 U. S., 442, 443
T. D. 3839, C. . -, 179 .) It was |ust as necessary under the statute for
the respondent to prove vaue as of March 1, 1913, as t was to prove cost n
1906 and the amount fnay receved by hm n 1920. The court beow, after a
revew of the facts, dsposed of the matter by sayng:
To determne, n vew of these varabe factors, or ack of factors, ts
true or appro mate vaue on a Rven date, as that of March 1, 1913, seected
by the Commssoner as the bass of the ta cacuaton, was a sheer mposs-
bty. The ony f ed factors n the stuaton were those of cost n 1906
and return In 1920. It foows that the proper bass for measurng the pet-
toner s admtted oss because the ony possbe bass was that of cost and
return.
We can not agree that the mpossbty of estabshng a specfc fact, made
essenta by the statute as a prerequste to the aowance of a oss, |ustfes a
decson for the ta payer based upon a consderaton ony of the remanng
factors whch the statute contempates. The defnte requrement of secton
202 (a) 1 of the ct s not thus easy to be put asde. The mpossbty of
provng a matera fact upon whch the rght to reef depends, smpy eaves
the camant upon whom the burden rests wth an unenforcbe cam, a
msfortune to be borne by hm, as t must be borne n other cases, as the resut
of a faure of proof. (Compare Underwood v. Wng, 4 De Ge . M. G., 632,
660 Newe ct a. v. Nchos et a.. 75 N. Y., 78, 90 state of hc, 73 Ws.,
445, 459-460 2 Chamberayne, Modern Law of vdence, secton 970.)
Nether can the presumpton be nduged that the cost of respondent s
Interest n 1906 was the vaue of that nterest n 1013, for non constat that
such cost was the vaue even n 1900.
Moreover, we thnk the record s far from demonstratng the mpossbty
of suppyng evdence from whch the requred fact mght be found. The 7,268
shares of stock n the Pennsyvana Sugar Co., the dstrbuton of whch n 1920
cosed the transacton, had been receved by the Rea state Trust Co., as
eary as 1912. Ths stock, together wth certan bonds, not otherwse descrbed,
consttuted on March 1. 1913, the entre avaabe assets remanng of the
orgna Sega matters. There seems to have been no dffcuty n ascer-
tanng the vaue of the stock n 1920 and t s hard to see why ts vaue, as
we as the vaue of the bonds, coud not have been, at east appro matey,
determned as of March 1, 1913, and, consequenty, the appro mate vaue of
the contngent nterest of each of the subscrbers to the fund ascertaned as
of that date. No reason s suggested by the record or otherwse, and none
occurs to us, for not seekng ght on the sub|ect from those who had been n
charge of the qudaton of the Sega matters. We can not assume that such
an effort woud have been frutess. Respondent was bound to produce the
best avaabe evdence of vaue whch the crcumstances and nature of the
transacton permtted. It does not appear that he made any attempt to do so.
udgment reversed.
rtce 1561: ass for determnng gan or oss -25-5113
from sae. Ct. D. 351
INCOM T R NU CT O 1918 D CISION O SUPR M COURT.
Gan ob Loss Sae uture Payments Under Contract as Part
Consderaton equest of Interest n uture Payments.
Where through an agreement of stockhoders of the Corpora-
ton, essee of a mne, the essee s obged to apporton e tracted
ore among them accordng to ther hodngs, the ease contract not
requrng producton of ether ma mum or mnmum tonnage or
any defnte payments, and the owners of a the shares of stock n
the Corporaton, one of the stockhoders of the Corporaton,
se them for a consderaton n cash and an agreement by the pur-
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202, rt. 1561.
346
chasng corporaton to pay annuay for dstrbuton among them
a specfed amount for each ton of ore apportoned to It, t s mpos-
sbe to determne wth far certanty the market vaue of the
agreement by the purchaser to pay such specfed amount per ton
and under secton 202(a) of the Revenue ct of 1018 gan s not
reazed from a sae of shares of stock n the Corporaton
acqured before March 1, 1913, unt the tota amount actuay
receved from the sae thereof e ceeds ther far market vaue on
that date, whch s greater than cost. No ta abe ncome s derved
from a bequest of an nterest n such annua payments acqured
after ebruary 28, 1913, unt the annua payments receved from
the purchaser e ceed the far market vaue of such nterest at the
tme of the death of the testator.
Supreme Couet op the Unted States. Nos. 521 and 522. October Teem, 1930.
521. Davd urnet, Commssoner of Interna Revenue, pettoner, v. dth
ndrews Logan.
522. Davd urnet, Commssoner of Interna Revenue, pettoner, v. ua
ndrews ruce.
On wrts of certorar to the Unted States Crcut Conrt of ppeas for the Second Crcut
May 18, 1931.
Mr. ustce McRetnods devered the opnon of the court.
These causes present the same questons. One opnon, statng the essenta
crcumstances dscosed n No. 521, w suffce for both.
Pror to March, 1913, and unt March 11, 1918, respondent, Mrs. Logan,
owned 250 of the 4,000 capta shares ssued by the ndrews tchcock Iron
Co. It hed 12 per cent of the stock of the Mahonng Ore Stee Co., an oper-
atng concern. In 1895 the atter corporaton procured a ease for 97 years
upon the Mahonng mne and snce then has reguary taken therefrom
arge, but varyng, quanttes of ron ore n 1913, 1,515,428 tons n 1914,
1,212,287 tons n 1915, 2,311,940 tons n 1919, 1,217,167 tons: n 1921, 303,020
tons n 1923, 3,029,865 tons. The ease contract dd not requre producton of
ether ma mum or mnmum tonnage or any defnte payments. Through an
agreement of stockhoders (stee manufacturers) the Mahonng eom any s
obgated to apporton e tracted ore among them accordng to ther hodngs.
On March 11, 1916, the owners of n the shares n ndrews tchcock Co.
sod them to Youngstown Sheet Tube Co., whch thus acqured, among other
thngs, 12 per cent of the Mahonng company s stock and the rght to receve
the same percentage of ore thereafter taken from the eased mne.
or the shares so acqured the Youngstown company pad the hoders
2,200,000 n money and agreed to pay annuay thereafter for dstrbuton
among them 60 cents for each ton of ore apportoned to t. Of ths cash Mrs.
Logan receved 250/4000ths 137,500: and she became entted to the same
fracton of any annua payment thereafter made by the purchaser under the
terms of sae.
Mrs. Logan s mother had ong owned 1,100 shares of the ndrews tchcock
Co. She ded n 1917, eavng to the daughter one-haf of her nterest n pay-
ments thereafter made by the Youngstown company. Ths bequest was ap-
prased for edera estate ta purposes at 277,164.50.
Durng 1917, 1918, 1919, and 1920 the Youngstown company pad arge sums
under the agreement. Out of these respondent receved on account of her 250
shares 9,900 n 1917, 11,250 n 1918, 8,995.50 n 1919, 5,444.30 n 1920
35,589.80. v reason of the nterest from her mother s estate she receved
19,790.10 n 1919 and 11,077.49 n 1920.
Reports of ncome for 1918, 1919, and 1920 were made by Mrs. Logan upon the
bass of cash recepts and dsbursements. They ncuded no part of what she
had obtaned from annua payments by the Youngstown company. She man-
tans that unt the tota amount actuay receved by her from the sae of her
shares equas ther vaue on March 1, 1913, no ta abe ncome w arse from
the transacton. so that unt she actuay receved by reason of the rght
bequeathed to her a sum equa to ts apprased vaue, there w be no ta abe
ncome therefrom.
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347
202, rt. 1561.
On March 1, 1913, the vaue of the 250 shares then hed by Mrs. Logan
e ceeded 173,089.80 the tota of a sums actuay receved by her pror to
1921 from ther sae ( 137,500 cash n 1916 pus four annua payments amount-
ng to 35,589.80). That vaue aso e ceeded orgna cost of the snares. The
amount receved on the Interest devsed by her mother was ess than ts vaua-
ton for estate ta aton aso ess than the vaue when acqured by Mrs. Logan.
The Commssoner rued that the obgaton of the Youngstown company to
pay 60 cents per ton had a far market vaue of 1,942,111.46 on March 11, 1916
that ths vaue shoud be treated as so much cash and the sae of the stock
regarded as a cosed transacton wth no proft n 1916. e aso used ths
vauaton as the bass for apportonng subsequent annua recepts between
ncome and return of capta. s cacuatons, based upon estmates and
assumptons, are too ntrcate for bref statement.1 e made defcency assess-
ments accordng to the vew |ust stated and the oard of Ta ppeas approved
the resut.
The crcut court of appeas hed that, n the crcumstances, t was mpossbe
to determne wth far certanty the market vaue of the agreement by the
Youngstown company to pay 60 cents per ton. so, that respondent was
entted to the return of her capta the vaue of 250 shares on March 1, 1913,
and the assessed vaue of the nterest derved from her mother before she
coud be charged wth any ta abe ncome. s ths had not n fact been
returned, there was no ta abe ncome.
We agree wth the resut reached by the crcut court of appeas.
The 1916 transacton was a sae of stock not an e change of property.
We are not deang wth royates or deductons from gross ncome because of
depeton of mnng property. Nor does the stuaton demand that an effort be
made to pace accordng to the best avaabe data some appro mate vaue upon
the contract for future payment Ths probaby was necessary In order to
assess the mother s estate. s annua payments on account of e tracted ore
come n they can be ready apportoned frst as return of capta and ater
as proft. The abty for ncome ta utmatey can be fary determned
wthout resort to mere estmates, assumptons and specuaton. When the
proft, f any, s actuay reazed, the ta payer w be requred to respond.
The consderaton for the sae was 2,200,000 In cash and the promse of
future money payments whoy contngent upon facts and crcumstances not
possbe to forete wth anythng ke far certanty. The promse was n no
proper sense equvaent to cash. It had no ascertanabe far market vaue.
The transacton was not a cosed one. Respondent mght never recoup her
capta nvestment from payments ony condtonay promsed. Pror to 1921
a recepts from the sae of her shares amounted to ess than ther vaue on
March 1. 1913. She propery demanded the return of her capta nvestment
before assessment of any ta abe proft based on con|ecture.
In order to determne whether there has been gan or oss, and the amount
of the gan, f any, we must wthdraw from the gross proceeds an amount
suffcent to restore the capta vaue that e sted at the commencement of
the perod under consderaton. (Doye v. Mtche, 247 U. S., 179. 184, 185.)
(Revenue ct 1916, secton 2, 39 Stat., 757, 758 Revenue ct 1918, ch. 18, 40
Stat., 1057.) Ordnary, at east, a ta payer may not deduct from gross recepts
a supposed oss whch In fact s represented by hs outstandng note. ( rkert
v. Comm Umer of Interna Revenue. 283 U. S., 140 ( pr 13, 1931) Ct. D. 325,
1 In the bref for pettoner the foowng appears:
The far market vaue of the Youngstown contract on March 11. 1016, was found bv
the Commssoner to be 1,942,111.46. Ths was based upon an estmate that the ore
reserves at the Mahonng mne amounted to 82.858,535 tons: that a such ore woud be
mned that 12 per cent (or 9.042,564.2 tons) woud be devered to the Youngstown
company. The tota amount to be receved by a the vendors of stock woud then be
5,065,814.52 at the rate of 60 cents per ton. The Commssoner s fgure for the far
market vaue on March 11, 1916, was the then worth of 5,065,814.52, upon the assump-
ton that the amount was to be receved n equa annua nstaments durng 45 years,
dscounted at 6 per cent, wth a provson for a snkng fund at 4 per cent. or ark of
evdence to the contrary ths vaue was approved by the oard. The vaue of the
550/4000 Interest whch each acqured by bequest was f ed at 277,164.50 for purposes
of edera estate ta at the tme of the mother s death.
Durng the years here Invoved the Youngstown company made payments In accordance
wth the terms of the contract, and respondents respectvey receved sums proportonate
to the Interests n the contract whch they acqured by e change of property and by
bequest.
The oard hed that respondents recepts from the contract, durng the years n
queston, represented gross ncome that respondents shoud be aowed to deduct from
sad gross Income a reasonabe aowance for e hauston of ther contract Interests and
that the baance of the recepts shoud be regarded as ta abe ncome.
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202, rt. 1563.
348
page 241, ths uetn .) nd, conversey, a promse to pay ndetermnate sums
of money Is not necessary ta abe ncome. Generay speakng, the Income
ta aw Is concerned ony wth reazed osses, as wth reazed gans. (Lucas
v. mercan Code Co., 280 U. S., 445, 449 Ct. D. 168, C. . I -1, 314 .)
rom her mother s estate Mrs. Logan obtaned the rght to share In possbe
proceeds of a contract thereafter to pay ndefnte sums. The vaue of ths
was assumed to be 277,164.50 and ts transfer wag so ta ed. Some vauaton
specuatve or otherwse was necessary n order to cose the estate. It may
never yed as much, t may yed more. If a sum equa to the vaue thus
ascertaned had been nvested In an annuty contract, payments thereunder
woud have been free from Income ta unt the owner had recouped hs capta
nvestment. We thnk a ke rue shoud be apped here. The statute def-
ntey e cepts bequests from recepts whch go to make up ta abe Income.
(See urnet. CotnmUsmer, v. Whtchouse, 282 U. S., ( pr 13, 1931) Ct. D.
327, pa|re 366, ths uetn. .)
The |udgments beow are affrmed.
rtce 1563: Sae of property acqured by gft -24-5106
on or before December 31, 1920, or by bequest, Ct. D. 349
devse, or nhertance.
INCOM T R NC CT O 1918 D CISION O COURT.
Gan ob Loss ass Propebty cqured by Devse.
devsee acqures property wthn the meanng of secton
202(a)2 of the Revenue ct of 1918 at the date of the testator s
death and the bass provded by that paragraph n ascertanng
proft or oss on the subsequent sae of the property Is ts far mar-
ket vaue at that tme, when the death occurs on or after March 1,
1913.
Court of Cams or the Unted States. No. -64.
Rchard . McCann and Mason . Partrdge, |r., as ncary dmnstrators
of the state of ohn Wam Cooke, Deceased, v. The Unted States.
pr 6. 1931.
OPINION.
Whaey, udge, devered the opnon of the court.
Ths sut s brought by the admnstrators of the estate of ohn Wam
Cooke, who nherted an undvded one-eghth nterest n certan rea estate n
the cty of New York under the w of Wam Washngton Coe, who ded
March 10, 1915, to recover an assessment of addtona ncome ta es based on
the ncreased vaue of the property at the tme of sae over the apprased vaue
paced on t at the tme of the death of Coe. The pantffs contend the vaue
of the property n March. 1913, shoud be compared wth the sae prce receved
n 1920, whch woud show a oss sustaned nstead of a gan derved. ut
Cooke had no nterest n the property n 1913. The ony nterest he acqured
was under the w of Coe, and that nterest vested Immedatey upon the death
of Coe. The vaue of hs nterest was an undvded one-eghth of the tota
vaue of the property at that tme. The apprasa of the property by the State
authortes for nhertance-ta purposes paced a vaue of 800,000 on the prop-
erty at the death of Coe. Cooke s nterest was one-eghth of that amount, or
100,000. Cooko ded 18 days after the devse had vested. The pantffs are
the ancary admnstrators de bons non of hs estate and as hs representatves
are entted to receve hs nterest n the estate of Coe. No mmedate dstrbu-
ton of ths property was made by the e ecutor of Coe. It was hed by the
e ecutor unt 1920, when It was sod for 978,001.58, or a net gan of 178,-
001.58 over the apprasa made at the death of Coe. The mortgages taken n
part payment were not dsposed of unt 1923, and then dstrbuton was made
by the e ecutor of Coe of the proceeds of sae. The estate of Cooke receved
one-eghth of the 978,001.58, or 122,250, an ncrease of 22,250 over the vaue
of the property when acqured by Cooke upon the death of Coe. The Com-
mssoner of Interna Revenue assessed a ta on ths ncrease as ncome to the
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349
204, rt. 1603.
estate of Cooke. The ta abe year Is 1920 and the Revenue ct of 1918 Is
appcabe. The corpus of the devse Is e empt from ta aton, but the ncome
from such property s sub|ect to ta . (Secton 213(3), 40 Stat., 1057.) The
reguatons specfcay provde that where there s no apprased vaue for
edera estate ta purposes ts vaue as apprased n the State court for the
purpose of State nhertance ta es shoud be deemed to be ts far market vaue
when acqured. ( rtce 1562, Reguatons 45.)
Immedatey upon the death of the owner, tte to hs rea estate passes to
hs hers or devsees. The vaue ut the tme of Coe s death s the bass for the
ascertanment of gan or oss on the sae of rea estate. That s the tme of
acquston. Under the w of Coe, hs e ecutor had the power of sae of the
rea estate for dstrbuton, but the tte of Cooke vested at the tme of death
of Coe and ts vaue as of that tme s the bass on whch the ta shoud )e
computed. ( rewster v. Gage, 280 U. S., 327 Ct. D. 148, C. . I -1, 274 .)
The pantffs contend the mhrst case (69 C. Cs., 295) and the Mc nney
case (62 C. Cs., 180), decded by ths court, sustan ther poston. ut there
s no mert n ths contenton. In the mhrst case, supra, t was hed that
the cost to the testator of property purchased after March 1, 1913, was the
bass of computng gan or oss when sod by hs estate and the ownershp by
the testator durng hs fetme and hs estate afterwards was an entty. In
the Mc nney case, supra, the property had been purchased pror to March 1,
1913, and sod by the e ecutors. Ths court hed that the cost to the testator
was the bass of computng the gan derved or the oss sustaned from the sae.
It was the dfference between the orgna nvestment and the sae prce and
not the market vaue of the property on the date of the death of the testator.
In ths case the court treated the hodngs of Mc nney (urng hs fetme
and hs estate as an entty. These cases are entrey dfferent from the case
under consderaton. Nether Cooke nor hs estate had any nterest n the
property before March 10, 1915, and no purchase was made by Cooke. e
acqured hs nterest under the w of Coe n 1915. The estate of Coe s n
no way nvoved n the queston before us and ony the estate of Cooke s under
consderaton. There s a cear demarcaton between the Mc nney and m-
hrst cases, supra, and the case at bar. The Commssoner was correct n
assessng the ta and the compant shoud be dsmssed. It s so ordered.
rtce 1566: change of property whch resuts n no
gan or oss.
R NU CT O 1921 ND PRIOR R NU CTS.
Tradng n of trucks and passenger cars used for busness purposes
on new trucks and passenger cars to be used for ke purposes. (See
I. T. 2573, page 215.)
S CTION 203. IN NTORI S.
rtce 1584: Inventores at market.
R NU CTS O 1918 ND 1921.
Goods purchased n the open market and goods produced from
own propertes. (See G. C. M. 9401, page 102.)
S CTION 204. N T LOSS S.
rtce 1603: Net osses of partnershps, trusts, estates,
and nsurance companes.
R NU CT O 1921.
mendment of Reguatons 62, artce 1603, pertanng to net
osses of nsurance companes. (See T. D. 4308, page 22 .)
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205, rt. 1622.
350
S CTION 205. ISC L Y RS 1920-21
ND 1921-22.
rtce 1622: sca year endng n 1921.
( so Secton 335, rtce 952.)
--497
Ct. D. 298
INCOM ND P O ITS T S R NU CTS O 1916, 1917, ND 1918
decson of court.
1. Deducton Obsoescence sca Yeab wth Dt|tebent
In computng under secton 205(a) and secton 335(a) of the
Revenue ct of 1918 the proportonate part of ta es for that part
of the fsca year 1918 fang wthn the caendar year 1917, a
deducton from gross ncome for obsoescence s not aowabe, the
Revenue ct of 1916 as amended by the Revenue ct of 1917 not
havng authorzed such a deducton.
2. Decson ffrmed.
The decson of the oard of Ta ppeas (18 . T. ., 1245)
affrmed.
Unted States Crcut Court of ppeas for the Seventh CrRCurr. No. 4422.
October Term, 1930, anuary Sesson, 1931.
Ogesby Coa Co., pettoner, v. Commssoner of Interna Revenue, respondent.
Petton for revew of decson of Unted States oard of Ta ppeas.
efore schueb and Page, Crcut udges, and Lndey, Dstrct udge.
schueb, Crcut udge: Pettoner assas a |udgment of the oard of
Ta ppeas sustanng respondent n hs redetermnaton of a defcency n
pettoner s ncome and e cess profts ta es for ts fsca year endng March
31, 1918. The Commssoner, as we as the oard of Ta ppeas, n computng
the part of the ta for so much of the fsca year as fe wthn the caendar
year 1917, refused to aow as a deducton from gross ncome oss from ob-
soescence sustaned durng that part of the fsca year fang n the caendar
year 1918. The soe queston s whether the appcabe statute was correcty
Interpreted.
Tte II of the Revenue ct of 1918 deas wth ncome ta es, and secton
205(a) thereof provdes:
That f a ta payer makes return for a fsca year begnnng n 1917 and
endng n 1918, hs ta under ths tte for the frst ta abe year sha be the
sum of: (1) the same proporton of a ta for the entre perod computed under
Tte I of the Revenue ct of 1916 as amended by the Revenue ct of 1917 and
under Tte I of the Revenue ct of 1917, whch porton of such perod fang
wthn the caendar year 1917 s of the entre perod, and (2) the same propor-
ton of a ta for the entre perod computed under ths tte at the rates for
the caendar year 1918 whch the porton of such perod fang wthn the
caendar year 1918 s of the entre perod: .
Secton 335(a), Tte III, of the Revenue ct of 1918 deas wth war profts
and e cess profts ta es, and s In a essentas ke secton 205(a).
Secton 214(a) of the same ct, n specfyng the permssbe deductons
from ncome, enumerates: (8) reasonabe aowance for the e hauston, wear
and tear of property used n the trade or busness, ncudng a reasonabe a-
owance for obsoescence. The Revenue ct n force n 1917 authorzed no
aowance for obsoescence. It was stpuated that pettoner s oss n assets
from obsoescence durng the frst three months of 1918 was 53,122.42 and
that pettoner s ta abe net ncome for the entre fsca year, wthout any de-
ducton for obsoescence, was 55,000.37. Itacs supped.
Rates.
anuary 15, 1931.
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351
205, rt. 1622.
Pettoner contends that through the method adopted ts ta for the 1917
porton of the fsca year was computed on one net ncome and that for the
1918 porton upon another net ncome, but that the aw contempated but a
snge return of ncome that made n 1918 for the entre fsca year that
secton 205(a) and secton 835(a) refer ony to the rates of ta aton app-
cabe to the severa perods and not to the net ncome whch, t s contended,
most be the same for each of the caendar years nto whch the fsca year
fe.
The queston must be answered by the proper constructon to be gven sec-
tons 205(a) and 335(a). The evdent purpose of the sectons was to pace
on a party, as neary as mght be, the fsca year ta payers of 1917-18 and the
ta payers for the caendar year 1917.
Pettoner has cted varous sectons of the revenue aw to ndcate that
the ta payer s requred to make ony one return for the year, whether fsca
or caendar. Generay speakng, ths s true. ut these anaoges do not
materay assst n determnng the true ntent and scope of the sectons n
queston. What ther mport s must be gathered, f possbe, from the words of
the secton and ther conte t. The words, computed under Tte I of the
Revenue ct of 1916 as amended by the Revenue ct of 1917 and under
Tte I of the Revenue ct of 1917, are not mted n ther appcaton to
rates of ta aton as specfed n those cts. Tte I of the 1916 ct s broady
ncusve. It not ony f es the rates of ta aton, but prescrbes, nter aa, the
sub|ect matters of ta aton, and the aowabe e emptons, deductons, and
credts. Tte I of the Revenue ct of 1917 made radca changes n the
rates prescrbed n the ct of 1916, and when secton 205 of the 1918 ct
empoyed the words computed under Tte I, etc., wthout mtng ther
appcaton, we see no reason for confnng them to rates ony.
To compute the ta under the aw of 1917 mpes that the computaton be
made as t woud be n case the 1918 ct had not been passed. If there
were e emptons or other deductons permssbe under revenue aws n
force n 1917, but not under a subsequent ct, a computaton under the aw
of 1917 woud requre them to be deducted n computng net ncome. If the
subsequent aw aowed deductons whch were not aowabe n 1917, a
computaton of the ta under the aw of 1917 woud not admt of ther beng
deducted from ncome.
That the word computed as empoyed In ths connecton s genera, and
not restrcted merey to rates, has confrmaton from ts use n the very ne t
cause of the secton, whch deas wth the ta for the 1918 porton of the
fsca year. There t s stated: computed under ths tte at the rates for
the caendar year 1918. ut to have omtted the words at the rates
woud scarcey have atered the sense of ths cause, snce the words com-
puted under ths tte woud have ncuded the rates as we as a other
provsons of those cts whc bear on the amount of the ta .
The reguaton of the Treasury Department adopted shorty after the passage
of the 1918 ct provded that so much of the ta for a fsca year fang
wthn these two caendar years as Is attrbutabe to the year 1917 s found
by computng the ncome of the ta payer and the taw thereon n accordance
wth the statutes of 1916 and 1917 then n force, and that whch s attrb-
utabe to 1918 n accordance wth the 1918 ct (artce 1622, Reguatons 45)
and a smar rue was made respectng computaton of e cess profts ta es.
Whe ths reguaton s n no sense a bndng constructon of the sectons, t
s umnatng as ndcatng how the secton was construed by the Department
whch bas the wdest e perence wth edera ta aton.
In the Revenue ct of 1924, n provdng for a smar stuaton, the an-
guage empoyed was, the same proporton of a ta for the entre perod,
determned wder te aw appcabe to the frst caendar year and at the rates
for such year, . (Secton 207(a).) Pettoner nssts that ths
change ndcates congressona recognton that the 1918 ct was ackng n
those respects wheren the 1924 ct made defnte provson whe respondent
mantans that the ater ct was but a carfcaton of the former and a further
manfestaton of ts ntent. We are satsfed that there s no essenta dffer-
ence n the effect of the two. It s evdent that from the tme of adopton
of the 1918 ct ths contenton arose as to ts meanng and whe the ater
ct can not serve to construe or broaden the frst, the manfest ntent of the
former w not be narrowed or mted because of the cearer and more
defnte statement of the same Intent n the ater ct.
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212, rt. 23.
352
udca decsons afford but tte ght on the specfc queston. The oard
of Ta ppeas, n ts opnon heren, propery dstngushed the case of T. .
ard Gran Co. v. ar (25 . (2d), 536), upon whch pettoner paces much
reance. The queston there was whether a method of speca assessment of
corporate ta es as specfed n the 1918 ct was appcabe to a return for an
entre fsca year begnnng n 1917 and endng n 1918. The pettoner there
contended that the speca assessment method shoud be apped ony to the
1018 porton of the ta for the fsca year. The court, as we as the oard
of Ta ppeas, hed otherwse, as there was no provson n the 1918 ct for
appyng the speca assessment to a part ony of a fsca year. (Offesby Coa
Co. v. Com. Int. Rev., 18 . T. ., 1245.)
We are satsfed that a proper concuson was here reached, and the udgment
s affrmed.
S CTION 206. C PIT L G IN.
rtce 1651: Defnton and ustraton of capta
net gan.
R NU CT O 1 21.
Property hed by rea estate deaer for more than two years. (See
I. T. 2555 page 306.)
btce 1651: Defnton and ustraton of capta net gan.
R NU CT O 1921.
Sae of royates payabe n knd under ease of o property.
(See Ct. D. 294, page 223.)
P RT II. INDI IDU LS.
S CTION 212. N T INCOM O INDI IDU LS
D IN D.
rtce 23: ases of computaton. -3 4905
Ct. D. 270
ncome ta revenue act of 1916 decson of supreme court.
1. Returns ccrua ass.
corporaton that enters on ts books accounts payabe and
accounts recevabe and uses nventores n the determnaton of
ncome keeps ts books of account on an accrua bass and ts
returns must be fed on that bass under secton 13(d) of the
Revenue ct of 1916, as true ncome can not be arrved at on the
bass of cash recepts and dsbursements.
2. Deducton ccbua ass Muntons Manotactumbw Ta .
Where a corporaton keeps ts books on the accrua bass the
muntons manufacturers ta mposed by the Revenue ct of 1916,
whch was due and pad n 1917 but was attrbutabe to the pro-
ducton of ncome n 1916, s not deductbe from gross ncome n
1917.
3. Decsons ffrmed.
The decsons of the dstrct court (24 ed. (2d), 230) and the
crcut court of appeas (31 ed. (2d), 669) affrmed.
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353
212, rt. 23.
Supreme Coubt of the Unted States. No. 7. October Tebm, 1930.
The umnum Castngs Co., pettoner, v. Car . Routzahn, Indvdua y and
as Coector of Interna Revenue.
On wrt of certorar to the Unted States Crcut Court of ppeas for the Sth Crcut.
November 24, 1930.
Mr. ustce Stone devered the opnon of the court.
Pettoner, a manufacturer of meta castngs brought sut n the Dstrct
Court for Northern Oho to recover ncome and e cess profts ta es assessed and
pad for the caendar year 1917. ght to recover was asserted on the soe
ground that a muntons ta eved under Tte III of the Revenue ct of 1916
(ch. 463, 39 Stat, 756, 780), whch became due and was pad by pettoner n
1917, was correcty deducted from gross ncome n pettoner s ta return for
that year. The Commssoner, re|ectng ths contenton, deducted the ta
from gross ncome for 1916, the year when t accrued (see Unted States v.
nderson, 269 U. S., 422 T. D. 3839, C. . -, 179 ), and coected a corre-
spondngy ncreased ncome and profts ta for 1917, whch s nvoved n the
present sut.
The dstrct court, fndng that pettoner kept ts books and fed ts ta
returns for 1916 and 1917 on the accrua bass. gave |udgment for the Gov-
ernment (24 . (2d), 230), whch the Court of ppeas for the S th Crcut
affrmed (31 . (2d), 669). oth courts hed, on the authorty of Unted
States v. nderson, supra, that as the books were kept and returns made on
the accrua bass, the muntons ta whch accrued n 1916 coud not be de-
ducted n the return for 1917.
Pettoner s returns for 1916 and 1917 were made after the effectve date of
sectons 12(a), 13(b), and 13(d) of the evenue ct of 1916 (eh. 463, 39 Stat.,
767, 771). The ct mposes a ta on net ncome and profts ascertaned, as
provded by secton 12(a), by deductng from gross ncome e penses, nterest
and ta es pad, and osses sustaned, durng the caendar year. Secton 13(d)
provdes that corporaton keepng accounts upon any bass other
than that of actua recepts and dsbursements, uness suc other bass does
not ceary refect ts ncome, may, sub|ect to reguatons made by the Com-
mssoner of Interna evenue, wth the approva of the Secretary of the
Treasury, make ts return upon the bass upon whch ts accounts are kept, n
whch case the ta sha be computed upon ts ncome as so returned.
Pettoner, n response to an nqury on the form for the 1916 return, stated
that t was made on the bass of actua recepts and dsbursements, a state-
ment whch t repeated n the 1917 return wth the quafcaton that s
and accounts payabe and recevabe are treated as recepts and dsburse-
ments. In both returns, bs and accounts, payabe and recevabe, n fact
were treated as actua recepts and dsbursements and both were based on
nventores taken at the begnnng and end of the ta abe year. The mun-
tons ta deducted n the 1917 return frst appeared on the ta payer s books
n that year.
Pettoner contends that ts returns were made as cash recepts and ds-
bursements returns under secton 12(a) and not under secton 13(d), and
that snce by secton 12(a) ta es are requred to be deducted ony n the year
when pad, ts muntons ta was rghty deducted n the 1917 return. In
support of ths contenton, t s ponted out that secton 12(a) of the 1916 ct
does not dffer materay from correspondng provsons of the evenue cts of
1909 and 1913 (Corporaton cse Ta ct of ugust 5, 1909, ch. 6, sec. 38, 36
Stat.. 11, 112 Corporaton Income Ta ct of October 3, 1913, ch. 16, sec. II,
subdvson G, 38 Stat., 114, 172), and as pettoner s returns for 1916 and 1917
woud have been authorzed under these earer cts, and Treasury reguatons
suppementng them, t s argued that pettoner s rght to deduct ta es when
pad was not atered by the addton to the revenue aws, n the 1916 ct, of
secton 13(d), whch merey gave to the ta payer an opton, not avaed of by
pettoner, to make a return on the accrua bass.
Ths argument s, n substance, that consdered and re|ected by the court In
Unted States v. nderson, supra, page 439. There, as here, the ta payer s
return for 1917 computed Income on the bass of nventores and accrued tems,
payabe and recevabe, appearng on the ta payer s books of account for that
year, but deducted from gross ncome the muntons ta , pad n 1917, whch
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212, rt. 23.
354
had accrued the year before. The return, as made, woud have been per-
mssbe under the Revenue cts precedng that of 1918 but t was hed that
under that ct the ta was requred to be deducted n the year when t accrued.
Secton 12(a) of the 1916 ct, ke ts prototypes In the earer egsaton,
deas ony wth the deducton from gross ncome of amounts pad out or osses
sustaned. None of them, n terms, permtted the deducton of accounts pay-
abe or made any provson for the use of Inventores n computng net ncome.
perence demonstratng that ncome derved from merchandsng and manu-
facturng busnesses coud not be computed on the bass of recepts and ds-
bursements aone, Treasury reguatons were promugated requrng the use
of nventores n proper cases, and permttng the deducton of accounts pay-
abe when accounts recevabe were brought nto the ncome account. (Treas-
ury Reguatons 31, December 3, 1909, under the ct of ugust 5, 1909 33,
anuary 5, 1914, under the ct of October 3, 1913.)
ut ths acton of the Department, born of necessty In order to arrve at the
Income of certan busnesses, was nether a cassfcaton nor an rrevocabe
desgnaton of Items recevabe and payabe as cash recepts and dsbursements.
though the reguatons suppemented the provsons of the statute by provd-
ng for a dfferent method of computng ncome, they dd not ater the meanng
of ts words, or precude acceptance of them at ther face vaue when reenacted
n a new egsatve settng. Cassfcaton took pace when secton 13(d) was
substtuted for e stng Treasury reguatons,1 and broady authorzed returns
under It by ta payers keepng accounts upon any bass other than that of
actua recepts and dsbursements, a phrase whch, n the ght of the egs-
atve hstory, pany ndcates that the returns contempated by secton 13(d)
were to be deat wth as a separate cass, dstnct from those based on actua
recepts and dsbursements aone descrbed by secton 12(a).
y these sectons te tng of a return under secton 13(d), where the ta -
payer s abe to compy wth ts requrements, s optona f he s aso abo to
prepare a return on the bass of actua recepts and dsbursements whch re-
fects true ncome. ut notwthstandng the opton gven ta payers, t s the
purpose of the ct to requre returns that ceary refect ta abe ncome.
(Unted States v. Mtche, 271 U. S., 9, 12 T. D. 3885, C. . -, 233 .) y sec-
ton 13(b) of the 1916 ct, whch was new, the return In every case Is requred
to state such data as are approprate and n the opnon of the Commssoner
necessary to determne the correctness of the net ncome returned and to carry
out the provsons of ths tte. It foows that the return must be fed on the
accrua bass under secton 13(d), where true ncome can not be arrved at on
the bass of actua recepts and dsbursements. (See Unted States v. nderson,
supra, pages 437, 440.) ny other constructon of sectons 12(a) and 13(d)
woud dsregard the requrement of secton 13(b) and the domnatng purpose
of the ct, by enabng the ta payer to fe a return whch dd not refect true
ncome. (See Unted States v. Mtche, supra, pages 12, 13.) It was n
recognton of ths, and n compance wth secton 13(b), that Treasury De-
cson 2433, anuary 8. 1917, provded wth respect to returns made under
sectons 12(a) and 13(d) :
Ths rung contempates that the ncome and authorzed deductons sha
be computed and accounted for on the same bass and that the same practce
sha be consstenty foowed year after year.
Ths rung antedated pettoner s 1916 and 1917 returns, and obvousy gross
ncome and deductons n ts returns were not accounted for on the same
bass. Its ncome for 1917 coud not be ascertaned by deductng from gross
ncome, ncudng recevabes, some tems of cost and e pense, attrbutabe to
the producton of 1917 ncome, whch accrued but were not pad n that year,
and the muntons ta , whch was pad n 1917, but whch accrued and was
attrbutabe to the producton of ncome n 1916.
1 Pendng the adopton of reguatons appcabe to the ct of 1916, Treasury Decson
2867, September 14, 1910, contnued e stng reguatons n force ony so far as not ncon-
sstent wth the provsons of the 1916 ct. New reguatons appcabe to sectons 12(a)
and 13(d), adopted n Treasury Decson 2433, anuary 8, 191T, before pettoner fed Its
1916 and 1917 returns, are consdered nfra, page 4.
The report of the Commttee on Ways and Means ( ouse Report No. 922, S ty-fourth
Congress, frst sesson, page 4) states wth reference to the ncome ta provsons of the
Revenue ct of 1916:
s two systems of bookkeepng are n use n the Unted States, one based on the cash
or recept bass and the other on the accrua bass, t was deemed advsabe to provde n
the proposed measure that an ndvdua or corporaton may Drake return of ncome on
ether the cash or accrued bass, f the bass seected ceary refects the ncome.
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355
213(a), rt. 31.
Pettoner, reyng on the decaratons n ts returns that they were made on
the bass of actua recepts and dsbursements, contends that for that reason
they must be deemed made under secton 12(a) and not under secton 13(d).
ut whether a return s mude on the accrua bass, or on that of actua recepts
and dsbursements, s not determned by the abe whch the ta payer chooses
to pace upon t. The use of nventores, and the ncuson n the returns of
accrua tems of recepts and dsbursements appearng on pettoner s books,
ndcate the genera and controng character of the account (Nes ement
Pond Co. v. nted States, 281 U. S., 357, 360 Ct D. 185, C. . I -1, 295
Unted States v. nderson, supra, pages 442, 443), and support the fndng of
the tra court that books and returns were on the accrua bass. The record
does not dscose that pettoner offered to make a return for 1917 on the bass
of actua recepts and dsbursements, or that t coud have done so. It was,
therefore, competent for the Commssoner to correct the return for 1917, to
conform t to the system of accountng n fact adopted, by e cudng from t the
muntons ta whch had accrued n 1916. whether appearng on the books for
that year or not. ( nted States v. mercan Can Co., 280 U. S., 412 Gt. D.
164, C. . I -1, 292 Unted States v. nderson, supra Nes ement Pond
Co. v. Unted States, supra.)
ffrmed.
S CTION 213(a). GROSS INCOM D IN D:
INCLUSIONS.
rtce 31: What ncuded n gross ncome. -25-5114
Ct. D. 352
ncome ta revenue act of 1918 decson of supreme court.
Income empton Member of Osaoe Tbbe op Indans O
and Gas Leases.
duy enroed member of the Osage Trbe of Indans, hodng
a certfcate of competency, s not e empt from ta under the
Revenue ct of 1918 on ncome from shares n the trba ncome
from o and gas eases made by the trbe under the ct of une 28,
.)06, on ands aotted to ts members.
Supreme Court of the Unted States. No. 81. October Perm, 1930.
enry Choteau, pettoner, v. Davd urnet, Commssoner of Interna Revenue.
On wrt ot certorar to the Unted Stntea Crcut Court of ppeas for the Tenth Crcut.
May 25, 1931.
Mr. ustce Roberts devered the opnon of the court.
The pettoner s a member of the Osage Trbe of Indans, duy enroed as
such under the ct of une 28, 1906,1 and hods a certfcate of competency
ssued March 5,1910, pursuant to that ct. e owns hs own orgna aotment
of the trba ands, and has nherted from a deceased member a one-haf
nterest n the atter s aotment, but nothng n ths case turns on hs owner-
shp of these ands. e aso owns hs own orgna share n the trba revenues,
and, by nhertance from a deceased member, one-haf of the nterest n those
revenues, to whch that member woud be entted f vng.
In the years 1918, 1919, and 1920 pettoner s entre ncome was receved from
these 1 shares n the trba ncome from o and gas eases made by the trbe
under the authorty of the ct. These eases were on a porton of the ands
bought by the Unted States wth money beongng to the trbe, thereafter
hed n trust for t, and subsequenty aotted to ts members as drected by the
ct. ut n the dvson or aotment of the trba ands the o, gas, and other
mneras theren were e pressy reserved to the trbe for a perod of 25 years,
now e tended to pr 8, 1958.1 Provson was made for the easng of such
C. 3572, 34 Stat., 589.
Secton 3, ct of 1906, supra.
45 Stat., 1478.
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213(a), rt. 31.
356
mneras by the trba counc, wth the approva of the Secretary of the
Interor, 1 and the ncome from such eases s to be paced n the Treasury of
the Unted States to the credt of the members of the trbe and dstrbuted
among them quartery.5 Ths was the source of the pettoner s ncome.
The pettoner pad ncome ta es n each of the years mentoned. Upon the
recept of a defcency etter from the Commssoner of Interna Revenue he
nsttuted a proceedng before the oard of Ta ppeas n whch he camed
that he owed no defcences, but was entted to a refund of the amounts there-
tofore pad because he was e empt from ncome ta on the sums receved. The
oard s decson was for respondent, and was affrmed by the crcut court of
appeas.1 Ths court granted certorar.
The pettoner urges severa arguments n support of the cam that he s not
abe for ta under the Revenue ct of 1918. These may convenenty be
grouped nto two man contentons: rst, that the statute evdences no ntent
to ta pettoner on such ncome, and, second, that f ts anguage s broad
enough to cover hs case, hs status or the nature of the ncome, requres a
hodng that he s e empt.
The anguage of sectons 210 and 211(a) sub|ects the ncome of every n-
dvdua to ta . Secton 213(a)10 ncudes ncome from any source what-
ever. The ntent of Congress was to evy the ta wth respect to a resdents
of the Unted States and upon a sorts of ncome. The ct does not e pressy
e empt the sort of ncome here nvoved, nor a person havng pettoner s status
respectng such ncome, and we are not referred to any other statute whch
does.
ut t s sad that as to the ncome here ta ed pettoner s e empt because
of hs status as an Indan. Ths asserton requres a reference to the pocy of
the Government wth respect to the Indans. No provson n any of the treates
referred to by counse has any bearng upon the queston of the abty of an
ndvdua Indan to pay ta upon ncome derved by hm from hs own prop-
erty. The course of egsaton dscoses that the pan of the Government has
been graduay to emancpate the Indan from hs former status as a ward to
prepare hm for compete ndependence by educaton and the gradua reease of
hs property to hs own ndvdua management. Ths pan has ncuded mpos-
ng upon hm both the responsbtes and the prveges of the owner of prop-
erty, ncudng the duty to pay ta es.11 Pursuant to ths pocy the ct of 1006
drected the aotment to each member of the Osage Trbe of a homestead of 1GO
acres to be chosen by hm, whch was to be naenabe and nonta abe for 25
years or durng the fe of the aottee. fter settng apart such homestead to
each, the surpus ands were a to be equay dvded and aotted amongst the
members. Secton 2, seventh, of the ct provdes that the Secretary of the In-
teror, after due nvestgaton, may ssue certfcates of competency to members
of the trbe. It decares that upon the ssuance of such certfcate of com-
petency the ands of such member (e cept hs or her homestead) sha become
sub|ect to ta aton, and such member (wth e ceptons not here matera) sha
have the rght to manage, contro, and dspose of hs or her ands the same as
any ctzen of the Unted States.
Snce 1910, when he receved hs certfcate, pettoner has therefore been
ta abe upon hs aotted a.nds. e cept hs homestead, and they have been
freey aenabe.
Secton 3, ct of 190 , supra.
Secton 4, am and second, and secton 6, ct of 1906, supra.
14 . T. ., 1254.
38 . (2d). 976.
281 U. S 714.
40 Stat., 1062.
40 Stat., 1065. _
See Unted Mates v. . ce (241 T . S..S01, 598) Unted States v. TTafcr (243 . S.,
452, 459) McCunfu v. Unted States (246 . S., 263, 269) : Shaw v. ( I Corporaton
(276 U. 8., 575, 579). , .
Secton 4 ot the ct of ebruary 27, 1925 (ch. 359, 43 Stat, 1008), authorzes the
revocaton of a certfcate hed bv one of more than one-haf Indan bood, f the Secretary
of the Interor sha fnd that the hoder s squanderng or msusng hs or her funds.
The revocaton s not to affect the egaty of any transactons theretofore made by
reason of the ssuance of a certfcate, and a debts e stng at the tme of revocaton are
to be pad by the Secretary or hs representatve out of the ncome of the member. Ths
secton has no bearng upon the present case.
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357
213(a), rt. 36.
There are provsons n the ct of 1906 wth respect to the hodng, payment
and admnstraton of the royaty shares of members who do not have certfcates
of competency, but wth these we are not concerned. The shares of royaty of
those hodng such certfcates are to be pad to them quartery.
The pettoner, then, was competent to hod and make any use (e cept to
grant mnng eases) of a hs ands. e cept hs homestead were ta abe,
and were freey aenabe wthout contro or supervson of the Government.
s share of the royates from o and gas eases was payabe to hm, wthout
restrcton upon hs use of the funds so pad. It s evdent that as respects hs
property other than hs homestead hs status s not dfferent from that of any
ctzen of the Unted States. In the process of graduay changng the reaton
Iwtween the Indan and the Government he has been, wth respect to the ncome
In queston, fuy emancpated. (Compare Unted States v. Waer, supra.) It
s true, as pettoner asserts, that as to hs homestead he st remans a re-
strcted Indan. ut ths fact s ony sgnfcant as evdencng the contrast
between hs quafed power of dsposton of that property and hs untrammeed
ownershp of the ncome n controversy. The atter was ceary beyond the
contro of the Unted States. The duty to pay t nto pettoner s hands, and
hs power to use t after It was so pad, were absoute. (Work v. Moser, 261
U. 8., 352 Work v. Lynn, 266 U. S., 161.) The cam that wth respect to
ths ncome the pettoner was restrcted, and therefore e empt from the ta
ad by sectons 210 and 211(a) must fa.
It remans to consder whether there s anythng n the nature of the ncome
tsef makng t necessary to e empt t from the broad anguage of the Revenue
ct. It s suggested by pettoner that the sums receved were gfts and not
ncome. In vew of the facts above rected ths argument s wthout substance.
It s further nssted that snce the royates are not ta abe, so ong as they
reman n the hands of the Government n trust for the trbe and undstrbuted
to members, ncome erved by the ndvdua member from ths fund comes
from an e empt source and must therefore aso be hed to be e empt. (See
Poock v. armers Loan f Trust Co., 157 U. S., 429 158 U. S., 601.) Royates
receved by the Government from mnera eases of Indan hnds have been hed
to be beyond a State s ta ng power (Gespe v. Okahoma, 257 U. S., 501
Shaw v. Of I Corporaton, supra) on the ground that, whe n the possesson
of the Unted States they are a edera nstrumentaty, to be used to carry
out a governmenta purpose. It does not foow, however, that they can not be
sub|ected to a edera ta . The ntent to e cude must be defntey e pressed,
where, as here, the genera anguage of the ct ayng the ta s broad enough
to ncude the sub|ect matter. ( ener v. Coona Trust Co., 275 U. S., 232 T.
D. 4112, O. . II-1, 207 Shaw v. O Corporaton, supra.) ut whatever
may have been the abty of the fund to edera ta aton whe t remaned
n the hands of the Government, t can not propery be sad that the share of t
pad as royates to the pettoner consttuted n hs hands an nstrumentaty of
the Government and was therefore beyond the scope of the ta . (Compare
McCurdy v. Unted States, supra.) There s, therefore, nothng n the nature
of the ncome whch e cepts t from the effect of secton 213(a) of the Revenue
ct of 1918.
ffrmed.
rtce 36: Long-term contracts. -13-5000
Ct. D. 305
INCOM T R NU CT O 1918 D CISION O COURT.
Income Long-Tebm Contracts Method of Returnng Income
ecton.
Where persons engaged n contractng operatons e tendng over
a perod of a year eect to report ncome from an uncompeted con-
tract n the frst year of operatons by the estmated percentage
of profts method, pursuant to the provsons of artce 36 of Regu-
atons 45, reatng to the ncome ta , they are bound by the eec-
ton and ncome from the contract n subsequent years must be
reported by the same method.
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213(a), rt. 36.
358
Dstrct Court of the Unted States for the Western Dstrct of Mssour,
Southwestern Dvson.
. L. hands, pamtff, v. Noah Crooks, Coector of Interna Revenue,
defendant.
December 27, 1980.
opnon.
Pantff brngs ths sut to recover 6,708.75 aeged by hm to have been
egay assessed and coected as ncome ta for the year 1920.
Pantff and another were partners engaged n the contractng busness
and as such had n 1919 a contract (t was a subcontract but I thnk that tact
does not affect the queston here) for budng a certan meage of roadway
n the State of rkansas. The contract provded for payments on monthy
estmates wth a 15 per cent retanage on a estmates to nsure the competon
of the contract.
Work was commenced on ths contract n the mdde of the year 1919 and
contnued unt December, 1920, when the partnershp was notfed to cose
work chefy for the reason that the road dstrct was out of funds and coud
make no further payments. The payments for the months of September.
October, and November n 1920 had been n amounts ess than were caed for
by the terms of the contract. These defcences pus the 15 per cent retanage
were then due, but t was uncertan whether they woud be pad or pad n
fu. Ltgaton, not determned unt n 1922, was necessary. That tgaton
resuted n a |udgment, probaby for the fu amount camed, but consderaby
ess than one-haf of the |udgment has been pad.
ecause of the deveopment (wth respect to the probabe dscontnuance
of the contract ) begnnng n September, 1920, and cumnatng wth the cessa-
ton of work n December, the partnershp (and consequenty the ndvdua
partners, ncudng ths pantff) made no return of ncome for the year 1920
on account of ths contract. or the year 1919 the partnershp (and the pan-
tff as to hs ndvdua ncome) reported and was ta ed upon ts estmated
ncome from ths contract, havng eected that course pursuant to the provsons
of secton 36 of artce 45 of the reguatons artce 86 of Reguatons 45 .
Secton 36 s as foows:
Long-term contract . Persons engaged n contractng operatons, who have
uncompeted contracts, n some cases perhaps runnng for perods of severa
years, w be aowed to prepare ther returns so that the gross ncome w
be arrved at on the bass of competed work that s, on |obs whch have
been fnay competed any and a moneys receved n payment w be
returned as ncome for the year n whch the work was competed. If the
gross ncome s arrved at by ths method, the deducton from such gross
ncome shoud ncude and be mted to the e pendtures made on account
of such competed contracts. Or the percentage of proft from the contract
may be estmated on the bass of percentage of e pendtures, n whch case
the ncome to be returned each year durng the performance of the contract
w be computed upon the bases of the e penses ncurred on such contract
durng the year that s to say, f one-haf of the estmated e penses necessary
to the fu performance of the contract are ncurred durng one year, one-haf
of the gross contract prce shoud be returned as ncome for that year. Upon
the competon of a contract f t s found that as a resut of such estmate
or apportonment the ncome of any year or years has been overstated or
understated, the ta payer must fe amended returns for such year or years.
My vew s that the pantff s bound by the method that was eected as to
ths ong-term contract and that the return made for the year 1920 shoud
have been made upon that bass. That was the vew of the coector. That
vew was confrmed by the oard of Ta ppeas when ths same matter was
presented to t (10 . T. ., 1089.) The accrua method of accountng
requres that at the end of every accountng perod a ncome whch has been
earned durng the perod must be accounted for as ncome accrued n that
perod, though perhaps not coected, . ( ppea of Owen, tnes
mba Co., 5 . T. ., 921. 928.)
ach of the two methods provded for n secton 36 has certan advantages
and dsadvantages from the ta payer s standpont. The frst by whch ncome
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359
213(a), rt. 40.
s returned n that year when a ong-term contract s competed and fna pay-
ment s made, defers the mposton and coecton of the ta unt there s
certanty the ncome w be reazed but t may resut n a hgher rate than f,
under the second method, the ncome n each of the years durng whch the
contract contnues s estmated on the percentage bass. The adopton of the
second method, on the other hand, nvoves the eement of uncertanty as to
fu utmate reazaton on the contract. It s to be noted, however, that the
effect of ths dsadvantage nherent n the second method may be avoded
upon the competon of the contract by the fng of an amended return.
ut that reef must be had n the manner provded for and may not be gven
here.
The defendant shoud have |udgment. pproprate fndngs and decree may
be submtted for approva and entry.
rtce 40: Sae of patents and copyrghts. -5-4921
G. C. M. 8896
R NU CT OP 1918 ND PRIOR R NU CTS.
The ta payer, a foregn corporaton, assgned Unted States
patent rghts n 1905 for a consderaton, part of whch was pad
In cash and the baance was to be pad n 18 equa annua nsta-
ments begnnng n 1906, wth the provson that after May ,
1918, the baance, ess 5 per cent per annum, shoud become due
upon demand. agreements were performed, ncudng payment
of baance due on demand after May , 1918, dscounted at 5
per cent.
ed, the capta of the ta payer on March 1, 1913, conssted of
the rght to receve the then remanng unpad baance of the
purchase prce, and as respects each nstament the dfference
between the March 1, 1913, vaue of the rght to receve the same
and the amount actuay receved consttuted ncome sub|ect to ta ,
and beng ncome from property n or from sources wthn the
Unted States (because ncome from mercan patents), t s
ta abe to the foregn corporaton under the varous Revenue cts
nvoved.
n opnon s requested whether any porton of the moneys re-
ceved by the ta payer from the M Company s ta abe under the
foowng crcumstances:
In 1905 the N Company, a corporaton organzed and e stng
under and by vrtue of the aws of a foregn country, herenafter
referred to as the ta payer, owned vauabe Unted States etters
patent and appcatons for etters patent. The M Company, a
corporaton organzed and e stng under the aws of the State of
Y, desred to acqure tte to the aforementoned etters patent and
appcatons for etters patent.
In consderaton of the sum of 20.5a doars, 2.5a doars of whch
was pad n cash, and the baance to be pad n 18 equa annua
nstaments of doars each, the frst nstament to be pad on
May , 1906, the ta payer assgned and set over to the M Company,
ts successors and assgns, a rght, tte, and nterest n sad etters
patent and appcatons for etters patent at that tme owned or
to be acqured by the ta payer durng the term of 18 years from the
date of the agreement. s securty for the payment of the purchase
prce but not as a substtute therefor, the M Company agreed to hod
the tte acqured sub|ect to the payment of the baance due. It
was aso agreed that n the event of nonpayment of any nstament
contnung for 30 days after notce, the tte conveyed and a rghts
72109 31 24
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213(a), rt. 40.
3G0
acqured by the M Company shoud revert to the ta payer and
upon demand the company woud assgn such rghts to the ta payer.
It was further agreed that after May , 1918, f the ta payer gave 60
days notce to the M Company, the baance of the purchase prce,
ess 5 per cent per annum, shoud become due.
agreements were performed to the mutua satsfacton of the
partes. The M Company made a payments up to and ncudng
the year 1916 to the ta payer. The amounts due n 1917 and 1918,
as we as the baance due after May , 1918, dscounted at 5 per
cent n accordance wth the terms of the agreement, were pad to the
en Property Custodan as provded n the Tradng wth the
nemy ct.
The ta payer contends that no porton of the moneys receved
consttutes ta abe ncome that the payments made subsequent
to the enactment of the Revenue ct of 1913 were merey deayed
payments of the purchase prce of a baance due n 1905. In sup-
port of ths contenton, ta payer rees on the case of Saunders v.
Commssoner of Interna Revenue (29 ed. (2d), 834). In that
case Saunders, the ta payer, an empoyee of the Natona Tube Co.,
n 1911 nvented a ppe-drawng apparatus and made appcaton
for a patent thereon. The same day he assgned to the Natona
Tube Co. the e cusve rght to hs nventon, as we as any etters
patent that woud be ssued for sad nventon n the Unted States.
When the assgnment was made the ta payer understood that he
woud be pad for the same, the amount to depend upon future
crcumstances. Due to certan nterferences whch ed to tga-
ton, the patent was not granted unt 1918. In September, 1920,
the ta payer receved, as fu compensaton for hs nventon, the
sum of 25,000. The ureau contended that the 25,000 was ta -
abe ncome for the year n whch t was receved and the oard of
Ta ppeas so hed. (See /Saunders v. Commssoner, 11 . T.
., 201.) The ta payer appeaed the case to the Crcut Court
of ppeas, Thrd Crcut, and contended that the 25,000 receved
n 1920 was n payment of the amount whch the Natona Tube
Co. had agreed to pay n 1911. The court ponted out that The
contenton of the Ta oard s that the 25,000 was
ta abe ncome of Saunders for the year 1920. The court hed:
That when Saunders receved the 25,000 n 1920, he was recevng,
not ncome for that year, but the purchase prce of capta sod n 1911.
Thus the 25,000 was hed not to consttute ta abe ncome for the
year 1920.
It does not appear that the court consdered the possbty that
the obgaton owned by the ta payer on March 1, 1913, was of a
vaue ess than the amount receved by the ta payer n 1920 and that
the dfference shoud be treated as ncome, as was done n the case
of Patt v. owers, Interna Revenue Coector (13 ed. (2d), 951).
The fact that ths possbty was gnored docs not |ustfy the con-
cuson that, under the decson rendered n the Saunders case, no
part of the moneys receved by the ta payer n the nstant case, sub-
sequent to the enactment of the Revenue ct of 1913, s ta abe.
In the case of rancs S. osmer v. Commssoner (25 ed. (2d),
87), the Seventh Crcut, n affrmng the case of Ruth Iran Co. et
ah, pettoner, v. Commssoner of Interna Revenue, respondent
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361
213(a), rt. 50.
(4 . T. ., 1151), hed that the amount receved n 1921 and 1922
n payment of nonnterest-bearng notes receved for property sod
n anuary, 1913, s ta abe ony on the e cess of the amount re-
ceved over the March 1, 1913, vaue of the notes. The notes were
secured by a mortgage on the property and payment was guaranteed
by another corporaton. See aso the case of Ruth Iron Co. v. Com-
mssoner (26 ed. (2d), 30), n whch the ghth Crcut reached
the same concuson, and compare dredge v. Unted States (31 ed.
(2d), 924).
In the nstant case the annua payments were produced by the
contract entered nto n 1905. The tte acqured by vrtue of the
contract was hed sub|ect to the payment of the baance due. The
tte coud be dvested ony n the event of nonpayment and then at
the opton of the ta payer. The arrangement was purey a securty
one n the nature of a purchase money mortgage and ts ega effect
was not to render the obgaton to pay the purchase prce contngent
or of an undetermnabe vaue. y reason of the arrangement the
obgaton was a secured one and hence more vauabe and more
certan than otherwse. The ta payer e changed ts nterest n the
etters patent and appcatons for etters patent for the rght to
receve a certan amount of money. There was an e change of
property for property, a competed transacton, and therefore the
capta of the ta payer on March 1, 1913, conssted of the rght to
receve the then remanng unpad baance of the purchase prce.
It coud not be successfuy contended that the rght to receve an
doars payment on May , 1914, or the rght to receve 5 doars
on May , 1918, woud be worth doars or o doars on
March 1, 1913. In the nstant case, as respects each nstament,
the dfference between the March 1,1913, vaue of the rght to receve
the same and the amount actuaty receved consttutes ncome sub|ect
to ta , and beng ncome from property n or from sources wthn
the Unted States (because ncome from mercan patents) t s
ta abe to the ta payer (a foregn corporaton) under the varous
Revenue cts nvoved.
C. M. Carst,
Genera Counse, ureau of Interna Revenue.
btc e 50: orgveness of ndebtedness. -24-5107
Ct. D. 348
INCOM T R NU CT O 1921 D CISION O COURT.
1. Income Reef op Contngent Labty.
Where a essee makes a depost for the fathfu performance of
a ease whch provdes that the amount thereof be retaned by the
essor unt the competon of the term n and the property
sub|ect to the ease s sod to the ta payer, the depost beng cped-
ted upon the purchase prce and the ta payer assumng the ob-
gaton to repay the same upon e praton of the ease and subse-
quenty the ta payer and the essee enter nto an agreement by
whch the ease s canceed and the essee n consderaton thereof
renqushes to the ta payer aU nterest n the depost, the essee s
reease of hs nterest theren resuts n ncome to the ta payer n
the amount of the depost where there s no proof that the ta -
payer suffered a oss by reason of the termnaton of the ease.
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213( ), rt 50
362
2. Decson Reversed.
The decson of the oard of Ta ppeas (17 . T. ., 196)
reversed.
Unted States Crcut Court of ppeas, for the Seventh Crcut. No.
4403. October Term, 1930, anuary Sesson, 1031.
Commssoner of Interna Revenue, pettoner, v. Langtce Rea state Cor-
poraton, respondent.
Petton for revew of decson of Unted States oard of Ta ppeas.
efore schter. vans, and Sparks, Crcu udges.
March 18, 1931.
Respondent, n 1923, purchased certan Chcago rea estate whch was under
ease. The tenant, under the ease e ecuted n 1920. made a depost of
50,000 for the fathfu performance of the terms and condtons of ths
ease. The ease aso provded:
Sad sum of ffty thousand ( 50,000) doars s to be retaned by the and-
ord unt the fu and compete term of 21 years hereby demsed has been
fuy competed, renderng the same or any unused part thereof to the tenant
at the end of the sad term, provded
Nothng heren contaned sha n any way obgate the andord to
return same to the tenant unt the 31st day of March, 1941, .
Lessee was secured for the 50,000 advanced, by a en upon the property.
The depost drew nterest at 4 per cent.
Upon the conveyance of the property to respondent, 50,000 was credted upon
the purchase prce, and respondent assumed the obgaton to repay the same n
1941 upon the e praton of the ease. Subsequenty, n une, 1923, respondent
and the tenant entered nto an agreement canceng the aforesad ease. In
consderaton thereof, the tenant renqushed, assgned and transferred to
respondent a nterest n the 50,000 depost.
The Commssoner added to respondent s net ncome ths sum of 50,000 and
determned ts ta accordngy. The oard of Ta ppeas reversed the
rung of Commssoner. The Commssoner appeaed.
vans, C. .: We fnd t mpossbe to escape the concuson that upon the
tenant s reease of ts nterest n sad 50,000, respondent was enrched by that
amount. (Reguatons 62, Treasury Department, artce 50.) It was reeved
of ts obgaton to pay ths amount to the tenant at the e praton of the
ease. t the same tme and as a part of the same transacton, respondent
reeased the tenant from ts ease. Whether respondent suffered a oss by
reason of the termnaton of the ease presents another ssue, whch s not
covered by the fndngs of the oard of Ta ppeas. If respondent coud
have ready negotated another ease wth a responsbe party, as favorabe
as the ease whch was canceed, t suffered no oss. On the other hand, f t
coud not have negotated such a ease, then t suffered a oss. The amount
of such oss, f any, was the egtmate sub|ect of proof. The actua e ecuton
of a new ease was not necessary to determne ths ssue. The renta vaue
of such property coud be shown by ora testmony.
The oard of Ta ppeas stated:
It seems cear that the pettoner assumed an obgaton to pay the essee
50,000 n 1941 f a of the terms of the ease had been performed by the
essee durng ts fe. Ths obgaton, t s aso apparent, dd not stand aone,
but was baanced by a correspondng obgaton of the essee. We are not abe
to My that they dd not e acty baance, or, f not, n whose favor the scaes were
tpped. Ths beng so, when the essee and the pettoner then agreed to
cance the ease n une, 1923, t can not be sad wth any certanty whatever
that the 50,000 obgaton of the pettoner, contngent and uncertan as t
was that return need ever be made, dd not represent compensaton to the
pettoner for the oss sustaned by t on the canceaton of the ease. If so,
the amount woud not be ncome to the pettoner.
We thnk the oard was n error n assumng that a oss was sustaned
whch offset the 50,000 gan. In the absence of proof suffcent to support a
contrary fndng by the onrd of Ta ppeas, the fndng of the Commssoner
shoud have been sustaned ( very v. Commssoner, 22 . (2d), 6 T. D. 4116,
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363
5213(a), rt. 51.
C. . II-1, 155 ). The record before us does not warrant our makng a
fndng on ths ssue nor s t necessary for us so to do. (26 U. S. C. ., secton
1219 . Coa Co. D. Co. v. Commssoner, 29 . (2d), 559.)
Under a of the crcumstances, we thnk It woud be promotve of |ustce
n ths nstance to remand the case for further hearng. The ta payer shoud
be permtted the opportunty of offerng evdence to show that t suffered a
oss and aso the e tent of ts oss. If the proof be suffcent to sustan a
fndng of the amount of such oss, that sum shoud be deducted from the sad
50,000. If no such oss be estabshed, then the sum of 50,000 shoud be
Incuded as part of the ta payer s ncome.
The order of the oard of Ta ppeas s reversed wth drectons to proceed
n accordance wth the vews e pressed heren.
rtce 51: When ncuded n gross ncome. -6-4929
Ct. D. 277
ncome ta revenue act op 1918 decson of supreme court.
1. Gross Income Recovery of Losses of Prevous Years n Per-
formance of Contract.
Where a ta payer, engaged n busness for proft, acts for another
corporaton from 1913 to 1916, ncusve, n carryng out a contract
entered nto by the atter, n ts returns for those years addng to
gross ncome for each year the payments made under the contract
for that year and deductng ts e penses pad that year n perform-
ng the contract, the tota e penses e ceedng the payments and a
the returns e cept for 1914 showng a net oss, and n 1920, foow-
ng a fna |udgment n that year upon the contract compensatory
of the cost of the work, receves a sum whch ncuded the amount
by whch e penses under the contract had e ceeded recepts from
t, the amount so receved n 1920 s gross ncome for that year
wthn the meanng of secton 213(a) of the Revenue ct of 1918.
s so construed the subdvson s consttutona.
2. udgment Reversed.
The |udgment of the crcut court of appeas (35 ed. (2d),
312) reversed.
3. Decson Dstngushed.
The decson n ocers v. erbaugh- mpre Co. (271 U. S., 170
T. D. 3881, C. . -, 199 ) dstngushed.
Supreme Court of the Unted States. No. 31. October Term, 1930.
Davd urnet, Commssoner of Interna Revenue, pettoner, v. Sanford
rooks Co.
On wrt of certorar to the Unted States Crcut Court ot ppeas for the ourth Crcut.
anuary 5, 1931.
Mr. ustce Stone devered the opnon of the court.
In ths case certorar was granted (281 U. S., 707) to revew a |udgment
of the Court of ppeas for the ourth Crcut (35 . (2d), 312) reversng
an order of the oard of Ta ppeas (11 . T. ., 452) whch had sustaned
the acton of the Commssoner of Interna Revenue n makng a defcency as-
sessment aganst respondent for ncome and profts ta es for the year 1920.
rom 1913 to 1916, Incusve, respondent, a Deaware corporaton engaged
n busness for proft, was actng for the tantc Dredgng Co. n carryng out
a contract for dredgng the Deaware Rver, entered nto by that company wth
the Unted States. In makng Its ncome ta returns for the years 1913 to 1916,
respondent added to gross ncome for each year the payments made under the
contract that year, and deducted ts e penses pad that year n performng tho
contract. The tota e penses e ceeded the payments receved by 17G,271.SS.
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213(a), rt. 61.
364
The ta returns for 1913, 1915, an 1916 showed net osses. That for 1914
showed net Income.
In 1915 work under the contract was abandoned, and n 1916 sut was brought
n the Court of Cams to recover for a breach of warranty of the character
of the matera to be dredged. udgment for the camant (53 Ct. Cms., 490)
was affrmed by ths court n 1920. (Unted States v. tantc Dredgng Co.,
253 U. S., 1.) It hed that the recovery was upon the contract and was com-
pensatory of the cost of the work, of whch the Government got the beneft.
rom the tota recovery, pettoner receved n that year the sum of 192,577.59,
wch ncuded the 176,271.88 by whch ts e penses under the contract had
e ceeded recepts from t and accrued nterest amountng to 16,305.71. Re-
spondent havng faed to ncude these amounts as gross ncome n ts ta
returns for 1920, the Commssoner made the defcency assessment here In-
voved, based on the addton of both tems to gross ncome for that year.
The court of appeas rued that ony the tem of nterest was propery
ncuded, hodng, erroneousy as the Government contends, that the tem
of 176,271.88 was a return of osses suffered by respondent n earer years
and hence was wrongy assessed as ncome. Notwthstandng ths concuson,
ts |udgment of reversa and the consequent emnaton of ths tem from
gross ncome for 1920 were made contngent upon the fng by respondent
of amended returns for the years 1913 to 1916, from whch were to be omtted
the deductons of the reated tems of e penses pad n those years. Respondent
nssts that as the s teenth amendment and the Revenue ct of 1918, whch
was n force n 1920, pany contempate a ta ony on net ncome or profts,
any appcaton of the statute whch operates to mpose a ta wth respect to
the present transacton, from whch respondent receved no proft, can not be
uphed.
If the respondent s contenton that ony gan or proft may be ta ed under
the s teenth amendment be accepted wthout quafcaton (see sner v.
Macomber, 252 U. S., 189 T. D. 3010, C. . 3, 25 , Doye v. Mtche ros. Co.,
247 U. S., 179), the queston remans whether the gan or proft whch s
the sub|ect of the ta may be ascertaned, as here, on the bass of f ed
accountng perods, or whether, as s pressed upon us, t can ony be net
proft ascertaned on the bnss of partcuar transactons of the ta payer when
they are brought to a concuson.
the Revenue cts whch have been enacted snce the adopton of the
s teenth amendment have unformy assessed the ta on the bass of annua
returns showng the net resut of a the ta payer s transactons durng a
f ed accountng perod, ether the caendar year, or, at the opton of the
ta payer, the partcuar fsca year whch he may adopt. Under sectons 230,
232. and 234(a) of the Revenue ct of 1918 (40 Stat., 1057), respondent was
sub|ect to ta upon ts annua net ncome, arrved at by deductng from gross
ncome for each ta abe year a the ordnary and necessary e penses pad
durng that year In carryng on any trade or busness, nterest and ta es
pad, and osses sustaned, durng the year. y sectons 233(a) and 213(a)
gross ncome ncudes ncome derved from busnesses
or the transacton of any busness carred on for gan or proft, or
gans or profts and ncome derved from any source whatever. The amount
of a such tems s requred to be ncuded n the gross ncome for the ta abe
year n whch receved by the ta payer, uness they may be propery accounted
for on the accrua bnss under secton 212(b). (See Unted States v. nder-
son, 209 U. S., 422 T. D. 3839, C. . -, 179 umnum Castngs Co. v.
Routzahn, No. 7, October term, 1930, decded November 24, 1930 Ct. D. 270,
page 3 2, ths uetn .)
That the recovery made by respondent n 1920 was gross ncome for that
year wthn the meanng of these sectons can not, we thnk, be doubted.
The money receved was derved from a contract entered nto n the course
of respondent s busness operatons for proft. Whe t equaed, and In a
oose sense was a return of, e pendtures made In performng the contract,
st, as the oard of Ta ppeas found, the e pendtures were made n defray-
ng the e pense ncurred n the prosecuton of the work under the contract,
for the purpose of earnng profts. They were not capta Investment, the
cost of whch, f converted, must frst be restored from the proceeds before
there s a capta gan ta abe as ncome. (See Doye v. Mtche ros. Co.,
supra, 185.)
That such recepts from the conduct of a busness enterprse are to be n-
cuded n the ta payer s return as a part of gross ncome, regardess of whether
the partcuar transacton resuts n net proft, suffcenty appears from the
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365
213(a), rt. 51.
quoted words of secton 213(a) and from the character of the deductons
aowed. Ony by ncudng these tems of gross ncome n the 1920 return
woud t have been possbe to ascertan respondent s net ncome for the
perod covered by the return, whch s what the statute ta es. The e cess
of gross ncome over deductons dd not any the ess consttute net ncome
for the ta abe perod because respondent, n an earer perod, suffered net
osses a the conduct of ts busness whch were n some measure attrbutabe
to e pendtures made to produce the net ncome of the ater perod.
ocers v. erbuugh- mpre Co. (271 U. S., 170 T. D. 3881, C. . -,
199 ), on whch respondent rees, does not support ts poston. In that
case the ta payer, whch had ost, n busness, borrowed money, whch was
to be repad n German marks, and whch was ater repad n deprecated cur-
rency, had nether made a proft on the transacton, nor receved any money
or property whch coud have been made sub|ect to the ta .
ut the respondent nssts that f the sun whch t recovered s the ncome
defned by the statute, st t s not ncome, ta aton of whch wthout appor-
tonment s permtted by the s teenth amendment, snce the partcuar trans-
acton from whch t was derved dd not resut n any net gan or proft. ut
we do not thnk the amendment s to be so narrowy construed. ta payer
may be n recept of net ncome n one year and not n another. The net resut
of the two years, f combned n a snge ta abe perod, mght st be a oss
but t has never been supposed that that fact woud reeve hm from a ta
on the frst, or that t affords any reason for postponng the assessment of
the ta unt the end of a fetme, or for some other ndefnte perod, to ascer-
tan more precsey whether the fna outcome of the perod, or of a gven
transacton, w be a gan or a oss.
The s teenth amendment was adopted to enabe the Government to rase
revenue by ta aton. It s the essence of any system of ta aton that t shoud
produce revenue ascertanabe, and payabe to the Government, at reguar
ntervas. Ony by such a system s t practcabe to produce a reguar fow of
ncome and appy methods of accountng, assessment, and coecton capabe
of practca operaton. It s not suggested that there has ever been any gen
era scheme for ta ng ncome on any other bass. The computaton of ncome
annuay as the net resut of a transactons wthn the year was a famar
practce, and ta es upon ncome so arrved at were not unknown, before the
s teenth amendment. (See owers v. erbaugh- mpre Co., supra, 174
Pacfc Insurance Co. v. Soue, 7 Wa., 433 Poock v. armers Loan
Trust Co., 158 U. S., 601, 630.) It s not to be supposed that the amendment
dd not contempate that Congress mght make ncome so ascertaned the
bass of a scheme of ta aton such as had been n actua operaton wthn the
Unted States before Its adopton. Whe, concevaby, a dfferent system
mght be devsed by whch the ta coud be assessed, whoy or n part, on
the bass of the fnay ascertaned resuts of partcuar transactons, Congress
s not requred by the amendment to adopt such a system n preference to
the more famar method, even f It were practcabe. It woud not necessary
obvate the knd of nequates of whch respondent compans. If osses
from partcuar transactons were to be set off aganst gans n others, there
woud st be the practca necessty of computng the ta on the bass of
annua or other f ed ta abe perods, whch mght resut n the ta payer
beng requred to pay a ta on ncome n one perod e ceeded by net osses
n another.
Under the statutes and reguatons n force In 1920, two methods were pro-
vded by whch, to a mted e tent, the e penses of a transacton ncurred n
one year mght be offset by the amounts actuay receved from t n another.
One was by returns on the accrua bass under secton 212(b), whch provdes
that a ta payer keepng accounts upon any bass other than that of actua re-
cepts and dsbursements, uness such bass does not ceary refect ts ncome,
may, sub|ect to reguatons of the Commssoner, make ts return upon the bass
upon whch ts books are kept. (See Unted States v. nderson and umnum
Castngs Co. v. Routzahn, supra.) The other was under Treasury reguatons
(artce 121 of Reguatons 33 of anuary 2, 1918, under the Revenue cts of
1916 and 1917 artce 36 of Reguatons 45, pr 19, 191 , under the Revenue
ct of 1918) provdng that n reportng the ncome derved from certan ong-
term contracts, the ta payer mght ether report a of the recepts and a of the
e pendtures made on account of a partcuar contract n the year n whch the
work was competed, or report n each year the percentage of the estmated
proft correspondng to the percentage of the tota estmated e pendtures whch
was made n that year.
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213(b), rt. 73.
366
The court of appeas sad that the case of the respondent here fe wthn the
sprt of these reguatons. ut the court dd not hod, nor does respondent
assert, that It ever fed returns n compance ether wth these reguatons, or
secton 212(b), or otherwse attempted to ava tsef of ther provsons nor
011 ths record do any facts appear tendng to support the burden, restng on
the ta payer, of estabshng that the Commssoner erred n fang to appy
them. (See Ne ement Pond Co. v. Unted States, 281 . S., 867, 361 Ct. D.
185, C. . I -1, 295 .)
The assessment was propery made under the statutes. Reef from ther
aeged burdensome operaton whch may not be secured under these provsons,
can be afforded ony by egsaton, not by the courts.
Reversed.
S CTION 213(b). GROSS INCOM D IN D:
CLUSIONS.
rtce 73 : Gfts and bequests. -18-5048
Ct. D. 327
INCOM T R NU CT O 1921 D CISION O SUPR M COURT.
empton Property cqured by equest nnuty Payabe
from Cobpus.
Where a testator bequeaths an annuty, the payment of whch s
not dependent upon ncome of the estate but s made a charge upon
the whoe persona estate durng the fe of the egatee, the
amounts receved by the egatee durng the ta abe year, though
n fact pad from ncome of the estate, are e empt from ta under
secton 213(b)3 of the Revenue ct of 1921.
Supreme Court of the Unted States. No. 129. October Term, 1930.
Davd urnet, Commssoner of Interna Revenue, pettoner, v. Syb
Whteouse.
On wrt of certorar to the Unted States Crcut Court of ppeas for the rst Crcut.
pr 13, 1931.1
Mr. ustce McReynods devered the opnon of the court.
The Revenue ct of 1921 (ch. 136, 42 Stat., 227, 233, 237, 246) provdes
Sec 210. That there sha be eved, coected and pad for
each ta abe year upon the net ncome of every ndvdua a norma ta of 8
per centum of the amount of the net ncome .
Sec. 211. That n addton to the norun ta mposed by sec-
ton 210 of ths ct, there sha be eved, coected, and pad for each ta abe
year upon the net ncome of every ndvdua a surta .
Sec. 212. (a) That n the case of an ndvdua the term net ncome
means the gross ncome as defned n secton 213, ess the deductons aowed
by Recton 214 .
Sec. 213. That for the purposes of ths tte the term gross
ncome
(a) Incudes gans, profts, and ncome derved .
b) Does not ncude the foowng tems, whch sha be e empt from
ta aton under ths tte: .
(3) The vaue of property acqured by gft, bequest, devse, or descent (but
the ncome from such property sha be ncuded n gross ncome) .
ames Gordon ennett ded May 24, 1918. s w provded for payment of
20 or more annutes. mong other tems, t contaned the foowng:
Item Tenth. I aso gve and bequeath to the sad Syb Dougas, wfe of
Wam Whtehouse, an annuty of 5,000.
Item Twenty-eghth. annutes hereby gven sha commence
at the tme of my death and be payabe n equa parts haf-yeary, e cept as
herenabove specfcay mentoned.
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367
213(b), rt, 88.
Item 29 drected the e ecutors to estabsh a memora home and to that
end gave them the resdue of the estate.
Item Thrteth. I authorze and empower sad e ecutors or e ec-
utor to retan and hod any persona property whch may beong to me at the
tme of my death and to set asde and hod any part thereof to provde for
the payment and satsfacton of any annuty gven by me.
The annuty for Mrs. Whtehouse was satsfed from the corpus of the estate
pror to November 14, 1920 afterwards, out of ncome derved therefrom.
December 30, 1920, the e ecutors permanenty set asde for the memora home
a arge amount of Interest-bearng securtes but sub|ect to ta es, annutes,
and other charges.
The Commssoner of Interna Revenue demanded of Mrs. Whtehouse ncome
ta for the year 1921 on the semannua payments receved durng that perod.
She pettoned the oard of Ta ppeas for reef. It hed that the bequest
to her was wthn paragraph (b), tem (3), secton 213, Revenue ct of 1921,
and therefore e empt. The Crcut Court of ppeas, rst Crcut, approved
that concuson.
The most pausbe argument submtted for the Commssoner s ths. n
annuty gven by w s payabe prmary out of the ncome from the estate.
The resduary estate of ennett produced enough durng 1921 to meet a be-
queathed annutes. The payments receved by Mrs. Whtehouse durng that
year were, n fact, made from such ncome. Consequenty, t can not be sad
that the bequest was one of corpus and the payments were ta abe under
Irwn v. davt (268 U. S., 161 T. D. 3710. C. . 1 -1, 123 ).
s hed beow, the bequest to Mrs. Whtehouse was not one to be pad from
ncome but of a sum certan, payabe at a events durng each year so ong as
she shoud ve. It woud be an anomay to ta the recepts for one year and
e empt tem for another smpy because e ecutors pad the frst from ncome
receved and the second out of the corpus. The w drected payment wthout
reference to the e stence or absence of ncome.
Irwn v. Gavt s not appcabe. The bequest to Gavt was to be pad out
of ncome from a defnte fund. If that yeded nothng, he got nothng. Ths
court concuded that the gft was of money to be derved from ncome and to
be pad and receved as ncome by the donee. ere the gft dd not depend
upon ncome but was a charge upon the whoe estate durng the fe of the
egatee to be satsfed ke any ordnary bequest.
n attempt s made to strengthen the poston of the Commssoner by refer-
ence to secton 219, ct of 1921, whch decares that the ta mposed by sectons
210 and 211 sha appy to the ncome of estates, ncudng Income whch s to
be dstrbuted to the benefcares perodcay, . ut ceary enough,
we thnk, ths secton appes ony to ncome pad as such to a benefcary.
nd, as above shown, the sums receved by Mrs. Whtehouse were not gfts
to be derved from and pad out of ncome, nor were they receved as such
by her.
The e empton n secton 213 s pan and shoud not be destroyed by any
straned constructon of genera anguage found n secton 219.
The |udgment of the court beow must be affrmed.
rtce 88: Compensaton of State offcers -21-5075
and empoyees. Ct. D. 338
INCOM T R NU CT O 1921 D CISION O COURT.
1. Income empton Independent Contractor mp/tyeh of
State Lawyer mpoyed by boob Dstmot.
awyer engaged n the genera practce of hs professon who
s retaned as ega counse at a f ed yeary saary wth addtona
compensaton for servces n court by a brdge dstrct, a potca
subdvson of a State, has the status of an ndependent contractor
and not that of an offcer or empoyee of a potca subdvson of
a State, and the compensaton receved for ega servces rendered
by hm as such counse s not e empt from ncome ta . Nor s a
ta on such ncome mposed upon an agency of a State government
and therefore prohbted.
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213(b), rt. 88.
368
2. Decson Reversed.
The decson of the oard of Ta ppeas (16 . T. ., 556)
reversed.
Unted States Crcut Court of ppeas, ghth Cracurr. No. 8977.
November Term, . D. 1930.
Davd urnet, Commssoner of Interna Revenue, pettoner, v. ames .
MoDonough, respondent.
On petton to revew decson of Unted States oard of Ta ppeas.
efore enton and Gardner, Crcut udges, and Munger, Dstrct udge.
ebruary 2, 1931.
OPINION.
enton, Crcut udge, devered the opnon of the court.
Respondent, a practcng attorney at ort Smth, rt., was engaged to
act as ts counse by the ort Smth- an uren brdge dstrct, whch was
created by an act of the Genera ssemby of rkansas n 1909, for the pur-
pose of constructng and operatng a brdge across the rkansas Rver be-
tween ort Smth and an uren. s saary was by ora agreement f ed at
500 per year. It was aso provded that he shoud ook after the dstrct s
cases n court, and for such servce he was to have addtona compensaton,
to be f ed by the board, whch carred on the affars of the dstrct.
In 1921 and 1922 the dstrct became nvoved n tgaton, and respondent
appeared for t n some mportant cases, for whch he was pad n 1922 the
sum of 2,500, n addton to hs annua compensaton of 500, makng 3,000
receved by hm from the dstrct for that year. Ths he dd not Incude n hs
ncome ta returns for 1922, camng t to be e empt from edera ta aton.
The Commssoner of Interna Revenue hed that t shoud be ncuded, and
that there was a defcency n the ta pad for 1922 of 359.40.
Respondent nsttuted proceedngs for a redetermnaton under the aw by the
oard of Ta ppeas, and upon hearng sad oard determned that he was
an empoyee of the ort Smth- an uren dstrct, and that the compensa-
ton receved for hs servces was e empt from the edera ncome ta .
Pettoner asks revew of the Ta oard s decson.
The queston for determnaton s whether respondent s e empt from the
edera ncome ta on the compensaton receved by hm durng the year 1922
for actng as attorney for the ort Smth- an uren dstrct, on the theory
that such compensaton was pad to hm as an offcer or empoyee of a potca
subdvson of the State wthn the meanng of secton 1211 of the Revenue
ct of 1926 (ch. 27, 44 Stat., 130).
The Revenue ct of 1921 (ch. 136. 42 Stat, 237) provdes:
Sec. 213. That for the purposes of ths tte the term gross
ncome
(a) Incudes gans, profts, and ncome derved from saares, wages, or
compensaton for persona servce of whatever knd and n what-
ever form pad, or from professons, vocatons, trades, busnesses or
gans or profts and ncome derved from any source whatever.
The Revenue ct of 1926 (ch. 27, secton 1211, 44 Stat., 130 (secton 1065b,
ch. 19, Tte 26, U. S. C. .)) provdes:
ny ta es mposed by the Revenue ct, of 1924 or pror Revenue cts upon
any ndvdua n respect of amounts receved by hm as compensaton for per-
sona servces as an offcer or empoyee of any State or potca subdvson
thereof (e cept to the e tent that such compensaton s pad by the Unted
States Government drecty or ndrecty), sha, sub|ect to the statutory perod
of mtatons propery appcabe thereto, be abated, credted or refunded.
The rkansas Legsature In creatng the brdge dstrct provded t shoud
be a pubc agency and a body potc under the name of the ort Smth and
an uren dstrct, and coud appont a offcers and agents whch t deemed
necessary and sutabe for the conduct of Its busness.
Secton 1211 of the Revenue ct of 1926, whch we have heretofore quoted
and whch s retroactvey appcabe o the ta abe year 1922, e empts from
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213(b), rt. 88.
ta aton compensaton receved from a State or a potca subdvson thereof
when the person recevng the same s an offcer or empoyee thereof. If
therefore respondent was an offcer or empoyee of the State of rkansas or
a potca subdvson thereof he was not compeed to pay the ta n queston.
It s not urged n the bref of respondent that he was an offcer of the dstrct
or of the State, and t coud not we be under the authorty of Metcaf d
ddy v. Mtche (269 U. S., 514, 526 T. D. 3824, C. . -, 218 ), where
the Supreme Court sad, referrng to the cam that pantffs In error were
offcers of the State or a subdvson of the State: n offce s a pubc
staton conferred by the appontment of government. The term embraces
the dea of tenure, duraton, emoument and dutes f ed by aw. Where an
offce s created, the aw usuay es ts ncdents, ncudng ts term, ts
dutes and ts compensaton. Unted, States v. artm, 6 Wa., 385 a v.
Wsconsn, 103 U. S., 5.) The term offcer s one nseparaby connected wth
an offce There was ackng In each nstance the essenta eements
of a pubc staton, permanent n character, created by aw, whose ncdents
and dutes were prescrbed by aw.
The oard of Ta ppeas dd not fnd hm to be an offcer.
The proposton reed on s that respondent was an empoyee of the dstrct,
and that the dstrct was n potca subdvson of the State.
The facts as found by the oard of Ta ppeas are: That respondent was
seected as counse for the dstrct at a compensaton of 500 per year, wth
the rght n the board to ca upon hm for any and a necessary ega servces,
and that f he were requred to go nto court n the nterest of the dstrct he
shoud be aowed addtona compensaton, to be f ed by the board that he
dd serve the dstrct as counse, hs dutes ncudng consutatons and advce,
the wrtng of contracts, and routne ega servces, such as the board mght
requre that he attended meetngs of the board and represented t n hearngs
before assessors concernng assessments on property that durng a the tme
be was counse he mantaned hs own offces and had a genera aw practce,
but took no cases n confct wth the nterests of the dstrct that hs own
empoyees performed the cerca and stenographc work ncdent to the brdge
dstrct s busness.
Respondent n hs evdence before the oard of Ta ppeas stated he was
not empoyed to do a specfc servce, but was sub|ect at a tmes to the drec-
ton and contro of the board. Of course respondent was not gvng hs entre
tme to the board for a saary of 500 per year. Copes of hs ncome ta
returns are n the record and show that respondent was recevng arge fees
and saares from other sources. s ncome ta return for the year 1922 n-
dcated hs ncome from hs professon for that year to be 11,796, so that the
amount of work represented by the 500 coud not have been arge.
It s cear to us that under the decsons of the Supreme Court and of ths
court respondent was not an empoyee as that term s used n the statute, but
that he was an ndependent contractor. The board reserved no rght to drect
hm as to how hs work shoud be done. e was engaged n the genera prac-
tce of aw. It paced ts ega matters n hs hands for hm to take care of by
hs own means and methods, reevng t from responsbty therefor. It e -
ercsed no such contro over hm as characterzes the reaton of empoyer and
empoyee. The board woud not assume to know how a awyer shoud carry
on Ms work. e was engaged to render ega servces |ust as he woud have
been engaged by a prvate ndvdua. There was no dfference n hs reaton-
shp wth ths board from that wth any prvate cent who may have pad hm
500 a year to draw hs contracts and ook after some of hs ega work, and
agreed to pay hm addtona compensaton If he had to go nto court. The
oard of Ta ppeas dd not nd that the dstrct n any way controed the
manner n whch respondent carred on hs work as attorney for them, or what
degree of contro f any t e ercsed over hm.
In Metcaf ddy v. Mtche (269 U. S., 514), the facts were that Metcaf
ddy were professona consutng engneers empoyed to advse States or
subdvsons wth reference to proposed water suppy and sewage dsposa
systems. They camed to be empoyees of a oca subdvson of a State
wthn the meanng of the statute. The Supreme Court hed they were n-
dependent contractors, and sad: Nor do the facts stated n the b of e -
ceptons estabsh that the pantffs were empoyees wthn the meanng of
the statute. So far as appears, they were n the poston of ndependent
contractors. The record does not revea to what e tent, f at a, ther serv-
ces were sub|ect to the drecton or contro of the pubc boards or offcers
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213(b), rt. 88.
370
engagng them. In each nstance the performance of ther contract nvoved
the use of |udgment and dscreton on ther part aud they were requred to
use ther best professona sk to brng about the desred resut. Ths per-
mtted to them berty of acton whch e cudes the dea of that contro or rght
of contro by the empoyer whch characterzes the reaton of empoyer aud
empoyee and dfferentates the empoyee or servant from the ndependent
contractor. (Pages 520-521.)
We see tte dfference n the stuaton of these consutng engneers who
were renderng professona servces from that of an attorney who s advs-
ng a dstrct, as s respondent here. In both stuatons there s no contro as
to the method of performng ther dutes. The ony dfference s that here a
sma saary was pad to respondent, whe there compensaton was pad on an
annua, monthy or day bass.
Ths court n repke v. Commssoner of Interna Revenue (32 P. (2d), 594
Ct. D. 114, C. . III-2, 287 ), revewed some of the cases wheren the
test of contro was dscussed.
In the recent case of Roberts v. Commssoner of Interna Revenue (44 .
(2d), 168), pettoner who was empoyed under contracts wth the State ta
commssoner of Georga and wth boards of county commssoners to coect
denquent State and county ta es camed that hs ncome therefrom for the
years 1920 and 1921 was e empt from edera ta aton under secton 1211,
Revenue ct of 1926. The court sad that under the authorty of Metcaf f
ddy v. Mtche (269 U. S., 514) and Lucas v. oward (280 U. S., 526), he was
an ndependent contractor and not entted to cam e empton.
In Mesce v. Unted States (64 Ct. Cs., 481 T. D. 4155, C. . II-1, 227 ),
t was hed (syabus) budng e pert, whose servces are engaged by a
muncpaty n connecton wth vauaton of certan budngs affected by
oca mprovements, under a pocy of havng other than cty empoyees do such
work, who occupes no pubc offce, seects hs own quarters, equpment, and
empoyees, pays for the same at hs own e pense, and uses hs own methods
n arrvng at the requred resuts, s an ndependent contractor and not
a pubc nstrumentaty, and hs compensaton for such servces s sub|ect
to the edera ncome ta . The court hed that the ta payer was not an
empoyee and sad: e used hs own methods and nstrumentates and dd
the work of apprasng vaues In hs own way and as hs udgment dctated,
and n so dong he was free, and for such work he receved hs pay. s to
how, wth what assstance, and n what tme he shoud perform t he was |udge
and master. That the pantff was not a pubc nstrumentaty has been
passed upon by ths court. (Page 494.)
In Reed v. Commssoner of Interna Revenue (34 . (2d), 263), the Crcut
Court of ppeas of the Thrd Crcut hed that ncome receved by an attorney
for servces as speca counse n representng the Commonweath n coectng
State nhertance ta es was not sub|ect to the edera ncome ta , on the
theory that the attorney n performng such servces, acted as empoyee of
the State, wthn Revenue ct 1926, secton 1211. The same contenton was
made there as here. The Supreme Court of the Unted States n 281 D. S.,
699, reversed the case n a per curam opnon upon the authorty of Lucas v.
oward (280 U. S., 526) and Metcaf ddy v. Mtche (269 U. S., 514).
The prncpa cases cted n the opnon of the oard of Ta ppeas as sus-
tanng ther vew are Mathews v. Commssoner of Interna Revenue (29 .
(2d), 892) and ar v. yers (8 . T. ., 1191). It s nterestng to observe
as to Mathers v. Commssoner that on the same day the opnon was fed by
the crcut court of appeas n that case one was fed by the same court n
oward v. Commssoner, a smar case, decdng the same on the authorty
of the Mathews case, and that oward v. Commssoner was reversed by the
Supreme Court In a per curam opnon (280 U. S., 526) on the authorty
of Metcaf ddy v. Mtche, supra, and that as to ar v. yers, supra,
ths court n 35 . (2d), 326 Ct. D. 146, C. . I -1, 247), reversed the same,
hodng that yers, who was counse for the oard of Waterworks for the
Cty of Des Mones at a saary of 2,500 per annum, was not an empoyee of
the muncpaty, hut an ndependent contractor. Ths court n referrng to
the fact that durng a of ths tme yers was a awyer engaged n the genera
practce of hs professon n the cty of Des Mones, sad, (page 328) : We
thnk ths s suffcent to estabsh that he was free to engage, and was en-
gaged, n other busness for other cents that he was a free professona
agent as to the nature of hs servces aud the advce that he woud gve.
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371
213(b), rt. 88.
Nowhere In the record s t reveaed to what e tent, f at a, hs servces were
sub|ect to the contro of the board of trustees. urthermore, we are of
opnon that an attorney who Is engaged In ths manner, who has not contracted
to gve to such a cent hs entre and e cusve servces, does not thereby
become an offcer or empoyee n the sense of ths statute. It s our |udgment
that Mr. yers dd not become such an empoyee of ths potca subd-
vson of the State of Iowa, and that the compensaton whch he receved
for servces was therefore not e empt from ncome ta es. The fact that
yers was engaged n the e ercse of a propretary functon does not bear
on the queston as to whether he was an empoyee.
The cases are ake on the queston of whether these attorneys were em-
poyees under the terms of the statute. Respondent n hs statement before
the oard of Ta ppeas sad:
I mantan my own offces. They dd not furnsh me any offce and I dd
not have any offce In connecton wth the brdge company. I mantan my
own offce and the genera practce of aw.
Whatever stenographc or cerca work became ncdent to the transacton
of the brdge commsson s busness was performed by my empoyees wth the
e cepton of probaby once or twce In 1921 or 1922. Occasonay my ste-
nographers were so crowded n those years that I asked the board to stand for
e tra e pense and when that arose they dd t, but I do not thnk t arose
more than two or three tmes over the whoe perod.
Of course the busness whch I transacted us attorney for the brdge com-
msson was ony comparatvey a sma amount of my busness but I was
obged to perform t regardess of the amount or tme that t requred. I
ether had to do t mysef or through somebody I mght empoy. I of course
coud take any other concurrent empoyment f I saw ft but wth the under-
standng that t dd not essen my abty to do ther busness.
In addton to beng attorney for the brdge commsson I was attorney
for the Sebastan brdge dstrct, whch s the dstrct created by the egsa-
ture of 1913, whch constructed and owns the brdge at the foot of Garrson
venue across the rkansas Rver.
We are satsfed that respondent was not an empoyee of a potca subd-
vson of a State wthn the meanng of secton 1211 of the Revenue ct of
1926.
We refer to another pont suggested, . e., that the ta mposed s one upon a
State nstrumentaty necessary to carry on the affars of the State and that
therefore t s unconsttutona.
The authortes ceary estabsh the doctrne that an ndvdua renderng
servces to a State or a potca subdvson thereof does not beong to the
cass of State agences e empt from edera ta es uness he has acqured the
status of an offcer or an empoyee. On ths sub|ect the Supreme Court n
etcaf d ddy v. Mtche (269 U. S., 524-525), sad: ut here the ta s
mposed on the ncome of one who s nether an offcer nor an empoyee of
government and whose ony reaton to t s that of contract, under whch there
s an obgaton to furnsh servce, for practca purposes not unke a contract
to se and dever a commodty. The ta s mposed wthout dscrmnaton
upon ncome whether derved from servces rendered to the State or servces
rendered to prvate ndvduas. In such a stuaton t can not be sad that
the ta s mposed upon an agency of government n any technca sense, and
the ta tsef can not be deemed to be an nterference wth government, or an
mparment of the effcency of ts agences n any substanta way. We have
e amned a the cases cted by respondent on the sub|ect of what consttutes
an empoyee. They argey arse under workmen s compensaton acts and pass
on the queston of master and servant as dstngushed from the reatonshp
of an ndependent contractor. Some of them, such as magamated Roofng
Co. v. Traveers Ins. Co. (111.) (133 N. 259) and rown v. Industra cc-
dent Commsson of Caforna et a. (Ca.) (163 Pac., 664), seem to be author-
tes aganst respondent s poston.
The overwhemng weght of authorty eads us to the concuson that the
oard of Ta ppeas was n error n hodng that respondent s compensaton
receved from the dstrct was e empt from the edera ncome ta . The dec-
son s reversed and the case remanded for further proceedngs n harmony wth
ths opnon.
Reversed.
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213(c), rt. 92.
372
S CTION 213(c). G OSS INCOM D IN D:
NONR SID NT LI N INDI IDU L.
rtce 92: Gross ncome of nonresdent aen -13-5001
ndvduas. Ct. D. 306
INCOM T R NU CT O 1918 D CISION O COURT.
1. Nonresdent en Indvdua Meanng.
person born n a foregn country, of whch he remans a sub-
|ect, wthout defnte ntenton to abandon hs resdence n that
country, nnd whose stays n the Unted States are transtory and,
e cept for one or two occasons, ony for the purpose of fufng
professona engagements, s a nonresdent aen whose gross n-
come under secton 213(c) of the Revenue ct of 1918 ncudes
ony the gross ncome from sources wthn the Unted States.
2. Income Sources Wthn the Unted States Nonresdent
en.
Where a nonresdent aen professona snger makes a contract
n the Unted States wth a domestc corporaton dong busness
there under whch he sngs n the Unted States for the purpose of
enabng the corporaton to make phonograph records of seectons
rendered by hm and s pad compensaton n the Unted States by
the corporaton at a f ed sum for each record sod or a percentage
of the st prce of the records sod, the gross ncome receved by
the snger from the sae of records n foregn countres by foregn
corporatons, pursuant to contracts under whch the domestc
corporaton furnshed matrces of ts seectons and the foregn
corporatons were obged to pay the domestc corporaton a
royates whch t was requred to pay the snger, s gross ncome
from sources wthn the Unted States wthn the meanng of
secton 213(c) of the Revenue ct of 1918.
Unted States Dstrct Court, Southern Dstrct op New York.
Dorothy Caruso Ingram, as ncary dmnstratr of the state of nrco
Caruso, Deceased, pantff, v. rank , owers, Indvduay and as Co-
ector of Interna Revenue for the Second Dstrct of New York, defendant.
ebruary 9, 1931.
OPINION.
Patterson, D. .: cton at aw s brought to recover addtona ncome ta es
for the years 1918, 1919, and 1920, pad under protest by the pantff as
ancary admnstratr of nrco Caruso, deceased. y stpuaton the case
was tred before a |ury of one and both sdes moved for a drected verdct.
The case concerns the ta abty of ncome receved by Caruso by reason of
the sae of phonograph records outsde the Unted States, t beng conceded
that the sngng by Caruso for the manufacture of such records occurred wthn
the Unted States. The pantff contends, frst, that Caruso was a nonresdent
aen, a proposton whch the defendant dsputes: and, second, that the
amounts In queston were not ncome from sources wthn the Unted States,
whch the defendant aso dsputes.
Caruso was the foremost snger of the word. s fame was nternatona,
athough the greater part of hs sngng durng the ast 10 years of hs fe
was done n the Unted States. e was born n Itay and aways remaned a
sub|ect of that country. or many years pror to hs death n 1921, he spent
about s months of the year n the Unted States, sngng at the Metropotan
Opera ouse n New York Cty and gvng concerts at other ctes. t the
cose of the operatc season, he amost aways returned to Itay where he
mantaned a arge estate. s headquarters n the Unted States were the
nckerbocker ote, New York Cty, where he eased a sute of rooms, and
ater the anderbt ote here. e marred the pantff here In 1918, and
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373
(1213(c), rt. 92.
n 1919 a daughter was born here. s ncome from opera and concert work
In the Unted States was arge and n makng ncome ta returns he aways
camed the status of a nonresdent aen. Durng hs fetme, no queston
seems to have been rased as to ths beng hs rea status.
mong hs other engagements, Caruso was under contract wth the ctor
Takng Machne Co., a New ersey corporaton, to sng for the purpose of
enabng the ctor company to make phonograph records of seectons rendered
by hm. y contract dated pr 3, 1909, he agreed to sng seectons at the
ctor aboratores n Camden, the ctor company to pay hm a royaty of SO
cents on each arger record and a royaty of 25 cents on each smaer record
of hs voee whch t shoud se. The contract was to contnue for 25 years
and was e cusve n the sense that Caruso bound hmsef not to sng for the
purpose of makng phonograph records for anyone ese. On anuary 1, 1919,
ths contract was superseded by a new one, under whch Caruso was to render
40 seectons at the ctor aboratores. The ctor company bound Itsef to
pay Caruso a royaty equa to 10 per cent of ts st prce on a records of hs
voce whch shoud be sod, and t guaranteed a mnmum payment of
100,000 a year durng hs fe but not to e ceed 10 years. (It may be noted here
that for the remander of Caruso s fe the royates on the percentage bass
were far n e cess of 100,000, so that the guaranty dd not become opera-
tve.) The 1919 contract aso contaned a provson to the effect that Caruso
woud not permt any records of hs voce to be made by any other concern.
In performance of these successve contracts, Caruso woud go to Camden
and sng operatc seectons. The sound woud be recorded on wa , from whch
a master matr woud be made. rom ths master matr the records for
sae n the Unted States were manufactured. Records of Caruso s voce were
aso sod In other countres under the ctor contracts, and t s In reaton to
the royates measured by saes n these countres that the present case arses.
y contracts wth companes dong busness In Canada and n ngand, the
ctor company agreed to furnsh such companes wth matrces of ts seec-
tons. One of the terms as to payment by the foregn companes was that they
shoud pay the ctor company a royates whch the atter was caed upon to
pay the artst. Pursuant to such contracts, the ctor company sent varous
matrces of songs by Caruso to the foregn companes, and n due course they
credted the ctor company wth sums of money representng the royaty whch
the ctor company was obgated to pay Caruso, the amounts dependng of
course upon the number of records sod by the foregn companes. The sums
were credted to Caruso on the ctor books and were pad to hm aong wt
payments for records sod wthn the Unted States.
Upon an audt of Caruso s ncome ta return for 1918, the Commssoner
added the sum of . 18,536.25 to hs ta abe ncome as the amount receved by
hm from the ctor company because of the saes of records abroad. The ta
thereon was 13,924.69. Smary for the year 1919, the sum of 1,789.75 was
added to ncome, and a further ta of 1,086.86 was assessed. Smary for
1920, the sum of 36,400.59 was added to ncome, and a further ta of 25,844.42
was assessed. The pantff pad these amounts, totang 40,855.97, under
protest and brought ths acton to recover them.
Secton 213(c) of the Revenue ct of 1918 deas wth nonresdent aens and
provdes that n ther case gross ncome ncudes ony the gross ncome from
sources wthn the Unted States.
The frst ssue s whether Caruso was a resdent aen or a nonresdent aen
durng the three years n queston. If he was a resdent aen, he was ta abe
upon hs entre net ncome, rrespectve of source. ut I have no doubt that
hs status was that of a nonresdent. s orgna resdence was n Itay, and
there s no satsfactory evdence of an ntenton to abandon that resdence.
s stays n the Unted States were transtory and, e cept for one or two
occasons, were ony for the purpose of fufng operatc and concert engage-
ments. Grantng that domce and resdence are not synonymous under the
ncome ta statutes ( mcrng v. owers, 24 ed. (2d), 918), I am persuaded
that Caruso s resdence as we as hs domce was n Itay. e was therefore
ta abe ony on ncome from sources wthn the Unted States.
The second ssue s not so easy of souton. Dd the moneys receved by
Caruso on account of foregn saes of records consttute ncome from sources
wthn the Unted States I have reached the concuson that they dd. The
contracts whch Caruso made wth the ctor company were contracts requrng
hm to render servces. They caed upon hm to sng for ctor and to refran
from sngng for any other phonograph company. or ths he was to be pad by
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374
ctor accordng to the number of records sod, wth a mnmum compensaton
to be pad n any event. The contracts were n no sense contracts of sae or of
cense. Caruso had no propretary rght, tte or nterest n the matrces or n
the records. It s true that compensaton was measured, n part at east, by the
num er of records sod and was referred to as a royaty but the fact remans
that the arrangement was one to render servces n hs capacty as a snger, as
thoroughy as f the compensaton had been a set sum.
The servces rendered by Caruso were rendered In the Unted States. I thnk
that ths s the decsve feature. These servces were the source of a hs
ncome derved from the ctor contracts. It can not be dened that but for the
saes abroad part of ths ncome woud not have accrued. n event n a for-
egn country was necessary before the ncome became payabe. ut ths can not
obscure the fact that the source, the orgn of the ncome was Caruso s sngng
n Camden, N. . I can not see any dfference n prncpe between ths case
and a case where a awyer performs servces n New York on a awsut pendng
n London, hs compensaton to be contngent upon success n the awsut. No
ncome s reazed unt the happy ssue of the sut n London, but ceary the
source of the ncome, when reazed, was the work done n New York. Or sup-
pose a nonresdent aen spends a year n New York workng as saes manager
for a merchandsng company, hs compensaton to be a percentage of the pro-
ceeds of saes, and part of the saes are made n Canada and Me co. eyond
doubt hs earnngs represent ncome from sources wthn the Unted States,
where a hs woTk was done, despte the fact that the amount of hs earnngs
was enhanced by saes whch took pace n foregn countres. The same s true
here. It seems to me that where a snger makes and performs n the Unted
States a contract to sng for a phonograph company, for whch he s to be pad
a f ed sum for each record sod or a percentage of the st prce of the records
sod, the compensaton so receved s ncome from sources wthn the Unted
States the fact that some of the saes were made n foregn countres Is
mmatera.
I have consdered the cases hodng that where a fe nsurance agent has
obtaned poces n earer years, under an agreement wth the nsurance com-
pany that he s to receve a commsson out of a renewa premums on such
poces, such commssons receved by the agent n ater years w be deemed
ncome for the years when receved. ( dnards v. eth, 231 ed., 110 Wood
v. Lewcy, 252 ed.. 106.) These cases stand for the proposton that where a
person performs servces for compensaton condtonay promsed, no ncome s
reazed unt such tme as the condton s performed the tme when the work
was done s unmportant. The proposton s ceary a sound one and woud
appy to the present stuaton f there were any queston as to the tme when
Caruso receved ncome under the ctor contracts. (See aso ZmbaM v.
nderton, 23 ed. (2d), 328 T. D. 4219, C. . II-2, 305 , affrmed n 38 ed.
(2d), 57.) ut here the queston s one of pace, not of tme the search, under
the terms of secton 213(c) of the Revenue ct, s for the terrtora source of
the ncome. nd, as aready ponted out, t seems to me that the pace where
the work s done, and not the pace where the ater event f ng compensaton
occurs, s the source of the ncome, n cases where the ncome s from the
e ercse of a professon or vocaton as n ths case.
I have aready sad that the controng fact s that Caruso s part n the
makng of the records was performed n ths country. There are, however,
other eements n the case whch reenforce the concuson that the source of
ths ncome was wthn the Unted States. It was the reputaton whch Caruso
had won by hs operatc and concert successes n the Unted States that ed
to the makng of the ctor contracts. It was here that the contracts were
made. It was here that the payments under the contracts were made. The
payments were the obgaton of a company ncorporated and dong busness
here. The fact that the foregn saes were made by other companes s of no
consequence the stuaton s the same as f ctor had made such saes drecty.
It woud have been accountabe to Caruso for the agreed amount or percentage
n any event, even f t had receved nothng from ts contractors n ngand
and Canada.
My concuson Is that the ncome was from sources wthn the Unted States
and was therefore ta abe. verdct for the defendant s accordngy drected.
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375
214(a), rt. 101.
S CTION 214(a) 1. D DUCTIONS LLOW D:
USIN SS P NS S.
rtce 101: usness e penses. -12-4987
Ct. D. 301
ncome ta revenue act op 1916 decson of court.
Deducton- ddtona Compensaton Pad to Trustees by ene-
fcary.
ddtona compensaton for managng and deveopng a testa-
mentary trust estate pad to the trustees by a person hayng a
benefca nterest n the prncpa and ncome s not pad n carry-
ng on any busness of the benefcary and s therefore not deduct-
be from her gross ncome as a busness e pense under secton 5
of the Revenue ct of 1916.
Unted States Dstrct Coukt, Southern Dstrct of New York.
Wam R. enan, |r., and Lawrence C. anes, as ecutors and Trustees
of the state of Mary L. ( ager) ngham, Deceased, pantffs, v. rank
. owers, Coector of Interna Revenue, Second New York Dstrct,
defendant.
October 27, 1930.
OPINION.
. . Coeman, udge: The prncpa queston presented s whether the
ta payer, Mary ager ngham, was entted to a deducton of 308,860.69
from her gross ncome n 1917 because of her payment of that amount to the
trustees of her deceased husband s estate as compensaton for ther servces.
The husband, enry M. ager, had ded n 1913 eavng a hs property,
vaued at about 26,000,000, n trust for a perod of fve years wth the power
n the trustees to e tend the term for an addtona fve years n ther ds-
creton. e nomnated three trustees who quafed, but n 1915, one of them
havng ded t became necessary to obtan a substtute. The w mted
the compensaton of the trustees to 5,000 a year each, whch was entrey
dsproportonate to the abor and responsbty nvoved consequenty the
wdow agreed at the tme the substtute was apponted n 1915 that they
shoud receve 400,000 n 1918 as addtona compensaton. Instead of
abdng by the terms of that agreement, she vountary advanced the date
of payment and n 1917 out of her persona funds pad the tem n dspute,
308,860.69, on account of ther addtona compensaton. Snce she reported
on a cash bass she deducted the entre amount from her gross ncome for
that year, but the Treasury Department refused to aow any part of t as nn
e pense tem and coected an addtona ta of appro matey 165,000 on
account of t, whch pantffs now seek to recover.
The wdow was vtay nterested n the proper admnstraton of the trust
not ony because she was practcay the soe benefcary, but aso because
her persona funds were to some e tent nvoved n a raroad and a hote
company controed by the trustees. The trust estate conssted n part of
105,000 shares out of a tota of 125,000 shares of the capta stock of the
orda ast Coast Raway Co., and the remanng 20,000 shares were
owned by the wdow personay. so she owned bonds of the raroad n
the amount of 1,775,000, and had oaned to the trustees an addtona 875,-
000 for the use of the raroad and of the hote company of whch the trust
estate owned the entre capta stock and outstandng securtes.
er benefca nterest n the estate ncuded both prncpa and ncome.
Dsregardng certan neggbe bequests, the w provded that she was to
receve the entre corpus at the termnaton of the trust, and so much of the
ncome as was not used n deveopng the propertes owned by the estate.
More specfcay, the w drected that durng the frst fve years she be pad
72109 31 25
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214(a) 1, rt. 101.
376
an annuty of 100,000, the baance of the ncome to be used n deveopng the
varous propertes and that durng the remander of the term n addton to
the annuty she be pad a the ncome not needed n the busness enterprses.
The servces for whch the wdow agreed to pay addtona compensaton were
to be rendered entrey to the trust estate and not to her personay or to her
Indvdua property. They thus had no drect but a very arge ndrect vaue
to her. urthermore, ths vaue had reaton to her nterest n the corpus
of the trust estate rather than to her ncome from t or from her ndvdua
property. The servces dd, of course, to some e tent bear on her ncome from
both the trust estate and from her Indvdua property, because her annuty
of 100,000, her share of the trust ncome durng the e tended perod of the
trust and her dvdends and nterest from the stock and bonds of the raroad,
whch she ndvduay owned, mght have been affected by a maadmnstraton
of the trust. ut that resut woud be nconsderabe and amost neggbe
In comparson wth the effect upon the corpus of the trust. The trustees had
been gven very wde powers n the deveopment and admnstraton of the
propertes, and durng the frst fve years the buk of the trust ncome was to be
returned to the propertes and to become part of the corpus, wth power In the
trustees to contnue to do so n ther dscreton durng any e tenson of the
term. The concuson must be drawn, therefore, that n agreeng to pay the
addtona compensaton the wdow had as her prncpa purpose the protecton
and deveopment of the corpus of the trust estate, ncudng the accumuatons,
and ony Incdentay the protecton of her ndvdua property and of her
ncome from t and from the trust.
The statute controng s the Revenue ct of 1916, secton 5, whch reads
as foows:
Sec. 5. That n computng net Income n the case of a ctzen or resdent
of the Unted States
(a) or the purpose of the ta there sha be aowed as deductons
rst The necessary e penses actuay pad n carryng on any busness
or trade, not ncudng persona, vng, or famy e penses
Second. nterest pad wthn the year on hs ndebtedness
Thrd. Ta es pad wthn the year mposed by the authorty of the Unted
States, or ts Terrtores, or possessons, or any foregn country, or under
the authorty of any State, county, schoo dstrct, or muncpaty, or other
ta ng subdvson of any State, not ncudng those assessed aganst oca
benefts
ourth. Losses actuay sustaned durng the year, ncurred In hs busness
or trade, or arsng from fres, storms, shpwreck, or other casuaty, and from
theft, when such osses are not compensated for by nsurance or otherwse:
Provded, That for the purpose of ascertanng the oss sustaned from the
sae or other dsposton of property, rea, persona, or m ed, acqured before
March 1, 1913, the far market prce or vaue of such property as of March 1,
1913, sha be the bass of determnng the amount of such oss sustaned
fth. In transtons entered nto for proft but not connected wth hs
busness or trade, the osses actuay sustaned theren durng the year to an
amount not e ceedng the profts arsng therefrom
S th. Debts due to the ta payer actuay ascertaned to be worthess and
charged off wthn the year
Seventh. reasonabe aowance for the e hauston, wear and tear of prop-
erty, arsng out of ts use or empoyment n the busness or trade .
The ony pertnent part s the cause denomnated rst, the subsequent
causes beng set forth merey for ther possbe bearng upon ts constructon.
rom the wordng of that cause t s apparent that the payment to the trustees
was not deductbe uness t was a necessary e pense as dstngushed from a
capta e pendture and uness t was made n carryng on the busness of
the ta payer, Mary ager ngham. It shoud be borne n mnd that there
were two separate enttes nvoved, one the trust estate and the other, Mrs.
ngham. It may be assumed that had the payment been made by the trust
estate, t woud have been deductbe from the etter s gross Income as a neces-
sary e pense of carryng on the estate s busness. The dffcut questons now
presented are whether the payment was made n carryng on the busness of
Mrs. ngham, and f so, whether It was not a capta e pendture rather than
a necessary e pense.
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377
214(a), rt. 101.
It was n ts genera nature a busness and not a persona or famy trans-
acton. On the other hand, Mrs. ngham had no busness or trade n the
narrow sense. She had an ndvdua estate vaued at about 34,000,000 e cu-
sve of her nterest n the trust and took some part n the management of that
but she n no way partcpated n the management of the trust estate.
The pantffs contend that there are two grounds for hodng that the pay-
ment was made n carryng on the busness of Mra ngham (1) that t was
made n the management of ncome producng property whch Mrs. ngham
equtaby owned, and (2) that the busness of managng and deveopng the
trust property was the busness of Mrs. ngham ndvduay because the
trustees were vrtuay her agents. oth these contentons are based upon
the theory that the dstncton between the two enttes shoud be dsregarded
and that n ths acton at aw the court shoud consder the trust property
as vrtuay hers even though there were some mnor benefcares.
Legay, the trust property beonged to the trustees and not to Mrs. ngham
and the management of t was ther busness and not hers. They were not her
agents and had no power to bnd her ndvduay. The edera ncome ta
statutes gave them the status of ndependent ta payers, requrng them not ony
to report the entre ncome of the trust estate, but to pay the ta upon t though
they were aowed to deduct from the gross ncome of the estate so much as
was dstrbuted to the benefcares ( edera Income Ta aton, en, pages
1134, 1137, 1138, 1156). The case, therefore, presents a stuaton where one
ta payer vountary pad an tem that mght have been a deductbe e pense
of another ta payer and was actuated to do so by economc reasons reatng to
an ndrect and somewhat remote fnanca beneft to the payer.
Cases are cted where the oard of Ta ppeas has consdered somewhat
smar stuatons and has ether aowed or dsaowed the deducton. I
e cude those cases reatng to partnershps because n them nether the
common aw nor the ta statutes recognze the same dstncton between
two separate enttes. In he anc v. Commssoner (7 . T. ., 256) and In
re arod Mortenson (3 . T. ., 300), the oard aowed a stockhoder to
deduct from hs own gross ncome the payment of an tem whch mght have
been an e pense of the corporaton but n Chares Lsey mes v. Comms-
soner (14 . T. ., 1067) and a . Roach v. Commssoner (20 . T. .
(September, 1930)), the oard refused a smar deducton. There probaby
can not be a rgd rue estabshed because the ta payer s busness or trade
has been hed to be a very eastc e presson appcabe to much more than
the contnuous course of conduct usuay connoted by those words. On the
other hand, under a the crcumstances of ths case I beeve t woud be
stretchng the meanng too far f the deducton n queston were permtted,
snce Mrs. ngham nether owned the property upon whch the servces were
to be e pended, nor woud receve as ncome, even ndrecty, the fruts of
those servces, e cept to a neggbe e tent. s n Commssoner v. Marsha
ed, decded by the Crcut Court of ppeas of ths Crcut n uy, 1930,
the payment must be hed to fa wthn those genera costs of protectng
one s property for whch the statute makes no aowance.
If the above concuson s correct t s unnecessary to consder whether the
payment by Mrs. ngham shoud be consdered an e pense or a capta
e pendture. The servces for whch the compensaton was pad were to
cover at east 5 and perhaps 10 years and were reated to the corpus of the
estate rather than to the ta payer s Income. Though she reported on a cash
bass, there are strong reasons for not permttng her to deduct ths entre
amount n one year, partcuary when certan detas of the transacton
are consdered whch have not yet been mentoned. er orgna agreement
wth the trustees made n 1915 dd not make her personay abe for the
addtona compensaton but provded that the trustees sha receve from
my share of sad estate n fu compensaton for the servces the
sum of 400,000 n addton to the sum of 5,000 per year the sad
sum of 400,000 to be pad at the e praton of fve years from May 24, 1913,
and sad persons sha be entted to credt themseves wth sad
sum n accountng wth me at the termnaton of sad trust. The payment
whch she actuay made n 1917 gave her no greater rght of deducton than
woud a payment under the. orgna agreement because t was vountary
made by her and dd not secure for her or for the estate anythng whch had
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8214(a) 1, rt. 111.
378
not aready been secured by the orgna agreement. The actua payment
was, therefore, not a necessary one e cept n so far as t was made on
account of the orgna agreement and the atter tends to ndcate that tne
e pendture was to be a capta one, rather than an e pense.
s to the other tems sought to be deducted from the year s gross ncome
there can be no queston. The 485.01 pad for cerk hre and the 250 pad
for the rent of a safe n the management of Mrs. ngham s ndvdua ncome
producng property were pany deductbe. s to whether certan dvdends
amountng to 24,355 shoud be ncuded n the gross ncome for 1916 rather
than 1917, the defendant makes no opposton and the pantff s contenton
Is, therefore, aowed.
Sette fndngs on notce.
rtce 10G: Treatment of e cessve compensaton.
R NU CT O 1821.
cessve saary pad to offcer of a corporaton, who s aso a
stockhoder, evdence showng saary was n fact pad as saary and
not as a dvdend. (See Ct. D. 344, page 235.)
rtce 111: When charges deductbe. -12-4988
Ct. D. 302
INCOM T R NU CT O 1921 decson of court.
Deducton usness pense mount of udgment for Com-
pensaton for Servces.
Where a ta payer, keepng ts books on the accrua bass, n 1920
enters nto a contract for servces wth ts empoyee whereby he
was to receve as yeary compensaton a percentage of the profts
of the ta payer and the empoyee, dscharged n 1923, subsequenty
brngs sut camng that the profts had been erroneousy deter-
mned and obtans a |udgment for addtona saary for the years
n queston, whch |udgment was fnay affrmed and pad n 1927
after a contest of the ta payer s abty, the court n ts decson
statng the amount due for each year, no part of the |udgment s
deductbe as a busness e pense n any of the years for whch
addtona saary was awarded by the court.
Dstrct Court of the Unted States, Dstrct of Massachusetts.
ohn . Lankcnau Co. v. Unted States of merca.
December 17, 1930.
opnon.
Morton .: Ths Is a sut to recover back corporaton ta es pad by the
pantff for the years 1921, 1922, and 1923. No queston s made but what the
acton s propery brought under the statute of 1924, and a forma requre-
ments have been met by the pantff. The facts are covered by stpuaton.
Those matera to the present controversy may be brefy stated:
In anuary, 1920, the pantff hred one Stewart as saes manager under a
contract whereby ho was to receve as yeary compensaton, one-thrd of the
net profts of the corporaton. Ths arrangement contnued unt the end of
1923, when Stewart was dscharged. e subsequenty brought sut aganst the
present pantff camng that ts profts had been erroneousy fgured, In that
the saary of Mr. Lankenau as genera manager of the company had been de-
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379
214(a), rt. 111.
ducted as an e pense before statng them, Stewart s cam beng that he was
entted to have the profts taken wthout ths deducton as the bass for hs
saary. fter rather protracted tgaton ths queston was fnay decded n
Stewart s favor by the Supreme udca Court of Massachusetts n 1927 and
some 13,000 was awarded to Stewart as addtona saary for the years n
queston the court n ts decson stated the amount due for each year.
The Government s ready to admt ths |udgment as an e pense (or oss) of
the year 1927 when t was entered and pad. ut the pantff contends that
the oss estabshed shoud be carred back nto the years n whch t accrued,
and that the ta es for those years shoud be read|usted accordngy. Ths
s the queston at ssue.
The pantff durng the entre perod has kept ts books on an accrua
bass t never entered on them as accrued abty any of the amounts whch
Stewart fnay recovered. It never conceded that t owed Stewart the sums
whch he fnay recovered, and t contested hs cam to the btter end. Its
contenton s n effect that ts abty as determned by the tgaton s
reated back to, and takes effect as of, the tme when the money ought to have
been pad.
In cag v. mercan Code Co. (280 U. S., 445 Ct. D. 168, C. . I -1, 314 ),
the Code company had empoyed one arquhar as saes manager for a term
of 18 years wthn a year after the contract was made, t dscharged hm, for
good cause as t camed ths occurred n the year 1919 arquhar sued the
Code company and after ong tgaton he recovered n 1923 a substanta
|udgment. The Code company contended that t was entted to treat ths
|udgment whch It pad as a deducton from 1919 profts. It was hed that
the deducton was not aowabe. The opnon ponts out that both the abty
and the amount of damages were whoy unpredctabe unt the resut of
the tgaton that the Code company dd not accrue on ts books, wthn
the ta year, a abty n the estmated amount of the oss and that t
can not be sad that the oss actuay pad by the company n 1923 was, as
a matter of aw or of undenabe fact, sustaned n 1919. Nor dd the com-
pany so regard t. ( randes, ., pages 451 and 452.) In Leweyn v. ec-
trc Reducton Co. (275 U. S., 243), the Reducton company made n 1918 a
contract for tungsten ore whch was to be mported, apparenty from ussa
t pad the seer 30,000 to be apped aganst the purchase prce ony one
sma ot of the ore ever came forward and n March of the foowng year
the Reducton company brought suts n an endeavor to get the money back.
Ths tgaton fnay termnated unsuccessfuy n 1922. Thereupon the Re-
ducton company camed the uncoected baance as a deductbe oss aganst
ts 1918 ncome. It was hed that the oss was not deductbe aganst that
year. ere the ony fact reed upon to show a oss s the outcome of the
tgatons two years after respondent s payment to ouraveff. There s noth-
ng n the fndngs from whch we woud concude that the respondent n
1918 had ceased to regard hs rghts under the contract as havng vaue, or
that there was then reasonabe ground to suppose that efforts to enforce them
woud be frutess. On the fndngs respondent s not entted to recover.
(Stone, ., page 247.) These two decsons represent both sdes of the ques-
ton. In the former, a cam whch was unsuccessfuy ressted was hed
to be a oss of the year n whch the |udgment was entered aganst the ta -
payer. In the atter case, the same rue was apped to a cam prosecuted by
the ta payer to an unsuccessfu concuson. I am aware of no decsons n
whch |udgment on a tgated cam has, for ta aton purposes, been referred
back to the date when abty accrued or the cam arose. . S. v. nderson
(269 T . S., 422 T. D. 3839, C. . -, 1791) and mercan Natona Co. v.
. 8. (274 U. S., 99 T. D. 4099, C. . I-2, 193 ), whch are reed on by the
pantff, seem to me qute dstngushabe. In nether was there any dsputed
cam or any tgaton. In the nderson case the queston was whether a
ta whch had been ncurred n one year and was payabe the ne t year was
deductbe for the year n whch t was ncurred. The ta payer kept ts books
on an accrua bass and the ta was hed deductbe. In the mercan
Natona Co. case t was hed that the rather compcated arrangement under
whch a oan company dd busness created what was hed to be a present
charge aganst t nstead of a future one.
In my opnon the prncpe of the mercan Code Co. and the ectrc
Reducton Co. cases, supra, fuy covers the present cam.
udgment for defendant.
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214(a)2, rt. 121.
380
S CTION 214(a)2. D DUCTIONS LLOW D:
INT R ST.
fnct 121: Interest. -16-5025
Ct.D.318
INCOM T R NU CT O 1021 D CISION O SUI R M COURT.
1. Deducton Interest cepton adty.
The e cepton n secton 214(a)2 of the Revenue ct of 1921
to the aowance of nterest as a deducton Is vad as apped to
nterest pad by a deaer n ta -e empt muncpa securtes on
money borrowed for the purpose of purchasng and carryng
e empt securtes whch he ses In hs busness.
2. Decson Dstngushed.
The decson n Natona Lfe Insurance Co. v. Unted States
(277 U. S., 508 T. D. 4206, C. . II-2, 286 ) dstngushed.
Supreme Comer of the Unted States.
. O. Dcnman, dmnstrator of Chares 27. Nauts, Coector of Interna
Revenue, pettoner, v. W. L. Sayton.
On wrt of certorar to the Unted States Crcut Court of ppeas for the S th Crcut.
ebruary 24, 1931.
OPINION.
Mr. ustce McRetnods devered the opnon of the court.
Durng the year 1922 we respondent Sayton engaged n the busness of
buyng, carryng and seng ta -e empt muncpa bonds he coected 65,72O.0G
as nterest on securtes of that character whch he owned. e pad out
78,153.84 for nterest on money borrowed by hmsef n due course for the
purpose of purchasng and carryng e empt securtes. In hs return showng
ncome receved durng that year he e cuded the nterest so coected and
he camed deducton for the nterest pad out on the borrowed money. The
Commssoner dsaowed the deducton and made a correspondng addtona
assessment. Respondent pad the sum demanded thereunder and after proper
premnary acton sued to recover t.
Determnaton of the queston nvoved must turn upon the vadty, construc-
ton and effect of sectons 213 and 214, Revenue ct of 1921 (42 Stat, 227, 237,
238, 239). Ther pertnent provsons foow:
Sec. 213. That for the purposes of ths tte the term gross
ncome

(b) Does not ncude the foowng tems, whch sha be e empt from ta a-
ton under ths tte:
(4) Interest upon (a) the obgatons of a State, Terrtory, or any potca
subdvson thereof, or the Dstrct of Coumba .
Sec. 214. (a) That n computng net ncome there sha be aowed as
deductons:

(2) nterest pad or accrued wthn the ta abe year on ndebtedness,
e cept on ndebtedness ncurred or contnued to purchase or carry obgatons
or securtes (other than obgatons of the Unted States ssued after Septem-
ber 24, 1917, and orgnay subscrbed for by the ta payer) the nterest upon
whch Is whoy e empt from ta aton under ths tte .
y orgna petton In the Dstrct Court, Northern Dstrct of Oho, Sayton
asserted that the e cepton found n paragraph (2), secton 214(a), confcts
wth the edera Consttuton In that by necessary operaton t causes ds-
crmnaton aganst the owners of nonta abe securtes and nufes ther
mmunty from ta aton. so that the ct s dscrmnatory and unconst-
tutona n that necessary e penses ncdent to a other knds of busness,
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381
214(a)2, rt. 121.
ncudng nterest pad for purchasng and carryng merchandse and nvento-
res, are aowed as part of the operatng cost, whereas deducton of nterest
pad by pantff upon funds borrowed to carry nonta abe securtes (an ord-
nary operatng e pense) s prohbted. so that the ct s arbtrary and un-
consttutona because t dscrmnates aganst pantff whose resources do
not permt hm to purchase ta -free securtes for cash and n favor of those
whose resources permt them to purchase and carry such securtes wthout
borrowng.
The coector unsuccessfuy demurred to the petton upon the ground that
t states no cause of acton. udgment went for the pantff and was affrmed
by the crcut court of appeas. oth courts were of opnon that under the
doctrne announced n Natona Lfe Insurance Co. v. Unted States (277 U. S.,
5 1S) enforcement of paragraph (2), secton 214(a), woud deprve respondent
of rghts guaranteed by the edera Consttuton.
The chaenged |udgment must be reversed. The case w be remanded to
the dstrct court wth nstructons to enter |udgment for the coector.
The crcumstances dscosed n Natona Lfe Insurance Co. v. Unted States
were radcay dfferent from those now presented, and the doctrne upon whch
that cause turned does not contro the present one. The respondent here was
not n effect requred to pay more upon hs ta abe recepts than was demanded
of others who en|oyed ke ncomes soey because he was the recpent of
nterest upon ta -free securtes a resut whch we found woud have fo-
owed enforcement of the tera provsons of secton 245(a), Revenue ct
1921 (42 Stat., 227, 261). Whe guaranteed e emptons must be strcty
observed, ths obgaton s not nconsstent wth reasonabe cassfcaton de-
sgned to sub|ect a to the payment of ther |ust share of a burden fary
mposed.
The manfest purpose of the e cepton n paragraph 2, secton 214(a), was
to prevent the escape from ta aton of ncome propery sub|ect thereto by
the purchase of e empt securtes wth borrowed money.
Under the theory of the respondent, , wth an ncome of 10,000 arsng
from none empt securtes by the smpe e pedent of purchasng e empt
ones wth borrowed funds and payng 10,000 nterest thereon, woud escape
a ta aton upon recepts from both sources. It was proper to make prov-
son to prevent such a possbty. The cassfcaton companed of s not
arbtrary, makes no mproper dscrmnaton, does not resut n defeatng any
guaranteed e empton, and was wthn the power of Congress. The fact that
respondent engaged n the busness of buyng and seng s not mportant.
(See Wcuts, etc., v. unn, decded anuary 5, 1931 Ct. D. 280, page 309, ths
uetn .)
Reversed.
htce 121: Interest. -26-5121
G.C.M. 9575
R NU CT O 1921.
Interest on a defcency n ta shoud be accrued n the year n
whch the abty for the defcency s fnay determned, ether
by an agreement, fna order, or |udgment.
The opnon of ths offce s requested upon the queston of whether
a deducton for the nterest upon a defcency n ncome ta for 1921
shoud be aowed n 1926, the year n whch the amount of the
defcency and nterest was determned and pad, or whether the
deducton shoud be taken rataby over the years from the tme the
ta was due unt fna satsfacton, where the ta payer kept ts
accounts and fed ts return upon the accrua bass of accountng.
It has been contended on the one hand that the nterest accrued
rataby from the tme the ta was due (1922) to the date of notce
and demand by the coector, and that the deducton for such
nterest shoud be taken on the same bass.
It s contended on the other hand that the nterest shoud be
accrued n the year n whch the defcency was assessed.
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214(a)2, rt, 121.
382
s recent decsons upon the queston, Mssour Pacfc Raroad
Co. v. Commssoner (22 . T. ., 267) and rookyn Unon Gas Co.
v. Commssoner (22 . T. ., 507) are cted.
In the Mssour Pacfc case the oard of Ta ppeas hed that
the nterest receved by the ta payer from the edera Government
on quartery baances under the edera Contro ct, approved
March 21, 1918 (40 Stat., 451), was not e empt from ta as nterest
on obgatons of the Unted States. The decson furnshes tte,
f any, ght upon the ssue here nvoved.
In the rookyn Unon Gas Co. case the oard had for consdera-
ton the ssue of when to accrue New York State franchse ta es
whch had been dsputed by the ta payer, tgated, and fnay pad
n a year subsequent to the orgna assessment. In that case the.
oard specfcay hed that the ta and the nterest on the unpad
porton of the ta accrued n the year of assessment rather than the
year n whch the abty to pay the ta and nterest was fnay
admtted.
In Lucas v. mercan Code Co. (280 U. S., 445, Ct. D. 168, C. .
T -1, 314), the Supreme Court had for consderaton the queston
of when a oss arsng from a breach of contract accrued where t
appeared that the abty was dsputed and contested n court over
a perod of years. In that case the Supreme Court hed that the
oss shoud be taken n the year of fna |udgment and not n the
year the contract was breached. In the course of ts opnon the
court sad:
The oard of Ta ppeas has hed, n a seres of we-reasoned
opnons, that a oss occasoned by the ta payer s breach of contract s not
deductbe n the year of the breach, e cept under the speca crcumstances
where, wthn the ta year, there s a defnte admsson of abty, negota-
tons for settement are begun, and a reasonabe estmate of the amount of
the oss s accrued on the books.

In the case at bar, the contract had neary 18 more years to run, at the
tme of hs ts breach. Labty for the breach was dened and strenuousy
contested, the tgaton beng carred to the hghest court of the State. The
amount of the damages, f any, was whoy unpredctabe. Whe the facts
determnng abty had occurred n the year of the breach, the amount to be.
recovered, f there was ega abty, depended n arge part on the course
of future events.
The case at bar s unke Unted States v. nderson (269 T . S., 422
T. D. 3839, O. . -, 179 ). There, the abty for the muntons ta at
a f ed rate on the busness done n 1916 had confessedy accrued n that
year and was a charge on the busness of that year, athough the e act
amount due may not have been then ascertanabe and the ta was not payabe
unt 1917. It s aso unke mercan Natona Co. v. Unted States (274
U. S., 99 T. D. 4099, C. . I-2, 193 ). There, the bonus contract provded
defntey for the payment of a f ed amount. It was debtum n pracsent,
sovcndmn n futuro. The case at bar s n prncpe more ke Leweyn v.
ectrc Reducton Go. (275 T . S., 243). Itacs supped.
Snce ta es due the Unted States are debts Prce v. . S., 269
U. S., 492, T. D. 3820, C. . -, 318 ender v. Pfaff, 38 ed. (2d),
649), t woud seem to foow that so ong as the ndebtedness s
dened and the abty to pay ta es s contested before the ureau,
the oard of Ta ppeas, or the courts, the ta payer shoud not be
permtted or requred to accrue the nterest upon the dsputed ndebt-
edness (defcency), uness a dfferent rue appes n the case of
ta es than appes n the case of other accruabe tems. The eadng
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383
214 (a) 3, rt. 133.
case upon the accrua of ta es s, of course, Unted States v. nder-
son, cted supra. The Supreme Court has not ndcated that ts
decson n that case s mted to the accrua of ta es aone. t east
the decson has been cted and reed upon n cases nvovng the
accrua of other tems. (See mercan Natona Co. v. U. S., cted
supra U. S. v. mercan Can Co., 280 U. S., 412, Ct. D. 164, C. .
I 1, 292 umnum Castngs Co. v. Routzahn, 282 U. S., 92 and
Rouss v. owers, 30 ed. (2d), 628.)
urthermore, the accrua of the deducton rataby from the tme
the ta was due unt fna satsfacton appears to be sub|ect to strong
admnstratve ob|ectons. Where the defcency s dsputed, n
whoe or n part, by the ta payer the Income Ta Unt s faced wth
the practca dffcuty of not knowng how much of a deducton on
account of nterest to aow n ts audt of returns for subsequent
years. Where the dspute s proonged beyond two years, n cases
carred to the oard of Ta ppeas, the aowance of nterest on a
defcency, subsequenty determned not to e st, woud not appear to
be n harmony wth good accountng practce or sound ta admns-
traton. or e ampe: Suppose n 1925 a defcency of 1,000,000
for 1921 was asserted n a 60-day etter and the ta payer fed a
petton before the oard of Ta ppeas. If the oard deter-
mned n 1930 that no defcency e sted and the unt had n the
meantme aowed as a deducton the nterest on 1,000,000 for the
years 1922 to 1930, ncusve, t woud then fnd tsef n the poston
of havng aowed a deducton for an tem whch never e sted and
beng unabe to make proper ad|ustment for a or part of the years
due to the statute of mtatons. If, on the other hand, the accrua
s postponed unt the year n whch the dspute as to abty s
termnated and the actua abty s determned or agreed upon, no
such probem woud arse.
ccordngy, t s the opnon of ths offce that the nterest on
defcences n ta shoud be accrued n the year n whch the abty
for the defcency s fnay determned, ether by an agreement, fna
order, or |udgment.
C. M. Chakest,
Genera Counse, ureau of Interna Revenue,
S CTION 214(a)3. D DUCTIONS LLOW D:
T S.
rtce 131: Ta es.
R NU CT O 1921 ND PRIOR R NU CTS.
ees pad by a corporaton to the secretary of state n Oho n
connecton wth an amendment of ts charter. (See I. T. 2570,
page 115.)
rtce 133: Ta es for oca benefts.
R NU CT OP 1921 ND PRIOR R NU CTS.
Revocaton of Genera Counse s Memorandum 5589 (C. . III-1,
83), regardng treatment of assessments for street and ke mprove-
ments. (See G. C. M. 9461, page 120.)
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214(a)4, 5, 6, rt. 141.
384
S CTION 214(a)4, 5, ND 6. D DUCTIONS
LLOW D: LOSS S.
rtce 141: Losses. --4978
Ct. D. 296
INCOM T R NU CT OP 1921 D CISION O COURT.
1. Deducton Loss ssessment on Natona ank Stock.
payment made by a stockhoder of a natona bank on account
of an assessment upon the shares of ts capta stock ordered by
the Comptroer of the Currency to repar a oss on ts capta s
not deductbe as a oss under secton 214(a)5 of the Revenue ct
of 1921.
2. Decson ffrmed.
The decson of the oard of Ta ppeas (16 . T. , 1399)
affrmed.
Unted States Cbcutt Coubt of ppeas, Tenth Crcut. No. 262. October
Tebm, 1930.
rst Natona ank n Wchta, omes Meade and Carence . eck, Trustees
of the state of W. R. Ranney, Deceased, pettoners, v. Commssoner of
Interna Revenue, respondent.
On petton to revew the decson of the Unted States oard of Ta ppeas.
efore Lews and Cotteba, Crcut udges, and Poock, Dstrct udge.
anuary 5, 1931.
Poock, Dstrct udge, devered the opnon of the court.
The facts out of whch ths controversy arose are these: Pettoner on une
20, 1923, purchased 25 shares of the capta stock of the Securty Natona unk
of rkansas Cty, ans., payng therefor the fu par vaue of the shures,
twenty-fve hundred doars. On or about the 11th day of September, 1923,
pettoner receved a notce from the board of drectors of the bank that the
Comptroer of the Currency had found the capta of the bank mpared to the
e tent of 40,956, and ths amount shoud be made up by an assessment upon
the sharehoders of the bank, whch assessment of 41 per cent of the par vaue
of the stock n the bank was made and pettoner pad on hs shares 1,025.
Ths amount was utmatey ost to pettoner. In hs ncome ta return for
the year 1923 he deducted sad amount from hs tota gross ncome for the year
1923. On une 30, 1925, the Commssoner of Interna Revenue notfed pet-
toner ths deducton woud not be aowed. ganst ths decson pettoner
protested. On the 12th day of ugust, 1925, the Commssoner adherng to hs
former rung notfed pettoner there was a defcency n payment of hs ncome
ta for the year 1923 of 176.81 based on the deducton from hs gross ncome
of the assessment on hs stock n the bank. n appea was aowed from ths
order and taken to the oard of Ta ppeas. On a hearng that oard uphed
the order of the Commssoner, and pettoner appeas to ths court.
The soe queston for decson s ths: Is an assessment made on the shares
of capta stock of a natona bank to repar a oss on ts capta such a oss
as may be deducted from gross ncome by a ta payer under paragraph 5, sec-
ton 214, evenue ct of 1921, whch reads as foows:
(5) Losses sustaned durng the ta abe year and not compensated for by
nsurance or otherwse, f ncurred n any transacton entered nto for proft,
though not connected wth the trade or busness . No deducton sha
he aowed under ths paragraph for any oss camed to have been sustaned n
any sae or other dsposton of shares of stock or securtes made after the
passage of ths ct where t appears that wthn 30 days before or after the
date of such sae or other dsposton the ta payer has acqured (otherwse
than by bequest or nhertance) substantay dentca property, and the prop-
erty so acqured s hed by the ta payer for any perod after such sae or other
dsposton. If such acquston s to the e tent of part ony of substantay
dentca property, then ony a proportonate part of the oss sha be
dsaowed.
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385
214(a)8, rt. 161.
It s conceded the decson of no court controng here may be found on the
queston presented. Counse for respondent n ther bref contend that assess-
ments on shares n such a corporaton as a natona bank made by the Comp-
troer of the Currency to repar capta oss of the bank must be consdered
as money pad as a further nvestment n the capta of the bank and not
as a oss deductbe from ncome for purpose of ta aton. rtce 543 of the
reguatons promugated by the Treasury Department under the Revenue ct of
1921 roads:
n assessment pad by a stockhoder of a natona bank on account of hs
statutory abty s ordnary not deductbe but, sub|ect to the provsons of
the statute, may n certan cases represent a oss.
rtce 544 reads:
bt. 544. Contrbutons by stockhoders. Where a corporaton requres
addtona funds for conductng ts busness and obtans such needed money
through vountary pro rata payments by ts stockhoders, the amounts so
receved beng credted to ts surpus account or to a speca account, such
amounts w not be consdered ncome, athough there s no ncrease n the
outstandng shares of stock of the corporaton. The payments n such cr-
cumstances are n the nature of vountary assessments upon, and represent an
addtona prce pad for, the shares of stock hed by the ndvdua stock-
hoders, and w be treated as an addton to and as a part of the operatng
capta of the company .
The ureau of Interna Revenue has consstenty from the begnnng hed
assessments of the nature nvoved heren when pad are not deductbe osses
but are contrbutons to capta and the oard of Ta ppeas has |ust as
consstenty adhered to ths vew of the aw. (See ppea of arry . Lutz,
2 . T. ., 484 ohn O. Pa ton v. Commssoner, 7 . T. ., 92 urns v.
Commssoner, 11 . T. 524.) In rewster v. Cage (280 U. S., 327) Mr.
ustce uter, deverng the opnon for the court, sad:
It s the setted rue that the practca nterpretaton of an ambguous or
doubtfu statute that has been acted upon by offcas charged wth ts admn-
straton w not be dsturbed e cept for weghty reasons. (Logan v. Davs,
233 U. S., 613, 627 Maryand Casuaty Co. v. Unted States, 251 T . S., 322, 331.)
s we see no reason for departng from ths rue of the Department n ths
case, the decson of the oard of Ta ppeas s accordngy affrmed.
It s so ordered.
rtce 141: Losses.
R NU CT O 1921 ND PRIOR R NU CTS.
Tradng n of trucks and passenger cars used for busness purposes
on new trucks and passenger cars to be used for ke purposes. (See
L T. 2573, page 215.)
S CTION 214(a)8. D DUCTIONS LLOW D:
D PR CI TION.
rtce 161: Deprecaton. -17-5036
G. C. M. 9357
R NU CT O 1921.
No deducton for deprecaton s aowabe wth respect to e -
pendtures ncurred durng constructon, such ns engneerng nnd
superntendence, genera offcers and cerks saares, offce suppes
and e penses, n|ures and damages, and nsurance, whch upon
anayss can not reasonaby be assgned and attrbuted n whoe
or n part to any property sub|ect to e hauston, wear and tear,
and obsoescence, havng a usefu fe. The porton of such e -
pendtures whch can reasonaby be assgned or attrbuted n whoe
or n part to property sub|ect to e hauston, wear and tear, and
obsoescence may be ncuded n the cost of the deprecatng prop-
erty and a deducton aowed on the bass of the composte rate
propery appcabe to the partcuar year n queston.
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214 (a) 8, rt. 161.
386
n opnon has been requested reatve to the treatment to be
afforded certan e pendtures made by a pubc utty company and
ts subsdares.
In a memorandum from the Income Ta Unt the facts, so far
as are here matera, are stated as foows:
The M Company, a subsdary of the N Company, s requred n accordance
wth the unform cassfcaton of accounts prescrbed by the Pennsyvana
Pubc Servce Commsson to captaze on ts books numerous tems of e -
pense durng constructon, such as engneerng and superntendence, genera
offcers and cerks saares, genera offcers and cerks e penses, offce sup-
pes and e penses, aw e pendtures, n|ures and damages, and nsurance.
These tems are frst charged to the reguar e pense accounts and then a por-
ton thereof s aocated to constructon and captazed on the books.
composte rate of deprecaton has been aowed on a deprecabe prop-
erty, e cudng these tems of e pense durng constructon, and no aowance
has been made for osses on the sae or other dsposton of capta assets.
The accounts as they are desgnated on the books of the M Company as
undstrbuted constructon e pendtures are as foows:
Doars.
ngneerng and superntendence durng constructon 129
Genera offcers and cerks saares durng constructon 20
Genera offcers and cerks e penses durng constructon 3. 03
Offce suppes and e penses durng constructon 5. 33
Law e pendtures durng constructon 1. 39
In|ures and damages durng constructon 1. 28
Insurance durng constructon 9. 65
Other e pendtures durng constructon 37. 58
nd on the books of the O Company, another subsdary of the M Company,
as foows:
Doars.
ngneerng and superntendence durng constructon 331. 05
Law e pendtures durng constructon 289. 68
Other e pendtures durng constructon 507. 83
These accounts represent an accumuaton of constructon costs whch have
not been assgned to any specfc physca f ed capta account, and n the
absence of dstrbuton of these overhead e pendtures t s questonabe
whether such dstrbuton can be satsfactory made.
In ths connecton, there s quoted the provson n the cassfcaton of
accounts of the Pubc Servce Commsson of the Commonweath of Pennsy-
vana effectve anuary 1, 1919, page 64, under whose |ursdcton the nstant
ta payer operates:
Undstrbuted constructon e pendture accounts, charge to the approprate
accounts sted under ths capton the amount of those e penses theren
descrbed whch are ncurred by the utty durng the perod of the construc-
ton of ts eectrc system, or any part thereof, and whch can not be satsfac-
tory assgned by t to the specfc f ed capta accounts n chch t s requred
to record the tems of f ed capta acqured by t after December 31, 1918.
Itacs supped.
ccount 288. ngneerng and superntendence durng constructon.
ccount 289. Genera offcers and cerks saares durng constructon.
ccount 290. Genera offcers and cerks e penses durng constructon.
ccount 291. Offce suppes and e penses durng constructon.
ccount 292. Law e pendtures durng constructon.
ccount 293. In|ures and damages durng constructon.
ccount 294. Insurance durng constructon.
ccount 297. Other e pendtures durng constructon.
The queston presented s whether any aowance for deprecaton
can be made on the bass of the e pendtures above enumerated.
The Income Ta Unt has taken the poston that the e pendtures
nvoved n the nstant case are not susceptbe of satsfactory dstr-
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387
214(a)8, rt. 161.
buton or assgnment to the cost of specfc unts of physca prop-
erty, and that, accordngy, no deprecaton may be aowed wth
respect to the unassgnabe e pendtures. The decson of the oard
of Ta ppeas n Paducah Water Co. v. Commssoner (5 . T. .,
Dstrct of Coumba (33 ed. (2d), 559, Ct. D. 94, C. . III-2,
306), has been cted and reed upon n support of ths poston.
In the Pa ucah Water Co. case an apprasa ha beep made by
engneers purportng to state the vaue of the propertes of that
company as they e sted on March 1, 1913, and at prces then pre-
vang. Ths apprasa was made n 1919 n connecton wth the
proposa of the cty of Paducah to e ercse ts opton to purchase
the pant. Incuded among tems n the apprasa were premnary
costs, msceaneous nventores, engneerng and supervson, ad-
mnstratve costs, and contngent costs. The Commssoner took the
poston that n determnng the deprecabe vaue of the pant
these tems shoud be emnated. The oard of Ta ppeas agreed
wth the Commssoner s determnaton n ths respect and hed
that not a capta nvestment as of March 1, 1913, s sub|ect to
the annua deducton for e hauston that ths s pan as to and
and shoud be equay pan as to ntangbes havng an uncertan
or ndefnte fe and that ths does not mean that the nvestment
represented by such tems s not recoverabe but ony that ts re-
covery must awat the utmate sae or dsposton of property n-
stead of comng out of annua ncome.
In affrmng the decson of the oard of Ta ppeas the court
of appeas used the foowng anguage:
Whe the emnated tems enter nto the vaue of the pant, they
are not deprecabe n fact, and hence were propery emnated n f ng the
vaue of deprecabe property.
In the opnon of ths offce, the broad genera anguage used by
the court of appeas n ts decson must be read n the ght of the
mted statement of facts whch was before the court n that case.
The facts n the nstant case are n many matera respects ds-
tngushabe from those n the case of the Paducah Water Co. The
tems n the nstant case represent actua cash e pendtures and not
ntangbe, estmated, or fcttous tems resutng from an apprasa.
Secton 12(a) of the Revenue ct of 1916 provded that m com-
putng the net ncome of a corporaton there shoud be deducted
a reasonabe aowance for the e hauston, wear and tear of prop-
erty arsng out of ts use or empoyment n the busness or trade.
Ths anguage has been retaned n substance n a the subsequent
Revenue cts, e cept that begnnng wth the Revenue ct of 1918
the words trade and busness have been transposed so as to
read trade or busness. egnnng aso wth the Revenue ct of
1918, the words ncudng a reasonabe aowance for obsoescence
have been added.
In the case of L. Ttus (2 . T. ., 754, C. . -, 5) the oard
of Ta ppeas sad:
The theory of deprecaton s that the ta payer shoud be aowed,
durng the usefu fe of property used n hs busness, to recover the cost of
such property. Itacs supped. (See aso rost Manufacturng Co.,
13 . T. ., 802.)
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214 (a) 8, rt. 161.
388
In the case of Coca-Coa ottng Co. (6 . T. ., 1333), the oard
hed that where a contract grantng a cense to prepare and se
certan products n defned terrtory for an ndefnte perod had no
determnabe usefu fe t was not sub|ect to e hauston and see
San ngeo Teephone Co. (6 . T. ., 1189) Wam T. Reynods
Co., Inc. (6 . T. ., 16) Western ave ag Co. (13 . T. ., 749).
In Genera qupment Co. (2 . T. ., 804) the ta payer camed
a deducton for deprecaton on certan agency contracts for ndef-
nte perods. The oard dened ths on the ground that t s obv-
ous that no aowance may be made for e hauston wth respect
thereto, snce no e hauston s actuay takng pace, wthn the pur-
vew or the statute, whch s susceptbe of measurement. Itacs
supped.
In rcade Department Store, Inc. (18 . T. ., 1172, C. . I -
2, 3) a cam was made for deprecaton on certan assets. The
oard, n denyng the aowance, sad The record does not sats-
factory estabsh the remanng usefu fe of the varous artces
and, consequenty, there s no bass upon whch we can
compute deprecaton thereon for the ta abe perod and year here
nvoved. Itacs supped. nd see Leggett Patt Sprng
ed Mfg. Co. (18 . T. ., 1012) Marc dtz Son, Inc. (18
. T. ., 187) (nonacquesced n C. . I -2, 72, but nonacquescence
reates to other ssues). See aso artces 161, 162, and 164 of Regu-
atons 62.
It s apparent from the foregong that n genera the aowance
for deprecaton must be confned to property whch graduay ap-
proaches a pont where ts usefuness s e hausted, and that t may
be made ony where the property has a determnabe usefu fe
reasonaby susceptbe of measurement. It s equay cear that the
deducton may not be camed wth respect to tems whch, athough
they represent capta nvestments, do not enter nto the cost of wast-
ng or deprecatng propertes or are not reasonaby attrbutabe to
such propertes. (See Paducah Water Co. v. Commssoner, supra.)
The rea queston n ths case s whether the tems mentoned
above, or any part of them, entered nto the cost of deprecatng
propertes.
Snce the statute provdes for a reasonabe aowance for e haus-
ton, wear and tear, and obsoescence, t s evdent that the aow-
ance must be determned n the ght of the facts and crcumstances
of each case. (See Ceveand ome rewng Co., 1 . T. ., 87, C. .
I -1, 1 Whtete ectrc Co., 18 . T. ., 934 Cumberand Gass
Mfg. Co. v. Unted States, 44 ed. (2d), 433 and Geuder, Paeschke
rey Co. v. Commssoner, 41 ed. (2d), 308.) The anguage of
the statute appears to be suffcenty broad to warrant the deducton
where t s demonstrated that a gven capta e pendture may rea-
sonaby be attrbuted to wastng or deprecatng propertes whch
have a usefu fe capabe of appro maton. The fact that the e -
pendtures can not be aocated n mnuta to each ndvdua pece
of physca property does not warrant a dsregard of the e pendture
for deprecaton purposes f, n fact, t appears that the tem reason-
aby and fary entered nto the cost of wastng or deprecatng prop-
ertes whch had a usefu fe. In other words, where a gven capta
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389
214(a)8, rt. 162.
e pendture of a more or ess genera nature, such as the tems here
nvoved, can reasonaby be sad to have entered nto the cost of sev-
era deprecatng propertes but t can not be specfcay attrbuted
to partcuar propertes, t woud appear that the requrement of the
statute and reguatons woud be met by an apportonment process
whch woud dvde the e pendture, on a percentage bass f neces-
sary, among the severa propertes benefted.
Wth respect to the queston of whether a gven e pendture
entered nto the cost of deprecatng property, t s cear that no test
of unversa appcaton can be stated. owever, t woud appear
generay that f an e pendture was of such a nature that t woud
recur wth each reconstructon of a pant or property, then that
e pendture may reasonaby be sad to consttute a part of the cost
of the property for deprecaton purposes. or e ampe, f an
e pendture s made for attorneys fees, damages, and costs n suts
arsng from n|ures to workmen n the course of the constructon
of a pant, t woud appear that such an e pendture may reasonaby
be sad to consttute a part of the deprecatng cost of the pant,
because when the pant s worn out and has to be repaced the same
type of e pendtures w n a probabty be agan ncurred. On
the other hand, f a premnary survey of a watershed s made
before the constructon of a dam the amount e pended for such
purpose woud not appear to be necessary recurrent even though
the dam were subsequenty rebut.
It s evdent from the foregong that the e pendtures nvoved
n the nstant case w fa wthn two genera cassfcatons,
namey, (1) e pendtures, whch, upon anayss, can not reasonaby
be assgned or attrbuted n whoe or n part to any property sub|ect
to e hauston, wear and tear, and obsoescence, havng a usefu fe.
s to these e pendtures, no deducton for deprecaton woud ap-
pear to be aowabe under the decsons n the Paducah Water Cfo.
case, supra (2) e pendtures, whch, upon anayss, can reasonaby
be assgned or attrbuted n whoe or n part to property sub|ect
to e hauston, wear and tear, and obsoescence. The porton of these
e pendtures so attrbuted shoud be ncuded n the cost of the
deprecatng property and the deducton aowed on the bass of the
composte rate propery appcabe to the partcuar year n queston.
C. M. Charest,
Genera. Counse, ureau of Interna Revenue.
rtce 162: Deprecabe property.
R NU CT O 1921 ND PRIOR R NU CTS.
Revocaton of Genera Counse s Memorandum 5589 (C. . III-1,
83), regardng treatment of assessments for street and ke mprove-
ments. (See G. C. M. 9461, page 120.)
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214(a) 10, rt 203.
390
S CTION 214(a) 10. D DUCTIONS LLOW D:
D PL TION.
rtce 203: mount returnabe through depe- -1 -5056
ton and deprecaton deductons n the case of Ct. D. 331
essee.
INCOM T R NU CT O 1918 D CISION O SUPR M COURT.
Deducton Depeton Capta Recoverabe,
In determnng the capta recoverabe by a essee through depe-
ton deductons under the Revenue ct of 1918 n the case of a
easehod of o mnng property acqured pror to March 1, 1913,
there shoud be deducted from the vaue of the essee s nterest as
of March 1, 1913, depeton sustaned from that date to the ta abe
year, whether egay aowabe or not as deductons n years pror
to the ta abe year.
Supreme Coubt of the Unted States. No. 288. October Term, 1930.
Davd urnet, Commssoner of Interna Revenue, pettoner, v. Thompson O t
Gas Co.
On wrt of certorar to the Unted States Crcut Court of ppeas for the Tenth Crcut
pr 13, 1931.
Mr. ustce Roberts devered the opnon of the court.
The Commssoner of Interna Revenue determned a defcency n the respond-
ent s ncome ta for 1918. Upon the ta payer s petton the oard of Ta ppeas
sustaned the Commssoner.1 n appea was taken to the court of appeas,
whch reversed the |udgment of the oard Ths court granted certorar.
The queston presented s whether under secton 234(a)9 of the Revenue ct
of 1918, n determnng for any ta abe year the capta vaue, recoverabe
through depeton aowance, of o mnng propertes acqured pror to March
1, 1913, there shoud be deducted from the March 1, 1913, vaue of the proper-
tes the amount of depeton actuay sustaned n earer years, or ony so much
of such depeton as was aowabe as deductons under the Revenue cts In
force In those years.
The oard of Ta ppeas found the foowng facts: The ta payer owned
an o and gas mnng ease acqured pror to March 1, 1913. On that date the
recoverabe o u the reserve embraced by the ease was 27S,000 barres, and ts
vaue was 156,645, or 0.56347 per barre. etween March 1, 1913, and Decem-
ber 31,1915, t e tracted 162,717 barres of o, so that at the unt rate mentoned
t sustaned depeton amountng to 91,686.15. Its deducton for depeton n
computng net ncome under the Revenue ct of 19135 was computed not by
reference to the number of barres e tracted, or to the vaue of the reserve on
March 1, 1913, but by takng 5 per cent of the gross ncome from the sae of
o. The depeton aowance for 1913 to 1915, ncusve, computed by ths
method, amounted to 6,322.02.
In 1916 the ta payer secured an e tenson of ts ease at a cost of 30,000,
whereby ts o reserve was ncreased by 300,000 barres. There then remaned
of the orgna reserve 115,283 barres havng a vaue as of March 1, 1913, of
15 I . T. ., 993.
40 . (2d), 493.
282 U. S., 823.
40 Stat.. 1077. Sec. 234. (a) That In computng the net ncome of a corporaton
sub|ect to the ta mposed by secton 230 there sha be aowed as deductons:
(9) In the caso of mnes, o and gas wes, other natura deposts, and tmber, a
reasonabe aowance for depeton and for deprecaton of mprovements, accordng to the
pecuar condtons n each case, based upon cost Incudng cost of deveopment not other-
wse deducted : Provded, That n the case of such propertes acqured pror to March 1.
1913, the far market vaue of the property (or the ta payer s nterest thereu) on that
date sha be taken n eu of costs up to that date: such reasonabe aowance
n a the above cases to be made under rues and reguatons to be prescrbed by the
Commssoner wth the approva of the Secretary.
C. 16, Secton II 38 Stat., 1G7. That n computng net ncome there
sha be aowed as deductons : s th, a reasonabe aowance for the e haus-
ton, wear and tear of property arsng out of ts use or empoyment n the busness, not
to e ceed, n the case of mnes. 5 per centum of the gross vaue at the mne of the output
for the year for whch the computaton s made, .
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391
214(a)10, rt. 203,
64,958.85. The Commssoner added to ths depeted vaue the cost of the e -
tenson of the ease, and added to the remanng o reserves of the orgna
ease the addtona 300,000 barres then acqured. e thus ascertaned a new
tota recoverabe reserve of 415,283 barres havng a basc vaue or cost of
94,958.85, or 0.22866 per barre. There were no subsequent addtons to the
reserves.
In 1916 there were produced under the ease 49,452 barres of o, and n 1917,
39,204 barres, eavng the reserve at anuary 1, 1918, 326,627 barres.
new method of aowance for depeton was adopted n the Revenue ct of
1916. Depeton was sustaned under the formua theren prescrbed n those
two years, amountng to 20,272.08. It s agreed that ths fgure s correct and
represents the sustaned depeton as we as aowed depeton for those years.
Durng 1918 there were produced 33.697 barres of o. t the unt prce
adopted by the Commssoner of 0.22860 per barre, the depeton sustaned and
aowed for that year was 7,705.16. It s ths depeton aowance for the year
1918 whch s here caed n queston.
In vew of the fact that the depeton actuay sustaned by the ta payer
between March 1, 1913, and December 31, 1915, was 91,686.15, whereas n con-
formty wth the ct of 1913 the deducton actuay aowed t as for depeton
was ony 6,322.02, the respondent contended that the unt rate of depeton per
barre for 1918 shoud have been based upon the orgna March 1, 1913, vaue
of the reserves, pus the cost of the e tenson of the ease, and ess ony that
porton of the actuay sustaned depeton whch was n fact aowed pursuant
to the terms of the 1913 ct. The Commssoner, on the other hand, subtracted
from the March 1, 1913, vaue pus the cost of the e tenson of the ease, the
sustaned or actua depeton, hodng that the entre depeton actuay sus-
taned shoud be deducted from the orgna March 1, 1913, vaue, regardess
of whether t was aowabe as deductons from the gross ncome of the years
1913, 1914, and 1915. The Crcut Court of ppeas decded n favor of the
respondent.
The partes agree that respondent s not entted as matter of rght to make
any deducton from annua ncome for depeton of the o e tracted and sod
durng the year. If t may take any such deducton, authorty therefor must be
found n the statute. It foows that the queston for decson s purey one of
Statutory constructon.
It s cear that Congress Intended that the essee of an o we shoud be
entted to a reasonabe aowance for depeton based upon cost or March 1,
1913, vaue. It dd not however attempt to prescrbe a formua for ascertanng
t, but e pressy deegated that functon to the Commssoner of Interna Reve-
nue, who was to make rues and reguatons to that end. Pursuant to ths
authorty, reguatons were made, whch requred the deducton of depcton
theretofore sustaned n ascertanng the capta remanng n any year recover-
abe by depeton deductons. It s undsputed that the Commssoner cacu-
ated the depeton deducton n ths case n accordance wth the reguatons.
The ta payer contends, however, and the court beow hed, that the aow-
ance granted was not reasonabe as the ct requred t shoud be because
athough t refected the actua depeton n the year 1918, consdered by tsef,
the resut of the appcaton of the reguaton w fa short of returnng to the
ta payer ts March 1, 1913, capta ta -free at the date of e hauston of the o
reserve. It s sad that ths was the ntent of Congress as shown not ony by
the terms of the ct, but by the hstory of pror egsaton. ence t s camed
that ony the depeton aowed under the ct of 1913 shoud be deducted n
ascertanng the depetabe capta at anuary 1, 1918. Thus respondent woud
recover ts entre capta ta -free. The Government contends that the depeton
aowance provded by the reguatons s reasonabe.
C. 463, 39 Stat., 767-768. Sec. 12. (a) In the case of a corporaton such
net Income sha be ascertaned by deducton from the gross amount of ts ncome
. Second. osses actuay sustaned and charged off wthn the year and not
compensated by nsurance or otherwse, ncudng (a) n the case of o and
gas wes a reasonabe aowance for actua reducton n fow and producton to be
ascertaned not by the fush fow, but by the setted producton or reguar fow .
Stanton v. ato Mnng Co. (240 f|. S., 103 GO L. d., 546).
rt. 203. Capta recoverabe through depeton deductons n the case of essee.
(a) In the case of a essee, the capta remanng n any year recoverabe through depe-
ton and deprecaton deductons s (1) the vaue as of the basc date of the essee s
equty n the property pus (2) subsequent aowabe capta addtons but mnus (3)
depeton and deprecaton sustaned, whether egay aowabe or not, from the basc
date to the ta abe year.
72109 31 26
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214(a)10, rt. 203.
392
It s evdent that the ct of 1913 dd not aow enough to return the capta
on e hauston of the reserve. The deducton permtted by that ct fe some
85,000 short of what was requred n 1913-1915 for that purpose. Was t then
the ntent of the ct of 1918 to permt a deducton from gross ncome for depe-
ton whch woud represent not ony that year s sustaned depeton, but make
up for sustaned but dsaowed depeton n the earer years The Govern-
ment says, and we thnk rghty, that there s nothng n the terms of te ct to
ndcate any such purpose. The ta s an ncome ta for 1918, and n the
absence of e press provson to the contrary, t s not to be supposed that the
ta payer s authorzed to deduct from that year s ncome, deprecaton, depe-
ton, busness osses or other smar tems attrbutabe to other years. The
very fact that Congress dened deductons equa to the sustaned depeton n
the earer years negatves an ntent that they shoud be aowed n ater years,
as f for depeton then sustaned. The constructon adopted by the court beow
n effect resuts n ncudng n the ta abe year tems referabe to other years,
and s contrary to the theory of a ta for specfc years.
The nature of the ta as one for annua perods has been repeatedy men-
toned n deang wth ts appcaton n varous stuatons.10 The ta abe year
1918, and that ony, s nvoved, and deductons appcabe to that year ony
shoud be aowed.
The court beow recognzed that ts decson resuted n attrbutng an e ces-
sve vaue to the reserves remanng n 1918, but thought that Unted States v.
Ludey11 requred t so to hod. That case, however, nvoved the determnaton
of ta abe gan or oss on the sae of an o property. To ascertan gan on a
sae of a capta asset, there must be subtracted from the sae prce a sum
suffcent to restore the vaue at the date of acquston (or March 1, 1913).a
The remander s ncome. So n the Ludey case t was hed that, n order to
ascertan the depeted cost, ony the aowed depeton shoud be deducted from
the orgna cost. owed depeton rather than sustaned depeton was there
the true measure of deducton. ut here the queston s what aowance Con-
gress ntended shoud be made from the gross annua ncome of the operaton
of an o we. In the one case the queston s how much of the capta has
aready been returned ta -free n the other how much of the o reserve re-
mans at the begnnng of a ta abe year to be depeted over the perod reman-
ng unt e hauston. The court beow reed on certan statements n the
opnon n the Ludey case whch were appcabe n the determnaton of gan
on a sae, but whch do not appy n ths case, for f the sae of each barre of
o were a parta sae of the reserve (whch t s not) to appy the rue whch
respondent seeks to deduce from the Ludey case woud ncrease the cost or
1913 vaue of each barre sod, n determnng gan or oss n 1918, beyond ts
actua cost or 1913 vaue, soey by reason of the fact that too ow a cost or
1913 vaue was taken for barres sod n pror years. The decson n the Ludey
case has been adopted In the ater statutes as affectng saes of capta assets,
but the provson for annua depeton aowance has remaned substantay
unchanged. Ths n tsef s persuasve evdence that Congress has approved
the e ecutve constructon emboded n the reguatons.
Respondent nssts that the ncreasng beraty n the statutory provsons
for depeton aowances n the successve Revenue cts ndcates that Congress
never ntended that the 1918 ct shoud be so construed or admnstered as to
deprve the ta payer of the return of hs entre capta ta -free. ut the
ncreasng beraty was to be appcabe n cacuatng net ncome for the
successve years and we can fnd no evdence ether n the cts or n the regua-
tons, of any ntent to ncrease future depeton aowances to redress the
nadequacy of those prevousy permtted.
It foows that the |udgment must be reversed.
s to osses, see e Loss v. Commssoner (28 . (2d), 803) urns v. Commssoner
(31 . (2d), 309). Compare Newman v. Commssoner (41 . (2d), 743).
w umnum Castngs Co. v. Routsahn (282 U. S., 92) urnet r. Stanford t rooks Co.
(282 U. S., 359 Ct. D. 277, page 363, ts uetn 1) awous Machne Co. v. Unted
States (282 T . S., 375 Ct D. 278, page 424, ths uetn .)
11 274 T . 8., 295 71 L. d., 1054.
Doye v. MtcheU ros. Co. (247 T . S.. 179 62 L. d., 1054).
ct of 1924. ch. 234, 43 Stat., 253, 283 ct of 1926. eh. 27, secton 202(b)2, 44 Stat.,
9, 12 ct of 1928, ch. 852, secton 111(b 2, 45 Stat.. 791, 815.
ct of 1921, secton 234(a)9. 42 Stat., 227, 2.r 0 : ct of 1924, secton 284 (a) 8, 43
Stat., 253. 284 ct of 1926, secton 234(a)8, 44 Stat., 9, 42: ct of 1928, secton
23(1). 45 Stat., 791, 800.
Unted States v. ermanos (209 T . S., 337 52 L. d., 821) Natona Lead Co.
Unted States (252 T . S 140 64 L. d., 496).
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393 230, rt. 502 .
rtce 231: Charges to capta and to e penses n the case
of tmber.
R NU CT O 1918.
Ta es on unproductve tmberands. (See Ct. D. 313, page 340.)
S CTION 217. N T INCOM O NONR SID NT
LI N INDI IDU LS.
rtce 317: Interest.
R NU CT O 1921.
Interest on bank depost credted to trustee. (See G. C. M. 9156,
page 166.)
P RT III. CORPOR TIONS.
S CTION 230. T ON CORPOR TIONS.
rtce 502: Rates of ta . -8-4947
Ct. D. 282
INCOM T R NU CT O 1918 D CISION O COURT.
Rates of Ta Lessor Raroad Company Perod of edera
Contro.
The net ncome of a essor raroad company, -whch had eased to
an operatng raroad company a ts property, appurtenances, and
franchses, whch ease was n fu effect durng the perod such
propertes were taken over and operated by the Drector Genera of
Raroads pursuant to the edera Contro ct and an agreement
between the Drector Genera and the essee, s ta abe at the rates
prescrbed by subdvson (a) and not by subdvson (b) of sec-
ton 230 of the Revenue ct of 1918.
Dstrct Court of the Unted States, Dstrct of Rhode Isand.
Provdence t Worcester Raroad Co. (the New York, Nco aven Mart-
ord Raroad Co., Lessee), pantff, v. The Unted States of merca,
defendant.
Provdence Worcester Raroad Co. (the New York, New aven art-
ford Raroad Co., Lessee), pantff, v. The Unted States of merca,
defendant.
Provdence Worcester Raroad Co. (the New York, New aven d art-
ford Raroad Co., Lessee), pantff, v. rank . 1 agc, Coector of Interna
Revenue, defendant.
December 15, 1930.
OPINION.
Letts, .: The above-named causes of acton are for the refund of ncome
and profts ta es, together wth nterest. nvove substantay the same
ssues and were heard together by stpuaton between the partes, tra by
ury n each case beng waved. The cases reate to ta es pad by the pantff
for the foowng years or portons thereof:
Docket No. 1881 caendar year 1918.
Docket No. 1980 caendar year 1919.
Docket No. 1981 caendar year 1920.
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230, rt. 502.
394
The queston presented s whether the rate of ncome ta on the ncome of
the pantff company shoud be 12 per cent or 10 per cent for the caendar
year 1918, and 10 per cent or 8 per cent for the caendar year 1919 and the
perod of anuary and ebruary of 1920. other ssues rased by the pead-
ngs have been waved. The cases nvove an nterpretaton and an anayss
of the ega effect of certan provsons of the Revenue ct of 1918 ( ct
of ebruary 24, 1919) consdered n connecton wth the edera Contro
ct of Raways of March 21, 1918, and a certan agreement dated pr
26, 1919, between the Drector Genera of Raroads and the New York, New
aven artford Raroad Co.
The pantff company, a Rhode Isand corporaton, under date of De
cember 17, 1892, eased a of ts property, appurtenances, and franchses for
the term of 99 years from uy 1, 1892, to the New York, New aven art-
ford Raroad Co., whch ease was n fu effect durng the perod repre-
sented by the years to whch these severa suts reate. The foowng are the
pertnent provsons of the ease so far as are nvoved n these suts:
nd the essee covenants to pay as rent hereunder on the ast day of each
of the months of September, December, March, and une, n each year durng
sad term, a sum equa to two and one-haf doars upon each share of the
capta stock of the essor (sad capta stock amountng at the date hereof
to 3,500,000), sad rent to be pad to the treasurer or other desgnated agent
of the essor and the essee further covenants to pay the nterest of a bonded
ndebtedness for the payment of whch the essor may be egay hoden as the
same sha from tme to tme mature, and to assume and pay a the other
ega obgatons of the essor of every name and nature, as the same sha
from tme to tme fa due, e cept the prncpa of the essor s bonded ndebt-
edness, for whch provson has been herenbefore made, and to keep and
perform a and snguar the contracts now n force and bndng on the essor.
nd the essee further covenants to pay, durng each year of sad term,
a ta es, rates, charges and assessments, ordnary and e traordnary, whch
may be awfuy mposed or assessed n any way upon the essor or essee wth
reference to the premses and property hereby demsed, the capta stock of the
essor, ts ndebtedness, franchses and revenues or sad renta sad pay-
ments to be made to the authorty or treasurer entted by aw to receve the
same, whether edera, State or muncpa, so that the essor sha be saved
harmess, durng the contnuance of ths ease from any ta , assessment or
charge under aws or proceedngs made or authorzed by the Unted States
or any State or muncpaty.
The provsons of the cts of Congress whch are nvoved are as foows:
edera Contro ct (40 Stat., 451) :
Seo. 1. That the Presdent, havng n tme of war taken over the pos-
sesson, use, contro, and operaton (caed heren edera contro) of certan
raroads and systems of transportaton (caed heren carrers), s hereby
authorzed to agree wth and to guarantee to any such carrer makng oper-
atng returns to the Interstate Commerce Commsson, that durng the perod
of such edera contro t sha receve as |ust compensaton an annua sum,
payabe from tme to tme n reasonabe nstaments, for each year and pro
rata for any fractona year of such edera contro, not e ceedng a sum
equvaent as neary as may be to ts average annua raway operatng
ncome for the three years ended une 30, 1917.
Revenue ct of 1918 (40 Stat., 1057):
Sec. 230. (a) That, n eu of the ta es mposed by secton 10 of the Reve-
nue ct of 1916, as amended by the Revenue ct of 1917, and by secton 4 of
the Revenue ct of 1917, there sha be eved, coected, and pad for each ta -
abe year upon the net ncome of every corporaton a ta at the foowng rates:
(1) or the caendar year 1918, 12 per centum of the amount of the net
ncome n e cess of the credts provded n secton 236 and
(2) or each caendar year thereafter, 10 per centum of such e cess amount.
(b) or the purposes of the ct approved March 21, 1918, entted n ct
to provde for the operaton of transportaton systems whe under edera
contro, for the |ust compensaton of ther owners, and for other purposes, fve-
s ths of the ta Imposed by paragraph (1) of subdvson (a) and four-ffths
of the ta mposed by paragraph (2) of subdvson (a) sha be treated as
eved by an ct n amendment of Tte I of the Revenue ct of 1917.
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395
230, rt. 502:
The raroad and transportaton system of the New York, New aven
artford Raroad Co. was among those taken over by the Government. On the
26th of pr, 1919, Waker D. nes, as Drector Genera of Raroads, entered
nto an agreement, consonant wth the authorty vested by sad secton 1 of the
edera Contro ct, wth sad corporaton. Ony certan provsons of ths
agreement are reevant to the present controversy. The more mportant of these
are as foows:
Secton L (a)
Ths agreement sha not be construed as creatng any rght, cam, prvege,
or beneft aganst ether party hereto n favor of any State or any subdvson
thereof, or of any ndvdua or corporaton other than the partes hereto.

(h) Wherever the property of the company s referred to n ths agree-
ment t sha be understood as ncudng a the property descrbed n paragraph
(a) of secton 2 hereof, whether owned by or eased to the company, and, where
the conte t permts, a addtons or betterments thereto or e tensons thereof
made durng edera contro and as to a such eased property the company
sha have the beneft of and be sub|ect to a the obgatons and provsons of
ths agreement and sha be sub|ect to a dutes mposed by aw n respect of
such eased property.
Secton 6 of the agreement embodes the provsons thereof reatve to ta es.
These provsons can not be adequatey quoted e cept n ther entrety and ths s
not practca. No agreement was entered nto between the Drector Genera
and the pantff company and no contract s presented n the record n any way
nvovng or reatng to the propertes of the pantff other than the one aready
referred to.
The pantff fed a corporaton ncome profts ta return for the caendar
year 1918, showng an ncome and profts ta abty of 53,230.84, whch sum
was pad to the coector of nterna revenue at Provdence. check for an
amount equa to ths ta was drawn by the New aven payabe to the pan-
tff, who n turn ndorsed the check or checks, deverng them to the coector.
fterwards the New aven was rembursed by the Drector Genera of
Raroads n an amount equa to the 2 per cent norma ta of the pantff for
sad year.
Subsequenty an addtona ta of 20,216.82 was assessed aganst the pan-
tff and the New aven, to cover sad assessment, devered to the pantff
two checks to ts order, one for 19,464.50 and the other for 750.32. ( n
error of 2, n the sums stpuated.) These were n turn ndorsed by the
pantff and devered to the coector. The smaer of the two checks was
drawn by the New aven aganst funds of the Drector Genera, ths
acton beng taken n accordance wth an approprate provson of the Trans-
portaton ct of 1920. The acton of drawng aganst these funds, to the
amount ndcated, was subsequenty ratfed by the Drector Genera.
The assessment and payment of the ta es for 1919 and the frst two months
of 1920 was handed and carred out n manner smar to that for 1918.
s a resut of these severa assessments and payments the pantff s ta es
were computed at the rate of 12 per cent on the ncome for 1918, and 10 per
cent on the ncome for 1919 and the frst two months of 1920, the amount of
the ncome beng determned by ncudng theren as ncome for each perod
amounts equa to the sums pad by the New aven to cover the ta es
assessed. In other words, the ta es assessed and pad to the Government,
funds for the payment of whch were provded by the New aven n accord-
ance wth the terms of the ease, were treated as a part of the ta abe ncome
of the pantff company. There appears to be no dspute that ths method
of arrvng at the amount of ta abe ncome was proper, and n accord wth
the determnaton of the Supreme Court n the case of Unted States v. oston
Mane Raroad, (279 U. S., 732 Ct. D. 73, C. . III-2, 315 ).
The queston now presented s whether the pantff company, as the essor
of raroad propertes whch were eased to and operated by the New aven,
s entted to recover back the addtona 2 per cent upon ts ncome whch was
not pad durng the perod of edera contro by the operatng raroads whose
factes had been taken over.
In the case of the ppea of the New York, Ontaro Western Raroad
Co. (1 . T. ., 1172), the Unted States oard of Ta ppeas recognzed that
carrer corporatons, whose factes had been taken over and havng a con-
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230, rt. 502.
396
tract wth the Drector Genera, were reeved under sectons 1 and 12 of
the edera Contro ct and the provsons of secton 6 of the standard con-
tract, from payng the 2 per cent norma ta . nd In the case of Western
Maryand Raway Co. v. Commssoner (12 . T. ., 889), the oard of Ta
ppeas e tended the same rue as to the 2 per cent norma ta to carrer
corporatons whose property had been taken over under edera contro, but
wth whom the standard contract had not been entered nto.
There appears to have been no case heretofore passed upon by any court
where the corporaton, makng cam to the beneft of such e empton, had
eased to an operatng company a of ts factes under a ong-term ease,
the propertes so eased havng been taken over under edera contro from
the essee. The Commssoner of Interna Revenue, however, has refused to
appy the ower rates n f ng the assessments upon such essor raroad
corporatons.
The probem stated n another way s: Can the owner of a reverson n the
physca propertes of a raroad cam the beneft of ths e empton as can
an operatng company
t the outset, we fnd that the Drector Genera at no tme entered nto a
contract wth the Provdence Worcester Raroad Co. It s doubtfu, however,
f the absence of such a contract woud precude the present cam f t ap-
peared from the enactments of Congress that t was the ntenton that such
essor corporatons shoud beneft thereunder. In ths respect the decson of
the oard of Ta ppeas n the case of the Western Maryand Raway Co.,
supra, seems |ustfed.
It was not the ntenton of Congress to eave t to the Drector Genera to
dscrmnate between carrers whose propertes were taken over, by enterng
nto or decnng to enter nto the standard form of contract drecty wth the
carrer.
The rea obstace n the way of pantffs cam s the dffcuty of brngng
the pantff, as a essor and as the owner of a reverson, ether wthn the tera
or common-sense nterpretaton of the statutes nvoved. Secton 1 of the ed-
era Contro ct s e pct n respect to those wth whom the Presdent s
authorzed to agree. rom that, one woud deduce that those wth whom agree-
ments are authorzed are the partes ntended to come wthn the scope of the
egsaton. Ths secton refers to carrers makng operatng returns to the
Interstate Commerce Commsson. It f es the ma mum compensaton whch
may be pad to such carrer by mtng t upon a 3-year average of ts annua
raway operatng ncome. Throughout the ct both carty of e presson and
emphass of repetton makes cear that the egsaton was Intended to appy
to operatng carrers ony.
The reports of the Senate Commttee and of the ouse Commttee on Inter-
state and oregn Commerce n respect to the egsaton then pendng before
those bodes are consstent wth ths vew. The statute seems to present no
ambgutes, however, whch ether necesstate or |ustfy turnng to such re-
ports for gudance n nterpretaton.
The camant ays consderabe emphass upon the argument that Congress
ntended the reease from the abty for the 2 per cent ta to appy to a
raroad corporatons whose propertes were n fact taken over and asserta
that the propertes of the camant were so taken. The weakness of ths argu-
ment appears to e n a msapprehenson of what the pantff corporaton
n fact owned durng the perod of edera contro and what t was that the
Government took over. The company s raroad propertes had been eased for
a perod of 99 years to the New aven and n substtuton therefor the
company hed ony Its rght of reverson wth whch t had not parted, to-
gether wth Its rghts under the ease. These property rghts were not
dsturbed or taken over.
The ownershp of property, when one speaks of compete ownershp, has been
kened to a bunde of straws, each straw representng a dfferent rght, and a
together consttutng fu or compete ownershp. There s the rght to se the
rght to possess the rght to use and varous other rghts ncdent to owner-
shp. The pantff, after easng ts propertes, had for 99 years parted wth
Its rght to use parted wth ts rght to possess parted wth ts rght to se,
e cept sub|ect to the easehod estate n the New aven. The pantff was
eft undsturbed n fu en|oyment of that whch consttuted ts property.
It s urged by the pantff that to deny the ower rate of ta to the essor
company defeats n part the payment of |ust compensaton to the essee. It Is
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397
234, rt. 561.
urged aso that the Drector Genera In assumng the payment of.or reeasng
the New aven from the secondary obgaton of bearng the 2 per cent
norma ta pad by the pantff, reeases aso the essor company from the
prmary obgaton.
oth of these arguments arse from a faure to ca thngs by ther rght
names. It s not for us to comment upon the eastc renta provsons of the
ease entered nto by the New aven. It s unescapabe, however, that the
varabe sums pad by the essee to the essor are not n part rentas and In
part ta es. These sums pad n toto are pad as rentas. (Unted States v.
oston d Mane Raroad, supra.)
If, as urged by the pantff, the essee company s unabe to get fu re-
payment from the Drector Genera for sums pad to the essor to cover ts
ncreased ta es on ncome resutng from the 2 per cent norma ta , and that the
essee s compensaton s to that e tent ess than ntended by the enactment of
Congress and ts rght to |ust compensaton, the forum to present that cam
s not wthn the present case. If t has mert, t s to be consdered n a
drect, not a coatera, hearng. Nor, as I understand the stuaton, dd the
Drector Genera n any sense reease the New aven from a secondary
abty by payng to, or aowng, t sums or credts suffcent to pay the
pantff an addtona renta because of ts norma ta . That course, on the
part of the Drector Genera, was the payment merey of part of the compensa-
ton to whch the New aven was entted under the aw and anaogous ony
to what the aw woud have treated as a renta had t been pad under a
ease, rather than pursuant to a statute n compensaton for a governmenta
takng.
udgment n each of the foregong cases may be entered for the defendant
S CTION 231. CONDITION L ND OT R
MPTIONS O CORPOR TIONS.
rtce 520: Soca cubs.
R NU CT OP 1921 ND PRIOR R NU CTS.
Dstrbuton of cub s funds to hoders of partcpatng certf-
cates. (See I. T. 2557, page 149.)
S CTION 234. D DUCTIONS LLOW D
CORPOR TIONS.
rtce 561: owabe deductons. - 1 979
Ct. D. 297
INCOM T R NU CT O 1921 D CISION O COURT.
1. Deducton usness penses nes, Costs, and Counse
ees Convcton fob Prce ng.
mounts pad by a ta payer, engaged n deang n and seng bud-
ng matera to contractors and buders, when convcted of prce f ng
n voaton of a statute and counse fees pad for ts defense are not
deductbe as ordnary and necessary busness e penses under secton
234(a) 1 of the Revenue ct of 1921. Nether are the amounts deduct-
be from gross ncome as a oss under paragraph 4 of that subdvson.
2. Decson ffrmed.
The decson of the oard of Ta ppeas (18 . T. ., 101)
affrmed.
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234, rt. 561.
398
Unted States Crcut Court of ppeas for the Second Crcut.
urroughs uUdnff Matera Co. v. Commssoner of Interna Revenue.
ppea from the Unted States oard ot Ta ppeas.
efore Manton, ugustus N. and, and Chase, Crcut udges.
anuary 5, 1931.
opnon.
Petton by urroughs udng Matera Co. to revew an order of the Unted
States oard of Ta ppeas determnng that there was a defcency of 3,591.24
n the ncome ta of pettoner for the year 1921. Order affrmed.
ugustus N. and, Crcut udge: The pettoner s a New York corporaton
whch was engaged n deang n and seng masons budng matera to con-
tractors and buders durng the year 1921. It entered nto an agreement wth
other deaers to f the prces at whch budng materas were to be sod to
contractors and buders. or partcpaton n ths prce-f ng agreement the
pettoner, on ebruary 9, 1921, was ndcted for voaton of secton 341 of the
Genera usness Law of New York, peaded guty to the ndctment and pad
a fne of 2,500 mposed by the Supreme Court of New York. The presdent of
the corporaton, because of partcpaton n the prce-f ng agreement, was aso
ndcted for voaton of secton 580 of the Pena Law of New York, peaded
guty and suffered mposton of a fne of 450 and 60 costs, whch the corpora-
ton pad on hs behaf. The corporaton aso pad 4,500 to a aw frm em-
poyed to conduct the defense of tsef and ts presdent as counse fees. In ts
return for ncome and profts ta es for the year 1921 the corporaton camed
deducton of the foregong sums, aggregatng 7,510, as ordnary and necessary
e penses pad durng the ta abe year n carryng on busness.
These deductons were dsaowed by the Commssoner, who accordngy de-
termned a ta defcency of 3,591.26. The ta payer thereupon sought a rede-
termnaton of the defcency by the oard of Ta ppeas. The oard sus-
taned the Commssoner, and from ts order the present appea has been taken.
The provsons of the ta aw nvoved are contaned In chapter 136 of the
Revenue ct of 1921 and are the foowng:
Seo. 234. (a) That n computng the net ncome of a corporaton sub|ect to
the ta mposed by secton 230 there sha be aowed as deductons:
(1) the ordnary and necessary e penses pad or ncurred durng the
ta abe year n carryng on any trade or busness, .
The mmedate queston s whether fnes and costs pad by the ta payer
when convcted of prce f ng n voaton of a statute, and counse fees pad
for ts defense, shoud be regarded as ordnary and necessary e penses
pad n carryng on busness.
When the queston of the rght of a ta payer to deduct somewhat smar
tems under the rtsh ncome ta acts was asserted before the court of
appea n Inand Revenue Commssoners . von Oem (1920) (2 . ., 553),
Scrutton, L. ., sad (p. 571) :
t seems to me that the obvous answer s Of course he can
not ut when one comes to state the reasons why that obvous
answer shoud be gven perhaps t s not so easy as sayng Of course he can
not
n attempt to ay down genera rues as to what e penses may be aowed
n cacuatng an ncome ta certany abounds In dffcutes. In Inand
Revenue Commssoners v. von Gehn, supra, penates and costs of court m-
posed for an nnocent voaton of customs aws were hed not to consttute
oss connected wth or arsng out of trade, or e -
penses for the purposes of such trade wthn the meanng of the
rtsh Income ta acts. Whe the deductons permssbe under the rtsh
acts were provded for n terms dfferent from those n our own statutes, the
courts n both countres have frequenty based ther concusons as to deduct-
bty upon the coseness of the reaton of the e pense to the norma conduct
of the busness. Thus Warrngton, L, ., remarked n Inand Revenue Comms-
soners v. von Oehn, supra:
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399
234, rt. 561|
t can not be sad that ths dsbursement was made n any way
for the purpose of the trade or for the purpose of earnng the profts of the
trade. It was made, because the ndvduas who were conduct-
ng the trade had been guty of an nfracton of the aw.
(See aso Inand Revenue Commssoners v. Warnes Co. (1919), 2 . .,
444 Ward Co. v. Commssoners (1923), . C, 145.) The Supreme Court n
omkauser v. Unted States (276 U. S., 145 T. D. 4222, C. . II-2, 267 ),
when aowng the deducton of attorneys fees pad In a sut for an accountng
whch a ta payer successfuy defended, sad that where a sut aganst a
ta payer s drecty connected wth, or, pro matey resuted from,
hs busness, the e pense ncurred s a busness e pense wthn the meanng of
secton 214(a), subdvson (1), of the ct.
ustce Sutherand n hs opnon cted wth approva rungs of the Depart-
ment aowng as deductons ega e penses ncurred by a doctor n defendng
an acton for mapractce, ega e penses ncurred n defendng an acton for
damages by a tenant whe at work on the ta payer s farm, and ega e penses
n defendng a sut for aeged patent nfrngement.
There are other decsons where e penses seem to have been dsaowed
because the courts thought t was aganst pubc pocy to recognze them In
any way benefca to the ta payer. Thus n Great Northern Ry. Co. v. Com-
mssoner (40 ed. (2d), 372), where the queston arose whether penates
pad by a raroad for voaton of edera Safety ppance cts, ours of
Servce ct, 28- our Lve Stock ct and Customs Reguatons mght be de-
ducted as busness e penses, the Court of ppeas of the ghth Crcut ds-
aowed them, sayng (at page 373) :
that they arose entrey from unawfu operaton, prohbted spe-
cfcay by statute or reguatons. It can not be that Congress ntended the
carrer shoud have any advantage, drecty or Indrecty, or any reducton,
drecty or Indrecty, of these penates.
So In Peope e re. ongswad v. WendeU (198 pp. Dv., 956), a oss of
5,000 ncurred n horse racng was dsaowed because the transacton was
aganst pubc pocy. The decson was affrmed by the Court of ppeas n
233 N. Y., 618.
It mght have been sad n Great Northern Ry. Co. v. Commssoner, supra,
that fnes for voatons of reguatons such as were there mposed are not n-
frequent, are nevtabe n any arge raroad system and for tbat reason may
reasonaby be aowed as ordnary and necessary e penses of the busness.
It s not easy to dstngush such fnes from e pendtures ncurred n connec-
ton wth actons to recover for neggence or because of patent nfrngements,
uness one draws an arbtrary ne between crmna and cv actons even
where the crmna actons reate to matters nvovng no mora turptude.
Undoubtedy e pendtures whch are n themseves mmora, such as for brbery
of pubc offcas to secure protecton of an unawfu busness, woud not have
to be aowed n order consstenty to |ustfy a deducton of fnes pad for
voatons of aw nvovng no mora turptude and practcay nevtabe. (See
Unted States v. Suvan, 274 U. S., at page 264 T. D. 4028, C. . I-2, 177 .)
In spte of some nconsstences In reasonng, two thngs seem to have been
generay hed by the courts:
1. Profts derved from an unawfu busness are sub|ect to ta aton. (Unted
States v. Suvan, 274 U. S., 259 Unted States v. Tugnovch, 256 U. S., 450
Stenberg v. Unted States, 14 ed. (2d), 564 Mnster of nance v. Smth
(1927), . C. 193.)
2. nes mposed for voatons of aw have been hed not deductbe as
e penses of a busness, ether on the ground that they were avodabe and
therefore had no necessary connecton wth t, or because, on grounds of pubc
pocy, they ought not to receve any sancton. (Great Northern Ry. Co. v.
Commssoner, 40 ed. (2d), 372 Inand Revenue Commssoners v. von Gehn
(1920), 2 . ., 553 Inand Revenue Commssoners v. Warnes Co. (1919),
2 . ., 444.)
The dffcuty of makng pro mate reaton of the e penses to a busness
the test of deductbty s often very consderabe. Lkewse t s n many
cases hard to see why a dstncton shoud be drawn between e pendtures ars-
ng from the voaton of a crmna statute and e pendtures occasoned by
the breach of a cv obgaton. ut whatever reasonng be adopted, t Is a
fact that both n ths country and ngand fnes have not been aowed as bus-
ness e penses even when they were due ether to ncdents of the busness
amost nevtabe or to nnocent mstakes. (Great Northern Ry. Co. v. Com-
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234, rt. 561.
400
mssoner, 40 ed. (2d), 372, and Inand Revenue Commssoners v. wn Gehn,
supra.) Certany the voatons of aw n the ast two cases nvoved no
greater mora obquty than the prce-f ng agreement for whch the fnes were
mposed here.
In the crcumstances we are ncned to foow the decsons referred to and
to hod that the fnes and costs can not be aowed as deductbe e penses.
If the fnes and costs can not be deducted, the ega e penses ncurred n t-
gatng the queston whether the ta payer voated the aw and whether fnes
shoud be mposed shoud naturay fa wth the fnes themseves.
ut t may be sad that under our statute the tems must be ordnary and
necessary e penses pad n carryng on busness, and that
the e penses here are n no event such.
The record does not show that prosecutons and fnes for voatons of the
New York ant-trust act and attorneys fees pad n connecton wth the
prosecutons were ordnary and necessary ncdents of the ta payer s bus-
ness. Ony such e penses may be deducted. It may be argued that they were
natura resuts of such a course of conduct as was pursued and that to say
that they were not ordnary and necessary assumes that the busness was
not cone under an unawfu prce-f ng agreement, as t n fact was. The
dsaowance may propery rest on a refusa to sancton e pendtures of such
a character as we have here on grounds of pubc pocy.
It may be contended that the tems n queston, even though not deductbe
as ordnary and necessary e penses, shoud be aowed the ta payer as a
oss. Such a contenton was dsposed of adversey n ornhauser v. Unted
States (276 U. S., at page 152), whch seems to be concusve on the pont.
The order s affrmed.
rtce 561: owabe deductons. -15-5017
Ct.D.314
ncome ta revenue act of 1t18 decson op supreme court.
Deducton Obsoescence of utdnos Due to Prohbton.
Secton 234(a)7 of the Revenue ct of 1918 authorzes a deduc-
ton for obsoescence of budngs due to prohbton. The fndngs
of fact showng that the mmnence of prohbton became known
n anuary, 1918, and that t took effect n anuary, 1920, such a
deducton s aowabe n the years 1918 and 1919.
Supreme Court of the Unted States.
. Locutcrs Gambrnus rewery Co., pettoner, v. Chares W. nderson, Ind-
vduay and as Coector of Interna Revenue of the Unted States.
On wrt of certorar to the Unted States Crcut Court of ppeas for the Second Crcut.
ebruary 24, 1931.
opnon.
Mr. ustce uter devered the opnon of the court.
Pettoner sued respondent n the Dstrct Court for the Southern Dstrct
of New York and obtaned |udgment for 22,091.01 on account of ncome and
profts ta es for 1918 and 1919 erroneousy e acted. The crcut court of
appeas reversed and, as the rght of pettoner to recover 4,128.85 was not
contested, ordered that t have |udgment for that amount. (42 . (2d), 216.)
Ths court granted pettoner s appcaton for a wrt of certorar, mted to
the queston whether pettoner s entted under secton 234(a)7 of the
Revenue ct of 1918 to any deducton for obsoescence of ts tangbe property
n such years. (282 U. S., 823.)
Revenue ct of 1918 (ch. 18, 40 Stat., 1077, 1078) provdes:
Sec. 234. (a) That n computng the net ncome of a corporaton
there sha bo aowed as deductons (7) a. reasonabe aowance
for the e hauston, wear and tear of property used n the trade or busness,
ncudng a reasonabe aowance for obsoescence .
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401
234, rt. 561.
ury havng been waved n wrtng, the ease was tred by the court
wthout a |ury. The court found:
Pantff, from 1879 unt October 29, 1919, was engaged at New York Cty n
the busness of manufacturng and seng beers, aes and porter and for that
purpose erected and nstaed sutabe budngs and equpment. anuary 31,
1918, t had become common knowedge and was known to pantff that pro-
hbton woud become effectve and that as a resut pantff and others en-
gaged In that busness woud suffer obsoescence n the vaue of ther capta
assets. Prohbton dd become effectve anuary 16, 1920. s found by the
Commssoner of Interna Revenue, the deprecated cost of pantff s budngs
as of that date was 153,932.18. The budngs were constructed especay for
the purposes of such manufacture and were not commercay adaptabe for
any other use. They had no savage vaue. s a resut of prohbton and
begnnng anuary 31, 1918, and endng anuary 16, 1920, pantff suffered
obsoescence of such budngs equa to such deprecated cost whch shoud
be rataby apportoned over that perod. fter makng provson for aow-
ances for such obsoescence, pantff had no net ncome for 1918 or 1919.
nd at defendant s request the court found: Wth the advent of prohbton
t became Iega to manufacture beers, aes and porter havng an acohoc con-
tent n e cess of one-haf of 1 per cent. ccordngy such manufacture was
dscontnued by the pantff when the prohbtory aw became effectve. Sub-
sequenty pantff to a sma e tent contnued the manufacture of beers, aes
and porter havng an acohoc content not n e cess of one-haf of 1 per cent,
and t st contnues to manufacture such beverages to a sma e tent.
The soe queston for decson s whether, n cacuatng ts ta es for 1918
and 1919, pantff was entted to any aowance for obsoescence of ts bud-
ngs resutng from the mmnence and takng effect of the prohbtory aws.
The anguage of secton 234(a)7 s broad enough to ncude a obsoescence
from whatever cause. ut the Government mantans that Congress dd not
ntend to provde compensaton n any form for osses caused by prohbton
egsaton, and that consequenty there can be no deducton for obsoescence
here even upon the facts found by the dstrct court. It rees on Cark v.
abere rewng Co. (280 T . S., 384) and Renzehausen v. Lucas (280 U. S.,
387).
The case at bar was decded n the dstrct court before our decson n the
abere case and on the authorty of that decson the crcut court of appeas
hed pantff not entted to any aowance for obsoescence of ts budngs.
ut the soe queston presented to us n that case was whether a brewng
company makng ts ta return for 1919 under the ct now before us and
whose busness woud be destroyed by the takng effect of prohbton was en-
tted to deduct anythng on account of e hauston or obsoescence of ts good
w. The court sad (page 386) : We sha not foow counse nto the
successon of reguatons or the varatons n the aw before the date of the
ct that we have to construe. In our opnon the words now used can not be
e tended to cover the oss n ths case and t s needess to specuate as to
what other cases t mght ncude. When regard s had to the ssue between
the partes and the pont decded, t s cear that there s nothng n our
constructon of the statute or n the reasons adduced to support the con-
cuson reached, that s decsve of the queston now under consderaton, or
that suggests that, n respect of aowances for obsoescence of tangbe
property, the statute does not appy to brewers and ther budngs |ust as t
does to others and ther tangbe property. Indeed the anguage used defntey
mts the opnon to obsoescence of good w.
In Renzehausen v. Lucas the ta payer was a dster. Ss cam for
obsoescence of good w, under secton 214(a)8 appcabe to ndvduas and
n the same words as secton 234(a)7, was dened on the authorty of the
abere case. e aso camed aowances for obsoescence resutng from
prohbton to hs pant, equpment and bonded warehouses. That cam was
dened by the Commssoner but t was aowed by the oard of Ta p-
peas (8 . T. ., 87), and that decson was affrmed n the crcut court of
appeas. (31 . (2d), 675.) The ta payer nssted here that the aowance for
obsoescence of hs warehouses was nadequate. The Government opposed the
ncrease but dd not chaenge ether the proprety of an aowance or the
amount f ed beow. Deang wth the case on the assumpton that the statute
apped to obsoescence due to prohbton |ust as t does to that resutng
from other causes, we hed that the ta payer had no reason to compan of
the aowance for obsoescence of the warehouses. That case makes aganst
rather than for the Government s present contenton.
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234, rt. 561.
402
The tangbe property by whch a busness s carred on s pany ds-
tngushabe from the eement of good w nherng theren. The cost of
pant deprecaton, . e., e hauston, wear, tear and obsoescence, s a part of
operatng e penses necessary to carry on a manufacturng busness. The gan
or oss n any year can not be rghty ascertaned wthout takng nto
account the amount of such cost that s |usty attrbutabe to that perod
of tme.
The hstory of secton 234(a) 7 dscoses a egsatve purpose that the
amount reasonaby attrbutabe to each year on account of obsoescence of
tangbe property used n the ta payer s busness s to be taken nto account
n ascertanng hs ta abe ncome. The e cse ta ct of 1909 permtted
the deducton of a reasonabe aowance for deprecaton of property, f
any. Reguatons of the Treasury Department construed the provsons
to mean the oss n vaue that arses from e hauston, wear and tear, or
obsoescence out of the uses to whch the property s put The Revenue
ct of 1913 provded for a reasonabe aowance for deprecaton by use,
wear and tear of property f any. The reguatons provded for a deducton
for deprecaton n the vaue of the property that arses from e hauston,
wear and tear, or obsoescence out of the uses to whch the property s put.
The Revenue ct of 1916 dropped the word deprecaton and permtted a
reasonabe aowance for the e hauston, wear and tear of property arsng
out of ts use or empoyment n the busness or trade. Under that pro-
vson no deducton on account of obsoescence was aowed e cept for the
wthdrawa from use of the obsoete property. The ouse draft of the
ct of 1918 provded for an aowance for e hauston, wear and tear. It
dd not e pressy refer to deprecaton or obsoescence. The Senate amended
by substtutng deprecaton for e hauston, wear and tear. In con-
ference that word was taken out and the provson was made to read as t
now stands, a reasonabe aowance for the e hauston, wear and tear of
property used n the trade or busness, ncudng a reasonabe aowance for
obsoescence.
None of the cts made any cassfcaton based on the causes from whch
obsoescence resuts. nd, as the soe purpose s to arrve at the net ncome
sub|ect to ta aton, t s cear that such a dscrmnaton coud not reason-
aby or |usty be made. Secton 234(a)7 and other provsons of the same
substance have been generay, f not unformy, hed to appy to obsoescence
of tangbe property, whatever ts cause, where the amount fary attrbutabe
to the ta year has been shown. There s nothng n the anguage of the
statute or the crcumstances of ts enactment to suggest that Congress ntended
that the ta abe ncomes of brewers shoud not be arrved at accordng to
the rues that govern ta abe ncomes of others.
The Government aso nssts that n any event there was no obsoescence
In pantff s budngs n 1918 or 1919 because, from ts very nature, obsoes-
cence begns ony when there s a reasonabe certanty that the property w
become obsoete.
The statute contempates annua aowance for obsoescence |ust as t does
for e hauston, wear and tear. That s necessary n order to determne true
gan or oss, because postponement of deductons to cover obsoescence unt
the property nvoved became obsoete woud dstort annua ncome. It s we
understood that e hauston, wear, tear, or obsoescence can not be accuratey
measured as t progresses and undoubtedy t was for that reason that the
statute authorzed reasonabe aowances to cover them n order equaby to
spread that eement of operatng e penses through the years. The fndngs
of fact show that the mmnence of prohbton became known In anuary of
1918 and that t took effect n anuary of 1920. The court found that, athough
they were subsequenty used to a sma e tent n the manufacture of non-
nto catng beverages, pantff s budngs had no savage vaue when proh-
bton took effect Undoubtedy t was obvous from the begnnng of that
perod that budngs not commercay adaptabe to any use other than brewng
nto catng quor woud suffer obsoescence because of the destructon of that
busness.
Under the order grantng the wrt there s before us no queston as to the
proprety of the amount of the aowance or ts aocaton between the ta
years n queston.
udgment of the crcut court of appeas reversed.
udgment of the dstrct court af rmed.
Mr. ustce Stone concurs n the resut.
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403
234, rt. 561.
rtce 561: owabe deductons. -15-5018
Ct. D. 315
ncome ta revenue act op 1918 decson op supreme court.
1. Deducton Obsoescence of Tangbe ssets Due to Proh-
bton.
Secton 234(a)7 of the Revenue ct of 1918 authorzes a deduc-
ton for obsoescence of tangbe assets due to prohbton.
2. Same Property Contnued n Use Proof.
deducton for obsoescence of tangbe property due to prohb-
ton s aowabe athough subsequent to the advent of prohbton
a part of such property was contnued n use n the manufacture of
nonn to ca tng beverages. There s no hard and fast rue that a
ta payer must show that hs property w be scrapped or cease
to be used or usefu for any purpose before any aowance may be
made for obsoescence a reasonabe appro maton of the amount
that fary may be ncuded n the accounts of any year s a that
s requred.
Supreme Court of the Unted States. No. 61. October Term, 1930.
Davd urnet, Commssoner of Interna Revenue, pettoner, v. Nagara as
rewng Go. and Pau , Schoekopf, Chares . aebere, ct a., etc.
On wrt of certorar to the Unted States Crcut Court of ppeas for the Second Crcut.
ebruary 24, 1931.
Mr. ustce uter devered the opnon of the court.
In makng ts ta returns for 1918 and 1919 the brewng company, because
of approachng prohbton, made deductons for obsoescence of ts budngs,
machnery and equpment. The Commssoner dsaowed the deductons on
the ground that after prohbton the ta payer contnued to use hs property
to make and se near beer and other nonnto catng beverages. The oard
of Ta ppeas sustaned the Commssoner. (13 . T. ., 1040.) The crcut
court of appeas reversed. (38 . (2d), 217.)
The pertnent words of the statute, Revenue ct of 1918, secton 234(a)7,
are: reasonabe aowance for the e hauston, wear and tear of property
used n the trade or busness, ncudng a reasonabe aowance for obsoes-
cence.
The Government contends that ths statute dd not authorze a deducton
for obsoescence of tangbe property resutng from the mmnence of prohb-
ton. ut n the Gambrnus case |ust decded see Ct. D. 314, on page 400, ths
uetn we hod the contrary.
The Government aso mantans that on the facts of ths case no aowance
for obsoescence shoud be made.
We take |udca notce of the foowng: Pror to the submsson of the
eghteenth amendment n 1917, more than 30 States had enacted prohbtory
aws. war measure, effectve ugust 10, 1917, requred the reducton of the
acohoc content of beer. The proposed amendment was ratfed by 12 States
n the frst s months of 1918 and by 3 more before the e praton of that
year 21 States ratfed n the eary part of anuary, 1919, and n that month
the amendment became a part of the Consttuton and took effect one year
ater, anuary 16, 1920.
There s no controversy as to the facts found by the oard of Ta ppeas.
The brewng company from 1902 unt October, 1919, was engaged n makng
and seng beer. Its saes from 1912 to 1917 ncusve ranged from 30,081 to
37,176 barres per year. Due to war-tme prohbton, ts saes fe off n 1913
to 30,204 barres, about 19 per cent ess than the saes of the precedng year,
and n 1919 to 17,823 barres, about 40 per cent ess than n 1918.
t the end of 1917 the deprecated cost, and actua vaue, of the company s
and, budngs and equpment was 477,054.00. fter deductng the aow-
ances n 1918 and n 1919 for e hauston, wear and tear of ts pant and for
obsoescence of property used, for makng beer, the book vaue of such property
was reduced to 279,117.08. ut due to prohbton aws ts actua vaue at
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234, rt. 561.
404
the end of 1919 was ony 90,475. That s 188,642.08 ess than the book vaue
after such deductons.
Its budngs, machnery and equpment were desgned and constructed for
the brewng and seng of beer and were not avaabe or ready adaptabe to
other uses. The budngs were damp, the foor eves uneven there were few
openngs for ght and no eevators, and the property was ocated n a manu-
facturng zone. Much of the machnery coud not be removed wthout ds-
mantng or tearng out the was of the budng and some of t coud not
be removed e cept by tearng out the sde of the budng. The company s
offcers consdered seng or convertng ts budngs and machnery nto a
pant for a dary, cod storage, ce cream manufacturng, dry storage, ce
manufacture, frut storage, semcod storage, machne shop, or chemca pant.
They coud fnd no use for the property e cept for the purpose of makng near
beer and other soft drnks.
In 1917 the company began to manufacture near beer and for that purpose
used the machnery and processes empoyed n the makng of beer. n add-
tona process for deacohozng was necessary. It sod 16 barres n that year,
327 n 1918, 8 n 1919, 7,921 n 1920, and 2,852 n 1921.
In 191S t began the manufacture of other soft drnks by use of machnery
not here nvoved. In October, 1919, because of prohbton, the company
dscontnued the makng of beer. It abandoned the ower foor of one of ts
budngs whch had been devoted to storng and agng beer. That process
s not nvoved n makng near beer. Thereafter a part of another budng
wth the equpment theren whch had been used three or four tmes a week
m makng and bottng eer was used ony once n about two weeks n makng
near beer. pparenty the rest of the property was used n connecton wth
the makng of such near beer and other soft drnks as were made by the
company pror to ts gong out of busness.
The company coud not operate at a proft after prohbton and the corpora-
ton was vountary dssoved n December of 1921. Its affars were admn-
stered by ts former drectors actng as trustees. In anuary, 1922, they
eased a the property, ncudng equpment that had been added for the makng
of soft drnks, for a term of three months wth prvege of renewa by the
essee. The ease was st n effect at the tme of the hearng before the
oard n 1927. The rent was at the rate of 5,000 per year pus ta es, nsur-
ance and repars.
The dfference between the deprecated cost (found to be actua vaue)
December 31, 1917, and the vaue of the property n 1918 and 1919 was due
to the mmnence and ncdence of war-tme and permanent prohbton.
There was no matera change n the vaue of and and budngs n the
vcnty used for purposes other than brewng. In December, 1921, the com-
pany sod certan of ts and, free from budngs, for 20,000. Up to the tme
of the hearng the hghest offer for the remanng property that the company
was abe to secure was 35,000.
The Government argues that obsoescence s the state of becomng obsoete,
that property s obsoete when t s no onger usefu for the purpose for
whch t was acqured and can not be used for any other purpose and that
obsoescence begns ony when there s a reasonabe certanty that the property
w become obsoete. nd further, that there s no fndng that at any tme
durng the ta abe years n queston t became apparent that the property
woud become obsoete and that no nference to that effect can propery be
drawn from the facts found.
In the souton of the probem here presented, no genera or comprehensve
defnton of obsoescence s necessary. The word s much used and ts
meanng depends upon and vares wth the connectons n whch t s em-
poyed. It has been sad to be the condton or process by whch unts gradu-
ay cease to be usefu or proftabe as a part of the property, on account of
changed condtons. 1 Obsoescence s not necessary confned to partcuar
eements or parts of a pant the whoe may become obsoete. Obsoescence
may arse as the resut of aws reguatng or forbddng the partcuar use of
the property as we as from changes n the art, the shftng of busness cen-
ters, oss of trade, nadequacy or other causes.
We are here concerned wth the meanng of obsoescence as used n the above-
quoted cause of the ta ng ct. Ceary the statute contempates that, where
warranted by the facts, the ta payer sha have the beneft of, and n makng
1 Transactons, m. Soc. C. ., voume 81, page 1527.
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405
234, rt. 561:
hs return may deduct n each year, a reasonabe aowance to cover obso-
escence of the tangbe property. nd that s n accord wth sound prncpes
of accountng . (Cf. ansas Cty So. Ry. v. Unted States, 231 U. S., 423, 451
Pacfc Oas Co. v. San, rancsco, 265 U. S., 403, 415.) The provson s genera
and apped ake to a ta payers ts purpose s to gude the ascertanment of
ta abe ncome n each year. It s a famar rue that ta aws are to be
beray construed n favor of ta payers. ( armers Loan Co. v. Mnnesota,
280 U. S., 204, 212 owers v. New York bany Co., 273 U. S., 346, 350 T. D.
4009, C. . I-1, 268 Unted, States v. Metrtam, 263 T . S., 179, 188 T. D.
3535, C. . II-2, 87 Shwab . Doye, 258 U. S., 529, 536 T. D. 3339, C. .
1-2, 312 dman v. Martnez, 184 U. S., 578, 583.)
It -woud be unreasonabe and voate that canon of constructon to put
upon the ta payer the burden of provng to a reasonabe certanty the e stence
and amount of obsoescence. Such weght of evdence as woud reasonaby
support a verdct for a pantff n an ordnary acton for the recovery of money
fary may be deemed suffcent. Nether the cost of obsoescence nor of accru-
ng e hauston, wear and tear that s propery chargeabe n any perod of tme
can be measured accuratey. reasonabe appro maton of the amount that
fary may be ncuded n the accounts of any year s a that s requred. In
determnng the proper deducton for obsoescence there s to be taken nto
consderaton the amount probaby recoverabe, at the end of ts servce, by
puttng the property to another use or by seng t as scrap or otherwse. There
s no hard and fast rue, as suggested by the Government, that a ta payer must
show that hs property w be scrapped or cease to be used or usefu for any
purpose, before any aowance may be made for obsoescence.
There s no cam that, f aowabe at a, the amounts deducted were e ces-
sve or that they were not propery aocated as between the two years n ques-
ton. The rapd advance toward prohbton pror to and n 1917 was suffcent
to warn one engaged n brewng beer that hs busness woud probaby be
brought to an end at an eary date. In anuary, 1919, before the ta return
for 1918 was due, prohbton was estabshed to take effect one year ater.
The facts found show that n the eary part of 1918 the company was abundanty
|ustfed n concudng that upon the takng effect of prohbton t must cease
to use ts brewery for makng beer.
It was then warranted n concudng that the perod of obsoescence com-
menced about the frst of 1918 and woud end upon the takng effect of prohb-
ton. The fact that prohbton woud put a the breweres out of busness s
enough to show that t woud be practcay mpossbe to se such propertes or
fnd other uses to whch they proftaby coud be put Due to prohbton the
dmnuton n vaue of the company s property n 1918 and 1919 was about twce
as much as the tota of a sums deducted to cover obsoescence n those years.
In that perod over 80 per cent of the 1917 vaue of ts ands, budngs and
equpment dsappeared. Notwthstandng dgent efforts, the property coud
not be put to any proftabe use or sod for more than a fracton of ts vaue n
1917. The rents reazed under a short-term ease renewed from tme to tme
for more than fve years amounted to ess than per cent of such vaue.
The facts found ceary show that obsoescence commenced about the begn-
nng of 1918 and that the property became obsoete upon the takng effect of
prohbton n anuary, 1920. The company was unabe to fnd any proftabe
use to whch the property coud be put. The sums receved on the sae and as
rents consttuted mere savage.
udgment affrmed.
rtce 561: owabe deductons. -15-5019
Ct. D. 316
INCOM T R NU CT O 1918 D CISION OP SUPR M COURT.
Deducton Obsoescence of Tangbe Property Due to Proh-
bton.
Secton 234(a)7 of the Revenue ct of 1918 authorzes a deduc-
ton for obsoescence of tangbe property caused by prohbton
egsaton.
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234, rt. 564.
406
Supeeme Court of the Unted States. No. 109. October Term, 1930.
Davd urnet, Commssoner of Interna Revenue, pettoner, v. Natona
Industra coho Co., Inc.
On wrt of certorar to the Court of ppeas of the Dstrct of Coumba.
ebruary 24, 1931.
Mr. ustce uter devered the opnon of the court.
The oard of Ta ppeas affrmed the Commssoner s determnaton of
defcences n respondent s ncome and profts ta es for fsca years endng
May 31, 1919 and 1920. The ta payer camed aowances for obsoescence,
resutng from prohbton egsaton, of a part of a budng. It was dened.
(7 . T. ., 1241.) The court of appeas reversed. (38 P. (2d), 718.)
The ta payer, a Lousana corporaton organzed In 1911, was engaged n
makng and seng beer. November 3, 1919, t abandoned that busness and
commenced the manufacture of near beer, whch t contnued unt 1923.
or the manufacture of beer the ta payer had a brewery budng and a cear
budng havng three foors. fter prohbton the brewery budng and
one foor of the cear budng were used n the producton of near beer. Two
foors of the cear budng and certan stee and wooden vats thereon formery
used for agng beer were not needed and ther use was dscontnued on Novem-
ber 3, 1919. The oard found that the vats had no savage vaue and hed
ther deprecated cost deductbe as obsoescence over the perod from De-
cember 18, 1917, the date of submsson of the eghteenth amendment, to
anuary 16, 1920, the date that prohbton took effect. ut t dened any
aowance for obsoescence of the two foors on the ground that, whe the
ta payer ceased to use them, there was nothng n the record to ndcate that
the structure was obsoete or becomng so. The court of appeas hed the
evdence ampe to support the ta payer s contenton that after abandonment
the two foors possessed no resdua or savage vaue. The Government has
rased here ony the queston whether under the Revenue ct of 1918, secton
234 (a)4 or (a)7 a deducton may be aowed for oss or obsoescence of
tangbe property caused by prohbton egsaton, and concedes that t s
not n poston to contend that the evdence was not suffcent to estabsh
obsoescence of the two foors.
The Government rees on Carh v. abere rewng Co. (280 U. S., 384)
and Rcn ehavsen v. Lucas (280 U. S., 387). ut we have hed n the 6am-
brnus case, |ust decded see Ct. D. 314, on page 400, ths uetn , that
under secton 234(a)7 a brewng company s entted to aowance for
obsoescence of ts budng that was caused by the mmnence and takng
effect of prohbton. That case rues ths one.
udgment affrmed.
rtce 561: owabe deductons.
R NU CT O 1918.
Ta es on unproductve tmberands. (See Ct. D. 313, page 340.)
rtce 564: Interest. -20-5065
Ct. D. 335
INCOM T R NU CT O 1921 D CISION O SUPR M COURT.
Deducton Interest cepton onds op ont Stock Land
ank.
Mortgages owned by a |ont stock and bank are, wthn the pur-
vew of secton 234(a)2 of the Revenue ct of 1921, obgatons
or securtes the nterest upon whch s whoy e empt from ta a-
ton under ths tte, and the bonds ssued by such a bank const-
tute ndebtedness ncurred to purchase or carry such obgatons.
ccordngy nterest pad by a |ont stock and bank on bonds
ssued by t may not be deducted from gross ncome n the con-
sodated return of an ordnary commerca bank and a |ont stock
and bank, affated corporatons.
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407
234, rt. 564.
Supreme Court of the Unted States. No. 124. October Term, 1930.
The rst Natona ank of Chcago, a Natona ankng ssocaton, pet-
toner, v. The Unted States.
On wrt of certorar to the Court of Cams.
pr 13, 1931.
Mr. ustce McRevnods devered the opnon of the court.
The rst Natona ank of Chcago made a consodated corporaton ncome
and profts ta return for the year 1922 whch, among other thngs, dscosed
resuts from operatons of two affated corporatons, the rst Trust ont
Stock Land anks of Chcago and Daas, organzed under the edera arm
Loan ct of 1916. It camed the rght to deduct from tota recepts the
amounts pad (or accrued) durng the year by the and banks for nterest upon
ther outstandng bonds. The Commssoner refused to aow the deductons.
Payment as demanded was foowed by sut to recover n the Court of Cams.
udgment went aganst the bank and the matter s here upon certorar.
rom the fndngs, based upon a stpuaton of facts, t appears
The rst Trust ont Stock Land ank of Chcago and the rst Trust
ont Stock ank of Daas, whch were organzed under the edera arm
Loan ct of uy 17, 1916, ssued to and/or had outstandng n the bands of
the pubc n the year 1922 ther |ont-stock and bank bonds, respectvey, on
whch nterest was pad and/or accrued n the year 1922, n the aggregate sum
of 78,807.80, part of whch was the ntercompany transacton n the amount
of 5,810.25, eavng a baance pad or accrued of 72,997.55. s securty for
the payment of sad |ont-stock and bank bonds sad |ont-stock and banks,
as provded n the edera arm Loan ct, deposted wth the proper farm oan
regstrars farmers promssory notes evdencng oans to sad farmers, whch
n turn were secured as to payment by sad farmers frst mortgages on ther
farms.
The proceeds comng nto the hands of sad |ont-stock and banks from
the ssuance and sae of sad |ont-stock and banks bonds were used by sad
|ont-stock and banks to make new addtona oans to farmers, whch new
oans made from the proceeds of sad |ont-stock and bank bonds ssued and/or
outstandng n 1922, were made n each nstance n consderaton of the mak-
ng and devery by the borrowng farmers, respectvey, of ther promssory
notes secured as to payment by frst mortgages on ther farms. of sad
oans, respectvey, and the farmers notes and mortgages, respectvey, ev-
dencng sad oans, were desgned to be and were of such a nature as to compy
wth (1) a the terms, condtons, restrctons, mtatons, and requrements
specfed n the edera arm Loan ct, as requste to quafy sad oans, notes,
and mortgages, as frst mortgages n contempaton of sad ct, so as to make
them avaabe as coatera securty aganst the ssue of |ont-stock and bank
bonds and (2) a terms, condtons, restrctons, mtatons, and requrements,
statutory or otherwse, specfed n the aws of the State n whch the farm
whch was the sub|ect of the partcuar oan was ocated (to wt, the States of
Inos, Iowa, Te as, and Okahoma, respectvey), as requste to quafy sad
oans, notes, and mortgages as vad and subsstng frst mortgages, n con-
tempaton of such aws. Sad notes and mortgages contan an agreement
provdng for the repayment of the oan on the amortzaton pan, as provded
n secton 12, second, of the edera arm Loan ct, and such agreement n
respect of each note and/or mortgage was not e tngushed wthn a perod of
ess than 33 years, e cept, of course, at the opton of the borrower.
The nterest receved by the pantff on such farmers notes and mortgages
was not ta abe as ncome to the pantff and was not so ta ed n respect to
pantff s return for the year 1922.
Decson of the cause must turn upon the constructon of pertnent portons,
Revenue ct 1921, Tte II (ch. 136, 42 Stat., 227, 237. 238, 252, 254).
Secton 213 provdes that the term gross ncome does not ncude nterest
upon securtes ssued under the provsons of the edera arm Loan ct of
uy 17, 1916.
Secton 230 mposes a ta at specfed rates upon the net ncome of every
corporaton.
72109 31 27
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234, rt. 564.
408
Secton 234 provdes (a) That n computng the net ncome of a corporaton
eub|ect to the tu mposed by secton 230 there sha be aowed as deductons:
(2) nterest pad or accrued wthn the ta abe year on ts ndebt-
edness, e cept on ndebtedness ncurred or contnued to purchase or carry
obgatons or securtes (other than obgatons of the Unted States ssued
after September 24, 1917, and orgnay subscrbed for by the ta payer) the
Interest upon whch s whoy e empt from ta aton under ths tte
The edera arm Loan ct 1916 (ch. 245, 39 Stat., 360, 372, 374, 380), pro-
vdes (secton 16) for the formaton of |ont stock and banks for carryng on
the busness of endng on farm mortgage securty and ssung farm oan bonds
whch sha have the powers of, and be sub|ected to a the restrctons and
condtons mposed on, edera and banks by ths ct, so far as such restrc-
tons and condtons are appcabe. Secton 13 authorzes edera and banks:
rst. To ssue, sub|ect to the approva of the edera arm Loan oard, and
to se farm oan bonds of the knds authorzed n ths ct, to buy the same for
ts own account, and to retre the same at or before maturty. Second. To
nvest such funds as may be n ts possesson n the purchase of quafed frst
mortgages on farm ands stuated wthn the edera and bank dstrct wthn
whch t s organzed or for whch t s actng. Secton 26. That every ed-
era and bank and every natona farm oan assocaton, ncudng the capta
and reserve or surpus theren and the ncome derved therefrom, sha be
e empt from edera, State, muncpa, and oca ta aton, e cept ta es upon
rea estate hed, purchased, or taken by sad bank or assocaton under the
provsons of secton 11 and secton 13 of ths ct rst mortgages e ecuted to
edera and banks, or to |ont stock and banks, and farm oan bonds ssued
under the provsons of ths ct, sha be deemed and hed to be nstrumen-
tates of the Government of the Unted States, and as such they and the ncome
derved therefrom sha be e empt from edera, State, muncpa, and oca
ta aton.
s ponted out by the court beow ont-stock and banks, not beng per-
mtted to engage n any busness, e cept that of makng oans to farmers and
ssung ther bonds to procure the necessary funds therefor, do not ordnary
have ncome sub|ect to ta aton, and so ong as such banks operate as nd-
vdua and separate nsttutons, t can not make the sghtest dfference whether
they have or do not have the rght to deduct the nterest pad on ther bonds.
Ther ncome s ta e empt, and consequenty the rght to make deductons
therefrom neas nothng. When, as n the nstant case, |ont-stock and banks
are affated wth bankng corporatons that do have ta abe ncomes, the ques-
ton assumes mportance, as the nterest deducton, f aowed, reduces the ta
abty of the affated group even then, however, t n no way affects the
|ont-stock and banks ncuded n such consodaton. They have no ta abe
ncome and they pay no ta es.
Consderng the crcumstances, we fnd no reason to concude that Congress
ntended to permt any ordnary commerca bank, wth ncome sub|ect to
ta aton, to secure parta reef therefrom through affaton wth a |ont-stock
and bank. That resut woud foow approva of the pettoner s poston.
In Denman, etc., Nauts, Coector, v. Sayton, decded ebruary 24, 1931 Ct
D. 318, page 380, ths uetn , we sad: The manfest purpose of the e cepton
n paragraph 2, secton 214(a), was to prevent the escape from ta aton of n-
come propery sub|ect thereto by the purchase of e empt securtes wth
borrowed money.
The edera arm Loan ct (sectons 16 and 13) empowers |ont stock and
banks to nvest ther funds n the purchase of quafed frst mortgages on
farm ands. The obvous meanng s that oans mght be made on such
securty. Loans, so made, become securtes ssued under the provsons of
the ct and nterest upon them s whoy e empt from ta aton under Tte II,
Ievenue ct of 1921.
Interpretng the anguage of the e cepton n secton 234 n vew of the egs-
atve purpose, we thnk that the farm mortgages owned by the affated |ont
stock and bank must be regarded as obgatons or securtes the nterest upon
whch s whoy e empt from ta aton under ths tte, and that the bonds
ssued by them consttuted ndebtedness ncurred to purchase or carry such
obgatons.
ffrmed,
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409
240, rt. 633
S CTION 240. CONSOLID T D R TURNS O
CORPOR TIONS.
rtce: 633: When corporatons are affated. -21-5076
Ct. D. 339
INCOM T R NU ) CT O 1918 D CISION O COURT.
1. Consodated Return ffaton Ownershp or Contko
of Stock.
Where borrows from a bank money necessary to purchase
stock n the Y Corporaton, gvng hs notes therefor ndorsed by
, and e ecutes an rrevocabe stock power assgnng hs stock
n the Y Corporaton to C, who n turn e ecutes a smar nstru-
ment assgnng the stock to , who deposted t as coatera
securty for the notes, the transacton s a pedge by to and
a repedge by to the bank and does not own or contro the
stock wthn the meanng of secton 240(b)2 of the Revenue ct
of 1918. Ownershp or contro by the same nterests of substan-
tay a of the stock of the Y Corporaton and another depend-
ng upon ownershp or contro by of sad stock n the Y Cor-
poraton, the two corporatons are not affated wthn the meanng
of that subdvson.
2. Decson ffrmed.
The decson of the oard of Ta ppeas (17 . T. ., 980)
affrmed.
Unted States Crcut Court of ppeas for the Second Crcut.
andy arman v. Commssoner of Interna Revenue.
ppea from the Unted States oard of Ta ppeas.
efore L. and, Swan, and Chase, Crcut udges.
anuary 5, 1931.
OPINION.
The ta payer has pettoned for revew of orders of the oard of Ta ppeas
n consodated proceedngs reatng to ncome and profts ta es for the years
1918 and 1919. ffrmed.
Swan, Crcut udge: andy arman s a New York corporaton. am-
ton DeLoss, Inc., s a Connectcut corporaton. The ssue presented by ths
appea s whether from anuary 1, 1918, to ebruary 1, 1919, they were aff-
ated corporatons wthn the meanng of secton 240(b) of the Revenue
ct of 1918 (40 Stat., 1057). The Commssoner rued aganst affaton and
dened the use of consodated returns n determnng the pettoner s ta es
for the years n queston. s acton was confrmed by the oard, whose
fndngs of fact and opnon are reported n 17 . T. ., 980.
S men owned 93.71 per cent of the stock of andy arman, the reman-
ng shares beng owned by empoyees and most of them beng hed sub|ect to
the corporaton s opton to repurchase shoud the sharehoder eave ts empoy.
The same s men aso owned, n somewhat dfferent proportons, 76.GC per
cent of the stock of amton DeLoss, Inc. n addtona 20 per cent of
the stock of ths corporaton stood n the name of . . amton, who was
not a stockhoder n andy arman. It s the contenton of pettoner that
amton s stock was owned or controed by arry DeLoss, who was one of
the s men ownng shares n both corporatons. Uness ths was so, con-
cededy there was a faure to prove affaton wthn the statutory defn-
ton requrng substantay a of the stock of the two corporatons to be
owned or controed by the same nterests. (See Ice Servce Co. v. Com-
mssoner, 30 . (2d), 230 (C. C. . 2) Commstoner v. doph Irsch Co.,
30 . (2d), 645 (C. C. . 2) Ct. D. 66, C. . 1II-1, 267 .)
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240, rt. 633.
410
The contenton that Mr. DeLoss dd own or contro Mr. amton s stock
s based upon the facts now to be stated. amton DeLoss was caused
to be organzed by the offcers and ma|orty sharehoders of andy arman
to take over a department of the atter s sversmthng busness. Mr.
amton, a man of e perence n sversmthng, was nvted to become pres-
dent of the new corporaton. e was wthout funds to purchase shares and
Mr. DeLoss made arrangements wth a bank whereby amton borrowed the
necessary money upon hs notes ndorsed by DeLoss. amton e ecuted
an rrevocabe stock power assgnng hs stock n amton DeLoss to
Robert M. ggns, who n turn e ecuted a smar nstrument assgnng the
stock to DeLoss, who deposted t as coatera securty for the notes.
amton never pad anythng upon the notes. In 1919 he became nsovent
and on ebruary 1, 1919, DeLoss pad the notes and took over the stock.
Pror to the ast-mentoned date amton attended a stockhoder s meetngs
of amton DeLoss and aways voted hs stock n harmony wth the men
who controed both corporatons. amton receved a saary from amton
DeLoss, but ts other drectors and offcers were aso offcers or empoyees
of andy arman and receved ther compensaton soey from the atter
corporaton even though a or a arge part of ther workng hours were
devoted to the former. Ou these facts the oard hed that amton s stock
was not owned or controed by DeLoss pror to ebruary 1, 1919, and the
correctness of that rung s the ssue before us.
It s consstent wth the fndngs and the evdence that the ndrect assgn-
ment of amton s shares to DeLoss was as securty for the atter s ndorse-
ment of amton s notes. Indeed, we do not understand t to be camed
that the assgnment made DeLoss the benefca owner nor, f such were the
cam, do we thnk the evdence woud support t. DeLoss testfed that
he ndorsed the notes gven by amton and the stock whch was ssued
to amton was mmedatey assgned to hm and deposted wth the bank
as coatera securty for the payment of the notes. Why the assgnment
was made through ggns does not appear. We regard the transacton as
a pedge by amton to DeLoss and a repedge by hm to the bank. It can
hardy be doubted that had amton pad hs notes, DeLoss nterest n the
stock woud have termnated. ence, DeLoss dd not own amton s
shares, and the queston s narrowed to whether he controed them.
In Unted States v. Ceveand P. d . R. Co. (42 . (2d), 413 (0. C. . 6)
Ct. D. 252, C. . I -2, 387 ), udge Mack thoroughy revewed the egsatve
hstory of the statute n queston and the |udca decsons whch have con-
strued t. s opnon demonstrates that the courts are not n accord as to
the meanng to be gven to the word contro n determnng whether or
not affaton e sts. One ne of cases hods that when the corporatons are
operatng as a busness unt, actua contro of the votng power of the mnorty
stock s suffcent, though based on revocabe pro es, reatonshps of bood
or frendshp, or perhaps even mere acquescence of the mnorty. To the
authortes cted by udge Mack as uphodng ths vew may be added the
ater cases of e Morgan Co. v. Commssoner (41 . (2d), 925 (C. C.
. 1)) . Rogers annery f Co. v. Commssoner (42 . (2d), 11 (C. C. . 3))
Commssoner v. Rchfed O Co. (42 . (2d), 360 (C. C. . 9)) by Shoe
Co., Inc., v. Unted States (44 . (2d), 273 (Ct. CI.)). If ths vew be ac-
cepted t can scarcey be doubted that amton s stock was controed
by DeLoss and hs assocates.
The other ne of cases adopts a narrower nterpretaton, and hods that f
contro means somethng dfferent from ownershp of stock, t must at
east be a contro egay enforceabe. See authortes cted n Unted States
v. Ceveand P. t . R. Co., supra. Ths court s aready commtted to the
narrower vew, Commssoner v. doph rsch Co.. supra and we are
dsposed to adhere to t unt an authortatve voce decares t wrong. It
s Impossbe to say that DeLoss had a egay enforceabe contro of
amton s shares before he pad the note and took over the stock. We
may assume wthout decdng, that a pedgee who s the regstered share-
hoder upon the books of the corporaton, contros the shares. (Cf.
Lavensten Corp. v. Commssoner (25 . (2d), 375 (C. C. . 4).) If we go
further and assume that a pedgee of the shares who has the power to get
them regstered n hs name contros them even before the power Is
e ercsed, DeLoss st fas short. (See ppea of Iron Cty ectrc Co.,
4 . T. ., 1178.) The oard found that he deposted the stock wth the
bank as coatera securty for the notes. We can scarcey beeve that ths
means that he dd not transfer to the bank the same tte that he hmsef
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411
250, rt. 1008.
had receved as securty for hs ndorsement but even f the certfcates were
merey deposted, wthout the e ecuton of an assgnment to the bank, hs
stuaton s no better. If, as seems probabe, the securty tte was trans-
ferred to the bank then t had whatever contro beongs to a pedgee f,
on the other hypothess, the certfcates were merey deposted wthout assgn-
ment, ths too woud dsabe DeLoss from gettng the shares regstered n
hs name, for ony upon presentaton of the od certfcates woud the corpora-
ton ssue new ones, and the od ones coud not be recamed from the bank
wthout payment of the notes. Therefore unt the notes were pad DeLoss
dd not have the rghts of a pedgee who s n possesson of stock certfcates
wth the power of havng them mmedatey regstered n hs name, even f t
be assumed that the contro of such a pedgee woud be suffcent.
The mora contro arsng from the pressure whch coud be put on amton
to make hm vote wth DeLoss and hs assocates s not, we thnk, the tng
e pressed by the statute. There must be the ega power through ownershp
or contro of substantay a the stock to drect the poces of both corpora-
tons for affaton to e st. s to amton s stock that was ackng.
ccordngy we thnk the oard was rght, and ts orders are affrmed.
P RT I . DMINISTR TI PRO ISIONS.
S CTION 250. P YM NT O T S.
rtce 1006: ppeas and hearngs.
R NU CT OP 1921.
Legaty of abatement cam fed n 1921 pror to enactment of
Revenue ct of 1921. (See Ct. D. 285, page 189.)
rtce 1008: Coecton of ta by sut.
R NU CT OP 1921.
ssessment waver e ecuted after e praton of statutory perod.
(See Ct. D. 279, page 274.)
rtce 1008: Coecton of ta by sut. -14-5010
Ct. D. 309
INCOM ND C SS PRO ITS T S R NU CT O 1918 decson of
COURT.
Transferee Trust- und Doctrne Corporate Name Used for
Indvdua usness.
Where a corporaton ssued a ts shares of stock wthout con-
sderaton and the prncpa stockhoder used the corporate name
as a fcttous name under whch he dd busness, made as presdent
of the corporaton fnanca statements of ts assets and abtes
to banks, and e ecuted, as presdent, a corporaton ta return
showng ts capta and ncome, the concuson s |ustfed that he
conducted hs busness through the corporaton and recognzed the
property descrbed n the corporaton return as the property of
the corporaton, and he s ndvduay abe, n a sut under the
trust-fund doctrne, for the ta upon the corporate ncome where
the property receved by hm from the corporaton, whch was ds-
soved, s n e cess of that ta . The fact that the corporaton was
dssoved and under the aw of the State of ncorporaton he be-
came one of the trustees n qudaton of the corporaton does not
requre that the |udgment n such a sut shoud be aganst hm as
trustee of the corporaton.
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250, rt. 1008.
412
Unted States Crcut ( oust of ppeas fob the Nnth Crcut.
Wam P. Pann, appeant, v. Unted States of merca, appeee.
Upon appea from the Dstrct Court of the Unted States for the Southern Dstrct of
Caforna, Centra Dvson.
October 27, 1030.1
OPINION.
Wbur, Crcut udge: Ths acton was brought by the Government aganst
Wam P. Pann, ane Doe Pann and een Donad to coect ncome ta and
e cess proft ta , based upon the returns of the ngees rokerage Co., a cor-
poraton, amountng to 1,435.03. It s aeged that the corporaton had ceased
dong busness and dssoved subsequent to December 31, 1919, and that upon
the dssouton ts property was sod and dstrbuted among the defendants,
stockhoders, eavng the corporaton wthout assets. The defendants |oned
n an answer admttng the ncorporaton of the ngees rokerage Co., aeg-
ng that the corporaton never dd any busness and never functoned as a cor-
poraton and that t had ost ts rght to e st by vrtue of noncompance wth
certan aws of the State of Caforna. It s admtted that defendants Wam
P. Pann and een Donad were stockhoders n the company, but dened that
zabeth I. Pann, sued as ane Doe Pann, ever hed any stock n the cor-
poraton. It s dened that the stockhoders ever receved any of the corporate
assets of the company. It s aeged that the defendant Wam P. Pann
regstered the corporate name as a fcttous name to be used by hm n dong
busness and that he dd busness under that name and made a mstake n
fng ncome ta return on behaf of the corporaton, and that the ncome
returned was the ncome not of the corporaton but of Wam P. Pann. Thus,
the prncpa ssue tendered by the answer was whether or not the corporaton
ever acqured or dsposed of any assets whatever. The appeant testfed that
the corporaton had no assets and that he now owned the assets whch were
sted by hm as beongng to the corporaton n hs ncome ta returns. e
testfed that upon the organzaton of the company ts 500 shares of stock were
ssued wthout consderaton and he receved 490 shares of the stock and de-
fendant Donad 10 shares. ppeant, on October 11, 1919, as presdent of the
ngees rokerage Co., made a fnanca statement to the ank of Itay gvng
ts assets as 70,780.57 and ts abtes as 44,646.40 made a smar state-
ment as presdent showng assets of 118,416.77 made a corporaton and e cess
proft ta return to the Government ebruary 28, 1918, showng an ncome of
12,076.11 and a capta of 9,995.32. Ths return was e ecuted by the ap-
peant as presdent and een Donad as treasurer. In uy, 1923, appeant
addressed a etter to the Commssoner of Interna Revenue and camed that
the ncome ta return was erroneous, that the property theren sted was not
the property of the corporaton, but of the appeant tradng under a fcttous
name, to wt, that of the corporaton. In the return of ta ncome for the
caendar year 1919, e ecuted and sworn to by the appeant as presdent of
the corporaton, and by hs codefendant, een Donad, as treasurer, the ncome
of the busness conducted by appeant was returned as ncome of the cor-
poraton. Ths evdence ceary |ustfed the concuson that the appeant
conducted hs busness through the corporaton and recognzed the property
descrbed n these returns as the property of the corporaton. e aeges that
the corporaton has dssoved and he has possesson of and cams as hs own
a the assets of the corporaton. Under these crcumstances t s we estab-
shed that the appeant was abe for the ta upon the corporate ncome
where the property receved by hm s n e cess of that ta . (Unted States v.
arbutt, 35 . (2d), 294, and cases theren cted Unted States v. Updke,
8 . (2d), 913.) Ths rght s assumed, f not decded, n Unted States v.
Updke (281 U. S., 489 Ct. D. 192, C. . I -1, 228 ) and Russe v. Unted
States (278 U. S., 181 T. D. 4260, C. . III-1, 206 ). ppeant seems to
concede ths, but contends that the |udgment shoud requre hm to pay the
ta from property receved by hm from the corporaton. Ths poston can not
be mantaned. The abty of the appeant to the Government s based upon
the proposton that he has acqured and utzed property of the corporaton
abe for the ta n e cess of the amount of the ta .
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413
250, rt. 1008.
It s aso contended that the |udgment shoud have been aganst the defend-
ant as trustee for the corporaton. Ths cam s based on the proposton that
under the Caforna aw (Stats, of Ca., 1915, p. 422) wth reaton to the sus-
penson and dssouton of corporatons for nonpayment of cense ta the
drectors thereupon become the trustees of the corporaton and hod the prop-
erty as such trustees unt such tme as the corporaton s revved by payment
of the ta or ts affars whoy qudated. Ths contenton entrey overooks
the fact that ths acton s based upon the cam that the appeant as a stock-
hoder of the corporaton has actuay receved as a stockhoder the property
of the corporaton n whch t hed stock.
In hs bref appeant contends that the statute of mtatons has barred
the acton. On the argument he conceded that the acton was not barred by
the statutes. ffrmed.
rtce 1008: Coecton of ta by sut. -22-5085
Ct. D. 342
federa, ta es sut on bond decson of court.
ond Defense beach Indemnty ond.
Where a bond, rectng that the prncpa made appcaton,
whch was granted, for an e tenson of the perod for the payment
of a ta unt s months from the date of the bond, s condtoned
to ndemnfy and save harmess the coector or hs succes-
sors aganst a oss, costs, damage or e pense to whch he may
be put by reason of havng granted sad e tenson of tme,
the bond s one not for the absoute payment of money but to
ndemnfy aganst oss or damage and the Unted States n a sut
upon the bond can not recover where the evdence fas to dscose
any oss or damage to consttute a breach by reason of the grantng
the e tenson and the refranng durng the perod of the post-
ponement from takng any acton to enforce the coecton of the
ta , the coecton of the ta havng been barred at the date of the
devery of the bond.
Dstrct Court of the Unted States fob the astern Dstrct of South
Carona.
The Unted States of merca, pantff, v. Chareston Lead Works, a Corpora-
ton, and Maryand Casuaty Co., a Corporaton, defendants.
March 28, 1931.
opnon.
Cochran, Dstrct udge: The Unted States brought ths acton aganst
the Chareston Lead Works as prncpa and the Maryand Casuaty Co. as
surety on a bond. The Chareston Lead Works has defauted. The Casuaty
company fed an answer. |ury tra was waved, and a wrtten stpua-
ton entered nto, settng forth the facts. The facts essenta to an under-
standng of the questons of aw presented are brefy as foows:
There was assessed aganst the Chareston Lead Works an addtona n-
come ta . The assessment was made wthn fve years from the date of the
fng of the return, but there were no other steps taken wthn the 5-year
perod by dstrant or otherwse. fter fve years had eapsed from the
date of the return, the bond on whch ths acton s brought was e ecuted.
The bond was made payabe to the coector of nterna revenue or hs suc-
cessors n offce. It rectes that the prncpa had made appcaton for an e -
tenson of the perod for the payment of the ncome ta es n queston, such
e tenson postponng the date of payment unt s months from the date
of the bond. The bond s under sea. The condton of the bond s to
ndemnfy and save harmess the coector or hs successors aganst
a oss, costs, damage or e pense to whch e may be put by reason of
havng granted sad e tenson of tme. The coector thereupon granted
an e tenson of tme of s months and durng that tme refraned from
takng any acton to enforce the coecton of the ta es. fter the s months
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414
e tenson had eapsed, the coector made demand upon the defendants for
the payment of the ta but no part of the same has been pad. There Is
no proof before the court that the coector coud have coected the ta f
the e tenson had not been granted, or that there has been any oss or damage
suffered by reason of the e tenson.
The pont was made that the Unted States coud not sue on the bond
because gven to the coector but the Casuaty company now concedes that
the Unted States s the rea party n Interest and can mantan the acton
on the bond, or a east that the queston s academc, n vew of the decson
of udge ae upon ths same bond n the case of Maryand Casuaty Co. v.
Chareston Lead Works (24 ed. (2d), 836).
It s perfecty cear that at the tme the bond was gven, both the coector
and the Unted States were barred from coectng the ta by the 5-year
mtaton provded n the Revenue ct of 1921, secton 250(d), ether by
sut or dstrant. ( owers v. N. 7. bany Lghterage Co., 273 U. S., 346
T. D. 4009, C. . I-1, 268 .)
ut the sut here s not for the coecton of the ta . Ths Is a sut upon the
bond. If there s any mtaton appcabe to the sut on the bond, t s conceded
that It has not yet become effectve. The 5-year mtaton provded n the
evenue ct of 1921, secton 250(d), does not appy to an acton on a bond.
(Unted States v. ohn arth Co., 279 U. S., 370 Ct. D. 65, 0. . III-1, 189 .)
The Casuaty company argues that there s no consderaton for the bond,
but I do not consder t necessary to decde that queston, as, n my opnon,
the acton can not be mantaned for other reasons.
The bond here does not provde for the payment of the ta , but to Indem-
nfy aganst oss or damage. The dstncton between bonds for absoute pay-
ment and bonds merey to ndemnfy aganst oss or damage has been ceary
ponted out n a number of decsons. In the former case, there s a breach of
the bond from the mere faure of payment. In the atter case, n order to
estabsh a breach of the bond, there must be aegaton and proof of oss or
damage. (Wcker v. oppock, 6 Wa., 94 Ms v. Dow s dmr., 133 U. S.,
424 ohnson v. Rsk, 137 U. S., 308 In re Lathrop, askns Co. (C. C. .
2), 216 ed., 102, 106, 107 Centra Trust Co. v. Lousve Trust Co. (C. O. .
6), 100 ed., 545, 547, 548.)
The Casuaty company argues that t was egay mpossbe for the coector
to suffer any damage by reason of the grantng of the e tenson, because at
the tme the bond was gven, nether the coector nor the Unted States coud
egay enforce the coecton ether by dstrant or otherwse, and even If the
coector had undertaken to enforce coecton and had actuay compeed the
payment, the aw woud have compeed a refund. Such woud appear to be
the ogca concuson. ut be that as t may, the Inescapabe fact remans n
ths case that the Government has not offered any proof that any oss or dam-
age has been suffered by reason of the grantng of the e tenson. The bond
beng condtoned for the payment of such oss or damage as may be occasoned
by the grantng of the e tenson, the Government has therefore faed to estab-
sh a breach of the bond, and can not recover.
The cases of Unted States v. ohn arth Co. (supra) and Unted States v.
. ogshre Son Co. (D. C.) (37 ed. (2d), 720) are ceary dstngushabe
from the case at bar. In those cases there was a bond condtoned to pay the
ta and not merey to ndemnfy aganst oss or damage. ere the bond does
not engage to pay the ta , but merey to ndemnfy aganst oss or damage.
The Government havng faed to estabsh a breach of the bond, the acton
must be dsmssed as to the Maryand Casuaty Co., and a proper order w
be entered accordngy.
rtce 1012: ssessment of ta . -5-4922
Ct. D. 274
INCOM T R NU CT O 1921 D CISION O SUPR M COURT.
1. Waver adty ecuted fter ab of Statute.
consent n wrtng by a ta payer to wave the statute of
mtatons operatng aganst the coecton of a ta s vad and
bndng upon such ta payer even when the waver s e ecuted after
the e praton of the statutory perod.
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415
250, rt. 1012
2. Waver ssessment Coecton.
consent by a ta payer to wave the statute of mtatons on
the assessment of a ta contempates aso the coecton of the ta
and waves the bar of the statute as to the coecton thereof.
3. Decson ffrmed.
The decson of the Court of Cams (68 Ct CI., 395) affrmed.
Supreme Court op the Unted States. No. 23. October Term, 1930.
Chares . Stange, pettoner, v. The Unted States.
On wrt of certorar to the Court of Cams.
anuary 5, 1931.
Mr. ustce randes devered the opnon of the court.
In ebruary. 1915, Stange made a return of ta abe ncome for the year
1914, under the Revenue ct of October 3, 1913 (ch. 16, 38 Stat., 114), and
pad the ta assessed thereon. In ebruary, 1924, the Commssoner of Inter-
na Revenue made a defcency assessment. Proceedngs for coecton were n-
sttuted n March, 1925. In order to avod dstrant, Stange pad the amount
assessed wth nterest and duy made cam for a refund on the ground that
the return made n 1915 had ncuded a the ncome ta abe. Upon the re-
|ecton of ths cam, he fed a suppementary cam for a refund on the ground
that the coecton of the addtona ta had been barred by the statute of
mtatons contaned n secton 250(d) of the Revenue ct of November 23,
1921 (ch. 136, 42 Stat., 227, 265). fter the apse of s months wthout a
determnaton by the Commssoner, he brought ths sut n the Court of
Cams to recover the money so pad. There he urged both contentons. In
answer to the atter, the Government nssted that the statute had been waved
by a wrtten agreement sgned by Stange n November, 1922, and by the
Commssoner n March, 1923. The tra court entered |udgment for the
Unted States. (68 Ct. CI., 395.) Ths court granted a wrt of certorar,
mted to the questons nvovng the vadty and effect of the waver of the
statute of mtatons. (281 U. S., 707.)
No consttutona queston s presented. Whether the pettoner s entted
to recover depends upon the constructon and effect of secton 250(d) and of
the wrtten agreement caed the waver. That secton provdes:
The amount of ncome, e cess-profts, or war-profts ta es due
under any return made under pror ncome, e cess-profts or war-
profts ta cts, or under secton 38 of the ct entted n ct to provde rev-
enue, equaze dutes, and encourage the ndustres of the Unted States, and
for other purposes, approved ugust 5, 1909, sha be determned and assessed
wthn fve years after the return was fed, uness both the Commssoner and
the ta payer consent n wrtng to a ater determnaton, assessment, and coec-
ton of the ta and no sut or proceedng for the coecton of any such ta es
due under ths ct or under pror ncome, e cess-profts, or war-profts ta cts,
or of any ta es due under secton 38 of such ct of ugust 5, 1909, sha be
begun, after the e praton of fve years after the date when such return was
fed, but ths sha not affect suts or proceedngs begun at the tme of the pas-
sage of ths ct: . (42 Stat, 265.)
The waver provdes:
C. . Stange, of Merr, Ws., n consderaton of the assurance gven hm
by offcas of the Income Ta Unt of the ureau of Interna Revenue that hs
abty for a edera ta es mposed by the ct of Congress approved Octo-
ber 3, 1913, on hs net ncome receved from a sources n the year
ended December 31, 1914, sha not be determned e cept after de-
berate, ntensve, and thorough consderaton, hereby waves any and a
statutory mtatons as to the tme wthn whch assessments based upon such
abty may be entered.
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250, rt| 1012.
416
rst. It s contended that the waver was of no effect because e ecuted more
than fve years after the fng of the return.1 The argument s that to gve effect
to a waver e ecuted after the e praton of the perod of mtaton woud gve
to the statute a retroactve effect, whch Congress can not be presumed to have
ntended. There was no ack of power. Pror to the 1921 ct no egsaton
barred the enforcement of the abty for a ta under the ct of 1913. Ta es
duy assessed coud be coected at any tme by sut There was a 3-year m-
taton on assessment2 (Secton 11( ), 38 Stat., 169), whch f duy made mght
be foowed by dstrant. ut there was no mtaton upon the tme wthn
whch the ta abty coud be enforced by sut wthout a pror assessment.
The 1921 ct was the frst to nterpose a mtaton upon the rght of the Govern-
ment to enforce a ta abty aready accrued.4 It barred coecton n any
manner after fve years ony n case no waver was gven. Congress must have
ntended that a waver shoud be operatve even though before the passage of
the ct, fve years had eapsed from the tme the return had been fed. mong
the earer Revenue cts referred to n secton 250(d) was that of 1909, the
returns under whch were requred to be fed more than 10 years pror to the
passage of the 1921 ct. (Secton 38, Thrd, 36 Stat, 114.) nd returns under
the Revenue ct of 1913 were requred to be fed more than s years before
the passage of the 1921 ct (Secton 11(D), 38 Stat, 168.) The consent
cause n secton 250(d) deas broady wth a assessments and coectons
under past and future cts, and there s no ndcaton of an ntenton to con-
fne t to those few cases under the eary Revenue cts n whch no return had
been fed or a so-caed common-aw waver had been gven pror to 1921.
Uness t s to be rendered practcay meanngess as apped to ta returns
under these earer cts, t must be construed to permt the e ecuton of
wavers after the perod of fve years. Moreover, there s the anaogy of the
rue that prvate debts barred by the statute of mtatons may be effectvey
revved, after the bar has faen, by a new promse wthout new consderaton.
(Wston, Contracts, sectons 160-184.)
Second. It s contended that the so-caed waver was noperatve because Its
provsons dd not conform to secton 250(d) of the Revenue ct of 1921, n that
t waved any and a statutory mtatons as to the tme wthn whch assess-
ments based upon such abty may be entered, but dd not n terms refer to
the determnaton or coecton of the ta . The argument s that Con-
gress had, n respect to a waver, prescrbed an e act and mandatory procedure
under whch the Commssoner was authorzed to defer acton ony f the ta -
1 On ths queston, there has been confct In the ower edera courts. See, sustanng
the vadty of such wavers, Stange v. Unted States (68 Ct. Cs., 395 Ct. D. 138, C. .
III-2, 268 ) W. P. rown c Sons Lumber Co. v. Commssoner (38 . (2d), 425
(C. C. . 6th)) Sabn v. Unted States (44 . (2d), 70 (Ct. Cs.)). Denyng vadty:
oy ora Co. v. Commssoner (29 . (2d), 865 (Ct. pp. D. C.)) (same queston under
secton 278(c) of the ct of 1924 (ch. 234, 43 Stat., 253, 300)) Spear Co. v. ener
(34 . (2d), 705) Pctora Prntng Co. v. Commssoner (38 . (2d), 563 (C. C. .
7th)) Coumba Iron Works v. rock (38 . (2d), 816) Chcago Raway qupment Co.
v. Commssoner (39 . (2d), 378 (C. C. . 7th)) (both under the 1924 ct) Wctherc
ros. Co. v. Whe (D. Mush., decded December 3, 1930, U. S. Day. December 30, 1930,
p. 3291 (under secton 278(e) of the 1920 ct, ch. 27, 44 Stat.. 9, 59).
2 There wns doubt whether ths provson requred the Commssoner both to dscover
the error In the return and to make an addtona assessment, or merey to make dscovery,
wthn three years. (See ken v. urnet, No. 69 Ct. D. 275, on page 417, ths uetn ,
decded ths day, note 2 rown Sons Lumber Co. v. urnet, No. 115, decded ths day,
note 2.)
Compare Unted States v. ashvUe, C. 6 St. L. y. (249 ed., 678) : Unted States v.
ver (12 . (2d), 194 T. D. 3869, C. . -, 397 ) Unted States v. eey (24 . (2d),
234) Unted States v. Green-fed Tap cC De Corp. (27 . (2d), 933 IT. D. 4196, C. .
II-2, 170 ).
The provsons n secton 250(d) of the Revenue ct of 1918 (40 Stat, 1057, 1083)
were not n terms retroactve and apped ony to ta es assessed under that ct. Com-
pare owrs v. N. Y. bany Lghterage Co. (273 U. S., 346, 350 T. D. 4009, C. .
. I-1, 268 ) orsh m ros Co. v. Unted States (280 U. S., 453, 459, note 5 Ct D.
167, C. . 1 -1, 260 ). ven after the ct of 1921 sut mght be brought, wthn tho
mtaton perod, though no assessment had been made. (See evenue ct of 1824, ch.
234. secton 278(d), 43 Stat., 253, 300.)
c On ths queston, the Government has unformy prevaed beow. (Stange v. Unted
States. 68 Ct. Cs., 395 Ct. D. 138. C. . III-2, 268 Sabn v. Unted States, 44 .
(2d), 70 (Ct. Cs.) Coumba Iron Works v. rock. 38 . (2d), 816 Washngton Coa
Coke Co. v. ener, 42 . (2d), 681 Ct. D. 216. C. . I -2, 249 Soomon v. Rener,
43 . (2d), 592 Crowd evator Co. v. en, 43 . (2d), 772 see aso, Watt 6 omes
ardware Co. v. Commssoner, 8 . T. 372 Sunshne Coak f Sut Co. v. Comms-
soner, 10 . T. ., 971 (under secton 278(c) of 1924 and 1926 ct ) Lutcher t Moore,
etc., Co. v. Commssoner. 19 . T. .. 887 cf. oy Ttcomb, Inc., v. Unted States,
69 Ct. Cs., 614 Ct D. 201, C. . I -2, 244 .)
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417
250, rt. 1012.
payer e pressy waved the mtatons on a three steps, determnaton, assess-
ment, and coecton reance beng had on the use of the con|unctve and
n the secton that the statutory authorty gven the Commssoner to consent
to a ater performance of these three steps dd not mpy a ke authorty as to
any one of them that under secton 250(d) the perods wthn whch both assess-
ment and coecton must be made, run concurrenty fve years from the fng
of the return and that nothng was accompshed by consentng to the assess-
ment, snce the assent to a ater coecton was wthhed.
We are of the opnon that the vadty of a waver under secton 250(d) was
not condtoned on the precse use of the three words theren mentoned. s
ponted out n orshem ros., etc., v. Unted States (280 U. S., 453, 466 Ct. D.
167, C. . I -1, 260 ), a waver s not a contract, and the provson requrng
the Commssoner s sgnature was nserted for purey admnstratve purposes
and not to convert nto a contract what s essentay a vountary, unatera
waver of a defense by the ta payer. The ambt of the Commssoner s author-
ty may be n many respects mted by the statute ( orshem ros., etc, v.
Unted States, supra, at 464), but no reason appears why t was essenta that
specfc reference be made to the perod for coecton, or why he coud not, wth
the ta payer s consent, empoy one word nstead of three to secure the desred
resut. The waver, n terms, was e ecuted by the ta payer n order that
hs abty mght be determned ony after ntensve and thorough
reconsderaton by the Commssoner. The partes can not have ntended to
have the amount of the ta ascertaned and to eave the ta payer free to pay
t or not. They ceary contempated the entre procedure necessary to deter-
mnaton and coecton of the ta . Ths does not mean that the dstnctons
between assessment and coecton were to be dsregarded, but merey that the
empoyment of a snge term comprehended both steps.
In November, 1922, both partes understood that the ta woud be assessed
and coected after a proper consderaton of the ta payer s ob|ectons to any
addtona assessment To secure suffcent tme for ths purpose, the so-caed
waver was e ecuted. The faure to nsert n the wrtten consent words e -
pressy wavng the statutory mtaton upon coecton, s e paned by the
beef prevang pror to the decson n owers v. N. Y. bany Lghterage
Co. (273 U. S., 346), that dstrant, the common method for coercng payment,
was possbe even when the statutory perod for coecton by sut had e pred.
That the partes at the tme may have beeved that coecton was possbe n-
dependent of any waver, does not make ess effectve the nstrument gven
for the purpose of tong the mtaton on the utmate determnaton and co-
ecton of the ta . It must be assumed that an effectve and not a fute act
was ntended.
ffrmed.
rtce 1012: ssessment of ta . -5-4923
Ct. D. 275
INCOM ND C SS TRO ITS T S W I RS D CISION O SUPR M
COURT.
1. Wavers ecuted efore the Revenue ct of 1921 Com-
mssoner s uthorty.
The Commssoner had authorty to accept wavers, e ecuted
before the enactment of the Revenue ct of 1921, of the mtaton
on the perod wthn whch assessments mght be made of ta es
mposed by the Revenue cts of 1916 and 1917.
2. Wavers Requrement op New Consent fter nactment
of the Revenue ct op 1921.
Secton 250(d) of the Revenue ct of 1921 does not requre a
new consent, e ecuted subsequent to ts enactment and n accord-
ance wth ts terms, to an assessment and coecton after the stat-
utory perod therefor. waver embracng any and statutory
mtatons upon the assessments of ta es mposed by the Rev-
enue ct of 1917 does not therefore e cude the mtatons subse-
quenty mposed by that secton.
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250, rt. 1012.
418
8. Wavers t.t. edera Ta es War Profts Ta .
waver of a statutory mtatons as to the tme wthn whch
assessments based upon abty for a edera ta es mposed by
the ct of Congress approved September 8, 1916, as amended by
the ct of Congress approved October 3, 1917, operates to e tend
the perod for the assessment of war profts ta es.
4. Waver ssessment Coecton.
consent by a ta payer to wave the statute of mtatons on
the assessment of a ta contempates aso the coecton of the ta
and waves the bar of the statute as to the coecton thereof.
5. Decson ffrmed.
The decson of the crcut court of appeas (35 ed. (2d), 620)
affrmed.
Supreme Court of the Unted States. No. 69. October Term, 1930.
tmette ken, dmnstratr of the state of rend M. ken, Deceased,
pettoner, v. Davd urnet, Commssoner of Interna Revenue.
On wrt of certorar to the Unted States Crcut Court of ppeas for the ghth Crcut.
anuary 5, 1931.
Mr. ustce randes devered the opnon of the court.
On March 30, 1918, ken fed hs return of ncome and e cess profts ta es
for the year 1917. On March 12, 1925, the Commssoner made a |eopardy
assessment, whch, upon a cam for abatement, he reduced, on October 7,
1920. ken thereupon appeaed to the oard of Ta ppeas on the grounds
that the |eopardy assessment had been erroneousy computed, and that both
assessment and coecton were barred by the statute of mtatons. The
Commssoner s determnaton was affrmed by the oard (10 . T. ., 553)
and ts decson was affrmed by the Crcut Court of ppeas for the ghth
Crcut (35 . (2d), 620). Ths court granted a petton for certorar, the
argument to be mted to the questons concernng the vadty and effect
of the wavers. (281 U. S., 713.)
The Revenue ct of November 23, 1921 (ch. 136, secton 250(d), 42 Stat.,
227, 265), provdes a 5-year perod of mtaton for the assessment and co-
ecton of ncome and e cess profts ta es under earer Revenue cts. The
fve years from the fng of the return e pred March 30, 1923. In order to
sustan the vadty of the assessment and the rght of coecton, t was neces-
sary to estabsh a waver effectve March 12, 1925, the date of the |eopardy
assessment. Severa wavers had been gven. The frst, whch was e ecuted
by the ta payer on ebruary 5, 1921, and fed wth the ureau two days
ater, was not e ecuted by the Commssoner unt after the enactment of the
1921 Revenue ct That waver e pred pr 1, 1924.1 efore that date, a
second waver had been duy e ecuted, whch by ts terms, was to reman In
effect for one year after the e praton of the statutory perod
of mtaton as e tended by any wavers aready on fe wth the ureau,
wthn whch assessments of ta es may be made. Thus the |eop-
ardy assessment was made shorty before pr 1, 1925, the e praton pe-
rod of the frst waver as e tended by the second and n order that ths
ta may be coected, both wavers must be vad.
rst. It s contended that the waver of ebruary 5, 1921, s nvad because
t was e ecuted pror to the enactment of secton 250(d) of the Revenue ct of
1921, whch was the frst of the Revenue cts to provde n terms for the gvng
of wavers. The argument s that pror to the enactment of that secton the
Commssoner acked authorty to accept wavers of the mtaton on the perod
wthn whch assessment mght be made under the cts of 1916 and 1917.
1 It was unmted n tme, but e pred under a departmerta rung, promugated pr
11, 1023, by whch a such waver were to termnate pr 1, 1924. (Mn. 30S5,
I. R. C. . TI-1, p. 174.)
Secton 9(a) of the ct of September 8, 1916 (ch. 463, 39 Stat., 756. 763), provded
that where a fase erroneous return had been fed, the Commssoner had three years n
whch to dscover the error and to make an addtona assessment. Secton 8 of the ct
of October 3, 1917 (ch. 63, 40 Stat., 300, 301), ncorporated these provsons by reference.
Compare, as to the 1909 and 1913 cts. ot Natona ank v. G (218 ed., 600),
Natona ank of Commerce v. en (223 ed.. 472), Wood v. Leweyn (252 ed., 106)
and see Reguatons 33 (1914), artces 25. 177 d. (Rev. ed. 1918), artces 38, 233
rown Sons Lumber Co. r. urnet, No. 115, decded ths day, note 2.
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419
250, rt. 1012
Ths contenton s not sound. The mtaton perods on assessment coud be
waved by the ta payer n the same fashon as other statutes of mtatons
are waved. No reason appears why the Commssoner coud not accept such a
waver pror to the ct of 1921. though the Government mght at that tme
st have brought sut even though the perod for assessment had e pred, t
was thought desrabe to foow the norma and smper course of assessment
and coecton by dstrant proceedngs because of the advantages afforded.
The Commssoner requested the ta payer to e ecute a waver n cases where
proonged ree amnaton of the return seemed necessary. If authorty was
needed for the acceptance of such wavers, t may be found n the genera
broad admnstratve provsons of the respectve cts.4 ven after the ct of
1921, a so-caed waver was not a contract. The requrement n secton
250(d) of that ct that the Commssoner sgn the consent was nserted to meet
e gences of admnstraton, and not as a grant of authorty to contract for
wavers. See Stange v. Unted States, No. 23, decded ths day Ct. D. 274,
page 414, ths uetn orshem ros. v. Unted States (280 U. S., 453, 466
Ct. D. 167, C. . I -1, 260 ).
Second. It s contended that the frst waver shoud not be construed as
wavng a mtaton prescrbed by a statute thereafter enacted. The argument
s that secton 250(d) of the ct of 1921 superseded ths waver and requred a
new consent e ecuted subsequent to ts enactment and n accordance wth ts
terms. Whe secton 250(d) frst specfed that a waver be n wrtng and
sgned by the Commssoner, there was nothng n that secton whch nva-
dated wavers made pror to ts enactment or mted the effect of such nstru-
ments on the mtatons theren mposed. Compare orshem ros:, v. Unted
States (280 U. S., 453, 467). The frst waver, by ts e press terms, embraced
any and a statutory mtatons upon the assessment of these 1917 ta es.
We see no reason for restrctng ths anguage so as to e cude the mtatons
subsequenty mposed by secton 250(d) of the ct of 1921.
Thrd. It s contended that the frst waver, even f vad, dd not operate
to e tend the perod for the assessment of war-profts as dstngushed from n-
come ta es. The argument s based on the reference n the waver, whch was
prepared by the Commssoner, to a edera ta es mposed by the ct of Con-
gress, approved September 8, 1916, as amended by the ct of Congress, ap-
proved October 3, 1917, and t s contended that the war-profts ta was a
separate enactment, not an amendment to the 1916 ct, and hence not ncuded
wthn the waver. It s cear that ths waver was ntended to embrace
a abty under the 1917 return then pendng. Moreover, the ony statute
approved October 3, 1917, was the Revenue ct of that year, chapter 63, the
genera ob|ect of whch was to ncrease for war purposes the ta es eved by
the ct of 1916.
ourth. The pettoner has argued aso that the frst waver dd not pur-
port to e tend the tme for coecton. Ths waver s dentca wth that before
us n Stange v. Unted States, No. 23, decded ths day, whch we hed was
ntended to embrace a the steps necessary for the utmate coecton of the
ta . The second waver e pressy ncuded determnaton, assessment, and
coecton. Consequenty, as the assessment of March 12, 1925, was tmey,
the rght of coecton s wthn secton 278(d) and secton 280 of the Revenue
ct of 1924 (ch. 234, Tte II, 43 Stat, 253, 300, 301), whch gves s years
from the makng of the assessment. ( orshem ros. v. Unted States, 280
U. S., 453, 467.) Compare Russe v. Unted States (278 U. S., 181 T. D. 4260,
C. . III-1, 206 ).
ffrmed.
Compare artce 233 of Reguatons 33 (Rev. ed. 1918), whch stated n ths connec-
ton : Whe the Government s fuy authorzed to recover such ta es by sut, It Is
desrabe, n order to obvate needess e pense and annoyance to the ta payer and the
Government, that the coecton be made as a resut of. a forma assessment. See aso
d., artce 38.
Revenue ct of October 3. 1917 (ch. 63, 40 Stat., 300, 325, secton 1001), provdes:
That every person abe to any ta mposed by ths ct, or for
the coecton thereof 8ha compy wth such reguatons as the Commssoner
of Interna Revenue, wth the approva of the Secretary of the Treasury, may from tme
to tme prescrbe. Ths was foowed by secton 1309 of the Revenue ct of 1918 (ch.
18, 40 Stat., 1057, 1143), whch authorzed a needfu rues and reguatons for the
enforcement of the provsons of ths ct. Compare Revenue ct of March 3, 1917
(ch. 159, 39 Stat, 1000, 1002, secton 207).
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250, rt. 1012.
420
rtce 1012: ssessment of ta .
R NU CTS O 1918 ND 1921.
Computaton of perod of mtaton upon assessment. (See Ct.
D. 292, page 258.)
rtce 1012: ssessment of ta . -6-5026
Ct, D. 319
INCOM T R NU CT O 1918 decson of court.
ssessment Lmtaton Commencement op Perod Conso-
dated Return Separate Return.
Where the Corporaton and the Corporaton fe a conso-
dated return whch does not state separatey the ncome and In-
vested capta of each and covers ony a part of the ta abe year
of the Corporaton and thereafter the Corporaton fes a sep-
arate return for ts entre ta abe year, the Commssoner havng
decned to aow a consodated return, the fng of the conso-
dated return does not start the runnng of the perod of mtaton
prescrbed by secton 250(d) of the Revenue ct of 1918 wthn
whch an assessment s requred to be made aganst the Corpora-
ton on the bass of Its separate return.
Unted States Crcut Court of ppeas, fth Crcut.
Unted States of merca, appeant, v. Natona Tank t port Co., appeee.
ppea from the Dstrct Court of the Unted States for the Southern Dstrct of Georga.
December 10, 1930.
opnon.
oster, Crcut udge: In ths case te matera facts are substantay
these: On March 14, 1919, appeee fed wth the coector of nterna revenue
at tanta, a tentatve return on orm 1031-T for the year endng December
31, 1918, showng an estmated ta due of 14,000, accompaned t wth a check
for 3,500 to cover one-fourth of the estmated ta and requested an e tenson
of tme of 45 days for fng a competed return. On May 1, 1919, a consodated
return was fed wth the Commssoner of Interna Revenue for the mercan
Nava Stores Co. and the Natona Tank port Co., appeee heren. The
consodated return dd not state separatey the ncome and nvested capta of
each corporaton. Ths return was made on the annua bass for the year 1918.
The Natona Tank port Co. kept ts books on the fsca year bass, the
year endng pr 30. The consodated return covered ony eght months of
the year endng pr 30, 1919. The return showed no ta due by appeee.
The Commssoner decned to aow the consodated return and a separate
return was fed for appeee on September 28, 1922, coverng ts fsca year
from May 1, 1918, to pr 30, 1919, ncusve. In anuary, 1925, an add-
tona ta of 11,096.70 was assessed aganst appeee. On pr 1, 1925. a
credt of 3,386.66, an overpayment for the ta abe year 1917, was apped
aganst the defcency. ppeee pad the baance under protest and brought
sut n the dstrct court to recover eght-twefths of the ta assessed, concedng
that recovery of the baance was barred. The court found that pettoner was
not entted to fe a consodated return wth the mercan Nava Stores Co.
but we are not caed upon to revew that phase of the court s fndng. ow-
ever, the court hed the assessment was barred by the mtaton of fve years
mposed by secton 250(d) of the Revenue ct of 1918, and subsequent cts,
hodng that t began to run wth the fng of the consodated return and
referred to the tentatve return as adng n reachng ths concuson. udg-
ment was entered for appeee.
It s setted that the fng of the tentatve return dd not start the runnng
of the statute of mtatons. ( orshem ros. v. U. S., 280 U. S., 453 Ct. D.
167, C. . I -1, 260 .)
In Wngham Loan Trust Co. v. Commssoner of Interna Revenue
(36 . (2d), 49) we had occason to consder the effect of the fng of separate
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421
252, rt. 1036
returns coverng parts of the ta abe year and hed that the statute began to
run whenever the ta payer fed returns wth the Commssoner that woud
show facts upon whch an assessment for the ta abe perod coud be made.
Necessary, the converse s true. In ths case the consodated return dd not
show the separate capta and ncome of each corporaton and was not a
compete return for appeee as t covered ony eght months of ts ta abe
year. The Commssoner therefore had not suffcent facts before hm upon
whch to base an assessment. The assessment was n tme. (Paso Rubes
Merc. Co. v. Commssoner of Interna Revenue, 33 . (2d), 653.)
It foows that the |udgment of the dstrct court must be reversed.
S CTION 252. R UNDS.
rtce 1031: uthorty for refund, credt, and abatement
of ta .
R NU CT O 1921.
When credt of an overpayment s aowed. (See Ct. D. 290,
page 283.)
rtce 1036: Cams for refund of ta es errone- -12-4989
ousy coected. Ct. D. 300
INCOM T R NU CT O 1921 D CISION O COURT.
Cam fob Refund dequacy of Cam.
cam for refund of 1 or more, wheren a ta payer states
ony that t s fed pursuant to the provsons of secton 252 of
the Revenue ct of 1921 for the refundng of any sum whch by
reason of future court cases, Treasury decsons, or for other rea-
sons t may appear has been egay or erroneousy assessed or
coected, s no more than a genera reservaton of a future
cams or a warnng that the ta payer may n the future make
a cam and does not consttute a suffcent cam for refund wthn
the meanng of secton 252 of the Revenue ct of 1921, whch pro-
hbts the makng of a refund after fve years from the date when
the return was due uness before the e praton of such fve years
a cam therefor s fed by the ta payer. Such a cam can not
be amended by an adequate cam fed after the statutory perod.
Cntcurr Coubt of ppeas of the Unted States fob the Second Cbcutt.
rt Meta Constructon Co. v. Te Unted States.
ebruary 2, 1931.
OPINION.
L. and, Crcut udge: In 1919 the pantff fed a return for ts ncome
and profts ta , showng more than 500,000 to be due, a of whch t pad
n that year. Later, at the request of the Commssoner t fed four wavers
the frst on December 18, 1923, whch e pred on December 18, 1924 the ne t
on anuary 19, 1925 the other two wthn the tme of e praton of the
precedng one. Thus, wth the e cepton of the nterva between December
18, 1924, and anuary 19, 1925, the e tenson of the Commssoner s tme was
contnuous up to December 31, 1927. On ebruary 26, 1924, whe the frst
waver was outstandng, the pantff fed a sworn cam for refund, upon
the form prescrbed, n whch t stated that t was engaged n manufacture,
that the cam reated to ts ncome and profts ta , whch had been assessed
at the fgure returned, and that t requested a reducton of 1 or more as
the amount to be refunded. The ony further contents of the cam was as
foows: Ths cam s fed pursuant to the provsons of secton 252 of the
Revenue ct of 1921, as amended by the ct of March 4, 1923, for the refund-
ng of any sum whch, by reason of future court cases, Treasury rungs, or
for other reasons, t may appear has been egay or erroneousy assessed or
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252, rt. 1036.
422
coected. The purpose In submttng ths cam s to protect the ta payer s
rghts n respect of the tme wthn whch such cams must be fed. t
ths tme the pantff was mantanng that t was entted to a speca assess-
ment of ts nvested capta for the year 1917, under the forerunner of secton
328 of the ct of 1918, but, as w be observed, the cam dd not assert such
a rght for 1918.
Later, the Commssoner took up certan ad|ustments of ts ta es, to whch
the pantff ob|ected, and the waver of anuary 19, 1925, aready mentoned,
was gven n response to a etter from the Commssoner that hs tme to reassess
woud soon e pre, and that he must have more tme wthn whch to consder
the matter. Nothng further was done before pr 1, 1925, the day when the
pantff s rght to make any cam for refund e pred but on pr 21 the
Commssoner proposed to assess addtona ta es for 1918 and 1919, and the
pantff protested on May 21, askng eave to fe a bref. Ths t dd on uy
C, ob|ectng to the added ta es, and for the frst tme demandng a speca
assessment for 1918, for reasons then set forth. It may be assumed that ths
was an adequate cam for a refund on that ground, f n season.
s above stated, the Commssoner thereafter twce asked for further
wavers, each tme referrng to the proposed added assessment and once more
generay, to the determnaton of your correct ta abty. The oard of
Ta ppeas decded n uy, 1926, that the pantff was entted to a speca
assessment for 1917. ventuay n ugust and December, 1927, the Comms-
soner assessed a defcency for 1919 not here n queston and found that the
pantff had been overassessed for 1918, because entted to a speca assess-
ment, as n 1917. e, however, decded that the cam for refund, frst made
n uy, 1925, was too ate, dsregardng that of ebruary, 1924.
Under the statutes as they e sted n ebruary, 1924, the pantffs tme to
fe a cam for refund was mted to fve years after the return was fed.
(Secton 252 of the Revenue ct of 1921, as amended by the ct of March 4.
1923, 42 Stat., 1504.) Thus the orgna cam was tmey. Ths perod was
e tended by the ct of 1926 (secton 284(g)) unt pr 1,1925, In cases where
the ta payer had fed a waver and t woud have been further e tended for
a year more had the second waver been gven before the e praton of the
perod of the frst, whch was, however, not the case, because of the hatus
mentoned above. ence, any cam for refund was due before pr 1, 1925,
and the ony cam fed n tme was that of ebruary, 1924. Uness ths
coud be amended by the cam set up n the bref of uy 6, 1925, there was
no seasonabe cam, and the Commssoner was rght, snce no acton of hs
coud to the statute, once the mtaton had eapsed.
The supposed cam was no cam at a t was a mere caveat, an attempt
to reserve the ta payer s rght at some ater tme to fe a cam, shoud some-
thng turn up, ether because of a change n the rungs of the courts, or of the
Department, or for any other reason whch mght ead hm to suppose that
he coud get back what he had aready pad. We are not therefore deang
wth a cam neffectuay couched, whch advsed the Commssoner that the
ta payer had come to doubt the vadty of any part of the ta . In such cases
we may assume arguendo that much attude woud be aowed, not ony to
amend as to the amount demanded, but to ampfy the grounds of the cam
and perhaps to set out others.
The answer s made that the Commssoner must have known that a speca
assessment was n mnd, because that had aready been bruted for the year
1917, and t coud not be supposed that what was demanded for one year, woud
be abandoned for the ne t. So far as nferences are to count at a, the drect
opposte was at east as reasonabe. If the ta payer, havng aready rased
the queston of a speca assessment for 1917, meant by hs cam for the ne t
year to ask the same treatment, nothng woud appear ess key than that he
shoud then omt t. Perhaps a mere reference woud have served, but t was
surey most natura to suppose that he dd not then ntend to press what he
had every reason to assert. Speca assessments vary wth the crcumstances
of the ta payer they are especay wthn the dscreton of the Commssoner,
and the facts of one year are not necessary the facts of the ne t.
Moreover, we can not agree that such a cam can be peced out by matter
n pas certany when t s no more than a genera reservaton of a future
cams. Whatever the purpose of the statute, t s at east to advse the Com-
mssoner that the ta payer ntends by It to assert that a part of hs ta was
never due. To aow hm to substtute, not a cam, but a warnng that he may
n the future make a cam whch s a on any theory that the supposed cam
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423
252, rt| 1036.
was substantay dspenses wth the statute atogether. Presumaby, t was
to avod e acty such resutng uncertantes that the ct and the reguatons
requred somethng defnte enough for acton. The cam caed for, and
ndeed admtted, no acton at a. Therefore the Commssoner was not bound
to return t. It bore no evdence that the pantff had any present compant
n mnd there was no ntmaton unt after pr 1, 1925, that anythng had
happened whch had caused t to doubt any tem of the ta whch t had tsef
computed and pad. Patenty, the cam was nothng but an effort to e tend
the tme whch the statute had gven an effort whch the Commssoner was no
more bound to repudate than If t had e pressy asserted such a rght, as
perhaps ndeed t dd.
gan, we can not see what dfference It made that under e stng rungs the
cam woud have been re|ected, had t been a cam at a. ta payer who
returns and pays a ta aways thnks that he must pay t as the aw s ese
he woud act otherwse. e s gven a perod n whch to repent hs compa-
sance, but ts mt confnes hm so Congress has determned. Wthn t he must
make up hs mnd what to chaenge hs remedes are at hand, f he wshes n
the courts to reverse the rungs of the Commssoner, or to persuade hm to
recant. It w not entte hm to an e tenson that, so far as he can see, he
must be unsuccessfu n mne he must present and prosecute hs cam, whe
he s n the way wth hs adversary. nythng ese s merey a contrvance
to escape what for good or , Congress has seen ft to enact.
It must be confessed that the authortes are not n unson. It s aways a
harsh thng to sustan a statute of mtatons aganst a conceded cam
douby so, perhaps, n the case of ta es e actons, whose grounds courts have
aways scrutnzed narrowy. No doubt ths accounts for the engths to whch
the rght of amendment has at tmes been pushed. Nevertheess, we fnd no
authortatve decson aganst what, we can not hep thnkng, s the pan
purport of the aw.
In Tucker v. e ander (275 U. S., 228, 48 S. Ct, 45 (6 m. ed. Ta . Rep.,
7070 T. D. 3973, C. . I-1, 2S7 ), the cam had set forth two grounds of
egaty, and when the acton came on for tra the ta was contested upon a
thrd. The Government counse at the tra stpuated that f the sut was
good on the merts the pantff shoud recover, notwthstandng the necessty
of amendng hs cam. ths apparenty took pace before the tme to fe
the cam had e pred. The case s ceary to be dstngushed, n the frst
pace because a cam had been fed for refund of a specfc part of the ta ,
and the amendment merey set up a new ground second, because there was
an e press stpuaton by the tra counse ast, because, as we have sad, the
mtaton had not yet e pred at east ths appears to have been true from
the opnon n the court beow (15 ed. (2d), 356 (6 m. ed. Ta Rep.,
6338)). See aso Maryand Casuaty Co. v. Unted States (251 U. S., 342, 354,
40 S. Ct., 155 (3 m. ed. Ta Rep., 3010)).
It Is qute true that n et Tarrant Mfg. Co. v. Unted States (37 ed.
(2d), 977 ( 8 m. ed. Ta Rep., 10097) (Ct CI.)), a cam n as genera an-
guage as that before us was hed suffcent, and that the other decsons of that
court ( eather Rver Lumber Co. v. Unted States, 66 Ct. Cs., 54 (6 m. ed.
Ta Rep., 7830 T. D. 4211, C. . II-2,182 ), onesboro Grocer Co. v. Unted
States, 66 Ct. CI., 320 (7 m. ed. Ta Rep., 8943 Ct. D. 84, C. . III-2,
258 ), Tayor-Lockwood Co. v. Unted States, December 8, 1930, can be recon-
ced wth the rung, though by somewhat cose dstncton. Stoft v. Unted
States (67 Ct. Cs., 322 (8 m. ed. Ta Rep., 9020)) s ceary dfferent
owever, n Ordoay v. Unted States (37 ed. (2d), 19 (8 m. ed. Ta Rep.,
9950)), we hed a smar cam to be a nuty n an especay aggravated
case and Unted States e re. ndcott v. Meon (39 ed. (2d), 505 (8 m.
ed. Ta Rep., 10549) (C. . D. C.)) s to the same effect. There the Com-
mssoner had assessed an added ta whch the ta payer fed a cam to abate.
In t he Inserted a cam for refund of 1, and so far as appears, never made
any effort to amend. The cam was thought bad, though t s dffcut to see
why, f the pantff here s correct snce a cam for 1 woud ordnary be
read as comprsng an unknown sum. The addendum n the case at bar, not
present In that case, seems to us to be mmatera. Red Wng Matng Co. v.
Wcutt (15 ed. (2d), 626 (6 m. ed. Ta Rep., 6360) (C. C. . 8) T. D.
3980, C. . I-1, 225 ), whe scarcey a rung, ponts the same way.
In the dstrct courts the decsons are aso dvded. Leach v. Nchos (42
ed. (2d), 918 (8 m. ed. Ta Rep., 11253)) Lehgh, etc., Co. v. Unted
72109 31 28
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326, rt. 845.
424
States (38 ed. (2d), 637 ( 8 m. ed. Ta Rep., 10340)) Unon, etc., Co. v.
aton (20 ed. (2d), 419 (6 m. ed. Ta Rep., 6857)) Warner v. Wash (24
ed. (2d), 449 ( 6 m. ed. Ta Rep., 7322)) 27 ed. (2d). 952 ( 6 m. ed. Ta
Rep., 7960)) and Wundere v. McCaughn (38 ed. (2d), 258 (8 m. ed. Ta
Rep., 10314)), make for the pantff, though severa of them are certany ds-
tngushabe. Menrath rokerage Co. v. Crooks (28 ed. (2d), 991 (7 m.
ed. Ta Rep., 8266) Ct. D. 42, C. . III-1, 2S7 ), Pwen dms Co. v.
Unted States (34 ed. (2d), 217 (8 m. ed. Ta Rep., 9301)), and Conne v.
opkns (43 ed. (2d), 773 Ct. D. 24S, C. . I -2, 407 ) ook the other
way though here agan there s room for dstnctons.
udgment reversed petton dsmssed.
(Note. The companon case of Zeer v. Unted States (35 ed. (2d), 870),
whch nvoved the same queston and was tred n the same tra court wth
the same resut, was reversed by the Crcut Court of ppeas under the opnon
n rt Meta Constructon Co. v. Unted States.)
rtce 1036: Cams for refund of ta es erroneousy
coected.
R NU CT O 1921.
ppcaton for speca assessment soe bass of cam as ground for
sut. (See Ct. D. 336, page 431.)
S CTION 256. IN ORM TION T SOURC .
rtce 1071: Return of nformaton as to payments of
1,000.
R NU CTS O 1918 ND 1921.
Payments of renewa commssons to estates of deceased agents.
(See I. T. 2560, page 173.)
TITL III. W R-PRO ITS ND C SS-PRO ITS T
OR 1921.
P RT . IN ST D C PIT L.
S CTION 326. IN ST D C PIT L.
rtce 845: Surpus and undvded profts: -6-4030
reserve for ncome and e cess-profts ta es. Ct. D. 278
C SS PRO ITS T R NU CT O 1918 D CISION O SUrR M COURT.
L Invested Capta Reducton ecause of Ta es fob Precedno
Year.
edera ncome and e cess profts ta es are deemed to have been
pad out of the net ncome of the ta abe year for whch they are
eved. ccordngy, where a ta payer s books are kept on the ac-
crua bass, nvested capta for the year 1919, computed under sec-
ton 326 of the Revenue ct of 1918, shoud be reduced by the
amount of ncome and profts ta es for the year 1918 as of the
dates n 1919 when the ta es or nstaments thereof became due
and payabe.
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425
326, rt. 845.
2. Decson ffrmed.
The decson of the Court of Cams (68 Ct 01., 784) affrmed.
SUPR M COU T O T UNIT D ST T S. NO. 40. OCTO T RM, 1930.
awcus Machne Co., pettoner, v. The Unted States.
On wrt of certorar to the Court of Cams.
anuary 5, 1931.
Mr. ustce Roberts devered the opnon of the court
Certorar was granted to the Court of Cams to revew a |udgment n
favor of the Unted States n an acton to recover an aeged overpayment of
e cess profts ta for the caendar year 1919. The pettoner, a corporaton,
kept ts books and made ts returns of ncome and e cess profts ta es on the
accrua bass. In ts return for the year ended December 31, 1919, t dd not
deduct from nvested capta any amount on account of ncome and e cess
profts ta es for 1918 assessed and pad n 1919.
The Commssoner of Interna evenue determned that the nvested capta
for 1919 shoud be reduced by the amount of ncome and profts ta es for 1918,
as of the dates n 1919 when the nstaments of ta es fe due and were pad.
To accompsh ths he computed an average deducton for the year 1919, and
dmnshed the earned surpus as of anuary 1, 1919, by subtractng from t the
amount so ascertaned.
The Commssoner s acton was n accordance wth artce 845 of Treasury
Reguatons 45, promugated pr 17, 1919, appcabe to the Revenue ct of
1918. The pertnent porton foows:
edera ncome ta es are deemed to have been pad out of the
net ncome of the ta abe year for whch they are eved.
Secton 326(a) of the Revenue ct of 1918 provded that as used n ths
tte the term nvested capta for any year means :
(1) ctua cash bona fde pad n for stock or shares
(2) ctua cash vaue of tangbe property, other than cash, bona fde pad
n for stock or shares,
(3) Pad-n or earned surpus and undvded profts not ncudng surpus
and undvded profts earned durng the year
Pettoner asserts that artce 845 was based on the erroneous assumpton
that ncome ta es are payabe out of the net ncome of the ta abe year for
whch they are eved.
The Unted States repes that t s, and snce 1914 t has been, requred
that a ta payer sha keep hs books and make hs returns on a bass whch
w refect true ncome that whe the ta es for any year are not payabe
unt the foowng year, good accountng practce requres an accrua of
them as a abty of the current year s busness and that the reguaton n
queston was not ony reasonabe, but necessary for proper admnstraton of
the Revenue ct.
The poston of the Government s sound. corporaton can not cam to
have accumuated any net ncome n any year unt provson s made for ta es
accrued, based on net ncome for the same year.
The reasonabeness of the reguaton s further shown by the fact that
nvested capta was merey a egsatve defnton of an eement n the
formua prescrbed for computaton of e cess profts ta . Congress mght
have e pressy decared that ta es shoud be e cuded from nvested capta.
It dd not do so n secton 326(a), or esewhere n the ct. The reguatons
were made pursuant to e press authorty. (See secton 1309 of the Revenue
ct of 1918.) They are vad uness unreasonabe or nconsstent wth the
statute (Unted States v. Ormaud, 220 U. S., 506, 517-518 Internatona Ry.
Co. v. Davdson, 257 U. S., 506, 514.) They consttute contemporaneous con-
structon by those charged wth the admnstraton of the ct, are for that
reason entted to respectfu consderaton, and w not be overrued e cept for
weghty reasons. (Unted States v. Moore, 95 U. S., 760, 763 rewster v.
Gage, 280 U. S., 327, 336 Ct. D. 148, C. . I -1, 274 .)
Pettoner nssts that artce 845 s unreasonabe as apped to 1918 ta es
that no one coud know what those ta es woud be at the cose of the year,
because the so-caed Revenue ct of 1918 was not passed unt ebruary, 1919,
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328, rt. 911.
426
and made changes n the rates. ut the 1917 ct was n force, and requred
the payment of the same sort of ta es, and pettoner concedes t accrued ts
ta es for 1918 and set them up n a reserve at the end of the year. The ct
of 1918 was retroactve and repaced the pror ct of October 3, 1917, and ta -
payers understood that the pocy of the Unted States wth respect to ncome
and profts ta was contnuous. In ebruary, 1919, the Treasury promugated
Decson 2791, appcabe to the 1917 ct, and n substance the same as artce
845, whch was ssued under the 1918 ct on pr 17, 1919. The ta es
n queston were provded for by an ct passed n ebruary, 1919, but they were
for the year 1918. The ct was passed n ampe tme to aow the ta payer
to read|ust ts accounts for the year by ncudng these ta es and, snce ts
books were kept on an accrua bass, t was necessary that ths shoud be done
n order ceary to refect the ncome for 1918.
Unted States v. Wood-ward (256 U. S., 632 T. D. 3195, C. . 4, 153 ), on
whch pettoner rees, s ceary dstngushabe on the grounds stated n
Unted States v. nderson (269 U. S., 422, 441 T. D. 3839, C. . -. 179 ).
We can not hod that the reguaton on whch the Commssoner reed was
unreasonabe or n confct wth the provsons of the statute. The |udgment
s affrmed.
S CTION 328. COMPUT TION O T IN
SP CI L C S S.
rtce 911: Computaton of ta n speca -17-5037
cases. Ct. D. 322
e cess trofts ta revenue act of 1018 decson of court.
Speca ssessment Commssoner s Dscreton ursdcton
or Courts.
Secton 328 of the Revenue ct of 1918, whch authorzes the
Commssoner to determne the ta as provded theren n the case
of a speca assessment, vests n the Commssoner admnstratve
dscreton whch a dstrct court s wthout |ursdcton to revew
and whch a crcut court of appeas s wthout |ursdcton to
revew on appea from a dstrct court.
Unted States Crcut Court of ppeas for the Second Crcut.
rown s Shamrock Lnens, Ltd., pant ff-appeant, v. rank C. Dowers, as
ecutor of the state of rank . owers, Deceased, defendant-appeee.
March 14, 1931.
opnon.
Swan, Crcut udge: The pantff s a corporaton organzed under the
aws of Great rtan, and durng the year 1918 t was engaged n the busness
of mportng and seng n the Unted States nens and other te tes, eng
a foregn corporaton, the assessment of ts war profts and e cess profts ta
was requred, by secton 327(b) of the Revenue ct of 1918, to be computed
by the Commssoner n accordance wth secton 328 (40 Stat., 1093). That
secton reads n part as foows:
Sec 328. (a) In the cases specfed n secton 327 the ta sha be the
amount whch bears the same rato to the net ncome of the ta payer
for the ta abe year, as the average ta of representatve corporatons engaged
n a ke or smar trade or busness, bears to ther average net ncome
for such year.
In computng the ta under ths secton the Commssoner sha compare
the ta payer ony wth representatve corporatons whose nvested capta can
be satsfactory determned under secton 326 and whch are, as neary as may
be, smary crcumstanced wth respect to gross ncome, net ncome, profts
per unt of busness transacted and capta empoyed, the amount and rate of
war profts or e cess profts, and a other reevant facts and crcumstances.
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427
f 328, rt 911.
The compant aeges upon Informaton and beef that for the year 1918
the rato of the average ta to the average net ncome of representatve cor-
poratons engaged In ke busness and smary crcumstanced to pantff
n the respects specfed n the statute, dd not e ceed the sum of 25 per cent,
and t charged that the Commssoner faed to use ths rato but egay
assessed aganst pantff a ta whch was 44.8 per cent of ts net ncome for
sad year, resutng n an ega e acton of some 19,600, for the recovery
of whch ths sut was brought after a cam for refund had been re|ected.
Thus t s apparent that the compant attacks the correctness of the rato
used by the Commssoner and asks the court to revew a the comparatve
data whch under the statute must enter nto hs determnaton of such rato.
The dstrct court hed that secton 328 vested n the Commssoner admnstra-
tve dscreton n the computaton of the ta whch was not sub|ect to |ud-
ca contro on the mere aegaton of error or egaty. Its opnon may be
found n 41 . (2d), 862. The correctness of ths vew s the soe queston
presented by ths appea.
ma|orty of the court are of opnon, as was the |udge beow, that the
aw s setted adversey to appeant s contenton by Wamsport Wre Rope
Co. v. Unted States (277 U. S., 551 T. D. 4172, C. . II-2, 323 ). There
t was hed that the Court of Cams was wthout |ursdcton to revew the Com-
mssoner s refusa to grant a domestc corporaton a speca assessment,
because the Commssoner s determnaton nvoved admnstratve dscreton
whch coud ony propery be e ercsed by an offca or a body havng wde
e perence wth the cass of probems concerned. It s true that there the
precse queston was whether condtons e sted whch entted the domestc
ta payer to a speca assessment, the Commssoner havng computed ts ta
by the norma method whe here the foregn ta payer s requred to have
a speca assessment and the queston s whether t has been rghty computed.
ut the consderatons whch controed the answer to the former queston are
equay appcabe to souton of the atter, and were, we thnk, present to the
mnd of the court, as ndcated by the foowng quotatons from the opnon
of Mr. ustce randes (pages 558-559):
t rp||e task mposed on the Commssoner by sectons 327 and 328
was one that coud ony be performed by an offca or a body havng wde
knowedge and e perence wth the cass of probems concerned. or the
requrement of a speca assessment under paragraph (d) of secton 327 and
ts computaton n a eases, are dependent on the average ta of representa-
tve corporatons engaged n a ke or smar trade or busness. Itacs ours.

-what are representatve corporatons engaged n a ke or smar
trade or busness whch corporatons are as neary as may be, smary
crcumstanced wth respect to gross ncome, net ncome, profts per unt of
busness transacted and capta empoyed, the amount and rate of war profts
or e cess profts, and a other reevant facts and crcumstances these are a
questons of admnstratve dscreton.
In ar v. Osteren Co. (275 U. S., 220, 226 T. D. 4120, C. . II-1, 181 ),
t was sad that there s no nherent mpossbty or, Indeed, serous dff-
cuty n revewng |udcay any determnaton authorzed by sectons 327
and 328, but ths anguage was used wth reference to a revew by the oard
of Ta ppeas and must, n the ght of the ater Wamsport decson,
be so mted. Whether upon appea from the oard, a crcut court of appeas
has power to revew a decson of the oard n respect to speca assessment
under these sectons, we need not now say. (See Ryan Car Co. v. Comms-
soner, 44 . (2d), 26 (C. C. . 7) cf. Cramer t ng Co. v. Commssoner,
41 . (2d), 24 (C. C. . 3).)
The nterpretaton of the Wamsport opnon whch we adopt was aso
adopted by the Court of Cams n Chcago rog Swtch Co. v. Unted States
(67 Ct Cs., 662 Ct. D. 127, C. . III-2, 355 , cert, dened, 280 U. S., 579).
That was a case Identca wth the sut at bar, e cept that the companng
ta payer was a domestc corporaton. (See aso Cnton Iron Stee Co. v.
ener, 30 . (2d), 542, 544 (D. C. W. D. Pa.).) The fact that speca assess-
ment s mandatory for a foregn corporaton and permssve for a domestc
one furnshes no bass for dstncton when each s attackng the Commsson-
er s computaton on the ground that he seected mproper comparatves n
determnng the assessment whch he made.
The udgment s affrmed.
Manton, ., dssents wth opnon.
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1318, 1319, 1320, rt. 1050. 428
P RT IL MISC LL N OUS.
S CTION 335. ISC L Y RS NDING IN
1921 O 1922.
rtce 952: sca year of corporaton endng n 1921.
R NU CTS O 1916, 1017. ND 1018.
Deducton for obsoescence n computng the proportonate part of
ta es of that part of the fsca year 1918 fang wthn caendar year
1917. (See Ct. D. 298, page 350.)
TITL III. G N R L DMINISTR TI PRO ISIONS.
S CTIONS 1318, 1319, ND 1320. LIMIT TIONS UPON
SUITS ND PROS CUTIONS.
. rtce 1050: Suts for recovery of ta es errone- - 6-5027
ousy coected. Ct. D. 317
INCOM ND C SS PRO ITS T S R NU CT O 1917 D CISION of
COURT.
1. Sut Defense Res udcata.
|udgment n a sut by a corporaton aganst a coector for
the recovery of ta es pad s a bar to a subsequent sut by the
same corporaton aganst the coector for the recovery of the same
ta es though based upon a ground not specfcay set forth n the
peadngs or consdered by the court n the frst sut.
2. ont dventure.
Where a mnng corporaton enters nto a contract wth anothe
corporaton whereby the former secures the atter to fnance the
operaton of a mne, upon whch the former company hods a ease,
to render servces and to market the ore produced n consderaton
of a percentage of the net profts, the osses, f any, to be borne
equay, the tte to the ease and to the ore n the ground to
reman n the mnng company and the tte to the ore when
devered to pass to the other, the agreement does not consttute
the two corporatons |ont adventurers.
Unted States Dstrct Court, Dstrct of Mnnesota, Thrd Dvson.
owe- urke Mnng Co., a Corporaton, and owe- urke Co., a Corporaton,
pantffs, v. Lev f. Wouts, Coector of Interna Revenue of the Unted
States of merca n and for the Dstrct of Mnnesota, defendant.
December 12, 1930.
opnon.
Sanborn, D. .: Ths sut s brought by the same pantffs aganst the
same defendant, to recover the same ta es as n a former sut n ths court,
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429 1318, 1319, 1320, rt. 1050.
No. 1574 Law. In the former case, the |udgment was n favor of the defendant
Grounds for recovery of the ta asserted n ths case are dfferent, namey,
that the profts ta ed were not profts of an ndvdua partnershp or cor-
poraton, and that the statute of mtatons had run aganst a porton of the
tota ta es sought to be recovered at the tme t was coected.
It seems cear that ths acton s barred by the former udgment, as camed
by the defendant. It s a fnaty as to the cam or demand n controversy,
concudng partes and those n prvty wth them, not ony as to every matter
whch was offered and receved to sustan or defeat the cam or demand, but
as to any other admssbe mutter whch mght have been offered for that
purpose. (Cromwe v. County of Sac, 94 U. S., 351, 352 Myers v. Interna-
tona Trust Co., 263 U. S., 64, 70.)
party seekng to enforce a cam, ega or equtabe, must present to
the court, ether by the peadngs or proofs, or both, a the grounds upon
whch he e pects a |udgment n hs favor. e s not at berty to spt up
hs demand and prosecute t by pecemea, or present ony a porton of the
grounds upon whch speca reef s sought, and eave the rest to be pre-
sented n a second sut, f the frst fa. There woud be no end to tgaton
f such a practce were permssbe. (Stark v. Starr, 94 U. S., 477, 485
Wercn v. New Oreans, 177 U. S., 390, 398, 400 atmore Steamshp Co. v.
Phps, 274 U. S., 316.)
The defendant, on the tra, faed to ntroduce n evdence the fes and
records n the former case, and thereafter made a moton to reopen for that
purpose. I have granted the moton, but, even wthout t, ths court w take
|udca notce of ts own records. In St. Lous-San rancsco R. Co. v. yrnes
(24 ed. (2d), 66, 69), udge enyon, for the crcut court of appeas, sad:
The dstrct court coud take |udca notce of ts own records, and n so
dong woud have fu knowedge of the orgna sut. (Wson v. Cacua-
graph Co. (0. C. .), 153 ed., 961 The Goden Gate (C. O. .), 286 ed., 105.)
It s here camed, however, that the pantffs were precuded by the court
n the former sut from rasng the queston that the profts ta ed were
those of |ont adventurers, because the pantffs had not fed a cam for re-
fund on that ground. The records show ony that that queston was not
specfcay set forth n the peadngs or consdered by the court. ssumng,
for the purpose of ths decson, that that queston coud not have been pre-
sented n the pror tgaton, my opnon s that the evdence does not sustan
the pantffs contenton. The contract between the pantff owe- urke
Mnng Co. and Pckands, Mather Co. was one whereby the Mnng company
secured Pckands, Mather Co. to fnance the operaton of the mne, upon
whch the former company hed a ease, to render servces, and to market the
ore produced, n consderaton of 50 per cent of the net profts. Under the
contract, osses were to be borne equay, f there were osses. The tte to
the mnng ease and to the ore n the ground remaned n the Mnng company.
The tte to the ore when devered to Pckands, Mather Co. passed to that
company. The contract was essentay one whereby the Mnng company
secured fnances and a purchaser for ts ore, not upon a bass of f ed com-
pensaton, but upon a contngent bass. The agreement dd not consttute
the two corporatons partners, nor dd t make them |ont adventurers. ach
retaned ts dentty wth respect to ts deangs wth the other. The Mnng
company had certan defnte obgatons to perform and e penses to pay, and
so dd Pckands, Mather Co. The Mnng company operated the mne
the other company took and sod the ore. The |ont account was obvousy
to secure such advances as mght be made by Pckands, Mather Co. under
the contract. If the Mnng company had been abe to fnance ts own opera-
tons, but had contracted wth Pckands, Mather Co. to take the entre out-
put of ts mne on the bass of 50 per cent of the entre net profts, the stuaton
woud have been, n substance, the same.
The profts accrung to a corporaton by vrtue of such a contract are none
the ess ta abe because t procures ts fnances and the sae of ts ore n the
manner dscosed.
or the foregong reasons, I fnd generay n favor of the defendant, that
he s entted to |udgment for a dsmssa of ths acton, and for hs costs
and dsbursements.
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1318, 1319, 1320, rk 1050. 430
rtce 1050: Suts for recovery of ta es errone-
ousy coected.
-18-5049
Ct. D. 329
federa ta es bond as a defense decson of court.
Sut Defense ond.
Where an assessment s made wthn the statutory perod there-
for and after the e praton of the perod the ta payer fes a
cam for abatement accompaned by a bond to secure the payment
of a sums of money fnay ad|udcated by the Commssoner
to be due by t, the bond s an ndependent vad promse to pay
the tu found due by the Commssoner, s a waver of the perod
of mtaton on coecton, and s a defense to a sut by the ta -
payer based upon the ground that the coecton of the amount
fnay determned by the Commssoner and pad by the ta payer
upon demand was burred by the statute of mtatons.
Unted States Crcut Court of ppeas fob the fth Cbcut. No. 5909.
ryant-Lnk Co., a Corporaton-, appeant, v. George C. opkns, Coector
of Interna Revenue, appeee.
ppea from the Dstrct Court of the Unted States for the Northern Dstrct of Te as.
ryan, Crcut udge: ppeant sued n the dstrct court to recover the
amount of an addtona assessment for the caendar year 1917 of an ncome
ta whch t pad under protest. The sut was based on the ground that the
coecton of the ta was barred because t had not been assessed wthn
the tme aowed under secton 250(d) of the Revenue ct of 1921, under
whch the Commssoner of Interna Revenue, f he fa to determne and assess
a ta wthn fve years, can not thereafter enforce coecton n the absence of
a consent n wrtng.
|eopardy assessment was made wthn the statutory perod, and shorty
after the e praton of that perod appeant fed a cam of abatement, and
a bond to secure the payment of a sums of money fnay ad|udcated
by the Commssoner to be due by t. The Commssoner dd not fnay
determne the amount of the addtona assessment unt severa months
after the apse of the statutory perod as e tended by a wrtten waver. The
|eopardy assessment was somewhat reduced upon consderaton of the cam
of abatement and the amount fnay determned was pad by the ta payer
upon demand beng made upon t by the Commssoner. The Government reed
on the bond as a defense to the sut and the |udgment was n ts favor.
We are of opnon that appeant s bond consttuted a waver of the 5-ycar
statute of mtatons and an ndependent vad promse to pay the ta found
by the Commssoner to be due. The bond paced no mt upon the tme
wthn whch the Commssoner shoud pass upon the cam of abatement
and fnay determne the amount of the ta . The statute of mtatons
reed on by appeant does not prevent a sut on the bond. In Unted States
v. ohn arth Co. (279 U. S., 370 Ct. D. 05, C. . III-1, 1S9 ), t s sad:
The ob|ect of the bond was not ony to prevent the mmedate coecton of
the ta but aso to prevent the runnng of tme aganst the Government. The
ta payer has obtaned hs ob|ect by the use of the bond, and he shoud not
ob|ect to makng good the contract by whch he obtaned the deay he sought.
The fact that appeant pad the ta on demand, and thus rendered a sut
on the bond unnecessary, does not affect the queston of aw decded n the
case |ust cted. The bond has the same effect upon the statute of mtatons,
whether t s sued on by the Government or s peaded by t as a defense to
a sut brought by a ta payer to recover back the ta he tns pad. On the
authorty of Unted States v, ohn arth Co., supra, the |udgment s affrmed.
March 24, 1931.
OPINION.
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431 1318, 1319, 1320, rt. 1050.
rtce 1050: Suts for recovery of ta es errone- -20-5066
ousy coected. Ct. D. 336
federa ta es revenue act of 1921 decson of supreme court.
Sut Cam fob Refund Suffcency of Cam.
cam for refund of ta es egay coected whch s fed
to protect a possbe rghts of the ta payer and states as the
soe ground for a refund that the ta payer has fed wth the Com-
mssoner an appcaton for a speca assessment of the e cess
profts ta , does not consttute a cam for refund, under secton
1318 of the Revenue ct of 1921, whch w support a sut to recover
a ta based on the ground that a deducton from gross ncome was
dsaowed. The necessty for fng a cam such as that secton
requres s not dspensed wth because the cam may be re|ected.
Supreme Court of the Unted States. No. 116. October Term, 1930.
The Unted States, pettoner, v. et Tarrant Mfg. Co.
On wrt of certorar to the Court of Cams.
pr 13, 1931.
Mr. ustce Stone devered the opnon of the court.
Ths court granted certorar (281 U. S., 719) to revew a |udgment of the
Court of Cams, aowng recovery by respondent of ncome and e cess profts
ta es aeged to have been egay e acted for the year 1917. (37 . (2d),
977.) It s conceded that respondent was entted to a deducton from gross
ncome for that year on account of e hauston or obsoescence of patents, under
secton 203 of the Revenue ct of March 3, 1917 (39 Stat, 1001) sectons 4
and 206 of the ct of October 3, 1917 (40 Stat., 302, 305) secton 12(a) of
the ct of 1916 (39 Stat., 767), whch, f aowed, woud resut n the refund
demanded.
The soe ob|ecton to recovery urged by the Government s that the cam
for refund fed by pettoner as a prerequste to sut dd not compy wth
secton 1318 of the Revenue ct of 1921 (42 Stat., 314) and artce 1036 of
Treasury Reguatons 62, under that ct.
Secton 1318 provdes that no sut sha be mantaned n any
court for the recovery of any nterna-revenue ta aeged to have been
egay coected unt a cam for refund or credt has
been duy fed wth the Commssoner of Interna Revenue, accordng to the
provsons of aw n that regard, and the reguatons of the Secretary of the
Treasury . rtce 1036, Treasury Reguatons 62, provdes that
cam for refund sha be made on orm 843 and that a the facts reed
upon n support of the cam shoud be ceary set forth under oath.
Respondent fed an appcaton under oath for reducton of ts 1917 ta
abty and for a correspondng return of ta es pad, on orm 843, whch t
desgnated a cam for refund of ta es egay coected. ut the soe
ground stated for the demanded reducton of ta was that pettoner had fed
wth the Commssoner an appcaton for speca reef from the amount of ts
e cess profts ta under secton 210 of the ct of 1917 (40 Stat., 307) .
1 The matera part of the cam for refund Is as foows:
The ta payer has fed wth the Commssoner a cam for peca reef under secton
210 of the 1917 Revenue ct for the e cess profts ta assessed for ths perod.
Ths cam Is fed to protect a possbe ega rghts of the ta payer, pendng, and
at the rate of, the settement of the cam for reef. Computaton has been made as
foows:
Tota profts ta es pad 227, 789. 38
Less: Decrease n ncome ta es on account of profts ta es
credt 13, 667. 3T
Refund camed 214, 122. 01
The ta payer requests an ora hearng and the rght of appea n the event of an
adverse decson on the part of the unt and before any forma re|ecton of the cam
s made.
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1324, rt. 1040.
432
That secton provdes for a speca method of assessment of e cess profts
ta es n any case where the Secretary of the Treasury s unabe satsfactory
to determne the nvested capta of the ta payer. It has no reaton to deduc-
tons from gross ncome on account of e hauston or obsoescence of patents.
In support of ts cam, whch was utmatey aowed n part, respondent pre-
pared and fed a bref, and an ora argument was hed n the offce of the Com-
mssoner but nether n ts cam for refund, ts bref, nor at the hearng,
was menton made of the deducton now camed.
The fng of a cam or demand as a prerequste to a sut to recover ta es
pad s a famar provson of the revenue aws, compance wth whch may
be nssted upon by the defendant, whether the coector or the Unted States.
Tucker v. e ander, 275 U. S., 228 T. D. 3973, C. . I-1, 287 Maryand
Casuaty Co. v. Unted States, 251 U. S., 342, 353, 354 ngs County Savngs
Insttuton v. ar, 116 U. S., 200 Nchos v. Unted States, 7 Wa., 122, 130.)
One ob|ect of such requrements s to advse the approprate offcas of the
demands or cams ntended to be asserted, so as to nsure an ordery admn-
straton of the revenue (Nchos v. Unted States, supra, page 130), a purpose
not accompshed wth respect to the present demand by the bare decaraton
n respondent s cam that t was fed to protect a possbe ega rghts of
the ta payer. The cam for refund, whch secton 1318 makes prerequste
to sut, obvousy reates to the cam whch may be asserted by the sut.
ence, qute apart from the provsons of the reguatons, the statute s not
satsfed by the fng of a paper whch gves no notce of the amount or nature
of the cam for whch the sut Is brought, and refers to no facts upon whch
t may be founded.
The Court of Cams, In aowng recovery, reed upon Tucker v. e ander,
supra, and upon the fact that at the tme when pettoner fed ts return and
ts cam for refund, the Treasury had consstenty refused to aow deductons
from gross ncome for e hauston of patents. Consequenty t hed that the
fng of a demand whch was certan to be refused was a fute and unneces-
sary act. ut n Tucker v. e ander the rght of the Government to nsst
upon compance wth the statutory requrement was emphaszed. Ony be-
cause that rght was recognzed was t necessary to decde whether t coud
be waved. The court hed that t coud, and that n that case t had been
waved by the stpuaton of the coector fed n court. ere there was no
compance wth the statute nor was there a waver of ts condton, snce the
Commssoner had no knowedge of the cam and took no acton wth re-
spect to t.
The necessty for fng a cam such as the statute requres s not dspensed
wth because the cam may be re|ected. It s the re|ecton whch makes the
sut necessary. n antcpated re|ecton of the cam, whch the statute con-
tempates, s not a ground for suspendng ts operaton. ven though forma,
the condton upon whch the consent to sut s gven Is defned by the words
of the statute, and they mark the condtons of the camant s rght.
(Rock Isand R. R. Co. v. Unted States, 254 U. S., 141, 143 Ct. D. 2, C. . 4,
342 .) Compance may be dspensed wth by waver, as an admnstratve
act (Tucker v. e ander, supra) but t s not wthn the |udca provnce to
read out of the statute the requrement of ts words. (Rand v. Unted States,
249 U. S., 503, 510.)
Reversed.
S CTION 1324. INT R ST ON R UNDS
ND UDGM NTS.
rtce 1040: Interest on refunds and |udgments.
R NU CT O 1021.
Date credt of overpayment s aowed. (See Ct. D. 293, page 335.)
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433
1324, rt, 1040.
rtce 1040: Interest on refunds and |udg-
ments.
-26-5122
Ct. D. 353
federa ta es revenue act of 1921 decson of supreme court.
Intebkst Refund Specfc Protest Request fob Speca. s-
sessment.
request for a speca assessment of e cess profts ta wth a
statement of tbe ground for the same s not a specfc protest
settng forth n deta the bass of and reasons for such protest
wthn the meanng of subdvson (a) of secton 1324 of the
Revenue ct of 1921, whch provdes for the aowance of nterest
on refunds under the condtons specfed theren.
SUP M COU T O T UNIT D ST T S. No. 263. OCTO T M, 1930.
Mans Wadsten Co., pettoner, v. The Unted States.
Mr. ustce MoReynods devered the opnon of the court.
The pettoner seeks to recover nterest on an overpayment made une 20,
1918, on account of ncome and e cess profts ta es assessed for the year 1917,
whch was refunded durng 1922. The Court of Cams dened reef and we
are asked to reverse ths acton.
The Revenue ct of 1917 (40 Stat., 300, 303, 304, 307) ad an ncome ta aso
a ta upon e cess profts equa to desgnated percentages of the net ncome,
after makng deductons therefrom as stated In secton 203. The amount of
such deductons depended upon nvested capta, prewar operatons, etc.
The provsons of that ct here specay appcabe foow
Sec 205. (a) That f the Secretary of the Treasury, upon compant fnds
ether (1) that durng the prewar perod a domestc corporaton or partnershp,
or a ctzen or resdent of the Unted States, had no net ncome from the trade
or busness, or (2) that durng the prewar perod the percentage, whch the
net ncome was of the nvested capta, was ow as compared wth the percent-
age, whch the net ncome durng such perod of representatve corporatons,
partnershps, and ndvduas, engaged n a ke or smar trade or busness,
was of ther nvested capta, then the deducton sha be .
Sec. 210. That f the Secretary of the Treasury s unabe n any case
satsfactory to determne the nvested capta, tbe amount of the deducton
sha be the sum of (1) an amount equa to the same proporton of the net
ncome of the trade or busness receved durng the ta abe year as the
proporton whch the average deducton (determned n the same manner as
provded n secton 203, wthout ncudng the 3,000 or 6,000 theren referred
to) for the same caendar year of representatve corporatons, partnershps,
and ndvduas, engaged n a ke or smar trade or busness, bears to the
tota net ncome of the trade or busness receved by such corporatons, part-
nershps, and ndvduas, pus .
rtce 52, Treasury Department Reguatons 41, promugated under the
Revenue ct of 1917, states
Secton 210 provdes for e ceptona cases In whch the nvested capta
can not be satsfactory determned. In such cases the ta payer may submt
to the Commssoner of Interna Revenue evdence n support of a cam for
assessment under the provsons of secton 210.
Revenue ct of 1921 (ch. 136, 42 Stat., 227, 316)
Sec. 1324. (a) That upon the aowance of a cam for the refund of or
credt for nterna revenue ta es pad, nterest sha be aowed and pad upon
the tota amount of such refund or credt at the rate of one-haf of 1 per
centum per month to the date of such aowance, as foows: (1) f such
amount was pad under a specfc protest settng forth n deta the bass of
and reasons for such protest, from the tme when such ta was pad.
The pettoner, a domestc corporaton, on March 28, 1918, fed ts ncome
and e cess profts ta return for the year 1917. rom ths t appeared that,
On wrt of certorar to the Court of Cams.
May 25, 1931.
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1324, rt 1040.
434
reckoned accordng to the rue commony appcabe, the ta amounted to
1,508,400.25. Wth the return pettoner sent a wrtten communcaton, ad-
dressed to the Commssoner, coped n the margn.1 Ths e pressed the opnon
that our ta s proportonatey arger than that of other representatve con-
cerns n the same ne of busness and that ths dsproporton arses from
causes of the nature of those specfed n artce 52, of Reguatons No. 41.
nd fnay: Upon the above statement, whch we are prepared to support
and ampfy f requred, we request assessment n the manner provded for n
artce 52, referrng aso to artces 18 and 24, Reguatons No. 41.
On une 20, 1918, payment was made of the fu amount of the ta reckoned
upon the March 28 return. Ths was accompaned by a etter statng we fed
a request dated March 28 for assessment n the manner provded for n artce
52, referrng aso to artces 18 and 24, Reguatons 41. Understandng that
these questons w be passed upon at a ater date, we sha be peased to be
advsed that a hearng w be granted to us. t ths tme no provson of aw
permtted recovery of nterest upon refunded overpayments.
December 30, 1021, pettoner fed a forma cam for the refund of e cess
payment of ncome and e cess-profts ta for 1917.
The pettoner now cams that the contents of ts etter of March 28, 1918,
reterated n the ater one, were suffcent to meet the requrements of secton
1324(a), ct of 1921 that what was there wrtten amounted to a specfc
protest settng forth n deta the bass of and reasons for such protest, wthn
the meanng of the statute. The Court of Cams hed otherwse and whe ts
opnon can not be whoy approved, the |udgment s correct and must be
affrmed.
1 maas wadsten co.
March 28, 1918.
Commssoner of Interna Revenue,
Washnyton, D. C.
Dear Sr : We beg to submt herewth ta returns for the Maas Wadsten Co. coverng
the year 1917 as foows :
Ta return. mount of ta .
Corporaton Income ta return 72, 762. no
Do 482. 56
Muntons manufacturers ta return 242, 704. 39
Corporaton e cess profts ta return 1, 435, 637. 35
Tota amount of ta 1, 751, 587. 20
Our net ncome for the ta abe year was 2,650,395.01. We are therefore requred to
pay In the above ta es substantay 66 per cent of our net ncome. Of the tota amount
of the e cess profts ta , substantay 83 per cent s assessed at the 60 per cent rate, n
addton to whch we are requred to pay over 242,000 for the muntons manufacturers
ta .
It s our opnon that our ta s proportonatey arger than that of other representa-
tve concerns n the same ne of busness. It s our further opnon that ths dspropor-
ton arses from causes of the nature of those specfed n artce 52 of Reguatons
No. 41, for the foowng reasons:
1. Under paragraph 3, artce 52, It s our beef that through the smpe form and
manner of our organzaton we are paced at a dsadvantage n comparson wth repre-
sentatve concerns In a smar trade or busness. In accordance wth the reguatons
appyng to e cess profts ta returns, we have reduced the vaue of the tangbe assets
acqured at the tme of our organzaton to 100,000. No proper evdence of the actua
vaue of these assets when acqured by the corporaton s now n e stence, but t s our
opnon that ther actua vaue was far n e cess of 100,000. y reason of our organ-
zaton, t has been possbe to make our return n strct accord wth the aw and the
reguatons. We beeve thnt ths fact paces us at a dsadvantage wth concerns whch,
by reason of the manner of ther organzaton, and by reason of reorganzatons through
whch they may have passed, are not abe to correct ther capta account In the manner
provded n the reguatons.
2. Under paragraph 4, artce 52, our nvested capta, when computed In the manner
specfed In the reguatons, s manfesty serousy dsproportonate to the ta abe ncome.
Ths arses n part for the reasons specfed n the precedng paragraph and n part for
the reason specfed under (b) n paragraph 4. bout 90 per cent of our tota net ncome
was earned through the operaton of our guncotton pant. Ths pant was erected oey
for war purposes to meet the needs of a foregn government and w not be wanted for
the purpose of our trade or busness after the termnaton of the war. Under the regu-
atons t has not been possbe to propery aow for the amortzaton and e ceptona
deprecaton of ths pant.
Upon the above statement, whch we are prepared to support and ampfy f requred,
we request assessment n the manner provded for n artce 52, referrng aso to artces
18 and 24, Reguatons No. 41.
ery truy yours,
Maas Wadsten Co..
enr: . Waker, Presdent.
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435
1324, rt: 1040.
The genera purpose of the pettoner s communcatons to the Commssoner
was to nduce the atter to set on foot an nvestgaton of the company s affars
to the end that, after ascertanng the crcumstances and In the e ercse of a
proper dscreton, he mght make an assessment duy proportoned to those
mposed upon others engaged n ke busness. There was no chaenge of the
Commssoner s rght then to demand payment accordng to the genera rue
no cam that n vew of the facts then before hm ths woud amount to an
unawfu mposton. Consderng the crcumstances dscosed, the Comms-
soner dd nothng un|ust or contrary to aw when he demanded payment and
If he had concuded to take no further proceedngs, the pettoner coud have
recovered nothng. (Wumsport Wre Rope Co. v. Unted, States, 277 U. S.,
551 T. D. 4172, C. . II-2, 323 .)
In rard Trust Co. v. Unted States (270 U. S., 163, 170, 173 T. D. 3919,
C. . -2, 209 ), ths court ponted out that the ct of 1921 s remeda am
was passed wth the genera purpose to requre the Government to recoup
the ta payer un|usty deat wth by payng nterest durng the whoe tme the
money was detaned. so, we there sad protest s for the purpose of
Invtng attenton of the ta ng offcers to the egaty of the coecton, so that
they may take remeda measures at once.
We are unabe to concude that the pettoner s acton amounted to a precse
ob|ecton to an unauthorzed e acton wthn the far ntendment of the
statute. Metcuous compance by the ta payer wth the prescrbed condtons
must appear before he can recover. (Lucas v. PUod, Lumber Co., 281 U. S.,
245, 249 Ct. D. 266, C . I -2, 396 .)
ffrmed.
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S L S T RULINGS.
TITL II. MISC LL N OUS T S. (1928)
DMISSIONS ND DU S.
Reguatons 43, rtce 41: Intaton fees. -8-4948
Ct.D. 283
T ON DMISSIONS ND DU S R NU CT O 1928 D CISION O COU T.
Intaton ees mount Pad to Retrnq Member fob Stock.
n amount pad by a new member to a retrng member of a cub
for shares of stocks n a corporaton whch are requred to be
owned by the new member as a condton to membershp n the cub
are ntaton fees wthn the meanng of secton 501 of the Revenue
ct of 1926 as amended by secton 413 of the Revenue ct of 1928.
s so construed the secton s consttutona.
Unted States Crcut Court of ppeas for the Second Crcut.
ctor 0. Munn, pantff-appeee, v. rank . owers, Coector of Interna
Revenue for the Second Dstrct of the State of New York, defendant-
appeant.
anuary 3, 1931.
opnon.
Manton, Crcut udge: ppeee was eected a member of a gof cub Deep-
dae Cub a vountary assocaton. Its consttuton and by-aws requred, n
order to quafy a member, that such member be the owner of one Share of cass
and one share of cass stock of the Deepdae Gof Cub, Inc. ut owner-
shp of such shares aone dd not entte the owner to membershp n the cub
t was necessary that he be eected n pursuance to rtce of ts by-aws.
ppeee purchased from a retrng member of the Deepdae Cub, the requred
shares of stock for 4,500, whch he pad to the retrng member. ta of
450 was assessed and pad to the cub as an agent of the coector. Ths ta
of 10 per cent of the purchase prce of the stock was eved pursuant to secton
501 of the Revenue ct of 1926 ( 44 Stat, (part 2), 9) as amended by secton
413 of the Revenue ct of 1928 (45 Stat, 791). cam for a refund was
re|ected and sut was brought. On moton made for |udgment on the peadngs,
t was hed that the ta coud be recovered.
Secton 413 of the Revenue ct of 1928, referrng to cub dues ta , mposes
such ta upon persons payng dues or ntaton fees and provdes:
s used n ths secton the term ntaton fees, ncudes any
payment, contrbuton, or oan requred as a condton precedent to member-
shp, whether or not any such payment, contrbuton, or oan s evdenced by
a certfcate of nterest or ndebtedness or share of stock, and rrespectve of
the person or organzaton to whom pad, contrbuted, or oaned.
Under the 1928 amendment, t s cear that the purchase of stock by the
appeee from the Deepdae Gof Cub, Inc., woud requre the payment of a
ta . ut the argument s that because the purchase was from a retrng
member, the stock of the andownng corporaton was not a payment to the
Deepdae Cub and therefore not ta abe. The Deepdae Gof Cub, Inc., s a
thrd party as between the appeee, a new member, and the Deepdae Cub,
an assocaton. The 1928 amendment provdes for the payment of dues to
(436)
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437
Regs. 43-11, rt. 11.
such a cub or organzaton and the anguage s Identca wth the phrase
appearng n secton 701 of the Revenue ct of 1917 (40 Stat., 300) secton
801 of the Revenue ct of 1918 (40 Stat., 1057) secton 801 of the Revenue
ct of 1921 (42 Stat., 227) secton 501 of the Revenue ct of 1924 ( 43 Stat.,
253) and secton 501 of the Revenue ct of 1926 (44 Stat (part 2), 9). ut
n the 1928 amendment, Congress added the term ntaton fees. Ths we
thnk broad enough to cover the case at bar. nd the ct shoud be so
construed as to e tend to ntaton fees snce t does not defeat or destroy
that whch formery was ta abe. ( erner v. Same, 147 U. S., 242, 246
ar v. Chcago, 201 U. S., 400.) The payment made by the appeee to the
retrng member for the stock was a condton precedent to membershp n
the Deepdae Cub. The payment was for the shares of stock to a person.
Under the 1928 amendment, t must be regarded as an ntaton fee. The
phrase rrespectve of the person or organzaton to whom pad, contrbuted,
or oaned was ntended to cover such a transacton and to ta a payments
requred to be made as a condton precedent to membershp. The Comms-
soner n hs reguatons under the 1928 amendment (Reguatons 43, artce
41) has substantay so rued. Ths departmenta constructon of the statute
shoud be gven weght. (Logan v. Davs, 233 U. S., 613 . S. v. Rermanos y
Compana, 209 U. S., 337 ee fed Co. v. Rener, 25 ed. (2d), 560
(C. C. . 3).)
It s argued that the ta ng statute does not reach the amount pad for
these shares of stock snce the requrement of ownershp of shares n the
by-aws s not the same as a payment, contrbuton, or oan as used n
the statute. ut the appeee purchased the stock n order to meet the requre-
ments of the by-aws payng the face vaue to acqure ownershp. There was
no other ntaton fee requred, other than the ownershp of the stock. It
was that payment Congress ntended to ta .
It s argued that ths constructon of the ct mposes a drect ta upon the
persona estate by reason of genera ownershp thereof and that t s unconst-
tutona because t s not apportoned. (T . S. Consttuton, rtce I, secton
2, cause 3 rtce I, secton 9.) It s an e cse ta whch must be unform.
Unformty s not ntrnsc but geographc. ( ngs v. Unted States, 232
U. S., 261 romey v. McCaughn, 280 U. S., 124 Ct D. 140, C. . II1-2,
392 .)
The ta mposed by ths statute s an e cse on the prvege of |onng a
cub of a desgnated character, the measure beng 10 per cent of the amount
pad as ntaton fees. To mpose the ta , the member must e ercse the
prvege of |onng the cub. The ta fas upon hm for such prvege and
e may escape t by not |onng. The ta s ncapabe of apportonment. The
obgaton to pay an e cse ta s usuay based upon the vountary acton of the
person ta ed ether for en|oyng the prvege or engagng n the occupaton
whch s the sub|ect of the e cse and the eement of absoute and unavodabe
demand as n the case of property ta s ackng. (Ryton v. U. S., 3 Daas,
171 romey v. McCaughn, supra.) The ta ng statute s consttutona.
Decree reversed.
TITL . T ON DMISSIONS ND DU S. (1926)
DU S ND INITI TION S.
Reguatons 43-11, rtce 11: Lfe membershp. -14-5011
Ct. D.311
T ON DMISSIONS ND DD S R NU CTS OP 1921, 1924, ND 192ft
D CISION O COURT.
Lte Membershps cse Ta Consttutonaty.
The ta on dues n the case of fe membershps n a soca,
athetc, or sportng cub mposed by secton 801 of the Revenue
ct of 1921 and secton 501 of the Revenue cts of 1924 and 1926
s consttutona as an e cse ta on the e ercse of the prveges
of membershp whether the members became such before or after
the passage of the Revenue ct of 1917.
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Regs. 43-11, rt. 11.
438
Dstrct Court op the Unted States fob the Dstrct op Oregon.
Mutnomah mateur thetc Cub, a Corporaton, pantff, v. Cyde O.
untey, Coector of Interna Revenue of the Unted States for the Dstrct
of Oregon, defendant.
December 18, 1930.
OPINION.
ean, Dstrct udge: Ths s an acton to recover 6,992.15 pad by the
pantff under protest as ta es, on ts fe members, assessed and coected
by defendant under the Revenue cts of 1921, 1924, and 1926.
The pantff s a corporaton organzed n 1891 To promote and deveop
the physca and menta capacty of Its members. Its membershp Is cass-
fed nto varous groups, ncudng honorary and fe members. n honorary
membershp s for fe and s granted for dstngushed servce upon vote of
the board of drectors, wthout cost to the member. Lfe members are requred
to pay n advance a certan entrance fee. oth fe and honorary members
are entted to a the prveges of the cub wthout payment of dues.
Durng the perod begnnng October 1, 1923, and endng ugust 31, 1927,
the ta n queston was assessed and coected from fe and honorary members
of the pantff who became such pror to the passage of the Revenue ct of
1917. The ta was pad under protest, and upon refund beng refused, ths
acton was brought.
The appcabe aw provdes that there sha be eved, assessed, coected
and pad a ta equvaent to 10 per centum per annum of any
amount pad as dues (where the dues of an actve annua member are In
e cess of 10 per year) to any soca, athetc, or sportng cub or organza-
ton, and that a fe member sha pay annuay at the tme for the pay-
ment of dues by actve resdent annua members a ta equvaent to the ta
upon the amount pad by suc member, but sha pay no ta upon the amount
pad for fe membershp. (42 Stat, at L., 291 43 Stat at L., 321 44 Stat
at L., 92.)
The pantff apparenty concedes that the ta may be egay assessed and
coected from a persons who become fe or honorary members of ts organ-
zaton after the passage of the Revenue ct of 1917, but t nssts that the aw
has no appcaton to those who become such pror to that date, athough
they are entted to a the prveges of the cub. ut I am unabe to apprec-
ate the dstncton. The ta s not on property nor on the amount pad for
fe membershp but an e cse ta on the prvege to share n the factes of
the cub. (McCaughn v. Wams, 23 ed. (2d), 840 T. D. 4154, C. . II-1,
291 .) Ths rght s accorded fe and honorary members regardess of when
they became such. The aw deas wth an e stng status and was manfesty
ntended to and does mpose a ta on a members entted to the prveges of
the cub, whether they became such before or after the passage of the Revenue
ct, or whether they are fe or due payng members, or whether they ava
themseves of the prveges or not. The ta s on the rght to en|oy the prv-
eges of the cub and t s mmatera whether ths prvege s e ercsed or
not. It s argued that the ta , n the nstant case, s nvad because sub-
stantay a the fe members n queston became such because of ther
nterest n the pantff as a cvc enterprse, and to ad n fnancng t, and not
from a desre to make use of the prveges, and thereby had a f ed status
at the tme the aw was passed whch they can not termnate by resgnaton
or renqushment. The reason whch prompted these persons to become mem-
bers s, of course, mmatera, nor s t necessary to consder at ths tme
whether they can renqush ther membershp or wthdraw from the cub. The
controng fact s that they were members, entted to the prveges of the
cub, at the tme the ta was eved and t s upon that prvege the ta was
assessed and coected.
The demurrer s therefore sustaned.
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439 Regs. 47, rt. 10.
TITL I. CIS T S. (1924)
S L S Y T M NU CTUR R.
Reguatons 47, rtce 10: Saes to the Gov- -26-5123
ernment or a State. Ct. D. 354
saes ta revenue act of 1024 decson of supreme court.
empton Sae to Muncpa Corporaton.
The sae by the manufacturer of motor cyces to a State agency,
such as a muncpa corwraton, for use n ts poce servce, s
consttutonay mmune from edera ta aton and therefore s not
sub|ect to ta aton under secton 600 of the Revenue ct of 1924,
whch ays a ta on the sae, and on that aone, of the artces
mentoned theren.
Supreme Court of the Unted States.
Indan Motocyce Co. v. The Unted States of merca.
May 25, 1931.
OPINION.
Mr. ustce an Devanter devered the opnon of the court.
Ths s a certfcate from the Court of Cams. t a pror term the certfcate
was dsmssed as not n accord wth appcabe rues and then renstated, as n
Wheeer Lumber, rdge Suppy Co. v. Unted States (281 U. S., 572 Ct D.
190, C. . I -2, 417 ). It snce as been amended, and further argument has
been heard.
The facts dscosed n the certfcate are: In 1925 the pantff, a corporate
manufacturer of motor cyces n Massachusetts, sod a motor cyce of ts
manufacture to the cty of Westfed, a muncpa corporaton of that Common-
weath, for use by the cty n ts poce servce. ta n respect of the sae
was assessed and coected from the pantff under secton 600 of the Revenue
ct of 1924 (ch. 234, 43 Stat., 322). fter due but unsuccessfu effort to have
the same refunded, the pantff brought sut n the Court of Cams to recover
the money so e acted from t the ta beng assaed as nvad, as t had
been n the appcaton for a refund, on the ground that t was mposed n
contraventon of the consttutona mmunty of the State and her govern-
menta agences from edera ta aton. The partes submtted an agreed
statement showng the facts here rected, and the Court of Cams then certfed
to ths court the queston (we state ts substance), where a motor cyce s sod
by ts manufacturer to a muncpa corporaton of a State for use by such
corporaton n ts poce servce, can the transacton be ta ed under secton 600
of the Revenue ct of 1924 consstenty wth the consttutona mmunty
of the State and her governmenta agences from edera ta aton.
Our |ursdcton to entertan certfcates from the Court of Cams, and the
mtatons on that |ursdcton, are e paned n Wheeer Lumber, rdge
Suppy Co. v. Unted States, supra. The present certfcate when tested by the
rues there stated s unob|ectonabe. It presents a queston of aw sutaby
dstnct and defnte. nd whe, wth the facts setted by an agreed state-
ment accepted beow, t s apparent that a decson of the queston ether way
w be decsve of the case, ths affords no ground for decnng to entertan
the certfcate. (Unted States v. Mayer, 235 U. S., 55, 66, and cases cted.)
Secton 600 of the Revenue ct of 1924 (ch. 234, 43 Stat., 253, 332) s part
of Tte I, entted cse Ta es. The secton provdes that there sha be
eved, assessed, coected and pad upon the foowng artces sod or eased by
the manufacturer, producer, or mporter, a ta equvaent to the foowng per-
centage of the prce for whch so sod or eased. Motor cyces are among the
artces enumerated and the appcabe ta s 5 per centum of the prce for
whch they are sod. Manufacturers, producers and mporters are requred
severay to make returns of ther saes and to pay the ta .
72109 31 29
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Regs. 47, rt. 10.
440
Ths ta ng provson s a reenactment, wth mnor changes not matera
here, of a provson whch was ncuded n the Revenue ct of 1917 (ch. 63,
secton 600, 4 Stat., 300, 316) and repeated n succeedng enactments. It s
now secton 600 of the Revenue ct of 1926 (ch. 27, 44 Stat., 9, 93 U. S. C,
Tte 26, secton 881).
oth partes rghty regard the ta as an e cse, and not a drect ta on the
artces named. ut they dffer as to the transacton or act on whch t s
ad. Counse for the pantff nsst t s ad on the sae. Counse for the
Government regard t as ad on manufacture, producton or mportaton, or,
n the aternatve, on any one of these and the sae. We thnk t s ad on
the sae, and on that aone. It s eved as of the tme of sae and s measured
accordng to the prce obtaned by the sae. It s not ad on a saes, but ony
on frst or nta saes those by the manufacturer, producer or mporter.
Subsequent saes, as where purchasers at frst saes rese, are not ta ed.
Counse for the Government base ther contenton on the requrement that the
ta be pad by the manufacturer, producer or mporter but we thnk ths
requrement s ntended to be no more than a comprehensve and convenent
mode of reachng a frst or nta saes, and that t does not refect a purpose
to base the ta n any way on manufacture, producton or mportaton. Im-
portaton, as such, aready was otherwse ta ed (ch. 356, secton 1. paragraph
309, 42 Stat, 858, 885 U. S. C, Tte 19, secton 121, paragraph 369), and n
our opnon the words reed on fa short of e pressng a purpose to sub|ect
t to a further ta .
Ths vew of the ta s not new. The admnstratve ureau adopted t at
te outset and has adhered to t up to the present tme. The reguatons ssued
under the Revenue ct of 1917 sad on ths pont: The ta s on the sae
of the artces mentoned (20 Tr. Dec. Int. Rev., 365) and ths s repeated
n the ater reguatons. (21 Tr. Dec. Int. Rev., 412 23 Tr. Dec. Int. Rev.,
68 24 Tr. Dec. Int. Rev., 5 26 Tr. Dec. Int. Rev., 592.) Indeed, the ta s
frequenty spoken of n the reguatons as a saes ta . nd t s so descrbed
n reports of congressona commttees deang wth revenue bs n whch t
was retuned. (Senate Report No. 398, page 40, S ty-eghth Congress, frst
sesson ouse Report No. 1, page 16, S ty-nnth Congress, frst sesson.)
Whe not controng, ths admnstratve and egsatve acton strengthens
our concuson, drawn from the ta ng provson, that the ta s ad on the
sae, and on that aone.
The cases of Corne v. Coyne (192 U. S., 418) and meroan Manufacturng
Co. v. |Sf#. Lous (250 U. S., 459), cted by counse for the Government, are not
pertnent, for both reated to ta es dstncty mposed on manufacturng.
Wth ths understandng of the nature of the ta , we come to the queston
propounded n the certfcate.
It s an estabshed prncpe of our consttutona system of dua government
that the nstrumentates, means and operatons whereby the Unted States
e ercses ts governmenta powers are e empt from ta aton by the States, and
that the nstrumentates, means and operatons whereby the States e ert
the governmenta powers beongng to them are equay e empt from ta aton
by the Unted States. Ths prncpe s mped from the ndependence of the
Natona and State Governments wthn ther respectve spheres and from
the provsons of the Consttuton whch ook to the mantenance of the dua
system. (Coector v. Day. 11 Wa., 113. 125, 127: Wcut v. unn, 282
U. S. 216, 224-225 Ct D. 280, page 309, ths uetn .) Where the prncpe
appes t s not affected by the amount of the partcuar ta or the e tent of the
resutng nterference, but s absoute. McCuoch v. Maryand, 4 Wheat., 316,
430 Unted States v. atmore Oho R. R. Co., 17 Wa., 322, 327 ohnson v.
Manam, 254 U. S., 51. 55-56 Gespe v. Okahoma, 257 U. S., 501, 505
Cranda v. Nevada, 6 Wa., 35. 44-46.)
Of course, the reasons underyng the prncpe mark the mts of ts range.
Thus as to persons or corporatons whch serve as agences of government,
Natona or State, and aso have prvate property or engage on ther own ac-
1 Respectng the mmunty from State ta es ths court there sad :
Wth regard to ta aton, no matter how reasonabe, or how unversa and undscrm-
natug, th State s Inabty to Interfere has been regarded as estabshed snce McCuoch
. Maryand (4 Wheat., 310). The decson n that ease was not put upon any consdera-
ton of degree but upon the entre absence of power on the part of the States to touch,
In that way at east, the nstrumentates of the Unted States (4 Wheat., 429, 430)
and that s the aw to-day. ( ormers Mechancs Savngs ank v. Mnnesota, 232 U. 8..
510, 525, 526.)
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441
Regs. 47, rt. 10.
count n busness for gan, t s we setted that the prncpe does not e tend
to ther prvate property or prvate busness, but ony to ther operatons or acts
as such agences and, n harmony wth ths vew, t aso has been hed where
a State departs from her usua governmenta functons and engages n a bus-
ness whch s of a prvate nature no mmunty arses n respect of her own or
her agents operatons n that busness.3 Whe these decsons show that the
mmunty does not e tend to anythng yng outsde or beyond governmenta
functons and ther e erton, other decsons to whch we now shu refer show
that t docs e tend to a that es wthn that fed.
It has been ad|udged that bonds of the Unted States ssued to rase money for
governmenta purposes, and the nterest thereon, are mmune from State ta a-
ton, because such a ta , even though nconsderabe n amount and mposed
ony on hoders of the bonds, woud burden the e ercse by the Unted States of
ts power to borrow money. (Weston v. Chareston, 2 Pet, 449, 408 The anks
v. The Mayor, 7 Wa., 16 orne Savngs ank v. Des Mones, 205 U. S., 503,
513 Northwestern Insurance Co. v. Wsconsn, 275 U. S., 130, 140.) nd ths
mmunty has been hed to ncude bonds of a muncpa corporaton n a Terr-
tory ssued to rase money for muncpa purposes, the decson beng put on the
ground that such a corporaton s an nstrumentaty of the Unted States e er-
csng deegated governmenta powers. ( armers Mechancs Savngs ank v.
Mnnesota, 232 U. 8., 516, 525.) It aso has been ad|udged that bonds of munc-
pa corporatons n the severa States ssued to rase money for pubc muncpa
purposes, and the nterest thereon, are mmune from edera ta aton, and ths
on the ground that such corporatons are representatves of the States and
e ercse some of ther powers, and that under the mpcatons of the Consttuton
the governmenta agences and operatons of the States have the same mmunty
from edera ta aton that ke agences and operatons of the Unted States
have from ta aton by the States. (Poock v. armers Loan Trust Co., 157
U. S., 429, 584-586, 601, 652, 053 S. C, 158 U. S., 601, 618, 693.)
It has been further ad|udged that the saary of an offcer of the Unted States
Is mmune from State ta aton because the saary s the means by whch hs
servces are procured and retaned and ts ta aton by a State woud burden
the e erton by the Unted States of powers beongng to the atter. (Doobns
v. Commssoner of re County, 16 Pet., 435, 448, 449.) nd for ke reasons
t has been hed that the saary of a State offcer s mmune from edera ta a-
ton. (Coector v. Day, 11 Wa., 113, 124.)
Other appcatons of the prncpe are shown n cases where t has been rued
that a State e cse on the transmsson of teegrams s vod as to messages sent
by offcers of the Unted States on pubc busness, because the e cse, athough
e acted ony of the teegraph company, s, so far as t s based on the Govern-
ment messages, a ta on the means empoyed by the Unted States In carryng
ts consttutona powers nto effect (Western Unon Teegraph Co. v. Te as,
105 U. S., 460, 466 Wams v. Taadega, 226 U. S., 404, 41S-419) and that
bonds e acted by a muncpa corporaton of a State as a condton to grantng
censes the ssue of whch s commtted by the State to such corporaton can
not be ta ed by the Unted States, even though the ta be coected ony from
the censees, because such a ta woud burden the e ercse of a functon beong-
ng to the State and cty n ther governmenta capacty ( mbrosn v. Unted
States, 187 U. S., 1, 8).
In Panhande O Co. v. no (277 U. S., 218), ths court was caed upon to
determne whether a State e cse ad on the sae of gasone, and coected ony
from the deaer makng the sae, coud be apped to saes to the Unted States
for the use of ts Coast Guard feet and ts veterans hospta, and the rung,
made after much consderaton, was that the e cse coud not be so apped con-
sstenty wth the consttutona prncpe. The court there hed that whe a
State may mpose a ta on a deaer for the prvege of carryng on trade that
s sub|ect to the power of the State, she may not ay any ta on saes to the
Thomson v. Pacfc Raroad (9 Wa., 579. 591) : Raroad Co. v. Pcnston (18 Wn.,
5, 34, 36-37) Centra Pacfc R. R. Oo. v. Caforna (102 U. S., 91, 125, 126) at-
more Shp udng f Dry Dock Co. v. atmore (195 U. S., 375, 382). ward v. ohnson
(decded ebruary 24, 1931). nd see McCuoch v. Maryand, supra, page 436 Osooro v.
ank of Unted States (9 Wheat., 738, 867) Caam County v. Unted States (203 U. S.,
341. 345).
Sonth Carona v. Unted States (199 U. S., 437).
Ths court there sad : The rght to ta the contract to any e tent, when made, must
operate upon the power to borrow before t Is e ercsed, and have a sensbe nfuence on
the contract. The e tent of ths nfuence depends on the w of a dstnct government.
To any e tent, however Inconsderabe, It s a burden on tbe operatons of government.
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Regs. 4.8, rt. 21.
442
Unted States by whch t secures the thngs desred for ts governmenta
purposes, and further:
It s mmatera that the seer and not the purchaser s requred to report
and make payment to the State. Sae and purchase consttute a transacton by
whch the ta s measured and on whch the burden rests. To use
the number of gaons sod the Unted States as a measure of the prvege ta s
n substance and ega effect to ta the sae. (Ctng cases.) nd that Is to
ta the Unted States to e act trbute on ts transactons and appy the same
to the support of the State.
We thnk t foows from these decsons, partcuary from the one ast cted,
that the sae of motor cyces to a State agency, such as a muncpa corporaton,
for use n ts poce servce s not sub|ect to ta aton by the Unted States. The
mantenance of a poce servce by such a State agency, ke the mantenance of
a Coast Guard Servce by the Unted States, s a governmenta functon and
that functon e tends In one nstance as much as n the other to the purchase
of equpment and suppes needed to render the partcuar servce effcent
Under the consttutona prncpe the e erton of such a functon by a State
or a State agency has the same mmunty from edera ta aton that ke e er-
tons by the Unted States or ts agences have from State ta aton. ere the
ta s ad drecty on the sae to a governmenta State agency of an artce
purchased for governmenta purposes. The sae and purchase consttute a
snge transacton, n whch the purchaser s an essenta partcpant. Wthout
that partcpaton the sae coud not be effected. Thus, the transacton fas
wthn the cass whch the Unte States can not ta consstenty wth the
constutona prncpe.
The decsons n Metoaf ddy v. Mtche (269 U. S., 514, 526 T. D. 3824,
C. . -, 2181) Wheeer Lumber, rdge d Suppy Co. v. Unted States (2S1
U. S., 572, 579 supra ) and WUeuts v. unn (282 U. S., 216, 225 et scq.
supra ), cted by counse for the Government, are a dstngushabe, for the
ta es there In queston were not ad on transactons nvovng an e erton of
governmenta functons and ther bearng on governmenta operatons was so
Indrect or remote as to pace them outsde the prncpe whch s appcabe
here.
The queston propounded n the certfcate s answered n the negatve.
Mr. ustce omes regards Panhande O Co. v. no as controng n prn-
cpe and upon that ground acquesces n ths decson.
W LRY.
Reguatons 48, rtce 21: ppcaton of ta . -7-4940
Ct. D. 281
CIS T S R NU CT O 1924 D CISION OP COURT.
Ta on ewery Lease ass of Ta .
In the case of a ease of |ewery the ta mposed by secton
604(a) of the Revenue ct of 1924 attaches upon the e ecuton of
the ease upon the tota amount payabe thereunder, whether or not
t s coectbe.
Unted States Cbcut Coubt of ppeas fob the TnntD Cmcurr.
Uppman s Incorporated, appeant, v. D. . encr, Coector of Interna Reve-
nue for the Twenty-thrd Dstrct of Pennsyvana, appeee.
ppea from the Dstrct Court of the T ntpd States for the Western Dstrct of
Pennsyvana.
anuary 15, 1931.1
OPINION.
uffnoton, .: We are satsfed that a that can be sad n an opnon
by ths court has been set forth n that of the court beow. We mt our-
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443
Regs. 48, rt. 21.
seves to adoptng as our own that opnon and affrmng the |udgment beow.
The opnon beow reads as foows:
Ths s an acton to recover . 8,529.72 wth nterest, aeged to have been erro-
neousy coected from the pantff on |ewery eased by the pantff under the
ordnary form of ease or bament effectve In Pennsyvana for the easng
of persona property. There are no facts n dspute. The pantff eased
|ewery to baee n Pennsyvana, on whch the Government coected the ta
here sought to be recovered. Ths ta was computed on the bass that the ta
attached upon the easng of the |ewery for the tota renta prce rrespectve
of whether or not that renta was actuay coected by the pantff. If the
pantff s egay requred to pay ta ony on the amount of renta nstaments
coected on the bament ease n Pennsyvana, then the pantff woud be
entted to recover n the nstant case. |ury tra was waved and the case
heard before the court wthout a |ury.
The pantff contends that under the statute the ta ony appes to sad
portons of the renta. The Government contends that under the statute the ta
s due upon the e ecuton of the ease agreement rrespectve of whether or not
the rentas are pad.
The statute nvoved s secton 604(a) of the Revenue ct of 1924, whch
we quote:
G04. (a) On and after the e praton of 30 days after the enactment of ths
ct there sha be eved, assessed, coected and pad upon a artces
commony known as |ewery and bnocuars upon any
of the above when sod or eased by or for a deaer or hs estate for consumpton
or use, a ta equvaent to 5 per centum of the prce for whch so sod or eased.
In connecton wth ths ct, the Treasury Department has aso ssued
Reguatons 48 ( ugust, 1924), affectng sectons 603, 604 of the Revenue ct of
1924, provdng n artce 4 as foows:
rt. 4. When ta attache . In the case of a sae the ta attaches when
the tte to the artce passes from the vendor to the purchaser. When tte
passes s a queston of fact, dependent upon the ntenton of the partes as
gathered from the contract of sae and the attendant crcumstances. Where
Roods are segregated from other goods owned by the vendor and t s the
Intenton of both the vendor and the purchaser at the tme the goods are
segregated that they sha then beong to the purchaser, the tte w be pre-
sumed to pass at such tme. In the absence of any ntenton to the contrary,
the tte s presumed to pass upon devery of the artce to the purchaser or
to a carrer for the purchaser.
In the case of a condtona sae, where the tte s reserved unt payment
of the purchase prce n fu, the ta attaches (a) upon such payment, or (b)
when tte passes f before competon of the payments, or (c) when, before
competon of the payments, the deaer dsposes of the sae by chargng off
by any method of accountng he may adopt the unpad porton of the contract
prce, or (d) when the vendor dscounts the notes of the purchaser for cash
or otherwse, or (e) when the vendor transfers hs tte n the artce sod
to another.
In the case of a ease, whch ncudes a so-caed condtona sae agreement
purportng to be a ease, the ta attaches upon the tota amount payabe under
the nstrument upon the e ecuton thereof and devery of the artce to the
so-caed essee or to a carrer therefor.
Ths statute and these reguatons need no fne-spun constructon. The
pan words used by Congress ceary ndcate that the ta attaches when the
property s eased.
The pantff has argued very ngenuousy that the word when as used
n ths ct means f. We can not so construe the ct. ven f the word
when dd mean f, It woud not change the constructon of the statute
one wht, because the ta woud st be due f t read when eased of f
eased.
Counse for the pantff has aso asked us to appy to ths easng the regu-
aton whch appes wth reference to sae of goods on condtona-sae con-
tracts. We can not do so, because the statute tsef specfcay uses the word
ease and provdes dstncty that the ta attaches when the property
s eased to gve the constructon whch the pantff desres woud go drecty
contrary to the words of the statute.
We note n ths connecton that the Crcut Court of ppeas of the Nnth
Crcut, n consderng condtona-sae contracts there, hed that notwthstand-
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Regs. 47, rt. 19.
444
ng the reguaton to whch we have reverted, the ta attached upon the devery
of the merchandse sod. Carter v. Savck ewery Co., 26 ed. (2d), 571
T. D. 4108, C. . II-2, 345 .)
The defendant s moton for |udgment must be granted. Let an order be
submtted accordngy.
TITL I . CIS T S. (1921)
Reguatons 47, rtce 19: Candy. -23-5096
Ct. D. 345
CIS T S R NU CTS OP 1918 ND 1921 D CISION O SUPR M
COURT.
Candy wthn the meanng of secton 900(9) of the Revenue ct
of 1018 and secton 000(6) of the Revenue ct of 1021 ncudes
sweet chocoate and sweet mk chocoate, whether pan or m ed
wth nuts, sod and used as confectonery or sweetmeats.
Supreme Couet op the Unted States. Nos. 426-441. October Tebm, 1930.
426. . D. McCaughn, Coector, pettoner, v. ershey Chocoate Co. 427.
state . Lederer, Coector, pettoner, v. ershey Chocoate Co. 428.
state . . Davs, Coector, pettoner, v. ershey Chocoate Co. 429.
state . Lederer, Coector, pettoner, v. ershey Chocoate Co. 430. . D.
McCaughn, Coector, pettoner, v. ershey Chocoate Co. 431. state .
. Davs, Coector, pettoner, v. ershey Chocoate Co. 432. state . .
Davs, Coector, pettoner, v. en Chocoate Co. 433. state . Lederer,
Coector, pettoner, v. en Chocoate Co. 434. state . Lederer, Co-
ector, pettoner, v. en Chocoate Co. 435. akey D. McCaughn, Co-
ector, pettoner, v. en Chocoate Co. 436. state . Lederer, Coector,
pettoner, v. Wbur Sucard Chocoate Co. 437. state . Lederer. Coector,
pettoner, v. Wbur Suchard Chocoate Co. 438. akey D. McCaughn, Co-
ector, pettoner, v. Wbur Suchard Chocoate Co. 439. state . . Davs,
Coector, pettoner, v. York Chocoate Co. 440. state . Lederer, Co-
ector, pettoner, v. York Chocoate Co. 441. akey D. McCaughn, Co-
ector, pettoner, v. York Chocoate Co.
On wrt of certorar to the Unted States Crcut Court of ppeas for the Thrd Crcut
May 18, 1931.
Mr. ustce Stone devered the opnon of the court.
Secton 900 of the Revenue ct of 1918 (40 Stat., 1057, 1122) mposed, at
varyng percentages, an e cse ta upon the saes prce of enumerated artces,
most of whch may be characterzed as u ures. The enumeraton of the
nnth subdvson was, Candy, 5 per centum. Secton 900(6) of the Revenue
ct of 1921 (42 Stat., 227, 292) reenaeted ths provson but reduced the ta
to 3 per centum. Respondents, manufacturers of sweet chocoate and sweet
mk chocoate, brought suts n the Dstrct Court for astern Pennsyvana,
to recover about 8,000,000 of ta es assessed under these sectons for the years
1918 to 1924, on the ground that the artces sod are not candy, sae of whch
was ta ed. On wrtten stpuaton of the partes, the cases were tred by the
court wthout a |ury. udgments for pettoners were reversed by the Court
of ppeas for the Thrd Crcut. (42 . (2d), 408.) Ths court granted
certorar (282 U. S., 827) October 20, 1930. to resove the confct of the decson
beow wth that of the Court of ppeas for the rst Crcut n Maey v.
Water aker t Co. (281 ed., 41 T. D. 3344. C. . 1-2, 300 ).
The tra court found that sweet chocoate s a sod or pastc mass, made by
m ng sugar wth chocoate, whch s the powdered cacao nb or bean, wth or
wthout the addton of favorng matera, and that sweet mk chocoate aso
contans mk sods that the type of sweet chocoate manufactured and sod
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445
Regs. 47, rt. 19.
by respondents s commony sod In sma bars, sometmes contanng nuts, or n
bocks, attractvey dressed up for sae under names whch woud appea to
candy consumers, and s usuay consumed n the same manner as candy, that
s, eaten n sma quanttes from the hand as a sweetmeat. One of the
respondents descrbed ts product as a confecton upon some of ts abes and
dspay matter.
Respondents rest ther case many upon dfferences n composton of sweet
chocoate from that of confectonery, made prncpay of sugar or moasses,
wth or wthout the addton of coorng or favorng matter, whch, t s urged,
s aone descrbed by the word candy. They assert that chocoate s food and
candy s not, and hence chocoate can not be propery descrbed as candy. ut
t s common knowedge that sugar, aso a food, s an ngredent both of candy
as thus defned and of sweet chocoate, sometmes to the e tent of 50 per cent
or more of the atter as was conceded on the argument here. We kewse
know, as was conceded, that chocoate n a great varety of forms s an m-
portant ngredent of what s commony known as candy, and that peces
of sweet chocoate of the type descrbed by the fndngs are often ncuded n
packages of confectonery commony sod as candy. These consderatons at
east suggest that the form and use of sugar compounds, ntended for taste
gratfyng consumpton, are qute as mportant n determnng whether they are
candy, as ther partcuar composton. (See Maey v. Water aker Co.,
supra, page 40.)
No doubt the word candy, n vew of ts use to desgnate confectons made
prncpay of sugar before the wdespread consumpton of sweet chocoate prep-
aratons as confectons or sweetmeats, and as the dctonary suggests, may be
used n ths narrower and more restrcted sense. ut t may be, and we thnk
s used, as the dctonary aso suggests, n a popuar and more genera sense, as
synonymous wth sugar compounds sod and used as confectonery or sweet-
meats, and embraces them, as we as candy made chefy of sugar.
If t were necessary to our decson, n the absence of any controng egs-
atve hstory or any suggested pausbe reason why a ta on candy, n a
genera revenue measure ta ng u ures, shoud be deemed to appy to one type
of confectonery and not the other, we shoud hestate to say that the word was
used n ts restrcted sense, or to hod that substance made of sugar and choco-
ate, a wdey known and popuar form of confectonery dentfed, n use and
method of dstrbuton, wth other types of confectonery known as candy,
was not ntended to be ta ed. (See DcOanay v. Lederer, 250 U. S., 376, 331
an Camp Sons v. mercan Can Co., 278 U. S., 2-45, 253.)
Possbe doubts as to the proper constructon of the anguage used shoud be
resoved n the ght of ts admnstratve and egsatve hstory. Shorty
after the adopton of the 1918 ct, artce 22 of Reguatons 47, May 1, 1910,
announced that Candy wthn the meanng of the ct ncudes
sweet chocoate and sweet mk chocoate, whether pan or m ed wth frut
or nuts. Ths contnued to be the rung of the Treasury Department unt
the repea of the ta by secton 1100(a) of the Revenue ct of 1924 (43 Stat.,
253, 352). It and ater reguatons e cuded unsweetened chocoate from the
ta and, as revsed n December, 1920, the reguaton, and aso artce 19 of
Reguatons 47, anuary 6, 1922, under the 1921 ct, e cuded from the ta
a sweet chocoate whch obvousy woud not be consumed n the condton
or form n whch sod. Ths was but a recognton that use may be a deter-
mnng factor n ascertanng what sugar compounds are embraced n the
word candy.
The admnstratve constructon was uphed n 1922 by Maey v. Water
aker Co., supra, the ony case, other than the present, whch has consdered
t. The provson has been consstenty enforced as construed, was reenaeted
by Congress n the 1921 ct, and remaned on the statute books wthout amend-
ment unt ts repea. Such a constructon of a doubtfu or ambguous statute
by offcas charged wth ts admnstraton w not be |udcay dsturbed
e cept for reasons of weght, whch ths record does not present. (See rewster
v. Oage, 280 U. S., 327, 336 Ct. D. 148, C. . I -1, 274 Unversa attery
Co. v. Unted Staes. 281 U. S., 580, 583 Ct. d. 220, C. . I -2, 422 awcus
Machne Co. v. Unted States, 282 U. S. 375, 378 Ct. D. 278, page 424, ths u-
etn .) The reenactment of the statute by Congress, as we us the faure to
mend t n the face of the consstent admnstratve constructon, s at east
Itersuasve of a egsatve recognton and approva of the statute as construed.
(See Natona Lead Co. v. Unted States, 252 U. S., 140, 146.) We see no reason
for re|ectng that constructon.
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11318.1
446
The court beow found support for Its decson n the fact that varous tarff
and revenue cts have separatey cassfed candy and chocoate, and respond-
ents make the pont here. ut t s to be noted that n none of the cts cted
does the word candy appear aone, as n the present statute. In the earer
tarff cts the duty was ad on sugar candy. (See ct of ugust 10, 1790,
Stat, ISO ct of une 7, 1794, 1 Stat., 390.) In those of ugust 5, 1909 (36
Stat., 11) October 3, 1913 (38 Stat, 114) and September 21, 1922 (42 Stat.,
858), whch may be taken as typca, a duty was mposed on mportatons of
sugar candy and a confectonery not specay provded for at one rate,
and by a dfferent paragraph, on chocoate, at a dfferent rate. The dfferences
n rate made cassfcaton necessary and as the cacao bean s not produced n
the Unted States and -sugar s, that fact may be taken to account n a tarff
ct for the dfferences both n rate and cassfcaton. ut a dfference n com
Itoston, reatvey mnor so far as t has any bearng on the genera character
of the product or ts use, s of tte moment n determnng whether the
product fas wthn or wthout a snge cass of u ures ta ed, for revenue
ony, at a snge rate. Smary, rungs of the Department of grcuture
sottng up standards under the Pure ood Laws for the composton of varous
types of confectonery, ncudng sweet chocoate, throw no ght on the present
probem.
Nor do we thnk of sgnfcance the fact reed upon here and by the court
beow that statements nconsstent wth the concuson whch we reach were
made to commttees of Congress or n dscussons on the foor of the Senate by
Senators who were not n charge of the b. or reasons whch need not be
restated, such ndvdua e pressons are wthout weght n the nterpretaton
of a statute. (See Dupe Co. v. Deerng, 254 U. S., 443, 474 Lapna v. W-
ams, 232 U. S., 78, 90 Unted States v. reght ssn., 166 U. S., 290, 318.)
Reversed.
TITL III. G N R L DMINISTR TI
PRO ISIONS. (1921)
LIMIT TIONS UPON SUITS ND PROS CUTIONS.
Secton 1318. -17-5038
Ct. D. 323
D R L T S SUIT Y T P Y R D CISION O COURT.
Sut rroneous Refund Repad to Government Ta payer s
Rght of Recovery.
Where tu es are erroneousy refunded and upon demand are
repad under protest to the Government at a tme when the Gov-
ernment mght have recovered them n a pro er acton, the ta -
payer, n a sut aganst the Unted States for money had and
receved, s not entted to recover such ta es even though at the
tme the ta payer s acton was commenced the Government s rght
to recover the refunded ta es was barred by the statute of
mtatons.
Unted States Crcut Court of ppeas, ghth Crcut.
Champ Sprng Co., a Corporaton, appeant, v. Unted States of merca,
appeee.
ppea from the Dstrct Court of the L utcd States for the astern Dstrct of Mssour.
ebruary 14, 1931.
OPINION.
Gap||ner, Crcut udge, devered the opnon of the court.
Ths s an acton brought by the appeant as pantff beow aganst the
Unted States to recover 22,975.76 as for money had and receved. No ques-
tons are rased on the peadngs. The acton was brought under the pro-
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447
1318.
vsons of the so-caed Tucker ct, subdvson 20 of secton 41, Tte 28,
U. S. C. . Ths provson of the ct specfcay provdes that a suts brought
thereunder sha he tred by the court wthout a |ury. The acton was tred
on a stpuaton of facts and certan ora testmony, and t s not camed
that there s any dspute as to the facts.
Durng the perod from ebruary 24, 1919, to une 30, 1922, pantff was
engaged n the manufacture and sae of eaf sprngs, and durng sad perod
made monthy returns of ts saes and pad a ta of 5 per cent, shown to be due
by sad returns, the tota payments so made amountng to 34,403.03. On
ugust 8, 1922, the then Commssoner of Interna Revenue promugated a rue
to the effect that automobe eaf sprngs such as were manufactured by pantff
were not ta abe under the provsons of the revenue aw, and thereupon the
pantff fed a cam for refund of the ta es so pad by t, together wth
nterest, whch cam was aowed and the moneys so receved on account of
sad ta es were returned to the pantff. On December 17, 1923, the Com-
mssoner promugated a ta rung, reversng hs former rung, hodng that
the eaf sprngs used on automobes were sub|ect to the ta . The Commssoner
then attempted to make another assessment aganst the pantff n the tota
sum of 35,491.67, the amount refunded, and on or about anuary 15, 1924,
demanded payment thereof from pantff. Ths suppementa assessment cov-
ered the same saes of eaf sprngs durng the perod above mentoned, wth
respect to whch pantff s cam for refund had been aowed and pad. The
Commssoner thereafter abated 12,515.91 of ths suppementa assessment on
the ground that such porton of the assessment was barred by the statute of
mtatons, eavng a baance of 22,075.76. Ths amount was coected from the
pantff n nstaments, the frst nstament of 500 beng pad pr 4, 1924,
the second nstament of 500 beng pad May 2, 1924, and the thrd nstament
of 21,975.76 beng pad une 5, 1925, recepts beng ssued by the former co-
ector of nterna revenue for sad payments, rectng on ther face that the
payments were made under protest, and t was camed that the payments
were made under threat of dstrant. The ower court determned as a matter
of aw that the pantff was not entted to recover, and from a |udgment
dsmssng ts acton ths appea s prosecuted.
The ta es n the frst nstance were propery coected as e cse ta es.
(Unversa attery Co. v. Unted States, 281 U. S., 580.) The refund to the
pantff was therefore erroneous, and the Government mght have mantaned
an acton for the recovery of these Government funds so erroneousy pad to
the pantff. (Tacott v. Unted States, 23 ed. (2d), 897 T. D. 4137, C. .
II-1, 3191 ecy v. Unted State . 30 ed. (2d). 193 Unted States v.
Standard Sprng Mfg. Co., 23 ed. (2d), 495 T. D. 4115, C. . II-1, 308
Unted States v. artron, 35 ed. (2d), 705 Wsconsn Centra R. R. Co. v.
Unted States, 164 U. S., 190.)
In Tacott v. Unted States, supra, decded by the Crcut Court of ppeas
of the Nnth Crcut, t s sad:
They (the authortes cted) estabsh the prncpe that t s mmatera
whether payments whch are thus sought to be recovered were made under
mstake of aw or mstake of fact, that the ony queston s whether they were
pad wthout ega authorty or ega abty therefor, and that the repayment
to a ta payer of a sum pad for ta es s not a fna determnaton of hs rght
to receve the same, that the Government may recover as for money had and
receved a payments egay pad by a pubc offcer, and that the decsons
of e ecutve offcers n makng such payments are not |udca and are not
bndng on a court. (Unted States v. urchard, 125 U. S., 176.)
The rue of aw s stated by the Supreme Court of the Unted States n
Wsconsn Centra R. R. Co. v. Unted States, supra, as foows:
s a genera rue, and on grounds of pubc pocy, the Government can
not be bound by the acton of ts offcers, who must be hed to the performance
of ther dutes wthn the strct mts of ther ega authorty, where, by ms-
constructon of the aw under whch they have assumed to act, unauthorzed
payments are made.
It s to be observed aso that at the tme the revenue offcer demanded and
receved repayment of the funds nvoved n ths acton, the Government s
rght to proceed by acton to recover as for money had and receved had not
been barred by any statute of mtatons. We have, therefore, a stuaton
n whch the pantff had possesson of these funds through the erroneous act
of the coector of nterna revenue n refundng them to t. They were Gov-
ernment funds, whch, confessedy, the Government mght have recovered n
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1318.
448
a proper acton. ut t s contended by the pantff that because the Gov-
ernment dd not resort to such an acton, but nstead possessed tsef of these
funds through unwarranted threats of duress by ts offcers, that therefore t
has now a rght to recover them.
In the vew we take of the ssues, t s not necessary to determne whether
the coector of nterna revenue had authorty to make the reassessment. s
has been observed, the pantff s acton s n the nature of a sut for money had
and receved. Whe ths s an acton at aw, t s, nevertheess, governed by
equtabe prncpes, and t can be mantaned ony when one has money n
hs hands beongng to another, whch n equty and good conscence he ought
to pay over to that other. The ssue n ths case s: To whom does the money
n equty, |ustce, and good conscence beong If the pantff fas to show
that t has a superor rght to that of the defendant, t can not recover.
( eyes v. rst Natona ank of berdeen, 25 ed. (2d), 6S4 D. W. osey
Co. v. Wrfs, 30 ed. (2d), 667 MUett v. Omaha Nat. ank, 30 ed. (2d),
665 oand Land Loan Co. v. oand (Mo.), 208 S. W., 30 enderson v.
oeng (Mo.), 01 S. W., 88 St. Chares Savngs ank v. Orthwen Investment
Co. (Mo.), 140 S. W., 021 cnwn v. Natona Counc . L. S. (Mo.), 200
S. W.. 608 Wson v. Torchon Lace, etc., Co. (Mo.), 140 S. W., 1156 Copper
e Mnng Co. v. eeson ( rz.), 134 Pac, 285.)
In eye v. rst Natona ank, supra, ths court, n dscussng the nature
of an acton to recover money had and receved, sad:
The acton of assumpst for money had and receved s equtabe n ts
essenta nature and purpose. It es for money whch e aequo et bono the
defendant ought to refund. The underyng promse s ony mped, mposed
by aw from the facts and the mposton w not be made f un|ust to
defendant.
The Supreme Court of Mssour n oand Land Loan Co. v. oand,
supra, sad
The acton for money had and receved Is one at aw, but s governed by
equtabe prncpes.
It was, therefore, ncumbent upon the pantff, to entte t to recover,
to show, not that the defendant had by some ega method secured these
funds, but that the pantff had a better rght to them than the defendant.
The funds were erroneousy refunded to pantff by an offcer of the Govern-
ment. They confessedy beonged to the Government. It can not, therefore, be
sad that n equty and good conscence, the pantff, as aganst the defendant,
was entted to ths money. efore t coud recover, t must show a better
rght thereto than that of the Government, and ths t has faed to do.
If the pantff has suffered any damage by reason of the wrongfu acts of
the revenue offcers n resortng to dstrant nstead of resortng to an acton
at aw, t has ts remedy, but the mere fact of such rreguarty does not
create n the pantff, n equty and good conscence, a rght to recover these
funds.
It Is, however, urged by the pantff that t ought to be permtted to recover,
because at the tme t commenced ths acton, the Government s rght to
recover the refunded ta es had been barred by the statute of mtatons. The
Government, however, was not seekng to mantan an acton to recover ths
money. It aready had the money, havng coected t at a tme that t mght
have recovered t n an acton at aw. In ths acton the Government dd not
pead any cause of acton and was not seekng to recover, but was smpy
denyng pantff s rght of recovery. statute of mtatons s a statute of
repose to be nvoked as a bar to the mantenance of an acton, but t can not
be nvoked as the bass for a cause of acton, because a party s rght to reef
s dependent upon the strength of hs own cause of acton, and not the weak-
ness of hs adversary s defense or cam. ere the burden was on the pan-
tff to prove, as aganst the defendant, ts rght, n equty and good con-
scence, to these funds, and t can not estabsh such ght by deayng ts
acton unt the statute of mtatons woud bar an acton by te owner, and
then seek to recover from the Government money n possesson of the Govern-
ment to whch the pantff has no equtabe rght.
The |udgment of the ower court correcty determned the ssues n ths
case and s affrmed.
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ST T T RULINGS.
TITL II. MISC LL N OUS T S. (1928)
P RT I. ST T T S.
Reguatons 70(1929), rtce 41: Deducton of -3-4907
the vaue of transfers prevousy ta ed. T. D. 4304
ST T T D DUCTION O T LU O PROP RTY PR IOUSLY T D.
rtces 41 and 53 of Reguatons 70 (1929 edton) amended.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
Paragraph (8) of artce 41 of Reguatons 70 (1929 edton) s
hereby amended to read as foows:
(8) The deducton Is further mted to the e tent ndcated n the ast par-
agraph of ths artce.
The ast paragraph of artce 41 of Reguatons 70 (1929 edton)
s hereby amended to read as foows:
The deducton for property prevousy ta ed, or that acqured n e change
therefor, s not dmnshed by amounts deducted under paragraph (1) or (3)
of subdvson (a) of secton 303, merey because such amounts were pad out
of sad property. On the other hand, however, the deducton Is dmnshed to
the e tent that the vaue of the property so ta ed, or of that acqured n
e change therefor, s deducted under sad paragraph (1) or (3) on account of
such osses arsng from casuaty or theft as are ncurred wth respect to sad
property durng the settement of the estate, or on account of such transfers of
specfc tems of sad property as the decedent made n hs fetme or by hs
w, for pubc, regous, chartabe, scentfc, terary, or educatona purposes,
and the deducton s further dmnshed to the e tent that the amounts aowed
under sad paragraph (1) or (3), other than those reatng to sad osses or
transfers, are n e cess of the vaue of the decedent s property not prevousy
ta ed. The burden of provng that the estate s entted to the deducton rests
upon the e ecutor. The provsons of ths paragraph appy n ke manner to
cases controed by the Revenue cts of 1921 and 1924.
Reguatons 70(1929), rtce 53: Deducton of -3-4908
the vaue of transfers prevousy ta ed. T. D. 4304

rtce 53 of Reguatons 70 (1929 edton) s hereby amended to
read as foows:
bt. 53. Deducton of the vaue of property prevousy ta ed. The rght
to deduct the vaue of property receved by a nonresdent decedent by gft from
any person wthn fve years pror to hs death, or by gft, bequest, devse, or
nhertance from any person who ded wthn fve years pror to hs death, or
(449)
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Regs. 70(1929), rts. 17, 18.
450
of the vaue of property acqured In e change for property so receved, s gov-
erned by the same rues as those appyng to estates of resdent decedents
(arts. 41 to 43, ncusve), sub|ect to the two foowng e ceptons: (1) That the
provsons of paragraph (1) or (3) of subdvson (b) of secton 303 appy
nstead of the provsons of paragraph (1) or (3) of subdvson (a) of secton
303 (2) that such rght s not avaabe to any e tent uness the e ecutor
ncudes n the return the vaue at the tme of the decedent s death of that part
of the gross estate not stuated n the Unted States. (See art. 52.)
Davd urnet,
Commssoner of Interna Revenue.
pproved anuary 10, 1931.
. W. Meon,
Secretary of the Treasury.
TITL m. ST T T . (1926)
Reguatons 70(1929), rtce 9: Credt aganst -8-4951
estate ta . T. D.4306
ST T T CR DITS.
rtce 9 of Reguatons 70 (1929 edton) amended.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
rtce 9 of Reguatons 70 (1929 edton) s hereby amended by
strkng out the ast paragraph of subdvson (a) and the ast para-
graph of subdvson (b) thereof, and by addng to tho fourth
paragraph of sad subdvson (a) the foowng sentence:
The provsons of ths paragraph sha not appy to any case where a petton
for a redetermnaton of a defcency s duy fed wth the oard of Ta ppeas
on or after March 1, 1931.
Davd urnet,
Commssoner of Interna Revenue.
pproved ebruary 17, 1931.
. W. Meon,
Secretary of te Treasury.
TR NS RS Y D C D NT IN IS LI TIM .
Reguatons 70(1929), rtces 17 and 18: Genera -22-5086
(transfers ntended to take effect n possesson or T. D. 4314
en|oyment at or after death).
state ta ont resouton of March 3, 1931.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
Secton 302(c) of the Reve ue ct of 1926 was amended by a
|ont resouton (Pub. 131), approved 10.30 p. m., Washngton,
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451 Regs. 70(1929), rt. 41.
D. C, tme, March 3, 1931, to read as foows (the porton added by
the amendment s n tac) :
(c) To the e tent of nny nterest theren of whch the decedent has at any
tme made a transfer, by trust or otherwse, n contempaton of or ntended
to take effect n possesson or en|oyment at or after hs death, ncudng a
transfer under whch the transferor has retaned for hs fe or any perod
not endng before hs death (1) the possesson or en|oyment of, or the ncome
from, the property or (2) the rght to desgnate the persons ww sha possess
or en|oy the property or the ncome therefrom- e cept n case of a bona fde
sae for an adequate and fu consderaton n money or money s worth.
In vew of the decsons of the Supreme Court of the Unted
States n Nchos v. Coodge (274 U. S., 531 T. D. 4072, C. . I-2,
351 ), May v. Rener (281 U. S., 238 Ct. D. 186, C. . I -1, 382 ),
Coodge v. Long (282 U. S., 582), urnet v. Northern Trust Co.
(51 S. Ct., 342), dgar M. Moravan, |r., v. urnet (51 S. Ct., 343)
and Cyrus II. McCormck v. urnet (51 St. Ct., 313), the porton
added by the amendment to secton 302(c) of the Revenue ct of
1926, as set forth above n tac, w, notwthstandng the pro-
vsons of secton 302(h) of that ct, be apped prospectvey ony,
. e., to such transfers comng wthn the amendment as were made
after 10.30 p. m., Washngton, D. C, tme, March 3, 1931.
Reguatons 70, 1929 edton, w be amended to make the changes
necesstated by the amendment to secton 302(c) of the Revenue
ct of 1926 and the above decsons of the Supreme Court.
Davd urnet,
Commssoner of Interna Revenue.
pproved May 22, 1931.
. W. Meon,
Secretary of the Treasury.
D DUCTIONS.
Reguatons 70 (1929), rtce 41: Deducton -7-4941
of vaue of transfers prevousy ta ed. G. C. M. 8481
t the tme of her death and her survvng husband, , hed
certan rea propertes, under two deeds, as tenants by the en-
trety. orgnay owned a of the rea property whch was
conveyed to one of the tenances by the entrety and and each
pad for an undvded one-haf part of the rea property whch was
conveyed to the other of such tenances. The vaue of the rea
property whch orgnay owned and the vaue of the undvded
one-haf part of the rea property, whch had pad for, were
ncuded n her gross estate. There was pad by or on behaf of the
estate of a edera estate ta . The husband, , ded wthn
fve years after the death of and n the year 1928. The vaues
of the rea propertes whch and had hed as tenants by the
entrety were ncuded n s gross estate.
ed, that the whoe of the rea property whch had orgnay
beonged to and the undvded one-haf of the rea property,
whch had pad for, the vaues of whch were ncuded n a
gross estate, were receved as pure gfts, usng that term n the
broadest sense, from by under the deeds whereby the ten-
ances by the entrety were created, and that wth reference to such
gfts s estate s entted under the provsons, of secton 80. 5(a)2
of the Revenue ct of UG, to a deducton on account of property
prevousy ta ed.
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Regs. 70(1929), rt. 41. 452
The queston presented n ths case s whether, wth reference to
the rea propertes herenafter mentoned, the estate of the decedent,
, s entted, under the appcabe provsons of the Revenue ct
of 1926, to a deducton on account of property prevousy ta ed.
The referred to provsons are as foows:
Sec. 303. or the purpose of the ta the vaue of the net estate sha be
determned
(a) In the case of a resdent, by deductng from the vaue of the gross
estate

(2) n amount equa to the vaue of any property ( ) formng a part of
the gross estate stuated n the Unted States of any person who ded wthn
fve years pror to the death of the decedent, or ( ) transferred to the de-
cedent by gft wthn fve years pror to hs death, where such property can
be dentfed as havng been receved by the decedent from such donor by
gft or from such pror decedent by gft, bequest, devse, or nhertance, or
v. hch enn be dentfed as havng been acqured n e change for property
so receved. Ths deducton sha be aowed ony where a gft ta mposed
under the Revenue ct of 1924, or an estate ta mposed under ths or any
pror ct of Congress was pad by or on behaf of the donor or the estate
of such pror decedent as the case may be, and ony In the amount of the vaue
paced by the Commssoner on such property n determnng the vaue of the
gft or the gross estate of such pror decedent, and ony to the e tent that the
vaue of such property s ncuded n the decedent s gross estate and not de-
ducted under paragraph (1) or (3) of ths subdvson
The pror decedent, , who ded n the year 1925, was survved by
her husband, , who ded wthn fve years after s death, and n the
year 1928.
t the tme of the death of she and hed, under two deeds,
as tenants by the entrety, certan:
1. Rea property whch orgnay beonged to .
The tenancy by the entrety to whch that rea property was con-
veyed s herenafter sometmes caed the frst tenancy.
2. Other rea property, the purchase prce of whch was pad by
the respectve spouses n equa proportons, . e., and , each, pad
for an undvded one-haf part of such property.
The tenancy by the entrety to whch the rea property so pad for
n equa proportons by and was conveyed s herenafter some-
tmes caed the second tenancy.
Wth reference to the rea property conveyed to the frst tenancy,
the vaue thereof was ncuded n the gross estate of the pror de-
cedent, , and wth reference to the rea property conveyed to the
second tenancy the vaue of the one-haf part thereof for whch
had pad was ncuded n such gross estate. These property tems,
the vaues of whch were ncuded n the pror decedent s gross estate,
are herenafter caed the propertes prevousy ta ed.
edera estate ta was pad by or on behaf of s estate.
The vaues of the rea propertes whch had been conveyed to the
two tenances by the entrety were ncuded n s gross estate. No
part of those vaues was deducted under paragraph (1) or (3) of
secton 303(a) of the Revenue ct of 1926.
The queston presented w now be consdered from the stand-
pont of whether the decedent, , receved the prevousy ta ed
propertes by bequest, devse, or nhertance from the
pror decedent, .
s to a tenancy by the entrety, t s setted that the survvng
spouse takes the entre estate under the orgna grant ount v.
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453
Regs. 70(1929), rt. 41.
Unted States, 59 Ct. Cs., 328), . e., under the deed whereby the
tenancy was created.
rom ths t foows that the decedent, , receved the propertes
prevousy ta ed under the deeds whereby the tenances by the en-
tretes n the nstant case were created. e, therefore, dd not re-
ceve those propertes by bequest, devse, or nhertance
from the pror decedent, .
There remans to be consdered the pont as to whether the
decedent, , receved the propertes prevousy ta ed, under
the deeds whereby the tenances by the entrety were created, by
gft from the pror decedent, .
That pont s smar to one of the ponts whch were nvoved n
the cases entted Tyer v. Unted States Unted States v. Provdent
Trust Co. Lucas v. Grard Trust Co. (281 U. S., 497). In those
cases each of the deceased spouses had ether drecty or through a
thrd person conveyed property orgnay owned by hm to a ten-
ancy by the entrety, or had pad the whoe of the purchase prce of
the property ncuded n such a tenancy.
The Supreme Court n dsposng of the ponts nvoved n the
Tyer, the Provdent Trust Co., and the Grard Trust Co. cases,
supra, hed, n effect, among other thngs, that the property, no part
of whch orgnay beonged to one spouse, but whch came to the
tenancy by the entrety, medatey or mmedatey, as a pure gft
from the other, was reeved, as a consequence of the atter s death,
from restrctons mposed by the common aw n respect of tenancy
by the entrety, so as to produce n the survvng spouse the soe
rght of propretorshp.
rom ths hodng of the court t s manfest that the property
conveyed to the frst tenancy was receved by the survvng spouse,
the decedent, , under the deed whereby that tenancy was created
as a pure gft, usng that term n ts broadest sense, from the
deceased spouse, the pror decedent, .
Concernng the property conveyed to the second tenancy, t has
aready been sad that and , each, pad for an undvded one-
haf part thereof. t the death of the pror decedent her survvng
husband, , became, under the deed whereby the second tenancy was
created, the absoute owner of the whoe property whch was con-
veyed to such tenancy. That s to say, the decedent. , became at
the death of , the absoute owner not ony of the haf of the prop-
erty whch had been pad for by hm but aso of the other haf
thereof, whch had been pad for by . or that haf of the prop-
erty, whch pad for and of whch became, at s death, the
absoute owner, the pror decedent dd not receve any consderaton
or compensaton whatsoever. It foows that the one-haf of the
property whch pad for was receved from her by , under the
deed whereby the second tenancy was created, as a pure gft.
In vew of the foregong, ths offce s of the opnon that the
present estate s entted, n respect of the propertes whch were
prevousy ta ed and whch the decedent receved as gfts from the
pror decedent, to a deducton under the provsons of secton
303 (a) 2 of the Revenue ct of 1926.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
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Regs. 70(1926), rts. 77, 105.
454
COLL CTION Y SUIT OR DISTR INT.
Reguatons 70(1926), rtce 77: ssessments.
rtce 105: Suts.
-10-4969
Ct. D. 289
estate ta revenue act of 1926 decson of court.
1. Sut Coecton Lmtaton.
Whore a vad assessment of an estate ta mposed by the Rev-
enue ct of 1918 s made before the enactment of the Revenue ct
of 1924 and coecton thereof s not barred at the tme of the
enactment of the Revenue ct of 1928 by the statutory perod of
mtaton propery appcabe thereto, secton 311(b) or secton
1109(3) of the Revenue ct of 1926 s appcabe and the Unted
States has s years from the date of the assessment wthn whch
to nsttute sut for coecton.
2. pprova or Cam for batement dy Commttee Concusve-
The approva of a cam for abatement ndorsed upon t by
the commttee on cams s not an aowance thereof and s not
bndng on the Commssoner.
Unted States Crcut Court of ppeas fob the Nnth Crcut.
arvey M. Tay and Ma-bee . Lucas, Indrtduay and as dmnstrators of
the W nne ed of the state of George Dane Toy, Deceased, appeants,
v. Unted States of merca, appeee.
Upon appea from the Dstrct Court of the Unted States for the Northern Dstrct of
Caforna, Southern Dvson.
errgan, Dstrct udge: Ths case nvoves a ta upon the estate of George
Dane Toy, who ded anuary 23, 1921. t the tme the estate ta return
was made, a ta was pad upon the theory that the wdow nherted one-haf
of the communty property, ta -free. On ugust 16, 1922, an addtona ta
n the sum of 23,99 ).03 was assessed upon the theory that the wdow s haf
of the communty property was a part of the husband s estate and was there-
fore ta abe. part of ths amount was pad, eavng a baance of 16,303.87.
In March. 1925, the Commssoner of Interna Revenue advsed the estate,
whch had protested the addtona assessment, that the estate was entted
to abatement and refund, and stated that a forma cam shoud be ted. Such
cam was made March 28, 1925. The cam for refund was re|ected September
29, 1926, by the Commssoner, and the cam n abatement was kewse
re|ected October 23, 1926. Ths sut by the Unted States to recover the ta
was fed November 14. 1927. countercam of 8,797.20 because of pror
ta aton wthn a 5-year perod (the wdow of George Dane Toy havng
ded, and her estate havng pad ths sum) was camed by defendants and, at
the tra, was conceded by the Unted States. udgment was gven for 7,511.67
wth nterest and costs.
ppeants chef contenton upon ths appea s that the cause of acton Is
barred, because sut was not fed by anuary 23, 1927, fve years from the
tme such ta was due, as provded by secton 1320 of the Revenue ct of
1921, or fve years after such ta es became due, as provded by secton
1109(a) 1 of the Revenue ct of 1926. The Government rees upon secton
311(b) of the Revenue ct of 1926, provdng:
Sec. 311. (b) Where the assessment of any ta mposed by ths tte or of
nny estate or gft ta mposed by pror ct of Congress has been made
(whether before or after the enactment of ths ct) wthn the statutory perod
of mtaton propery appcabe thereto, such ta may be coected by dstrant
or by a proceedng n court (begun before or after the enactment of ths ct),
but ony f begun (1) wthn s years after the assessment of the ta , or (2)
.SS.
December 1, 1930.
OPINION.
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455
Regs. 70(1926), rt. 77.
pror to the e praton of any perod for coecton agreed upon n wrtng by
the Commssoner and the e ecutor. (44 Stats, at L., 77.)
ppeants pont out that ths secton s mted In Its appcaton by secton
311(c), as foows:
Seo. 311. (c) Ths secton sha not bar a dstrant or proceedng n court
begun before the enactment of the Revenue ct of 1924 nor sha t authorze
the assessment of a ta or the coecton thereof by dstrant or by proceedng
n court (1) If at the tme of the enactment of ths ct such assessment, ds-
trant, or proceedng was barred by the statutory perod of mtaton propery
appcabe thereto, uness pror to the enactment of ths ct the Commssoner
and the e ecutor agreed In wrtng thereto, or (2) contrary to the provsons
of subdvson (a) of secton 308 of ths ct. (44 Stats, at L., 77.)
Secton 308(a) confers upon the ta payer the rght to appea to the oard
of Ta ppeas from a determnaton of defcency by the Commssoner, pror
to the actua evy of assessment for the defcency.
The contenton s that the reference to secton 308(a) In secton 311(c) pre-
cudes the appcaton of secton 311(b) n any case where there has been no
opportunty afforded the ta payer to appea to the oard of Tm ppeas. I
the present case the assessment sued upon was made n 1922, pror to the
creaton of the oard of Ta ppeas, and we are urged to hod that, the ta -
payers not havng had ther appea to that oard, the statute of mtatons
e stng at the tme of the assessment, namey, secton 1320 of the Revenue
ct of 1921, s the appcabe statute.
We thnk t cear, however, that the fna cause of secton 311(c) reates
soey to the manner and mode of makng a new assessment and appes ony
where a new assessment s made after the Revenue ct of 1926 became effec-
tve. The prohbton n secton 308(a) aganst an acton for the coecton of
a ta unt after a defcency notce has been maed, etc., s ncdenta to the
makng of a new assessment, and ntended to stay proceedngs so as to gve
a rght of appea from the Commssoner s decson, but obvousy has no app-
caton to a case where the ta s aready determned. Consequenty, the
commencement of an acton upon a ta aready assessed and wthn s years
of the assessment, as e pressy authorzed by secton 311(b), s not contrary
to the provsons of secton 308(a) wthn the meanng of secton 311(c).
The case thus fang wthn the specfc provsons of secton 311(b), t s
cear that secton 1320 of the Revenue ct of 1921 does not appy.
There remans for consderaton the possbe appcabty of secton 1109 of
the Revenue ct of 1926 (44 Stats, at L., 114). Secton 318(d) of the same
ct provdes:
Sec. 318. (d) If any defcency n any estate ta mposed by the Revenue
ct of 1917, the Revenue ct of 1918, or the Revenue ct of 1921, or by any
such ct as amended, was assessed before une 3, 1924, but was not pad n
fu before the date of the enactment of ths ct, and f the Commssoner,
after the enactment of ths ct, fnay determnes the amount of the de-
fcency, he s authorzed to send by regstered ma to the person abe for
such ta notce of such defcency, whch notce sha, for the purposes of ths
ct, be consdered a notce under subdvson (a) of secton 308 of ths ct.
In the case of any such na determnaton the amount of the ta (whether
as defcency or addtona ta or as nterest, penaty, or other addton to
the ta ) sha be computed as f ths ct had not been enacted, but the amount
so computed sha be assessed, coected, and pad n the same manner and
sub|ect to the same provsons and mtatons (ncudng the provsons n
cases of denquency n payment after notce and demand, and the provsons
reatng to cams and suts for refund) as n the case of a defcency n the
ta mposed by ths tte, e cept as otherwse provded n subdvson (g) of
ths secton, and e cept that the perod of mtaton prescrbed In secton
1109 of ths ct sha be apped n eu of the perod prescrbed n subdvson
(a) of secton 310. (44 Stats, at L., 82.)
Secton 318(d) forms an e cepton n the genera scheme of appeas to the
oard of Ta ppeas pror to any assessment. It affects cases where def-
cency assessments had n fact been made but not fnay determned, and con-
tempated a new assessment upon such determnaton foowed by coecton of
the ta , both wthn the perod f ed by secton 1109 of the Revenue ct of 1926.
Subdvson (a) of secton 1109 provdes that assessments sha be made
72109 31 30
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Regs. 68(1924), rt. 9.
456
wthn four years, and that suts for the coecton of ta es wthout assess-
ment sha not be begun after fve years after the ta s due. Subdvson
(3) of the same secton permts suts upon vad assessments to be begun
wthn s years after assessment.
When the Revenue ct of 1926 went nto effect the assessment here sued
upon was n e stence the defcency had not been pad n fu there were
pendng before the Commssoner cams for refund and n abatement. The
Commssoner dd not act upon these cams unt after four years from the
date when the ta became due. t that tme he was wthout power to evy
a vad reassessment, and he made no attempt to do so. The mere pendency
before hm of the cams dd not destroy the assessment of 1922, and t s
upon ths earer assessment, and not upon an attempted reassessment, that
ths sut s brought. It s doubtfu whether under these crcumstances sec-
ton 318(d) s appcabe at a, but f t s to be apped, reference to secton
1109 of the Revenue et of 1926 makes t apparent that the proper subdvson
s to be seected accordng to the type of proceedng. Secton 318(d) refers
to the whoe secton. In the present case, where the sut s upon an assess-
ment, the approprate subdvson s subdvson (3), a 6-year statute, and
not the 5-year statute of subdvson (a), appcabe to actons wthout
assessments.
The net resut of ths dscusson s that whether secton 311(b) or secton
1109 of the Revenue ct of 1926 s to be apped to ths case the perod of
mtatons s the same, s years. Ths sut was brought wthn that tme
from the assessment.
The further pont made by appeants, that favorabe ndorsement on the
cam for abatement by the commttee on cams n 1925 operated as an aow-
ance thereof, s not tenabe. It s true that the cam was fed n response
to a etter from the Commssoner ntmatng that a cam, f fed, woud
be aowed. No certfcate of overassessment was ever made, however, nor
was there an abatement of the assessment entered upon the coector s books.
fter the cam was fed, the ony acton taken upon t pror to ts fna
re|ecton was ts submsson to the commttee on cams, whch ndorsed ts
approva thereon. Ths recommendaton was not bndng upon the Comms-
soner and was not acted upon by hm. It dd not determne the cam n
appeants favor.
The |udgment s affrmed.
TITL III. P RT I. ST T T . (1924)
Reguatons 68(1924), rtce 9: Credt aganst -8- 952
estate ta . T. D. 4307
ST T T CR DITS.
rtce 9 of Reguatons 68 (1924 edton) amended.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, t). C.
To Coectors of Interna Revenue and Others Concerned
rtce 9 of Reguatons 68 (1924 edton) s hereby amended as
foows:
The fourth paragraph of subdvson (a) s amended to read:
Where credts are aowed they w be apped aganst any unpad ta , and
f there then remans an amount not so apped the e ecutor shoud fe a cam
for the refund of the amount of the edera estate ta by whch the credt e -
ceeds the unpad ta , or f the entre edera estate ta has been pad, a cam
for refund shoud be fed for such porton thereof as resuts from the aow-
ance of the credt. The provsons of ths paragraph sha not appy to any
case where a petton for a redetermnaton of a defcency s duy fed wth
the oard of Ta ppeas on or after March 1, 1931.
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457
Regs. 70(1926), rt. 22.
The seventh paragraph of subdvson (a) begnnng wth the words
Credt aowances fa nto two casses and endng wth the words
has fnay passed upon the appea s strcken out.
The thrd paragraph of subdvson (b) s amended to read:
Where credts are aowed they w be apped aganst any unpad ta , and
f there then remans an amount not so apped the e ecutor shoud fe a cam
for the refund of the amount of the edera estate ta by whch the credt
e ceeds the unpad ta , or f the entre edera estate ta has been pad, a cam
for refund shoud be fed for such porton thereof as resuts from the aow-
ance of the credt The provsons of ths paragrapb shaU not appy to any case
where a petton for a redetermnaton of a defcency s duy fed wth the
oard of Ta ppeas on or after March 1, 1931.
The s th paragraph of subdvson (b) begnnng wth the words
Credt aowances fa nto two casses and endng wth the words
has fnay passed upon the appea s strcken out.
Davd urnet,
Commssoner of Interna Revenue.
pproved ebruary 17, 1931.
. W. Meon,
Secretary of the Treasury.
TITL III. ST T T . (1924)
PROP RTY LD OINTLY.
Reguatons 70(1926), rtce 22: Property hed -14-5012
|onty or as tenants by the entrety. Ct. D. 312
estate ta revenue act op 1924 decson op court.
Gross state state by the ntrety Transfer efore Pas-
sage of ny state Ta ct.
The vaue of property transferred by a decedent to hmsef and
spouse as tenants by the entrety before the enactment of the frst
Revenue ct that mposed an estate ta s propery ncuded n
determnng the vaue of the decedent s gross estate under secton
302 of the Revenue ct of 1924.
Dstrct Court of the Unted States, Dstrct of Massachusetts.
The Thrd Natona ank f Trust Co. of Sprngfed et a. v. Thomas T . Whte,
Coector.
December 19, 1930.
opnon.
Morton, .: Ths s an acton to recover back nn estate ta coected aganst
the estate of rederck arrs, who ded n ebruary, 1926. The ta was
assessed under the Revenue ct of 1924, secton 302 (e) and (h). The prop-
erty on whch the ta was assessed was entrey persona. It orgnay
beonged to Mr. arrs, and n 1915 was transferred by hm, through a thrd
party, to hmsef and hs wfe as tenants by the entrety. The defendant has
demurred to the decaraton.
The present case s fuy covered by Tyer v. . 8. (281 T . S., 497 Ct. D. 190,
C. . I -1, 3831), e cept for the fact that here the transfer was competed, not
ony before the passage of the statute mposng a ta , but before any statute
ta ng estates had been passed. The frst edera estate ta was mposed
by the statute of 1916, whe Mr. arrs s conveyance was made n the precedng
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Regs. 70, rt. 50.
458
year. In the Tyer case the tenances by the entrety whch were hed ta -
abe were created subsequent to the passage of the ta statute.
s an orgna queston, t was very arguabe that a tenancy by the entrety
was a typca case n whch an nterest was obterated (281 U. 8., 243) by
death Instead of beng passed aong, and that such property coud not bo ta ed
as estate of the deceased tenant. ut the Tyer case repudates ths vew, and
hods that the death of one tenant by the entrety, operatng as t does to free
the property from hs rghts n t, s the generatng source of mportant and
defnte accessons to the property rghts of the otber (Sutherand, ., at page
504), and that the vaue of such accessons s ta abe as estate of the deceased
tenant. That decson dd not n the east depend upon the fact that the
tenances were estabshed subsequent to the statute t rests upon the char-
acterstcs of the estate whch each tenant hods. or these reasons, whch
mght be much eaborated, I fnd mysef n agreement wth the ma|orty of the
oard of Ta ppeas n Pennsyvana Company for Insurance v. Commssoner
of Interna Revenue, decded November 3, 1930, that the Tyer case appes
regardess of the date when the tenances were created.
In the present case the vaue of the entre property hed n the tenancy was
ta ed. Ths was done n the Tyer case, and I am of course bound by that
decson. sde from t I shoud certany have supposed that the nterest n
the property whch Mr. arrs rrevocaby transferred to hs wfe n 1915,
many years before hs death and not n contempaton of t, then ceased to be
part of hs estate. One may freey gve hs property to another by absoute
gft wthout sub|ectng hmsef or hs estate to a ta , but we are asked to say
that ths statute means that he may not make a gft nter vvos, equay abso-
ute and compete, wthout sub|ectng t to a ta , f the gft takes the form of
a fe estate n one wth remander over to another at or after the donor s
death. It woud requre pan and compeng anguage to |ustfy so ncongru-
ous a resut, and we thnk t s wantng n the present statute. (Stone, .,
n Renecke v. Northern Trust Co., 278 U. S., 339 at 347 and 348 T. D. 4261,
C. . III-1, 305 .) If Mr. arrs had conveyed the property, or even an
undvded nterest n t, to Mrs. arrs absoutey, the vaue of the porton
so conveyed coud not have been ta ed. The conveyance whch he actuay
made dvested hm of a haf nterest more competey than f the estate had been
a tenancy n common. Thereafter he coud not transfer any part of the prop-
erty wthout her assent. To say that because the tenancy whch he created
was one by the entrety t subtracted nothng from the vaue of what remaned
n hm, s certany not the fact. If the ega fcton that every tenant by the
entrety owns the entre property be resorted to t s repudated n the
opnon t woud seem to foow that the survvor s rghts were not ncreased
by the death whch, n ths vew, merey obterated a confctng nterest.
owever, as I have sad, I am bound by the Tyer case and there must be
|udgment for the defendant.
D DUCTIONS ST T S O NONR SID NTS.
Reguatons 70, rtce 50: Stus of property of -13-5002
nonresdent decedents. Ct. D. 307
estate ta revenue act op 1024 decson of court.
Gross state cuson Nonresdent en Moneys Depos-
ted Wth ankers Loan.
Where a nonresdent aen decedent devers hs check for a sum
of money to two of the fve members of a frm dong busness n
the Unted States, for whch they sgn as ndvduas a recept for
the amount on oan at 5 per cent per annum, nterest payabe
semannuay, and the frm opens no account on ts hooks n the
name of the deceased by reason of the transacton and makes no
other record thereof, the frm s books however showng credts to
the two members for the amount, whch s carred as a abty
of the frm to ten, the transfer of the check consttutes a oan
and not a depost and s therefore not e cuded from the gross
estate of the decedent under secton 303(c) of the Revenue ct of
1924 as moneys deposted wth any person carryng on the bankng
busness.
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459
Regs. 70, rt. 50.
Court ot Cams op the Unted States. No. -374.
uphema an Rensseaer Todd, s ecutr of Sr oseph Whte Todd,
aronet, Deceased, v. The Unted States.
ebruary 9, 1931.
OPINION.
Green, udge, devered the opnon of the court.
The pantff s the e ecutr of the estate of oseph Whte Todd, deceased,
and brngs ths sut to recover 6,000 and nterest aeged to have been wrong-
fuy coected as part of the ta eved aganst the estate of the decedent.
The deceased was a nonresdent aen, and the queston n controversy n the
case s whether a certan transacton had by hm n the cty of New York
amounted to a oan of money or was a depost n a bank. The Commssoner
ncuded the fund n the gross estate of the decedent for the purpose of
computng hs ta payabe on property n ths country. The pantff nssts
that the fund was deposted wth a person carryng on the bankng busness
and was e empt under the statutory provsons.
The aw governng the case s found n secton 303 of the Revenue ct of
1924, and s as foows:
Sec. 303. or the purpose of the ta the vaue of the net estate sha be
determned

(e) The amount recevabe as Insurance upon the fe of a nonresdent
decedent, and any moneys deposted wth any person carryng on the bankng
busness, by or for a nonresdent decedent who was not engaged n busness
n the Unted States at the tme of hs death, sha not, for the purpose of
Part I of ths tte, be deemed property wthn the Unted States.
The evdence n the case shows that the decedent, about s weeks before hs
death, was n the cty of New York and sod some stocks or securtes for
upward of 100,000. e had twTo stepsons, Cortandt an Rensseaer asey
and Chares D. asey, |r., who were, wth three others, members of the co-
partnershp of C. D. asey Co., dong busness n that cty n the way oC
deang n money and securtes, buyng and seng securtes for the account
of others and chargng commsson therefor, borrowng money from banks and
trust companes, bankers, and ndvduas, upon whch they pad nterest, and
n some nstances takng deposts and for partcuar reasons aowng a few
of ther cents to draw checks on ther baances. ut at the tme nvoved
n the case ths frm dd not hod tsef out to the pubc as a bank or bankng
nsttuton, dd not carry the word bankers or bank on ts etterheads
or offce, and had never comped wth the aws of the State of New York to
authorze t to do busness as a banker. The decedent asked to see hs step-
sons, and after some conversaton wth them ndorsed and devered to them
a check for 100,000. t the same tme he prepared a recept or acknowedge-
ment whch they sgned and whch read as foows:
New York, anuary 11, 1926.
Receved from Sr oseph Whte Todd, baronet, the sum of one hundred
thousand doars ( 100,000) on oan at 5 per cent per annum. Interest payabe
semannuay. The prncpa to reman for two years wth opton of ender
and borrower to e tend the term of oan year by year by gvng 12 months
notce.
an It. at.sey,
Chas. D. asey.
The frm of C. D. asey Co. dd not open any account on ts books n
the name of the deceased by reason of ths transacton. No record thereof
appears anywhere on the books of C. D. asey Co. showng any transacton
wth te pantff s testator. The books of C. D. asey Co. show ndvdua
nvestments of 50,000 each, made by Cortandt an Rensseaer asey and
Chares D. asey, |r., n the frm of C. D. asey Co. by an entry made at
the tme whch has snce been contnued and shows a abty of the frm to
Cortandt an Rensseaer asey and Chares D. asey, |r.
casua readng of the statute shows that n order to gan the beneft of
the e empton the funds must not ony be deposted, but the depost must be
made wth a person carryng on the bankng busness. Some argument as
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Regs. 70, rts. 17, 44, 45
460
been made by counse upon the queston of whether asey Co. were engaged
n the bankng busness. The evdence shows that ths frm has not comped
wth the aws of New York wth reference to persons engagng n that busness,
but we do not fnd t necessary to determne ths queston. The transfer of
the funds by decedent was not made to the frm but to two members thereof n
ther ndvdua capacty, as was shown by the recept for the money, whch they
sgned as ndvduas. Moreover, there was no entry on the books of the frm
showng a credt n favor of the decedent as a resut of the transacton. On
the contrary, Cortandt an Rensseaer asey and Chares D. asey, |r., were
each credted wth 50,000 on the frm s books, and these amounts have snce
been carred as a abty of the frm to the two partners above named. There
s nothng n the evdence to show that these two partners were engaged n
the bankng busness. The crcumstances ndcate that they were not. If
there was any depost, t was ceary wth persons not engaged n the bankng
busness. ut we do not thnk the money was deposted n the sense that the
word depost s used n the statute. It was ceary the ntent of Congress
to requre the depost to be made n the same manner that t woud have been
n an ordnary bank. The recept and the accompanyng crcumstances show-
that the transfer of the check consttuted a oan rather than a depost, and we
have so found.
or the reasons stated above, the petton of the pantff must be dsmssed,
and t s so ordered.
TITL I . ST T T . (1921)
TR NS RS Y D C D NT IN IS LI TIM .
eguattons 70, rtce 17: Transfers ntended -23-5097
to take effect at or after death. rtces 44 and Ct. D. 346
45: Chartabe bequests.
ST T T R NU CT O 1921 D CISION O COURT.
1. Gross state Transfer at or fter Death.
Where a decedent e ecutes a statement to the effect that he was
seng to 300 shares of stock (worth over 100,000) to be trans-
ferred to her wthn 10 days after hs death and acknowedges
theren recept of a sum of money as consderaton, ony 10
however beng pad and that amost mmedatey deposted to s
credt, and after sgnng the statement he receved one quartery
dvdend and another was paced to hs credt a day or two before
hs death, possesson of the stock never havng been devered to
, there s no gft nter vvos and the transfer, f any, s one
ntended to take effect n possesson or en|oyment at or after
hs death wthn the meanng of secton 402(c) of the Revenue
ct of 1921.
2. Deducton Chartabe equests Masonc Lodges.
Loca odges of Masons are unncorporated and grand bodes of
masonry over them are ncorporated not for chartabe purposes
e cusvey but for fraterna and benefca purposes as we. c-
cordngy an endowment bequest to these oca masonc bodes s
not deductbe from the gross estate under secton 403(a)3 of the
Revenue ct of 1921 as a bequest to a corporaton organzed and
operated e cusvey for chartabe purposes.
3. Decson ffrmed.
The decson of the oard of Ta ppeas (16 . T. ., 719)
affrmed.
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461
Regs. 70, rts. 17, 44,45
Unted States Crcut Court of ppeas for the fth Crcut. No. 5863.
The rst Natona ank n Daas, Temporary dmnstrator of the state of
Lous . Pres, Deceased, and Successor Through Consodaton of the Cty
Natona ank of Daas, ormer wecutor of a state, pettoner, v. Com-
mssoner of Interna Revenue, respondent.
Petton for revew of decson of the Unted States oard of Ta ppeas (Dstrct of
Te as).
efore ryan and oster, Crcut udges, and Dawkns, Dstrct udge.
December 23, 1930.
opnon.
ryan, Crcut udge: Ths s a petton to revew a decson of the oard of
Ta ppeas sustanng a defcency assessment aganst the estate of Lous .
Pres, deceased. The Commssoner of Interna Revenue, n determnng the
nmount of the assessment, ncuded n the vaue of the estate the vaue of cer-
tan property, consstng of bank stock, whch wthn two years pror to hs
death Pres transferred to zabeth acon, and of an amount whch he be-
queathed n the resduary cause of hs w to severa oca odges or subordnate
bodes of the York and Scottsh tes of Masonry. The pettoner, temporary
admnstrator and e ecutor of the estate, makes the contentons that both the
vaue of the bank stock and the amount of money represented by the bequest
shoud have been e cuded from consderaton n arrvng at the vuue of the
estate to be ta ed, on the grounds that the transfer of the stock took effect
before Pres death, and that the Masonc bodes named as benefcares of hs
bequest were corporatons organzed and operated e cusvey for chartabe
purposes or were trustees under hs w for such purposes.
The facts are stated n much deta n the opnon of the oard of Ta
ppeas (16 . T. ., 719), and therefore need not be narrated here at any
great ength.
t the tme of hs death Pres was 81 years of age and unmarred. e ved
n Daas, Te ., and was a cose frend of zabeth acon and her husband.
Wthn ess than s months before hs death he e ecuted a statement to the
effect that he was seng to zabeth acon 300 shares of bank stock to be
transferred to her wthn 10 days after hs death. Ths statement acknow-
edged recept of a sum of money as consderaton, but ony 10 was pad,
and that amount Pres amost mmedatey deposted to her credt The stock
was worth 112,500, but t was not transferred durng the fetme of Pres
and after the statement was sgned he receved one quartery dvdend and
another was paced to hs credt a day or two before hs death.
y hs w Pres, after makng certan specfc bequests, gave the resdue
of hs estate as endowments to the Masonc bodes of Daas, of whch he mght
be a member at the tme of hs death, and three other benefcares, share and
share ake. These Masonc bodes were oca odges or branches of the Grand
bodes of Masonry, and a the atter, e cept one, were ncorporated not for
busness or gan but for fraterna and benevoent purposes. It was stpuated
that no gft had been or, wthout voatng Masonc usage or custom of ong
standng, coud be used for any other than chartabe purposes. In a sut
brought n a State court hers at aw of Pres chaenged the rght of the
Masonc benefcares to take or admnster that part of the estate gven them
by the w. partes at nterest were before the court. In a speca verdct
(he |ury found that the funds of Masonc bodes were used e cusvey for
chartabe and educatona purposes, and the court entered a |udgment to the
effect that these bodes were themseves purey chartabe organzatons.
The assessment was made under the Revenue ct of 1921, whch mposes an
estate ta upon the transfer of the net estate of every decedent dyng after
the passage of the ct. (Secton 401.)
The vaue of the gross estate s determned by ncudng the vaue at the
tme of hs death of a property to the e tent of the nterest theren of whch
the decedent has made a transfer n contempaton of or ntended to take
effect n possesson or en|oyment at or after hs death, e cept n case
of a bona fde sae for a far consderaton n money or money s worth. ny
transfer of a matera part of a decedent s property made wthn two years
pror to hs death s presumed to have been made n contempaton of death,
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Regs. 63, rt. 19.
462
uness the contrary s shown. (Secton 402.) or ta aton purposes the vaue
of the net estate of a resdent s to be determned by deductng from the vaue
of the gross estate the amount of a bequests, egaces, devses to
or for the use of any corporaton organzed and operated e cusvey
for chartabe purposes, or to a trustee or
trustees e cusvey for chartabe purposes. (Secton 403.)
(42 Stat., 277, 278, 279.)
The transfer of the bank stock havng been made wthn two years pror to
Pres death must under the terms of the statute be deemed to have been n
contempaton of death, snce there was no showng to the contrary. The cr-
cumstances that Pres contnued to receve dvdends on the stock after the
purported sae, wthout ob|ecton from zabeth acon, s a cear ndcaton that
the transfer was not ntended to take effect unt after hs death. The conduct
of both partes nterested s nconsstent wth the theory advanced by pettoner
that the tte passed mmedatey, and that ther ntenton was ony that the
ssuance of a new certfcate evdencng a change of ownershp shoud be post-
poned unt after Pres death. There was no gft nter vvos, as Pres dd
not dever possesson but remaned n contro and domnon of the stock.
( asket v. asse, 107 . S., 002, 614.)
The Revenue ct n queston by secton 403 e empts from an estate ta ,
among other thngs, bequests to corporatons whch are organzed and op-
erated e cusvey for chartabe pur|wses. The oca odges of whch Pres
was a member were not ncorporated at a, and the Grand bodes of Masonry
over them were ncorporated not for chartabe purposes e cusvey, but for
fraterna and benevoent purposes as we. raterna organzatons may be
descrbed generay as soca n ther nature, and desgned not e cusvey for
chartabe purposes but for the en|oyment of ther members n many ways.
(5 R. C. L., 372.) Chartabe organzatons are benevoent, but benevoent
organzatons are not e cusvey chartabe. (Chambern v. Stearns, 111 Mass.,
267.) Nor are Masonc bodes operated e cusvey for chartabe purposes,
snce they carry out aso benevoent and other purposes for whch tey were
organzed. The Revenue ct aso e empts from an estate ta bequests made to
trustees e cusvey for chartabe purposes, but Pres resduary bequest was
not made to the Masonc bodes as trustees t was gven to them, as t was
to the other benefcares wthout dstncton, as an endowment The Masonc
bodes receved ther share of the bequest on the same terms as dd the other
benefcares, and so t can not be sad that the word endowment was used
n a speca sense as apped to any one benefcary, or that t had a meanng
understood ony by Masons. The bequest coud have been used wthout vo-
atng the w for any endowment purpose, ncudng the constructon of a
tempe or budng for fraterna and benevoent purposes ody. The verdct
and |udgment n the State court sut were broader than was authorzed by the
provsons of the w. The Government was not a party to that sut, and
was not bound by t, but had the rght to proceed n ts own way to coect
ta es, sub|ect ony to the mtatons mposed by a aw of ts own makng.
The petton for revew s dened.
TITL I . ST T T . (1918 ND 1921)
TR NS RS Y D C D NT IN IS LI TIM .
Reguatons G3, rtce 19: Genera. -19-5057
Ct, D. 333
ST T T R NU CT OP 1918 D CISION O SUPR M COURT.
Gboss state Transfer to Takb ffect at Death Contngent
Remander Consttutonaty.
Where one cause of a deed of a decedent conveyng and to
another grants a fe estate wth an e press reservaton of the fee
whch s to reman vested n sad grantor n the event that the
grantee sha de pror to the decease of sad grantor and by another
cause the grantee takes the fee n the event and n that case
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463
Regs. 63, rt. 19.
ony that she sha survve the grantor, the decedent has made a
transfer of the remander ntended to take effect n possesson or
en|oyment at or after hs death wthn the meanng of secton
402(c) of the Revenue ct of 1918. That subdvson s const-
tutona n so far as t requres the ncuson n the gross estate
of the vaue of an nterest transferred competey and rrevocaby
by deed made after the enactment of the Revenue ct of 1916 and
before the enactment of the Revenue ct of 1918.
Sttpbkme Coubt of the Unted States. No. 387. October Term, 1930.
tta M. en, ormer dmnstratrw of the state of Soomon en, Deceased,
etc., et a., pettoners, v. The Unted States.
On wrt of certorar to the Court of Cams.
pr 13, 1931.
Mr. ustce Sutherand devered the opnon of the court.
The pettoners are the soe survvng hers of Soomon en and dstrbutees
of hs estate. e ded ntestate eavng, among other property, two parces of
and n Cook County, 111., whch, some 15 months pror to Ids death, he had
conveyed to hs wfe, tta M. en, by deed, the habendum causes of whch
are as foows:
rst. To have and to hod the sad ands unto the sad grantee for and
durng the term of her natura fe, and f she sha de pror to the decease
of sad grantor then and n that event she sha by vrtue hereof take no greater
or other estate n sad ands and the reverson n fee n and to the same sha
n that event reman vested n sad grantor, hs hers, and assgns, such reverson
beng hereby reserved to sad grantor and e cepted from ths conveyance.
Second. Upon condton and n the event that sad grantee sha survve the
sad grantor, then and n that case ony the sad grantee sha by vrtue of
ths conveyance take, have, and hod the sad ands n fee smpe, unto the soe
use of hersef, her hers, and assgns forever.
In audtng the estate ta return of the admnstratr , the Commssoner of
Interna Revenue ncuded n the gross estate the vaue of these two parces of
and, after deductng therefrom the vaue of the fe estate and the ta thereto
attrbutabe was assessed aganst the estate. Ths was pad, and a cam for
refund was re|ected. Thereupon, pettoners sued n the Court of Cams to
recover the amount. That court rendered |udgment aganst pettoners. (42 .
(2d), 596.)
The case turns upon the meanng and appcaton of secton 402 of the Revenue
ct of 1918 (ch. 18, 40 Stat., 1057, 1097), whch provdes that the vaue of the
gross estate of the decedent sha be determned by ncudng the vaue at the
tme of hs death of a property, etc.
(c) To the e tent of any nterest theren of whch the decedent has at any
tme made a transfer, or wth respect to whch he has at any tme created a
trust, ntended to take effect n possesson or en|oyment at or after
hs death .
The two causes of the deed are qute dstnct the frst conveys a fe estate
the second deas wth the remander. The fe estate s granted wth an e press
reservaton of the fee, whch s to reman vested n sad grantor n the event
that the grantee sha de pror to the decease of sad grantor. y the
second cause the grantee takes the fee n the event and n that case ony
that she sha survve the grantor. It foows that ony a fe estate mme-
datey was vested. The remander was retaned by the grantor and whether
that ever woud become vested n the grantee depended upon the condton
precedent that the death of the grantor happen before that of the grantee. The
grant of the remander, therefore, was contngent. See 2 Washburn, Rea Prop-
e ty (4th d.), pages 547-548, 559, paragraph 1. The decsons of the Supreme
Court of Inos, the State where the deed was made and the property es, sup-
port ths concuson. ( oward et a. v. Pcavc|, 12S 111., 430, 439 ae / v.
Strahan, 314 111., 213, 217.)
It s sad that we must consder the deed as a whoe that snce there s
nothng n the grantng cause to ndcate the nature of the estate granted we
must go to the habendum to determne that queston that the habendum con-
ssts of two causes, one conveyng a fe estate, and the other the fee and that
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Regs. 63, rt. 79.
4b 4
the greater estate or fee naturay swaows up the esser or fe estate when
created by the same nstrument. The prncpe nvoked, however, does not
hep the pettoners, for certany here the estates were not merged durng the
fe of the grantor and the deed evnces the cear ntenton of the grantor that
they shoud not be. Nothng s to be ganed by mutpyng words n respect of
the varous ncetes of the art of conveyancng or the aw of contngent and
vested remanders. It s perfecty pan that the death of the grantor was the
ndspensabe and ntended event whch brought the arger estate nto beng
for the grantee and effected ts transmsson from the dead to the vng, thus
satsfyng the terms of the ta ng act and |ustfyng the ta mposed. Compare
Ter v. Unted States (281 U. S., 497 Ct. D. 190, C. . I -1, 383 ).
The provson of the Revenue ct of 1918, so far as t seeks to ta the
transfer n queston, s assaed as unconsttutona because, t s sad, the
transfer was compete and rrevocabe before the ct was passed. In support of
ths vew Nchos v. Coodge (274 U. S., 531 T. D. 4072, C. . I-2, 351 |), and
smar decsons of ths court are cted. ut the deed under revew, whe
made before the enactment of the Revenue ct of 1918, was made after the ct
of 1916 (ch. 463, 39 Stat., 756, 777), whch, wth an addton not pertnent here,
contaned (secton 202) e acty the same provson and the contenton, for that
reason, other grounds asde, s wthout mert Mken ct at. v. Unted States
(2 3 U. S., 15, decded March 2, 1931 Ct, D. 320, page 472, ths uetn ),
where the cases reed upon by pettoners are dstngushed.
udgment affrmed.
estate ta revenue acts of 1918, 1921, and 1926 decson of court.
1. Sut Necessty of ssessment.
n assessment of an estate ta mposed by the Revenue ct of
1918 s not essenta where a proceedng n court s begun for the
coecton of the ta .
2. ecutor Persona Labty ppcaton fob Dscharge.
n appcaton by an e ecutor, fed pursuant to secton 407 of
the Revenue ct of 1921, for determnaton of the amount of the
ta and dscharge of persona abty has no effect n dschargng
hm from abty for an estate ta that accrued under the Revenue
ct of 1918.
3. Same Incompete Return.
return wheren no vaue can be paced upon the decedent s
nterest In certan property and wheren severa camed deductons
are estmated s not a compete return, the fng of whch s
essenta to the dscharge from persona abty of the e ecutor
when he makes appcaton therefor as provded by secton 407 of
the Revenue ct of 1921.
4. Same Waver.
Where after the fng of an appcaton pursuant to secton 407
of the Revenue ct of 1921 the Commssoner does not obtan the
requested cooperaton of the e ecutor n the determnaton of the
amount of the ta and a deay n the determnaton favorabe to
the estate s thereby occasoned, the appcaton s waved and the
e ecutor s not dscharged of persona abty as provded n that
secton.
5. Sut nforcement of Ta Len ssets n Possesson of
Trustee Defen se.
Nether secton 308(a) nor secton 316(a) of the Revenue ct of
1920 s a bar to a sut aganst a testamentary trustee, commenced
wthn 00 days after the mang of the notce of a defcency au-
thorzed to be sent by secton 308(a), to coect the ta by enforce-
ment of a en upon the assets n possesson of the trustee whch
formery were owned by the decedent-
P YM NT O T ND INT R ST.
Reguatons 63, rtce 79: Payment of ta
genera.
-19-5058
Ct. D. 332
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465
Regs. 63, rt. 79.
Unted States Dstrct Cottbt, Southebn Dstrct of New York.
Unted States of merca, pantff, v. Wam Crukshank and enry C.
Drayton, Indvduay and as ecutors of the state of Charotte ugusta
ag, Deceased, and Unted States Trust Go. of New York, a Corporaton,
defendants.
anuary 23, 1931.
OPINION.
Patterson, D. .: Sut In equty s brought to coect an addtona estate ta
aeged to be owng to the Unted States under the Revenue ct of 1918. The
defendants are Wam M. Crukshank and enry C. Drayton, ndvduay and
as e ecutors of the estate of Charotte ugusta ag, and Unted States Trust
Co. of New York, whch s trustee of sad estate. Drayton was not served. The
facts have been presented by wrtten stpuaton.
The decedent ded on uy 30, 1920. On uy 28, 1921, pursuant to the
Revenue ct of 1918 then n force, her e ecutors fed an estate ta return,
showng a ta of 28,929.39, whch sum was pad by them at the same tme.
Certan features of ths return w be dscussed ater. On December 7, 1921,
the e ecutors (by ther attorneys) fed a wrtten appcaton for determnaton
of the ta wthn one year and for dscharge of persona abty. Ths app-
caton was made under secton 407 of the 1921 ct, whch had become effectve
on November 23, 1921. There had been no smar provson n the 1918 ct.
The reevant porton of ths secton s as foows:
If the e ecutor fes a compete return and makes wrtten appcaton to
the Commssoner for determnaton of the amount of the ta and dscharge
from persona abty therefor, the Commssoner, as soon as possbe and
In any event wthn one year after recept of such appcaton, sha notfy the
e ecutor of the amount of the ta , and upon payment thereof the e ecutor sha
be dscharged from persona abty for any addtona ta thereafter found
to be due, and sha be entted to receve a recept or wrtng showng such
dscharge: .
The Commssoner dd not audt the return or notfy the e ecutors of the
amount of the ta wthn one year. It was not unt over three years had
passed that the e ecutors receved any notce of a defcency n the ta . Mean-
whe however, the Commssoner had wrtten to the e ecutors severa etters,
the frst of whch s dated May 31, 1922, to the effect that among the deductons
camed n the return were severa tems that were ony estmated, and that
before fna audt coud be made he shoud be advsed of the sums actuay pad.
The e ecutors reped to some of these etters, furnshed certan data, and
stated that certan other nformaton woud be furnshed ater. Despte severa
ater requests for ths nformaton, t was not gven. nay, the Commssoner
went ahead wth hs audt wthout the addtona data, and on ebruary 19,
1925, gave the e ecutors notce of a tentatve determnaton of ta defcency
n the amount of 0,456.04. The e ecutors fed a protest and an amended
protest, whch set before the Commssoner for the frst tme the actua payments
n pace of the estmated payments. The Commssoner thereupon, on pr
14, 1925, notfed the e ecutors that ther protest had been sustaned and the
defcency was ony 4,541.53. They were aso advsed that appea mght be
fed wth the oard of Ta ppeas wthn 60 days.
The e ecutors pad no attenton to ths notce. They dd not fe an appea,
nor dd they pay the defcency. They had aready, on November 23, 1923, after
payng debts and admnstraton e penses and retanng commssons for ther
own servces, turned over the entre net assets remanng n the estate to the
Unted States Trust Co., the trustee named n the w. Ths was done pursuant
to decree of the Surrogate s Court of New York County.
The Commssoner never made an assessment of the ta . The ony further
effort to coect the defcency pror to nsttuton of sut was a terse demand,
made on uy 12, 1926, upon Unted States Trust Co. for payment Sut was
commenced on uy 21, 1926, a few days short of fve years from the fng of
the return.
The b of compant, after settng forth the facts as to the ncdence of the
ta and as to possesson by the trustee of assets of the estate, aeges that the
unpad amount s a en upon sur-h assets. The reef demanded s that t be
ad|udged that there s due and owng to the Unted States the sum of 4,541.53,
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Regs. 63, rt. 79.
466
wth nterest that t be further ad|udged that the estate assets n the hands
of the trustee are sub|ect to a en n favor of the Unted States, and that uness
the ta be pad, the estate assets be apped to the satsfacton of the ta .
y an amendment to the b, t s aeged that the e ecutors pad debts owed
by the decedent, wthout satsfyng the debt owed to the Unted States, In
voaton of secton 3407 of the Revsed Statutes, and that they are therefore
personay abe for the ta .
It s conceded by the defendants that the vaues paced by the Commssoner
on tems consttutng the gross estate were correct, and t s not dsputed that
hs fna ad|ustments were n each nstance proper and that there s an unpad
baance of estate ta n the amount of 4,541.53. The defendants contend,
however, that for seve-a reasons they are not abe for ths unpad baance
and that ths sut s not mantanabe aganst them.
s a genera proposton, t can not be dsputed that an e ecutor who dstrb-
utes an estate wthout payment of the estate ta becomes personay abe
for the ta . Indcatons of such a abty are to be found n the 191S ct
and n a ater cts, but t s suffcent to cte secton 3467 of the Revsed
Statutes. It s kewse cear that the ta s a en for 10 years upon the gross
estate (1918 ct, secton 409, and smar provsons n ater cts), and that
the Unted States may enforce ts en by sae n ega proceedngs. (Page v.
Sknno 29S ed., 731 T. D. 3600, C. . 1II-1, 485 .) It s aso cear that the
statute of mtatons on coecton of the ta by proceedngs n court had not
run when ths sut was commenced. The perod was fve years (1921 ct, sec-
ton 1320 1924 ct, secton 1009 1926 ct, secton 1109), and t dd not e pre
unt uy 28, 1926. The pantff s therefore entted to the reef prayed for,
both aganst the e ecutor who was served and aganst the estate assets n the
hands of the trustee, uness the speca matters peaded by the defendants have
mert.
1. It s sad that the coector shoud have made out a return for the estate,
and that snce ths was not done, the sut can not be mantaned. Ths argument
s derved from secton 405 of the 1918 ct, to the effect that where no return
s fed by the e ecutor or where the return fed by hm contans a fase or
ncorrect statement, the coector sha make a return and the Commssoner
sha make an assessment on such return. There s no substance n the argu-
ment. The admnstratve procedure outned n secton 405 s not e cusve.
It s ony one of severa methods avaabe for coecton of the ta . The
faure of the coector to make a return under ths secton was reed upon by
defendants n Unted States v. ver (12 ed. (2d), 194 T. D. 3869, O. . -.
397 ), but was hed mmatera by the Crcut Court of ppeas for the rst
Crcut (see page 197). Moreover, at the tme when ths sut was started the
1926 ct was n force and was controng as to the manner of coectng ta es
under the 1918 ct. though not of course as to the computaton of the ta .
(1926 ct, secton 318.) The 1926 ct contaned no drecton as to the coector
makng returns n cases where the return fed by the e ecutor was fase or
ncorrect. or these reasons the fact that the coector dd not fe a return s
of no moment.
2. It s sad that the sut fas because there was no assessment of the ta by
the Commssoner. ssessment may be a necessary premnary step to dstrant
as a means of coectng ta es from persons unwng to pay, but there can be
no ((ueston that assessment s not essenta where sut s resorted to as the
method of forcng payment. (Unted States v. yer, supra, and authortes
coected there.) The defendants pont out that the yer case arose before the
passage of the 1924 ct and the 1926 ct. So t dd, but that fact does not hep
the defendants. Whereas the earer cts dd not contan any e press provson
to the effect that proceedngs n court coud be brought wthout assessment,
both the 1924 ct and the 1926 ct decare n so many words that sut to coect
an estate ta mav be brought wthout a pror assessment. See 1924 ct, sec-
tons 308(h), 311 1926 ct, secton 310.
3. I come now to an argument of greater force. It s urged that the e ecutors
are dscharged from persona abty because of the appcaton made by them
under secton 407 of the 1921 ct for prompt determnaton of the ta , fo-
owed by the faure of the Commssoner to notfy them of any addtona ta
wthn one year thereafter. s matter of strct constructon, the dscharge
cause of secton 407 does not ft ths case n terms t covers ony nstances
where, after recept of the appcaton, the Commssoner gves notce of the
amount of the ta wthn the year, where such amount s pad, and where there-
after a further amount s found to be due. The provson s that the e ecutor
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467
Regs. 63, rt. 79.
sha bo free from persona abty as to such further amount ut I take t
that the words the Commssoner, as soon as possbe and n any event wthn
one year after recept of such appcaton, sha notfy the e ecutor of the
amount of the ta , are mandatory, and that ordnary the e ecutor s ds-
charged from persona abty where the Commssoner fas to gve notce
wthn the year of any defcency n the ta aready pad. Common sense woud
seem to |ustfy ths broader operaton of the cause, and I w adopt t.
Nevertheess, there are severa features n the present case whch convnce
me that the e ecutors were not dscharged from persona abty. In the frst
pace, t seems to me that the appcaton made by the e ecutors had no effect
upon a ta abty whch had accrued under the 1918 ct. That ct contaned
no provson whereby e ecutors mght appy for a prompt audt and thereby
cut short the perod of ther persona abty. The 1921 ct, whe t repeaed
the 1918 ct generay, provded that the 1918 ct shoud reman n fu force
for the assessment and coecton of ta es accrued under t (1921 ct, secton
1400.) It was not unt the 1924 ct that ths pocy was changed and the
practce adopted of havng the admnstratve provsons of ater statutes govern
cases st open under earer cts. There was nothng retroactve n the 1921
ct, nothng whch affected n any way ta es under the 1918 ct. The ta aton
of estates of persons who had ded pror to November 23, 1921, was eft to be
governed n a respects by the 1918 ct. It therefore seems to me that the
appcaton made by the e ecutors under the 1921 ct was fute.
In the second pace, the e ecutors dd not fe a compete return, whch s
the prmary requste under secton 407 of the 1921 ct. The return was ncom-
pete both as to the gross estate reported and as to the deductons camed.
mong the assets reported was an undvded nterest n certan mortgages hed
n escrow pendng determnaton of ta es n another estate. The return stated
that the vaue of the decedent s nterest n the mortgages coud not be deter-
mned unt the ta abty of the other estate shoud be setted, and no fgure
was Inserted n the return as the vaue of the decedent s nterest. (In 1925
the Commssoner f ed the vaue of the decedent s nterest n these mortgages
at 00,666.67, whch vaue s conceded to be correct. The addton of ths fgure
to the vaue of the gross estate accounts for the greater part of the ta def-
cency sued for.) The good fath of the e ecutors n stng the property s
beyond queston, but to my mnd a return wheren no vaue was paced or coud
be paced upon the decedent s nterest n ths vauabe property and where no
ta was pad on account of t s not a compete return. Secton 404 of the
1918 ct requred that the return set forth the vaue of the gross estate, and
here the e ecutors themseves stated n ther return that the vaue of the gross
estate coud not be set forth. Nor was the return a compete one as to deduc-
tons. Severa of the deductons were estmated, whch was doubtess the best
the e ecutors coud do at the tme. The fact remans, however, that one of the
matters whch apparenty caused the ong deay n the audt was the effort of
the Commssoner to obtan more specfc nformaton as to these estmated
deductons. The e ecutors themseves, n ther etter to the Commssoner of
uy 16, 1923, n effect admtted that further nformaton as to the deductons
was necessary as an amendment to the orgna return. The return beng
ncompete n these respects, secton 407 of the 1921 ct has no bearng upon
the case.
In the thrd pace, the demand for prompt audt was waved by the e ecutors.
The Commssoner sought ther cooperaton n competng an eary audt, but
dd not obtan t Whe the Commssoner mght have gnored r. estmated
deductons and thus have competed hs audt wthn one year, he seems to
have deayed hs audt n order to do fu |ustce to the estate. s ate as uy,
1923, the e ecutors promsed to furnsh compete suppementa data n a few
weeks. There s no queston that the deay was benefca to the estate, for n
1925 the e ecutors asked for and were gven the beneft of deductons whch
had not been made at the e praton of one year after December 7, 1921.
or the reasons outned above, I have reached the concuson that the
e ecutors dd not by ther appcaton for prompt audt and for dscharge, cear
themseves of persona abty for payment of the ta , and that ther defense
aong ths ne s unavang.
4. nay the defendants urge that ths sut can not be mantaned because
of certan restrctons mposed by the 1926 ct upon the rght of the Unted
States to commence suts to coect defcences n estate ta es. The genera
proposton Is beyond dspute that the Unted States may mantan a sut to
coect unpad revenue, uness another remedy has been e pressy made e cu-
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Regs. 63, rt. 79.
468
sve. (Doar Savngs ank v. Unted States, 19 WaL, 227 Unted States v.
Nashve, G. St. L. Ry., 249 ed., 678 Unted States v. yer, supra.) It Is
aso beyond dspute that pror to the passage of the 1926 ct the Unted States
had the rght to nsttute suts at aw or n equty to coect unpad ta es at any
tme after they fe due, sub|ect of course to any appcabe statute of mtaton.
One may search the 1916 ct, the 1918 ct, the 1921 ct, and the 1924 ct
from begnnng to end, wthout turnng up any condton or restrant upon such
rght. In the 1926 ct, however, there are certan restrctons upon the power
to commence suts for the coecton of estate ta es. The mportant secton u
ths connecton s secton 308(a), whch provdes that the Commssoner on
determnng a defcency may send notce thereof to the e ecutor and that tte
e ecutor sha have the rght, wthn 60 days, to fe a petton wth the oard
of Ta ppeas for redetermnaton of the defcency, and then goes on to say
No assessment of a defcency n respect of the ta mposed by ths chapter
and no dstrant or proceedng n court for ts coecton sha be made, begun,
or prosecuted unt such notce has been maed to the e ecutor, nor unt the
e praton of such 60-day perod, nor, f a petton has been fed wth the oard,
unt the decson of the oard has become fna.
It w be observed that secton 308(a) s confned to defcences n estate
ta es under the 1926 ct. Secton 318(a), however, assmates the procedure
n coectng estate ta es under earer cts to the procedure n the case of
defcences under the 1926 ct. nd secton 316 provdes that the abty
of transferees (ncudng hers, egatees, dstrbutees and devsees) for estate
ta under any ct sha be assessed, coected and pad n the same manner as
ndcated n the case of a defcency under the 1926 ct.
The purpose of these provsons s pan. Congress had aready n 1924
created the oard of Ta ppeas and had gven ta payers the rght to appea to
the oard from defcences determned by the Commssoner. ut there was
nothng n the 1924 ct whch prevented the Unted States from brngng sut
at any tme to coect the ta . In broadenng the |ursdcton of the oard n
1926, Congress saw ft to provde that unt the e ecutor had waved hs rght
to ay the matter before the oard, the coecton of the ta shoud be hed n
abeyance and there shoud be no assessment, dstrant or sut to coect the
defcency.
So far as the e ecutors n ths case are concerned, these sectons of the 1920
ct furnsh no defense. s to them the Commssoner comped wth the con-
dton precedent to the commencement of sut. e gave them wrtten notce of
defcency, and he wated more than 60 days before nsttutng ths sut. They
fed no petton wt the oard. They were therefore sub|ect to sut n the
Unted States dstrct court at the tme ths sut was commenced.
s to the trustee, however, the Commssoner dd not wat the requred perod.
e commenced sut wthn 10 days after the frst notce of defcency served
upon the trustee. If ths were a sut to estabsh abty aganst the trustee
as a transferee of estate assets, I woud be ncned to hod that secton 316(a),
read n connecton wth secton 308(a), was a bar to mantenance of a sut.
(See Phps v. Commssoner, 42 ed. (2d), 177, 179 Ct. D. 211, C. . I -2,
253 .) It shoud be noted, however, that the contrary seems to have been ed
n two cases n other crcuts whch arose under the companon sectons deang
wth abty of transferees for ncome ta es, secton 274(a) and 280(a).
(Unted States v. Greenfed Tap De Corporaton, 27 ed. (2d), 933 T. D.
4196, C. . II-2, 170 Unted States v. Updke, 25 ed. (2d), 746, affrmed n
32 ed. (2d), 1 Ct. D. 102, C. . I -1, 228 .) ut ths queston need not be
decded, for ths sut s not one to fasten abty upon the trustees and secton
316 s not nvoved. The prayer for reef does not ask that the trustee be hed
abe for the ta . If we ay to one sde the asserted persona abty of the
e ecutors , the sut s soey to coect the ta through enforcement of the ta
en upon assets formery beongng to the decedent. The trustee s a party
defendant merey because these assets are now hed by t. It s doubtess true
that the restrcton upon proceedngs n court, whch appears n secton 308(a),
appes to a sut to coect a ta through enforcement of en, as we as to other
suts to coect ta es n fact, secton 314, whch authorzes proceedngs n court
of ths character, e pressy decares that coecton of a defcency by ths
method sha be sub|ect to the provsons of secton 308(a). ut, as aready
ponted out, the requrements of secton 308(a) were fuy comped wth by the
Commssoner. s I vew the case, therefore, the cam that the 1926 ct for-
bade the brngng of ths sut on uy 22, 1926, s untenabe.
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469
Regs. 70, rt. 10.
The orgna b sought no reef aganst the e ecutors, athough namng them
as defendants. It was not unt une, 1930, that the amendment was fed,
wheren persona abty on ther part was asserted. It s not necessary to
decde whether the statute of mtatons s a good defense under such crcum-
stances, because no such defense has been peaded.
There w be a decree for the reef prayed for by the Unted States. The
decree w provde that the ta , wth nterest and costs, be pad out of the
estate assets n possesson of the trustee, n dscharge of the ta en, and n
defaut of such payment, by the defendant Crukshank. The pantff w sub-
mt a decson embodyng fndng of fact and concusons of aw, n compance
wth the new rue of the Supreme Court, on fve days notce, and w thereafter
submt a decree.
TITL I . ST T T . (1918)
GROSS ST T .
Reguatons 70, rtce 10: Character of nter- -3 4906
ests ncuded. Ct. D. 271
ST T T R NU CT O 1918 D CISION O SUPR M COURT.
. Gooes state Rea state Located n Mssour.
The nterest of a decedent n rea estate ocated n Mssour not
beng sub|ect under the aws of that State to the payment of the
e penses of admnstraton, the vaue thereof shoud not be n-
cuded n determnng the vaue of the gross estate under secton
402(a) of the Revenue ct of 1918.
2. Decsons ffrmed.
The decsons of the dstrct court (28 ed. (2d), 510) and the
crcut court of appeas (36 ed. (2d), 410) affrmed.
Supreme Court of the Unted States. No. 24. October Term, 1930.
Noah Crooks, Coector of Interna Revenue, pettoner, v. en|amn arreson
et at.
On wrt of certorar to the Unted States Crcut Court of ppeas for the ghth Crcut.
November 24, 1930.
Mr. ustce Sutherand devered the opnon of the court.
en|amn . arreson, a resdent of Mssour, da testate n 1920, eavng
wthn the State property and assets whch ncuded rea property vaued at
over 269,000. The Commssoner of Interna Revenue, upon a fna audt and
revew of the edera estate ta return of the e ecutors made under the Reve-
nue ct of 1918, Incuded the rea property as a part of the gross estate for the
purpose of computng the ta . The e ecutors pad 37,762.20, the amount
attrbutabe to the vaue of the rea property, and subsequenty camed a re-
fund thereof on the ground that the vaue of the decedent s rea property havng
ts stus In Mssour was not, under the aw of that State and the terms of the
edera statute, propery sub|ect to an estate ta , and the amount was, there-
fore, egay assessed and coected. The estate havng been cosed and ds-
trbuted and the e ecutors dscharged, pantffs (respondents here), as soe
benefcares and dstrbutees, brought ths acton n a edera dstrct court
aganst the defendant (pettoner here) to recover the amount so pad and
camed, together wth nterest. Defendant demurred to the compant on the
ground that the facts stated were not suffcent to consttute a cause of acton.
The dstrct court overrued the demurrer, and defendant havng decned to
pead further, rendered |udgment aganst hm for the sum camed, wth nterest
and costs. (28 . (2d), 510.) Upon appea the crcut court of appeas affrmed
the |udgment. (35 . (2d), 410.)
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Regs. 70, rt. 10.
470
correct determnaton of the queston presented requres consderaton of
the provsons of secton 402 of the Revenue ct of 1918 (ch. 18, 40 Stat., 1057,
1097-1098), the reevant porton of whch foows:
Sec. 402. That the vaue of the gross estate of the decedent sha be deter-
mned by ncudng the vaue at the tme of hs death of a property, rea or
persona, tangbe or ntangbe, wherever stuated
(a) To the e tent of the nterest theren of the decedent at the tme of hs
death whch after hs death s sub|ect to the payment of the charges aganst hs
estate and the e penses of ts admnstraton and s sub|ect to dstrbuton as
part of hs estate
The court beow hed (1) that by the e press provsons of the foregong
secton, the vaue of the nterest of the decedent n any property at the tme of
hs death may not be ncuded n the gross estate for the purpose of the
ta uness there be a concurrence of the requrements there set forth,
namey, (a) that the nterest of the decedent be sub|ect to the payment of
the charges aganst hs estate, (b) that such nterest be sub|ect to the e -
penses of admnstraton, and (c) that such nterest be sub|ect to dstrbuton
as part of hs estate and (2) that by the aw of Mssour such nterest n
rea property s not sub|ect to the e penses of admnstraton, and, therefore,
the requrement n that respect s not met. oth propostons are controverted
by the pettoner.
rst. The meanng of the provson n queston, consdered by tsef, does
not seem to us to be doubtfu. The vaue of the nterest of the decedent s
not to be ncuded uness t s sub|ect to the payment of the charges aganst
bs estate and the e penses of ts admnstraton not one or the other, but
both. We fnd nothng n the conte t or n other provsons of the statute
whch warrants the concuson that the word and was used otherwse than
n Its ordnary sense and to construe the cause as though t sad, to the
payment of charges and e penses, or ether of them, as pettoner seems
to contend, woud be to add a matera eement to the requrement, and thereby
to create, not to e pound, a provson of aw. Nor w t do to say that the
words, charges aganst hs estate, ncude e penses of admnstraton, for
pany they are dfferent and dstnct thngs, generay so cassfed n the
settement of estates of decedents, and so regarded by Congress, as evdenced
by the dscrmnatng terms of the statute.
smar queston was presented to ths court and decded n Unted States
v. ed (255 U. S., 257). It was there hed that, the nterest of the decedent,
Mrs. ed, was not ta abe under secton 202(a) of the Revenue ct of 1916,
reenacted as cause (a) of secton 402 now under revew, because t was not
her property at the tme of her death, nor sub|ect to dstrbuton as part of
her estate. The court sad (p. 262) :
The condtons e pressed n cause (a) are to the effect that the ta abe
estate must be (1) an nterest of the decedent at the tme of hs death, (2)
whch after hs death s sub|ect to the payment of the charges aganst bs
estate and the e penses of ts admnstraton, and (3) s sub|ect to dstrbu-
ton as part of hs estate. These condtons are e pressed con|unctvey and
t woud be nadmssbe, n construng a ta ng ct, to read them as f pre-
scrbed ds|unctvey. ence, uness the apponted nterest fufed a three
condtons, t was not ta abe under ths cause.
It s to be observed that the court, by combnng under one head the provson
n respect of charges aganst the estate and that n respect of e penses of admn-
straton, treated cause (a) as contanng three condtons nstead of four but
ths does not ater the fact that, whether stated separatey or n combnaton,
the second condton contans two dstnct requrements, e pressed con|unc-
tvey, and may not be read as though stated ds|unctvey. It seems cear
enough that the ed ease s decsve of the queston and requres us to hod
that f the vaue of the nterest of the decedent now beng consdered s not
sub|ect, under the aw of Mssour, to the e penses of admnstraton, t forms
no part of the gross estate for the purpose of the edera estate ta .
It s urged, however, that f the tera meanng of the statute be as ndcated
above, that meanng shoud be re|ected as eadng to absurd resuts, and a con-
structon adopted n harmony wth what s thought to be the sprt and purpose
of the ct n order to gve effect to the ntent of Congress. The prncpe sought
to be apped s that foowed by ths court n oy Trnty Church v. Unted
States (143 U. S., 457) but a consderaton of what s there sad w dscose
that the prncpe s to be apped to overrde the tera terms of a statute ony
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471
Regs. 70, rt. 10.
under rare and e ceptona crcumstances. The ustratve cases cted n the
opnon demonstrate that to |ustfy a departure from the etter of the aw upon
that ground, the absurdty must be so gross as to shock the genera mora or
common sense. (Compare Pre v. Chcago Tte d Trust Co., 182 U. S., 438,
451 452.) nd there must be somethng to make pan the ntent of Congress
that the etter of the statute s not to preva. (Treat v. Whte, 181 U. S.,
264, 268.)
Courts have sometmes e ercsed a hgh degree of ngenuty n the effort to
fnd |ustfcaton for wrenchng from the words of a statute a meanng whch
teray they dd not bear n order to escape consequences thought to be absurd
or to enta great hardshp. ut an appcaton of the prncpe so neary
approaches the boundary between the e ercse of the |udca power and that
of the egsatve power as to ca rather for great cauton and crcumspecton
n order to avod usurpaton of the atter. (Monson v. Chester, 22 Pck., 385,
387.) It s not enough merey that hard and ob|ectonabe or absurd conse-
quences, whch probaby were not wthn the contempaton of the framers, are
produced by an act of egsaton. Laws enacted wth good ntenton, when put
to the test, frequenty, and to the surprse of the awmaker hmsef, turn out to
be mschevous, absurd, or otherwse ob|ectonabe. ut n such case the rem-
edy es wth the awmakng authorty, and not wth the courts. (See In re
ma Spnnng Co., L. R. 16, Ch. Dv., 681, 686 ng v. Commssoners, 5 .
., S04, 816 bey v. Dae, L. . (1851), N. S., Pt 2, vo. 20, 233, 235. nd see
generay Chuny ook v. Whte, 264 U. S., 443, 445 Commr. of Immgraton v.
Gotteb, 265 U. S., 310, 313.)
In support of the cam that a tera constructon s not admssbe, t s
sad that by other provsons of secton 402 certan nterests n rea property,
such as dower, etc., are made sub|ect to the ta wthout regard to the con-
dtons set forth n subdvson (a), and that ths resuts n an ncongruty
amountng to an absurdty. ut uness the Consttuton be voated, Congress
may seect the sub|ects of ta aton and quafy them dfferenty as t sees ft
and f t does so n pan terms, as t has done here, t s not wthn the
provnce of the court to modfy the aw by constructon. In any event, con-
cedng that the condtons assaed have produced the ncongruous resuts
companed of, they fa far short of that degree of absurdty contempated by
the oy Trnty Church case, or by any other decson of ths court.
nay, the fact must not be overooked that we are here concerned wth
a ta ng ct, wth regard to whch the genera rue requrng adherence to
the etter appes wth pecuar strctness. In Unted States v. Merram
(263 U. S., 179, 187-188 T. D. 3535, C. . II-2, 87 ), after sayng that n
statutes evyng ta es the tera meanng of the words empoyed s most m-
portant, for such statutes are not to be e tended by mpcaton beyond the
cear mport of the anguage used, we quoted wth approva the words of
Lord Carns n Partngton v. ttorney-Genera (L. R., 4, . L., 100, 122),
that f the Crown, seekng to recover the ta , can not brng the sub|ect
wthn the etter of the aw, the sub|ect s free, however apparenty wthn
the sprt of the aw the case mght otherwse appear to be. In other words,
f there be admssbe n any statute, what s caed an equtabe constructon,
certany such a constructon s not admssbe n a ta ng statute, where you
can smpy adhere to the words of the statute.
Second. It s conceded by the pettoner, as t must he, that at common aw
rea estate can not be sod to pay e penses of admnstraton, and that ths
rue of the common aw s n effect n Mssour uness modfed by statute.
It s further conceded that there s no statute whch permts rea estate to
be sod merey to pay such e penses. One contenton, however, s that an
e ecutor or admnstrator may be authorzed by the proper court to se rea
estate to pay debts and egaces f the persona estate s nsuffcent and that
upon such sae the e ecutor or admnstrator s entted to a commsson on
the proceeds of the sae, whch takes prorty over the payment of debts aganst
the estate. s to ths t s suffcent to say, as the court beow sad, that ths
commsson s not an e pense of admnstraton, but an e pense ncdenta
to the sae of the ands. The Mssour Court of ppeas, n stroth v. Young
(04 Mo. pp., 351, 355-356), hed that the proceeds of the sae of ands so
made coud not be used to make good defcences n the e penses of
admnstraton.
The further contenton that If the persona estate has been consumed by
admnstraton e penses and rea estate s sod to pay debts and egaces, as
72100 31 31
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Regs. 70, rt. 15.
472
a practca matter, rea estate has been sod because of admnstraton e penses,
we put asde as nconsequenta. In the case supposed t s perfecty evdent
that the rea estate as been sod not to pay admnstraton e penses, but to
pay debts and egaces, and tat fact s n no wse atered because the sae was
necesstated by the consumpton of the personaty for such e penses. The
cause of the sae must not be confused wth ts purpose.
Nothng woud be ganed by a revew of the numerous decsons of the
Mssour courts. They are set forth and fuy and we consdered by the
court beow, and we entrey agree wth that court s concuson that these
decsons estabsh that rea estate of a decedent n that State can not be
sod for the payment of e penses of admnstraton, nor can the proceeds of
and sod to pay debts be awfuy used to pay e penses of admnstraton.
We have not faed to note the decson of the Court of Cams n Steedman
v. Unted States (63 C. Cs., 226 T. D. 4049, C. . I-2, 342 ), as we as the
decson of the oard of Ta ppeas n artett v. Commssoner (16 . T. .,
811, 816), but n so far as they confct wth the foregong concusons, they
are dsapproved.
udgment affrmed.
TR NS RS Y D C D NT IN IS LI TIM .
Reguatons 70, rtce 15: Transfer durng -16-5028
fe. Ct. D. 320
ST T T R NU CT O 1018 D CISION O SUPR M COURT.
Gboss state Transfer and Contempaton of Death Retro-
actvty Con stuton aty.
Secton 402(c) of the Revenue ct of 1918 requres that there
sha be ncuded n the gross estate the vaue of property trans-
ferred by a decedent n contempaton of death after the enactment
of the Revenue ct of 1916 and before the enactment of the
Revenue ct of 1918. s so construed the subdvson s const-
tutona.
Supreme Court of the Unted States.
Seth M. Mken errsh . Mken, and arod . atch, ecutors of the
state of Seth M. Mken, Deceased, pettoners, v. Unted States.
On wrt of certorar to the Court of Cams.
March 2, 1931.
OPINION.
Mr. ustce Stone devered the opnon of the court.
In ths case certorar was granted (282 U. S., 817) October 13, 1930, to
revew a |udgment of the Court of Cams denyng to pettoners recovery of
a ta aeged to have been egay e acted under the decedents estates
provsons of the Revenue ct of 1918 (38 . (2d), 381 ct of ebruary 24,
1019, ch. 18, 40 Stat., 1007, 1096, 1097, 1149, 1150).
In December, 1916, whe the Revenue ct of that year was In force ( ct
of September 8, 1916, ch. 463, 39 Stat., 756, 777), pettoners decedent gave to
hs chdren certan shares of corporate stock. The donor ded March 5,
1920, after the effectve date of the 1918 ct. The Commssoner ncuded the
shares of stock n the decedent s estate as a gft made n contempaton of
death, secton 402(c) of the 1918 ct, and assessed and coected the ta now
n sut, whch was computed on the bass of the vaue of the stock at the tme
of decedent s death, and at the rates n the 1918 ct, whch were hgher than
those f ed by the correspondng provsons of the ct of 1916.
Secton 401 of the 1918 ct mposed ta es at specfed rates upon transfers
of estates by decedents. Under secton 403, the ta abe estate was the gross
estate ess enumerated deductons. Secton 402 provded for the ncuson
n the gross estate of the vaue of property (c) To the e tent of any nterest
theren of whch the decedent has at any tme made a transfer, or wth
respect to whch he has at any tme created a trust, n contempaton of or
ntended to take effect n possesson or en|oyment at or after hs death
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473
Regs. 70, rt. 15.
(whether such transfer or trust Is made or created before or after the passage
of ths ct) . The ct of 1916, sectons 201, 202(b), whch had
contaned smar provsons for the ta ng of decedents estates, ncudng
gfts n contempaton of death, but at ower rates, was repeaed, wth pro-
vsos not now matera, by secton 1400 of the 1918 ct
The fndng of the Commssoner that the present gft was n contempaton
of death s not questoned by pettoners, and s controng here snce t s
not chaenged by any facts appearng of record. (Nes ement Pond Co. v.
Unted States, 281 U. S., 357, 361 Ct. D. 185, C. . I -1, 2951 5 urnet .
Sanford rooks Co., 282 U. S., 359, decded anuary 5, 1931 Ct. D. 277, page
363, ths uetn .) though antedatng the enactment of secton 402, the
gft s embraced wthn ts provsons, whch are n terms appcabe to gfts n
contempaton of death made before the passage of the ct.
Pettoners argument that secton 402 does not appy Is not supported by
ther ctatons of Reneoke v. Northern Trust Co. (278 U. S., 339 T. D. 4261,
C. . III-1, 305 ) and May v. Sener (281 U. S., 238 Ct. D. 186, C. . I -1,
382 .) In those cases the gfts nter vvos were not n contempaton of
death, and the ony reevant queston was one of constructon, whether some
of them were of the cass ntended by Congress to be ta abe under secton
402(c) as transfers ntended to take effect n possesson or en|oyment at
or after death. It was hed that they were not. ut those gfts were not of
the cass now nvoved, gfts n coutempaton of death, made before the
passage of the ct, whch are e pressy named by secton 402(c) as sub|ect to
ts provsons.
Ths court has not passed drecty on the consttutonaty of the edera
ta aton of gfts made n contempaton of death. ut ta aton of transfers
at death has been uphed ( nmcton v. Moore, 178 U. S., 41), as has, more
recenty, the ta aton of gfts nter vvos ( romey v. McCaughn, 280 U. S.,
124 Ct. D. 140, C. . III-2, 392 ) and we hod, as ths court has severa
tmes ntmated, that the ncuson of ths type of gfts n a snge cass
wth decedents estates to secure equaty of ta aton, and prevent evason of
estate ta es, s a permssbe cassfcaton of an approprate sub|ect of
ta aton. (See Nchos v. Coodge, 274 U. S., 531, 542 T. D. 4072, C. . I-2,
351 Tyer v. Unted States, 281 U. S., 497, 505 Ct. D. 190, C. . I -1, 383
Corss v. owers, 281 U. S., 376, 378 Ct. D. 188, C. . I -1, 254 Taft v.
owers, 278 U. S., 470, 482 Ct. D. 49, C. . III-1, 226 cf. Schesnger v.
Wsconsn, 270 U. S., 230, 239.)
The ob|ecton to the ta , chefy urged n bref and argument, s that the
ta ng statute, as apped, s a dena of due process of aw because retroac-
tve. It s sad that the statute s nvad not aone because t reaches a gft
made before ts enactment, but because t measures the ta by rates not n
force when the gft was made, apped to the vaue of the property not when
gven, but at the uncertan ater tme of the death of the donor.
Ths court has hed the ta aton of gfts made, and competey vested beyond
reca, before the passage of any statute ta ng them to be so papaby arb-
trary and unreasonabe as to nfrnge the due process cause. (Nchos v.
Coodge, supra Untcrmyer v. nderson, 276 U. S., 440 T. D. 4157, C. .
II-1, 326 Coodge v. Long, 282 U. S., 582, decded ebruary 24, 1931.)
In Nchos v. Coodge t was hed that secton 402 of the 1918 ct coud not
consttutonay be apped to a gft nter vvos, not n contempaton of death,
and made ong before the adopton of any congressona egsaton mposng
an estate ta or ta ng gfts to take effect u possesson or en|oyment at or
after death. In Untcrmyer v. nderson, supra, t was hed that the retro-
actve provson of the nove gft ta of the Revenue ct of 1924 was nvad
as apped to gfts antedatng the ct. In both the pont was stressed, as the
bass of decson, that the nature and amount of the ta burden mposed coud
not have been understood and foreseen by the ta payer at the tme of the
partcuar vountary act whch was made the occason of the ta . (See
Nchos v. Coodge, supra, page 542 Untermyer v. nderson, supra, page 445.)
Upon smar grounds, n Coodge v. Long, supra, a State ta on successons
was hed nvad as apped to the gft to the donor s chdren nvoved n
Nchos v. Coodge, supra, because deemed to be a ta on a successon to a
gft competey vested before the enactment of the ta ng ct or of any other
aw ta ng successons by nea descendants of the donor.
ut a ta s not necessary and certany arbtrary and therefore nvad
because retroactvey apped, and ta ng cts havng retroactve features have
been uphed n vew of the partcuar crcumstances dscosed an consdered
by the court. (See Stockdae v. Insurance Companes, 20 Wa., 323, 331
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Regs. 70, rt. 15.
474
Raroad Co. v. Rose, 95 U. S., 78, 80 Raroad Go. v. Unted States, 101 U. S.,
543, 549 nt v. Stone Tracy Co., 220 U. S., 107 ngs v. Unted States, 232
U. S., 261, 282 rushaber v. Unon Pacfc R. R. Co., 240 U. S 1, 20 Lynch v.
ornby, 247 U. S., 339, 343 echt v. Maey, 265 U. S., 144, 164 T. D. 3595,
C. . III-, 489 Cooper v. Unted States, 280 U. S., 409 Ct, D. 163, C. . I -1,
272 . See Taft v. owers, supra Unted States v. enszm, 206 U. S., 370
Graham v. Ooodce, 282 U. S., 409, decded anuary 26, 1931 Ct D. 287, page
191, ths uetn .)
ence, n chaengng the present ta t does not suffce to say that the gft
antedated the statute. It s necessary to consder the nature of the ta and of
the decedent s gft. When the gft was made t was sub|ect to the provsons of
the 1916 Revenue ct. y t, Congress had adopted the we understood system
of ta aton of transfers of property at death, aready n force u 42 States.
(Report No. 793, Senate Commttee on nance Report No. 922, ouse Com-
mttee on Ways and Means, both on . R. No. 16763, S ty-fourth Congress.)
characterstc feature of the system was that ncorporated n sectons 202(b)
of the 1916 ct and 402(c) of the 1918 ct, both of whch mposed a ta on
gfts made n contempaton of death, computed at the same vaue and rate as
though the property gven had been a part of the donor s estate passng at
death.
Whe we need not attempt at ths tme to defne wth precson gfts n con-
tempaton of death, ther characterstc features have been suffcenty nd-
cated by the varous Treasury reguatons deang wth the sub|ect. Regua-
tons 37 under the 1918 ct (revsed ebruary 24, 1019) s typca. It provdes
(artce 23) : The words n contempaton of death do not refer to the genera
e pectaton of death whch a persons entertan. transfer, however, s made
n contempaton of death wherever the person makng t s nfuenced to do so
by such an e pectaton of death, arsng from body or menta condtons, as
prompts persons to dspose of ther property to those whom they deem proper
ob|ects of ther bounty.
It s suffcent for present purposes, that such gfts are motvated by the same
consderaton as ead to testamentary dspostons of property, and made as
substtutes for such dspostons wthout awatng death, when transfers by
w or nhertance become effectve. Underyng the present statute s the
pocy of ta ng such gfts equay wth testamentary dspostons, for whch
they may be substtuted, and the preventon of the evason of estate ta es by-
gfts made before, but n contempaton of, death. It s thus an enactment n
ad of, and an ntegra part of, the egsatve scheme of ta aton of transfers
at death. Decedent s gft as a substtute for a testamentary dsposton was
thus brought wthn the operaton of the 1916 ct ta ng such gfts on the same
bass, wth respect to rate and vauaton, as transfers of property at death.
Not ony was the decedent eft n no uncertanty that the gft he was then
makng was sub|ect to the provsons of the e stng statute, but n vew of ts
we understood purpose he shoud be regarded as takng hs chances of any
ncrease n the ta burden whch mght resut from carryng out the estabshed
pocy of ta aton under whch substtutes for testamentary gfts were cassed
and ta ed wth them.
The reasonabeness of the present appcaton of the ncreased rate of ta of
the 1918 ct must be determned n te ght of the egsatve pocy whch
the 1916 ct had estabshed before the gft was made. Obvousy that pocy
woud be set at naught f gfts made n contempaton of death, after the 1916
ct, were to be ta ed more favoraby than transfers from the donor occurrng
at and by reason of hs death. s was apparent when the 1916 ct was
adopted, that pocy coud be made effectve ony f gfts made n contempaton
of death, whe that ct was n force, were to be sub|ect at the donor s death
to such rate as mght at the tme of that event be appcabe to the transfer of
the donor s estate. The decedent, when he made hs gft, was as we warned
that t mght be ta ed on that bass as he was that t woud be so ta ed f on
that day he had made the same dsposton of It by w. change n the rate
appcabe to transfers at death necesstates a correspondng change n the
rate appcabe to gfts made n contempaton of death, ese the purpose n
ta ng the atter woud not be attaned. That purpose, as aready ndcated,
was to put such gfts on the same pane as testamentary dsposas.
Ony a word need be sad of the suggeston that the appcaton of secton
402(e) to gfts made whe the 1916 ct was n force destroys the character
of the ta as one on prveges, and so renders t nvad as an unapportoned
drect ta forbdden by sectons 2 and 9 of rtce I of the Consttuton. (See
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475
Regs. 70, rt. 15.
Levy v. Warde, 258 U. S., 542, 545.) The present gft was sub|ect to the
e cse when made and for reasons aready Indcated, we thnk a mere ncrease
In the ta , pursuant to a pocy of whch the donor was forewarned at the tme
he eected to e ercse the prvege, dd not change ts character. (See echt v.
Mwep, supra, page 164.) urther, as an approprate and Indeed necessary
measure to secure the effectve admnstraton of a system of death ta es, we
thnk the present ta s to be supported as an ncdent and n ad of the e ercse
of the consttutona power to evy a ta on the transfer of the decedent s estate
at death. (See Purty tract Co. v. Lynch, 226 U. S., 192 acob Ruppert v.
Coffey, 251 U. S., 264 Lambert v. Yeowey, 272 U. S., 581.)
ffrmed.
Reguatons 70, rtce 15: Transfer durng -21-5078
fe. Ct. D. 340
estate ta revenue act of 1918 decson of supreme court.
1. Tbansfers n Contempaton of Death.
Where at the tme of transfers by a decedent he consdered that
he had recovered from hs former ness and beeved the assur-
ances gven hm by hs physcan that he need have no fear of ts
recurrence or any an ety whatever about hs state of heath and
the mmedate and movng cause of the transfers was the carryng
out of a pocy ong foowed by the decedent n deang wth hs
chdren of makng bera gfts to them durng hs fetme, the
transfers were not n contempaton of death wthn the mean-
ng of secton 402(c) of the Revenue ct of 1918.
2. Same Meanng.
It s the thought of death as a controng motve promptng
the dsposton of property that affords the test of a transfer n
contempaton of death wthn the meanng of secton 402(c) of the
Revenue ct of 1918, and t can not be sad that the determnatve
motve s ackng merey because of the absence of conscousness
that death s mmnent. It s contempaton of death, not neces-
sary contempaton of mmnent death, to whch the statute
refers. It s concevabe that the dea of death may possess the
mnd so as to furnsh a controng motve for the dsposton of
property, athough death s not thought to be cose at hand. The
words n contempaton of death mean that the thought of
death s the mpeng cause of the transfer, and whe the beef
n the mmnence of death may afford convncng evdence, the
statute s not to be mted and ts purpose thwarted by a rue of
constructon whch n pace of contempaton of death makes the
fna crteron to be an apprehenson that death s near at hand.
Transfers n contempaton of death are not confned to gfts
causa morts whch are made n antcpaton of mpendng death,
are revocabe, and are defeated f the donor survves the appre-
hended per. The descrpton embraces gfts nter vvos despte
the fact that they are fuy e ecuted, are rrevocabe and nde-
feasbe.
Supreme Coubt or the Unted States. No. 252. October Term, 1930.
The Unted States, pettoner, v. rtemus C. Wes et ah. ecutors of the
state of ohn W. Wes.
On wrt of certorar to the Court of Cams.
pr 13, 1931.
Mr. Chef ustce ughes devered the opnon of the court
ohn W. Wes, a resdent of Menomnee, Mch., ded on ugust 17, 1921. The
Commssoner of Interna Revenue assessed addtona estate ta es, upon the
ground that certan transfers by the decedent wthn two years pror to hs
death, were made n contempaton of death and shoud be ncuded n the ta -
abe estate under the provsons of secton 402(c) of the Revenue ct of 1918
(40 Stat., 1057, 1097). The amount of the addtona ta was pad by the
e ecutors and cam for refund was fed. The cam havng been re|ected, the
e ecutors brought ths sut n the Court of Cams to recover the amount pad.
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Regs. 70, rt. 15.
476
The Court of Cams decded n favor of the e ecutors (69 C. Cs., 485, 39 ed.
(2d), 998) and ths court granted a wrt of certorar.
The substance of the fndngs of the Court of Cams wth respect to the cr-
cumstances of the transfers may be stated as foows:
The decedent ded at the age of 73 years hs wfe and fve chdren, three
sons and two daughters, survved hm. When a young man he became nter-
ested n the busness of acqurng and seng tmberands and of manufacturng
umber. e contnued n that busness to the tme of hs death.
s eary as the year 1901, decedent began the makng of advancements of
money and other property to hs chdren. e kept a set of books on whch
he charged to hs chdren some, but not a, of the amounts transferred to them.
The decedent beeved that the approprate course for a man of weath was to
gve to hs chdren substanta sums of money durng hs fetme whe he
coud advse wth them as to ts proper use. e nformed one of hs frends: I
am makng dstrbuton from tme to tme of part of my property to see what
my chdren w do durng my fetme, and I w then know when my tme s
up what I ought to do wth the baance. 1
In 1918, decedent advanced to three of hs chdren, Raph W. Wes, Mrs.
dna Wash, and Mrs. orence Law, shares of stock n the Dunbar Wnu-
saukee Raway Co., for whch he charged each of them, n the equazaton
hereafter mentoned, the sum of 25,460. Nether ths transfer, nor any of the
earer transfers, s n controversy.
In December, 1919, decedent transferred to hs son rtemus C. Wes, 343
shares, and to hs son Dane Wes, 73 shares, of the stock of the . W. Wes
Lumber Co. e charged rtemus wth 89,180, and Dane wth 18,890, on
account of these transfers.
On anuary 1, 1921, after carefuy e amnng hs accounts n preparng
for the fna equazaton of the pror advancements, decedent transferred to
hs chdren 68.985 shares of the stock of the Grard Lumber Co. s sum-
mares of accounts wth each of hs chdren showed debt baances, on whch
he had computed nterest, as foows: Dane Wes, 266,530 rtemus C.
Wes, 231,651 Raph W. Wes, 214,008 Mrs. orence Law, 216,445 and
Mrs. dna Wash, 180,662. The decedent ndorsed each of these statements
wth the words ccount wth . Ths account s canceed and edger
baanced to date as a gft to (the name of the son or daughter beng
nserted), or wth other words to the same effect.
In ths process of equazaton decedent charged hs chdren wth a tota of
3,458 shares of the capta stock of the Loyd Manufacturng Co. These shares
were not devered at that tme, as decedent had agreed to e change them for a
ke number of shares n a new company to resut from an e pected merger.
On anuary 26, 1921, decedent transferred to Marsha . Loyd, as trustee
for the beneft of hs wfe and fve chdren, 3,713 shares of the stock of the
Loyd Manufacturng Co., wth authorty to e change these shares for shares
of the stock of the new corporaton, on the ssue of whch the trustee was to
assgn the shares to decedent s wfe and chdren, respectvey, n desgnated
amounts, or, n the event that the e change was not consummated before De-
cember 1, 1921, to dstrbute to them the shares of the Loyd company. On
1 Speakng of a ess bera pocy of tt former busness assocate, who ded In or about
the year 1018, decedent frequenty e pressed hs opnon that hs frend had made a bg
mstake In not dstrbutng hs propery to hs chdren whe he was ave to hep them
hande t propery and sad that Is not my pocy.
2 On the day that ths trust agreement was made, decedent wrote to hs son Raph
(then n ngand) : I am gong to dvde Loyd pref. stock and most of G. L. Co.
(Grard Lumber Co.) among you chdren at once so you w have enough to keep you
from hunger at enst. I own now 5,103 Loyd stock, 100 per share. Income 35,72 .
I am gong to even up my gfts to n now, and the foowng s the way they stand
before the evenng up (Insertng statement). I have charged a of you nterest on
your accounts at 5 per cent and I have charged you and rt 50,000 apece for motor oss
and credt you for W. P. L. Co. stock charged you. I am mghty busy gettng ready for
the West, so good-by.
On ebruary 3, 1021, on eavng for Caforna, decedent wrote to hs daughter, Mrs.
dna Wash : I have been workng on ny book and evenng up a your accounts.
Dan, rt, and Raph have had advances that were more than you and orence had and I
have equazed one wth the other by chargng each wth what they have had and chargng
them nterest on the account to date, and the ncosed sheet shows what each has had
and how I equazed your a/cs by gvng stock to even, our Loyd stock w be de-
vered as soon as the dea s cosed, whch w be very soon. Your Loyd stock s worth
S108.000 and the Grnrd stock Is worth 252,000, so you need not take n washng for
support uness you throw t away on copper or other |unk. In makng out these accounts,
the thng that seems most Important s how nterest runs up. Good safe bonds are the
best nvestment for a person who does not understand busness. We, my dear gr, take
good care of ths, remember the poor and needy, and you w receve your reward.
Good-by.
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477
Regs. 70, rt. 15.
pr 6, 1921, Loyd, the trustee, dstrbuted the certfcates for the shares In
the new company, but the fndng states that the decedent had dvested hm-
sef of a nterest n the 3,713 shares of the Loyd stock when they were
transferred n trust.
The transfers whch the Commssoner deemed to be sub|ect to the addtona
estate ta are these:
That of December, 1919, to hs sons Dane and rtemus, of 416 shares of the
stock of the . W. Wes Lumber Co., ncreased by a subsequent stock dv-
dend to 1,280 shares at the date of the decedent s death
That of anuary 1, 1921, to hs chdren, of 68,985 shares of the stock of the
Grard Lumber Co.
That of anuary 20, 1921, n trust for hs wfe and chdren, of 3,713 shares
of the stock of the Loyd Manufacturng Co.
The aggregate vaue at the tme of the decedent s death of a the prop-
erty embraced n these transfers was 782,903. cudng ths property, the
vaue of decedent s estate at the tme of hs death was 881,314.61, on whch
the decedent s annua ncome was appro matey 50,000 a year.
The Court of Cams made detaed fndngs as to the state of decedent s
heath. It appeared that for some tme pror to the year 1919, he had suffered
from attacks of asthma. In May of that year he went to a hospta n Chcago
for treatment and remaned 11 days. bout the mdde of pr, 1920, dece-
dent began to be affcted wth uceratve cots, a condton n whch the arge
ntestne becomes nfamed. The fndng states: It s a curabe dsease.
bout 80 to 85 per cent of the cases are cured. In une, 1920, decedent
was advsed by physcans n Caforna that he was sufferng from cancer
of the Intestnes. In the foowng uy, decedent agan entered the hospta
n Chcago and, on an e amnaton by a specast n dseases of the bowes,
the case was dagnosed as uceratve cots. etween uy and September,
1920, decedent was nformed n deta of hs condton. s physcan tod
hm that he woud get we.
Whe at the hospta, foowng an nqury by hs busness assocate, Mar-
sha . Loyd, whether decedent had made any agreement wth hs second
wfe, atherne Wes, wth reference to a dvson of property after hs
death, decedent made such an agreement. Rectng hs ness, t provded
that hs wfe shoud have 100,000 n money and certan other property n
eu of her statutory and dower rghts. Mrs. Wes ratfed a gfts thereto-
fore made by the decedent to hs chdren and a gfts whch mght be made
to hs chdren thereafter and before hs death whether any of such gfts
be made n contempaton of hs death, or otherwse. Pursuant to the agree-
ment, decedent made hs w on ugust 18, 1920, the provsons of whch
dffered ony sghty from those of an earer w. fter provdng for the
payment of 100,000 to hs wdow and makng other bequests, decedent de-
vsed resduary estate to hs fve chdren, wth the provso: Provded, how-
ever, that the amount shown to be due me from each of my chdren severay
n accordance wth my books at the tme of my death, sha be consdered
advancement made by me to them from tme to tme and sha be chargeabe
to each of them severay as advancements and sha be deducted from ther
respectve shares.
On September 14, 1920, decedent wrote to hs son Raph: The doctors say
that I w be absoutey cured f I am carefu for two or three months after
eavng and I certany w be carefu after ths.
On September 22, 1920, decedent was dscharged from the hospta n an
mproved condton. s medca advser stated that decedent s condton
was e ceent he had not fuy at that tme recovered but he dd wthn
the ne t two or three months. s appearance was norma he had ganed
an apprecabe amount of weght and he was n a very far state of heath.
On hs return to Menomnee, decedent sad to hs son, who had been n
charge of hs affars durng hs absence, that he was competey cured of the
troube that he had had and he fet good. Decedent ten resumed hs norma
busness actvtes.1
t about ths tme, the hospta physcan found marked evdence ot an nfammaton of
the ethmod ces whch are connected wth the nasa cavty, and concuded that there was
very key a cose reaton between the ethmodts and the asthma.
Wrtng to hs son Raph on October 30. 1920, decedent sad : I am around about the
same as usua. I fee ns we as ever, and bowes seem norma, but doctor says
I must det and take bsmuth medcne (or a whe and be carefu. Ganed 6 pounds snce
I came home.
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Regs. 70, rt 15.
478
Decedent was agan admtted to the hospta n Chcago, on November 30,
1920, for the purpose of an operaton to reeve hs asthma. s physcan
stated that at that tme he found hm to be n good genera condton.
On December 9, 1920, decedent was dscharged from the hospta and returned
to hs home. e went back to the hospta on anuary 10, 1921, for the com-
peton of the nasa operaton. t the tme of hs dscharge on anuary 14,
1921, the medca e amnaton showed a very greaty mproved condton
and that n respect to the uceratve cots t was 90 per cent norma.
On anuary 2(5, 1921, the date of the trust agreement (consttutng the ast
of the transfers n queston), decedent wrote to hs son Raph: The doc-
tors pronounce me cured of bowe troube, but I w aways have asthma.
I wegh 140 strpped. On ebruary 3, 1921, he eft for Caforna, where he
was accustomed to spend the wnter months. s physcan stated that de-
cedent at that tme consdered hmsef we, and I tod hm that he need, have
no an ety whatever about hs state of heath that I consdered hm n e ce-
ent condton that he need have no fears of any recurrence of the ucerated
cots. 7
ut n pr, 1921, whe st n Caforna, decedent had such a recurrence.
e consuted a specast of reputaton who after e amnaton nformed hm
that he mght have a cancer, and advsed an operaton. In une, 1921, deced-
ent reentered the hospta n Chcago. s condton proved to be due to
a vruent form of nfecton that faed to yed to treatment. Returnng to
hs home, he contnued to ose ground and he ded on ugust 17, 1921. n
autopsy dscosed a severe and e tensve nfammaton of the arge ntestne,
wth uceraton of the bowe. No trace of cancer was found. The death
certfcate sgned by hs physcan set forth the cause of decedent s death
as suppuratve cots and ts duraton one year.
The Court of Cams dd not fnd, n terms, that the transfers n queston
were not made In contempaton of death, but t s evdent that the court con-
sdered that ts fndngs of fact amounted to that n substance, n vew of the
concuson of aw, based upon these fndngs, that the e ecutors were entted
to recover the addtona ta . Ths s aso manfest from the reasonng of
the court s opnon. The court sad:
The pantffs have not ony overcome the presumpton created by the stat-
ute that the transfers were made n contempaton of death but have defntey
estabshed the fact, that the mmedate and movng cause of the transfers was
the carryng out of a pocy ong foowed by decedent n deang wth hs
chdren of makng bera gfts to them durng hs fetme. e had con-
sstenty foowed that pocy for neary 30 years and the three transfers
n queston were a contnuaton and fna consummaton of such pocy. In
the ast transfer such amounts were gven to hs chdren as woud even them
up one wth another, n the gfts and advancements made to them.
That ths was the motve whch actuated the decedent n makng these
transfers seems unquestoned. e repeatedy, n etters to hs chdren and.
In statements to busness assocates at about the tme the transfers were made,
gave ths as hs reason for such transfers. fter the fna transfer n whch
the advancements and gfts to the chdren were evened up n anuary, 1921,
the decedent st possessed property of the vaue of neary 900,000, from
whch he drew an annua ncome of appro matey 50,000. t the tme the
transfers were made, decedent had no reason to beeve otherwse than, asde
from hs asthma, he was, for a man of hs age, n ordnary heath. Whe
c The physcan sad that decedent came to the hospta for treatment of the asthma,
not for the bowe troube. In fact, t was by arrangement when he eft the hospta n
September that he came back at ths tme, n November, to have the operatve work done
on the nose that was desgned to cear up the asthma.
Is physcan then made the foowng entry n the hospta record wth respect to
decedent s condton : Iu genera fees very we. Ganed 6 pounds n weght. sthma
has been somewhat troubesome at tmes, as had very good bowe functon. No pan.
Returns for competon of nasa operaton.
1 In ebruary, 1921. frends of the decedent, vstng hm In Caforna, were taken by
hm on e tended motor trps. Decedent drove the car hmsef through the congested
porton of the cty (Los ngees), as we as around or over the mountans near that cty.
t paces on these mountan roads the automobe party drven by the decedent traversed
roads that ran aong a precpce where there s a sneer fa of s or seven thousand feet
wthout any apparent concern or dstress on the part of the decedent. s frends dd
not see any dfference n hs appearance. e seemed to be |ust as spry as he ever was,
and handed the car n pretty good shape. e was thought to be very cheerfu.
In a etter dated ebruary 21, 1021, wrtten to hs chdren, decedent sad: I am
about free of my bowe troube, but have my od compant, asthma, but I have taken
treatment at atch ( reek Treatment Rooms here the ast two years and they have ceared
t up and they are now treatng me and t s cearng up.
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479
IRegs. 70, rt. 15.
he had gone through a most serous and panfu Iness, he had, as he beeved,
made an amost compete recovery. e was assured of ths fact by hs
physcan, an emnent specast, n whom he had great confdence. The re-
peated statements made by hm to cose frends and assocates, hs day
actvtes n matters connected wth hs busness affars, hs etters to hs
chdren assurng them of hs renewed heath, show that he fuy beeved the
assurances gven hm by hs physcan that he was cured and had nothng to
fear on account of hs former ness.
The presumpton created by the statute that the transfers n queston
were made n contempaton of death can not stand aganst ascertaned and
proven facts showng the contrary to be true. The best evdence of the state
of the decedent s heath at the tme the transfers were made s the statement
of the doctor. The best evdence of the decedent s state of mnd at the tme
and the reasons actuatng hm n makng the transfers are the statements
and e pressons of the decedent hmsef, supported as such statements are
by a the crcumstances concernng the tranfers.
The Government contests the decson of the Court of Cams upon the
ground that the concuson was reached by an erroneous constructon of the
words n contempaton of death as used n the statute. The court hed
that 1 contempaton of death does not mean that genera knowedge of
a men that they must de, but that there must be a present apprehenson,
from some e stng body or menta condton or mpendng per, creatng
a reasonabe fear that death s near at hand, and that suc reasonabe fear
or apprehenson must be the drect or anmatng cause, and the ony cause
of the transfer. The Government nssts that ths defnton s too narrow
that transfers n contempaton of death are not mted to those nduced by
a condton causng e pectaton of death n the near future that the char-
acter of such gfts s determned by the state of mnd of the donor at the
tme they are made, and that the statutory presumpton may be overcome ony
by proof that the decedent s purpose n makng the gft was to attan some
ob|ect desrabe to hm durng hs fe, as dstngushed from the dstrbuton of
hs estate as at death.
The phrase n contempaton of death, prevousy found n State statutes,
was frst used by the Congress n the Revenue ct of 1916, mposng an estate
ta . It was couped wth a cause creatng a statutory presumpton n case of
gfts wthn two years before death.10 The provson was contnued n the
Revenue ct of 1918, whch governs the present case, and n ater egsaton.
Referrng to the agreement made n the Rummer of 1020 wth the decedent s wfe as
to her share of hs property, and to the makng of hs w, the court sad : Whe these
trnnsactons are entted to consderaton n connecton wth a the other facts and
crcumstances shown, we do not regard them as havng a great dea of weght In deter-
mnng the queston as to the decedent s state of mnd and the motves actuatng hm n
mukng transfers of property, four months ater. No transfers of property were made to
the chdren at the tme of the e ecuton of the property agreement wth hs wfe, and
the provsons made for ther beneft n the w e ecuted at that tme were dentca wth
the provsons of a former w. Whatever apprehensons the decedent entertaned at the
tme of the makng of the property agreement wth hs wfe as to the chances of recovery
from the ness from whch he was sufferng at that tme, had ceased to e st before the
transfer of the Grard Lumber Co. stock on anuary 1, 1021, and the Loyd Manufacturng
Co. stock on anuary 26, 1921.
In support of ths vew, the court cted Spreckes v. State (30 Ca. pp., 363) Shwab
Doye (269 ed., 321) Meyer v. Unted States (60 C. Cs., 474) Rea v. cner (6 P.
(2d), 389) and Starch. ecutor (3 . T. ., 514). (See, aso, Phps, ecutor,
7 . T. ., 1054 Sten et a., ecutors, 9 . T. ., 486 Ombe et a.. ecutors, 11 . T.
., 214 George . Wheeock s state, 13 . T. ., 831 Commonweath v. eney, 189 y.,
480 State v. Pabst, 139 Ws.. 561 State v. Thompson. 154 Ws., 320 athcr v. Mes,
268 ed., 692 aughan v. Rordan, 280 ed., 742 Pannery v. Wcuts, 25 . (2d),
951 eeer v. Motter, 33 . (2d), 788 Rosentha v. Peope. 211 111., 306 Peope v.
Carpenter, 264 111.. 400 Peope v. Northern Trust Co.. 324 111., 625 Matter of aker,
83 pp. Dv. (N. Y.), 530, affrmed 178 N. Y., 575 Matter of Pamer, 117 pp. Dv.
(N. Y.), 361 Matter of ar, 219 pp. Dv. (N. Y.), 418. ut, compare state of
Reynods, 169 Ca., 600: state of Pauson, 186 Ca., 358 Chambers v. Larronde, 196
Ca, 100 rmstrong v. Indana.72 Ind. pp., 303 Matter of Crary, 31 Msc. (N. Y.), 72
Matter of Prre, 62 Msc. (N. Y.), 149 Ta Commsson v. Parker, 117 Oho St., 215
Rcngstorff v. McLaughn. 21 . (2d), 177 Peope v. urkhater, 247 111., 600.)
10 39 Stat., 756, 777. 778.
1140 Stat., 1057, 1097. Secton 402(c) provdes: To the e tent of any nterest
theren of whch the decedent has at any tme made a transfer, or wth respect to whch he
has at any tme created a trust, n contempaton of or ntended to take effect n posses-
son or en|oyment at or after hs death (whether such transfer or trust s made or
created before or after the passage of ths ct), e cept n case of a bona fde sae for a
far consderaton n money or money s worth. ny transfer of a matera part of hs
property n the nature of a fna dsposton or dstrbuton thereof, made by the decedent
wthn two years pror to hs death wthout such a consderaton, sha, uness shown to the
contrary, be deemed to have been made n contempaton of death wthn the meanng of
ths tte.
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Regs. 70, rt. 15.
480
Whe the nterpretaton of the phrase has not been unform, there has been
agreement upon certan fundamenta consderatons. It s recognzed that
the reference s not to the genera e pectaton of death whch a entertan.
It must be a partcuar concern, gvng rse to a defnte motve. The pro-
vson s not confned to gfts causa morts, whch are made In antcpaton of
mpendng death, are revocabe, and are defeated f the donor survves the
apprehended per ( asket v. asse, 107 U. S., 602, 609, 610.13) The statu-
tory descrpton embraces gfts nter vvos, despte the fact that they are fuy
e ecuted, are rrevocabe and ndefeasbe. The quaty whch brngs the
transfer wthn the statute s ndcated by the conte t and manfest purpose.
Transfers n contempaton of death are ncuded wthn the same category,
for the purpose of ta aton, wth transfers ntended to take effect at or after
the death of the transferor. The domnant purpose s to reach substtutes
for testamentary dspostons and thus to prevent the evason of the estate ta .
(Nchos v. Coodge, 274 U. S., 531, 542 T. D. 4072, C. . I-2, 351 Mken v.
Unted States, decded March 2, 1931, 282 U. S., Ct D. 320, page 472, ths
uetn .) s the transfer may otherwse have a the ndca of a vad gft
ntervvos, the dfferentatng factor must be found n the transferor s motve.
Death must be contempated, that s, the motve whch nduces the transfer
must be of the sort whch eads to testamentary dsposton. s a condton
of body or mnd that naturay gves rse to the feeng that death s near,
that the donor Is about to reach the moment of nevtabe surrender of owner-
shp, s most key to prompt such a dsposton to those who are deemed to be
the proper ob|ects of hs bounty, the evdence of the e stence or none stence
of such a condton at the tme of the gft s obvousy of great mportance
n determnng whether t s made n contempaton of death. The natura
and reasonabe Inference whch may be drawn from the fact that but a short
perod ntervenes between the transfer and death s recognzed by the statutory
provson creatng a presumpton n the case of gfts wthn two years pror
to death. ut ths presumpton, by the statute before us, s e pressy stated
to be a rebuttabe one, and the mere fact that death ensues even shorty after
the gft does not determne absoutey that t s n contempaton of death.
The queston, necessary, s as to the state of mnd of the donor.
s the test, despte varyng crcumstances, s aways to be found n motve,
t can not be sad that the determnatve motve s ackng merey because of
the absence of a conscousness that death s mmnent. It s contempaton
of death, not necessary contempaton of mmnent death, to whch the statute
refers. It s concevabe that the dea of death may possess the mnd so as to
furnsh a controng motve for the dsposton of property, athough death
s not thought to be cose at hand. Od age may gve premontons and prompt-
ngs ndependent of morta dsease. Yet age n Itsef can not be regarded as
furnshng a decsve test, for sound heath and purposes assocated wth fe,
rather than wth death, may motvate the transfer. The words n contempa-
ton of death mean that the thought of death s the mpeng cause of the
rtce 23 of Reguatons 37, tnder the Revenue ct of 1918, contaned the foowng:
rt. 23. Nature of transfer. The words n contempaton of death do not refer to
the genera e pectaton of death whch a persons entertan. transfer, however, s
made In contempaton of death wherever the person makng t s nfuenced to do so by
such an e pectaton of death, arsng from body or menta condtons, as prompts persons
to dspose of ther property to those whom they deem proper ob|ects of ther bounty.
The cause whch nduces such body or menta condtons s mmatera and It s not
necessary that the decedent be n the mmedate e pectaton of death. Such a transfer s
ta abe, athough the decedent parts absoutey and mmedatey wth hs tte to and
possesson of the property. Transfers made wthn two years of a decedent s death are
presumed to be ta abe f they are of a matera part of hs property and are n the
nature of a fna dsposton thereof. facts reatng to the transfer shoud be
stated, ncudng the motve therefor, the decedent s state of heath, and hs antcpaton
of death. The presumpton of tn abty may be rebutted by proof that the transfer was
not nduced by Dody or menta condtons eadng the grantor to make a dsposton of
property testamentary n ts nature. The fact that a gft was made as an advancement,
to be taken nto account upon the fna dstrbuton of the decedent s estate, Is not
enough, standng aone, to estabsh ta abty but t s a crcumstance to be consdered
n determnng whether the transfer was made n contempaton of death.
13 In Matter of Seaman (1-47 N. Y., 09, 70), the court, referrng to the words In con-
tempaton of deafh n the nhertance ta aw of New York, sad that the cause
evdenty referred to grunts or gfts causa morts. (See aso Matter of dgerton. 35
pp. Dv. (N. Y.), 12T. affrmed 158 N. Y., 071 Matter of Snaudtg, 49 pp. Dv. (N. Y.).
541. affrmed 103 N. Y., 007 Matter of aker, 83 pp. Dv. (N. Y ). 530, affrmed 178
N. Y, 575. ut compare Matter of Pamer, 117 pp. Dv. (N. Y.). 361. 306, 367, 368
Matter of Crary. 31 Msc. (N. Y.). 72, 75 Matter of Prce, 62 Msc. (N. Y.), 149. 151.
152 : Matter of Dee, 148 N. Y. Supp , 423 affrmed 101 pp. Dv. (N. Y.), 881, affrmed
210 N. Y 025 Matter of odges, 215 N. Y., 447.)
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481
Regs. 70, rt. 15.
transfer, and whe the beef n the mmnence of death may afford convnc-
ng evdence, the statute s not to be mted, and ts purpose thwarted, by a
rue of constructon whch n pace of contempaton of death makes the fna
crteron to be an apprehenson that death s near at hand.
If t s the thought of death, as a controng motve promptng the dspo-
ston of property, that affords the test, t foows that the statute does not
embrace gfts nter vvos whch sprng from a dfferent motve. Such trans-
fers were made the sub|ect of a dstnct gft ta , snce repeaed. s us-
tratng transfers found to be reated to purposes assocated wth fe, rather
than wth the the dstrbuton of property n antcpaton of death, the Gov-
ernment mentons transfers made for the purpose of reevng the donor of
the cares of management or n order that hs chdren may e perence the
responsbtes of busness under hs gudance and supervson. The us-
tratons are usefu but not e haustve. The purposes whch may be served
by gfts are of great varety. It s common knowedge that a frequent nduce-
ment s, not ony the desre to be reeved of responsbtes, but to have ch-
dren, or others who may be the approprate ob|ects of the donor s bounty,
ndependenty estabshed wth competences of ther own, wthout beng
compeed to awat the death of the donor and wthout partcuar consderaton
of that event. There may be the desre to recognze speca needs or e gences
or to dscharge mora obgatons. The gratfcaton of such desres may be a
more compeng motve than any thought of death.
It s apparent that there can be no precse demtaton of the transactons
embraced wthn the concepton of transfers n contempaton of death,
as there can be none n reaton to fraud, undue nfuence, due process of aw,
or other famar ega concepts whch are appcabe to many varyng cr-
cumstances. There s no escape from the necessty of carefuy scrutnzng
the crcumstances of each case to detect the domnant motve of the donor
n the ght of hs body and menta condton, and thus to gve effect to the
manfest purpose of the statute.
We thnk that the Government s rght n ts crtcsm of the narrowness of
the rue ad down by the Court of Cams, n requrng that there be a cond-
ton creatng a reasonabe fear that death s near at hand, and that such
reasonabe fear or apprehenson must be the ony cause of the transfer.
It s suffcent f contempaton of death be the nducng cause of the transfer
whether or not death s beeved to be near. ut t does not appear that the
decson of the court rests upon the mtaton thus e pressed. The court dd
not rey merey upon the fact that at the tme of the transfers decedent con-
sdered that he had recovered from hs former ness and beeved the assur-
ances gven hm by hs physcan that he need have no fear of ts recurrence or
any an ety whatever about hs state of heath. That fact was manfesty
mportant, but, n addton to that, the court hed that the mmedate and
movng cause of the transfers was the carryng out of a pocy, ong foowed
by decedent n deang wth hs chdren of makng bera gfts to them durng
hs fetme. The court regarded the transfers n queston as a contnua-
ton and fna consummaton of such pocy, sayng that ths was the motve
whch actuated the decedent n makng these transfers seems unquestoned.
In the vew of the court as thus e pcty stated, not ony was there no fear
at the tme of the transfers that death was near at hand, but the motve for
the transfers brought them wthn the category of those whch, as descrbed
by the Government, are ntended by the donor to accompsh some purpose
desrabe to hm f he contnues to ve. In the presence of such a motve,
appropratey found, and of the underyng facts whch have been e pressy
found, there woud be no ground for a reversa of the |udgment merey be-
cause of an Inaccuracy n the genera statement as to the meanng of the
statutory phrase.
The ony dffcuty presented by the record s that ths statement wth re-
spect to the motve of decedent appears n the opnon of the court and not
n ts fndngs of fact. We are not at berty to refer to the opnon for ad-
dtona fndngs. The fndngs of fact of the Court of Cams are to be treated
ke the verdct of a |ury.1 We can not add to them, or modfy them, but
Revenue ct of 1924, sectons 319-324 (43 Stat., 253, 313), as amended by Revenue
ct of 1926, secton 3324 (44 Stat, 9, 86). romey v. McCaughn (280 U. S., 124 Ct D.
140. C. .. III-2, 392 ). Revenue ct of 1926, secton 1200(a) (44 Stat., 9, 125, 126).
Stone v. Unted States (104 II. S., 380, 382, 383) Crocker v. Unted States (240
U. S., 74, 78) rothers v. Unted States (250 U. S., 88, 93).
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Regs. 70, rt. 15.
482
the absence of the fndngs of an utmate fact does not requre a reversa of
the |udgment f the crcumstanta facts as found are such that the utmate
fact foows from them as a necessary nference.1
It s evdent that the court dd not consder the statements n ts opnon,
whch we have quoted, as addtona fndngs of fact, but as an argument wth
respect to the concuson to be drawn from ts fndngs. In ts opnon,
the court was summarzng what t consdered to be the effect of ts fndngs,
and no usefu purpose woud be served n returnng the case for a specfc
fndng that the motve whch mpeed the decedent to make the transfers
was precsey that whch the court has thus defntey stated. Whe, n ac-
cordance wth proper practce and the rue of ths court, the Court of Cams
shoud have found the utmate fact, and we do not approve the method t
adopted, we are of the opnon that, n vew of the fndngs of fact actuay
made and the concuson they mport, the |udgment shoud be sustaned.18
udgment affrmed.
Mr. ustce obebts took no part n the consderaton or decson of ths case.
Unted Staes . Pugh (99 . S., 265. 2G9, 270) otany Worsted Ms v. Unted
States (278 U. 8., 282, 290 Ct. . 39, C. . III-1, 279 ).
Rue 41.
ct of ebruary 26, 1919 (en. 48, 40 Stat., 1181 U. S. C, Tte 28, secton 391).
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C PIT L STOC T RULINGS.
TITL IL C PIT L STOC T . (1924)
CORPOR TIONS D IN D ND DISTINGUIS D.
Reguatons 64(1924), rtce 4: ssocatons
and |ont stock companes.
-17-5039
Ct. D. 324
C PIT L STOC T R NU CTS O 1918, 1921, ND 1924 D CISION OP
COURT.
Trust ssocaton Ta abty.
trust formed for the purpose of purchasng certan property
hed by testamentary trustees, pursuant to a decree of the probate
court authorzng them to transfer such property to themseves as
trustees and to ssue therefor transferabe shares to the bene-
fcares, and for the purpose of purchasng, mprovng, seng,
or hodng any property n a descrbed terrtory, the artces of
organzaton gvng the trustees very broad busness powers, s
organzed for the purpose of dong busness for proft and s an
assocaton wthn the meanng of secton 1 of the Revenue ct
of 1918 and secton 2(a)2 of the Revenue cts of 1921 and 1924,
and therefore abe for the capta stock ta Imposed upon cor-
poratons by the Revenue cts of 1918, 1921, and 1924.
Unted States Cbcut Coubt of ppeas fob the bst Crcut.
Robert . Gardner ct a., Trustees, pettoners, appeants, v. Unted States
of merca, defendant, appeee.
ppea from the Dstrct Court of the Unted States for the Dstrct of Massachusetts.
nderson, .: Ths appea rases the snge queston whether the Samue
ammond Rea state Trust s an assocaton sub|ect to ta es as a corpora-
ton for the fve years endng une 30, 1926.
y stressng the facts that ths trust succeeded to a testamentary trust,
and that ts actua busness actvtes have been tte more than those of
the testamentary trustees, earned counse for the appeant has made a fary
pausbe argument that t shoud be cassed wth such concerns as the Wson
Syndcate Trust ( ar v. Wson Syndcate Trust, 39 ed. (2d), 43) and the
Costea Trust (Whte v. ornbocer, 27 ed. (2d), 777). oth of these trusts
were hed organzed for qudaton, not for the purpose of dong busness
for proft.
ut we thnk the court beow was rght n hodng ths trust an assocaton
conductng busness for proft, and ta abe as though a rea corporaton.
( nt v. Stone Tracy Co., 220 U. S., 107, 171.)
Whe t orgnated under a decree of the probate court authorzng testa-
mentary trustees to transfer rea and persona property to themseves as
trustees, and to ssue therefor transferabe shares to a arge number of bene-
fcares nstead of seng a property descrbed. In the petton to that court
ebruary 19, 1931.
opnon.
(483)
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Regs. 50, rt. 23.
484
as of consderabe and mcreasnff vaue e amnaton of the terms of ths
trust nstrument shows that ts potentates went far beyond qudaton.
It was dated une 1, 1910, neary 17 years before ths sut was brought. No
step toward qudaton seems to have been taken n ths fary ong perod.
rtce 1 reads:
Ths trust s formed for the purpose of purchasng certan property hed
by the trustees under the w of Samue ammond, ate of oston, and of pur-
chasng, mprovng, seng or hodng any persona property and any other rea
estate n the cty of oston, n the Commonweath of Massachusetts, or wthn
25 mes thereof, ether n fee smpe or for any ess estate, or soe owners or
as tenants n common wth other owners, or as subscrbers to other trust
agreements for the purchase of any rea estate ncuded n the above descrp-
ton, or terrtory.
Under artce 4, the trustees were gven very broad busness powers.
rtces 7 and 9 provde for the possbe ssue of 100 shares, addtona to
the 7,507 shares ssued for the property ntay taken over.
rtce 11 orgnay gave three-fourths In vaue of the sharehoders powers
to requre the termnaton of the trust, to turn the property over to a new trust
or to a corporaton, to remove trustee, and to amend the trust deed. Ths was
amended by a new artce 13, on November 29, 1919, somewhat mtng the
powers of the sharehoders as to remova of trustees.
rtce 12 contans carefu provsons for meetngs of sharehoders at the
cang of a trustee or at the request of sharehoders ownng not ess than one-
tenth n vaue of the shares.
Wth such broad powers of dong busness, the facts that the trustees have
made few changes n the orgna nvestments and have eased most of ther rea
estate so as to avod furnshng |antor, eevator, and heatng servce, can not
dstngush ths concern from the echt and aymarket Trusts ( echt v.
Maey, 265 U. S., 144 T. D. 3595, C. . III-, 489 ). (See aso Unted States v.
ea. 28 ed. (2d), 1022 certorar dened, 278 U. S., 659 compare Crocker v.
Matey, 249 U. S., 223.)
The |udgment of the dstrct court s affrmed.
TITL . SP CI L T S. (1918)
T ON MUTU L INSUR NC COMP NI S
Reguatons 50(rev.), rtce 23: Mutua nsur- -20-5068
ance companes. Ct. D. 337
capta stock ta revenue acts of 1918 and 1921 decson of
supreme court.
1. Computaton of Ta Mutua Insurance Company.
Dvdends apportoned and payabe to annua and deferred dv-
dend poces and dvdends hed awatng apportonment upon de-
ferred dvdend poces represent surpus wthn the meanng of
secton 1000(c) of the Revenue ct of 1918, whch provdes the
method of computng the capta stock ta n the case of a mutua
nsurance company.
2. Labty fob Ta Yeas ndng une 30, 1921.
Secton 1000 of the Revenue ct of 1918 mposed the capta stock
ta for the year endng une 30, 1921, abty for whch was not
affected by the Revenue ct of 1921.
3. Repea Yeab ndng une 30, 1921.
Sectons 243 and 1400 of the Revenue ct of 1921 operate to
cance or remt the capta stock ta for the year endng une 30,
1922.
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485
Regs. 50, rt. 23.
Supreme Court of the Unted States.
93. Now York Lfe Insurance Co., pettoner, v. rank Cog owers, ecutor
of rank . owers, Coector of Interna Revenue for the Second Dstrct of
the State of Neo York.
160. rank Cos owers, ecutor of rank . owers, Coector of Interna
Revenue for the Second Dstrct of the State of ew Yorfc, pettoner, v. New
York Lfe Insurance Co.
On wrts of certorar to the Unted States Crcut Court of ppeas for the Second Crcut.
pr 13, 1931.
OPINION.
Mr. ustce uter devered the opnon of the court.
The company sued the coector n the Dstrct Court, Southern Dstrct of
New York, to recover capta stock ta es e acted under secton 1000(c) of the
evenue ct of 1918 for four years endng une 30, 1922. |ury was waved
and the case was submtted on an agreed statement of facts. The court hed
the ta es for the frst three years were rghty coected and as to the causes
of acton aeged on account of them dsmssed the compant. It hed that,
by reason of the Revenue ct of 1921 (42 Stat., 227, 201), the capta stock
ta dd not appy to the ast year, and gave pantff |udgment for the amount
pad for that perod. (34 . (2d), 60.) On the company s appea (No. 93 here)
and the coector s cross-appea (No. 160) the crcut court of appeas affrmed
the |udgment. (39 . (2d), 556.)
The company s a New York corporaton wthout capta stock engaged n
mutua fe nsurance on the eve premum pan. It made a return for each
of the years showng no ta . fter audtng the returns, the Commssoner of
Interna Revenue assessed the ta es n queston.
y means of an accepted mortaty tabe and an assumed rate of nterest,
the company cacuates the amount that woud be requred to be pad by the
nsured each year n advance to cover pocy cams f deaths occur as nd-
cated by the tabe and f that rate of nterest s reazed on the nvestments.
The amount so ascertaned s caed the net or mathematca premum. There
s added oadng to cover e penses and unforeseen contngences such as e cess
mortaty, dmnshed nterest, nvestment osses and hgher ta es. The pre-
mum so but up s named n the pocy and consttutes the ma mum that
the company may requre the nsured to pay.
The amount by whch the premum e ceeds the company s actua cost must
be returned to the pocyhoder. (Pcnn Mutua Co. v. Lederer. 252 U. S., 523,
525 T. D. 3046, C. . 3, 249 ..) Some of the company s poces are on the
annua dvdend pan, whch requres t to account for dvsbe surpus and
to make yeary dstrbuton to the pocyhoders. The other poces are on
the deferred dvdend pan and provde for hodng the overpayments to the
credt of the deferred dvdend pocyhoders as a cass, accumuatng them at
nterest and payng to each hoder of a pocy n force at the tme desgnated
theren hs share of the accumuated sum.
s soon as practcabe after the e praton of each caendar year, the com-
pany takes an account of ts busness, ascertans the surpus earned that year,
and determnes the amount whch safey may be dstrbuted out of the surpus
for that and pror years. y the aws of New York and of other States where
the company does busness, t s requred annuay to fe a statement showng,
among other thngs, ncome and dsbursements n, and ts assets and abtes
at the end of, the precedng year. Item 35 on the form used shows dvdends
apportoned and payabe to annua dvdend pocyhoders to and ncudng
December 31 foowng. Item 36 covers dvdends apportoned and payabe to
deferred dvdend poces n the same perod. Item 37 shows the amounts set
apart, apportoned, provsonay ascertaned, cacuated, decared or hed awat-
ng apportonment upon deferred dvdend poces not ncuded n tem 36.
Secton 1000(c) mposes a ta on each mutua nsurance company s surpus
or contngent reserves mantaned for the genera use of the busness. The
Commssoner based the capta stock ta es for each year on the tota of tems
35, 36, and 37 as dscosed by the company s annua statements fed for the
years endng respectvey December 31, 1917, 1918, 1919, and 1920.
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Regs. 50, rt. 23.
486
1. These tems represent surpus wthn the meanng of-subdvson (c).
The sums to be pad as dvdends are not a part ot the nsurance specfed
n the poces. They are derved from amounts whch, from abundant cauton,
are ncuded n the advance premums over and above what s found by actua
e perence to be necessary to pay the cost of the nsurance and the e penses
of carryng on the busness. They ndcate a surpus, . e., assets n e cess
of what s deemed necessary to provde for the payment when due of the
amounts specfcay covered by the poces.
No money or property s set asde on account of such dvdends. The tems
n queston do not consttute abtes. They are merey accountng entres
to show the amounts presenty avaabe for dvdends currenty payabe and as
we the fund accumuated n respect of deferred dvdends. Such entres are
anaogous to those n baance sheets of busness corporatons whch show capta
stock as a abty. nd unt actuay pad out as dvdends the money or
securtes used for that purpose propery may be deemed to be mantaned for
the genera use of the busness.
Under the company s constructon of subdvson (c) t was not abe for
the ta for any year whe the 1918 ct was n force. ccordng to ts returns
t had no surpus or contngent reserves. The company does not suggest and
there s no reason to suppose that, n respect of assets propery so to be cassed,
t s not typca of mutua nsurance companes generay. When regard s
had to the we-known and necessary practce of mutua nsurance companes
to coect n advance premums n e cess of tota costs and to pay dvdends
out of the resutng surpus t s cear that the company s constructon s un-
reasonabe. It woud operate to defeat the pany e pressed purpose of Con-
gress to mpose a capta stock ta on mutua nsurance companes.
2. The company contends that n any event subdvson (b) of secton 1000
requres that tem 37 be e cuded from the amount used to measure the e cse.
That provson s: In computng the ta n the case of nsurance companes
such deposts and reserve funds as they are requred by aw or contract to man-
tan or hod for the protecton of or payment to or apportonment among pocy-
hoders sha not be ncuded. The egsatve hstory of secton 1000 goes far
to make ts meanng cear. Secton 407 of the 1916 ct mposed upon corpora-
tons a speca e cse measured by the vaue of ther capta stock. (39 Stat.,
789.) Its scope was not cear. t frst the Treasury Department rued that as
mutua nsurance companes have no capta stock the secton dd not appy to
them. (Reguatons 38, artce 2(b).) That constructon was ater reversed.
(Reguatons 38 (revsed), artce 3.) nd see Lumber re Ins. Co, v. Maey
(44 . (2d), 553 Ct. D. 269, pace 487, ths uetn .)
In the b for the Revenue ct of 1918 as t passed the ouse, secton 1000
was substantay the same as secton 407 of the 1916 ct The Senate subst-
tuted provsons to ta the ncomes of nsurance companes. In conference, the
orgna secton 1000 was restored, and there was added to t the provson n
paragraph (c) whch specfcay decares that the ta es mposed by that secton
sha appy to mutua nsurance companes. The provson added was compete
n tsef. It specfed the rate and ndcated the bass on whch the ta was to
be cacuated t was adequate to govern the ascertanment of the amount and
there s nothng to ndcate an ntenton that the anguage there used shoud be
modfed by anythng n subdvson (b). It s cear that (c) was ntended
e cusvey to govern mutua nsurance companes, and that (b) appes ony to
stock nsurance companes.
3. The company nssts that secton 1000 of the 1918 ct dd not mpose a ta
for the year endng une 30, 1921.
The Treasury Department rued that the ta es mposed by secton 407 of the
1916 ct were payabe n advance for the year commencng uy 1, and that con-
structon was foowed whe the secton remaned n force. Undoubtedy Con-
gress ntended that the same rue shoud be foowed under the substtute
provson, secton 1000 of the 1918 ct. nd the Treasury Department so con-
strued t. The 1918 ct was not approved unt ebruary 24, 1919. The year
commencng uy 1, 1918, was the frst for whch t mposed the capta stock
ta . (See ccht v. Mae/, 265 U. S., 144, 163 T. D. 3595, C. . III-, 489 .)
nd ths company s annua statement for 1917 was the bass on whch the Com-
mssoner made hs cacuatons. The egsatve hstory and the admnstratve
constructon make t cear that such ta es were payabe n advance.
The ta es for the thrd year under the 1918 ct were cacuated on the nsur-
ance company s annua statement for the caendar year 1919 and were payabe In
advance for the fsca year commencng uy 1, 1920. There s nothng n the
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487
Regs. 38(1918), rt. 12.
1921 ct, whch was not approved unt November 23, to suggest that Congress
Intended that capta stock ta es so payabe In 1920 were to be returned f
aready pad or canceed f denquent. The company was rghty hed for that
year s ta .
4. The coector mantans that despte the 1921 ct the company s abe
under secton 1000 of the 1918 ct for the capta stock ta for the year endng
une 30, 1922.
Secton 243 of the 1921 ct mposes a ta upon the net ncome of every nsur-
ance company for the caendar year 1921 and each ta abe year thereafter. It
decares that ta to be n eu of other ta es mposed by that ct, namey, n-
come ta es on corporatons generay, secton 230, capta stock ta es, secton
1000, and profts ta es, Tte III. Secton 1400(a) repeaed, to take effect anu-
ary 1,1922, Tte of the 1918 ct, whch ncudes secton 1000. Secton 1400(b)
provdes: In the case of any ta mposed by any part of the Revenue ct of
1918 repeaed by ths ct, f there s a ta mposed by ths ct n eu thereof,
the provson (of the 1918 ct) mposng such ta sha reman n force unt the
correspondng ta under ths ct takes effect. The ncome ta mposed by sec-
ton 243 s decared to be In eu of capta stock ta n secton 1000 of the same
ct. nd, as the atter ta was n eu of the capta stock ta mposed by sec-
ton 1000 of the 1918 ct, t reasonaby may be sad that the ncome ta mposed
by secton 243 was ntended to be In eu of the capta stock ta of secton 1000
of the 1918 ct
Ths ncome ta was one correspondng to the capta stock ta under sec-
ton 1000 of the 1918 ct wthn the meanng of secton 1400(b). nd under
that provson the ast-mentoned ta remaned n force unt the former took
effect. The ncome ta mposed by secton 243 was for the caendar year
1921. Secton 1400(b) makes t pan that there was no ntenton to sub|ect
nsurance companes to both ta es for the same perod. The 1921 ct operated
to cance or remt the capta stock ta for that year. The company s entted
to recover the amount coected for that perod.
In No. 93 |udgment affrmed.
In No. 160 |udgment affrmed.
TITL I . SP CI L T S. (1916)
Reguatons 38(1918), rtce 12: empt corpo- -2-4897
ratons. Ct. D. 269
C PIT L STOC T R NU CT O 1916 D CISION O COURT.
1. empton Mutua re Insurance Company.
mutua fre Insurance company wthout capta stock s not
e empt from ncome ta under secton 11 of the Revenue ct of
1916, and s, therefore, not e empt from the capta stock ta m-
posed by secton 407 of that ct.
2. ar veraoe aue Meanng Mutua re Insurance
Company.
ar average vaue of ts capta stock as used n secton 407
of the Revenue ct of 1916 as the bass of the computaton of the
capta stock ta means n the case of a mutua fre Insurance com-
pany wthout capta stock the net vaue of the property owned by
the company and used n ts busness.
Dstrct Court of the Unted States, Dstrct op Massachusetts.
Lumber Mutua re Insurance Co. v. ohn . Mae/, ormer Coector.
December 1, 1930.
opnon
Morton, .: The statute n queston (Revenue ct of September 8, 1916,
secton 407) puts nsurance companes nto a cass by themseves. It provdes
that very corporaton havng a capta stock represented by
72109 31 32
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Regs. 38(1918), rt. 12.
488
shares, and every nsurance company Itacs mne sha pay an-
nuay a speca e cse ta wth respect to the carryng on or dong busness
by such corporaton or nsurance company and n est-
matng the vaue of capta stock the surpus and undvded profts sha be
ncuded. The eeht case decdes that the words capta stock n a smar
ta ng statute covered not ony a decared capta so carred on the books, but
aso the net vaue of the property owned by the assocaton and used n that
busness. ( echt v Maey, 265 U. S., 144, at 162-163 T. D. 3595, C. .
III-, 489 .) The same concuson was reached n Ray Consodated Copper
Co. v. Unted States (268 U. S., 373, at 376, 377, 378 T. D. 3721, C. . I -1,
333 ).
The property whch was ta ed as capta stock of ths pantff beonged to
the company, havng been accumuated over a perod of years. It was not
represented by shares, as was true n the echt case, but ths fact does not
seem sgnfcant on the present queston.
In my opnon the Commssoner was rght n ta ng t as he dd. The
pantff was ceary wthn the words of the statute, every nsurance com-
pany. Its contenton, that ths broad provson ought to be restrcted by
|udca constructon so as to e cept mutua companes ke the pantff, on the
ground that, as such organzatons have no capta stock, they can not have
been ntended to come wthn the statute, s greaty weakened by the echt
decson. Moreover, n secton 11 of Tte I of the ct under consderaton
certan named nsurance and beneft organzatons, mutua n character, were
e pressy e cepted from the operaton of the ct. The persons who drafted
the statute had them n mnd. If t had been the ntenton that mutua re
nsurance companes ke the pantff shoud not be ncuded, t s atogether
probabe that they woud have been e pressy provded for, ether by an
e cepton after the words every nsurance company or by beng ncuded
n secton 11. Whe the Treasury Department at frst construed the ct
n accordance wth the pantffs contenton, t ater reversed ts poston and
took what s n my opnon the correct vew. udge Mack s observatons on
ths statute n New York Lfe Insurance Co. v. owers, Coector (34 . (2d),
60, at 61) were obter dcta and were based on the orgna Treasury regua-
ton. The change n the reguaton seems not to have been caed to hs
attenton, and he evdenty assumed that there was no queston about the
matter.
The statute when construed n the ght of the authortes s not, I thnk,
suffcenty ambguous for ts meanng to be controed even by a setted
practce n the Commssoner s offce not to ta mutua companes generay.
udgment for defendant.
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MISC LL N OUS T RULINGS.
TITL I . T ON CIG RS, TO CCO, ND M NU-
CTUR S T R O . (1926)
IMPORT D TO CCO M NU CTUR S.
Reguatons 8, rtce 125: Imported tobacco -8-4949
manufactures Labty to ta . Ct. D. 284
ta on cgars, tobacco, and manufactures thereof revenue acts
of 1921, 1024, and 1926 decson of court.
Sut ursdcton Court of Cams Imported rom Cuba
Treaty Wth Cuba.
sut by an mporter of cgars and other manufactures of
tobacco from Cuba, the same beng the product of the so of that
country, for the refund of 20 per cent of the amount of ta es
mposed on mports of such tobacco manufactures by secton 700
of the Revenue ct of 1921 and secton 400 of the Revenue cts
of 1924 and 1926, the rght to such refund beng predcated upon
the provsons of the treaty of commerca recprocty concuded
between the Unted States and Cuba on December 11, 1902, s a sut
growng out of or dependent on a treaty stpuaton entered nto
wth a foregn naton to whch the |ursdcton of the Court of
Cams of the Unted States does not e tend (secton 153 of the
udca Code). Such cam s not one founded upon the ct of
Congress of December 17, 1903, enacted to carry the treaty nto
effect, and therefore wthn the provsons of secton 145 of the
udca Code, whch gves to that court |ursdcton of a cams
founded upon any aw of Congress.
Court of Cams of the Unted States. No. -688.
abor, Coe d Gregg, Inc., v. The Unted States.
December 1, 1930.
OPINION.
ooth, Chef ustce, devered the opnon of the court.
The defendant s demurrer to pantff s petton s drected to two defenses n
aw, ether of whch, f sustaned, s suffcent to warrant a dsmssa of pan-
tffs petton.
The pantff, a New York corporaton, s engaged n the busness of buyng,
mportng, manufacturng, and seng cgars, cgarettes, and tobacco products
n varous forms. rom 1923 to 1927 the pantff mported from Cuba, through
the port of New York, arge consgnments of the above merchandse, about whch
there s no dspute. The mportatons were accompshed n the usua manner
and the pantff comped wth the orders, reguatons, and drectons of the
coector of customs and the Treasury Department. t the tme the mpor-
tatons were accompshed there was n fu force and effect a commerca
treaty between the Unted States and Cuba (33 Stat., 2136) concuded December
11, 1902, the pertnent artces of whch we quote:
rt. I. Durng the term of ths conventon, a artces of merchandse
beng the product of the so or ndustry of the Unted States whch are now
(489)
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Regs. 8, rt. 125.
490
Imported nto the Repubc of Cuba free of duty, and a artces of merchandse
beng the product of the so or ndustry of the Repubc of Cuba whch
are now mported nto the Unted States free of duty, sha contnue to be so
admtted by the respectve countres free of duty.
bt. II. Durng the term of ths conventon, a artces of merchandse
not ncuded n the foregong rtce I and beng the product of the so or ndus-
try of the Repubc of Cuba mported nto the Unted States sha be admtted
at a reducton of 20 per centum of the rates of duty thereon as provded by
the Tarff ct of the Unted States approved uy 24, 1897, or as may be
provded by any tarff aw of the Unted States subsequenty enacted.

bt. . It s understood and agreed that the aws and reguatons adopted,
or that may be adopted, by the Unted States and by the Repubc of Cuba, to
protect ther revenues and prevent fraud n the decaratons and proofs that
the artces of merchandse to whch ths conventon may appy are the product
or manufacture of the Unted States and the Repubc of Cuba, respectvey,
sha not mpose any addtona charge or fees therefor on the artces mported,
e ceptng the consuar fees estabshed, or whch may be estabshed, by ether
of the two countres for ssung shppng documents, whch fees sha not be
hgher than those charged on the shpments of smar merchandse from any
other naton whatsoever.

rt. III. The rates of duty heren granted by the Unted States to the
Repubc of Cuba are and sha contnue durng the term of ths conventon
preferenta n respect to a ke mports from other countres, and, n return
for sad preferenta rates of duty granted to the Repubc of Cuba by the
Unted States, t s agreed that the concesson heren granted on the part of
the sad Repubc of Cuba to the products of the Unted States sha kewse be,
and sha contnue, durng the term of ths conventon, preferenta n respect
to a ke mports from other countres.
rt. I . In order to mantan the mutua advantages granted n the present
conventon by the Unted States to the Repubc of Cuba and by the Repubc
of Cuba to the Unted States, t s understood and agreed that any ta or charge
that may be mposed by the natona or oca authortes of ether of the two
countres upon the artces of merchandse embraced n the provsons of ths
conventon, subsequent to mportaton and pror to ther enterng nto consump-
ton n the respectve countres, shn be mposed and coected wthout ds-
crmnaton upon ke artces whensoever mported.
rt. . It s hereby understood and agreed that n case of changes In the
tarff of ether country whch deprve the other of te advantage whch s rep-
resented by the percentages heren agreed upon, on the actua rates of the
tarffs now n force, the country so deprved of ths protecton reserves the
rght to termnate ts obgatons under ths conventon after s months notce
to the other of ts ntenton to arrest the operatons thereof.
nd t s further understood and agreed that f, at any tme durng the term
of ths conventon, after the e praton of the frst year, the protecton heren
granted to the products and manufactures of the Unted States on the bass of
the actua rates of the tarff of the Repubc of Cuba now n force, shoud appear
to the Government of the sad Repubc to be e cessve n vew of a new tarff
aw that may be adopted by t after ths conventon becomes operatve, then
the sad Ttepuhc of Cuba may reopen negotatons wth a vew to securng
such modfcatons as may appear proper to both contractng partes.
On December 17, 1903 (U. S. Code, sectons 124, 125, Tte 19), the foowng
ct of Congress was approved:
Sm 124. Products of Cuba reducton of dutes on. So ong as the conven-
ton between the Unted States and the Repubc of Cuba, sgned on the 11th
day of December, n the year 1902, sha reman n force, a artces of mer-
chandse beng the product of the so or ndustry of the Repubc of Cuba,
whch on December 17, 1903, were mported nto the Unted States free of
duty, sha contnue to be so admtted free of duty and a other artces of
merchandse beng the product of the so or ndustry of the Repubc of Cuba
mported nto the Unted States sha be admtted at a reducton of 20 per
centum of the rates of duty thereon, as provded by ths chapter, or as may
be provded by any tarff aw of the Unted States subsequenty enacted. The
rates of dut| heren granted by the Unted States to the Repubc of Cuba are
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491
Regs. 8, rt. 125.
and sha contnue durng the term of sad conventon preferenta n respect
to a ke Imports from other countres. Nothng contaned n ths secton sha
be hed or construed as an admsson on the part of the ouse of Representa-
tves that customs dutes can be changed otherwse than by an ct of Congress,
orgnatng n sad ouse. (December 17, 1903, ch. 1, secton 1, 33 Stat., 3
October 3, 1913, ch. 16, Secton I , 38 Stat., 192.)
Sec. 125. Same no addtona charges on equa treatment of mports. -
So ong as the conventon mentoned n secton 124 of ths tte sha reman
In force, the aws and reguatons adopted, or that may be adopted by the
Unted States to protect the revenues and prevent fraud n the decaratons
and proofs, that the artces of merchandse to whch sad conventon may
appy are the product or manufacture of the Repubc of Cuba, sha not
mpose any addtona charge or fees therefor on the artces mported, e -
ceptng the consuar fees estabshed, or whch may be estabshed, by the Unted
States for ssung shppng documents, whch fees sha not be hgher than
those charged on the shpments of smar merchandse from any other naton
whatsoever. rtces of the Repubc of Cuba sha receve, on ther mporta-
ton nto the ports of the Unted States, treatment equa to that whch smar
artces of the Unted States sha receve on ther mportaton nto the ports
of the Repubc of Cuba. ny ta or charge that may be mposed by the
natona or oca authortes of the Unted States upon the artces of mer-
chandse of the Repubc of Cuba, embraced n the provsons of sad conventon,
subsequent to mportaton and pror to ther enterng nto consumpton nto
the Unted States, sha be mposed and coected wthout dscrmnaton upon
ke artces whensoever mported.
Secton 10 of the Tarff ct of uy 24, 1897 (30 Stat, 206), mentoned n
rtce II of the foregong treaty, provded n terms as foows:
That secton 3394 of the Revsed Statutes of the Unted States, as amended,
be, and the same s hereby, further amended so as to read as foows:
Upon cgars whch sha be manufactured and sod, or removed for con-
sumpton or sae, there sha be assessed and coected the foowng ta es, to
be pad by the manufacturer thereof: On cgars of a descrptons made of
tobacco, or any substtute therefor, and weghng more than 3 pounds per thou-
sand, 3 per thousand on cgars, made of tobacco, or any substtute therefor,
and weghng not more than 3 pounds per thousand, 1 per thousand on
cgarettes, made of tobacco, or any substtute therefor, and weghng more
than 3 pounds per thousand, 3 per thousand on cgarettes, made of tobacco,
or any substtute therefor, and weghng not more than 3 pounds per thousand,
1 per thousand: Provded, That a ros of tobacco, or any substtute therefor,
wrapped wth tobacco, sha be cassed as cgars, and a ros of tobacco, or
any substtute therefor, wrapped n paper or any substance other than tobacco,
sha be cassed as cgarettes.
nd the Commssoner of Interna Revenue, wth the approva of the
Secretary of the Treasury, sha provde des and adhesve stamps for cgars
weghng not more than 3 pounds per thousand: Provded, That such stamps
sha be n denomnatons of 10, 20, 50, and 100, and the aws and reguatons
governng the packng and remova for sae of cgarettes, and the aff ng and
canceng of the stamps on the packages thereof, sha appy to cgars weghng
not more than 3 pounds per thousand.
Paragraph 217 of the foregong Tarff ct (30 Stat., 169) eved the foowng
Import dutes:
217. Cgars, cgarettes, cheroots of a knds, 4.50 per pound and 25 per
centum ad vaorem .
Wthout quotng the provsons of the Tarff cts subsequent to 1897, t Is
suffcent for present purposes to state the dutes upon mportatons of the
character here nvoved were contnued theren and no pont arses wth respect
thereto. It s to be observed, however, that rtce II of the treaty between
the Unted States and Cuba provdes that Cuban products as theren mted
sha be admtted at a reducton of 20 per centum of the rates of duty thereon
as provded by the Tarff ct of the Unted States approved uy 24, 1897, or
as may be provded by any tarff aw of the Unted States subsequenty
enacted.
The pantff aeges that nasmuch as secton 10 of the ct of uy 24, 1897,
supra, s a dstnct provson of the Tarff ct of that date, and eves, n add-
ton to the dutes e acted by paragraph 217 of the ct, the ta es theren pre-
scrbed, that t was entted to a reducton of 20 per centum of the ta es eved
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Regs. 8, rt. 125.
492
by secton 10 of the ct, precsey as t was entted to the same reducton
accorded t under paragraph 217 of the ct. In other words, that for the sums
e pended n the procurement of nterna revenue stamps e acted by the coector
of customs under sectons 3377 and 3402, Revsed Statutes, n accord wth
Treasury and customs reguatons wth respect thereto, t s entted to recover
back from the fu amount pad therefor 20 per centum thereof under rtce
II of the treaty as aforesad.
The frst and, obvousy, mportant ssue arsng under the demurrer s one
of |ursdcton. If the asserted cam s one growng out of or dependent on
any treaty stpuaton entered nto wth foregn natons ths court s wthout
|ursdcton. (Secton 153 of the udca Code. Secton 1066, R. S. astern
tenson,- ustraasa Chna Teegraph Co., Ltd., v. Unted States, 231
U. S., 326 nkead v. Unted States, 18 C. Cs., 504, 514.) The pantff s con-
tenton s that the asserted cam s one founded upon the ct of December 17,
1903, and hence |ursdcton attaches n vrtue of secton 145 of the code, our
genera |ursdctona act. The ct of December 17, 1903, supra, s entted
n ct to carry nto effect a conventon between the Unted States and the
Repubc of Cuba, sgned on the 11th day of December, n the year 1902. The
ct tsef was made necessary by the acton of the Senate wheren ratfcaton
of the treaty wth amendments was advsed. rtce I provded: Ths con-
venton sha not take effect unt the same sha have been approved by the
Congress. The treaty wth the amendments was duy ratfed by the two
countres nvoved, and procamed on December 17, 1903. (Unted States v.
mercan Sugar Refnng Co., 202 U. S., 563.) Snce that date the nstrument
was treated and observed as a treaty obgaton, and the ct of Congress of
December 17, 1903, regarded as an essenta egsatve step, the fna one, to
f ts effectve date. Ths s n accord wth the rung of the Supreme Court n
the mercan Sugar Refnng case |ust cted. The pantff n opposton ctes
the case of Unted States v. Wed (127 T . S., 51). In our opnon, t s
decdedy napposte, and f at a avaabe as a precedent supports rather
than dscredts the demurrer. The case tsef was the outgrowth of an award
pad to the Unted States by Great rtan n settement of the hstorca
abama cams n accord wth an arbtraton provded for n the treaty of
Washngton (17 Stat., 863). The sum awarded the Unted States the Geneva
award was 15,500,000, and foowng ts qudaton the Congress created a
trbuna known as the Court of Commssoners of abama Cams and con-
ferred upon the same |ursdcton to hear and determne the cams of ctzens
to any porton of the award. Obvousy the ct of Congress created a rght
whch under the treaty coud not have been asserted n ths court. Other cases
of a ke nature have been before ths and the Supreme Court, and the Wed
case, supra, foowed n ther ad|udcaton. The Supreme Court n dsposng of
the ssue Invoved n the Wed case sad:
It may be sad, n opposton to ths vew of the case, that, bad there been
no treaty of Washngton, there woud have been no fund of 15,500,000 to ds-
trbute, the ct of une 5, 1882, woud never have been passed, and, therefore,
that the treaty s the bass of a the subsequent egsaton, and consequenty the
bass of ths cam n other words, that, therefore, ths cam s dependent
upon and grows out of the treaty of Washngton.
We are of opnon, however, that such a dependency upon or gronng out of,
s too remote to come wthn the meanng of secton 1060, Revsed Statutes.
In our vew of the case, the statute contempates a drect and pro mate con-
necton between the treaty and the cam, n order to brng such cam wthn
the cass e cuded from the |ursdcton of the Court of Cams by secton 1066,
Revsed Statutes. In order to make the cam one arsng out of a treaty wthn
the meanng of secton 1066, Revsed Statutes, the rght tsef, whch the pet-
ton makes to be the foundaton of the cam, must have ts orgn derve ts
fe and e stence from some treaty stpuaton. Ths rung s anaogous to
that of the ancent and unversa rue reatng to damages n common-aw
actons namey, that a wrongdoer sha be hed responsbe ony for the pro -
mate, and not for the remote, consequences of hs acton.
ttenton s drected by the pantff to what s sad to be a specfc prescrp-
ton of rates of duty n the ct of 1903 appcabe to the merchandse mported,
and from ths an nference s drawn that Congress ntended the sub|ect matter
of the ct as one entrey for egsatve reguaton. In support of ths con-
tenton the provson n the ct that Nothng contaned n ths secton sha
be hed or construed as an admsson on the part of the ouse of Representa-
tves that customs dutes can be changed otherwse than by an ct of Congress,
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493
Regs. 8, rt. 125.
orgnatng n sad ouse, s kewse cted. The anguage of the ct of 1903
conforms to the terms of the treaty, the dentca sub|ect matter wth whch
Congress was mmedatey concerned. It woud be dffcut, ndeed, n vew of
the hstory of the transacton, to hod that Congress by the ct was egsatng
recproca and preferenta rghts as between two countres wth respect to
tarff dutes, when precsey the same sub|ect matter was covered by treaty
stpuatons then before Congress for consderaton, and n vew of the fact
that the treaty tsef depended by ts own provsons for effectveness upon the
enactment of such an ct. True, Congress nserted a provson n the ct
e pressy e cudng t as a precedent n the event of a confct as to the awfu
and consttutona rght to change customs dutes otherwse than n an ct
orgnatng n the ouse of Representatves but ths provson n no sense
ndcates that n the enactment of ths ct Congress was egsatng ndepend-
enty of the treaty. The tte and anguage of the ct Itsef e cude the pos-
sbty of such an ntent. On the contrary, the facts concusvey show that
Congress was actng n accord wth the artces of the treaty, and egsatng as
theren provded to gve t effect, whereas wthout such egsaton t woud
have been neffectve. The case, we thnk, s governed by the decson of the
Supreme Court n the foowng cases: astern tenson, ustraasa S Chna
Teegraph Co. (supra), nkead v. Unted States (supra), and Great Western
Insurance Co. v. Unted States (112 U. S., 193), and ths court s wthout |urs-
dcton to consder t.
The demurrer w be sustaned and the petton dsmssed. It s so ordered.
Whaey, udge Wams, udge and Ltteton, udge, concur.
Gkeen, udge, concurrng:
I concur n the foregong opnon to the effect that pantff s cause of acton
Is based upon a treaty provson. Such beng the case, t s cear that ths
court has no |ursdcton of the case. The pantff, however, nssts that the
cam s based upon a statutory provson passed by both ouses of Congress
and not upon a treaty. Concedng for the sake of the argument ony that ths
statement s correct, I am ceary of the opnon that a case s not stated n
the petton.
The matera portons of the commerca treaty between the Unted States
and Cuba nvoved n the case are set out n the foregong opnon, together wth
the statutory provsons pertanng thereto so far as matera to the consdera-
ton of the case at bar.
The ta n controversy was eved by secton 10 of what s commony caed
the Tarff ct of uy 24, 1897, but I assume that the fact that the provson
tnder whch the ta was assessed was one of the sectons of a tarff b w
not be consdered as makng the ta eved thereby an mport duty. It s a
very common practce on the part of Congress to ntermnge n the same cts
customs dutes and nterna revenue provsons. Nor do I thnk that the fact
that n some provsons of the nterna revenue aw the ta on cgars s made
to appy (as t was n secton 3402, Revsed Statutes, ct of uy 20, 1868) to
cgars mported from foregn countres s at a matera. Pantffs prncpa
contenton s that the ta whch s sought to be recovered back n ths case
s n substance and nature an mport duty, but the argument presented on be-
haf of pantff s as I thnk based on a msconcepton of the true dstncton
between an mport duty and an nterna revenue ta .
The bass of an mport duty s the fact that the goods have been mported, but
t s entrey mmatera n the assessment of an nterna revenue ta whether
the artces have been mported or not. n mport duty coud be made ether
by aw or reguaton a condton precedent to foregn goods enterng our
boundares, athough as a matter of fact for convenence ths s not done. n
Interna revenue ta can not be eved or coected unt the goods are ocated
wthn our boundares. The customs duty s eved on the prvege of brngng
foregn goods nto our country the nterna revenue ta n ths case s eved
on the prvege of removng the goods after they have come wthn our bound-
ares for consumpton or sae. Ths w be observed from the anguage of the
provson whch mposes the ta n queston, whch s upon cgars
sod or removed for consumpton or sae, and ke any other ta upon a
prvege t may be coected before the prvege s e ercsed (as t usuay s)
and before the cgars are actuay removed for sae. The remova for sae does
not refer to the remova from foregn countres. The prvege of remova
whch s ta ed s one whch s to be e ercsed wthn ths country, otherwse
the ta woud not appy to domestc cgars, as t unquestonaby does.
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Regs. 8, rt. 125.
494
Counse for pantff say In ther bref
Congress, of course, has no power to evy an e cse ta on mported goods
whe they are st n customs custody, .
It needs no argument to show that a State coud not evy a ta affectng m-
ported goods whe they were st n the custody of the Government, but I
know of nothng to prevent Congress from so dong f t s consdered advsabe.
s Congress s gven compete power to egsate wth reference to mporta-
ton of foregn goods, t may enact statutes whch appy to mported goods
whe st In the custody of the customs offcas. It s true that the statutes
mposng the ta requre the aff ng of stamps n payment thereof whe the
cgars are st n the custody of the coector of customs but, as before stated,
ths s not upon the prvege of mportaton but upon the prvege of remova
for sae and appes wherever the cgars may be found whether n the custody
of the customs offcas or esewhere. No reason can be gven why Congress
may not requre the stamps to be aff ed whe the cgars are st n the custody
of the coector of customs. In so dong, t s merey provdng for the co-
ecton of the ta n advance of the prvege ta ed beng e ercsed, and f the
cgars were reeased wthout the stamps beng so aff ed t woud probaby
resut n much evason of the aw. Secton 3402, Revsed Statutes ( ct of
uy 20,1868), accordngy provded that cgars mported from foregn countres
shoud pay n addton to the mport dutes mposed thereon the ta pre-
scrbed by aw for cgars manufactured n the Unted States, and shoud have
the same stamps aff ed and canceed by the owner or mporter whe they
were n the custody of the proper customhouse offcer. The anguage used
n mposng the ta by secton 3402 shoud specay be noted. The ta Is
n addton to the mport duty, not an addtona mport duty. The requre-
ment that the stamps shoud be aff ed and canceed whe n the custody of
the customhouse offcer s merey to prevent evason, otherwse they coud
|ust as we be aff ed after the property had passed out of the hands of the
customs authortes. In none of the cts whch have been cted n connecton
wth the ta n controversy s the mportaton made the bass of the ta .
The Government smpy refuses to reease the goods unt the nterna-revenue
ta s pad. The necessty of preventng the evason woud be abundant
authorty for Congress so requrng the coecton of the ta , f anythng
ese was needed beyond ts genera authorty wth reference to mported goods
and mposng e cse ta es.
In ordan, Coector, v. Roche (228 U. S., 436) t appeared that by procama-
ton of the Presdent ssued under authorty of aw a tarff dutes on
merchandse comng nto the Unted States from Porto Rco ceased (tacs
n Supreme Court opnon), but artces of merchandse of Porto Rcan manu-
facture comng nto the Unted States sha pay a ta equa to the nterna
revenue ta mposed n the Unted States upon the ke artces of merchandse
of domestc manufacture. It was hed n that case that bay rum mported
from Porto Rco was sub|ect to the nterna-revenue ta upon dsted sprts,
notwthstandng a mport dutes had ceased. It s manfest that ths hod-
ng s contrary to the ogc of pantff s argument, the bass of whch s that
any ta whch s ad upon domestc and mported artces ake s an mport
ta when t appes to artces that have been mported.
Counse for pantff cte severa decsons by the Unted States Court of
Customs ppeas whch tend to sustan ther poston, but I can not foow the
reasonng upon whch these decsons were based. It s qute correct to say that
cang an e cse duty an nterna revenue ta does not make t such but I
thnk t s equay true that cang a ta a customs duty because t ncudes
wth others goods whch have been mported does not make t n fact a customs
duty. The edera Government does not have to wat unt goods pass out of
the hands of the customs offcas n order to mpose an ndrect ta whch may
be assessed upon them. It has, as I thnk, every rght and authorty to mpose
such a ta whe the goods are n the custody of the customs offcas and say,
as t dd n ths case, that they sha not reease the goods unt the stamps
requred by the aw are aff ed. The cases of rown v. State of Maryand (12
Wheat., 419) and May v. New Oreans (178 U. S., 496) appear to me to have no
appcaton. The opnons and |udgments rendered theren were upon ato-
gether dfferent facts and upon atogether dfferent questons.
On the grounds stated above, as we as upon those set forth n the ma|orty
opnon, I concude that the demurrer shoud be sustaned.
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MISC LL N OUS RULINGS.
TO CCO.
Reguatons 8, rtces 41, 44, 47, 50. -1 -5031
T. D.4311
M NU CTUR D TO CCO.
Casses of manufactured tobacco, ncudng scrap chewng to-
bacco, defned. Subdvson of packages of tobacco and snuff
prohbted. rtces 41, 44, 47, and 50, Reguatons 8, amended.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
The fourth paragraph of artce 41, Reguatons 8 (1928 edton),
s amended so as to read as foows:
Tobacco scraps, cuttngs, and cppngs, when favored, sweetened, and n-
tended for use prmary for chewng purposes, sha be reported as scrap
chewng tobacco, but when such scraps, cuttngs, and cppngs are prepared
prmary for smokng purposes, they sha be reported as smokng tobacco.
Manufactured tobacco and snuff whch has once been removed from the fac-
tory and has been so reported sha not be returned to the factory (receved
wthn ts bonded premses), e cept by e press authorty from the coector
of nterna revenue for the dstrct, to be reworked, as provded n artce 108.
(In respect to entres n case of reworkng manufactured tobacco or snuff,
see artce 107 n case of oss by fre, theft, etc., see artce 104 n case of
destructon of matera, stems, waste, etc., see artce 105 n case of sae of eaf
tobacco, see artce 98 n case of remova of scraps, cuttngs, and cppngs,
see artce 99 and further n reaton to entres n manufacturer s revenue
book, see artce 101 and use of orm 774, see artce 100.)
rtce 44 of sad reguatons s amended so as to read as foows:
bt. 44. Cassfcaton of manufactured tobacco. Manufactured tobacco, for
nterna revenue ta purposes, sha be dvded nto fve casses, vz:
1. Pug, where the tobacco s manufactured and pressed nto fat cakes.
2. Twst, where the tobacco s twsted and marketed n that form.
3. ne-cut chewng, where the product s prepared from eaf tobacco cut nto
fne shreds by the use of machnes and ntended e cusvey for chewng
purposes.
4. Scrap chewng, where the product s prepared from tobacco eaves cut or
broken nto sma peces, or from tobacco scraps, cuttngs, or cppngs, favored,
sweetened, and ntended prmary for chewng purposes.
5. Smokng, where the product conssts of granuated tobacco, varous pug
cuts, ong cut (tobacco cut nto shreds or strngs), a so-caed m tures, and
tobacco scraps, cuttngs, or cppngs, prepared or sutabe for smokng purposes.
rtce 47 of sad reguatons s amended so as to read as foows:
bt. 47. Subdvson packages prohbted. Snce stamps for manufactured
tobacco and snuff are now supped n numerous sma denomnatons, manufac-
turers w not be permtted to pack manufactured tobacco or snuff n unstamped
subdvsons or parces for repackng n arger packages to whch the proper
(495)
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Regs. 9(1925), 20, 29, etc.
496
stamp s aff ed. The unt package s the sze of package prescrbed by aw.
Ths prohbton, however, does not precude the use of tn fo.
Subdvson (a) of artce 50 of sad reguatons s amended so as
to read as foows:
(a) Strp stamps, n sheets, n denomnatons of , , , , , 1, 1 ,
1 , 1 , 1 , 1 , 1 , 1 , 2, 2 , 2 , 3, 3 , 3 , 3 , 4, 5, 6, 7, 8, 9, 10,
11, 12. 13, 14, 15, and 16 ounces, to correspond wth the szes of packages pre-
scrbed by aw, to be used on packages of smokng tobacco, scrap chewng
tobacco, fne-cut chewng tobacco, and a other knds of tobacco not otherwse
provded for, aso sma packages of Cavendsh, pug, twst, or eaf tobacco.
Strp stamps, n sheets, and n denomnatons as shown above, but of a separate
seres, are provded to be used on packages of snuff and snuff chewng gum.
Davd urnet,
Commssoner of Interna Revenue.
pproved pr 10, 1931.
. W. Meon,
Secretary of the Treasury.
OL OM RG RIN .
Reguatons 9(1925), Sectons 20, 29, 37, 42, 43, -20-5069
71,75,77, and 82. T.D.4313
OL OM RG RIN CT OP M RC 4, 1931.
Reguatons No. 9 amended.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
The ct of Congress approved March 4, 1931 (Pubc, No. 867
Seventy-frst Congress . R. 16836), n so far as the same reates
to the nterna revenue ta on oeomargarne, reads as foows:
n ct to amend the ct entted n ct defnng butter, aso
mposng a ta upon and reguatng the manufacture, sae, Importa-
ton, and e portaton of oeomargarne, approved ugust 2, 1886,
us amended, and for other purposes.
e t enacted by the Sen-ate and ouse of Representatves of the Unted
States of merca n Congress assembed, That the second paragraph of secton
3 of the ct entted n ct defnng butter, aso mposng a ta upon and
reguatng the manufacture, sae, mportaton, and e portaton of oeomarga-
rne, approved ugust 2, 1886, as amended (U. S. C, Tte 26, secton 207), s
amended to read as foows:
nd any person that ses, vends, or furnshes oeomargarne for the use
and consumpton of others, e cept to hs own famy tabe wthout compensa-
ton, who sha add to or m wth such oeomargarne any substance whch
causes such oeomargarne to be yeow n coor, determned as provded n
subsecton (b) of secton 8, sha aso be hed to be a manufacturer of oeo-
margarne wthn the meanng of ths ct and sub|ect to the provsons
thereof.
Sec. 2. Secton 8 of such ct of ugust 2, 1880, as amended (T . S. C, Tte
26, secton 546), s amended to read as foows:
Seo. 8. (a) Upon oeomargarne whch sha be manufactured and sod,
or removed for consumpton or use, there sha be assessed and coected a ta
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497
Regs. 9(1925), 20, 29, etc
at the rate of one-fourth of 1 cent per pound, to be pad by the manufacturer
thereof e cept that such ta sha be at the rate of 10 cents per pound In the
case of oeomargarne whch s yeow n coor.
(b) or the purposes of subsecton (a) and of secton 3, oeomargarne
sha be hed to be yeow n coor when t has a tnt or shade contanng more
than 1.6 degrees of yeow, or of yeow and red coectvey, but wth an e cess
of yeow over red, measured n the terms of the Lovbond tntometer scae or
ts equvaent. Such measurements sha be made under reguatons prescrbed
by the Commssoner of Interna Revenue, wth the approva of the Secretary
of the Treasury, and such reguatons sha provde that the measurements
sha be apped n such manner and under such condtons as w, n the
opnon of the Commssoner, nsure as neary as practcabe that the resut of
the measurement w show the coor of the oeomargarne under the condtons
under whch t s customary offered for sae to the consumer.
(c) The ta eved by ths secton sha be represented by coupon stamps
and the provsons of e stng aws governng the engravng. Issue, sae, account-
abty, effacement, and destructon of stamps reatng to tobacco and snuff, as
far as appcabe, are hereby made to appy to stamps provded for by ths
secton.
Sua 3. .
Sec. 4. Ths ct sha take effect upon the e praton of 90 days after the
date of ts enactment
pproved March 4, 1931.
In accordance wth the terras of that aw, Reguatons No. 9 (re-
vsed ugust, 1925) are hereby amended as ndcated herenafter.
Secton 20 s amended to read as foows:
Seo. 20. Rates of tan. The foowng tabe shows the annua rates of speca
ta es mposed upon persons engagng n the severa busnesses comng wthn
the scope of these reguatons:
Manufacturers of oeomargarne 600
Whoesae deaers n oeomargarne ta ed at 10 cents per ound 480
Whoesae deaers n oeomargarne ta ed at cent per pound 200
Reta deaers n oeomargarne ta ed at 10 cents per pound 48
Reta deaers n oeomargarne ta ed at cent per pound 6
Manufacturers of aduterated butter 600
Whoesae deaers n aduterated butter 480
Reta deaers n aduterated butter 48
Manufacturers of process or renovated butter 50
Secton 29 s amended to read as foows:
Seo. 29. Defnton. (a) manufacturer of oeomargarne s one who manu-
factures oeomargarne for sae, or one who adds to or m es wth oeomar-
garne any substance whch causes such oeomargarne to be yeow n coor
determned as provded n secton 8 of the ct of ugust 2, 1886, amended, as
amended by secton 2 of the ct of March 4, 1931, and ses, vends, or furnshes
the same for the use and consumpton of others, e cept to hs own famy tabe
wthout compensaton.
(b) prvate ndvdua may coor oeomargarne ta ed at the rate of one-
fourth of 1 cent per pound wthout abty as a manufacturer f the oeo-
margarne s furnshed to hs own famy tabe wthout compensaton. Those
who may be served at such famy tabe ncude ony father, mother, chdren,
servants, and guests who are entertaned wthout charge, and those for whose
support the aw ordnary requres the head of a famy to provde.
(c) ny Insttuton under the compete contro of a State or a potca sub-
dvson thereof may coor oeomargarne for use of nmates and empoyees
wthout ncurrng abty to the manufacturer s speca ta or to stamp ta .
In a cases It must be cear that the nsttuton s under the compete contro
of a State or a potca subdvson thereof snce nsttutons under prvate
contro are not e empt.
(d) Labty as a manufacturer of oeomargarne and to stamp ta on the
quantty of oeomargarne coored w be ncurred by
(1) deaer n oeomargarne who adds t or m es wth the oeomargarne
any substance whch causes such oeomargarne to be yeow n coor determned
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Regs. 9(1925), 20, 29, etc.
498
as provded n secton 8 of the ct of ugust 2, 1886, amended, as amended by
secton 2 of the ct of March 4, 1931, regardess of whether the coorng s done
at the request of a customer ether before or after sae and wth or wthout
proft. (T. D. 1517.)
(2) person who coors oeomargarne for demonstraton purposes and
furnshes t for the use and consumpton of others, gratutousy or otherwse, at
each pace where the oeomargarne s coored. If oeomargarne coored for
demonstraton purposes s not furnshed for the use or consumpton of others
abty as manufacturer s not ncurred. No abty s ncurred by a demon-
strator who gves away sampes of oeomargarne yeow n coor, provded t
has been propery ta -pad.
(3) The propretor of a hote, restaurant, boardng house, or smar estab-
shment who sha add to or m wth oeomargarne any substance whch
causes such oeomargarne to be yeow n coor determned as provded n
secton 8 of the ct of ugust 2, 1886, amended, as amended by secton 2 of the
ct of March 4, 1931, and serves the same to payng guests.
(4) chartabe or semchartabe nsttuton, coorng oeomargarne for
use of nmates, or empoyees recevng food as a part of ther compensaton.
(See subsecton (c).)
Subsecton (b) (2) of secton 36 s amended to read as foows:
(b) (2) Separate records must be kept In respect to oeomargarne ta ed at
the rate of 10 cents per pound and oeomargarne ta ed at the rate of one-fourth
of 1 cent per pound.
Subsectons (a) and (d) of secton 37 are amended to read as
foows:
Sec. 37. Returns. (a) ach manufacturer of oeomargarne must furnsh to
the coector of hs dstrct, not ater than the 15th day of each month, an ac-
curate return, under oath, on orms 216 and 216a, of the knds and quantty
of each knd of matera used by hm n the manufacture of oeomargarne,
the quantty of oeomargarne produced, of a oeomargarne dsposed of, of
a oeomargarne returned, and the vaues of a stamps purchased and used by
hm durng the precedng month. Transactons n oeomargarne ta ed at the
rate of one-fourth of 1 cent per pound must be reported n one return and those
coverng oeomargarne ta ed at the rate of 10 cents per pound n another.
No coector w accept a return whch covers both casses of oeomargarne.
Such returns sha be prepared In dupcate and shoud be typewrtten, the
orgna beng forwarded to the coector and the dupcate or carbon copy beng
retaned by the manufacturer at the factory for a perod of two years, sub|ect
to nspecton of any nterna revenue offcer or agent. return on orm 216
and 216a for each cass of oeomargarne s requred to be made for each month
from date of openng nventory to date of fna nventory. The fna return
shoud be marked fna.
(d) The summares ou page 1 of the return shoud be competed by reportng
the actua baances on hand at the begnnng and at the cose of the month
for whch the return s to be rendered, and they shoud be baanced. The sev-
era pages of each return sha be arranged n order, numbered consecutvey,
and securey fastened together by means of the punched hoes provded for that
purpose. ach return must be sgned and sworn to as provded n secton 56.
manufacturer who produces ony oeomargarne ta abe at the rate of one-
fourth of 1 cent per pound w be requred to amend the |urat on hs return to
ncude a statement to that effect n order to be e cused from makng a return
coverng the product ta ed at the rate of 10 cents per pound.
Secton 42 s amended to read as foows:
Seo. 42. Rates of stump ta on oeomargarne. The ta upon oeomargarne
when t has a tnt or shade contanng more thnn 1.6 degrees of yeow, or
of yeow and red coectvey, but wth an e cess of yeow over red, measured
n the terms of the Lovbond tntometer scae or ts equvaent, s 10 cents per
pound, and the ta upon oeomargarne havng a tnt or shade contanng ess
than 1.6 degrees of yeow, or yeow and red coectvey, but wth an e cess
of yeow over red, measured n the terms of the Lovbond tntometer scae
or ts equvaent, s cent per pound. ny fractona part of a pound n
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499
Regs. 9(1925), 20, 29, etc|
a package s ta abe as a pound. The ta on oeomargarne accrues upon
remova from the factory or pace where t s made, or upon sae pror to such
remova, and Is to be pad by the manufacturer thereof by the aff ng of stamps
before remova. Oeomargarne may be removed from the pace of manufacture
wthout the payment of ta for e port (secton 96) or for use of the Unted
States upon compance wth the provsons of revsed Reguatons 73 and 34,
respectvey.
Secton 43 s amended to read as foows:
Sec. 43. Method to be used n determnng the degree of coor n oeomar-
garne. The sampe of oeomargarne to be tested shoud be spread to a smooth
surface n a gazed porcean tray havng an nsde depth of of an nch.
Irreguartes on the surface of the oeomargarne shoud be avoded because
they cause the formaton of dark shadows. cessve workng of the product
shoud aso be avoded because any meted fat on the surface w ncrease
the tnt of the oeomargarne. The temperature at whch the test s made
depends to some e tent upon the composton of the oeomargarne but t (tem-
perature) shoud be hgh enough to permt the spreadng of the oeomargarne
n the tray and ow enough to prevent metng on the surface. temperature
of 60 . has been found satsfactory.
The tray contanng the oeomargarne shoud be paced on a sheet of whte
fter paper |ust beow the ce end of a monocuar ttng type Lovbond
tntometer. ne precptated cacum suphate worked to a smooth surface
shoud be put n a smar tray aongsde the tray contanng the oeomargarne.
y ttng the rear of the nstrument to an appro mate ange of 30 the ght
from both trays s refected through the nstrument. Standard coor gass
sdes shoud be paced n sots provded for ths purpose unt the tnt of the
cacum suphate appears to be the same as the tnt or shade of the oeomarga-
rne. The numerca coor vaue of the gass sdes used s the tnt or shade
of the oeomargarne.
The ce end of the tntometer s paced n an 18-nch cubca skeeton frame
constructed from -nch square wooden matera, fve sdes beng covered wth
sheets of whte fter paper, the s th sde beng eft open for the tntometer.
Lght from a north wndow s preferabe n takng readngs. The use of ftered
ght through ths devce makes the coor more dstnct and aso cuts off the
possbty of shadows from the outsde.
The adaptabty of the eye to perceve varatons n coor vares consderaby
wth tme of observaton. It s mperatve, therefore, to mt the observaton
to a f ed tme, for whch fve seconds w be found convenent.
The procean trays used n ths test must be of the type generay used
wth the Lovbond tntometer for matchng coors of powders.
Secton 71 s amended to read as foows:
Sec. 71. Regstry and payment of speca taw. very whoesae deaer n
oeomargarne must make return on orm 11, pay speca ta , and otherwse
compy wth the provsons reatve thereto n sectons 12 to 28. One who has
pad speca ta at the rate of 480 per annum may se oeomargarne ta ed
ether at the rate of 10 cents per pound or at one-fourth of 1 cent per pound,
or he may se oeomargarne ta ed at both rates. The payment by a whoesae
deaer n oeomargarne of speca ta at the mnmum rate of 200 per annu a
permts hm to se ony oeomargarne ta ed at the rate of one-fourth of 1 ce t
per pound. If one who has pad speca ta to se oeomargarne ta ed at the
rate of one-fourth of 1 cent per pound ater makes return and pays speca t :
coverng the same perod to dea n the product ta ed at the rate of 10 cents per
pound, he may submt through the coector for hs dstrct the stamp frst
secured by hm, wth cam on orm 843 for ts redempton.
Subsecton (f) of secton 72 s amended to read as foows:
(f) Storng oeomargarne. Manufacturers of, and whoesae deaers n,
oeomargarne may store ta -pad packages of such product at paces other than
those named n ther speca-ta stamps and may make deveres from such
paces of storage wthout ncurrng addtona speca ta abty, provded that
saes of oeomargarne so stored are absoutey competed by the manufacturers
or whoesae deaers at ther regstered paces of busness by constructve de-
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Regs. 9(1925), 20, 29, etc.
500
very there pror to actua remova of the goods from the pace of storage for
devery to purchasers. Recept of an order at the pace of busness of a manu-
facturer or deaer and the sendng of such order to the storage house for dev-
ery s not a sae of the goods at sad pace of busness. manufacturer or
deaer must not merey receve the order at hs pace of busness, but he must
make out there and dever to the customer orderng, or send to hm drect a
b of sae n each nstance transferrng to hm the ownershp of the goods
before there s an actua devery from the pace of storage. Manufacturers of,
and whoesae deaers n, oeomargarne w not be permtted to store packages
of oeomargarne ta ed at the rate of 10 cents per pound on the premses of a
deaer who has not pad speca ta to se the product ta ed at the rate of
10 cents per pound.
Subsecton 3 of secton 74 s amended to read as foows:
3. Separate records must be kept n respect to coored and uncoored oeo-
margarne.
The frst paragraph of secton 75 s amended to read as foows:
Seo. 75. Returns. very whoesae deaer n oeomargarne must furnsh to
the coector of hs dstrct, not ater than the 15th day of each month, an
accurate return, under oath, on orms 217 and 217a of a oeomargarne re-
ceved and dsposed of by hm durng the precedng month. Transactons n
oeomargarne ta ed at the rate of one-fourth of 1 cent per pound must be
reported n one return, and those coverng oeomargarne ta ed at the rate of
10 cents per pound n another return n whch the etters un n the word
Uncoored sha be strcken out wherever they appear theren. No coector
w accept a return whch covers both casses of oeomargarne.
Secton 77 s amended to read as foows:
Sko. 77. Regstry and payment of speca ta n. very reta deaer n oeo-
margarne must make return on orm 11 and pay speca ta and otherwse
compy wth the provsons reatve thereto n sectons 12 to 28. One who has
pad speca ta at the rate of 48 per annum may se oeomargarne ta ed
ether at the rate of 10 cents per pound or at one-fourth of 1 cent per pound,
or he may se oeomargarne ta ed at both rates. The payment by a reta
deaer n oeomargarne of speca ta at the mnmum rate of 6 per annum
permts hm to se ony oeomargarne ta ed at the rate of one-fourth of 1 cent
per pound. If one who has pad speca ta to se oeomargarne ta ed at the
rate of one-fourth of 1 cent per pound ater makes return and pays speca ta
coverng the same perod to dea n the product ta ed at the rate of 10 cents
per pound, he may submt through the coector for hs dstrct the stamp frst
secured by hm, wth cam on orm 843 for ts redempton.
Secton 82 s amended to read as foows:
Sew. 82. Packages wthout stamps or marks to be sezed for forfeture.
packages of oeomargarne sub|ect to ta found wthout stamps or marks pro-
vded by aw and these reguatons are abe to sezure for forfeture kewse
any yeow oeomargarne wthn the meanng of that term as provded n sec-
ton 8 of the ct of ugust 2, 1886, amended, as amended by secton 2 of the
ct of March 4, 1931, found on the market n packages bearng ta -pad stamps
at the rate of one-fourth of 1 cent per pound.
The provsons of ths Treasury decson w take effect une 3,
1931, and a rungs n so far as they may be nconsstent therewth
are hereby revoked as of that date.
Davd urnet,
Commssoner of Interna Revenue.
pproved May 7,1931.
. W. Meon,
Sewetary of the Treasury.
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501 egs. 9(1925), 20, 29, etc.
-12-4991
. R. 16836. PU LIC NO. 867, S NTY- IRST CONGR SS.
n ct to amend the ct entted n ct defnng butter, aso
mposng a ta upon and reguatng the manufacture, sae, m-
portaton, and e portaton of oeomargarne, approved ugust 2,
1886, as amended, and for other purposes.
e t enacted, by the Senate and ouse of Representavoes of the
Unted States of merca n Congress assembed, That the second
paragraph of secton 3 of the ct entted n ct defnng butter,
aso mposng a ta upon and reguatng the manufacture, sae, m-
portaton, and e portaton of oeomargarne, approved ugust 2,
1886, as amended (U. S. C, tte 26, secton 207), s amended to
read as foows:
nd any person that ses, vends, or furnshes oeomargarne for the use
and consumpton of others, e cept to hs own famy tabe wthout compen-
saton, who sha add to or m wth such oeomargarne any substance whch
causes such oeomargarne to be yeow n coor, determned as provded n
subsecton (b) of secton 8, sha aso be hed to be a manufacturer of oeo-
margarne wthn the meanng of ths ct and sub|ect to the provsons
thereof.
Seo. 2. Secton 8 of such ct of ugust 2, 1886, as amended
(U. S. C, tte 26, secton 546), s amended to read as foows:
Sec. 8. (a) Upon oeomargarne whch sha be manufactured and sod, or
removed for consumpton or use, there sha be assessed and coected a ta at
the rate of one-fourth of 1 cent per pound, to be pad by the manufacturer
thereof e cept that such ta sha be at the rate of 10 cents per pound n
the case of oeomargarne whch s yeow n coor.
(b) or the purposes of subsecton (a) and of secton 3, oeomargarne
sha be hed to be yeow n coor when t has a tnt or shade contanng
more than 1.6 degrees of yeow, or of yeow and red coectvey, but
wth an e cess of yeow over red, measured n the terms of the Lovbond
tntometer scae or ts equvaent. Such measurements sha be made under
reguatons prescrbed by the Commssoner of Interna Revenue, wth the
approva of the Secretary of the Treasury, and such reguatons sha provde
that the measurements sha be apped n such manner and under such con-
dtons as w, In the opnon of the Commssoner, nsure as neary as prac-
tcabe that the resut of the measurement w show the coor of the oeo-
margarne under the condtons under whch t s customary offered for sae
to the consumer.
(c) The ta eved by ths secton sha be represented by coupon stamps
and the provsons of e stng aws governng the engravng, ssue, sae,
accountabty, effacement, and destructon of stamps reatng to tobacco
and snuff, as far as appcabe, are hereby made to appy to stamps provded
for by ths secton.
Seo. 3. That secton 15 of the grcutura Marketng ct, ap-
proved une 15, 1929, s amended by addng at the end thereof a
new subdvson to read as foows:
(g) s used n ths ct, the term agrcutura commodty ncudes, n
addton to other agrcutura commodtes, crude gum (oeoresn) from a
vng tree, and the foowng products as processed by the orgna producer
of the crude gum (oeoresn) from whch derved: Gum sprts of turpentne
and gum rosn, as defned n the Nava Stores ct, approved March 3, 1923.
Seo. 4. Ths ct sha take effect upon the e praton of 90 days
after the date of ts enactment e cept secton 3, whch sha take
effect upon the approva of ths ct.
pproved March 4, 1931.
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Msc.
502
-2-4898
MS. 110
Schedue of oeomargarne produced and materas used durng the month of
November, 1930, as compared wth November, 1829.
Tota producton of uncoored oeomargarne
Ingredent schedue for uncoored oeomargarne:
utter -
Cocoanut o
Corn o
Cottonseed o -
Dervatve of gycerne
dbe taow.
g
gg yok..
ecthn...
Mk..
M m 1 o
Neutraard
Oeoo
Oeo stearne
Oeo stock
Pam o
Peanut o
Sat...
Sesame o
Soda (benzoate of).
Soya bean o
Tota.
Tota producton of coored oeomargarne
Ingredent schedue for coored oeomargarne:
utter
Cocoanut o
Coor
Cottonseed o
Dervatve of gycerne
Lecthn
Mk
Neutraard
Oeo o -
Oeo stearne
Oeo stock
Pam o
Peanut o
at
Sesame o
Soda (benzoate of) -
Soya bean o
Tota.
N ovemM r,
1930.
November,
1929.
28, 673, 932
31, 70S, 818
102,606
16, 795, 774
559
1,975,191
16,309
266, 0IS
16,167, 661
2,067,009
79
1,367
8,104,310
3,535
1.030,189
2,698,764
486,457
86,163
62,288
492,052
2,353,601
13,748
9,226
314. 210
1,605
610
9,015.677
5, 506
1,687.733
4,034,519
647. 571
84.973
116.096
604.317
2,681,919
R
34,538.423
37, 694. 957
959, 204
1. 728, 074
6,407
3,122
315,697
1,121
635,552
1,975
185,210
115,592
70
16
299,554
106,463
248,494
9,085
1,945
14.119
13,077
84,950
2
97
947
470,126
176, 162
373, 375
8,914
6,628
29,788
87,413
135,209
213
1,217,635
2,063,687
1 Of the amount produced, 12,856 pounds were reworked,
9 Of the amount produced, 1,530 pounds were reworked.
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503 Msc.
-6-4932
MS. I
Schedue of oeomargarne produced and materas used durng the month of
December, 1930, as compared wth December, 192S.
December,
December,
1929.
eSC.
Pounds.
Pounds.
31,226.440
Ingredent schedue for uncoored oeomargarne:
1 28,066,303
utter
121, 590
16,205,762
280
2,049,296
16, 791
379.209
17,342,324
3,326,213
dbe taow
1,470
100
Lecthn
1,339
7,877,117
1,099
960.147
2,804,669
464,144
96,015
204,858
497,981
2,325,243
10,500
8,425
299,044
8, 709, 481
6,110
1. 879, 076
3,631,307
454,127
8tt 510
99,623
476,677
2,690,568
Mk
Mustard o - -
Oeo o
Oeo stearne
at
19,863
7,169
33,944,300
39, 002, aS7
Ingredent schedue ot coored oeomargarne:
902,489
1,656.465
1,570
285,213
1,401
128, 789
67
6
3.200
674, 562
Dervatve of gycerne
2,083
184,738
Lecthn
Mk
280,487
104,563
236,092
10,907
3,365
11,700
11,866
84,684
97
695
459,506
186,222
939
10,316
6,150
35,325
28.049
135,161
155
Neutra ard -
Oeo o
at
Tota
1,101,391
2,023,613
Of the amount produced, 16,577 pounds were reworked.
Of the amount produced, 2,004 pounds wero reworked.
72109 31 33
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Msc. 504
-10-4970
MS. 112
Schedue of oeomargarne produced and materas used durng the month of anuary,
1931, as compared wth anuary, 1980.
anuary,
1931.
anuary,
1930.
Ingredent schedue for uneoored oeomargarne:
Po f .
1 143,892
Pound .
31,021,542
utter -
86,718
14, 672,976
1,806, 751
13,578
232, 634
17,904,930
2,466,805
dbe taow
.705
Lecthn
1,403
7, 296, 776
26,669
692,337
2,040,351
425,572
60,509
600,448
Mk
8.603,966
6,438
1.641,831
3,211,016
499,792
70.4S5
45,199
970
487,922
2,595,620
Ooo o
444.772
2,040,016
16,074
8,083
196,964
Sat
10,129
2.385
Tota
30, 429, 997
37,781,833
Ingredent schedue for coored oeomargarne:
596, 247
1, 518, 491
utter
450
200,443
599
68,005
45
2,945
584,662
1,734
162,676
Mk
167,331
65,838
123, 710
3,220
1,010
17,800
9,818
48,694
74
351
430,894
1 I.. ..-
328,474
Neutra ard ..
Oeo o
8,300
6,230
41,472
28,574
123,989
173
Pam o
Sat
Tota-.
697,286
1,883,422
Of the amount produced, 39,1 54 pounds were reworked.
Of the amount produced, 3,184 pounds were reworked.
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505 Msc.
-15-5020
MS. 113
Schedue of oeomargarne produced and materas used durng the month of
ebruary, 1931, as compared wth ebruary, 1930.
ebruary,
1931.
ebruary,
1930.
Ingredent schedue for uncoored oeomargarne:
Poundt.
19,802,694
Pounds.
27,014.733
utter
78. 214
11.317,625
160
214, 539
13,837,727
Corn o _.
Cottonseed oL
1,410,843
15,070
2,192, 785
Dervatve of gycerne
dbe taow
923
Lecthn
1,069
5,667,445
1, 750
468,067
1, 584, 755
432, 075
47, 247
600,190
361,355
1,624,962
3,650
5,885
186. 979
Mk
7, 325,465
4,957
1,498, 494
4, 488, 333
610,296
60,820
25,134
441, 537
2,212, 720
871
7,631
1,367
Mustard o
Oeoo -
Oeo stearne
Oeo stock
Pam o
Peanut o .
Sat
Soy bean o _ ...
Tota
23,807,341
32, 823,610
Tota producton of coored ooomargarne
532, 261
1, 387, 660
Ingredent schedue for coored oeomargarne:
utter
1,321
174,786
510
54,214
27
3,039
618,462
1,734
158,622
Mk
146, 321
37, 630
127, 045
3,725
2,025
16.985
7,323
43,842
41
88
388,306
144,693
304, 109
9,628
8, 470
50,607
23.649
113,753
134
Neutra ard
Oeo o
Oeo stock
Pam o _
Sat
Tota
615,883
1, 725, 201
I Of the amount produced, 28,672 pounds were reworked.
Of the amount produced, 2,187 pounds were reworked.
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506
-19-5059
MS. 114
Schedue of oeomargarne produced and materas used durng the month of March,
1981, as compared wth March, 1930.
March, 1931
March, 1930.
Tota producton of uncoored oeomargarne.
20,607,176
Ingredent schedue or uncoored oeomargarne:
utter -
Cocoanut o
Cottonseed o
Dervatve of gycerne
dbe taow
Lecthn
Letsene concentrate
Mk
Mustard o
Neutra ard -
Oeo o
Oeo stearne..
Oeo stock
Pam o
Pam-kerne o -
Peanut o
Sat -
Sesame o.
Soda (benroate of)
Soya bean o -
66,157
11,886,757
1.526,810
15,447
934
5,756,693
2,790
530,240
1,658,172
427,295
60,052
4U7.91
371, 287
1, 669,947
4,725
6,533
165,529
Tota _
24, 636, 362
Tota producton of coored oeomargarne
Ingredent schedue for coored oeomargarne:
utter
Cocoanut o -
Coor -
Cottonseed o
Dervatve of gycerne --
Mk
Mustard o
Neutra ard
Oeo o
Oeo stearne
Oeo stock
Pam o
Peanut o.
Sat.
647, 312
816
199, 358
817
93,930
21
169,824
Soda (bentoate of),
Soya bean o
Tota.
51,895
130,475
9,555
6,458
29,6.10
6.866
69,800
42
193
758,590
1 Of the amount produced, 21,007 pounds were reworked.
Of the amount produced, 2,270 pounds were reworked.
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Msc.
-23-5098
MS. 115
Schedue of oeomargarne produced and materas used durng te month of
pr, 1931, as compared wth pr, 1930.
pr, 1931. pr, 1930.
Tota producton of uncoored oeomargarne
Ingredent schedue for uncoored oeomargarne:
utter
Cocoanut o -
Cottonseed o -
Dervatve of gycerno _
dbe taow ---
Lectbn
Letsene concentrate
Mk ---
Mustard o -
Neutra ard -
Oeoo
Oeo stearne --
Oeo stock ---
Pam o
Peanut o -
Sat.
Sesame o
Soda (benzoate of)_
Soya bean o
Tota.
Tota producton of coored oeomargarne
Ingredent scheduo for coored oeomargarne:
utter
Cocoanut o
Coor
Cottonseed o --.
Dervatve of gycerno
Mk
Neutra ard
Oeoo --
Oeo stearne -
Oeo stock
Pam o - -
Peanut o
Sat -
Soda (bemoate of) -
Soya bean o
Tota.
Pounds.
1 19,088, 903
52, 782
171, 269
364,676
15, 218
678
,234,714
2,067
804, 333
, 515, 891
395, 231
51,231
328,695
342,547
, 509, 187
1,650
6,336
49,661
22, 844, 866
529, 106
332
157, 503
778
82,331
18
152, 583
65,231
113,282
9,795
5,300
25,388
5.204
47,527
18
25
655,315
1 Of the amount produced, 16.112 pounds were reworked.
3 Of the amount produced, 1,247 r ounds were reworked.
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508
MISC LL N OUS.
-6-4931
RUL S O PR CTIC OR T UNIT D ST T S O RD O
T PP LS. R IS D TO RU RY 1, 1931.
These rues are promugated pursuant to authorty of secton 907(a) of the Revenue
ct of 1024, as amended by secton 601 of the erenue ct of 1928. whch provdes In
part that The proceedngs of the oard and Its dvsons sha be conducted n accord-
ance wth such rues of practce and procedure (other than rues of evdence) as the
oard may proscrbe and In accordance wth the rues of evdence appcabe n courts o
equty of the Dstrct of Coumba,
Rue 1. u8Inbs8 ours.
The offce of the oard at Washngton, D. C, w be open each busness day
from 9 o cock a. n. to 4.30 o cock p. m.
Rue 2. dmsson to Practce.
regster w be mantaned by the oard n whch w be entered the
names of a persons entted to practce before the oard. Corporatons and
frms w not be admtted or recognzed.
The foowng casses of persons whom the oard fnds, npon consderaton
of ther appcatons, to be ctzens of the Unted States, of good mora character
and to possess the requste quafcatons to represent others may be admtted
to practce before the oard:
(a) ttorneys at aw who are admtted to practce before the Supreme Court
of the Unted States or the hghest court of any State or Terrtory or the
Dstrct of Coumba.
(6) Certfed pubc accountants duy quafed under the aw of any State
or Terrtory or the Dstrct of Coumba.
n appcaton under oath for admsson to practce sha be addressed to the
Unted States oard of Ta ppeas, Washngton, D. C, and must state the
name, resdence address, and offce address of the appcant, the appcant s
connecton as a member or assocate of any frm of attorneys or accountants,
the names of any professona socetes of whch appcant s a member, and the
me and pace of hs admsson to the bar, or quafcaton as a certfed pubc
accountant. The appcaton of an attorney at aw sha aso state whether the
appcant has ever been suspended or dsbarred from practce as an attorney n
any court or before any department or agency of the Unted States. The app-
caton of a certfed pubc accountant sha aso state whether appcant has
been suspended or e peed from any professona socety or socety of certfed
pubc accountants, whether hs rght to practce as a certfed pubc accountant
has ever been suspended or revoked n any |ursdcton and whether appcant
has ever been suspended or dsbarred from practce before any department or
agency of the Unted States. Such appcaton sha be accompaned by a cer-
tfcate of the cerk of the court n whch the appcant s admtted to practce
to the effect that he has been so admtted and s n good standng or a certf-
cate by the proper State, Terrtora, or Dstrct authorty to the effect that
the appcant s a certfed pubc accountant In good standng, duy quafed and
entted to practce n such State or Terrtory or the Dstrct of Coumba.
ach appcant sha take an oath n the form prescrbed by the oard.
The oard may, n ts dscreton, deny admsson, suspend, or dsbar any
person who, t fnds, does not possess the requste quafcatons to represent
others, or s ackng n character, ntegrty, or proper professona conduct.
n attorney or certfed pubc accountant who has been admtted to practce
may be dsbarred ony after he s afforded an opportunty to be heard.
The oard sha have the rght at any tme to requre a statement, under
oath, of the terms and crcumstances of any contract of empoyment of an
attorney or certfed pubc accountant wth the ta payer he represents.
ny ndvdua ta payer or member of a ta payer partnershp may appear
for hmsef or such partnershp upon adequate dentfcaton to the oard.
ta payer corporaton may be represented by a bona fde offcer of the
corporaton upon permsson granted, n ts dscreton, by the oard or the
dvson sttng.
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509
Msc.
orms for use n makng appcaton for admsson to practce w be
furnshed upon request.
Rue 4. orm and Sty.b op Papers.
papers fed wth the oard sha be ether prnted or typewrtten, and
f typewrtten sha be on one sde of pan whte paper ony, whch sha
be not more than 8 nches wde and 11 nches ong, weghng not ess than
16 pounds to the ream, foo base 17 by 22 nches, and fastened on the eft
sde. Copes sha be egbe, but may be on any weght paper. If prnted,
they sha be n 10 or 12 pont type, on good ungazed. paper, 5 nches wde
by 9 nches ong, wth nsde margn not ess than 1 nch wde, and wtb
doube-eaded te t and snge-eaded quotatons. Ctatons sha be n tacs.
cept when otherwse provded n these rues, an orgna and four con-
formed copes of a papers sha be fed. Wherever any paper s fed n
more than one proceedng (as a moton to consodate proceedngs or n pro-
ceedngs aready consodated) one addtona copy sha be fed for each
addtona proceedng.
Rue 5. Intaton op a Proceedng Petton.1
proceedng sha be ntated by fng wth the oard a petton, as pro-
vded n rues 6, 7, and 8. It sha contan:
(o) capton n the foowng form:
UNIT D ST T S O RD O T PP LS.
, Pettoner,
v.
Commssoner of Interna Revenue, Respondent.
Docket No.
P TITION.
(b) Proper aegatons showng |ursdcton n the oard.
(c) statement of the amount of the defcency or abty as the case
may be , determned by the Commssoner, the nature of the ta , the perod
for whch determned, and the amount thereof (as neary as may be computed)
n controversy.
(d) Cear and concse assgnments of error aeged to have been commtted
by the Commssoner. Such assgnments of error sha be numbered.
(e) Cear and concse numbered statements of the facts upon whch the
pettoner rees as sustanng the assgnments of error e cept those assgn-
ments of error n respect of whch the burden of proof s by statute paced
upon the Commssoner. (See sectons 601, 602 of the Revenue ct of 1928.)
If) prayer, settng forth reef sought by the pettoner.
(g) verfcaton by pettoner provded that where the pettoner s a
nonresdent aen or s so|ournng outsde the Unted States the petton may
be verfed by a duy apponted attorney n fact, who sha attach to the pet-
ton a copy of the power of attorney under whch he acts and who sha state
n hs verfcaton that he acts pursuant to such power, that such power has
not been revoked, that pettoner s absent from the Unted States, and the
grounds of hs knowedge of the facts aeged n the petton. s used heren
the term Unted States ncudes ony the States and the Dstrct of
Coumba.
copy of the notce of defcency or abty, as the case may be , wth
accompanyng statements, f any, so far as matera to the ssues set out n
the assgnments of error, sha be appended to the petton.
The petton sha be compete n tsef so as fuy to nform the oard of the
ssues to be presented. It sha be sgned by the pettoner or hs counse,
e cept that n the case of estates, trusts, or other fducares, t sha be sgned
by a ma|orty of the fducares but may be verfed by one of them. The
name and mang address of the pettoner or of counse sha be typed or
prnted mmedatey foowng the sgnature.
The sgnature of counse and the verfcaton of the pettoner to the petton
sha be consdered the certfcate of each that there s good ground for the
mended une 9, 1931. See on page 522.
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Msc.
510
petton, that the proceedng has not been nsttuted merey for deay, and Is
not frvoous.
(See orm No. 2.)
Rue 6. Desgnaton of Partes.
The proceedng sha be brought by and n the name of the person aganst
whom the defcency or abty, as the case may be s asserted by the Com-
mssoner, or a fducary egay entted to nsttute a proceedng on behaf of
such person. (Secton 281, Revenue ct of 1026.) If an ndvdua, the fu
gven name and surname sha be set forth n the capton. If a marred woman,
her gven name sha be used. If a fducary, both the names of the fducary and
of the estate, trust, or other person for whom he acts sha be used. In the
event of a varance between the name set forth n the notce of defcency or
abty and the correct name, a statement of the reasons for such varance
sha be set forth n the petton.
The proper capton sha be paced on a papers fed.
Rue 7. ng or Petton.
n orgna and four cear copes of the petton, ether prnted or typewrtten
as provded n rue 4, sha be fed wth the oard at Washngton, D. C. The
copes of the petton sha be conformed to the orgna by the pettoner.
aure to fe a suffcent number of copes, as provded n ths rue, or to
conform to the requrements of rue 5 or of rue 8, sha be ground for dsmssa
of the proceedng.
Rue 8. ee foe ng Petton.
fee of 10, whch shoud accompany the petton, Is hereby mposed for the
fng of any petton.
Rue 11. Docket.
Upon recept of the petton the proceedng w be docketed and assgned a
number and the partes notfed thereof. Ths number sha be paced by the
partes on a papers thereafter fed n the proceedng.
Rue 12. Servce on the Commssoner.
Upon fng of a petton and the copes, as prescrbed n rue 7, the oard
w serve a copy upon the Commssoner.
The Commssoner sha not be requred to answer any petton uness and
unt he has been served wth a copy thereof as heren provded.
Servce of a copy of the petton on the Commssoner, or a person desgnated
by hm, sha suffce n eu of process.
Rue 14. nswer.1
fter servce upon hm of a copy of the petton, the Commssoner sha
have 60 days wthn whch to fe an answer or 45 days wthn whch to move
n respect of the petton. The answer sha be so drawn as fuy and competey
to advse the pettoner and the oard of the nature of the defense. It sha
contan a specfc admsson or dena of each matera aegaton of fact con-
taned n the petton and a statement of any facts upon whch the Commssoner
rees for defense or for affrmatve reef or to sustan any ssue rased n
the petton n respect of whch ssue the burden of proof s, by statute, paced
upon the Commssoner. ach paragraph contaned In the answer sha be
numbered to correspond wth the paragraphs of the petton. n orgna and
four copes of the answer sha be fed, of whch the orgna sha be sgned
by the Commssoner or hs counse and the copes conformed by hm.
Upon the fng of the answer the oard w serve one copy thereof on the
pettoner or hs counse of record by regstered ma.
Rue 15. Repy.
If the answer of the Commssoner sets forth facts upon whch he rees
for affrmatve reef, or contans a statement of the facts upon whch he rees
See on page 521, order temporary suspendng rue 14.
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to sustan an Issue In respect of whch the burden of proof s paced upon hm
by statute, the pettoner sha, wthn 45 days after a copy of such answer s
maed to hm or hs counse of record by regstered ma, fe a repy whch sha
contan a specfc admsson or dena of each matera aegaton of fact
contaned n the answer and sha set forth any facts upon whch he rees
for defense. ach paragraph contaned n the repy sha be numbered to
correspond wth the paragraphs of the answer. n orgna and four copes
of the repy sha be fed, of whch the orgna sha be sgned by the pettoner
or hs counse and the copes conformed by hm. Upon fng the repy and
the copes, the oard w serve a copy upon the Commssoner.
No repy w be requred n respect of an answer fed before ebruary 1, 1931.
Rue 16. Servce on Counse.
Servce of any peadng, order, or notce upon any counse of record sha
be deemed servce thereof upon the party.
Rue 17. onder of Issue.
proceedng sha be deemed at ssue upon the fng of the answer uness
a repy s requred under rue 15, n whch event the proceedng sha be
deemed at ssue upon the fng of the repy.
Rue 18. mended and Suppementa Peadngs.
The pettoner may, as of course, amend hs petton at any tme before
answer s fed. fter answer s fed, a petton may be amended ony by
consent of the Commssoner or on eave of the oard.
Upon moton made, the oard may, n ts dscreton, at any tme before
the concuson of the hearng, permt a party to a proceedng to amend the
peadngs to conform to the proof. motons to amend, made pror to the
hearng, must be accompaned by the proposed amendments or amended pead-
ng. When motons to amend are granted at the hearng, the amendment or
amended peadng sha be fed at the hearng or wth the cerk wthn such
tme as may be f ed.
Rue 19. Peadngs Genera.
further and better statement of the nature of the cam or defense, or
of any matter stated n any peadng, may be ordered n any proceedng.
ach and every matera aegaton of fact set out n the petton and not
dened n the answer, or set out n the answer and not dened n the repy,
where a repy s requred by these rues, sha be deemed to be admtted. If
no repy s requred by these rues, each and every matera aegaton of fact
set out n the answer sha be deemed to be dened.
ny new or affrmatve matter contaned n the repy sha be deemed to
be dened.
Rue 20. tensons of Tme.
Contnuances, e tensons of tme (e cept for the fng of the petton), and
ad|ournments may be ordered by the oard on ts own moton or may be
granted by t n ts dscreton on moton of ether party fed n wrtng and
showng good and suffcent cause therefor.
Rue 24. Caendars.
(a) Genera caendar. proceedngs w as of course be paced upon the
genera caendar when at ssue.
(6) Crcut caendar. proceedng whch s at ssue may, n the dscreton
of the oard and upon tmey moton, be paced upon the crcut caendar for
hearng outsde Washngton.
(c) Day caendar. The cerk w, from tme to tme as drected by the
charman, prepare a day caendar of the proceedngs to be heard n Washngton
and esewhere.
(d) Reserve caendar. proceedng whch s at ssue may be paced on
the reserve caendar for good cause shown, as, for e ampe, to awat the
decson of the Supreme Court n a case pendng.
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512
Rue 25. Notce op earng.
When a proceedng has been paced upon the day caendar the cerk w,
not ess than 15 days In advance, notfy the partes of the pace where and
the date when t w be caed up on the day caendar.
Rue 26. habno ees.
hearng fee of 10 Is hereby mposed on every proceedng pendng before
the oard at the tme of the enactment of the Revenue ct of 1926 whch has
not been heard on the merts before such enactment. Such fee sha be pad
on demand and before the hearng of any such proceedng. aure to pay
such fee sha be suffcent ground for the dsmssa of the proceedng.
Rue 27. Ca of Caendar and ssgnment for earng.
The day caendar of proceedngs to be heard at Washngton w be caed
at 9.30 a. m. The day caendar of proceedngs to be heard esewhere w be
caed at the tme ndcated n the notce of hearng. Proceedngs w be
assgned therefrom for hearng n due course.
Rue 29. Submsson Wthout Persona ppearance.
proceedng n whch ssue has been |oned, n whch no ssue of fact s
rased, or n whch evdence of contested facts has been submtted other than
by ora hearng before the oard, or one n whch there s a contested moton
not predcated on an ssue of fact, and both partes are not present n person
or by counse at the tme of hearng, w be regarded as submtted on the
part of the absent party or partes. refs may be fed n eu of persona
appearance, but the oard may, n ts dscreton, requre appearance for
argument.
Testmony taken by deposton w not be consdered unt offered and
receved n evdence.
Where there s a |onder of ssue on questons of fact, the provsons of ths
rue reatve to submsson wthout argument sha not reeve the party upon
whom rests the burden of proof from adducng at the hearng proper evdence
n support of the ssues. Statements n the petton, e parte affdavts, and
brefs do not consttute evdence. aure to adduce evdence n support of
the matera facts aeged n the petton and dened by the Commssoner n
hs answer w be ground for dsmssa.
Rue 30. urden of Proof.
The burden of proof sha be upon the pettoner, e cept as otherwse provded
by statute and e cept that n respect of any new matter peaded n hs answer,
t sha be upon the respondent.
Rue 31. Dsmssa.
proceedng may be dsmssed for cause upon moton of ether party or upon
the oard s moton.
Rue 32. Motons.
Motons must be tmey and, e cept durng tra, must be n wrtng, and an
orgna and four copes fed. One copy w be served upon the adverse party.
Motons w be acted upon as |ustce may requre and may, n the dscreton
of the oard, be paced upon the day caendar for argument.
The fng of a moton sha not consttute cause for postponement of a hearng
from the date set.
Rue 35. refs.
refs may be fed wthn the tme f ed by the dvson before whch the
hearng s had. If the brefs are typewrtten, an orgna and 4 copes sha be
fed f prnted, 20 copes.
refs sha contan, n the order here stated:
(o) statement of the nature of the ta and how the proceedng comes
before the oard.
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(6) concse statement of the facts, whch shoud contan references to the
pages of the transcrpt or to the e hbts reed upon n support thereof,
(c) concse statement of the ponts upon whch the pettoner rees.
d) The argument.
very bref of more than 20 pages sha contan on ts front fyeaves a tabe
of contents wth page references, suppemented by a st of a cases referred to,
aphabetcay arranged, together wth references to pages where the cases
are cted.
Rue 36. Substtuton or Wthdrawa of Counse Notce of ppearance.
Counse of record sha prompty notfy the oard of hs wthdrawa as coun-
se for the pettoner n any proceedng pendng. Where the petton s not sub-
scrbed by counse, or counse has wthdrawn, counse subsequenty appearng
for the pettoner sha mmedatey fe a notce of appearance, whch sha
ncude statements of hs admsson to practce before the oard and of the
mang address of such counse.
Notce of a change In the mang address of counse or pettoner sha be
prompty fed wth the oard n each pendng proceedng affected thereby.
Rue 37. Substtuton of Partes.
In the event of the death of a pettoner or for other cause, the oard may
order the substtuton of the proper partes. In event of mstake n the name or
tte of a proper party the oard may order substtuton of the proper name
or tte n any proceedng before the oard.
Motons for substtutons shoud be accompaned by a proper certfcate of
the court or offca havng custody of the record showng the nterest of the
party substtuted. In the event of a change of name of a corporaton or other
party pettoner, a moton to amend the peadngs to show such change shoud
be fed, accompaned by a certfed copy of the certfcate, decree, or other docu-
ment, effectng such change, certfed by the offca havng custody of such
document
Rue 38. Stpuatons.
The partes may, by stpuaton n wrtng fed wth the oard or presented
at the hearng, agree upon any facts nvoved n the proceedng.
Rue 39. vdence.
The rues of evdence appcabe n courts of equty of the Dstrct of Coum-
ba sha govern the admsson or e cuson of evdence before the oard or
any of ts dvsons.
Rue 40. Transcrpts of Proceedngs.
earngs before the oard or ts dvsons sha be stenographcay reported
and a transcrpt thereof sha be made f, n the opnon of the oard or of
the dvson hodng the hearng, a permanent record of the hearng s deemed
necessary. Transcrpts sha be supped to the partes and to the pubc by
the offca reporter at such rates as may be f ed by contract between the
oard and the reporter.
Rue 43. Documentary vdence.
(a) When books, records, papers, or documents have been receved n ev-
dence, a copy thereof or of so much thereof as may be matera or reevant may,
n the dscreton of the dvson hodng the hearng, be substtuted therefor.
(6) fter the decson of the oard n any proceedng has become fna the
oard may, upon moton of ether party, permt the wthdrawa by the party
entted thereto of orgnas of books, documents, and records, and of modes,
dagrams, and other e hbts, ntroduced n evdence before the oard or any
dvson or the oard may, on ts own moton, make such other dsposton
thereof as t deems advsabe.
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514
Rue 44. Subpoenas.
(a) Sow ssued. No subpoena w be ssued at the nstance of ether party
e cept upon wrtten appcaton tmey made.
(6) ppcaton for. The appcaton sha state the name and address of
each wtness requred, the tme and pace at whch and the person before whom
he s to appear, and whether he may desgnate some one to appear n hs pace.
n orgna and two conformed copes sha be fed. (See orm No. 3.)
(0) or producton of documents. If evdence other than ora testmony Is
requred, such as documents or wrtten data, the appcaton sha set forth the
specfc matter to be produced and suffcent facts to ndcate that such matter
s reasonaby necessary to estabsh the cause of acton or defense of the
appcant.
(d) Servce and, proof. The oard w not serve subpoenas, but w eave
servce to be procured by the party makng the appcaton. Servce may be
made by any ctzen of the Unted States over the age of 21 years and competent
to be a wtness, and not a party to or n any way nterested n the proceedng.
Proof of servce may be made by affdavt
Rue 45. Depostons.
Depostons may be taken n accordance wth the foowng rues:
(a) ppcaton to take. When ether party proposes to take a deposton,
a verfed appcaton, wth two conformed copes, sha be fed wth the oard
settng forth the foowng:
(1) The name and post-offce address of the wtness whose deposton s
proposed to be taken.
(2) The sub|ect matter or matters concernng whch the wtness s to testfy,
together wth a statement of the reasons why t s desred to take the
depostons and why the wtness shoud not be requred to appear personay
and testfy at the hearng.
(3) The tme and pace of takng the deposton and the name, post-offce
address, and offca desgnaton of an Indvdua competent to admnster oaths
under the Revenue ct of 1926 before whom t s proposed that the deposton
sha be taken. (See orm No. 5.)
(6) Order for. Upon recept of such appcaton, the oard w serve a copy
thereof on the opposte party, aow a reasonabe tme for ob|ecton thereto,
and w, n ts dscreton, make an order, copy of whch w be maed or
devered to the partes or ther counse, wheren the oard w name the
wtness whose deposton s to be taken and specfy the tme when, the pace
where, and the offcer before whom the wtness s to testfy, but such tme and
pace and the offcer before whom the deposton s to be taken, so specfed n
the oard s order, may or may not be the same as those named In the appcaton
to the oard.
(c) y stpuaton. t any tme after ssue s oned the partes or ther
counse may, by stpuaton duy sgned and fed, take depostons. In such,
cases the stpuaton sha state the name and address of each wtness, the tme
when and the pace where such deposton w be taken, and the name, address,
and offca tte of the offcer before whom t s proposed to take the deposton.
In such cases no order to take such deposton w be ssued, but such deposton
sha be taken and returned by the offcer n accordance wth the rues of the
oard.
(d) Manner of takng. ach queston propounded to the wtness must be
recorded and hs answers must be taken down n hs own words.
Ob|ectons to questons or answers sha be e pcty but brefy and con-
csey stated, but no comment, e panaton, or argument of any knd sha be
recorded nether sha there be recorded any comment, e panaton, or argu-
ment by e amnng counse. ny matter reported n voaton of ths rue may
be suffcent cause for the suppresson of the deposton.
Rue 46. Genera Provsons as to Depostons.
(a) Other wtnesses to be e cuded. t the request of ether party a person
whom ether e pects or ntends to ca as wtness n the same case or n any
kndred case sha be e cuded from the room where the testmony of a wtness
s beng taken. If such person remans n the room or wthn hearng of the
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e amnaton after such request has been made, he sha not thereafter be
admtted to testfy n the case or any kndred case e cept by the consent of the
party who requested hs e cuson.
(6) Oath. Wtnesses must be sworn or affrmed before any questons are put
to them.
(c) Depostons to be sgned. The testmony of the wtness when transcrbed
sha be read over to or by hm and be sgned by hm.
(d) What return must show. In hs return the offcer must show that the
wtness was propery sworn or affrmed and that the questons and answers
were taken down n hs presence. (See orm No. 6.)
(c) Sheets to be attached. The offcer must so fasten the sheets of the
deposton that they can not be tampered wth. e must spare no pans to
return to the oard the e act evdence he has taken. e hbts must be
carefuy marked so as to be capabe of dentfcaton and when practcabe
must be attached to the deposton.
(f) Capton. The offcer must state n the capton of the deposton the
cause n whch t was taken, the pace and date of takng, the name of the
wtness, the party by whom caed, and the names of partes and counse
present, and n the body of the deposton must show by whom the wtness was
e amned and cross-e amned.
(g) uafcaton of offcer. In no case sha a deposton be taken before
any person who has any offce connecton or busness empoyment wth the
ta payer or hs counse e cept by consent of partes and when no other offcer
s avaabe, and n hs certfcate to such deposton such offcer sha so certfy.
(ft) Return of. The offcer must ncose the orgna depostons and e hbts,
together wth two copes of the depostons, n a seaed packet, wth postage or
charges prepad, and drect and ma or e press the same to the Unted States
oard of Ta ppeas, Washngton, D. C. In each case the orgna of the
depostons must be drected and maed or e pressed to the oard. The
offcer may, upon wrtten request, dever a copy of the depostons to ether
or to both of the partes, or to ther representatves, n eu of sendng such
copes to the oard as above provded. If one or both of the requred copes
are devered by the offcer takng the depostons, he sha attach to hs return
the wrtten request of the party or partes, or of ther counse to whom such
copy or copes were devered, and sha state n hs certfcate of return the
fact of devery by hm of such copy or copes. If copes of the depostons
are devered by the offcer takng the same, no servce of copes of such depos-
tons upon the party or hs counse of record w be made by the oard.
() I mtaton on tme for appcaton to take. ppcatons to take depos-
tons must be fed at east 30 days pror to the date set for the hearng of the
proceedng, and such depostons must be competed and fed wth the oard
at east 10 days pror to the hearng: Provded, Such appcatons w not be
regarded as suffcent ground for the grantng of a contnuance from the date
or pace of the hearng theretofore set, uness the proceedng sha have been
at ssue ess than 60 days and the moton for contnuance sha have been fed
not ess than 20 days pror to sad date of hearng: Provded further, That under
speca crcumstances, and for good cause shown, the oard may otherwse
order.
(/) The deposton of any wtness sha not consttute a part of the record
unt receved n evdence at a hearng of the proceedng.
Rue 47. Depostons on Wbtten Interrogatores.
Depostons may be taken n the dscreton of the oard on wrtten nter-
rogatores n substantay the same manner as provded n rues 45 and 46
for depostons on ora e amnatons. The nterrogatores must be fed wth
the appcaton n trpcate and a copy thereof w be served upon, or maed
to, the opposte party by the oard. Wthn 10 days after such notce such
opposte party may fe wth the oard hs ob|ectons, f any, to such nter-
rogatores, together wth any cross-nterrogatores he desres to propose. If
he fe cross-nterrogatores, they sha be fed wth the oard n trpcate
and one copy thereof w be forwarded to the opposte party, or hs counse,
who sha wthn 10 days thereafter fe hs ob|ectons, f any, to such cross-
nterrogatores. No ob|ectons to the nterrogatores or cross-nterrogatores
w be consdered at the hearng uness taken before the order for the takng
of the deposton ssues.
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516
When a deposton s taken upon wrtten nterrogatores and cross-nterroga-
tores nether the counse for the ta payer nor for the Commssoner, nor any
person other than the wtness, a stenographc reporter, and the offcer takng
the deposton sha be present at the e amnaton of the wtness, whch fact
sha be certfed by the offcer takng the deposton, who sha n such
case propound the nterrogatores and cross-nterrogatores to the wtness n
ther order and reduce the testmony to wrtng n the wtness s own words.
Depostons obtaned n foregn countres must be taken on wrtten nter-
rogatores.
Rue 50. Settement.
When the oard determnes the ssues n any proceedng and wthhods
decsons of the defcency or overpayment for ater computaton, the partes
sha, f they are n agreement as to the amount of the defcency or over-
payment, n accordance wth the report of the oard, fe wth the oard
an orgna and two copes of a computaton showng the amount for entry
of decson forthwth. If the partes are not n agreement as to the amount
to be entered n the decson, ether of them may fe wth the oard a com-
putaton of the defcency or overpayment beeved by hm to be n accordance
wth the report of the oard. The cerk w serve a copy thereof upon
the opposte party and w thereupon pace the matter upon the day caendar
for hearng n due course and gve the usua notce. If the opposte party
fas to fe ob|ecton, accompaned by an aternatve computaton, wthn fve
days pror to the date of such hearng, or any contnuance thereof, the
defcency or overpayment shown n the computaton aready submtted sha
be taken to be correct and decson thereon w be entered. If the partes
submt dfferent computatons and amounts, they w be afforded an oppor-
tunty to be heard thereon on the date f ed, and the oard w determne the
correct defcency or overpayment and enter decson.
ny hearng under ths rue w be confned strcty to the consderaton of
the correct computaton of the defcency or overpayment resutng from the
report aready made, and no argument w be heard upon or consderaton
gven to the ssues or matters aready dsposed of by such report or of any
new ssues. Ths rue s not to be regarded as affordng an opportunty for
rehearng or reconsderaton.
Rue 51. Costs Preparaton of Record on Revew.
It sha be the duty of the cerk, mmedatey after the contents of a record
on revew have been setted or agreed to, to notfy the pettoner of the costs
and charges for the preparaton, comparson, and certfcaton of sad records
such charges to be determned n accordance wth the provsons of an ct
of Congress entted n ct to provde fees to be charged by cerks of the
dstrct courts of the Unted States, approved ebruary 11, 1925 (43 Stat, 857-
858).
No transcrpt w be certfed and transmtted to the appeate court unt
the cost and charges therefor have been pad to the oard.
pettoner for revew who requests the cerk to certfy but not to pre-
pare documents for transmsson to a Crcut Court of ppeas or the Court
of ppeas of the Dstrct of Coumba sha furnsh the cerk wth the copy of
the documents to be certfed.
Rue 52. Costs Prntng op Record oy Revew.
In each proceedng for revew of a decson of the oard by the Unted
States Crcut Court of ppeas for the Second Crcut when revew s sought
by the Commssoner of Interna Revenue, the cerk of the oard sha, m-
medatey after the contents of the record on revew, as requred by rue 35
of the court, have been setted or agreed upon, make avaabe to the Comms-
soner, or hs counse, the record of the oard n the proceedng. The Com-
mssoner sha cause the record to be prnted. S teen copes of the prnted
record sha e devered to the cerk of ths oard for certfcaton and fng
wth the cerk of the crcut court of appeas. The cerk of the oard sha
serve fve copes of the prnted record upon counse for the ta payer by regs-
tered ma.
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517
Msc.
Rue 60. ees and Meage.
The foowng Is from the Revenue ct of 1926:
Sec. 909. (a) ny wtness summoned or whose deposton s taken under
secton 908 sha receve the same fees and meage as wtnesses n courts of
the Unted States. Such fees and meage and the e penses of takng any such
deposton sha be pad as foows:
(1) In the case of wtnesses for the Commssoner, such payments sha
be made by the secretary out of any moneys approprated for the coecton
of nterna-revenue ta es, and may be made n advance.
(2) In the case of any other wtnesses, such payments sha be made,
sub|ect to rues prescrbed by the oard, by the party at whose nstance the
wtness appears or the deposton s taken.
(b) Ths secton sha take effect ns of une 2, 1924, n the case of fees,
meage, or e penses accrued pror to, but remanng unpad at the tme of,
the enactment of the Revenue ct of 1926.
No wtness, other than one for the Commssoner, sha be requred to testfy
n any proceedng before ths oard unt he sha have been tendered the
fees and meage to whch he s entted n accordance wth the above prov-
son of aw.
Rue 61. Computaton of Tme Sundays and odays.
When the tme prescrbed by these rues for dong any act e pres on a
Sunday or a ega hoday n the Dstrct of Coumba, such tme sha e tend
to and ncude the ne t succeedng day that s not a Sunday or such a ega
hoday: Provded, That when the tme for performng any act s prescrbed
by statute nothng n these rues sha be deemed to be a mtaton or e ten-
son of the statutory tme f ed.
The foowng-named days are ega hodays wthn the Dstrct of Coumba :
New Year s Day, anuary 1 (secton 993, Revsed Statutes, reatng to D. C).
Washngton s rthday, ebruary 22 ( ct of anuary 31, 1879).
Inauguraton Day, every fourth year ( ct of une 18, 1888).
Decoraton Day, May 30 ( ct of ugust 1, 1888).
ourth of uy (secton 993, Revsed Statutes, reatng to D. C).
Labor Day, frst Monday n September ( ct of une 28, 1894).
Thanksgvng Day, day procamed by Presdent (secton 993, Revsed
Statutes, reatng to D. C).
Chrstmas Day, December 25 (secton 993, Revsed Statutes, reatng to
D. C).
When ega hodays fa on Sunday the ne t day sha be a hoday ( ct
of December 20, 1881).
Rue 62. Speca ssessment.
(a) If some of the ssues rased by the petton nvove secton 327 or sec-
ton 328 of the Revenue ct of 1918 or of 1921 or secton 210 of the Revenue
ct of 1917, as the case may be , and some do not nvove such sectons, the
hearng may, n the dscreton of the oard, on moton, be mted n the frst
nstance to tra of the ssues whch do not nvove such sectons.
( ) hearng may, n the dscreton of the oard, on moton, be had,
mted to the tra of the ssue whether the pettoner s entted to have ts
ta determned as provded n secton 328 or secton 210, as the case may be .
(o) If the oard decdes that the pettoner s entted to have ts ta
determned as provded n secton 328 or secton 210, as the case may be ,
the respondent sha wthn 60 days after such decson fe wth the oard an
orgna and two copes of a proposed redetermnaton showng the method
of the computaton. If, wthn 20 days after servce by the oard upon the
pettoner of a copy of such proposed redetermnaton, the partes are unabe
to agree upon the amount of ta , ether party may move, or the oard may
upon ts own moton order, that the case be paced upon the day caendar
for further hearng, at whch ether party may submt proof of the correct
amount of ta and defcency or overpayment.
(d) If from the peadngs or otherwse t appears of record before the
oard that the partes agree that pettoner s entted to have ts ta de-
termned as provded n secton 328 or secton 210, as the case may be ,
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518
and the ony ssue s as to the correct amount of the ta so determned, the
case w be paced upon the day caendar n due course for hearng, at whch
ether party may submt proof of the correct amount of the ta and defcency
or overpayment.
Rue 70. ffectve Date.
These rues sha become effectve ebruary 1, 1931, supersedng pror
edtons and amendments.
PP NDI .
ORMS.
These forms are sub|ect to amendment as crcumstances may render
necessary.
No. 2. Petton.
No. 3. ppcaton for subpoena.
No. 5. ppcaton for order to take depostons.
No. 6. Certfcate on return depostons.
(Note. Read rue 4 of the rues of practce of the oard and carefuy
observe the requrements thereof as to form, sze, and stye of papers.)
No. 2. P TITION.
(See rues 4, 5, 6, 7, and 8.)
Unted States oabd op Ta ppeas.
-, Pettoner,
.
Commssoner of Interna Revenue, Respondent.
petton.
Docket No..
The above-named pettoner hereby pettons for a redetermnaton of the
defcency set forth by the Commssoner of Interna Revenue n hs notce of
defcency ( ureau symbos) dated , 19 , and as a
bass of hs proceedng aeges as foows:
1. The pettoner s (set forth whether ndvdua, corporaton, fducary, etc.,
as provded n rue 6) wth prncpa offce (or resdence) at
(Street.)
(Cty.) (State.)
2. The notce of defcency (a copy of whch s attached and marked hbt
) was maed to the pettoner on , 19
3. The ta es n controversy are (Income, profts, estate, or gft) ta es for the
(caendar or fsca year) year 19 and for doars (state as
e acty as possbe the amount n dspute).
4. The determnaton of ta set forth n the sad notce of defcency s based
upon the foowng errors: ( numerate specfcay the assgnments of error n
a concse manner and avod peadng facts whch propery beong n the suc-
ceedng paragraph.)
5. The facts upon whch the pettoner rees as the bass of ths proceedng
are as foows: ( ere set forth aegatons of the facts reed upon but not the
evdence n ordery and ogca sequence, wth subparagraphs ettered, so as
fuy to nform the oard of the ssues to be presented and to enabe the Com-
mssoner to admt or deny each specfc aegaton).
Wherefore, the pettoner prays that ths oard may hear the proceedng and
(here state the reef desred).
Counse for Pettoner.
( ost-offce address.)
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519
Msc.
State of
County of ./
, beng duy sworn, says that he s the pet-
toner (f a corporaton, or fducary, state tte or offce or trust of person ver-
fyng and that he s duy authorzed to verfy the foregong petton) above
named that he has read the foregong petton, or had the same read to hm,
and s famar wth the statements contaned theren, and that the facts stated
are true, e cept as to those facts stated to be upon nformaton and beef, and
those facts he beeves to be true.
Subscrbed and sworn to before me ths day of
19
No. 3. PPLIC TION OR SU POZN .
, Pettoner,
v.
Commssoner of Interna Revenue, Respondent.
Docket No
To the Unted States oard of Ta ppeas:
ppcaton s hereby made for the ssuance of a subpoena for the attendance
before
(The Unted States oard of Ta ppeas, or the name and offca tte of the
person authorzed to take depostons.)
at on
at o cock m. of the foowng persons whose ora testmony
s desred on behaf of the n the above-
(Pettoner or respondent.)
entted proceedng:
N M . DDR SS.
Dated , 193
(Sgned) ....
( ddress) _.
72109 31 34
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520
No. 5 - PPLIC TION OR ORD R TO T D POSITIONS.
(See rues 45, 46, and 47.)
Unted States oakd op Ta ppeas.
, Pettoner,
v. Docket No. .
Commssoner of Interna Revenue, Respondent.)
PPLIC TION O O D S TO T D POSITIONS.
To the Unted States oard of Ta ppeas:
1. ppcaton s hereby made by the above-named
(Pettoner or respondent.)
for an order to take the deposton of the foowng-named person :
N M O WITN SS. POST-O IC DDR SS.
(a)
(b)
(c)
(d)
2. It s desred to take the depostons of the persons above named and each
of them for the foowng reasons:
(a) w testfy to the foowng matera
matters:
(Set forth brefy the matter upon whch sad wtness w be caed to testfy.)
(b) w testfy to the foowng matera
matters:
(c) w testfy to the foowng matera
matters:
(d) w testfy to the foowng matera
matters:
3. The reasons why desres to take the
(Pettoner or respondent.)
testmony of the above-named persons rather than have them appear personay
and testfy before the oard are as foows: (State specfcay reasons for each
wtness for whom subpoena s requred.)
4. It s desred to take the testmony of
(Names of wtnesses.)
on the day of , 19 , at the hour of o cock m.
( date suffcenty n advance of the day set for hearng of the proceedngs to enabe the
deposton to be competed and fed wth the oard at east 10 days pror to the hearng.)
before n the cty of
(State name and tte of offca.)
State of at room .
(Gve number of room, street number, and
name of budng.)
5. That Is a
(Name of offca before whom depostons are to be taken.)
. , who has no offce connecton or busness empov-
(Gvc offca tte.)
ment wth the pettoner or hs counse.
Dated , 19
Counse for Pettoner.
State of 1
Count / of |ss:
, beng duy sworn, says that the foregong
(Pettoner or counse.)
appcaton for order to take depostons s made n good fath and for the rea-
sons theren stated and that the same s not made for purposes of deay.
Subscrbed and swoen to before me ths day of
19 .
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521 Msc.
No. (. C RTI IC T ON TU N.
, the person named n the foregong order to
take depostons, hereby certfy:
1. I proceeded, on the day of , . D. 19 , at the
offce of , n the cty of , State of
, at o cock, m., under the sad order and n
the presence of and ,
the counse of the respectve partes, to take the foowng depostons, vz:
, a wtness produced on behaf of
the
(Pettoner or respondent.)
the
(Pettoner or respondent.)
the
a wtness produced on behaf of
a wtness produced on behaf of
(Pettoner or respondent.)
That sad wtness were e amned under oath at such tmes and paces
as condtons of ad|ournment requred, and that the testmony of sad wtness
(or ther answers to the nterrogatores fed) was taken stenographcay and
reduced to typewrtng by me or under my drecton.
2. I further certfy that after the sad testmony of sad wtness was re-
duced to wrtng the transcrpt of the testmony was read and sgned by sad
wtness n my presence, and that acknowedged before
( ach of them or he.)
me that sad testmony was n a respects truy and correcty transcrbed.
3. I further certfy that, after the sgnng of the deposton n my presence,
no ateratons or changes were made theren.
4. I have no offce connecton or busness empoyment wth the pettoner
or hs attorney e cept that of , ob|ecton to whch was
(State connecton.)
waved by both partes to the proceedng.
S L.
(Sgnature of person takng deposton.)
(Offca tte.)
Notb. Ths form when propery e ecuted shoud be attached to and bound wth the
transcrpt precedng the frst page thereof. It shoud then be ncosed n a seaed enveope
and addressed to Unted States oard of Ta ppeas, Washngton, D. C
-17-5040
Order suspendng rue 14.
Unted States oard of Ta ppeas,
Washngton, D. C, pr 10,1931.
The Genera Counse| ureau of Interna Revenue, under date
of pr 9, 1931, fed wth the oard hs moton to suspend rue 14,
statng as the reason therefor that a temporary serous emergency
e sts by reason of the fact that the unusuay arge number of
pettons fed between March 1 and May 31, 1931, makes t e ceed-
ngy dffcut for the respondent to fe the requred peadngs wthn
the tme prescrbed by rue 14 of the oard s rues of practce.
fter fu consderaton thereof, t appears to the oard that a
temporary emergency e sts, and t s
Ordered: That rue 14 be and t hereby s temporary suspended
because of the emergency n respect of proceedngs nsttuted by
pettons fed wth the oard between March 1, 1931, and May 31,
1931, both ncusve, and that n respect of such proceedngs the
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522
Commssoner sha answer or otherwse move wthn s months
after servce upon hm of a copy of the petton.
y order of the oard.
Logan Morrs, Charman.
-25-5116
Unted States oard of Ta ppeas,
Washngton, une 9, 1931.
The oard announces the promugaton of amended rue 5 (see
ebruary, 1931, edton of the Rues of Practce see on page 508 ),
as foows, effectve from and after to-day:
Rue 5. Intaton of a Proceedng Petton.
proceedng sha be ntated by fng wth the oard a petton, as pro-
vded n rues 6, 7, and 8. The petton sha be compete n tsef so as fuy to
nform the oard of the ssues to be presented. It sha contan:
(a) capton n the foowng form:
UNIT D ST T S O RD O T PP LS.
, Pettoner, 1
v. Docket No.
Commssoner of Interna Revenue, Respondent.
P TITION.
(6) Proper aegatons showng |ursdcton n the oard.
(o) statement of the amount of the defcency or abty as the case
may be , determned by the Commssoner, the nature of the ta , the perod
for whch determned, and the amount thereof (as neary as may be computed)
n controversy.
(d) Cear and concse assgnments of error aeged to have been commtted
by the Commssoner. Such assgnments of error sha be numbered.
(e) Cear and concse numbered statements of the facts upon whch the
pettoner rees as sustanng the assgnments of error e cept those assgn-
ments of error n respect of whch the burden of proof s by statute paced upon
the Commssoner. (See sectons 601, 602, of the Revenue ct of 1928.)
f) prayer, settng forth reef sought by the pettoner.
ff) The sgnature of the pettoner or that of hs counse. The sgnature of
counse sha be n ndvdua and not n frm name. The name and mang
address of the pettoner or of counse sha be typed or prnted mmedatey
foowng the sgnature.
verfcaton by the pettoner provded that where the pettoner a
so|ournng outsde the Unted States or s a nonresdent aen, the petton
may be verfed by a duy apponted attorney n fact, who sha attach to the
petton a copy of the power of attorney under whch he acts and who sha
state n hs verfcaton that he acts pursuant to such power, that such power
has not been revoked, that pettoner s absent from the Unted States, and the
grounds of hs knowedge of the facts aeged n the petton. s used heren
the term Unted States ncudes ony the States and the Dstrct of
Coumba.
In the case of estates, trusts, or other fducares, the petton may be sgned
by counse o by one or more of the fducares and sha be verfed by one or
more of the fducares. ma|orty of the fducares sha ether sgn or
verfy the petton.
The sgnature and the verfcaton to the petton sha be consdered the
certfcate of those performng these acts that there Is good ground for the
petton, that the proceedng has not been nsttuted merey for deay, and
s not frvoous.
copy of the notce of defcency or abty, as the case may be , wth
accompanyng statements, f any, so far as matera to the ssues set out n the
assgnments of error, sha be appended to the petton.
(See orm No. 2.)
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523
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vaabty of ega or equtabe nterest n property hed by en
Property Custodan for payment of ncome ta . (See G. C. M.
9064, page 314.)
-20-5067
I. T. 2574
Pubc Resouton No. 74, Seventy-frst Congress (S. . Res. 163),
approved May 19, 1930, Is appcabe ony to those cases n whch
ta es have been egay pad by or on behaf of a duy enroed
Indan aottee.
dvce s requested reatve to refund cams fed on behaf of
for the years 1917 to 1920, ncusve, whch cams were re|ected n
vew of the fact that they had been fed subsequent to the e praton
of the statutory perod of mtaton for fng cams and subsequent
to the death of .
There has been submtted to ths offce a copy of Pubc Resouton
No. 74, Seventy-frst Congress (S. . Res. 163), approved May 19,
1930, and the request s made that the above-mentoned cams be
reopened and consdered n connecton wth the resouton.
Pubc Resouton No. 74 provdes as foows:
Resoved by the Senate and ouse of Representatves of the Unted States
of merca n Congress ssembed, That any person duy enroed as a member
of an Indan trbe who receved n pursuance of a trba treaty or agreement
wth the Unted States an aotment of and whch by the terms of sad treaty
or agreement was e empted from ta aton, and from whch and the restrc-
tons have been removed, and who was requred or permtted contrary to such
stpuaton to pay any ega or unauthorzed edera ta on the rents, royates,
or other gans arsng from such ta -e empt ands durng the perod of such
e empton and who woud be entted under the aw and rungs of the Treasury
Department n smar Indan cases to a refund of the ta es so egay or er-
roneousy coected but for the fact that he faed to fe a cam for such refund
wthn the tme prescrbed by aw, sha be aowed one year after the approva
of ths act wthn whch to fe such cam, and f otherwse entted thereto he
may recover such ega ta es In the same manner and to the same e tent as
If such cams for refund had been theretofore duy fed as requred by aw.
It not beng the pocy of the Government to nvoke or pead a statute of m-
tatons to escape the obgatons of agreements soemny entered nto wth ts
Indan wards: Provded, however, That n the case of the death of any such
person any such ega ta es pad by hm or on hs account may n ke manner
be camed and recovered by the person or persons who woud have receved
such money had t consttuted a part of hs estate at the tme of hs death.
fter carefu consderaton ths offce has concuded that the reso-
uton above quoted s appcabe ony to those cases n whch ta es
have been egay pad by, or on behaf of a duy enroed Indan a-
ottee. In the nstant case the duy enroed aottee ded n 1915,
and the ta es n queston are those pad on behaf of s son, , dur-
ng hs mnorty, who, t appears was not an enroed member of an
Indan trbe. Snce the resouton specfcay refers to ta es pad by
or on behaf of a duy enroed Indan aottee, t s apparent that the
hers of are not entted to any reef under such resouton. The
reopenng of the cams fed on behaf of the estate of for the
years 1917 to 1920, ncusve, s accordngy dened.
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524
-12-4990
. R. 9801. PU LIC, NO. 862, S NTY- IRST CONGR SS.
n ct to permt the Unted States to be made a party defendant
n certan cases.
e t enacted by the Senate and ouse of Representatves of the
Unted States of merca n Congress assembed, That upon the
condtons heren prescrbed for the protecton of the Unted States,
the consent of the Unted States be, and t s hereby gven, to be
named a party n any sut whch s now pendng or whch may here-
after be brought n any Unted States dstrct court, ncudng those
for the dstrcts of aska, awa, and Porto Rco, and the Supreme
Court of the Dstrct of Coumba, and n any State court havng
|ursdcton of the sub|ect matter, for the forecosure of a mortgage
or other en upon rea estate, for the purpose of securng an ad|ud-
caton touchng any mortgage or other hen the Unted States may
have or cam on the premses nvoved.
Sec. 2. Servce upon the Unted States sha be made by servng
the process of the court wth a copy of the b of compant upon the
Unted States attorney for the dstrct or dvson n whch the sut
has been or may be brought and by sendng copes of the process and
b, by regstered ma, to the ttorney Genera of the Unted States
at Washngton, D. C. The Unted States sha have 60 days after
servce as above provded, or such further tme as the court may
aow, wthn whch to appear and answer, pead or demur.
Sec. 3. ny such sut brought aganst the Unted States n any
State court may be removed by the Unted States to the Unted States
dstrct court for the dstrct n whch the sut may be pendng. The
remova sha be effected n the manner prescrbed by secton 29 of
the udca Code (tte 28, secton 72, U. S. C.): Provded, That the
petton for remova may be fed at any tme before the e praton
of 30 days after the tme heren or by the court aowed to the
Unted States to answer, and no remova bond sha be requred.
The court to whch the cause s removed may, before |udgment,
remand t to the State court f t sha appear that there s no rea
dspute respectng the rghts of the Unted States, or a the other
partes sha concede of record the cams of the Unted States.
Sec. 4. cept as heren otherwse provded, a |udca sae made
n pursuance of a |udgment n such a sut sha have the same effect
respectng the dscharge of the property from ens and encumbrances
hed by the Unted States as may be provded wth respect to such
matters by the aw of the State, Terrtory, or Dstrct n whch the
and s stuated, provded that a sae to satsfy a en nferor to one
of the Unted States sha be made sub|ect to and wthout dsturbng
the en of the Unted States, uness the Unted States, by ts attor-
neys, consents that the property may be sod free of ts mortgage or
en and the proceeds dvded as the partes may be entted: nd
provded further, That where a sae s made to satsfy a en pror to
that of the Unted States, the Unted States sha have one year from
the date of sae wthn whch to redeem. In any case where the debt
owng the Unted States s due, the Unted States may ask, by way of
affrmatve reef, for the forecosure of ts own en or mortgage and
n any case where property s sod to satsfy a frst mortgage or frst
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en hed by the Unted States, the Unted States may bd at the sae
such sum not e ceedng the amount of ts cam wth e penses of sae,
as may be drected by the chef of the department, bureau or other
agency of the Government whch has charge of the admnstraton of
the aws n respect of whch the cam of the Unted States arses.
Sec. 5. If any person sha have a en upon any rea or persona
property, duy fed of record n the |ursdcton n whch the prop-
erty s ocated, and a |unor en (other than a en for any ta ) n
favor of the Unted States attaches to such property, such person
may make a wrtten request to the offcer of the Unted States
charged wth the admnstraton of the aws n respect of whch the
en of the Unted States arses, to have the same e tngushed. If
after approprate nvestgaton, t appears to such offcer that the
proceeds from the sae of the property woud be nsuffcent to satsfy,
n whoe or n part, the en of the Unted States, or that the cam
of the Unted States has been satsfed, or by apse of tme or other-
wse has become unenforceabe, such offcer sha so report to the
Comptroer Genera who thereupon may ssue a certfcate of reease,
whch sha operate to reease the property from such en.
Sec. 6. No |udgment for costs or other money |udgment sha be
rendered aganst the Unted States n any sut or proceedng whch
may be nsttuted under the provsons of ths ct. Nor sha the
Unted States be or become abe for the payment of the costs of any
such sut or proceedng or any part thereof.
pproved March 4,1931.
-12-4993
. R. 10658. PU LIC, NO. 828, S NTY- IRST CONGR SS.
n ct to amend secton 1 of the ct of May 12, 1900 (chapter
393, Thrty-frst Statutes, page 177), as amended (Unted States
Code, secton 1174, chapter 21, tte 26).
e t enacted by the Senate and ouse of Representatves of the
Unted States of merca n Congress assembed, That secton 1 of
the ct entted n ct authorzng the Commssoner of Interna
Revenue to redeem or make aowance for nterna-revenue stamps,
approved Mav 12,1900 (chapter 393, Thrty-frst Statutes, page 177),
as amended (Unted States Code, secton 1174, chapter 21, tte 26),
be, and the same s hereby, amended by addng at the cose thereof
the foowng: nd provded further, That nterna-revenue stamps
aff ed to packages of tobacco, snuff, cgars, or cgarettes whch, after
remova from factory or customhouse for consumpton or sae, the
manufacturer or mporter wthdraws from the market, may, under
reguatons prescrbed by the Commssoner of Interna Revenue
wth the approva of the Secretary of the Treasury, be redeemed f
ssued after December 31, 1931, and f cam for ther redempton s
presented by the manufacturer or mporter wthn three years after
the year of ssue as ndcated by the number or symbo prnted
thereon by the Government, rrespectve of the date of ther purchase.
egnnng wth the year 1933, stamps of any ssue sha not be sod
unt those of the prevous year s ssue have been dsposed of or
ater than one year after the year of ssue.
pproved March 3, 1931.
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526
-23-5095
G. C. M. 9453
Pubc, No. 862, Seventy-frst Congress (26 U. S. C. ., secton
136 see on page 524 ) (e cept secton 5), covers ta ens, as we
as other ens, hed or camed by the Unted States on rea estate,
but does not repea secton 3207 of the Revsed Statutes, as amend-
ed. In so far as they overap, Pubc, No. 862, creates an addtona
remedy to that provded In secton 3207 of the Revsed Statutes, as
amended.
n opnon s requested reatve to what effect, f any, Pubc, No.
862, has upon secton 3207 of the Revsed Statutes, as amended by
secton 1127 of the Revenue ct of 1926.
readng of the egsatve hstory of Pubc, No. 862, eads to
the concuson that Congress ntended that ct, wth the e cepton
of secton 5 thereof, to cover a ens (whether or not arsng out
of a contract), hed or camed by the Unted States on premses
nvoved n such forecosure proceedngs as are referred to theren.
The fact that Congress found t necessary to e pressy e cept ta
ens from the operaton of secton 5, reatng to the reease of Gov-
ernment ens on both reaty and personaty, ends further support
to ths concuson. n attempt to mt the terms of a statute, ev-
denty ntended by Congress to be genera n ts appcaton, woud
be unwarranted. It s, accordngy, the opnon of ths offce that
Pubc, No. 862 (e cept secton 5), covers ta ens, as we as other
ens, hed or camed by the Unted States on rea estate.
Secton 3207 of the Revsed Statutes deas e cusvey wth ta es or
ta ens. Subdvson (a) of sad secton provdes a remedy whereby
the Commssoner of Interna Revenue can effect, through proceed-
ngs n a dstrct court of the Unted States, coecton of past due
ta es out of rea estate owned by a denquent ta payer or n whch
such ta payer has any rght, tte, or nterest. Under subdvson (a)
the acton s ntated by the Government, actng through the Com-
mssoner of Interna Revenue. Subdvson (b) provdes for the
ntaton of a sut, to whch the Unted States sha be made a party,
by any person havng a en upon or any nterest n rea estate, upon
whch the Unted States has a |unor en for ta es, or by any person
purchasng the rea estate at a sae to satsfy such pror en or
nterest.
The procedure prescrbed by subdvson (b) of secton 3207 of
the Revsed Statutes has ong been recognzed by the ureau and the
courts as beng the proper procedure for the remova from rea
estate of |unor edera ta ens. (G. C. M. 4715, C. . II-2, 94
She-wood v. U. S., 5 ed. (2d), 991, T. D. 3706, C. . I -1, 84
Ormsbee v. U. S., 23 ed. (2d), 926.) The foregong was the status
of the aw wth respect to ta ens pror to the enactment of Pubc,
No. 862.
The frst paragraph of Pubc, No. 862, reads as foows:
e t enacted by the Senate and ouse of Representatves of the Unted States
of merca n Congress assembed, That, upon the condtons heren prescrbed
for the protecton of the Unted States, the consent of the Unted States be, and
t s hereby gven, to be named a party n any sut whch s now pendng or
whch may hereafter be brought n any Unted States dstrct court, ncudng
those for the dstrcts of aska, awa, and Porto Rco, and the Supreme
Court of the Dstrct of Coumba, and n any State court havng |ursdcton
of the sub|ect matter, for the forecosure of a mortgage or other en upon rea
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527
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estate, for the purpose of securng an ad|udcaton touchng any mortgage or
other en the Unted States may have or cam on the premses nvoved.
Secton 2 of the ct deas wth process and secton 3 wth remova
of cases from State to edera courts. Secton 4 of the ct reads as
foows:
Sec. 4. cept as heren otherwse provded, a |udca sae made n pur-
suance of a |udgment In such a sut sha have the same effect respectng the
dscharge of the property from ens and encumbrances hed by the Unted
States as may be provded wth respect to such matters by the aw of the
State, Terrtory, or Dstrct n whch the and s stuated, provded that a
sae to satsfy a en nferor to one of the Unted States sha be made sub-
|ect to and wthout dsturbng the en of the Unted States, uness the Unted
States, by ts attorneys, consents that the property may be sod free of ts
mortgage or en and the proceeds dvded as the partes may be entted:
nd provded further, That where a sae s made to satsfy a en pror to that
of the Unted States, the Unted States sha have one year from the date of
sae wthn whch to redeem. In any case where the debt owng the Unted
States s due, the Unted States may ask, by way of affrmatve reef, for
the forecosure of ts own en or mortgage and n any case where property s
sod to satsfy a frst mortgage or frst en hed by the Unted States, the
Unted States may bd at the sae such sum not e ceedng the amount of ts
cam wth e penses of sae, as may be drected by the chef of the department,
bureau or other agency of the Government whch has charge of the admns-
traton of the aws n respect of whch the cam of the Unted States arses.
rom the foregong, t appears that whe the two statutes may
overap wth respect to a certan type of case, they aso cover dffer-
ent types of cases. Subdvson (a) of secton 3207 of the evsed
Statutes ceary deas wth a stuaton not ntended to be covered
by Pubc, No. 862. Subdvson (b) of secton 3207 of the Revsed
Statutes deas ony wth remova of |unor edera ta ens, and n
ths respect s much more mted n ts operaton than Pubc, No.
862, whch deas wth a types of edera hens, regardess of whether
sad edera ens are senor or |unor ens. On the other hand, the
operaton of Pubc, No. 862, s mted to cases brought for the
forecosure of a mortgage or other en upon rea estate, whereas
under secton 3207(b) any person havng a en or any nterest n the
rea estate, notce of whch was duy fed of record pror to the
fng of the en of the Unted States, as provded by secton 3186 of
the Revsed Statutes, as amended, s, upon fufment of the pre-
scrbed condtons, entted to have the tte to the rea estate
nvoved ceared of the edera ta en.
nother notabe dfference between the two statutes s that n
Pubc, No. 862, t s provded that where a sae s made to satsfy
a en pror to that of the Unted States, the Unted States has one
year from the date of the sae n whch to redeem. Under Pubc,
No. 862, the proceedng may be orgnay begun n a State court,
sub|ect, however, to the rght of remova to a edera court as pro-
vded n secton 3 of sad ct. There may be other dfferences, but
the foregong s suffcent to show that Congress, n enactng the
two statutes, was not deang wth dentca stuatons. Nowhere
n Pubc, No. 862, was any menton made of secton 3207 of the
Revsed Statutes. Pubc, No. 862, contaned no repeang cause.
oth statutes are remeda or procedura n nature. The overappng
features of the two statutes reate to the remova from rea estate
of |unor ta ens hed by the Unted States. One statute pre-
scrbes one set of condtons under whch the Unted States gves
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Msc.
528
ts consent to be sued wth respect to ts |unor ta ens, -whereas
the other statute prescrbes a dfferent set of condtons. Dfferent
consequences may fow from the seecton of the partcuar statute
under whch such en s sought to be removed. The statutes do not,
however, appear to be nconsstent. In Lews Sutherand Statu-
tory Constructon, oume I, second edton, secton 267, the fo-
owng appears:
Seo. 267. Repea by mpcaton avoded f possbe. If two statutes can
be read together wthout contradcton, or repugnancy, or absurdty, or un-
reasonabeness, they shoud be read together, and both w have effect. It
s not enough to |ustfy the nference of repea that the ater aw s dfferent
t must be contrary to the pror aw. It s not suffcent that the subsequent
statute covers some or even a the cases provded for by the former, for It
may be merey affrmatve, accumuatve or au ary there must be postve
repugnancy and even then the od aw s repeaed by mpcaton ony to
the e tent of the repugnancy. If, by far and reasonabe nterpretaton, acta
whch are seemngy Incompatbe or contradctory may be enforced and
made to operate n harmony and wthout absurdty, both w be uphed,
and the ater one w not be regarded as repeang the others by constructon
or ntendment. s aws are presumed to be passed wth deberaton and
wth a fu knowedge of a e stng ones on the same sub|ect, t s but
reasonabe to concude that the egsature, n passng a statute, dd not ntend
to nterfere wth or abrogate any former aw reatng to the same matter,
uness the repugnancy between the two s rreconcabe.
The same author n secton 260 of the same voume states that
a subsequent statute whch nsttutes new methods of proceedng
does not, wthout negatve words, repea a former statute reatve
to procedure. (See aso 25 R. C. L., Statutes, sectons 167 to
172, and cases there cted, for a genera dscusson of the rues of
statutory constructon.)
ppyng the foregong rues of statutory constructon, ths offce
s of the opnon that Pubc, No. 862, dd not repea secton 3207
of the Revsed Statutes, as amended, and that, n so far as sad
statutes overap, Pubc, No. 862, creates an addtona remedy to
that provded n secton 3207 of the Revsed Statutes, as amended.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
-21-5077
Mm. 3878
Speca dvsory Commttee.
Com. Mmeograph 3558 C. . I-2, 403 amended.
Treasuky Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C, May U, 1931.
Coectors of Interna Revenue, Interna, Revenue gents n Charge,
Offcas and mpoyees of the ureau of Interna Revenue, and
Others Concerned:
ffectve as of pr 1, 1931, Commssoner s Mmeograph 3558,
pubshed n Cumuatve uetn I-2, page 403, as amended by
Commssoner s Mmeograph 3814, pubshed n Cumuatve ue-
tn I -2, 459, and reatng to the organzaton of the Speca
dvsory Commttee, s further amended as foows:
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529
(Msc.
Subdvson (b) of the thrd paragraph s amended to read:
(b) Cases arsng out of the mang of defcency notces as prescrbed by
the varous Revenue cts, e cept (1) cases nvovng the queston of the
appcaton of secton 104 of the Revenue ct of 1928 and secton 220 of pror
Revenue cts, whch sha be consdered and acted upon by the nterpretatve
dvson of the offce of the Genera Counse of the ureau of Interna Revenue,
sub|ect to the approva of the Commssoner, and (2) cases nvovng the
mposton of the 50 per centum ad vaorem penaty for fng a fase or
frauduent return.
The ast paragraph s amended to read:
Compete records sha be mantaned by the commttee of ts acton on cases,
and by the Genera Counse of hs acton on cases fang wthn the e cepton
contaned n (b)(1) above. The commttee sha not reconsder any case on
whch the revew dvson of the Genera Counse s offce has taken acton pror
to uy 1, 1930, n the absence of newy dscovered evdence, or recent court or
oard decsons n whch the ureau has acquesced, or changes n the aw and
reguatons.
Davd t|knet, Commssoner.
-25-5115
G. C. M. 9503
The phrase any perod n secton 24(e), Tradng wth the
nemy ct, as amended, contempates the partcuar perod wthn
any ta abe year (not the ta abe year as a unt) durng whch
the property s In custody. The perod durng whch the ta payer
retaned the custody of ts property and carred on ts busness
under censes s not wthn the purvew of secton 24(e), Tradng
wth the nemy ct, as amended.
The opnon of ths offce s requested on two questons:
(1) Whether the phrase any perod n secton 24(e), Tradng
wth the nemy ct, as amended, contempates a ta abe year or a
perod ess than a ta abe year and (2) Whether the supervson
e ercsed by the en Property Custodan, or other offcas of the
Unted States, under deegated authorty from the Presdent, pursu-
ant to the procamatons of the Presdent dated pr 6, 1917, and
uy 13, 1917, and secton 4, Tradng wth the nemy ct, was
wthn the contempaton of secton 24(e), Tradng wth the nemy
ct, as amended.
The ta payer, the M Company, a German corporaton, estabshed
a branch offce n the Unted States pror to 1917 for the transacton
of ts busness after the decaraton of war a speca cense to
contnue busness was granted to the ta payer, pursuant to the above-
named procamatons of the Presdent upon the enactment of the
Tradng wth the nemy ct a revocabe cense, pursuant to that
ct, was granted to the ta payer n November, 1917, and contnued
n force unt November 18, 1918, on whch date t was canceed
and on November 18, 1918, the assets of the ta payer were sezed by
the en Property Custodan, pursuant to the Tradng wth the
nemy ct.
The frst ssue reates to the meanng of tt any perod n secton
24(e), Tradng wth the nemy ct, as amended, whch provdes:
In case of any nterna-revenue ta mposed n respect of property conveyed,
transferred, assgned, devered, or pad to the en Property Custodan, or
sezed by hm, and mposed n respect of any perod (n the ta abe year 1917
or any succeedng ta abe year) durng whch such property was hed by hm
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Msc.
530
or by the Treasurer of the Unted States, no nterest or cv penaty sha be
assessed upon, coected from, or pad by or on behaf of, the ta payer nor
sha any Interest be credted or pad to the ta payer n respect of any credt
or refund aowed or made n respect of such ta .
The norma meanng of any s one ndfferenty out of a
number, and of perod, a porton of tme as mted and deter-
mned by some recurrng phenomenon a dvson of tme,
as a seres of years, months, or days, n whch somethng s com-
peted. The determnant of the porton of tme contem-
pated by the statute n the phrase any perod was not eft n
doubt, but was e pressy specfed n the cause durng whch such
property was hed by hm or by the Treasurer of the Unted States.
There s nothng on the face of the statute whch even suggests that
the perod contempated s anythng other than the actua perod of
tme commencng wth the sezure of the property and endng wth
ts return to ts owner, and the parenthetca cause (n the ta abe
year 1917 or any succeedng ta abe year) mmedatey foowng
any perod must be read any perod n the ta abe year 1917
or any succeedng ta abe year, uness the anguage of the statute
s ungrammatca or uness words are to be strcken therefrom as
unntended. To read the statute as f t read any perod, . e., the
ta abe year 1917 or any succeedng ta abe year, voates the
estabshed usages of speech, and, whe t s true that the ncome
ta (ony one of the ta es to whch the statute appes) s mposed
for the ta abe year upon net ncome of that year, the statute does
not speak of the ta mposed for any year, but of the ta m-
posed n respect of any perod. The ndefnte n respect of
s the approprate phrase to ndcate the e stence of some reaton-
shp, but the phrase does not connote the precson of reatonshp
whch the word for does. The use n the same sentence of both
any perod and any ta abe year ndcates a deberate choce
of words, whch requres that ther meanngs be respected.
It s sad that the underyng reason for the statute s that the
ta payer, an aen enemy beyond the seas, whose property has been
sezed was not n a poston tmey to return and pay the ta for
the ta abe year n whch hs property has been sezed and for
that reason s not requred to pay nterest on a defcency. ut
for the ta abe year n whch the ta payer s property was returned
to hm there was no such dsabty, and t s cear that, at east n
respect of a porton of that year, the statute contempates the coec-
ton of no nterest on the defcency and no nterest on the refund,
and, as has been ndcated, the scope of the statute s suffcenty
ndcated by ts anguage.
The concuson s that secton 24(e) contempates by any perod
not ta abe years as unts, but the partcuar perod (wthn any
ta abe year) durng whch property s n custody. Of course, even
for that perod the statute appes ony to the ta n respect of the
property n custody.
The second ssue s whether any perod durng whch
property conveyed, transferred, assgned, devered, or pad to the
en Property Custodan, or sezed by hm was hed by hm or by
the Treasurer of the Unted States, ncudes the censng perod
under the procamatons of the Presdent and secton 4, Tradng wth
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531
Msc.
the nemy ct. If the words of the statute were to be gven ther
most e tended possbe meanng, t woud seem mpossbe to descrbe
anythng that occurred under the censes as the conveyance, transfer,
assgnment, devery, or payment of property to the en Property
Custodan, or the sezure thereof by hm. The scope and purpose
of the procamatons of the Presdent, and of secton 4, Tradng
wth the nemy ct (censes), are qute dfferent from those of
sectons 6, 7, and 8, Tradng wth the nemy ct (sezure, etc., of
property). These dfferences, n the ght of the anguage of the
statute, make t cear that the perod durng whch the ta payer
retaned the custody of ts property and carred on ts busness under
the censes s not wthn the purvew of secton 24(e), Tradng
wth the nemy ct, as amended.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
1 -26-5124
Dsbarments and suspensons from practce before Treasury Department of
attorneys and agents
DIS RM NTS.
The Secretary of the Treasury, after due notce and opportunty
for hearng, has ordered the dsbarment from further practce be-
fore the Treasury Department of the foowng-named attorneys and
agents:
Name.
Date of ds-
barment.
Cause.
ayer, Lous...
erger, . Mar|ore..
rodsky, yman M.
Chambers, W. ....
Cooper, Merton .-
New York, N. Y an. 2,1930 Charged wth recevng money from cent to
pay ther edera Income ta es wth (ang
to pay such money to the coector of nterna
revenue and wth ssung fase and forged
edera ncome ta recepts to such cents.
Charges found proven.
oywood, Caf pr. 8,1930 Charged wth knowngy advsng and counse-
ng cents to make fase edera ncome ta
returns and wth knowngy preparng fase
ncome ta returns for such cents. Charges
found proven.
Worcester, Mass.. May 13,1930 Charged wth appropratng funds of hs em-
poyer to hs own use. Charges found proven.
Norfok, Nebr Mar. 26,1930 Charged wth preparaton of fase edera n-
come ta returns for ta payers. Charges
found proven.
y Ch- May 14,1930 Charged wth ssung frauduent checks and re-
cagor 111., now cevng goods, moneys, and hote accommo-
ophn, Mo. datons on such worthess checks. Charges
found proven.
Seatte, Wash pr. 1,1931 Charged wth makng fase ncome ta returns
for a ta payer. Charges found proven.
Chcago, m an. 2,1930 Charged wth frauduenty convertng funds
beongng to cents to hs own use. Charges
. , found proven.
Daz, uan Tampa, a an. 14,1930 Charged wth havng been convcted of the
crme of forgery. Charges found proven.
hs rung (5124) Incudes aso rungs Nob. 4891, 4899, 4903, 4916, 4924, 4933,
4942, 4950, 4054, 4971, 4980, 4992, 5003, 5006, 5021, 5032, 5041, 5050, 5060 5070,
5079, 5087, 5099, 5108, and 5117. These rungs have been thus consodated because
pubcaton of each one separatey woud be argey dupcaton.
3 Ths st Incudes a attorneys and agents dsbarred from practce durng the 12-month
perod uy 1, 1930- une 30, 1931, ncusve, and a suspensons In effect durng the
6-month perod anuary 1- une 30, 1931, ncusve. It does not Incude those barred
from practce by reason of dsapprova of ther appcaton for enroment.
Cuter, . C
Davdson, ohn L__.
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Msc.
532
Name.
ddress.
Date of ds-
barment.
Cause.
Dworak, .
ayden, dward
Leffer, Lous.
Mer, Mchae
Sper, oseph N
Terry, . C
Whte, oward ..
Omaha, Nebr
oywood, Caf-.
ormery New
York, N. Y.,
now rookyn,
N. Y.
atmore, Md
rookyn, N. Y...
ormery Long
each, Caf.,
now Los nge-
es, Caf.
New York, N. Y.
pr. 21,1930
pr. 6,1930
an. 5,1931
Oct. 31,1930
an. 5,1931
an. 17,1930
une 13,1930
Charged wth preparng a fase fnanca state-
ment for a corporaton, whch was used to n-
duce persons to purchase shares of stock n
such corporaton. Charges found proven.
Charged wth knowngy advsng and counse-
ng cents to make fase edera ncome ta
returns and wth knowngy preparng fase
ncome ta returns for such cents. Charges
found proven.
Charged wth havng attempted to e tort
money by threatenng to charge a ta payer
wth makng a fase statement n regard to
ta es. Charges found proven.
Charged wth embezzement of funds of cents.
Charges found proven.
Charged wth havng attempted to e tort
money by threatenng to charge a ta payer
wth makng a fase statement n regard to
ta es. Charges found proven.
Charged wth preparng fase ncome ta re-
turns for cent wth ntent to ad such cent
to evade the payment of ncome ta es.
Charges found proven.
Charged wth havng msapproprated trust
funds to hs own use, and wth havng been
convcted and sentenced to serve a term n
State prson by State court for such crme.
Charges found proven.
DIS RM NT MODI I D.
The ctng Secretary of the Treasury has ordered that the order
of dsbarment entered aganst the foowng-named person be mod-
fed as ndcated beow:
Name.
ddress.
Remarks.
Gbson, Wam atrck.
ormery New York,
N. Y., now Pan-
fed, N. .
Dsbarment ordered an. 12,1929 dsbarment modfed
on une 8, 1831, to suspenson from practce for the
perod from an. 12,1929, to une 8,1931.
SUSP NSIONS.
The Secretary of the Treasury, after due notce and opportunty
for hearng, has ordered the suspenson from practce before the
Treasury Department for the perod stated n each case of the
foowng-named attorneys and agents:
Name.
ddress.
Perod of
suspenson.
Cause.
Coopersmth, Morrs.
Tnkoff, Paysoft
New York, N. Y_.
Chcago, 111
1 year, from
May 2,1931.
Chargod wth testfyng fasey n a proceed-
ng before the Commttee on nroment
and Dsbarment of the Treasury Depart-
ment. Charges found proven.
1 year, from
une 4,1930.
Charged wth havng fed wth the coector
of nterna revenue an atered surety bond,
and wth preparng fase edera ncome
ta returns. Charges found proven.
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533
Msc.
Resgnatons from enroment to practce before the Treasury Department.
The foowng-named persons have tendered ther resgnatons
from enroment to practce before the Treasury Department. The
Secretary of the Treasury has accepted ther resgnatons and ordered
ther names strcken from the ro of attorneys and agents enroed
to practce before the Treasury Department. They are therefore no
onger entted to practce before the Treasury Department.
Name.
ddress.
Desgnaton.
Date of
acceptance.
Chase, C. D...
ume, Legh
Mcntosh, Moore C
aughn, orrest
San rancsco, Caf.
gent.
do
Dec. 30,1930.
Do.
ormery Oakand, Caf.,
now Modesto, Caf.
Do.
ormery Washngton,
D. C, now Phoen , rz.
ormery Parkersburg, W.
a., now Seymour, Ind.
do....
.do.
pr. 10,1931.
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IND .
batement cams. (See Cams.)
ccountng methods, accrua bass, returns
d|usted compensaton certfcates, transfer to unversty, de-
ducton
ffated corporatons. (See Corporatons.)
greement to suspend runnng of statute of mtatons, 1928 ct
en Property Custodan, ega or equtabe nterest n property
hed by, ta coecton
ens:
nemy, Tradng wth the nemy ct, any perod, sec-
ton 24(e), nterpretaton.
Nonresdent. (See Nonresdent aens.)
mendments:
Reguatons 8
rtce 41
rtce 44
rtce 47
rtce 50
Reguatons 9, sectons 20, 29, 37, 42, 43, 71, 75, 77, 82
Reguatons 62, artce 1603
Reguatons 65, artce 1625
Reguatons 68 (1924 edton), artce 9
Reguatons 69
rtce 1234
rtce 1625
Reguatons 70 (1929 edton)
rtce 9 -
rtce 41
rtce 53
Reguatons 74
rtce 271
rtce 501
rtce 996
rtce 1173
Revenue ct of 1926, secton 302(c)
Treasurv decsons
3856
4277
nnutes, bequests payabe from corpus of estate, e empton
ssessments:
Loca benefts, treatment
Ta es. (See Ta es.)
ssgnments, future ncome, vadty
ssocatons:
Partnershps dstngushed
Trusts dstngushed
thetc coaches, State unversty, saares, e empton
ttorneys and agents:
Dsbarments and suspensons
Resgnatons from enroment
72109 31 35 (535)
Rung
No.
4905
4919
4912
4960
5115
5031
5031
5031
5031
5069
4981
4981
4952
5091
4981
4951
4907
4908
5029
5030
4982
5091
5086
5109
4917
5048
5072
4912
4946
/5039
15062
5081
5124
5124
G
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536
ttorney fees. (See ees.)
utomobes, tradng n on new purchases, gan or oss.
wards, Settement of War Cams ct
.
ad debts, notes, ndorser s deducton
ankruptcy and recevershps, banks, partnershp, ta abty
and returns..
anks:
Deposts, ta evy
Prorty over depostary s |udgment
Sut to coect, penates
Inventores
Natona, stock assessment, oss deducton._
enefcares, nspecton of returns
equests:
nnuty payabe from corpus, e empton
Interest n future contract payments, ncome
onds:
batement cam, defense, sut for recovery of ta
tenson of tme payment
Reease
Sut, no oss or damage shown
Interest. (See Interest.)
usness e penses:
ttorney fees
reach of contract, |udgment affrmed ater year
Compensaton for persona servces
ddtona, pad trustee by benefcary
cessve
nes
udgment for compensaton for servces
C.
Caforna, communty property. (See Communty property.)
Capta e pendtures, assessments aganst oca benefts
Capta gans and osses:
Rea estate deaers
Royates, o eases
Capta stock ta :
ssocaton dstngushed from trust, ta abty
ar average vaue, meanng
Insurance company, mutua, dvdends to pocyhoders, com-
putaton of ta
Mutua fre nsurance company, e empton .
Carryng charges, tmberand, effect on gan or oss saes bass..
Chartabe bequests, Masonc odges, estate ta deducton
Ctzens and ctzenshp:
Loss of ctzenshp, ta abe status
Naturazaton. (See Naturazaton.)
Cams:
batement, coecton stayed, refund mtaton.
Credt or refund. (See Credt or refund.)
Refund or credt. (See Credt or refund.)
Cosng agreements. (See Ta es: na determnaton and
ment.)
Rung
No.
5063
/5073
15074
5045
4927
4999
5094
5005
4978
5109
5048
5113
5049
4959
5085
4979
4988
4987
5092
4979
4988
5072
4904
4975
5039
4897
5068
4897
5016
5097
4960
4913
4956
4957
4958
215
129
133
241
270
299
300
106
384
146
366
345
430
256
413
397
378
375
235
397
378
120
223
483
487
484
487
340
460
314
186
189
190
191
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537
Commssons:
Genera nsurance agent s, earned ncome
Insurance premum renewas, payment to deceased agents
estates, nformaton return
Communty property and ncome, Caforna
arned ncome credt n case of separate returns
1927 and subsequent year returns, nstructons
Compensaton:
ddtona, deducton. (.See usness e penses: Compensa-
ton.)
cessve saary, dvdend, burden of proof
State offcers and empoyees. (See|State.)
Compromse, transferee s abty, effect on transferor
Consent agreements. (See Lmtaton perod: Wavers.)
Consodated returns. (See Returns.)
Contracts, ong-term:
Method of returnng ncome, eecton
Recovery of pror ye vr s osses, ncome
Contrbutons, chartabe, ad|usted compensaton certfcate
transfer
Cooperatve assocatons, e empton. ( See empt corporatons.)
Corporatons:
ffaton determnaton
empton. (.See empt corporatons.)
ees, State charter amendment, deducton
Returns. (See Returns.)
Transferred assets, ta coecton
Court decsons:
ken v. urnet
e ander v. ng
e ander v. Ruzek
en v. Moravan
hands v. Crooks
umnum Castngs Co. v. Rouzahn
nderson Gambrnus rewery Co. v
nderson ennngs v
nderson Reeves v
rt Meta Constructon Co. v. Unted State
ankers Reserve L|e Co. v. Unted States
ank of Mount ope Unted Staes v
ass Group No. 1 O Corporaton v
one v. Unted States
onwt Teer Co. v. Unted States
oston uck Co. Unted States v -
oston Pressed Meta Co. v. Unted States
owe- urke Mnng Co. et a. v. Wcuts
owers rown s Shamrock Lnens, Ltd., v
owers Ingram v
owers enan, |r., e a. v
owers Munn v
owers v. New York L|e Insurance Co
rown Sons Lumber Co. v. urnet
rown s Shamrock Lnens, Ltd., v. owers
ruce urnet v
ryant-Lnk Co. v. opkns
nn Wcuts v
urnet ken v
urnet rown Sons Lumber Co. v
urnet v. ruce
Rung
No.
5035
4945
1/4955
t5084
/5100
5120
4894
5092
5015
5000
4929
4919
4920
15076
5053
5010
4923
4975
4975
5034
5000
4905
5017
4958
4958
4989
4997
4961
5055
5092
5064
4968
4958
5027
5037
5001
4987
4948
5068
4938
5037
5113
5049
4939
4923
4938
5113
G
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)

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-
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538
Court decsons Contnued.
urnet v. Chcago Raway qupment Co
urnet Choteau v._
urnet ckert v
urnet v. ouston
urnet v. Logan
urnet v. McDonough
urnet Nash- reyer Motor Co. v
urnet v. Natona Industra coho Co., Inc
urnet v. Nagara as rewng Co. et a
urnet v. Sanford rooks Co
urnet v. Thompson O Gas Co
urnet v. Whtehouse
urnet v. WMngham Loan TrusLCo
urroughs udng Matera Co. v. Commssoner
Champ Sprng Co. v. Unted States
Chareston Lead Works et a. Unted States v
Chcago Raway qupment Co. urnet v
Choteau v. urnet
Commssoner urroughs udng Matera Co. v
Commssoner am v
Commssoner rst Natona ank n Daas v
Commssoner rst Natona ank n Wchta et a. -
Commssoner andy tfc arman v
Commssoner v. Langwe Rea state Corporaton
Commssoner McLarry v
Commssoner Ogesby Coa Co. v
Commssoner Phps et a. v
Crooks hands v
Crooks v. arreson et a
Crukshank Unted States v
Davs v. ersheu Chocoate Co
Davs v. en Chocoate Co..
Davs v. York Chocoate Co
Denman v. Sayton
astern qtes Corporaton v. Unted Sates
ckert v. urnet
am v. Commssoner
re Coa Coke Co. Iener v
aber, Coe Gregg, Inc., v. Unted States
awcus Machne Co. v. Unted Sates
et Tarrant Mfg. Co.: Unted States v
rst Natona ank n Daas v. Commssoner
rst Natona ank n Wchta e. a. v. Commssoner.
rst Natona ank of Chcago v. Unted States
rday Co., Inc., v. Unted States
Gambrnus rewery Co. v. nderson
Gardner et a. v. Unted States
Goodce Graham and oster v
Graham and oster v. Goodce
Group No. 1 O Corporaton v. ass
andy arman v. Commssoner
arreson e a. Crooks v
Iener v. re Coa Coke Co
Iener Lppman s, Inc., v
Iener Russe v
ershey Chocoate Co. Davs v
ershey Cocoate Co. Lederer v
ershey Cocoate Co. McCaughn v
ckman v. Unted States
opkns ryant-Lnk Co. v
ouston urnet v
Rung
No.
Page.
4928
323
5114
355
5045
241
5047
343
5113
345
5075
367
5093
292
5019
405
5018
403
4929
363
5056
390
5048
366
4965
258
4979
397
5038
446
5085
413
4928
323
5114
355
4979
397
5009
303
5097
460
4978
384
5076
409
5107
361
5120
307
4977
350
5112
264
5000
357
4906
469
5058
464
5096
444
5096
444
5096
444
5025
380
4958
191
5045
241
5009
303
4957
190
4949
489
4930
424
5066
431
5097
460
4978
384
5065
406
4998
295
5017
400
5039
483
4958
191
4958
191
5055
153
5076
409
4906
469
4957
190
4940
442
4915
233
5096
444
5096
444
5096
444
4986
332
5049
430
5047
343
G
e
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)

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1
3
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1
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2

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8
9
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4
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539
ng
No.
Court decsons Contnued.
untey Mutnomah mateur thetc Cub v.
Indan Motocyce Co. v. Unted States
Ingram v. owers
Iron Cap Copper Co. Unted States v
ennngs v. nderson
enan, |r., et a. v. owers
ng e ander v
en et a. v. Unted States
en Chocoate Co. Davs
en Chocoate Co. Lederer v
en Chocoate Co. McCaughn v
reger Unted States v
Lang we Rea state Corporaton Commssoner v
Lankenau Co. v. Unted States
Lederer v. ershey Chocoate Co
Lederer v. en Chocoate Co
Lederer v. York Chocoate Co
Lederer v. Wbur Suchard Chocoate Co
Lews and Cooper v. Reynods
Lppman s, Inc., v. ener
Ltte v. Whte
Logan urnet v
Lucas Prce Lucas Cder negar Co. v
Lucas v. Schneder
Lucas Wrght Tayor v
Lumber Co., . M. O., v. Unted Staes
Lumber Mutua re Insurance Co. v. Maey
McCann and Partrdge v. Un ted Staes
McCaughn v. ershey Chocoate Co
McCaughn v. en Chocoate Co
McCaughn v. York Chocoate Co
McCaughn v. Wbur Suchard Chocoate Co
McDonough urnet v
McLarry v. Commssoner
Maas Wadsten Co. v. Unted Staes
Magee v. Unted States
Maey Lumber Mutua re Insurance Co. v
Mascot O Co. v. Unted States
Mche Unted States v
Mken et a. v. Unted Sates -
Morsman en v
Mutnomah mateur thetc Cub v. untey
Munn v. owers
Nash- reyer Motor Co. v. urnet
Natona Industra coho Co urnet v
Natona Tank port Co. Unted States v
Nagara as rewng Co. et a. urnet v
New York Lfe Insurance Co. v. owers
Oak Worsted Ms v. Unted States
Ogesby Coa Co. v. Commssoner
Pacfc Mutua Lfe Insurance Co. of Caforna v. Unted
States
Page Provdence fc Worcester Raroad Co. v
Pann v. Unted States
Parker v. Routzahn
Phps et a. v. Commssoner
Potstown Iron Co. v. Unted States
Prce Lucas Cder negar Co. v. Lucas
Provdence Worcester Raroad Co. v. Page
Provdence fe Worcester Raroad Co. v. Unted States
Reeves, Inc., v. nderson
5011
437
5123
439
5001
372
4968
335
4958
191
4987
375
4975
223
5057
462
5096
444
5096
444
5096
444
5008
279
5107
361
4988
378
5096
444
5096
444
5096
444
5096
444
5103
180
4940
442
5046
317
5113
345
4976
327
5083
230
4958
191
5016
340
4897
487
5106
348
5096
444
5096
441
5096
444
5096
444
5075
367
5120
307
5122
433
4956
189
4897
487
4957
190
5008
297
5028
472
5034
125
5011
437
4948
436
5093
292
5019
405
5026
420
5019
405
5068
484
4958
191
4977
350
4896
293
4947
393
5010
411
4913
186
5112
264
4967
301
4976
327
4947
393
4947
393
4958
191
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540
Court decsons Contnued.
Reynod Lews and Cooper v
Rose Wooford Reaty Co. v
Routzahn umnum Castngs Co. v
Routzahn Parker v
Russe v. ener
Ruzek e ander v
Sanford rooks Co urnet v
Schneder Lucas v
Second Natona ank of Sagnaw v. Unted States
Sayton Denman v
Stange v. Unted States
Swft Co. Unted States v
Taft Wooen Co. v. Unted Sates
Thrd Natona ank Trust Co. of Sprngfed e a. v.
Whte - -
Thompson O Gas Co. urnet v
Todd v. Unted Sates
Toy e a. v. Unted Staes
Unted Sates rt Meta Constructon Co. v
Unted States v. ank of Mount ope
Unted Staes ankers Reserve Lfe Co. v
Unted Staes: one v
Unted Staes onwt Teer Co. v
Unted Staes v. oston uck Co
Unted Staes oston Pressed Meta Co. v
Unted States Champ Sprng Co. v
Unted States v. Chareston Lead Works e a
Unted States v. Crukshank et a
Unted States astern qutes Corporaton v
Unted Sates aber, Coe Gregg v
Unted States awcus Machne Co. v
Unted States v. et Tarrant Mfg. Co
Unted Staes rst Natona ank of Chcago v
Unted States rday dk Co. v
Unted Staes Gardner et a. v
Unted States ckman v
Unted States Indan Motocyce Co. v
Unted States v. Iron Cap Copper Co
Unted States en e a. v
Unted States v. reger
Unted Sates Lankenau Co. v
Unted Staes . M. O. Lumber Co. v ---
Unted States McCann and Partrdge v
Unted States Maas WaUsten Co. v
Unted Staes Magee v
Unted Sates Mascot O Co. v
Unted Staes v. Mche
Unted States Mken et a. v
Unted States v. Natona Tank port Co
Unted Staes Oak Worsted Ms v
Unted States Pacfc Mutua Lfe Insurance Co. of Caforna
v
Unted States Pann v
Unted States Pottstown Iron Co. v
Unted States Provdence Worcester Raroad Co.
Unted States Second Natona ank of Sagnaw v..
Unted States Stange v
Unted States v. Swft Co
Unted States Taft Wooen Co. v
Unted States Todd v
Unted States Toy et a. v
5103
180
4895
221
4905
352
4913
186
4915
233
4975
223
4929
363
5083
230
4958
191
5025
380
4922
414
4966
283
4958
191
5012
457
5056
390
5002
458
4969
454
4989
421
4961
320
4997
286
5092
235
5064
328
4968
335
4958
191
5038
446
5085
413
5058
464
4958
191
4949
489
4930
424
5066
431
5065
406
4998
295
5039
483
4986
332
5123
439
4968
335
5057
462
5008
297
4988
378
5016
340
5106
348
5122
433
4956
189
4957
190
5008
297
5028
472
5026
420
4958
196
4896
293
5010
411
4967
155
4947
393
4958
191
4922
414
4966
283
4958
191
5002
458
4969
454
G
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541
Court decsons Contnued.
Unted States v. Unted States Trust Co. of New York
Unted States v. Wes et a
Unted Sates v. Wyman, Partrdge Co
Unted Staes Trust Co. of New York Unted States v
Wes e a. Unted States v --
Whte Ltte v
Whte Thrd Natona ank Trust Co. of Sprngfed et a. v.
Whtehouse urnet v
Wbur Suchard Chocoate Co Lederer v
Wbur Suchard Chocoate Co. McCaughn v.
Wcus owe- urke Mnng Co. et a. v
Wcuts v. unn
Wngham Loan Trust Co. urnet v
Wooford Reaty Co., Inc., v. Rose -
Wrght Tayor, Inc., v. Lucas
Wyman, Partrdge Co. Unted States v
York Chocoate Co. Davs v
York Chocoate Co. Lederer v -
York Chocoate Co. McCaughn v
Courts, |ursdcton of. (See ursdcton.)
Credt or refund:
Cams
dequacy
ass of sut, prerequste-
ffect on prevous cosng agreement offer
Informa, waver nvted by Commssoner... ...
Speca assessment request as bass, nterest
States, ta on ncome from brdges acqured by
Coecton stayed by abatement cam. (See Cams:
batement.)
Commssoner s authorty, addtona ta due but barred
from assessment
Date of aowance, mtaton.
Indans, e tenson of tme for fng cams.
Interest. (See Interest.)
Recever s pavment under court order.
S
Suts. (See Suts: Recovery- of ta .)
Credts:
arned ncome
Insurance agent s commssons
Separate returns on communty property bass
Trusts --
Persona e empton, husband and wfe, separaton
Ta es, foregn, year n whch credt taken, accrua bass
opton
Cuba, cgar mporter, sut, ta refund, court s |ursdcton
D.
Defcences, ta es. (See Ta es.)
Depeton, eases, o and gas, acqured pror to March 1, 1913,
essee s aowance
Deprecaton:
Constructon e pendtures
urnture and f tures, nsurance companes
aprovement, speca assessments
. (See ttorneys and agents.)
Rung
No. 1
5058
5078
4957
5058
5078
5046
5012
5048
5096
5096
5027
4939
4965
4895
4958
4957
5096
5096
5096
4989
14896
4998
5066
5119
5064
5122
4900
5103
(4966
14967
(4968
5067
4985
5035
5100
5120
5034
5044
5082
4949
5056
5036
5014
5072
G
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542
Dstrant:
ank deposts
Prorty over depostary s |udgment
Sut to coect, penates
Dvdends:
cessve saary, burden of proof
Stocks sod between dvdend dates, vendee s ncome
Dues and ntaton fees:
Cubs, fe membershp, e cse ta , consttutonaty
Payment to retrng member for stock
.
arned ncome credts. (See Credts.)
state ta :
ssessment, sut for coecton, mtaton
Credts
rtce 9, Reguatons 68 (1924), amended.
rtce 9, Reguatons 70 (1929), amended
Deducton for ncome ta . (See Ta es: state and nhert-
ance.)
ecutor, persona abty
Gross estate, estate by the entrety, transfer pror to passage
of any ct
Nonresdent aen decedent, domestc check transfer, oan
dfferentated
Property prevousy ta ed, artces 41 and 53, Reguatons 70
(1929 edton), amended
Rea estate nterest ncuded n gross estate, Mssour
Sut for enforcement of ta en. -
Transfers
In contempaton of death
Prevousy ta ed, deducton
To take effect at death
states and trusts:
Decedent s estate durng admnstraton
Curtesy dstrbutons, ta abty
Income ta abe to benefcares
Notes, nstament obgatons
Wdow s aowance, deducton --
change rates, foregn. (See oregn.)
changes of property:
utomobes traded n on new purchases, gan or oss
Reorganzaton, gan or oss.
Transfer to corporaton controed by transfer or, gan or oss
bass
empt corporatons:
Cooperatve assocatons
Mutua fre nsurance company, capta stock ta
Soca cubs -
empt ncome. (See empton: Income.)
empton:
Corporatons. (See empt corporatons.)
Income
Gan from sae of State obgatons
Gfts and bequests
Indans, Osage, o and gas eases
States: State empoyees. ( See State.)
Saes ta , State agency
Rung
No.
Page.
4999
299
6094
300
5092
235
5052
101
5011
437
4948
436
4960
454
4952
456
4951
450
5058
464
5012
457
5002
458
(4907
449
4908
449
4906
469
5058
464
/5028
472
5078
475
4941
451
f5057
462
5086
450
15097
460
5007
243
5046
317
4995
137
4974
175
5063
215
/4914
215
4926
219
4984
151
4935
150
4897
487
4911
149
4939
309
5048
366
5114
355
5123
489
G
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543
.
ees:
ttorneys , busness e pense
Charter amendment, Oho, deducton
nes, busness e pense deducton
oregn:
change, rates prevang December 31, 1930
Ta es. (See Ta es.)
orgveness of ndebtedness, ncome .
urnture and f tures, deprecaton. (See Deprecaton.)
G.
Gan or oss:
change of property. (See changes.)
Notes transferred to decedent s estate
Reorganzaton. (See Reorganzaton.)
Saes. (See Saes.)
Gasone ta es. (See Ta es: Motor vehce fue.)
Germany:
ommandtgeseschaft auf akten, cassfcaton
Ta es, aufbrngung der udustrebeastung (Dawesabgabe)
and krchensteuer, deducton.....
Gfts, assgnment of future ncome, vadty
.
usband and wfe:
Interest on contracts between
Persona e empton
Tenants by entrety. (See Tenants by entrety.)
I.
Income from sources wthn Unted States:
Interest on bank deposts
Patent rghts, Unted States, sae
Royates, contract made n Unted States
Indans:
Osage, ncome from o and gas eases, ta abty
Refund of ta es, e tenson of tme for fng cams
Informaton returns. (See Returns.)
Inspecton of returns. (See Returns.)
Instament:
Obgatons, gan or oss, upon dsposton
Saes. (See Saes.)
Insurance:
Commssons, genera agent s, earned ncome
Premums, renewa commssons, nformaton returns
Insurance companes:
Dvdends to pocyhoders, computaton of ta
urnture and f tures, deprecaton
Mutua fre, capta stock ta , e empton
Net osses
Interest:
ank deposts, nonresdent aen benefcary
onds, |ont stock and banks, deducton
Credt of overpayment
Dates of aowance
Offset of nterest due from ta payer
usband and wfe oans, deducton
Rung
No. 1
4979
5053
4979
4910
5107
4995
4946
4902
4913
4944
5044
4996
4921
5001
5114
5067
4995
5035
4945
5068
5014
4897
(4981
4982
4996
5065
4967
4968
(4967
4968
4944
G
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544
Interest Contnued.
Money borrowed to purchase ta -e empt securtes, deduc-
ton
Refunds, specfc protest, request for speca assessment
Ta es, defcences, accrua
Inventores:
anks
Goods purchased, goods produced from own property
Invested capta, reducton, ta es for precedng year
.
ewery, ease of, bass of ta
ont adventure, defnton
ont stock and banks, bond nterest, deducton.
udgments, compensaton for servces, when deductbe
ursdcton, courts :
ppea taken to oard
Court of Cams, tobacco ta refund based on treaty wth
Cuba
Refund cam not fed
Revew of
oard s decson, venue
Commssoner s speca assessment determnaton
L.
Leases:
Canceaton, essee s depost forfeture, essor s ncome
Depeton. (See Depeton.)
O and gas, State unversty, ncome, e empton
ewery, bass of ta
Lens:
edera ta es
Pubc, No. 862, effect on secton 3207, Revsed Statutes
State egsaton mparment
Suts, Unted States party defendant
Lmtaton perod:
ssessment of ta es
ppea to oard, e tenson
Commencement date, consodated return, separate re-
turns -
Computaton of perod
Defcency, no appea, second notce coverng addtona
defcency -
Coecton of ta es
state ta assessment
Wavers. (See Lmtaton perod: Wavers.)
Credt or refund, coecton stayed by abatement cam
Suts, recovery of ta
ccount stated n certfcate of overassessment
greements to suspend runnng of statute
Commencement of 2-year perod
Informa refund cam, effect
Refund cam re|ected, notce requrements
Wavers
ssessment purposes ony, coecton
Coecton of ta , effect of bond
Rung
No.
5025
5122
5121
5005
5043
4930
4940
5027
5065
4988
4997
4949
4896
5093
5037
5107
361
5055
153
4940
442
6095
526
4961
320
4990
524
4976
327
5026
420
4965
258
6105
259
4969
454
4913
186
4956
189
4957
190
4958
191
5064
328
4912
186
5008
297
5064
328
4986
332
4922
414
4923
417
4938
274
5049
430
G
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545
Rung
No.
Lmtaton perod Contnued.
Wavers Contnued.
Duress
ecuted
fter statutory perod and appea to oard.
Pror to 1921 ct
tenson, appea to oard
Instructons governng e ecuton
War profts ta ..
Looses:
ssessment on natona bank stock
utomobes traded n on new purchases.
Resdenta property sae
Stock, wash saes
Lousana gasone ta , deducton
4928
4928
/4923
14938
4928
4976
4936
4923
4978
5063
4937
5090
4893
M.
Mane, gasone ta , deducton
Manufacturer s e cse:
Candy, cassfcaton
Ta es erroneousy refunded, sut, recovery
Marred women, naturazaton and ctzenshp
Masonc odges, chartabe bequests, estate ta deducton
Massachusetts, husband and wfe contracts
Mchgan, estate durng admnstraton, wdow s aowance,
deducton
Mssour, rea estate nterest ncuded n gross estate
Motor vehce fue. (See Ta es.)
Muntons manufacturers ta , accrua bass, when deductbe
Mutua fre nsurance company, e empton, capta stock ta .
(See empt corporatons.)
N.
Naturazaton aws:
mercan-born women marryng aens
Postng notces of petton for ctzenshp
Net osses:
ffated corporatons
Insurance companes
Predecessor s e stence contnued, successor s deducton.
New Me co gasone ta , deducton
Nonresdent aens:
Defnton
Income from Unted States sources
Interest on bank deposts
Unted States ctzenshp ost, ta abe status
Notes:
ad debt deducton.
Transfer to decedent s estate, gan or oss
5054
5096
5038
5089
5097
4944
4974
4906
4905
5089
5089
4895
1/4981
4982
4890
4889
5001
5001
4996
4960
5045
4995
O.
Obsoescence:
Due to prohbton egsaton, deducton.
sca year ended n 1918
Oho, fees, charter amendment, deducton
f5017
5018
5019
4977
5053
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54G
Rung
No.
Page.
O and gas:
Leases. (.See Leases.)
Royates. (See Royates.)
Oeomargarne:
mendment to ct approved ugust 2, 1886, as amended. .
Defned, Reguatons 9 amended
Statstcs of producton and materas used
November, 1930 and 1929
December, 1930 and 1929
anuarv, 1931 and 1930
ebruarv, 1931 and 1930
March, 1931 and 1930
pr, 1931 and 1930
Oregon:
Rea estate ta es, deducton by tenants by entrety
Ta on ncome from ntangbes
P.
Partnershps:
ssocatons dstngushed
anks, bankrupt, ta abty and returns
usband and wfe, communty ncome, Caforna
Income of member as State recever
Patents, sae of Unted States rghts by foregn corporaton
Penates. (See Ta es: Penates.)
Pennsyvana, estates, curtesy dstrbutons, ta abty
Penson trusts. (See Trusts.)
Persona e empton. (.See Credts.)
Protest, request for speca assessment as
R.
Raroads, eases, Government s operatng agreement wth essee,
essor s ta rate
Rea estate:
Deaers sae, capta gan or oss
Instament saes. (See Saes.)
Refunds. (See Credt or refund.)
Reguatons:
mendment. (See mendments: Reguatons.)
Inspecton of returns
Reorganzaton, e changes of stock. (See changes.)
Resdenta property, sae of, oss deducton
Resgnatons from enroment. (See ttorneys and agents.)
Returns:
ankruptcy and recevershps, partnershp bank
Communty ncome. (See Communty property and n-
come.)
Consodated, affaton determned. (See Corporatons:
ffaton.)
Corporatons
Pace for fng
Reorganzaton, pror operatons, separate returns
Informaton
Dvdend payments
Renewa commssons on nsurance premums, pay-
ment to deceased agent s estate
Inspecton of, reguatons governng
Royates:
Nonresdent aen, ncome from Unted States sources
O ease, sae of, capta gan
4991
5069
4898
4932
4970
5020
5059
5098
5102
5111
4946
4927
5084
5009
4921
5007
5122
4947
4904
5109
4937
4927
4963
5023
4917
4945
5109
5001
4975
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547
s.
Saares. (See Compensaton.)
Saes:
uture payments under contract part consderaton, gan
or oss
Gan or oss
Property acqured before March 1, 1913
Property acqured by gft, devse, etc
Unproductve tmberands, carryng charges
Instament, rea property, mortgage assumed by purchaser,
nta payment
State agency, saes ta e empton
Stock-
Reorganzaton e changes. (See changes.)
Wash saes, oss deducton
Soca cubs, e empton.
Speca dvsory Commttee
Speca assessment:
Commssoner s dscretonary power, courts |ursdcton
Request for, specfc protest, refund nterest
Stamps, nterna revenue, redempton and sae
State:
Income, o and gas eases, Te as unversty, e empton
Inspecton of edera ta returns
Legsaton, mparment to edera ta en
Obgatons, gan from sae, e empton
Offcers and empoyees
ttorneys for court recevers
Drector of county agrcutura e tenson work
Independent contractor, ncome
Lawyer empoyed by brdge dstrct
Manager and controer of muncpa harbor department
Unversty students assocaton empoyees
Refund cams, ta on ncome from brdges acqured by
Saes ta e empton
Ta es-
Income from ntangbes, Oregon
Rea estate, deducton by tenants by entrety, Oregon..
Stock:
change of. ( See changes.)
Saes. (See Saes.)
Suts:
Coecton of ta es
ond, e tenson of tme ta payment, no oss or damage
shown
state ta assessment, mtaton
Transferee -
Court s |ursdcton. (See ursdcton.)
Lmtaton perod. ( See Lmtaton perod.)
Recovery of ta es
ppea taken to oard
Cam for refund, prerequste
Commencement of 2-year perod
Defense, bond
rroneous refund repad to Government
udgment barrng subsequent sut on dfferent grounds..
Lmtaton perod. (See Lmtaton perod.)
Unted States as party defendant
ons. (See ttorneys and agents.)
Rung
No.
5113
5047
5106
6016
5083
5123
5090
4911
5077
5037
5122
4993
5055
6109
4961
4939
6009
4964
4915
5975
4973
5081
4900
5123
5111
5102
5085
4969
5010
4997
4896
4998
5066
5008
5049
5038
5027
4990
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548
T.
Ta es:
ssessment
Lmtaton perod. (See Lmtatonperod.)
Wavers. (See Lmtaton perod: Wavers.)
Capta stock. (See Capta stock ta .)
Coecton
Lmtaton perod. (See Lmtaton perod.)
Suts. (See Suts.)
Compromse, effect of transferor s abty
Credts for. (See Credts: Ta es.)
Defcences
ssessment mtaton. (See Lmtaton perod.)
Coecton, bond reease
Interest, accrua -
state and nhertance, deducton, ncome ta computaton-
state. (See state ta .)
ees, State charter amendment, deducton
na determnaton and assessment, cosng agreements, re-
fund cam fed subsequenty, wthdrawa effect
oregn, Germany, aufbrngung der ndustrebeastung
(Dawesabgabe) and krchensteuer
Gasone. (See Ta es: Motor vehce fue.)
Lens. (See Lens.)
Motor vehce fue
Lousana
Mane
New Me co
Penates-
ank account dstrant, sut to coect
aure to fe returns, transferee s abty
State. (See State.)
Suts. (See Suts.)
Waver of statute of mtatons. (See Lmtaton perod:
Wavers.)
Tenants by entrety, Oregon, rea estate ta , deducton
Te as, unversty s o eases, ncome, e empton
Tmberand, carryng charges, effect on gan or oss saes bass. .
Tobacco, casses of manufacture defned, Reguatons 8, amended
Tradng wth the nemy ct, any perod, secton 24(e), nter-
pretaton
Transferred assets, cams aganst
Trusts:
ssocatons dstngushed
arned ncome credt
Investment, ta abe status
Penson, artce 271, Reguatons 74, amended
.
Unted States oard of Ta ppeas:
Decsons of
Lst of acquescences and nonacquescences
Revew, choce of venue, restrcton
Rung
No.
5015
4959
5121
5104
5053
5119
4902
4893
5054
4889
5094
5024
5102
5055
5016
5031
5115
f5010
15015
15024
15112
/5039
5062
5034
5062
5029
5118
5093
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549
Unted States oard of Ta ppeas Contnued.
Rues of practce
Revsed to ebruary 1, 1931
Rue 5 amended
Rue 14 suspended
Unted States, party defendant
.
enue, revew of oard s decsons
W.
Wavers. (See Lmtaton perod: Wavers.)
War cams, awards under Settement of War Cams ct.
Rung
No.
4931
5116
5040
4990
5093
/5073
5074
o
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