Boulton v. Heiner, 3026.

Citation3 F. Supp. 372
Decision Date05 November 1932
Docket NumberNo. 3026.,3026.
PartiesBOULTON v. HEINER, Collector of Internal Revenue.
CourtUnited States District Courts. 3th Circuit. United States District Courts. 3th Circuit. Western District of Pennsylvania

Bell, O'Laughlin & Silberblatt, of Clearfield, Pa., and Max J. Spann, of Pittsburgh, Pa., for plaintiff.

Louis E. Graham, U. S. Atty., for Western District of Pennsylvania, and John A. McCann, Sp. Asst. to U. S. Atty., both of Pittsburgh, Pa., and C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, and E. F. McMahon, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., for the defendant.

GIBSON, District Judge.

Findings of Fact.

1. The plaintiff is a citizen and resident of the borough of Clearfield, county of Clearfield, and state of Pennsylvania, and of the United States.

2. Defendant is the duly appointed, commissioned, and qualified Collector of Internal Revenue for the Twenty-third District of Pennsylvania, in said Western District, and resides in the borough of Kittanning, in said Western District.

3. In accordance with the provisions of the income tax laws of the United States, the plaintiff duly filed in the office of C. G. Lewellyn, then Collector of Internal Revenue for the Twenty-third District of Pennsylvania, an income tax return for the year 1917, and upon such return was assessed with income taxes amounting to $1,418.49, which he duly paid to the said Collector of Internal Revenue.

4. Upon audit of the plaintiff's income tax return for the year 1917, the Commissioner of Internal Revenue assessed an additional tax of $6,165.17, which was paid under protest by the plaintiff on the 11th day of May, 1923, and later, on the 8th day of June, 1923, there was also paid a further sum of $308.26, as a penalty for delay in the payment of said sum of $6,165.17.

5. That within sixty days of the time of the payment of said sum of $6,165.17, the plaintiff filed his claim for refund, which was rejected as indicated by letter of January 29, 1924 (Plaintiff's Exhibit C), and on the 12th day of March, 1924, this action was instituted.

6. That the Commissioner of Internal Revenue disallowed the claim of the plaintiff that the sum of $17,500 should be added to the $11,500 allowed by said Commissioner, making a total of $29,000, in determining the cost of the capital stock of the Hale Coal Company and the Lady Smith Coal Mining Company.

7. That by reason of said disallowance, the plaintiff was assessed with and paid additional income tax for the year 1917 in the amount of $3,138.59, of which sum, $2,989.08 is an overassessment and the sum of $149.51 is the excess penalty collected; which sum of $3,138.59, with interest from May 11, 1923, the plaintiff seeks to recover in this action.

8. By stipulation entered into between both parties, the plaintiff waived all exemption to items of additions made by the Commissioner of Internal Revenue except the additional assessment of alleged profit made on the sale of the stock of the Hale Coal Company and the Lady Smith Coal Mining Company and the additional penalty collected by reason thereof.

9. That in the year 1912, and for many years prior thereto, Caroline H. Steinman was the owner in fee of certain lands in Rush township, Centre county, Pa.

10. That Caroline H. Steinman and her husband, A. J. Steinman, for several years prior to 1912 had spent considerable money and labor in prospecting the location, the extent, and value of the coal seams underlying said land. The cost of said investigation and prospecting amounting to approximately $25,000.

11. That Caroline H. Steinman, prior to 1912, had had offers to lease or otherwise dispose of said property.

12. That in the year 1911, diamond drilling and other prospecting works were carried on on said property by John F. Steinman, son of Caroline H. Steinman.

13. That prior to 1912, neither Caroline H. Steinman, her husband, nor her two sons, John F. Steinman and James Hale Steinman, had any knowledge of the coal industry and were uncertain whether it would be more advantageous to lease the property or to operate the same themselves.

14. That the plaintiff, Harry Boulton, together with John Benson of Houtzdale, now deceased, had practical knowledge as to the production and sale of coal.

15. That during the latter part of 1911, an oral agreement was entered into between the Steinmans and Harry Boulton, and John Benson, whereby it was agreed that corporations would be formed, one of which would take a lease from Caroline H. Steinman for the mining of the coal under a portion of her land.

16. That in consideration of the right to subscribe for 25 per cent. of the stock of said corporation, Harry Boulton orally contracted and agreed with Caroline H. Steinman, as well as with John F. Steinman and James Hale Steinman to render his services in the opening and developing of said mine or mines and to do all acts necessary for the opening and developing of said mines, and to superintend the operation of the same as well as the sale of coal produced therefrom until such time as said corporation reached a dividend-paying basis.

17. That after consideration, the Steinmans accepted the proposal of Harry Boulton and John Benson and in consideration of their oral covenants and oral promises, permitted each to subscribe for one-fourth of the capital stock of the corporations to be formed.

18. That the land of Caroline H. Steinman was situate two miles distant from the nearest railroad.

19. That it was required to form a separate corporation known as the Lady Smith Coal Mining Company and to make and take a lease from...

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3 cases
  • Mountain Producers Corp. v. Commissioner of Int. Rev., 1516.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (10th Circuit)
    • 26 de agosto de 1937 participate in the depletion allowance." A case more applicable in principle to the determination of our question is Boulton v. Heiner (D.C.) 3 F.Supp. 372. The court there was confronted with the matter of determining whether or not the value of services under contract should be include......
  • Picker v. United States
    • United States
    • Court of Federal Claims
    • 20 de janeiro de 1967
    ...Estate, 229 F.2d 569 (6th Cir. 1956); W. D. Haden Co. v. Commissioner of Internal Revenue, 165 F.2d 588 (5th Cir. 1948); Boulton v. Heiner, 3 F.Supp. 372 (W.D.Pa.1932). ...
  • FOSS & CO. v. Nichols
    • United States
    • United States District Courts. 1st Circuit. United States District Courts. 1st Circuit. District of Massachusetts
    • 23 de janeiro de 1933
    ......Notwithstanding Boyd v. Heiner, published in 1926 in 5 Am. Fed. Tax Reports page 6069, I feel constrained to rule that the ......

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