Boyce v. United States
| Decision Date | 13 December 1968 |
| Docket Number | No. 370-66.,370-66. |
| Citation | 405 F.2d 526 |
| Parties | William Q. BOYCE, Individually and as Executor of the Will and Estate of Ida Mae Boyce, Deceased v. The UNITED STATES. |
| Court | U.S. Claims Court |
William Q. Boyce, pro se.
E. Alan Moorhouse, Washington, D. C., with whom was Asst. Atty. Gen. Mitchell Rogovin, for defendant, Philip R. Miller, Joseph Kovner and Mason C. Lewis, Washington, D. C., of counsel.
Before LARAMORE, Acting Chief Judge, DURFEE, DAVIS, COLLINS, SKELTON and NICHOLS, Judges.
This case was referred to Trial Commissioner Mastin G. White with directions to make findings of fact and recommendation for conclusions of law under the order of reference and Rule 57 (a). The commissioner has done so in an opinion and report filed on February 8, 1968. Exceptions to the commissioner's opinion, findings and recommended conclusion of law were filed by plaintiff and the case has been submitted to the court on oral argument of plaintiff, pro se, and of counsel for defendant and the briefs of the parties. The major issue in this case is governed by the "claim of right" doctrine which "is now deeply rooted in the federal tax system." United States v. Lewis, 340 U.S. 590, 592, 71 S. Ct. 522, 523, 95 L.Ed. 560 (1951). See also Healy v. Commissioner of Internal Revenue, 345 U.S. 278, 73 S.Ct. 671, 97 L.Ed. 1007 (1953), and James v. United States, 366 U.S. 213, 216, 219, 238, 256-257, 81 S.Ct. 1052, 6 L.Ed.2d 246 (1961). Since the court agrees with the commissioner's opinion, findings and recommended conclusion of law, as hereinafter set forth, it hereby adopts the same as the basis for its judgment in this case.* Therefore, plaintiff is not entitled to recover and the petition is dismissed.
WHITE, Commissioner:
The petition in this case asserts that the plaintiff is seeking refunds of income taxes paid by him pursuant to deficiency assessments for the years 1959, 1961, and 1962.
The petition and the evidence in the record indicate that the deficiencies for 1961 and 1962 were assessed because of a holding by the Internal Revenue Service that hotel expenses for lodging and food which the plaintiff and his wife (who is now deceased) incurred during 1961 and 1962 incident to the diagnosis and treatment of an illness from which the plaintiff was suffering at the time did not constitute deductible expenses, as claimed by the plaintiff and his wife in their joint income tax returns for 1961 and 1962. However, in the brief which the plaintiff filed subsequent to the trial, the plaintiff states that "The claim that Plaintiff's deductions for hotel food and lodging expenses for the years 1961 and 1962 were improperly disallowed is abandoned." Accordingly, it is unnecessary to discuss the claims asserted in the petition with respect to the years 1961 and 1962.
The claim relative to the year 1959 presents for determination the primary question of whether the gains realized by the plaintiff in connection with the disposition of two parcels of land were taxable in 1959, as determined by the Internal Revenue Service when it issued the deficiency assessment for 1959, or in 1964, as contended by the plaintiff.
It is my opinion that the gains mentioned in the preceding paragraph were taxable in 1959, and, accordingly, that the Internal Revenue Service did not commit any error with respect to this point.
In 1959, the State of Texas filed two suits in a state court against the plaintiff for the condemnation of two parcels of land situated in Potter County, Texas. One of the parcels contained 9.984 acres, and the other parcel contained 3.75 acres. The State of Texas wished to acquire the property for highway purposes.
In accordance with state court procedure, the suits were heard before commissioners, who, on April 1, 1959, awarded the plaintiff a total of $34,335, of which the sum of $24,960 was attributable to the larger parcel of land and the sum of $9,375 was attributable to the smaller parcel of land. The sum of $24,960 for the larger parcel included a net increase of $18,439.38 above the cost of this parcel to the plaintiff, and the sum of $9,375 for the smaller parcel included a net increase of $8,924.74 above the cost of such parcel to the plaintiff.
The State of Texas was dissatisfied with the awards made by the commissioners, and took appeals to the County Court of Potter County, Texas.
While the appeals were pending before the County Court of Potter County, the State of Texas took possession of the property on June 2, 1959. On the same date, the State, in accordance with the provisions of Article 3268 of the Vernon's Ann.Revised Civil Statutes of Texas, deposited the amounts of the awards, totaling $34,335, with the clerk of the County Court of Potter County.
The deposit mentioned in the preceding paragraph was subject to the order of the plaintiff; and a few days after the deposit was made by the State of Texas, the funds were withdrawn by the plaintiff.
Judgments on the appeals from the commissioners' awards were not entered by the County Court of Potter County until December 27, 1963, at which time the awards previously made by the commissioners were affirmed. The time for taking appeals from these judgments to a higher court did not expire until January 1964, and, accordingly, the judgments did not become final until 1964.
The joint income tax return which the plaintiff and his wife filed with the Internal Revenue Service for the year 1959 on the cash basis of accounting did not report any gains derived from the disposition of the two parcels of land previously mentioned. However, when this return was audited by the Internal Revenue Service early in 1964, a deficiency was assessed in the amount of $8,895.33 (consisting of $6,984.31 as principal and $1,911.02 as interest) on the ground that the gains realized by the plaintiff in connection with the disposition of such property were taxable in 1959. The deficiency was paid by the plaintiff on November 10, 1964.
Thereafter, a claim for the refund of the deficiency assessment mentioned in the preceding paragraph was filed by the plaintiff with the Internal Revenue Service on June 24, 1965. The claim was formally disallowed on December 21, 1965.
The present suit was filed by the plaintiff on October 24, 1966.
The plaintiff contended before the Internal Revenue Service, and he asserts here, that the gains realized from the condemnation of the two parcels of land were taxable in 1964, rather than in 1959.
With respect to a taxpayer, such as the plaintiff, who is on the cash basis of accounting, Section 451(a) of the Internal Revenue Code of 1954 provides that income shall be included in the return "for the taxable year in which received by the taxpayer * * *." In my opinion, the income from the disposition of the two parcels of land condemned by the State of Texas and involved in the present litigation was "received" by the plaintiff in June 1959, when he withdrew the $34,335 from the County Court of Potter County, Texas. The statutory provision (Article 3268 of the Revised Civil Statutes of Texas) under which the State of Texas deposited the money with — and the plaintiff withdrew it from — the County Court of Potter County did not impose upon the plaintiff any restriction whatever concerning the disposition of the funds; and thereafter, while awaiting the decision of the County Court of Potter County on the appeals from the commissioners' awards, the plaintiff proceeded to utilize portions of such funds from time to time for the building of fences on a farm near Denton, Texas, automobile taxes, telegrams, accounting services, insurance, investments, and other personal purposes.
It is true that, as pointed out by the plaintiff, the withdrawal of the $34,335 from the County Court of Potter County was subject to the declaration in Article 3268 of the Revised Civil Statutes of Texas that "in any case where the award paid the defendant i.e., the present plaintiff or appropriated by him exceeds the value of the property as determined by the final judgment, the court shall adjudge the excess to be returned to the plaintiff i.e., the State of Texas." It actually happened in the present instance that the County Court of Potter County ultimately affirmed the awards which the commissioners had made to the plaintiff in connection with the condemnation of his lands by the State of Texas. However, up until the time when the court finally acted, there was a possibility that the court might decide that the amount awarded to the plaintiff by the commissioners was excessive, and order the plaintiff to return the excess to the State of Texas. This possibility, in my opinion, was not sufficient to affect the conclusion that the plaintiff "received" the money for his lands in June 1959, when he withdrew the $34,335 from the County Court of Potter County without any restriction as to the disposition of the money.
The problem in this case is very similar to the problem that was involved in North American Oil Consolidated v. Burnet, 286 U.S. 417, 52 S.Ct. 613, 76 L.Ed. 1197 (1932). The background for that litigation really began to develop when a controversy arose between the United States and North American sometime prior to 1916 over the ownership of a certain section of oil-producing land. The Government instituted a suit in a United States District Court against North American to oust the company from the possession of the land; and on February 2, 1916, the Government secured the appointment of a receiver to operate the property and to hold the net income from it. In 1917, the District Court rendered a decision favorable to North American, whereupon the receiver paid over to the company the profits that had been earned from the property in 1916 during the receivership. The Government took an appeal (without supersedeas) to a Circuit Court of Appeals, which affirmed the decree of the District Court. The...
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