CIR v. Halquist
| Decision Date | 05 June 1961 |
| Docket Number | No. 13107.,13107. |
| Citation | 291 F.2d 49 |
| Parties | COMMISSIONER OF INTERNAL REVENUE, Petitioner, v. Albin C. HALQUIST and Madeline E. Halquist, Respondents. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Lee A. Jackson, Chief, Appellate Section, James P. Turner and Melva M. Graney, Attys., U. S. Department of Justice, Washington, D. C., Louis F. Oberdorfer, Asst. Atty. Gen., Abbott M. Sellers, Acting Asst. Atty. Gen., Charles K. Rice, Meyer Rothwacks, Department of Justice, Washington, D. C., for petitioner.
Richard D. Hobbet, Frank J. Pelisek, Milwaukee, Wis., for respondents. Michael, Spohn, Best & Friedrich, Milwaukee, Wis., of counsel.
Before HASTINGS, Chief Judge, and KNOCH and CASTLE, Circuit Judges.
Rehearing Denied En Banc, June 5, 1961.
The facts in this case are largely stipulated or undisputed. During the taxable years 1951 through 1954, respondents Albin C. Halquist and Madeline E. Halquist, his wife, as a partnership, Halquist Lannon Stone Company (hereinafter called "Halquist") engaged in the business of removing stone from two quarries in Waukesha County, Wisconsin.
This stone was sold in the form of two products: crushed stone and "dimension" stone1 of various shapes and sizes. Halquist also bought, processed and sold some dimension stone from other quarries. There was evidence that these stones usually were of a type not available in Halquist's own quarries.
In the Halquist quarries, the uppermost strata consist of thinly bedded slabs broken by seams or joints which result in blocks of varying size from a few square feet up to 25 or 50 square feet, and from about two to six inches in thickness. Dimension stone for building is taken from these upper strata. The uppermost level produces a thinner layer of stone suitable for flagstones and dry-wall.2
The lower strata are markedly different stone from these upper levels and are suitable only for crushed and broken stone.
Halquist removes the stone from the upper strata in its natural shapes and sizes. The stone thus removed is sorted into three classes: (1) waste; (2) flagstone and drywall, requiring mere breaking and splitting; and (3) stone suitable for process as dimension stone.
The waste is dumped into the pit of the quarry from which it is picked up and fed to the crusher.
The stones of the third class are carried to cutters, about 50 to 250 feet away from the place where the stone is quarried. The cutters then cut and break the stone into regular shapes of random lengths and heights suitable for use as veneer stone, a form of dimension stone in which the width is about the thickness of the wall to be built usually about four inches, the length is the horizontal measurement of the stone in the wall, and the height is its vertical measurement in the wall. In the processes of cutting, for which various tools and methods have been used, 40 to 50% of the weight is lost and becomes waste which is sold as crushed stone.
Halquist contends that veneer stone is its principal product; that production and sale of crushed stone and of agricultural limestone is a secondary operation, in part dictated by proper quarry housekeeping to dispose of the waste along with the stone of the lower levels which is suitable only for crushed stone.
The applicable statutes3 provide for percentage depletion allowance of the gross income from mining. "Mining" is limited to the ordinary treatment processes normally applied by mine owners and operators to obtain the commercially marketable mineral product or products. In computing its depletion allowance, Halquist used the gross proceeds (less delivery costs and discounts) from the sale of its crushed and broken stone, its flagstone and drywall, and its fully processed veneer dimension stone.
The Commissioner took the position that the gross income from mining was limited in the case of these quarries to the value of the rough uncut stone, or alternatively, (1) that the gross income be computed as though all the stone had been sold as crushed stone, or (2) that flagstone and drywall be considered the first commercially marketable products obtained from the upper levels.
The Tax Court redetermined all deficiencies as requested by Halquist, and the Commissioner appealed to this Court.
The Tax Court considered this case after our decision in Cannelton Sewer Pipe Co. v. United States, 7 Cir., 1959, 268 F.2d 334, but before the U. S. Supreme...
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Riddell v. California Portland Cement Company
...United States, D.C.Kan.1961, 194 F.Supp. 309; Standard Realization Co. v. United States, 7 Cir., 1961, 289 F.2d 247; Commissioner v. Halquist, 7 Cir., 1961, 291 F.2d 49; United States v. Portland Cement Co. of Utah, 10 Cir., 1961, 293 F.2d The general issue presented by the appeals herein i......
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FAYLOR v. Commissioner, Docket No. 65255.
...commercial meaning" in Albin C. Halquist Dec. 23,850, 33 T. C. 304, 321 (1959), reversed on another issue, 61-1 USTC ¶ 9430 291 F. 2d 49 (C. A. 7, 1961), certiorari denied 368 U. S. 930 (1961). See also Wagner Quarries Company v. United States 57-2 USTC ¶ 9915, 154 F. Supp. 655 (N. D. Ohio,......
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IOWA LIMESTONE COMPANY v. United States, 17936.
...States, 308 F.2d 669 (4th Cir. 1962); Riddell v. Victorville Lime Rock Co., 292 F.2d 427 (9th Cir. 1961); Commissioner of Internal Revenue v. Halquist, 291 F.2d 49 (7th Cir. 1961). See also Food Machinery and Chemical Corp. v. United States, 348 F.2d 921 (Ct.Cl.1965). Consequently taxpayer'......
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Jones & Laughlin Steel Corp. v. United States, Civ. A. No. 75-1571.
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