Doggett v. Burnet, 5603.

Decision Date10 April 1933
Docket NumberNo. 5603.,5603.
Citation65 F.2d 191
PartiesDOGGETT v. BURNET, Commissioner of Internal Revenue.
CourtU.S. Court of Appeals — District of Columbia Circuit

Clarence N. Goodwin, of Chicago, Ill., for appellant.

G. A. Youngquist, Sewall Key, C. M. Charest, and C. H. Curl, all of Washington, D. C., for appellee.

Before MARTIN, Chief Justice, and ROBB, VAN ORSDEL, HITZ, and GRONER, Associate Justices.

VAN ORSDEL, Associate Justice.

Hugenia S. Doggett filed her income tax return for the year 1926 with the collector of internal revenue at Los Angeles, Cal. The Commissioner determined a deficiency in her income tax for that year in the amount of $15,097.88, which was affirmed by the Board of Tax Appeals. The case comes here on appellant's petition for review.

It appears that in 1911 appellant went to England, and for a time performed social service work under the direction of the bishop of England. While there she became interested in the writings and teachings of Joanna Southcott, a religious teacher and prophetess, who died in 1814. Appellant read the sixty-five works of Joanna Southcott which were in the British library. The remaining works of Joanna Southcott are supposed to be sealed in an ark in the custody of the British Parliament, and her followers believe that the ark will be opened by the twenty-four bishops of the House of Lords. The ark was to be opened in 1914, or whenever the nation's troubles demanded that it be opened.

In 1917 appellant returned to this country and arranged in San Diego, Cal., for the publication of the works of Joanna Southcott. She undertook this enterprise for the benefit, as she alleges, of the American people, and also with the expectation of deriving a large profit from the sale of the books after the ark is opened. She expected, however, a limited profit from the sale of the books before the opening of the ark.

From 1917 to the present time appellant has devoted her time to the work of printing the books and advertising the sale of them. She advertised in newspapers and magazines and carried banners on the rear and sides of her automobile. She has expended approximately $38,000 on printing and advertising. The sale of the books has been limited, and about 200,000 are stored in San Diego. From the selling price of the books she would realize from 100 per cent. to 200 per cent. more than the cost. The works of Joanna Southcott have been translated into Spanish, French, and Hungarian, and are read by her followers in the United States, England, and in other countries. There are about 50,000 of her followers in the United States.

Appellant was assisted in her work by one Percy Granger Smith, who looked after the printing of the books, helped the petitioner with proof reading and with advertising. During the year in question, 1926, Smith devoted all his time to assisting the appellant in the dissemination of handbills, and the advertising of these publications. Smith had been an evangelist, and seems to have been a competent man in conducting the advertising business. Smith's compensation was estimated at $30 a week, but, instead of paying a direct salary, appellant furnished him with board and lodging and expenses, and claimed a deduction on this account of $1,500, which deduction was among the items disallowed by the Commissioner.

During the year 1926 appellant, in company with Smith, spent almost the entire year in traveling in an automobile, distributing handbills, and advertising the publications. They distributed approximately 150,000 handbills. They kept no accurate account of expenses, but estimated the expenses at $10 a day. They attended an Episcopal convention in New Orleans in an effort to get the convention to petition Parliament to open the ark containing the Southcott writings. In all they traveled 23,000 miles, making speeches, and distributing pamphlets in cities, towns, and villages through which they traveled. For this expense she deducted $3,650, which was disallowed.

It is contended by appellant that the deductions were proper as expenses incurred in conducting and carrying on a legitimate business. The Board denied her claim, holding that the enterprise did not constitute a business within the contemplation of the Revenue Act. The deductions are claimed under the provisions of section 214(a) (1) of the Revenue Act of 1926, 44 Stat. 9, 26 (26 USCA § 955(a) (1), as follows: "In computing net income there shall be allowed as deductions: (1) All the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including a reasonable allowance for salaries or other compensation for personal services actually rendered; traveling expenses (including the entire amount expended for meals and lodging) while away from home in the pursuit of a trade or business; and rentals or other payments required to be made as a condition to the continued use or possession, for purposes of the trade or business, of property to which the taxpayer has not taken or is not taking title or in which he has no equity."

"Business," within the contemplation of the law, is a word of large and indefinite import — one which is incapable of definite limited definition. It is defined by Bouvier, Rawles 3d, Rev. 406, as "that which occupies the time, attention, and labor of men for the purpose of livelihood or profit, but it is not necessary that it should be the sole occupation or employment. It embraces everything about which a person can be employed."

The Board, in its decision, denied the deduction on the ground that appellant has failed to show that the alleged business of publishing and marketing the books of Joanna...

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