Garry v. Comm'r of Internal Revenue, Docket No. 51904.

• Decision Date: 09 May 1955
• Docket Number: Docket No. 51904.
• Citation: 24 T.C. 174
• Parties: JOSEPH R. GARRY, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
• Court: U.S. Tax Court

24 T.C. 174

JOSEPH R. GARRY, PETITIONER,

v.COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Docket No. 51904.

Tax Court of the United States.

Filed May 9, 1955.

John W. Cragun, Esq., and Robert W. Barker, Esq., for the petitioner.

Wm. Schwerdtfeger, Esq., for the respondent.

Petitioner, an American Indian, duly enrolled as a member of the Kalispel Tribe, and a citizen of the United States, as heir of original Indian allottees, received during the taxable year agricultural income from restricted lands situated in the Coeur d'Alene Reservation in Idaho. Held, that such income was subject to Federal income tax.

OPINION.

WITHEY, Judge:

The respondent has determined a deficiency of $195.60 in the petitioner's income tax for 1951. Issues presented by the pleadings are the correctness of the respondent's action (1) in including in taxable income the amount of $1,528.48 representing income received from the sale of grain grown on allotted Indian lands on the Coeur d'Alene Reservation in Idaho, and (2) in failing to determine that income in the amount of $713.63 received from military service was excludable from taxable income. Issue 2 has been disposed of by stipulation of the parties.

All of the facts have been stipulated and are found accordingly.

Petitioner is an American Indian, duly enrolled as a member of the Kalispel Tribe, residing at Plummer, Idaho. His income tax return for 1951 was filed with the collector of internal revenue at Boise, Idaho.

In 1951 petitioner received income in the amount of $1,528.48 from the sale of grain grown on the lands referred to below. In his return petitioner showed the income as having been received as rents but claimed its exemption from taxation and did not include it in gross income.

The lands on which the grain was grown were lands held in trust by the United States for petitioner and other heirs of the original Indian allottees within the Coeur d'Alene Reservation, in Benewah and Kootenai Counties, Idaho. The Coeur d'Alene Reservation was established pursuant to Agreements of March 26, 1887, and September 9, 1889, which were ratified by an Act of Congress on March 3, 1891, 26 Stat. 989, 1026-1032.

The agreement with the Coeur d'Alene Tribe of March 26, 1887, ratified by an Act of Congress on March 3, 1891, 26 Stat. 989, 1026-1029, provided, in part, as follows:

ARTICLE 1.

Whereas said Coeur d'Alene Indians were formerly possessed of a large and valuable tract of land lying in the Territories of Washington, Idaho, and Montana, and whereas said Indians have never ceded the same to the United States, but the same, with the exception of the present Coeur d'Alene Reservation, is held by the United States and settlers and owners deriving title from the United States, and whereas said Indians have received no compensation for said land from the United States: Therefore,

ARTICLE 2.

For the consideration hereinafter stated the said Coeur d'Alene Indians hereby cede, grant, relinquish, and quitclaim to the United States all right, title, and claim which they now have, or ever had, to all lands in said Territories and elsewhere, except the portion of land within the boundaries of their present reservation in the Territory of Idaho, known as the Coeur d'Alene Reservation.

ARTICLE 5.

In consideration of the foregoing cession and agreements, it is agreed that the Coeur d'Alene Reservation shall be held forever as Indian land and as homes for the Coeur d'Alene Indians, now residing on said reservation, and the Spokane or other Indians who may be removed to said reservation under this agreement, and their posterity; and no part of said reservation shall ever be sold, occupied, open to white settlement, or otherwise disposed of without the consent of the Indians residing on said reservation.

The Agreement of 1889 ceded a further portion of the lands earlier specifically reserved (26 Stat. 1030, Art. 1).

The lands upon which the grain was grown were allotted to the original Indian allottees pursuant to the terms of the General Allotment Act of February 8, 1887, 24 Stat. 388, and are owned by the United States in trust for petitioner and other heirs of the original allottees. The trust period with respect to such lands has been extended from time to time and still exists as to them.

The petitioner concedes that as a citizen of the United States he, like others, who had such income, was subject to tax on his income from teaching but takes the position that he was not taxable on the income realized by him from the sale of grain produced on the Coeur d'Alene Reservation. In support of his position the petitioner contends, in effect, that the lands upon which the grain was produced are to be regarded as lands situated within the jurisdiction of a foreign government and, for that reason, the power of Congress to impose a tax on the income derived from them should not be implied. Granting, but not deciding, that the lands in question are to be regarded as petitioner contends, the petitioner is not aided here. In Cook v. Tait, 264 U.S. 47, it was held that Congress has the power to impose a tax on the income of a citizen of the United States who at the time the income was received was permanently resident and domiciled in Mexico, the income having been derived from real and personal property situated there. In so holding, the Supreme Court stated that the basis of the power to tax was ‘upon his (the taxpayer's) relation as citizen to the United States and the relation of the latter to him as citizen.’ In view of the foregoing, and since the petitioner is a citizen of the United States, his contention clearly is without any weight.

The petitioner further contends that in general the income tax laws are not applicable to income received by restricted Indians from restricted property unless such laws are so expressed as clearly to manifest an intention that they are to be so applicable, or, in other words, the general provisions of the income tax laws do not apply to such income and that special acts or provisions are required in order to make such income taxable. Blackbird v. Commissioner, 38 F.2d 976, and United States v. Homeratha, 40 F.2d 305 (decided on authority of Blackbird v. Commissioner, supra), appeal dismissed 49 F.2d 1086, are cited in support of the contention. Superintendent of Five Civilized Tribes v. Commissioner, 295 U.S. 418, involving the taxability of income derived from investment of funds arising from restricted lands belonging to a Creek...