Hoke v. United States, 2539.

Citation273 F. Supp. 756
Decision Date12 September 1967
Docket NumberNo. 2539.,2539.
CourtUnited States District Courts. 4th Circuit. Southern District of West Virginia
PartiesM. K. HOKE, J. W. Moody, J. Campbell Palmer III, Robert L. Elkins, John D. Gift, H. K. Miller, Paul T. Bricker, Paul T. Arbuckle, J. E. Hulshizer, and W. Elliott Abbitt v. UNITED STATES of America.

J. Campbell Palmer III, Charleston, W. Va., for plaintiffs.

Mitchell Rogovin, Washington, D. C., Milton J. Ferguson, Charleston, W. Va., for defendant.

FIELD, Chief Judge.

This case was instituted by the taxpayer, J. Campbell Palmer III, together with the other plaintiffs, to recover certain excise taxes assessed and paid on dues and fees incident to their membership in Sleepy Hollow Golf Club.

On cross motions for partial summary judgment, the question was presented whether the amount paid to the golf club as annual rental for a locker was properly subject to the excise tax imposed upon dues or membership fees under Section 4241 as defined in Section 4242 of the Internal Revenue Code of 1954. By ruling dated February 15, 1963, D.C., 215 F.Supp. 942, I held that such locker rentals were subject to the excise tax imposed by Section 4241, and indicated that the Government's motion should be granted and the plaintiff's motion denied.

Plaintiff, Palmer, filed a petition for rehearing and the question was further briefed by counsel. In the meantime other facets of the case came on for consideration, and the disposition of the petition for rehearing has remained in abeyance. In my original ruling I relied primarily on the case of Knoll Golf Club v. United States, 179 F.Supp. 377 (D.N.J. 1959). This case has been followed in two recent cases. Boots and Saddles, Inc. v. United States, 269 F.Supp. 274 (E.D. Mich.1967), and Gearhart v. United States, 269 F.Supp. 309 (E.D.Va.1967). In the latter case Judge Hoffman distinguished the case of Gould v. United States, 187 F.Supp. 337 (D.Col.1960), aff'd per curiam, 296 F.2d 740 (10th Cir. 1961), relied upon by plaintiff in his brief on rehearing. In my opinion Gould as well as Porter v. United States, 303 F. 2d 67 (5th Cir. 1962), cited by plaintiff, is inapposite to the facts presented here, and under the circumstances I see no reason to change my position from that stated in my letter of February 15, 1963.

Sleepy Hollow Golf Corporation Stock

The second phase of this case involves the question of the validity of the assessment of the federal excise tax on stock purchased by the several plaintiffs in Sleepy Hollow Golf Corporation (hereinafter called the "Corporation") as well as the application of the excise tax to a special assessment paid by plaintiffs to the Corporation subsequent to their purchase of stock therein. On this issue also the plaintiff, Palmer, and the Government have filed cross motions for summary judgment.

It appears that Sleepy Hollow Golf Club, Inc., a corporation, was organized on July 9, 1930, and operated a club on leased land with about 100 dues-paying members. On April 14, 1954, the name of the corporation was changed to Sleepy Hollow Golf Corporation with an authorized capital stock of 1,000 shares of no-par value. The purpose of this corporation was to purchase land and buildings to be leased to a social club, Sleepy Hollow Golf Club (hereinafter called the "Club"). The club was organized on May 21, 1954, with a limit of 400 family memberships.

The shares of the Corporation sold for $300 each and were freely transferable. Some individuals who had paid in money to the old club were given a credit of $100 and, accordingly, purchased their stock in the Corporation at $200 per share. The by-laws of the Club specifically provide that ownership of a share of stock in the Corporation is not a prerequisite to membership in the Club. The regular dues of the Club are fixed, but, however, it is provided that any member not owning stock in the Corporation must pay an additional $30 in dues per year. In effect, of course, the result is that each of the...

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