Karmun v. C.I.R., No. 84-7308

• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)
• Writing for the Court: Before WRIGHT, SNEED, and ALARCON; SNEED
• Citation: 749 F.2d 567
• Decision Date: 12 December 1984
• Docket Number: No. 84-7308
• Parties: -480, 84-2 USTC P 10,003 Harry H. KARMUN and Alice G. Karmun, Petitioners-Appellants, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee.

Page 567

749 F.2d 567 55 A.F.T.R.2d 85-480, 84-2 USTC P 10,003 Harry H. KARMUN and Alice G. Karmun, Petitioners-Appellants,
v.
COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee. No. 84-7308. United States Court of Appeals,
Ninth Circuit. Argued and Submitted Nov. 9, 1984.
Decided Dec. 12, 1984.

Page 568

Steven C. Moore, Boulder, Colo., for petitioners-appellants.

Nancy Morgan, U.S. Dept. of Justice, Washington, D.C., for respondent-appellee.

Appeal from a Decision of the United States Tax Court.

Before WRIGHT, SNEED, and ALARCON, Circuit Judges.

SNEED, Circuit Judge:

This is an appeal from a judgment of the United States Tax Court, 82 T.C. 201, finding deficiencies in the amounts of $1,931 and $8,688.83 in appellants' federal income taxes for 1977 and 1978. We affirm the Tax Court's judgment.

I.

FACTS AND PROCEEDINGS BELOW

Taxpayers Harry and Alice Karmun, who are natives of Alaska, filed federal income tax returns for 1977 and 1978 with the Internal Revenue Service Center in Ogden, Utah. For the same years, appellant Harry Karmun and his father, Alfred Karmun, filed partnership returns for their partnership named Alfred K. Karmun & Son (the partnership). The partnership operates a herd of approximately 2,000 reindeer under the provisions of the Reindeer Industry Act of 1937, 25 U.S.C. Sec. 500 (1982) (the Reindeer Act or the Act). The reindeer were grazed on public land under grazing permits

Page 569

issued by the Secretary of the Interior pursuant to the Act. The income here in dispute was appellants' distributive share of the partnership's income, all of which was realized from the sale of reindeer and reindeer products during 1977 and 1978.

The Reindeer Act was adopted in order to provide a "means of subsistence for the Eskimos and other natives of Alaska." 25 U.S.C. Sec. 500 (1982). To this end, the Act authorized the Secretary of the Interior to acquire for the Eskimos reindeer and other property owned by nonnatives. The Act further authorized the Secretary to distribute, or hold in trust, the reindeer and other property and to organize, manage, and regulate the reindeer industry in such a manner as to establish and maintain for such Alaska natives a self-sustaining business. Id.

On their joint federal income tax returns for 1977 and 1978, appellants did not include as income Harry Karmun's distributive share of the partnership income for those years. On examination of those returns, the Commissioner determined that this share should have been included in gross income for each year, and accordingly, determined income tax deficiencies in the respective amounts of $1,931 and $8,688.83. Appellants thereafter filed a petition with the Tax Court seeking a redetermination of the asserted deficiencies on the ground that the Reindeer Act exempts from taxation income derived from reindeer and reindeer products. The Tax Court rejected that contention. Therefore, the sole question on appeal is whether earnings received by Alaskan natives from the sale of reindeer and reindeer products are exempt from federal income taxation under the Reindeer Act.

II.

DISCUSSION

Appellants make five arguments. First, they contend that, although the Reindeer Act does not expressly exempt from taxation income derived from reindeer and reindeer products, this court ought to imply an exemption on the basis of the purposes and policies of the Act. Second, they argue that, under section 500g of the Reindeer Act, reindeer and reindeer products are "restricted property" as that term is used in Indian law, and that, under the principles of Squire v. Capoeman, 351 U.S. 1, 76 S.Ct. 611, 100 L.Ed. 883 (1956), income derived from restricted property is exempt from federal taxation. Third, they claim that the contracts conveying the reindeer to them from the Government evince an intent to exempt from taxation the income derived from operation of the herd. Fourth, appellants argue that this court ought to give great weight to an opinion issued by the Department of the Interior suggesting that a tax exemption is appropriate under the Act. Lastly, they argue that the IRS has conceded, through previous revenue rulings, that the income in dispute here is...