Mobile Bar Pilots Ass'n v. Commissioner of Internal Rev., 8483.

• Decision Date: 30 June 1938
• Docket Number: No. 8483.,8483.
• Citation: 97 F.2d 695
• Parties: MOBILE BAR PILOTS ASS'N v. COMMISSIONER OF INTERNAL REVENUE.
• Court: U.S. Court of Appeals — Fifth Circuit

97 F.2d 695 (1938)

MOBILE BAR PILOTS ASS'N v. COMMISSIONER OF INTERNAL REVENUE.

No. 8483.

Circuit Court of Appeals, Fifth Circuit.

June 30, 1938.

S. M. Johnston, of Mobile, Ala., and Geo. E. H. Goodner, of Washington, D. C., for petitioner.

Howard P. Locke and Sewall Key, Sp. Assts. to Atty. Gen., James W. Morris, Asst. Atty. Gen., and J. P. Wenchel, Chief Counsel, Bureau of Internal Revenue, and John E. Marshall, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., for respondent.

Before FOSTER, SIBLEY, and HUTCHESON, Circuit Judges.

FOSTER, Circuit Judge.

Petitioner filed income tax returns for its fiscal years 1930 and 1932 and took certain deductions, which were disallowed by the Commissioner and deficiencies were determined. The Board reversed the Commissioner in part and affirmed him in part and reduced the amount of the deficiencies. Before the Board petitioner contended that it is a non profit co-operative organization of pilots and is not taxable as a corporation. The Board found as a fact that petitioner is engaged in the business of furnishing qualified licensed pilots for the purpose of piloting boats across Mobile Bar into and out of the harbor of Mobile, Alabama. On this finding the Board held petitioner to be an association taxable as a corporation. Error is assigned to this finding of fact and to the ruling based thereon.

The undisputed facts in the record are these. Petitioner has been in existence for at least fifty years, has twenty members, all pilots licensed by the United States and the state of Alabama, actively engaged in piloting vessels in and out of the port of Mobile. Its members jointly own three boats, which are used exclusively in enabling them to render their service as pilots. The largest boat, the Alabamian, is stationed off Mobile Bar and is used as a quarter boat for pilots awaiting their turns to bring in incoming vessels. She is registered in the name of all the members of the association. The other boats are too small to require registry. The association has by-laws and rules regulating the conduct of its members. The pilots take regular turns in piloting vessels. It has a president and a secretary elected from its members and a paid bookkeeper, maintains an office in Mobile with a telephone. In the usual course when a pilot has completed the taking of a ship in or out of Mobile he presents a ticket to the master, who approves it, although sometimes payment is made in cash to the pilot. The association renders bills to the agents of the vessels in its own name but the name of the pilot for the particular ship appears on each bill. The association has a bank account and after paying current bills and deducting an amount for an emergency fund the balance is distributed pro rata to its members monthly. When a member resigns or dies an amount equalling his pro rata ownership in the property of the association is paid to him or his heirs. When a new member is admitted he pays into the association an amount necessary to equalize his joint ownership of the common property with the other members.

The Commissioner relies upon the following cases as having facts analogous with those in the case at bar and as sustaining the conclusion that petitioner is an association taxable as a corporation: Morrissey v. Commissioner, 296 U.S. 344, 56 S.Ct. 289, 80 L.Ed. 263; Swanson v. Commissioner, 296 U.S. 362, 56 S.Ct. 283, 80 L.Ed. 273; Helvering, Commissioner, v. Combs, 296 U. S. 365, 56 S.Ct. 287, 80 L.Ed. 275; Helvering v. Coleman-Gilbert Associates, 296 U. S. 369, 56 S.Ct. 285, 80 L.Ed. 278. In each of these cases property was transferred to trustees with authority to manage and dispose of it with the same...