National Memorial Park v. Commissioner of Int. Rev.
| Decision Date | 13 November 1944 |
| Docket Number | No. 5285.,5285. |
| Citation | 145 F.2d 1008 |
| Parties | NATIONAL MEMORIAL PARK, Inc., v. COMMISSIONER OF INTERNAL REVENUE. |
| Court | U.S. Court of Appeals — Fourth Circuit |
Llewellyn A. Luce and Robert H. McNeill, both of Washington, D. C., for petitioner.
Harold C. Wilkenfeld, Sp. Asst. to Atty. Gen. (Samuel O. Clark, Jr., Asst. Atty. Gen., Sewall Key and J. Louis Monarch, Sp. Assts. to Atty. Gen., on brief), for respondent.
Before PARKER, DOBIE, and NORTHCOTT, Circuit Judges.
By this appeal National Memorial Park, Inc. (hereinafter called petitioner), seeks reversal of a decision of the Tax Court of the United States, determining deficiencies in income and excess-profits taxes for the years 1935, 1936 and 1937, and penalties for 1935 and 1937.
Petitioner is a Delaware corporation, organized September 7, 1933, engaged during the years in question in the business of operating a cemetery, known as "National Memorial Park", located in Fairfax County, Virginia.
Sometime during 1933, at a cost of $32,202.32 petitioner acquired 92.986 acres of land in Virginia. This acreage was plotted into 24,429 salable four-grave cemetery lots. The balance was unsalable property, such as roads and paths.
On June 22, 1934, pursuant to a resolution adopted by petitioner's board of directors on June 12, 1934, petitioner entered into a trust agreement with the City National Bank of Philadelphia. Under the terms of this agreement, the City National Bank was to act as trustee, and all moneys received from the sale of burial lots were to be deposited with the Trustee as Depository.
Certain provisions of the trust agreement which are particularly germane to the questions on appeal are herein set forth ipsissimis verbis:
so that when payment is made in full by the purchasers of a section or lot in the Memorial Park the Trustee shall have credited the same as follows:
* * * * *
The moneys deposited in the General Fund were subject to the disposition of petitioner with no supervision or control by the trustee. Nor was the trustee under any obligation to see to the application of any of the money so paid to petitioner. A further provision of the agreement provided:
"It is agreed by and between the parties hereto, however, that in order that lots may be properly conveyed as sold that the said Memorial Park will immediately upon the execution hereof and from time to time thereafter as the same may become necessary, convey to the trustee by good and sufficient deed of conveyance title in fee to the ground upon which are located no less than three thousand (3,000) lots free of mortgage lien, and does hereby covenant and agree to and with the said trustee not to sell or dispose of the right of sepulchre to any section or lot other than those lots to which title has been conveyed to the trustee as aforesaid, and the trustee for its part agrees that it will hold title to such ground as may be conveyed to it in accordance with the terms hereof as trustee for the said Memorial Park and its assigns, and that it will upon receipt of the purchase price from individual purchasers convey by approved deed sections or lots and the right of sepulchre therein to the purchasers thereof, and that it will not in any manner or form alien or encumber the said ground, but will hold it solely for the uses and purposes herein specified."
On December 10, 1934, in compliance with the terms of the trust agreement, petitioner conveyed 3,004 lots to the nominee of City National Bank, and on December 6, 1937, the entire property of the cemetery was conveyed to the bank's nominee.
By the terms of the sales contracts used by petitioner during the years in question, petitioner agreed, upon full payment being made by the purchaser, to deliver "good and sufficient deed" to the allotted section, and further to set aside and build up a maintenance and an improvement fund. The contracts of sale were received in petitioner's office, together with the down payments.
When, and only when, 20 per cent or more of the sales price had been paid, petitioner deposited the money collected in the Hamilton National Bank for the account of City National Bank, at which time a statement called a "collection advice", listing the amounts received from each customer and the allocation of these amounts to the various funds, was prepared and sent to City National Bank. If the purchaser did not complete payments up to 20 per cent of the purchase price, the money was retained by petitioner.
When the final payment was made by the purchaser, petitioner delivered a deed, executed by the bank or its nominee, to the purchaser. These deeds provided in part as follows:
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