Shilkret v. Helvering

• Decision Date: 01 November 1943
• Docket Number: 8402.,No. 8387,8387
• Citation: 138 F.2d 925
• Parties: SHILKRET v. HELVERING, Commissioner of Internal Revenue. HELVERING, Commissioner of Internal Revenue, v. SHILKRET.
• Court: U.S. Court of Appeals — District of Columbia Circuit

138 F.2d 925 (1943)

SHILKRET v. HELVERING, Commissioner of Internal Revenue. HELVERING, Commissioner of Internal Revenue, v. SHILKRET.

Nos. 8387, 8402.

United States Court of Appeals. District of Columbia.

Argued October 13, 1943.

Decided November 1, 1943.

Mr. William Cattron Rigby, of Washington, D. C., with whom Mr. Alex M. Hamburg, of New York City, was on the brief, for petitioner in No. 8387 and respondent in No. 8402.

Mr. Bernard Chertcoff, of Washington, D. C., member of the Bar of the Supreme Court of Pennsylvania, pro hac vice, by special leave of court, with whom Messrs. Samuel O. Clark, Jr., Assistant Attorney General, Sewall Key and Miss Helen R. Carloss, Special Assistants to the Attorney General, were on the brief, for Commissioner of Internal Revenue. Messrs. J. P. Wenchel, Chief Counsel, and Claude R. Marshall, Special Attorney, Bureau of Internal Revenue, both of Washington, D. C., also entered appearances for Commissioner of Internal Revenue.

Before GRONER, Chief Justice, and MILLER and ARNOLD, Associate Justices.

GRONER, C. J.

This case involves petitioner's income taxes for the years 1936 and 1937. The Commissioner found deficiencies to the amount of $8,701.85 for 1936 and $7,412.01 for 1937. The Board sustained the Commissioner and this appeal followed.

The case presents two questions:

First, was petitioner domiciled in California during the taxable years so as to be entitled to report his taxable income on a community tax basis, Poe v. Seaborn, 282 U.S. 101, 51 S.Ct. 58, 75 L.Ed. 239; and Second, irrespective of domicile, did petitioner's earnings in California in the two taxable years constitute community income properly divisible between himself and his wife for Federal income tax purposes.

The following facts were found by the Board: Petitioner and his wife were born and were married in New York City and lived there continuously until the latter part of 1935. In that year they were living in an apartment which they leased from year to year, the then existing lease expiring September 30, 1936. On October 31, 1935, petitioner entered into an exclusive personal service contract with RKO Studios, Incorporated, located in Hollywood, California, running for two years with an option of renewal to RKO for an additional year. Petitioner left New York for California about November 14, 1935. His wife stayed at home until February, 1936, when she joined him in California. On August 10, 1936, while in California, she signed a new lease on the New York apartment running from August 31, 1936, to September 30, 1937, at the annual rental of $3,000. Subsequently she renewed the lease for still another year. Petitioner guaranteed payment of the rent. After petitioner's arrival alone in California he lived in a hotel or a furnished apartment some three or four months until the arrival of his wife. Thereafter they lived for awhile in furnished apartments and subsequently for a year and a quarter in a furnished house.

Under the contract with RKO petitioner was to be paid a salary of $1,000 a week for the first year and $1,100 a week for the second year, and RKO agreed in addition to pay his transportation from New York to Hollywood, together with the transportation charges on petitioner's musical library and to provide space for it in RKO Studios. RKO also agreed to furnish petitioner return transportation to New York City and to pay the cost of bringing back his library in the event it failed to exercise its option — on condition that petitioner should within two weeks after the two-year period leave Hollywood and return to New York.

Petitioner is a well-known musician, composer and director. Until 1935 his professional work was in and near New York City. For a long time he was Musical Director of the Victor Talking Machine Company. Around 1924 he began radio work which he has continued up to the present time. In 1929 he began the work of synchronizing for motion pictures. A few years later he formed the opinion that the competition of the radio industry with the recording field tended to diminish the business prospects of the latter and that the public was transferring its interest from the recording of music to the production of music by the radio.¹ He became interested in sound reproduction in the motion picture industry and in the technique involved in making the scores for music for motion pictures. He believed that this and the expansion in the field of television would become a new business in which he could use his experience and talent. Accordingly he went to Hollywood in April of 1935, where he met various people in the motion picture industry and received in September of 1935 the offer from RKO, which he subsequently accepted.

Just before he left New York City he disbanded two orchestras which he had organized and went to Hollywood, as he says, in the hope that he would remain there to work in the motion picture industry. He closed one of his New York bank accounts and ordered his life insurance premium notices addressed to him in Hollywood. He also removed his personal securities from New York to California. At its expiration, he renewed the insurance policy on his library with a Los Angeles agency. He joined the Hillcrest Country Club and the Musicians' Union in California and sent his son to the Law School of the University of Southern California.

The option reserved to RKO was not exercised and in anticipation that it would not be, petitioner, some six months in advance of the contract expiration, had negotiations with Metro-Goldwyn-Mayer with a view to obtaining a contract with them. These negotiations failing, in March, 1938, petitioner, with his musical library, returned to New York.

Neither petitioner nor his wife at any time changed their voting registration from New York to California, and both voted in New York City in the 1938 fall elections. While in California each filed California State income tax returns for 1936 and 1937 as "residents" of that State. During 1936 petitioner received interest on bank deposits in five New York banks and interest on New York mortgages. In 1937 he received interest on deposits in one New York bank and in one California bank. Petitioner's contributions during the period in question, as well as those made by his wife, were chiefly to New York charities. In 1936 petitioner took deductions in his Federal return for rent for three New York offices in the aggregate amount of $3,839.16, and in 1937 took a deduction of $483.33 as office rent in New York for that year, stating that he had used one room in his New York apartment in lieu of the offices he had previously kept in that City. Petitioner explained the renewals of the New York apartment lease covering the whole period of his sojourn in California as due to the fact that the apartment contained his furniture and to have cancelled the lease would have obliged the return of his wife to New York to pack and store the furniture, which she was unwilling or too unwell to undertake, but that he personally was opposed to a renewal and gave in only as a result of his wife's desires on the subject.

Petitioner's contention before the Commissioner, the Board and this Court is that he was domiciled in California in the years 1936 and 1937 (or, in the words of the Board's opinion, "He asserts that all of his acts, his state of mind, and his then intentions about the present and the future, were such that he acquired a new domicile.") As a result of this he insists he was entitled to divide with his wife, as he did, his net income derived from his salary from RKO. Acting on this theory each filed a Federal income tax return on the basis of the California community statutes.

The Commissioner argues that in deciding the case we are bound by the substantial evidence rule and that it is not our function to weigh the evidence or to choose between conflicting inferences. On the ground that there is substantial evidence to support the findings, he says our duty is to affirm without more. But we think that rule has no applicability here. Domicile, we recently said², is a compound of fact and law, and where, upon admitted or undisputed facts, the decision turns on controverted legal principles, it is reviewable. Here there is no dispute as to the essential facts, the conflict relates only to their legal effect. The question must be determined by the application of certain rules long established by the courts, State and Federal, to find where a man's home really is, and there is no dearth of authority on the subject. In one of our most recent pronouncements in this respect³, we said that to effect a change from an old and established domicile to a new one, there must be the absence of any present intention of not residing in the latter permanently or indefinitely. Or, stated differently, there must be a fixed purpose to remain in the new location permanently or indefinitely. For a domicile once acquired is presumed to continue until it is shown to have been changed, and to show the change two things are indispensable, — "First, residence in the new locality; and, second, the intention to remain there. The change cannot be made except facto et animo. Both are alike necessary. Either without the other is insufficient. Mere absence from a fixed home, however long continued, cannot work the change. There must be the animus to change the prior domicile for another. Until the new one is acquired, the old one remains. These principles are axiomatic in the law upon the subject."

This is the language of the Supreme Court in Mitchell v. United States, 21 Wall. 350, 352, 22 L.Ed. 584. See to the same effect Gilbert v. David, 235 U. S. 561, 569, 35 S.Ct. 164, 59 L.Ed. 360, and the cases cited in the footnote below⁴.

Appellant cites language from District of Columbia v. Murphy, 314 U.S. 441, 62 S.Ct. 303, 86 L.Ed. 329, which, when considered out of its context, might indicate a change in the established rule. But...