Stern v. Gray, 6723.

• Decision Date: 11 February 1941
• Docket Number: No. 6723.,6723.
• Citation: 296 N.W. 419,70 N.D. 549
• Parties: STERN v. GRAY, Tax Commissioner.
• Court: North Dakota Supreme Court

70 N.D. 549

296 N.W. 419

STERN

v.GRAY, Tax Commissioner.

No. 6723.

Supreme Court of North Dakota.

Feb. 11, 1941.

Syllabus by the Court.

1. A demurrer admits truth of all issuable, relevant, material facts well pleaded.

2. In determining the issue raised by a demurrer to a complaint, the allegations of the complaint are to be construed liberally.

Appeal from District Court, Richland County; W. H. Hutchinson, Judge.

Proceeding by Harry Stern against John Gray, as Tax Commissioner for the State of North Dakota, to recover income taxes paid under protest. From an order overruling a demurrer to the complaint, defendant appeals. Affirmed.

Conmy & Conmy, of Fargo, for plaintiff and respondent.

Alvin C. Strutz, Atty. Gen., C. E. Brace, Asst. Atty. Gen., and T. A. Thompson, of Bismarck, for defendant and appellant.

BURR, Chief Justice.

[1][2] The issue arises on demurrer to the complaint. For the disposition of the issue, the demurrer admits the truth of all issuable, relevant, material facts well pleaded (Englund v. Townley et al., 43 N.D. 118, 122, 174 N.W. 755); and the allegations thereof are to be liberally construed. Security State Bank v. Peterson, 49 N.D. 585, 590, 192 N.W. 491, 492.

[3] Plaintiff appealed to the district court from a holding of the tax commissioner, and in his complaint alleged: he is a resident of the state, “and has been for more than fifteen years last past engaged in the business of buying and selling corporate stocks and bonds”; in due time he filed his income tax report for 1938, and paid his tax as shown thereby; in his report he included an item of loss of $1,437.36 on the sale in 1938 of “bonds of the Canadian National Railroad, the Province of British Columbia, the Fidelity Fund Corporation, the Brush Terminal Company and Armour & Company”, purchased in previous years, and claimed deduction of this loss from the income of the year; these bonds “sold by him at a loss during the year 1938 are not ‘capital assets”’; the tax commissioner “has interpreted the words ‘capital assets' as used in Chapter 240 of the Laws of 1937 to include stocks and bonds such as were sold by this plaintiff at a loss during the year 1938”; the tax commissioner disallowed this claim of deduction and assessed an additional tax against him of $59.72, which he paid under protest on or about July 16, 1940; on or about August 8, 1940, he filed with the tax commissioner his application for revision, and a hearing was had thereon before the commissioner, who disallowed his application.

Attached to the complaint, and made a part thereof, is this statement of the tax commissioner:

“Please be advised that the State Income Tax Department, at a hearing held for Mr. Harry Stern with Mr. John Gray, Tax Commissioner and Mr. B. B. Conyne, Income Tax Deputy, disallows the protest of Mr. Conmy that the additional assessment of $59.72, paid under protest July 16, 1940, was an illegal assessment.

The State of North Dakota Capital Loss Deduction law as amended in the 1937 Session Laws reads as follows:

‘Provided, however, that the aggregate amount which may be deducted in connection with losses incurred in connection with sale or exchange of capital assets shall not exceed the aggregate gains reportedfrom the sale or exchange of capital assets in any year.’

The Department holds that the law covers Mr. Stern's capital loss deduction and therefore, disallows the protest of Mr. Conmy at the above hearing.” (Mr. Conmy is counsel for the taxpayer.)

The only ground of demurrer argued is: “That the complaint does not state facts sufficient to constitute a cause of action”. The trial court overruled the demurrer, and defendant appeals.

The income tax law, article 35 of the political code, as set forth in the Supp., being Sections 2346a1 to 2346a50 thereof, imposes an income tax “upon every resident of North Dakota” in...