Stevens v. Comm'r of Internal Revenue

• Decision Date: 25 February 1970
• Docket Number: Docket No. 4719-62.
• Citation: 54 T.C. 351
• Parties: BRYAN L. STEVENS AND BRYAN L. STEVENS AS SURVIVING SPOUSE OF ALMA STEVENS, DECEASED, PETITIONER v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
• Court: U.S. Tax Court

54 T.C. 351

BRYAN L. STEVENS AND BRYAN L. STEVENS AS SURVIVING SPOUSE OF ALMA STEVENS, DECEASED, PETITIONER

v.COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Docket No. 4719-62.

United States Tax Court

Filed February 25, 1970.

Charles A. Hobbs and Douglas W. Morrison, for the petitioner.

Ernest J. Wright, for the respondent.

Held, income of petitioner, a noncompetent Indian, from grazing cattle on land which had been allotted to another noncompetent Indian and purchased by petitioner who had it taken in trust for him by the United States under sec. 5 of the Act of June 18, 1934 (48 Stat. 984, 25 U.S.C.sec. 465), is not exempt from Federal income tax.

SUPPLEMENTAL OPINION

SCOTT, Judge:

On May 27, 1969, the Opinion of this Court in this case was filed (52 T.C. 330) and on August 6, 1969, the decision of this Court pursuant thereto was entered.

On September 23, 1969, petitioner filed a motion for leave to file a motion for review and revision of the opinion and lodged the Motion for Review and Revision of Opinion. On October 24, 1969, petitioner filed a motion to vacate the decision entered in this case on August 6, 1969. It appearing to the Court that the Opinion in this case filed May 27, 1969, considered certain transactions to have been entered into pursuant to the provisions of section 4 of the Act of June 18, 1934 (48 Stat. 984, 25 U.S.C.sec. 464), when in fact certain of these transactions were authorized by section 5 of that Act (25 U.S.C.sec. 465), petitioner's motions to vacate the decision entered August 6, 1969, and for leave to file Motion for Review and Revision of Opinion were granted on October 24, 1969, and the Motion of Review and Revision was filed on that date.

Petitioner's motion sought to have this Court revise its opinion to hold that petitioner's income from grazing cattle on the 362.59 acres of land which petitioner purchased with his own funds from Joseph Shawl (Fort Belknap allottee No. 1161) and Melda Black Hoop Shawl on December 9, 1947, and the approximately 360 acres of land which he acquired on August 16, 1951, from Lillian Adams Werle (Fort Belknap allottee No. 492) and Lewis H. Werle in exchange for the parcel of land containing approximately 360 acres which he had purchased with his own funds on June 30, 1950, from Edward Phares (Fort Belknap allottee No. 460) is exempt from Federal income tax.

On October 27, 1969, the parties filed a ‘Third Supplemental

Stipulation of Facts' and thereafter filed briefs and presented oral argument with respect to petitioner's motion.

The facts set forth in the third supplemental stipulation of facts are incorporated herein by reference. Summarily these facts are that it is customary practice on the Fort Belknap Indian Reservation for the Secretary to allow an Indian who applies to sell his restricted Indian lands to freely enter into negotiations respecting the sale and the selling price. In the case of a negotiated sale (as opposed to a bid sale) the Superintendent of the Fort Belknap Reservation furnishes the Indian seller with an appraisal of the value for use in negotiations involving the price of the land and the Secretary will not approve the sale unless the price equals or exceeds the appraised value and is clearly justified in the light of long-term best interests of the owner.

A noncompetent Indian can, with the approval of the Secretary, purchase trust land and take title in fee. If the Secretary is satisfied that the noncompetent Indian is capable of adequately managing his affairs, he would very probably approve the purchase in fee.¹

The Secretary approved the applications of the Joseph Shawls and Edward Phares to sell their restricted Indian lands and in accordance with petitioner's request the United States acquired legal title to the parcels which were held in trust for the Shawls and Edward Phares in trust for petitioner. The Bureau of Indian Affairs considered the transfers to be authorized by section 5 of the Act of June 18, 1934 (48 Stat. 984, 25 U.S.C.sec 465).

In view of the fact that we considered the question of the taxability of petitioner's income from grazing cattle on the land he acquired from the Joseph Shawls and the land he acquired from the Werles in exchange for the land he acquired from Edward Phares on the assumption that the acquisition of these lands by petitioner was authorized under the provisions of section 4 and not section 5 of the Act of June 18, 1934, we strike from our Opinion the portion thereof appearing on page 345 and reading as follows:

Section 4 of the Act of June 18, 1934, deals with the limitations on sales, devises, gifts, exchanges or other transfers of ‘restricted Indian lands, or of shares in the assets of any Indian tribe.'⁵ This is the only provision in the Act of June 18, 1934, dealing with the transfers of land from a noncompetent Indian. There is nothing in this provision relative to any guarantee of transfer by the United States of land to the assignee of an original allottee free of encumbrance. * * *

/5/ Sec. 4 of the Act of June 18, 1934, 48 Stat. 984 reads as follows:

Sec. 4. Except as herein provided, no sale, devise, gift, exchange or other transfer of restricted Indian lands or of shares in the assets of any Indian tribe or corporation organized hereunder, shall be made or approved: Provided, however, that such lands or interests may, with the approval of the Secretary of the Interior be sold, devised, or otherwise transferred to the Indian tribe in which the lands or shares are located or from which the shares were derived or to a successor corporation; and in all instances such lands or interests shall descend or be devised, in accordance with the then existing laws of the State, or Federal laws where applicable, in which said lands are located or in which the subject matter of the corporation is located, to any member of such tribe or of such corporation or any heirs of such member: Provided further, That the Secretary of the Interior may authorize voluntary exchanges of land of equal value and the voluntary exchanges of shares of equal value whenever such exchange, in his judgment, is expedient and beneficial for or compatible with the proper consolidation of Indian lands and for the benefit of cooperative organizations.

Section 5 of the Act of June 18, 1934, under which the Bureau of Indian Affairs considered it had the authority to approve the transfers of the Joseph Shawls and Edward Phares allotments to petitioner provides that the Secretary of the Interior is authorized to acquire through purchase, relinquishment, gift, exchange, or assignment, any interest in lands including trust allotments and that title to any lands so acquired shall be taken in the name of the United States in trust for the individual Indian for which the land is acquired.²

While there is nothing specifically stated in section 5 of the Act of June 18, 1934, relative to any guarantee of transfer by the United States of the land to an assignee of the original allottee free of encumbrance, Petitioner contends that under the provisions of 25 U.S.C. section 335³ the guarantee of the delivery of...