Stone v. District of Columbia, 11273.

• Decision Date: 10 July 1952
• Docket Number: No. 11273.,11273.
• Citation: 91 US App. DC 140,198 F.2d 601
• Parties: STONE v. DISTRICT OF COLUMBIA.
• Court: U.S. Court of Appeals — District of Columbia Circuit

91 US App. DC 140, 198 F.2d 601 (1952)

STONE v. DISTRICT OF COLUMBIA.

No. 11273.

United States Court of Appeals District of Columbia Circuit.

Argued March 21, 1952.

Decided July 10, 1952.

Irving B. Yochelson, Washington, D. C., with whom Rudolph A. Ashton, Solomon Grossberg and Isadore Brill, all of Washington, D. C., were on the brief, for petitioner.

George C. Updegraff, Asst. Corporation Counsel for the District of Columbia, Washington, D. C., with whom Vernon E. West, Corporation Counsel, and Chester H. Gray, Principal Asst. Corporation Counsel, Washington, D. C., were on the brief, for respondent.

Before CLARK, FAHY and WASHINGTON, Circuit Judges.

CLARK, Circuit Judge.

This is a petition to review a decision by the Board of Tax Appeals for the District of Columbia. Petitioner paid certain taxes to the District of Columbia in accordance with the provisions of statute imposing a tax upon the income of unincorporated businesses "For the privilege of carrying on or engaging in any trade or business within the District * * *". Thereafter, he made timely claim to a refund of those taxes, but his claim was denied. The Board of Tax Appeals upheld the denial, ruling that petitioner was engaged in an unincorporated business within the meaning of the District of Columbia Revenue Act of 1947.¹

The tax is imposed upon "the taxable income of every unincorporated business,"² and "gross income", from which taxable income is computed, is defined to include "gains, profits, * * * or income derived from any trade or business or sales or dealings in property, whether real or personal, * * *; also from rent, royalties, interest, dividends, securities, or transactions of any trade or business carried on for gain or profit * * *."³ Thus, it will be seen that liability to the tax depends upon whether or not petitioner is engaged in business.

The statute defines "unincorporated business" to be "* * * any trade or business, conducted or engaged in by any individual * * *; and includes any trade or business which if conducted or engaged in by a corporation would be taxable under sections 47-1571 to 47-1571a."⁴ It defines the words "trade or business" to "include the engaging in or carrying on of any trade, business, profession, vocation or calling or commercial activity in the District of Columbia."⁵

In this appeal, petitioner contends that his activities do not constitute engaging in a business or commercial activity, but, rather, that they amount to no more than the investment of funds in securities and that the receipt of interest or income from invested funds is not engaging in business. The facts are not in dispute, but whether or not a particular course of conduct constitutes engaging in business must necessarily depend upon the facts involved⁶, and since the statute in question imposes a tax for the privilege of engaging in business, the answer to that question will be dispositive of this appeal.

During the two years in question here, and for a number of years prior thereto, petitioner devoted his energies and funds to the purchase of second-trust notes at a discount. He was known in real estate circles as a source of second-trust money, and opportunities for the purchase of notes were brought to his attention by various persons. When approached for the purchase of a note, petitioner would investigate the credit of the maker and he would inspect the security to ascertain that the value justified the loan. If the credit risk and security were satisfactory to the petitioner, and if the price of the note was attractive, the transaction was completed. Thereafter, petitioner made his own collections, maintained records of payments, and followed up delinquent debtors by telephone or letter. During the years with which we are concerned, petitioner devoted his full time to these activities, and aside from relatively small amounts from dividends and insurance commissions he had no income other than interest realized on the notes which he had purchased.

Accepting, as we do, the well settled definition of business as that which occupies the time, attention, and labor of men for the purpose of a livelihood or profit, we...