United States v. Hotchkiss Redwood Co.
| Decision Date | 16 April 1928 |
| Docket Number | No. 5278.,5278. |
| Citation | 25 F.2d 958 |
| Parties | UNITED STATES v. HOTCHKISS REDWOOD CO. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Geo. J. Hatfield, U. S. Atty., of San Francisco, Cal. (C. M. Charest, Gen. Counsel, and L. H. Baylies, Atty., Bureau of Internal Revenue, both of Washington, D. C.), for the United States.
Jones & Dall, of San Francisco, Cal. (Esmond Schapiro, of San Francisco, Cal., of counsel), for defendant in error.
Before GILBERT, RUDKIN, and DIETRICH, Circuit Judges.
On and prior to June 19, 1919, the Hotchkiss Timber Company, a California corporation, was the owner of approximately 20,000 acres of timber land in Del Norte county, acquired in the year 1906 for the sole purpose of owning and holding the same and reselling as a whole at a profit. The Hotchkiss Redwood Company was organized in 1919, to take over the timber land for the like purpose and to place a new bond issue, which for some reason the old corporation was unable to do. After its incorporation the new company issued bonds in the sum of $550,000, secured by mortgage on its property, and used the proceeds of the bonds to redeem similar bonds issued by the old company and secured by a like mortgage. Since its organization the new company has from time to time levied and collected assessments on its capital stock to pay taxes, interest on its bonded indebtedness, and other necessary charges and expenses; to avoid condemnation proceedings, it sold a strip of land to Del Norte county for highway purposes for approximately $5,000; from November, 1919, to June, 1923, it paid the sum of $50 per month as salary to its secretary, and from July, 1923, to June 30, 1924, the president was paid the sum of $150 per month on account of office expenses; it has at all times maintained its corporate existence, and from time to time has carried on negotiations through its president with prospective purchasers and brokers, looking to the sale of its lands as a whole, but no person or agent has been employed for that purpose, the land has never been advertised for sale, and no part of it has been sold, except the right of way to Del Norte county. Such, in brief, were the activities of the corporation from the time of its organization up to June 30, 1924.
The present action was instituted by the corporation against the United States to recover taxes imposed and collected under the Revenue Acts of February 24, 1919, and November 23, 1921 (40 Stat. 1126; 42 Stat. 294 Comp. St. § 5980n), for the tax year ending June 30, 1924, and for the four years immediately preceding. The plaintiff had judgment below, and the United States sued out the present writ of error. The sole question presented for decision is: Was the defendant in error carrying on or doing business during the period in question, within the meaning of the Revenue Acts? If so, the judgment should be reversed; otherwise, it must be affirmed.
The mere substitution of one mortgage or one form of indebtedness for another, the levy of stock assessments to pay taxes and interest, the maintenance of corporate existence, the sale of a right of way for a public road to avoid condemnation proceedings, and the payment of nominal salaries to the secretary and president, did not, without more, constitute carying on or doing business, within the meaning of...
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