Vecellio v. United States
| Decision Date | 15 July 1961 |
| Docket Number | No. 221-227.,221-227. |
| Citation | 196 F. Supp. 1 |
| Court | U.S. District Court — Southern District of West Virginia |
| Parties | Leo VECELLIO, Plaintiff, v. UNITED STATES of America, Defendant. Emery TAMPLIN, Plaintiff, v. UNITED STATES of America, Defendant. Mary Frances TAMPLIN, Plaintiff, v. UNITED STATES of America, Defendant. Ross IRLE, Plaintiff, v. UNITED STATES of America, Defendant. Glendale TABOR, Plaintiff, v. UNITED STATES of America, Defendant. Charles McKINNEY, Plaintiff, v. UNITED STATES of America, Defendant. Warren A. THORNHILL, III, Plaintiff, v. UNITED STATES of America, Defendant. |
Scherer, Bowers & File, Floyd M. Sayre and Robert J. Ashworth, Beckley, W.Va., for plaintiffs.
Duncan W. Daugherty, U. S. Atty., Huntington, W. Va., for defendant.
These actions, consolidated for trial without a jury, were instituted by the respective plaintiffs to recover certain excise taxes which they were required to pay under the provisions of § 1710 of the Internal Revenue Code of 1939, 26 U.S. C.A. § 1710, and § 4241 of the Internal Revenue Code of 1954, 26 U.S.C.A. § 4241, which imposes a 20% tax on initiation fees and annual membership dues in excess of $10 paid by members of social, athletic or sporting clubs or organizations. In each of the cases it is agreed that the plaintiffs are residents of the Southern District of West Virginia, have paid the tax and have petitioned for refund, and that procedural requirements for these actions have been duly met. While there are some factual variations in regard to the several actions, the principal question common to all is whether Flat Top Lake Association was a social, athletic or sporting club or organization within the meaning of the statute during the years 1953 to 1956, inclusive. From the evidence which was largely uncontroverted, I find the following material facts to be true:
(1) Sometime during the year 1949 a group of approximately 100 persons living in the area of Beckley, West Virginia, conceived the idea of constructing a lake and developing a tract of land near Flat Top Mountain in Raleigh County, West Virginia. This group advanced the sum of $25 each, to make the necessary engineering surveys to determine the feasibility of the project. At that time they estimated the cost of land acquisition and construction of the lake at $150,000 and membership was to be limited to 150, each member paying $1,000. The original plan was that each member would receive approximately one acre of land fronting on the lake and extending back therefrom a distance of 300 feet.
A number of difficulties were encountered and it soon became evident that the cost of the project would run considerably more than was originally anticipated. Many landowners in the area were unwilling to sell parcels of only 300 feet around the perimeter of the proposed lake, and, accordingly, it became necessary to purchase entire tracts of land. Instead of an estimated $30,000, the actual cost of the some 2200 acres of land finally acquired was $134,000. The area finally selected and purchased is twelve to fourteen miles from the center of Beckley. In 1957, the population of Beckley was 18,000 and the population of Raleigh County was 96,000 persons.
(2) The Flat Top Lake Association, Inc., was organized under the laws of West Virginia on or about March 31, 1950, as a non-profit corporation and the stated objects in the certificate of incorporation were:
"To own, control, lease and sell real estate; to build, maintain and operate a lake and other recreational facilities for the pleasure and convenience of its members, without profit, upon a cooperative basis; and to do all other things necessary or incidental to the operation of a recreational and conservation project."
(3) It was necessary to obtain from the Public Service Commission of West Virginia a permit for the construction of the dam, which permit was issued and work begun on July 8, 1950. This work, consisting of the construction of the dam with a concrete core wall, the spillway, clearing of the lakebed, installation of a ten-inch sewer pipe under the lake and dam and a small amount of road work, was completed in 1951 at a cost of approximately $256,000. By November of 1950, the Association had incurred liabilities of some $190,000, and to meet this situation it was decided early in 1951 to reduce the size of the lots and increase the total number thereof to 373, each member being requested to purchase an additional lot for the price of $1,000. Practically all of the charter members complied with this request and the choice of lots was decided by a mass drawing at a membership meeting held in the Raleigh County Court House in March, 1951. The first or "pilot" deed of conveyance, the one to which subsequent deeds referred for covenants, reservations, conditions and restrictions, was executed under date of April 28, 1952.
(4) Under the by-laws, membership in the corporation is limited to those persons over 21 years of age who own in their own name one or more of the lots designated on the plat of land of the Association and who shall have been elected to membership as provided in the bylaws. The wife or husband of a member and their unmarried children under 21 years of age who are living in the home of such member, as well as guests of members, may be admitted to the privileges of the Association subject to certain rules and regulations promulgated by the Board of Directors. No individual can be elected to membership if he has received three negative votes by the Board of Directors. The annual dues of members are fixed by the Board of Directors and shall not exceed $50 per lot, and any unpaid dues become a lien against the lot or lots of a defaulting member. The by-laws provide the procedure for an assessment in any one year not to exceed the sum of $50 per lot, which likewise becomes a lien against the respective lots in the event of default. Under certain conditions, the membership can levy an assessment not to exceed $100 in any one year, payment of which also is secured by a lien.
(5) Article 8 of the by-laws specifies a number of covenants, reservations, conditions and restrictions to be included in all deeds and in the event of violation of any of such covenants or conditions, title to the lot or lots of such member shall revert to the Association with the provision that the owner may recover the value of the lot together with any improvements thereon. The by-laws further set up a procedure by which membership may be transferred and also provide for descent of the property in the event of the death of a member with certain restrictions upon the property in the hands of his heirs or devisees.
(6) There are presently 303 members owning 372 lots. The Association owns one of the lots as well as holding title to the remainder of approximately 1500 acres of land which was not sub-divided. In addition to the cost of the land and the construction of the lake, it was necessary to expend some $275,000 on access roads serving the lots around the entire perimeter of the lake. The initial cost of this construction was financed by issuing paving certificates in the amount of $260 per lot, which became a lien against the lot in event of default in payment. Later it was necessary to make additional assessments against each lot for the further improvement of the roads.
(7) The Association has no clubhouse facility and the annual dues are devoted for the most part to the maintenance and upkeep of the perimeter road and payment of the salary of a caretaker-supervisor. This caretaker is a Conservator of the Peace appointed by the Sheriff of Raleigh County and paid out of the Treasury of the County, the County being reimbursed the amount of his salary by the Association. This was done pursuant to the provisions of Chapter 6, Article 3, Section 1(b) (1), West Virginia Code, which provides for such appointment upon the petition of any resident or group of residents of any unincorporated community. The Association purchased and owns a patrol boat and certain life saving equipment which is primarily under the control of this supervisor. The gate to the Association property is monitored by the supervisor and only members and their families or authorized guests may be admitted.
(8) An unsightly area in the vicinity of the dam was cleared and sanded and provides a swimming facility for those members whose lots are of such a topographical nature as to make swimming hazardous or unpleasant. The total amount spent on this area was $1,700. There is no lifeguard, nor are any rafts or floats furnished by the Association and a very small percentage of the members resort to the use of this "beach." About 185 members have their own private swimming areas, some with diving towers and boards and sand beaches. Approximately 104 lot owners have built permanent homes around the lake and a number of members live there the year round.
(9) The rules of the Association provide that at no time shall there be group racing competition unless under the supervision of the Boating and Safety Committee. However, in fact, the Association has never permitted any boat race, swimming contest or other organized athletic or sporting activities. Some of the members desired to do some target shooting and, in the interests of safety, the Association bulldozed out an area for that purpose. This area has been used to a very small degree and is now grown up with underbrush. On the occasions when it was used each member supplied his own targets and other equipment. Hunting of waterfowl was permitted the first two years after completion of the lake, but has been prohibited since that time. During one hunting season, the limited hunting of upland game was permitted by the Board but likewise has been prohibited since. Certain individual members of the Association have stocked fish in the lake on occasions and any member may fish in the lake if he so desires.
(10) Any improvements to the...
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