Weible v. United States

• Decision Date: 15 April 1957
• Docket Number: No. 15150.,15150.
• Parties: Glenn WEIBLE and Patricia Weible, Appellants, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

244 F.2d 158 (1957)

Glenn WEIBLE and Patricia Weible, Appellants, v. UNITED STATES of America, Appellee.

No. 15150.

United States Court of Appeals Ninth Circuit.

April 15, 1957.

Thompson, Royston, Wiener & Moss, Robert S. Thompson, Clifford E. Royston, Conrad J. Moss, Los Angeles, Cal., for appellants.

Charles K. Rice, Asst. Atty. Gen., Lee A. Jackson, Helen A. Buckley, Karl Schmeidler, Washington, D. C., Laughlin E. Waters, U. S. Atty., Edward R. McHale, Los Angeles, Cal., for appellee.

Before POPE and LEMMON, Circuit Judges, and ROSS, District Judge.

ROSS, District Judge.

This is an action for refund of income taxes paid by appellant Glenn Weible for the year 1947, and by the appellants, Glenn Weible and his wife Patricia, for the years 1948 and 1949. During this period Weible was employed abroad. Appellants filed their claims for refund for the sum of approximately $3,509.79, the total amount of taxes paid during these years, claiming exemption under Section 116, Internal Revenue Code of 1939, Section 116, Title 26 U.S.C.A. The Collector of Internal Revenue disallowed the claims. Appellants then brought their action in the District Court for the recovery of the taxes paid. In that action judgment went for the Collector and against the appellants. Hence this appeal.

The Facts

Weible, the taxpayer, had been employed by Max Factor and Company for some years prior to World War II, from 1938 to 1941. During the war he was employed by Lockheed, and in 1945 again entered Max Factor's employment, this time for the specific purpose of planning and constructing of manufacturing plants for the company in foreign countries, and the training of personnel to operate the same. The contract of employment was oral and by it Weible agreed to undertake the duties connected with these foreign assignments and to remain permanently outside the United States in the performance of these duties except for short periods of training and consultation. The periods of foreign employment which followed were as follows:

Mexico, from January until May, 1946; Australia, from June, 1946, to October, 1948; Canada, from October, 1948, until July, 1949; England, from July, 1949 to December, 1950; South America, March, 1951, until date.

Without going into the evidence it is sufficient to state that in each country Weible became "integrated," at least to the extent of establishing social and business contacts with the local inhabitants. Since his job was the construction of manufacturing plants and the training of operating personnel his contacts in each country, as one may well imagine and as the record indicates, were many and varied, and much of his success appears to have been based on his ability to be and become a part of the social and commercial society of the particular countries in which he resided.

At the time Weible left for Australia he and his wife were living in Los Angeles where the wife was employed. They occupied a leased apartment. During his absence in Australia the couple were divorced, and he there met his present wife, Patricia, whom he married on a visit to the United States. At the time of the divorce Weible and his first wife owned a bank account, an automobile, and an equity in an unimproved lot they were purchasing, all of which was in Los Angeles, California. As a part of the divorce settlement Weible bought his wife's equity in the lot for $7,500.00, and gave her the furniture. The automobile was sold. During the years that followed he continued to make installment payments on the lot purchase contract. His bank account was maintained in Los Angeles.

During the period of the tax years involved the accounting department of Max Factor computed Weible's income taxes and paid the amount over to the Collector of Internal Revenue, though there was some doubt as to whether Weible owed any tax by reason of his foreign employment and residence. However, to be on the safe side it was paid, and the balance of salary deposited in Weible's Los Angeles bank account.

Weible and his wife then filed their claims with the Collector of Internal Revenue for a refund of the taxes paid for the calendar years 1947, 1948, and 1949. All claims for refund were denied and Weible brought this action in the District Court to recover the taxes for the year 1947, and he and his wife together for the taxes paid for the years 1948 and 1949.

The Exemption Statute, Section 116.

The pertinent portion of Section 116 reads as follows:

"Section 116. Exclusion From Gross Income.

"In addition to the items specified in section 22(b), the following items shall not be included in gross income and shall be exempt from taxation under this chapter:

"(a) Earned income from sources without the United States. —

"(1) Foreign resident for entire taxable year. In the case of an individual citizen of the United States, who establishes to the satisfaction of the Commissioner that he is a bona fide resident of a foreign country or countries during the entire taxable year, amounts received from sources without the United States (except amounts paid by the United States or any agency thereof) if such amounts would constitute earned income as defined in section 25 (a) if received from sources within the United States; but such individual shall not be allowed as a deduction from his gross income any deductions properly allocable to or chargeable against amounts excluded from gross income under this subsection * * *."

The Question Presented

Appellants present the question before the court in this fashion:

"The only question presented is whether appellants were bona fide residents of a foreign country or countries during the taxable years 1947, 1948, and 1949 within the meaning of Section 116(a) of the Internal Revenue Code of 1939 and thus entitled to the income exemption provided by that section."

The appellee poses the identical question in this language:

"Whether the District Court erred in finding that the evidence did not support the taxpayers\' contention that he was a bona fide resident of various foreign countries during the taxable years in question, within the meaning of Section 116(a), Internal Revenue Code of 1939."

Findings, Conclusions and Judgment

Findings of fact, conclusions of law and judgment were entered on April 6, 1955. The court concluded that appellant Glenn Weible was not a bona fide resident of Australia for the calendar year 1947, that Glenn Weible and Patricia Weible were not bona fide residents of Australia and Canada during the calendar year 1948, and that the appellants were not bona fide residents of Canada and England during the calendar year 1949, within the meaning of Section 116 of the Internal Revenue Code of 1939, and that therefore the earnings of Glenn Weible from Max Factor were taxable during this period. The judgment ordered that the appellants take nothing by their complaint.

Specifications of Error

Appellants' specifications of error are five in number, and are as follows:

(1) The court erred in failing to find that pursuant to his agreement with his employer and during the years 1947, 1948, and 1949 Weible agreed to and intended to remain continuously and indefinitely in a foreign country or countries in the performance of his duties except for short periods of training and consultation.

(2) The court erred in failing to find that the purpose of Weible in going to Australia, Canada and England was of such a nature that an extended stay in those countries may have been necessary for its accomplishment.

(3) The court erred in concluding that appellant Glenn Weible was not a bona fide resident of Australia during the calendar year 1947 within the meaning of Section 116, of the Internal Revenue Code of 1939.

(4) The court erred in concluding that appellants were not bona fide residents of Australia and Canada during the calendar year 1948 within the meaning of Section 116 of the Internal Revenue Code of 1939.

(5) The court erred in concluding that appellants were not bona fide residents of Canada and England during the calendar year 1949 within the meaning of Section 116 of the Internal Revenue Code of 1939.

Clearly Erroneous Rule

Appellee contends that the facts of this case presented clear grounds for the District Court's finding that the taxpayer was not a bona fide resident of a foreign country; that this holding was supported by substantial evidence and is not "clearly erroneous." Therefore, appellee contends, the decision of the trial court should be affirmed. In the reply brief the appellants meet this proposition head-on, in this fashion:

"Appellee implies that the holding of the District Court may be reversed only if this court finds that holding to have been clearly erroneous. On the contrary, since the question here presented is a question of law or mixed question of law and fact, this Court should review the entire record and in the light of all the evidence before it, substitute its judgment for that of the District Court if it finds that the conclusion of the District Court is contrary to the weight of the evidence. Commissioner of Internal Revenue v. Fiske\'s Estate 7 Cir., 1942, 128 F.2d 487, certiorari denied 317 U.S. 635 63 S.Ct. 63, 87 L.Ed. 512; Bogardus v. Commissioner, 1937, 302 U.S. 34, 39 58 S.Ct. 61, 82 L.Ed. 32."

If it is appellee's contention that we can reverse the District Court only if we find its holding to have been clearly erroneous, then we must dispose of such contention before we can proceed. We will resolve this first problem and then continue if our answer thereto should warrant.

In the Fiske case, Commissioner of Internal Revenue v. Fiske, 7 Cir., 128 F.2d 487, 489, cited by appellants, which was a case factually similar to ours, there was a like point raised, that is, was the matter reviewable. The Court said:

"Before discussing the cases * * * it is well that we dispose of respondent\'s contention that the conclusion of the Board that Fiske was a bona fide

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