Wilson v. Eisner, 250.
| Decision Date | 03 April 1922 |
| Docket Number | 250. |
| Citation | 282 F. 38 |
| Parties | WILSON v. EISNER, Collector of Internal Revenue. |
| Court | U.S. Court of Appeals — Second Circuit |
Taylor Jackson, Brophy & Nash, of New York City (John G. Jackson, of New York City, of counsel), for plaintiff in error.
William Hayward, U.S. Atty., of New York City (Richard S. Holmes, Sp Asst. U.S. Atty., of New York City, and Chester A. Gwinn, Sp Atty. Bureau of Internal Revenue, of Washington, D.C., of counsel), for defendant in error.
Before HOUGH, MANTON, and MAYER, Circuit Judges.
For convenience, we shall refer to the parties herein as plaintiff and defendant, as below. The defendant, by virtue of his authority, on July 5, 1916, assessed against the plaintiff an additional income tax for the year ending December 31, 1913. Pursuant to this demand of the defendant the plaintiff paid $962.12 under protest and claim of duress. A receipt was given, acknowledging payment of this additional tax, under date of November 22, 1917. Thereafter the plaintiff appealed to the Commissioner of Internal Revenue, pursuant to the regulations of the Secretary of the Treasury, asking to vacate this additional assessment as to $962.12 and pay back the said sum on the ground that the collection thereof was due to an illegal assessment. No decision was rendered, and, six months having elapsed, the plaintiff began this action to recover.
The claim is that the Commissioner of Internal Revenue, in assessing and collecting said additional tax, did so disregarding the income received, and in disallowing as a deduction the expenses paid by the plaintiff in conducting and operating a business as a stock raiser and breeder of horses during the year 1913. The plaintiff since 1905, was engaged in the business of breeding horses and raising stock as a business, for the purpose of profit and gain, and, as he says, to improve the standard breed of horses. His horses were entered at race meets in competition for money and prizes, and some were sold and others bought. In some instances, the plaintiff derived substantial profit from his business, as is shown by his returns for several years. In other years, he lost money. In 1913, he had a total of 57 mares, yearlings, and horses, and employed in the operation of his business about 29 persons, and gave his personal attention and supervision to the business. He rented a farm in Kentucky and subsequently purchased the farm. In his return for 1913, he entered an item of $33,338.30 as his income derived from this business, and in item of $52,357.35 as the expenses thereof. This expense account included the care, feed, and marketing of the horses. It thus appears that the business in 1913 lost $19,919.05. It is established that this amount was expended in conducting and operating the plaintiff's business as a horse breeder and stock raiser, and was not in any respect an addition to the capital, nor was it an item for personal living or family expenses.
Plaintiff, in his return, sought to have charged as a loss, against his profits for that year, this loss incurred in this business. In plaintiff's tax return for 1914, he sought to charge off, as against his profits, the loss sustained for that year. Subsequently this was disallowed, and the plaintiff was obliged to pay an additional tax. He did so under protest, and commenced another action to recover such tax. It appears from the record that the parties stipulated to try both cases together, although in this bill of exceptions the pleadings dealing with only the 1913 tax are incorporated.
Upon the trial, the plaintiff called three witnesses. The defendant's proof consisted of the income tax returns of the plaintiff for the years in dispute. The court submitted to the jury for special finding two specific questions: First. In the year 1913-1914, was the plaintiff, Richard T. Wilson, engaged in business as a horse breeder and stock raiser? Second. Were the sums of money paid by the plaintiff for transportation of horses and men from the stock farm in Kentucky to the Belmont Park race track, and to other race tracks, reasonable and necessary in the carrying on of the stock-raising and horse-breeding business, if there was one? The first question was answered 'No,' and under the court's charge it became unnecessary to answer the second question.
The plaintiff called his agent, who took care of his accounts. He testified that in 1913 he had 33 horses in training, 9 mares, 1 stallion, 8 yearlings and 6 weanlings; in 1914, 35 horses in training, 13 mares, 1 stallion, 6 yearlings and 7 weanlings, and further that the plaintiff started raising and breeding horses in 1898; that in 1913-1914 the horses were boarded, but the plaintiff had full use of the farm, and no other horses were kept there. Later the farm was leased. Plaintiff has no other occupation than this industry. The farm consisted of some 10 barns and houses for the employees. The acreage was used for raising corn and hay for the horses. The employees were a manager, farm hands, trainers, and two jockeys. The witness testified at some length as to their method of raising horses and the value of the horses. The source of income was derived from the sale of horses, and in this connection the management deemed it good business to, and in fact did, enter them in races where money prizes were obtained. They were also exhibited at county fairs. They were registered animals. He testified to the expenses as above stated in 1913, and to an expense of $71,490.38 1n 1914. The receipts for 1914 were $38,212.60.
The plaintiff testified that he resided in New York city; that in 1913-1914 he had no other business except breeding and raising horses. The horses were exhibited in the New York State Fair and were used in racing. He corroborated his agent's testimony as to the farm, which consisted of about 500 acres. The witness testified that he devoted most of his time to this business in 1913-1914, and that he looked at raising horses from the standpoint of business. He pointed out that his later returns, after 1914, show an increase in earnings, and that the losses were less, and, in some years, the business was profitable.
The decrease in losses he attributed to an improvement in conditions at the farm; that he intended to make the business a profitable one and considered entering into the breeding of horses to this end. He pointed out that it...
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...gross income tax. Farming may be classified as a business for tax purposes. Plant v. Walsh (1922), 2 Cir., 280 F. 722; Wilson v. Eisner (1922), 2 Cir., 282 F. 38. It is further pointed out that the provisions for exemptions and classifications are common to the retail sales acts found in th......
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...however, does not per se put a taxpayer in `business' within Section 23 1939 Internal Revenue Code. From the early case of Wilson v. Eisner, 282 F. 38 (2d Cir., 1922) through Brooks v. C. I. R., 274 F.2d 96 (9th Cir., 1959) and Wright v. Hartsell, 305 F.2d 221 (9th Cir., 1962), the warp and......
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