(299 F.)

ALBERT M. TRAVIS CO. v. HEINER, Internal Revenue Collector.

(District Court, W. D. Pennsylvania. April 25, 1924.)

No. 2907.

Internal revenue 9-Dealer in produce held "broker," under statute requiring payment of tax.

A corporation engaged in business of receiving farm produce on consignment for sale on commission, receiving such produce and advancing necessary charges, and thereafter selling it in its own name, receiving proceeds, and transmitting amount to consignors, was a "broker," within Revenue Act 1921, § 1001 (1), being Comp. St. Ann. Supp. 1923, § 59800, requiring brokers to pay $50 tax.

[Ed. Note. For other definitions, see Words and Phrases, First and Second Series, Broker.]

At Law. Action by the Albert M. Travis Company against D. B. Heiner, Collector of Internal Revenue. Judgment for defendant.

Calvert, Thompson & Wilson, of Pittsburgh, Pa., for plaintiff. Walter Lyon, U. S. Atty., and Warren H. Van Kirk, Asst. U. S. Atty., both of Pittsburgh, Pa., for defendant.

Before THOMSON and SCHOONMAKER, District Judges.

PER CURIAM. The action is one to recover the sum of $50 paid by the plaintiff under protest as a special tax levied and collected by the virtue of subparagraph (1) of section 1001 of the Revenue Act of 1921 (42 Stat. 227, 295 [Comp. St. Ann. Supp. 1923, § 59800]) for the period of one year beginning July 1, 1922, and ending June 30, 1923.

In the first instance, an affidavit of defense was filed, raising a question of law. By consent of the parties, this was withdrawn, a jury

For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes

trial was waived, and the case proceeded to trial before the court without a jury, as though an affidavit of defense had been filed, generally denying the facts set forth in the plaintiff's statement of claim. From the proofs offered, the court finds the following facts:

The plaintiff is a Pennsylvania corporation, having its place of business at No. 207 Twenty-First street, Pittsburgh, Pa. During the fiscal year beginning July 1, 1922, and ending June 30, 1923, it was engaged in the business of receiving farm produce on consignment for sale on commission.

In all transactions in which produce was consigned to the plaintiff for sale on commission, it received such goods into its possession and advanced all necessary charges thereon, such as freight, and thereafter the plaintiff sold the same in its own name, not the name of another, and received the proceeds of the sale, transmitting to the consignor the proceeds received by it, less the amount paid by the plaintiff for such charges and the plaintiff's commission.

It appears that the plaintiff's method of doing business is to solicit prospective buyers to attend at the railroad yards or the plaintiff's place of business, where the prospective buyers inspect the produce, and then a sale may be effected as the result of bargaining between the plaintiff and the prospective buyer.

Pursuant to section 1001 (1) of the Revenue Act of 1921, which provides, inter alia:

"Brokers shall pay $50. Every person whose business it is to negotiate purchases or sales of stocks, bonds, exchange, bullion, coined money, bank notes, promissory notes, other securities, produce or merchandise, for others, shall be regarded as a broker."

The plaintiff filed with the defendant a broker's special tax return for the fiscal year ending June 30, 1923, and paid, under protest, the $50 tax assessable against brokers. A claim for refund was duly filed by the plaintiff, which was rejected by the Commissioner of Internal Revenue on January 9, 1923.

The plaintiff contends that it is not a broker within the purview of section 1001 (1) of the Revenue Act of 1921, and therefore not liable to this tax. There is no warrant for this contention. The plaintiff corporation is plainly a broker within the definition of this act. Congress has defined in the statute a broker to be a person "whose business it is to negotiate purchases or sales of * * produce or merchandise for others." The business conducted by the plaintiff comes clearly within that definition. The statute is perfectly plain. There is no ambiguity, and therefore there is nothing for the court to construe. There is no principle of law better established than that where Congress expressly defines words, that definition must govern the courts.

The precise question at issue here has been decided adversely to the plaintiff by the District Court of the United States for the Northern District of Illinois, Eastern Division, in an opinion filed by Judge Lindley, on or about March 10, 1924, in the case of Schweizer v. Mager, Collector, etc. (No. 34580) 297 Fed. 334. We concur in the views expressed in the very able and elaborate opinion of Judge Lindley.

(299 F.)

The plaintiff has sought to convince us that Judge Lindley was wrong in his interpretation of the statute, in view of the legislative history of section 1001 of the Revenue Act of 1921; but there is no merit in plaintiff's argument on that point. Whatever may have been the legislative history of that section, the definition which Congress gave to the word "broker" in the act of 1921 is perfectly plain and must control.

Judgment, therefore, may be entered in favor of defendant and against the plaintiff, with costs.

(292 F.)

DUGAN et al. v. MILES, Collector of Internal Revenue.

(Circuit Court of Appeals, Fourth Circuit. July 3, 1923.)

No. 2088.

Internal revenue 8-Estate tax assessed in fund, income from which was bequeathed to charity, held excessive.

Where a testator by his will gave his widow power to dispose of $250,000 of his estate by her will, but directed that during her lifetime the estate be held in trust and the accumulated income therefrom, after payment of curtain annuities, on her death was made a charitable bequest, which was exempt from tax, federal estate tax was not assessable on the whole of the $250,000, but only on the remainder after deduction of the income therefrom during the life expectancy of the widow.

On Cross-Writs of Error to the District Court of the United States for the District of Maryland, at Baltimore; John C. Rose, Judge.

Action at law by Hammond J. Dugan and another, executors of the will of Thomas O'Neill, deceased, against Joshua W. Miles, collector of Internal Revenue. From the judgment, both parties bring error. Reversed.

See, also, 276 Fed. 401.

Joseph France and Harry N. Baetjer, both of Baltimore, Md. (Venable, Baetjer & Howard, of Baltimore, Md., on the brief), for plaintiffs in error and cross-defendants in error.

Thomas H. Lewis, Jr., Special Attorney, Bureau of Internal Revenue, of Salisbury, Md., and A. W. W. Woodcock, U. S. Atty.,. of Baltimore, Md. (Nelson T. Hartson, Solicitor of Internal Revenue, of Washington, D. C., on the brief), for defendant in error and crossplaintiff in error.

Before WOODS and WADDILL, Circuit Judges, and McDOWELL, District Judge.

WOODS, Circuit Judge. This action by the executors of the will of Thomas O'Neill, a resident of Baltimore, against the collector of For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes.

internal revenue, is for the recovery of, alleged excess estate taxes exacted. On demand of the collector, the executors in addition to the taxes admitted to be due, paid under protest $11,665.33 as if the whole of a certain $250,000 disposed of by will was taxable. The District Court, trying the cause by consent without a jury, adjudged the plaintiff entitled to recover $3,967.81 with interest from date of payment, October 18, 1920. The case is here on cross-writs of error. The question is what part, if any, of the particular $250,000 disposed of in the will was exempt from taxation as a bequest to charity.

Testator died April 6, 1919. By his will he provided that the residue of his estate, after the payment of legacies. not here involved, should go to trustees to pay from the income annuities of $25,000 to his wife Roberta O'Neill, $5,000 each to Mary O'Neill, Ella O'Neill, and Lizzie O'Neill, $1,000 to his sister "known in religion as Sister Loretta," and $500 to John O'Neill. The trustees were directed to hold the remainder of the income with power to reinvest until the death of the widow. They were directed on the death of the widow to set aside sufficient funds to provide for the other annuities. The will contained this provision:

"And I hereby invest my said wife with full power and authority notwithstanding anything to the contrary thereof herein contained, to make a last will and testament wherein she may dispose of two hundred and fifty thousand dollars of my estate, and while I do not enjoin it upon her, still I would be gratified if she would give the said sum or so much thereof as she thinks best for the same charitable objects and purposes hereinafter mentioned in whatever proportions according to her own judgment she may determine."

Testator directed all the remainder of his estate, both accumulated income and corpus, after payment of the annuities, to be paid to the charities, the Good Samaritan Hospital, Loyola College, and the Roman Catholic Arch-Bishop of Baltimore.

There is no conflict as to the true construction of the will. The widow has full power to dispose of $250,000 of the estate by will in any manner she chooses. The testator's expression of a preference as to her disposition of it had no legal effect. She takes under the will no beneficial interest in the $250,000 except as it is a part of the general estate from which she is entitled to receive her annuity. If she fails to dispose of it by will, it goes under the residuary clause to the charities named. The charities take no vested interest in the corpus of the $250,000; but they do take a vested ownership of the interest or income derived therefrom during the life of the widow, and are entitled to receive it subject only to the payment of the annuities from the whole estate.

Since the government has received without question from the whole estate the tax on so much of the value of the estate as is represented by the annuities, it cannot have the tax on the income derived from the special fund of $250,000 as a fund devoted to the payment of annuities and not to charity. The income of the $250,000 for the life of the widow must be considered as a part of the bequest to the charities mentioned, exempt from the tax; the corpus is not bequeathed