SUIT FOR SALARY-Continued
intention of Congress, in the enactment of the Civil Service Act, that the regulations made thereunder should have the force and effect of law within the purview of the statute conferring jurisdiction on the Court of Claims. Id.
IV. Under the statute conferring jurisdiction on the Court of Claims to render a money judgment based upon rights conferred, it is not necessary that the statute, contract, or regulation upon which a claim is founded contain a provision that denial of a legal right thereunder shall give rise to a cause of action for compensation or damages. See United States v. Wickersham, 201 U. S. 390. United States v. Bab- cock, 250 U. S. 328, distinguished. Id.
V. Where, in the instant case, there is no evidence that during the period of his separation plaintiff was unwilling or unready to discharge the duties of his position; and where plaintiff was never given an unsatisfactory efficiency rating; the court declines to find that plaintiff was unable to perform his duties merely on the basis of testimony that his work was in fact worse than indicated by the efficiency ratings given him by the same witnesses who testified that his work was not satisfactory. The official ratings made in due course are entitled to greater weight. Id.
VI. Plaintiff's services were first terminated on September 6, 1944. On September 29, 1944, he protested his dismissal to the Civil Service Commission, which, after investigation on November 30, 1944, ruled that plaintiff had been discharged in violation of the regulations and ordered that he be reinstated. December 11, 1944, he was reinstated. Plaintiff's claim is for his salary only during the three months and five days between his discharge and reinstate- ment. The amount of plaintiff's claim for salary was fixed as of the date of his reinstatement and any subsequent delay in bringing the instant suit could not impose any additional burden upon the Govern- ment so as to sustain the defense of laches. See Galliher v. Cadwell, 145 U. S. 368; Brissel v. Knapp, 155 Fed. 809. Id.
See Just Compensation I, II, III, IV, V.
I. (1) Where decedent, who had been employed outside the United States continuously since 1929, in Novem- ber 1944 returned to the United States on furlough until the end of February 1945 and on March 1, 1945, changed his residence to the United States and as of that date was granted sick leave, which was subsequently extended through 1946; and where decedent's salary for the entire period up to his death on December 30, 1945, was charged to the foreign branch office where he had last held an active status; it is held that decedent fulfilled the statutory requirements as to foreign service and the salary payments while on sick leave were at- tributable to his foreign residence and were exclud- able from gross income under the provisions of Section 116 (a) (2), Internal Revenue Code. Plaintiff, administrator, is entitled to recover. Augustus B. Chidester, Administrator, 87.
II. (2) The exemption granted by Section 116 (a) (2) was not dependent upon payment of foreign income taxes for the taxable year.
III. (3) Distributions by a corporation in payment of accumu- lated dividends on its preferred stock in the years 1937 to 1940, both inclusive, to the extent that they represented distributions out of appreciation in value of property existing on March 1, 1913, and realized thereafter, were exempt from income tax under Section 115 of the Revenue Act of 1936, and plaintiff is entitled to recover. Higginson. 131. IV. (4) Since the enactment of the income tax in 1916, earn- ings accumulated prior to March 1, 1913, or increase in value of property existing on that date, have been treated in cases such as this as being in the nature of capital and exempt from tax when distributed. Southern Pacific Co. v. Lowe, 247 U. S. 330, 335. Id.
V. (5) Where the trustees of an estate are granted discretion to determine all questions as between capital and income and where they thereafter decide to retain certain income from an apartment building of the estate to amortize the cost of alterations to such bullding; it is held that such undistributed income, so withheld and used is not taxable income to the beneficiary of the estate, and plaintiff is entitled to recover the tax paid on the amount of $1,059.54
TAXES-Continued
INCOME TAX-Continued
which was, in the discretion of the fiduciary, with- held and not paid or credited to the plaintiff. Id. VI. (6) The court holds further that plaintiff's original claim for refund of September 25, 1944, was sufficient and timely when analyzed in the light of the facts, and that the clarifying amendment thereof filed April 23, 1945, was proper. Id.
VII. (7) When the claim for refund was filed, the facts upon which the claim was based were already before the Commissioner, as disclosed by his investigation and audit of the books, records and return of the trust, and the Commissioner was not misled by the rather awkward manner in which the ground of the claim was set forth. Id.
VIII. (8) The use by plaintiff of the word "depreciation" instead of "amortization" was not fatal to the claim for refund in the circumstances of the instant case. The sufficiency of a claim for refund is to be judged by the substance as related to the facts rather than the form in which it is stated. Id.
IX. (9) Where the plaintiff, a corporation which was the lessee in a number of oil and gas leases which it was operating and from which it was producing and selling oil, determined by a vote of its board of directors in 1943 that a dividend should be paid out of the current year's earnings, but that it should be a dividend in kind, made by transferring certain property to the stockholders; and where such dividend in kind was paid by conveying its entire interests in certain productive oil and gas leases to two stockholders in proportion to their stock ownership, subject to retransfer of such assets to the corporation as soon as the payments to the stockholders was equal to the sum available out of current earnings of the corporation for payment of the dividend; and where after the receipt during the last three months of 1943 of approximately the amount of the declared dividend the stockholders executed retransfers to taxpayer of the interests in the leases which had been transferred to them; it is held that the dividend involved an assignment by the corporation of anticipated taxable income, and plaintiff is not entitled to recover. Rudco Oil & Gas Company, 206,
TAXES-Continued
INCOME TAX-Continued
X. (10) Where plaintiff during the year 1932, under the terms of a trust established by his great-grandfather, received a total of $131,839.27 from the Lambert Pharmacal Company pursuant to an agreement made with plaintiff's great-grandfather under which agreement the Lambert company agreed to pay a royalty for the use of certain formulae and trade names; it is held that the transaction between the Lambert company and plaintiff's great-grand- father resulted in a licensing arrangement and was not a sale or exchange, and plaintiff is not entitled to treat the royalties received as proceeds from a sale subject to tax at capital gain rates. Hopkins, 217.
XI. (11) In the instant suit plaintiff's first ground for recovery, that the transaction came within the capital gains provision, was not made the basis of refund claims filed in May 1937 and April 1939, and could not, therefore, be allowed if there had been such a transaction as would come within the capital gains provision. Id.
XII. (12) Plaintiff received the royalty payments under a bequest and upon termination of the trust he made no sale of the rights which he held. Plaintiff was not there- fore entitled to treat his receipts under the bequest as a return of capital.
XIII. (13) Plaintiff's third ground of recovery, that he was en- titled to reduce his royalty receipts by a sum representing annual depreciation of the value of the property right to receive the payments, is denied since he did not assert such ground in any refund claim; since the evidence did not show the value of the property on March 1, 1913; since the property was not used in taxpayer's trade or busi- ness; and since the right to receive the income under the license agreements in question, which were not limited as to time, was not a depreciable asset in plaintiff's hands. Id.
XIV. (14) Where upon the entire record in the instant case it is concluded by the Court that the Uptown Club of Manhattan was a club in which carefully chosen members could relax, eat, drink, visit and talk about a variety of subjects in a leisurely way under comfortable conditions, at breakfast and luncheon, and that the social features, in the circumstances,
TAXES-Continued
INCOME TAX-Continued
were a material purpose of the club; it is held that the club was a social club within the contemplation of the provisions of Section 1710 of the Internal Revenue Code, as amended, and plaintiff is not entitled to recover. Merchants Club v. United States, 106 C. Cls. 562, distinguished. Duquesne Club v. United States, 87 C. Cls. 483, and similar cases cited. Uptown Club, 422.
XV. (15) Where on June 10, 1940, the stockholders of the plaintiff company entered into an agreement with the Tri-County Electric Membership Corporation to sell to it certain of the physical properties of the plaintiff company as soon as that company was liquidated and the properties were received by the stockholders as a liquidation dividend; and where the liquidation of the company was carried out and the physical properties distributed to the stockholders and then sold to the Tri-County Corporation, all in accordance with the plan formulated in the beginning by plaintiff's stock- holders which was that they and not the corpora- tion should make the sale; it is held that the plaintiff company was not liable for income tax on the sale of the properties, since the sale was not made by the corporation but by the stockholders. Cumber- land Public Service Co., 460.
XVI. (16) Upon the evidence adduced the Court concludes there is no basis for holding that, although the sale in form was made by the stockholders, it was in fact made by the corporation, and it is held that the plaintiff is entitled to recover. Id.
XVII. (17) Although the avowed purpose of the stockholders of the plaintiff company in the instant case was to reduce taxes, nevertheless every step they took in the matter was entirely legal; there was no fraud or evasion involved; it was an open and above- board effort to carry out the transaction in the way that would result in the least taxes. This they had the legal right to do. Id.
XVIII. (18) In the case of Commissioner v. Court Holding Co., 324 U. S. 331, the corporation had initiated the negotiations for the sale, but when it was realized that this method would result in more taxes than from a sale by the stockholders, after a liquidating dividend, the sale by the corporation was osten- sibly dropped (as found by the Tax Court) and
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