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
|