made to "vessels of war of the United States," within the purview of section 630 of the Revenue Act of 1932, except when such vessels were operating as a part of the Navy, subject to orders of the Secretary of the Navy, in time of war or by direction of the President. However, the Act of August 4, 1949, Public Law 207, 81st Congress, 14 U.S.C. 1, changed the term "land and naval forces" to "armed forces" and provided that the Coast Guard, as established January 28, 1915, shall be a military service and a branch of the armed forces of the United States at all times. That Act also provided that the Coast Guard shall be a service in the Treasury Department, except when operating as a service in the Navy. Moreover, section 7701(a) (15) of the Internal Revenue Code of 1954 provides that the term. "armed forces of the United States" includes the Coast Guard. Prior to the amendment of section 1 of Title 14 of the United States Code by the Act of August 4, 1949, the applicability of the exemption to sales of articles for use as supplies for vessels or aircraft of the United State Coast Guard depended upon whether the vessels were operating as a part of the Navy. However, in view of that amendment and in view of the provisions of section 7701(a)(15) of the Internal Revenue Code of 1954, this distinction is no longer controlling and S.T. 724 is no longer applicable. Accordingly, it is held that, since the Coast Guard is considered to be a part of the armed forces of the United States, the exemption from manufacturers excise taxes provided by section 4221 (a) (3) of the Code, applies to the sale of articles for use as fuel supplies, ships' stores, sea stores, or legitimate equipment on vessels and aircraft of the United States Coast Guard. Similarly, the exemption provided by section 4041(e) of the Code would apply to the sale of special motor fuels for use as supplies for vessels or aircraft of the United States Coast Guard. SECTION 4271.-IMPOSITION OF TAX Whether the tax on transportation of property applies to the movement of excavated material from the point of excavation to a processing plant on the same premises where it is processed into sand and gravel. See Rev. Rul. 59-200, page 44. SECTION 6012.-PERSONS REQUIRED TO MAKE 26 CFR 1.6012-1. Individuals required to make returns of income. Income received from sources within the United States by a husband and wife, citizens and residents of a foreign country. See Rev. Rul. 59-199, page 32. SECTION 6013.-JOINT RETURN OF INCOME TAX 26 CFR 1.6013-1. Joint returns. Filing of returns by a husband and wife, citizens and residents of a foreign country, with respect to income received from sources within the United States which constitutes community income under the laws of such foreign country. See Rev. Rul. 59–199, page 32. SECTION 6416.-CERTAIN TAXES ON SALES AND SERVICES [ABATEMENTS, CREDITS, AND REFUNDS] Applicability of a credit or refund for tax paid on the sale of high fidelity phonographs which were later converted and sold as stereophonic phonographs. See Rev. Rul. 59-201, page 35. PART II RULINGS AND DECISIONS UNDER THE INTERNAL REVENUE CODE OF 1939, THE FEDERAL FIREARMS ACT, AND OTHER PUBLIC LAWS SUBPART A.-RULINGS AND DECISIONS UNDER THE INTERNAL REVENUE CODE OF 1939 Rulings and decisions published in Part II, Subpart A, of the Internal Revenue Bulletin are based on the applications of provisions of the Internal Revenue Code of 1939 and unless otherwise noted therein are published without consideration to any application of the provisions of the Internal Revenue Code of 1954, the Federal Firearms Act, or other public laws. SECTION 102.-SURTAX ON CORPORATIONS Section 39.102-2: Purpose to avoid surtax; evi- or investment company. T. D. 63781 TITLE 26-INTERNAL REVENUE, 1939.-CHAPTER I, SUBCHAPTER A.-INCOME AND EXCESS PROFITS TAXES Treasury Decision 4914, relating to corporation returns to be DEPARTMENT OF THE TREASURY, Washington 25, D.C. To Officers and Employees of the Internal Revenue Service and Others Concerned: In order to make the provisions of Treasury Decision 4914, approved July 26, 1939 (4 F.R. 3443, published in part as a note following 26 CFR, 1939 Supp., 9.102-2) [C.B. 1939-2, 108], as amended by Treasury Decision 5398, approved August 12, 1944 (9 F.R. 9944) [C.B. 1944, 194], applicable only to taxable years to which the Internal Revenue Code of 1939 and the Revenue Act of 1938 are applicable, Treasury Decision 4914 is further amended by adding at the end thereof the following new section: 124 F.R. 3819. § 22. The rules provided in this Treasury Decision shall not be applied with respect to taxable years beginning after December 31, 1953, and ending after August 16, 1954. Because this Treasury Decision merely prevents the application of Treasury Decision 4914, as amended, to taxable years to which the Internal Revenue Code of 1954 applies, it is hereby found that it is unnecessary to issue this Treasury Decision with notice and public procedure thereon under section 4(a) of the Administrative Procedure Act, approved June 11, 1946, or subject to the effective date limitation. of section 4 (c) of that Act. (This Treasury Decision is issued under the authority contained in sections 62 and 3791 of the Internal Revenue Code of 1939 (53 Stat. 32, 467; 26 U. S. C. 62, 3791).) Approved May 8, 1959. FRED C. SCRIBNER, Jr., DANA LATHAM, Commissioner of Internal Revenue. Acting Secretary of the Treasury. (Filed by the Division of the Federal Register on May 12, 1959, 8:50 a.m., and published in the issue of the Federal Register for May 13, 1959, 24 F.R. 3819.) SECTION 3475.-TRANSPORTATION OF PROPERTY REGULATIONS 113, SECTION 143.1: Meaning of terms. (Also Part I, Section 4271.) Rev. Rul. 59-200 The tax on the transportation of property does not apply to amounts paid to truckers on an hourly basis by a person engaged in the business of producing sand and gravel for the transportation of material excavated within the boundaries of his premises to a plant located on the same premises for processing into sand and gravel. Revenue Ruling 249, C. B. 1953–2, 437, modified. The Internal Revenue Service has been asked to reconsider Revenue Ruling 249, C. B. 1953-2, 437, which hold that the tax on the transportation of property applies to amounts paid to truckers on an hourly basis by a person engaged in the business of producing sand and gravel for the transportation of material excavated within the boundaries of his premises to a plant located on the same premises for processing into sand and gravel. Section 3475 of the Internal Revenue Code of 1939, under which Revenue Ruling 249 was issued, imposed a tax upon amounts paid for the transportation of property by rail, motor vehicle, water, or air from one point in the United States to another. That section further provided, however, that the tax would not apply to the transportation of earth, rock, or other material excavated within the boundaries of, and in the course of, a construction project and transported to any place within, or adjacent to, the boundaries of such project. The basis for the conclusion in Revenue Ruling 249 was that the material being transported was excavated in connection with a business of producing sand and gravel and not in the course of a construction project. Therefore, the conditions of the specific exemption provided by the statute were not met. The question now presented, however, is whether the movement of excavated material under these circumstances constitutes "transportation" within the meaning of the statute. The case of Kerns v. United States, 204 Fed. (2d) 813, involved a situation where (1) a movement of property was limited to premises on which mining, quarrying, manufacturing, or other form of productive enterprise was carried on, (2) such movement was of raw materials to be manufactured or used in the manufacturing process and was carried on as an integral part of the productive enterprise, (3) a hauler supplied trucks and drivers for the movement on a fixed hourly rental basis without regard to the work done or the tonnage hauled, and (4) the stone company had the exclusive power of directing the work in which the trucks were engaged. Under these circumstances the court held that the movement is not "transportation of property" within the meaning and intent of the statute to which the tax is intended to apply. The Service has decided to follow the Kerns decision in cases where the facts are substantially the same. It should be noted, however, that although the court in the Kerns case cited several decisions to support the conclusion reached, it nevertheless distinguished the case of Getchell Mine, Inc. v. United States, 181 Fed. (2d) 987. The Getchell case involved a movement of gold ore from mine to mill, all of which took place over private roads located on property of the taxpayer, in vehicles supplied by an independent contractor who was paid on a basis of the volume carried and the distance hauled. There the court held that the trucking services were furnished by a person engaged in the business of transporting property for hire and that the movement was from one point in the United States to another. Thus, the tax was held to apply to payments made for the transportation services furnished in that case. See also Iines Lumber Co. v. United States, 239 Fed. (2) 488. It will be the policy of the Service to adhere to the Getchell decision in cases where the facts are substantially the same as those present in that case. The position of the Service with respect to the Kerns and Getchell decisions will be followed without regard to whether the issue arises under the provisions of section 3475 of the 1939 Code or under the corresponding provisions of section 4271 of the Internal Revenue Code of 1954. In accordance with the above conclusion, Revenue Ruling 249 is hereby modified to the extent that it holds that amounts paid for the transportation of the material to the processing plant are subject to the tax on the transportation of property. |