First American National Bank of Nashville v. United States

purpose government proving of propositions. I think Powers that a exclusive agent govern- prove to that the had made an was entitled admission which was formally contended, binding principal, in the his had but rather resulting purpose explaining position in the the principal course a criminal trial of his the o.f Fidanzi, formally the entire had of that conviction asserted $2,240 proffered trial of proceeds con- I believe the Fidanzi. of the checks testimony stituted incometo Fidanzi.2 of Kurash should have been received.5 question my There is no mind bring inability respectfully I Powers’ to this fact therefore dissent. I jury may attention of the well been have would reverse remand for a new trial. the critical his convic- difference between possible acquittal. de-

tion his The “affecting was sub-

fect the record one rights” the defendant within stantial of Moreover, 52(b), Rule Fed.R.Crim.P. theory admissibility plain-

Powers’ of was

ly explained to the trial court.3 The narrow which then remains issue questions propounded whether FIRST AMERICAN NATIONAL BANK by purpose counsel for the of Powers’ NASHVILLE, Plaintiff-Appellant, OF proving position by the taken the government in the Fidanzi trial should America, UNITED STATES have answered. been Defendant-Appellee. Having concluded the ultimate No. 71-1491. sought proposition which Powers relevant, establish was I also conclude Appeals, United States Court of bringing proper that one method this Sixth Circuit. jury matter to the attention of the 4,Oct. 1972. through testimony government the the agent, Kurash, only analyzed who not had specific transaction but also testified proffered at the Fidanzi trial. Powers testimony,4

his not as in Santos for the argument jury 2. up his in the Fi- stand another in this court build- trial, government danzi ing say got money.” counsel stated: Powers charged $11,240 “For ’64 we and we Tr. 504. proved just gross that. He received a by 4. Kurash was the first witness called $11,240. supposed income of He was defense; thus, admissibility his it, return, to file a he knew he testimony, questions propound- unlike the didn’t, wilfully and he failed file.” Blazavier, ed was not limited Fidanzi, Tr. United States v. scope government’s examination 1969). F.2d 1361 proper the court’s as discretion limits on cross-examination. Well, Judge, 3. “MR. BAILEY: I what your think Moreover, Honor judge doesn’t know is that since the trial indicated inquiry Fidanzi Guido was an that he this considered line unreported income having tax case income. irrelevant after been advised of theory (Tr. admissibility Government that case based on Powers’ 504- testimony witness, 05, 575-76), of this I am satisfied no pocket, checks purpose went in his stuck Guido useful would have been served money unreported by any attempts Fidanzi with this as further to make an ade- quate appeal. Indeed, proper to him and used that evidence record for position judge’s basis of a criminal conviction trial five-year and a sentence. don’t think should excuse trial counsel the ne- up cessity correcting Government can stand in one minor deficien- building say court questions already in this cies in Guido the form got money put. and then come and Waller, Tenn., Nashville,

William plaintiff-appellant; Waller, Lansden, Davis, Nashville, Tenn., Dortch & brief. Virginia Hopkinson, Atty., M. Tax

Div., Justice, Dept, Washington, D. C., defendant-appellee; Charles H. Anderson, Atty., Nashville, Tenn., U. S. Johnny Walters, Gen., Atty. M. Asst. Ugast, Meyer Rothwacks, Fred B. Grant Wiprud, Attys., Div., Dept, W. Tax Justice, Washington, C.,D. on briefs. KENT, Before McCREE and Judges, O’SULLIVAN, Senior Cir- Judge. cuit PER CURIAM. appeal

This is an from the district plaintiff’s re- court’s denial of action cover inter- income taxes on certain years 1962, est for the 1963. A number of other were issues decided, appeal taken but no has been disposition the district court’s them. on the case was submitted stipulation pleadings facts. and a dealer, bank, a licensed

Plaintiff bond taxes this action to recover instituted paid on it received from munici- pal ordinarily bonds. Such interest Revenue under Internal Code count. When the trust accounts ac- reported quired 103(a), necessary funds, they paid so had been § of Inter- bank. The Commissioner the cost of disallowed this treatment nal Revenue interest and took to several return. Here, only purchases appellant, too, appellant reported three bond appeal: concern us on this terest it received on the which bonds as tax- exempt income. municipal (1) purchasing Instead of successfully they court, F.Supp. 675, bonds which had The district 327 agreed orally agreed bid, with the certain bond dealers Commissioner that the accruing categories appellant with that would interest on these bank buy appellant’s and bonds the bonds issuers between the time of acquisition disposition them to dealers at the and later sell of them was price paid. tax-exempt. Relying not the bank had Until these on American occurred, in National Bank latter sales the bank each of Austin v. United States, (5th 1970), case the interest on the bonds 421 F.2d 442 accrued Cir. coupon at the and credited this and Union Memphis rate Planters National Bank of exempt-interest to an account. v. United 426 F.2d 115 1970), In no did successful fail bidder court held that the buy the bonds from the bank at the “material fact” was “that the bank had ability price. in bid these transactions insu- itself late from at the loss and same consummating (2) pur- Instead time had bonds se- agreements they chase had made with curity.” agree. We dealers, ap- certain bond customers of orally agreed pellant American with bank Bank case National acquire concerned that it would the bonds from transactions similar in sub- category stance to dealers later sell them the those in described prices (1), paid, supra. case, customers at had that the Fifth Cir- adjustments that, purposes, cuit held for accrued interest. for tax Here, too, reported the bank the ac- functioned as a secured lender in its crued interest as income. transactions with the bond dealers. Planters, applied In Union the same we (3) Appellant purchased municipal arrangements rationale to under which a bonds from dealers later bond sold purchased upon bonds from dealers the bonds to various trusts for which promise the written of the dealers to re- department its trust acted as trustee. purchase price the bonds at the purchases, Prior to these officers of the bank ex- interest. We appellant’s department indicated pressly approved in Union Planters the depart- to officers of its reasoning Judge Ainsworth Ameri- ment that bonds under discussion Bank, can National 426 F.2d at 118. were suitable for trust accounts and although department Appellant, conceding that desired to the trust acquire (1) (2), supra, categories them for its accounts when are “simi- Usually, funds lar in were available. substance” to the dis- transactions purchase Bank, not known at the time of cussed in American National urges reasoning reject the commercial to which us to ground particular would case on Fifth Cir- bonds although allocated, ignored authority be cuit sometimes the line of hold- ing that, particular purposes, ownership lot of bonds was earmarked for tax particular actually pass property to a transfer trust ac- does until pursuant count delivered when the account had funds a contract sale. rule, option buy Until the trust accounts Under this an available. purchased bonds, appellant kept other contract to sell is deemed a mere regular executory pass them in ac- and does not its investment contract

1101 appellant’s Lucas reliance on the line See, g., v. North ownership. Lucas e. authority begs question 11, issue Company, U.S. 50 Lumber Texas —the appellant Thus, ever (1930). whether this case is 184, L.Ed. 668 S.Ct. appellant purposes, not owned for tax contends, ownership the bonds appellant whether owner- pass surrendered question did not customers, ship at the the contracts for sale re- time bond dealers or. hold, actually were for the reasons parties executed. We spectively, until those persuasive delivery National found in American bonds and took for the Planters, appellant argues Bank and Union that Union them. It further never owned the de- substance inapposite both because here Planters (2), supra, scribed dealer and is a bond licensed Revenue v. Commissioner of Internal acquire the bonds because it did not cf. 331, Holding Company, ultimately Court 324 U.S. parties to which it (1945), approval 65 S.Ct. 89 L.Ed. 981 expression of sold Our them. exemption thus not to a entitled tax Bank decision of the American National on the for the interest that accrued dic- in Union is asserted be Planters during period binding regard- bonds the under consider- tum not we and because ation. as a ed stronger Government’s case there the presented in the than that one in described With to the bonds 426 F.2d at 118.

Fifth Circuit decision. category (3), supra, appellant contends regard it would unrealistic be no merit to of these We see It was the bank as secured lender. a observes, appellee contentions. As stipulated that, exception of the price purchase lender of the of munici involved in two the trust accounts pal not able to collect bonds should be transactions, these the bank as trustee pay on the bonds tax-free authority for had no to borrow funds lending money. for the See Union purpose investing trust assets. the Planters, supra, F.2d at 116-117. Moreover, appellant the contends arrangements Yet, the described under depreciation lay in on risk of value herein, Bank as in American National department and not on the commercial Planters, in ef and Union the bank trustee, trust accounts since a under lending money purchase fect is law, principles of trust well-established paying no on the interest re and is tax “purchase is not allowed to bonds from pur Moreover, person ceived. who higher price itself at a purchase than it would the bonds from the effect chases bonds from an outsid- similar money buy borrows bonds without er, though even bonds had been ear- paying interest. results This particular for trust marked account.” Congress double tax benefit that intend enacting prevent by ed to I.R.C. § appeal The record on is unclear supra, 265(2). Planters, 426 F. Union concerning agree terms of the the exact And, completely 2d at 116. the bank is appellant’s ments between officers of insulated from the risk of market fluc departments. trust type tuations in this of transaction —its However, stipulated it was that “[t]he completely investment is secured since paid cost of the bank the receiving price is assured of interest.” It circumstances, bonds. In these appears appellant’s that, protesta thus clearly the bank in is se substance notwithstanding, contrary tions to the cured lender instead of an owner. department indem did indeed the trust ap against nify We therefore reiterate our the commercial proval of the American depreciation National Bank value decision, and circumstances, we hold the rationale of In we see bonds. these equally applicable significant that case to be in no difference between categories (1) transactions described in de and those tra-bank transactions (2), supra. out, points supra. appellee (2), As scribed in significant think it for the bank to in its taxable Nor do we include purchased the trust de- that which Revenue come the Internal all the bonds says specific partment earmarked Code is not to be included. were significant accounts; fact 264(a) provides Section of the Code acquired held were the bonds 103(a)(1) by of Section abuse ultimately purpose of transfer- for the ring forbidding deduction from income of in- accounts, in a them to the trust borrowings terest on made for insulating manner purpose acquiring free tax bonds. risk of market fluctuations.1 265(2) provides: Section Affirmed. for— “No deduction shall allowed be Judge O’SULLIVAN, Senior (2) Interest —Interest on indebted- (dissenting part). purchase ness incurred or continued to opinion of the court I concur obligations (other carry than obli- except acquired as it relates to bonds gations of States issued to various bank and later sold origi- 24, 1917, September after in its trust trusts under administration nally taxpayer) subscribed department. tax free As to the other wholly exempt the interest which acquired by the bonds which were imposed by this subti- taxes customers, that this and sold believe tle. ...” decision in Planters Na Court’s Union my view, language has no the above Memphis United tional Bank application to the transactions here in- 1970), States, 426 F.2d 115 es trust volved. Neither the nor its tablished the law of this Circuit. accounts have from income deducted case, we the Fifth Cir followed paid any borrowings terest made cuit’s decision American National acquisition of bonds. States, Bank of Austin v. United 421 F. conclusion tax that there was somehow a (1970). But neither of these de 2d 442 evasion the transaction between acquiring tax cisions dealt with a bank appears bank and its trust accounts acquisition as free bonds for ultimate stipulat- derive from the fact that was being by ad investments trust accounts ed that “the trust accounts by depart the bank’s trust ministered plus bank the cost of the accrued ment. interest.” There is no in the evidence Congress providing exemp- of The Act any record to purchased by of the bonds show that provides publicly tion issued bonds Department had the Trust 103(a)(1) follows: as U.S.C. § declined in value time “(a) General Rule.—Gross original purchase to date of a trust does not on— include interest acquisition estate’s of them. If obligations State, of a the mar- more than Territory, or a Unit- might bonds, acquired ket value of there any political ed or subdivision duty fiduciary indeed be a breach foregoing, or of the Dis- part upon Such of the trust officer. Columbia;” trict of conduct, however, repeal would not Sec- plain language, 103(a)(1) This is ing tion so as to taxable and I find noth- make says not taxable. what that Section the conduct its illegality necessary or immorali- trust officers which am unable to find made it emphasize holding cxprcssly in nil cir- 1. not decide whether We with re do that our depart- spect a bank’s commercial to the bonds involved in intra cumstances exemption narrowly upon a tax be denied should transactions based accruing stipulation on bonds for interest the always purchased the trust accounts contemplation purchases eventual the bonds from the department. i)rice paid to the bank’s sale at the the latter interest. We handling ty of bonds accounts,

bank’s trust revenue tax denied States to it.

that was due Court the District vacate

I would ac-

judgment to the bonds it relates trust ac-

quired bank’s

counts. America, STATES of UNITED (argued), C. Ausum John H. Plaintiff-Appellant, James Howard, LeGros, Bradbury, Buchan- Seattle, Wash., Paul, an & F. Lawrence GALLAGHER,

William Defendant- Ledebur, Section, Chief, Admiralty Appellee. Pitkin, C., Washington, U. D. Stan S. No. 71-1538. Atty., Seattle, Wash., plaintiff-appel- Appeals, United States Court of lant. Ninth Circuit. (argued), Don M. Gulliford Ruther- 3,Oct. ford, Kargianis Seattle, & Austin, Wash., defendant-appellee. HAMLEY, Before HUFSTEDLER GOODWIN, Judges.

HUFSTEDLER, Judge: complaint The Government filed a against Gallagher, negligently in- who jured employed by a seaman sums its sea- to recover man for maintenance and cure. action, and district dismissed court appeals. F.Supp. the Government stipulated The case tried on facts. was 1968, Gallagher negligently drove his causing injury taxicab, Frey, the sea- man, passenger who was cab. Frey a civilian on a was crewmember He vessel owned the Government. was on hurt. shore leave when he was paid Frey The Government maintenance during recuperation. and cure his Frey brought damage action Gallagher in state court. After liability Frey’s court decided favor un- terms settled on Govern- disclosed in record. The our

Case Details

Case Name: First American National Bank of Nashville v. United States

Court Name: Court of Appeals for the First Circuit

Date Published: Oct 4, 1972

Citation: 467 F.2d 1098

Docket Number: 71-1491

Court Abbreviation: 1st Cir.