*1 67 voluntarily St. trust. The trust on its (Smith-Hurd entered the statutes of Illinois Rev. debt, (Bums’ books, 17) and as its own liabilities 1931, 83, c. Indiana the tax Ill. corporation 1920. It if 1926, 302) Ann. actions aro St. Ind. family the Wolf removed their years. Within that time barred in themselves ten property another; government claim court from one filed house le they changed showing had been none their bankruptcy, that there address but liability against traits, obligations, rights. gally property a tax established corporation in the claimed. sum bankruptcy court, being a court The beyond of equity, looks outward mere recognize Illinois Indiana Both parties interest-beyond shell benefit persons for whose rule that third corporate fictions of law forms to may bring action thereon. contract is purposes and officers identified Kirkwood, 172 who are Bank Nat. See Commercial v. 216 S., See purpose. McCaskill Co.v. U. 107 219; Walker, E. Dean v. Ill. 50 N. U. 504, 30 590. The S. S. Ct. 54 L. 467; Ed. Rep. Chicago Title 540, Am. Ill. 47 government recognizes prop federal rules of 396, 144 Trust, Ill. Trust Central 312 Co. v. erty, compelled recognize but is trans 107, 132 165; Lackey, E. v. 191 Ind. N. Hess change fers which in no 562; result substantial Swaynie, v. 71 Ind. 257; N. E. Tinkler ownership. beneficial Osburn Califor Ind. N. E. See Moore, 153 53 Ransdel v. Corp. (C. A.) F.(2d) nia v. 39 Welch C. despite And, 53 L. A. 753. what R. commonwealths, the the rule in various other bankrupt The estate for the tax is liable long federal has abided in the same rule entity orig- as an identity the same as the S. Lindsay, 93 Hendrick v. U. courts. See taxpayer. inal liable, It 855; Co. 23 Amusement Princess pay agreement, terms the tax the trust (C. 6), 226 certiorari Wells, 271 F. A. liability corporation. The decree of 65 L. denied, S. Ct. 256 U. district court affirmed. Machine Talking 1178; v. Victor Ed. Gibson 225; Pullman’s (D. Barker v. C.) Co. E. page C.) (C. Palace F. Car al., 81 F. et Blackmore Parkes F. Dresser, In re 6);A.C. UNDERWOOD v. COMMISSIONER OF IN- Bank, 30 2);A. Millett v. Omaha Nat. TERNAL REVENUE. 8). follows that F.(2d) (C. C. A. No. 3208. legal lia having government, established file bility corporation, was entitled of the Appeals, Circuit Court of Fourth Circuit. bankrupt elaim in allowed its Jan. agreed assumed and parties who estate of the Rehearing 7, 1932. Denied March Furthermore, it was pay liabilities. such sitting duty, equity, the court’s bankrupt property of treat benefit creditors of fund for of the trust according respective corporation to their priorities. opinion We are of also that the court justified treating li tax as direct ability bankrupt ground identity entity organ in the two there family members izations. The of the Wolf of the trust who were beneficiaries corporation. such, stockholders As transfer of assets to authorized the stockholders in the themselves old Officers proportions'. corporation same officers of the trust. The identical became only change corporate was one existence executed waiver, to trust existence. corporation, signed by name of the secretary and treasurer of the trust. corpora appeal, perfected the name of the tion, by the was executed same officer *2 Washington, C.,D. Korner,
J. G. Jr., of for petitioner. building Atty. chitect, appointed Thompson, Wm. Sp. Asst. Cutler Car of North Gen., Public Laws Atty. commission. See Youngquist,
Gen. (G. A.
Asst.
Stat
olina of
ch.
Consolidated
Sp.
Atty. Gen., and
Sewall Key,
Asst. to
7494. In
In utes of North
§§
C. M.
Counsel, Bureau
Charest, Gen.
assist
employed as an
1919 Underwood was
ternal
L. H.
*3
Revenue, and Harold Allen and
in
salary
a
and served
ant state architect on
Rushbrook, Sp.
Internal
Attys., Bureau of
when
capacity
that
until March
Revenue,
Washington,
C.,
all of
D.
on the
Legisla
by the
changes
in
law
respondent.
were made
brief), for
providing
ture. The
for
statutes
and
PARKER, NORTHCOTT,
Before
architect
building
and the state
commission
SOPER,
Judges.
Circuit
provided
repealed;
and it was
were
come
of
institutions should
each
certain state
SOPER,
Judge.
Circuit
management of a
under
control
Harry
Underwood, a
of North
A.
resident
trustees,
appoint
board of
or
directors
Carolina, appealed
United States
by
Governor;
ed
each board should
Appeals
determination
of Tax
from a
Board
of
responsible
management
be held
for the
Internal
and order of the Commissioner of
care,
the institution
and for
committed to its
taxes
Revenue in
in income
which deficiencies
appropriations
the disbursements of
$4,112.49
years
$1,199.46,
the fiscal
of
for
permanent enlargement
maintenance and
ending February 29, 1924,
February
repair thereof; and that each
board
1925, respectively,
deter
assessed. The
were
appoint
select
from
a build
members
required
mination
include
ing
specially charged
committee,
with
$68,080.60,
his taxable
re
income the sum of
duty
supervision
buildings
of
$44,
by
of
first,
ceived
him in the
sum
repaired
built
appropriations
or
from
666.15,
these
by
received
of
him the second
to the
of
by
Assembly
institution
the General
by
years,
supplied
services
for
rendered and
Caro
state. See
Laws of North
Public
engineer
supervising
him as
architect
lina
North Car
of
chs. 183 and
state
connection with
of
the construction
(e),
olina
of
(a)
Code
§§
buildings
schools,
for
other
hospitals,
and sections 7487-7494.
public
His
institutions
Carolina.
of North
pro
legislative
theAs
of
result
these
complaint
the mon
contention and
was
visions,
several
appointed
boards
from
eys in
by him as com
were received
joint
their membership a
building commit
personal
em
pensation for
services as
tee,
April
body entered
this
exempt
state,
such,
ployee of
and as
were
into
contract
Underwood,
engineer
with
from federal
taxes.
income
The
superintend
and architect, to
direct the
ac
Appeals
the Commissioner’s
affirmed
institutions,
construction
work at certain
tion,
state
holding
Underwood was
independent contractor; and devoting
employment,
his entire
employee but
time to the
by
brought
peti
was
salary
per
ease
to this
for d
together
$500
month
with
tion for review.
office,
traveling,
expenses.
and clerical
might
contract provided
party
that either
ab
by
The Revenue Act of 1926
section
rogate
upon
sixty
party
giving the
1065b), provides
other
9,130 (26
Stat.
days’
findings
notice. The
of the Board
exemption
income
retroactively
for
offi Tax
compensation
state
that Underwood entered
taxes
received
show
employees
into
following
performance
cers and
terms:
contract
“Any
imposed
ployment
taxes
Revenue
agreed,
Act
devoted his entire time
prior
Revenue
in
or
Acts
any
job,
and did the work for four or five
respect
dividual
of amounts received
direction, control,
institutions under
compensation
personal
him as
services supervision
building
committee. He
employee
as an
or
any
officer
state
employed
discharged
the members
political subdivision thereof
(except to
force;
identity
his office
their number and
compensation
paid by the
extent
such
kept
his
He
was left
discretion.
accounts
directly
Government
indi
United States
expenses,
regular
intervals sub
his
shall, subject
period
rectly),
statutory
expens
salary
for his
mitted statements
applicable thereto,
properly
of limitations
upon the
received warrants
state
es, and
abated,
refunded.”
credited, or
therefor,
paid
which were
treasurer
out
appropriations.
payments
legislative
pro-
Formerly
North Carolina
the laws of
charged
state authorities
were
building’
commission to to
vided
state
against
appropriations
equal amounts
building
carry
public
co-ordinate and
state,
institutions concerned.
for a state ar-
and also
work of
be
less an
Early
changed
and not
plan
contractor
this
employee
exempt
cause
thought
the institu
whose
unfair to
com from
programs
income taxes.
tions
The Board said:
building
whose
agreed
paratively small.
therefore
“Although
petitioner
con-
his
expenses
cost and
thereafter the
required
tract was
and did devote
devote
employment should be divided
architect’s
perform-
time
entire
and attention
in the
among the
served
various institutions
ance of
North
his contracts with the
State
ap
proportions
legislative
their several
are
those services
such as
propriations
sum
bore
total
performed
en-
ordinarily
an architect
one
change,
appropriations.
Another
gineer.
plans
He
drew
in accordance
case,
important
decision of this
more
requirements
em-
suggestions
larger
brought
about
fact
*4
ployers
complied
he
with
wishes
and
their
by the
program
undertaken
building
was
respect
buildings
with
planning
the
to
the
state,
entailed
services
which
more onerous
did, however,
and the
He
erection of them.
part
than
the
of the architect.
formerly on
as-
maintain
office,employ
own
his own
his
in
The number
was
institutions served
of.
sistants,
expense
em-
the
of their
and bore
lieu
* * *
agreed
creased
It was
to twelve.
ployment
expenses,
salary
$500,
he should
the
and
“The
was
building program of the state
percentage
moneys expend
on
paid
the
be
required
petition-
extensive
the
and the state
depend
cent.,
ed,
per
ranging
to
1½
er to devote his
this work until
entire
to
time
the
the
ing upon
character and amount
completed.
the' same
In
performance
was
the
be
to
engineering services
architectural and
comply
the work
in-
he was to
with the
performed.
employers.
and
structions
of his
directions
architect
arrangement,
the
the
Under
new
bring
But
to
these results
he was
about
the
his entire
to
to devote
time
continued
through his own methods
instrumentali-
the
state,
direction of
the
work
the
think,
ties.
as
This,
stamps
petitioner
we
joint
committee,
he maintained
building
but
an
independent
with the State
contractor
continued
expense
at
own
office
his
employee.”
North
than as
rather
discharge
employ
his assistants
to
findings
These
are attacked
employees
necessities of
at will as the
on
at
behalf of
variance with
trial
at
required.
testified
work
He
testimony
express
of the committee’s
he
various
met with
boards
not
committee directed
chairman.
only
plans
them, and
institutions, discussed
result to be obtained
the method
but
prepared
drawings
final
preliminary
for their
employed
to
himself
by
be
the architect. He
approval.
said:
received in
He also
“I
testimony;
is
not
go
did
so far
his
$68,080.60;
$44,666.15.
I received in
likely
the chairman
intended
office
pay
Out
those
I
to
amounts
literally
the equiva
statement
taken
to be
hire, and
rent,
expenses, including
all
clerk
by
language
lent of the
so
often used
expens-
stationery
supplies, and all
office
independ
discussing
courts in
running
of-
es
covering
architect’s
Singer
instance,
ent
contractors, as
had
say
In 1924 and 1925 I
I
fice.
would
Manufacturing
Rahn,
employees.
ten
They
or twelve
archi-
were
said, page
where the
Ct.
tects, draftsmen, engineers,
inspectors
176,
engaged upon taxable, state were not state income work from it was necessary ployees, since the measure not still of control was to determine the deductions McDonough necessary expenses sufficiently ordinary full. Burnet v. See 944; Byers C. A.) F.(2d) 46 Blair Act v. business be allowed under the Revenue 326; Howard, 1924, 214, (26 A.) (2d) 35 F. Stat. Lucas 74 L. note). U. Ed. S. Ct. Reed, Lucas 50 S. Ct. Board, obvious $68,080.60 evidence it, the sums $44,666.15 years in Feb- ending There are a number circumstances represent- alone, 1925; respectively, tend which, ruary 1924 and taken pending Indeed, the employer em ed gross income. relationship to show net *6 the pointed opinion con in that ployee than rather that Board out of employ went to paid the tractor. no other commissions architect The architect had to always personal the ment; compensate command of him not for his only he was the at by they as also rendered services, to for perform such services but the services commission he the whose salaries might direct; employment continu assistants in office duration, paid; to the sus- ous, regular, of indefinite Board used this fact to him, taxpayer the tain its conclusion the did long as wanted continue so state exemption however, granted by the con within the the come qualification, with the party respect individual to amounts either statute to an in might tract terminated person- full days’ granting received for But him as notice. sixty in employee. that al a for considerations, think as state Counsel we services weight these to court, in Commissioner, were suffi the brief in this circumstances other attendant the emphasized independ point, the the nec- saying the to architect constitute cient merely engaged expenses essary office salaries of ten He was not ent contractor. beyond employees, the office consisting or twelve of archi- work upon professional skilled detail, engineers, tects, others, employers draftsmen, in must to control ability of his greater part twelve have absorbed far the the of office of of he in but .control power taxpayer the to amounts which the had received. employees whom he skilled ac will and whose discharge at employ and affairs, Notwithstanding state this subject direction. exclusive to his tivities were any make al Commissioner failed to figure were fixed a suffi commissions His ciently high taxpayer’s expenses lowance for the as ex to reimburse him for the receipts; the tax the gross sessed and this de office; nevertheless he but penses only action was affirmed Board. expenditures should be office termined what explanation in this court offered is work long performed he made, and so evidence did not disclose Board to properly, was entitled to him he intrusted expenses incurred; amount much commissions retain for himself so proof a this burden of sort is case expenses of the office after the remained taxpayer Board upon therefore the this substantial con met. We think obliged affirm Commissioner’s de to authorities, to intrusted trol, It termination. is settled that relationship incompatible with proof by burden a of de has the number employee, him an constituted ployer Supreme Burnet v. Court. cisions of independent contractor. 223, 413, 75 283 51 S. Houston, Ct. S., 991; Botany Mills 278 S. L. v. U. U. Ed. Board of Tax Although ruling 379; Ed. Reinecke 282; 129, L. 49 Ct. 73 regard S. this dis- correct Appeals was
73
ac
verse a
Board,
74
decision
if not
227,
96,
Spalding,
v.
280
50 Ct.
S.
S.
U.
re
S.,
law,
with
385;
Ed.
v.
cordance
with or
L.
Niles Bement Pond Co. U.
without
justice
rehearing,
251,
manding
ease
a
361,
281 U.
50
74
S.
S.
Ct.
require.
Cir
may
instances,
a
this rule so
number of
901. But we
do not think
In
eases
Appeals
re
Courts of
have remanded
powers
cuit
restricts
quire
of the Board
injustice.
necessary
rehearing
when it seemed
it to countenance
obvious
justice
It
parties.
order to do
does
“The
not court.
Board
is
appear
Old
in these
new evidence
an executive
administrative board.”
eases that
available;
Colony
279
evi
Commissioner,
S.
instant ease
Trust Co. v.
U.
but in the
dence is
Ed. 918.
known to
49
73 L.
exist and it would be
S. Ct.
it.
creating the abuse
discretion to
“An
decline
receive
examination
sections
(C.
A.) 39
can leave See Cohan v. Commissioner
C.
investing
power
board
with
it
F.(2d) 540, 543;
Soap
v. Lucas
doubt
intended to confer
Citrus
Co.
(C.
F.(2d)
42
judicial
A.)
372, 373;
C.
Porter
upon
appellate
are
Isbell
which
powers
v
(C.
432;
required by
A.)
sec
C.
only
40 F.(2d)
Not
Commissioner
is it
character.
Independent
Storage
hear
Ice Cold
tion
1216
v. Com
(e)
900
USCA
Co.
note]
[26
A.)
(C.
F.(2d)
missioner
50
appeals
section
C.
Russell
determine
taken under
v.
Commissioner
seq.],
A.)
F.(2d)
C.
100.
et
which
USCA
note
[26
addition,
In
is the
appeal
every ease where
there
rule
allows an
well-established
terms
Commissioner,
appellate
that an
power,
court has the
with
deficiency
is found
determining
out
oaths, and
empowered
disposing
case,
administer
but
remand it to
compel
lower court
attendance witnesses and
further
may proceedings
production of documents
records. It
has been
tried
investigate
gov wrong
anew
issues
theory,
between
record
not in condi
appellate
tion
taxpayer,
the de
ernment
decide the
question presented
appeal
affirm,
justice
set
par
all
termination
findings
aside, modify the
decision
See Finefrock
ties concerned.
Kenova
Co.,
(C. A.)
Mine
Petition
MARSHALL, Com’r, Deputy al. AN- et F. et al. DREW MAHONY CO.
No. Appeals, Court of Ninth
Circuit Circuit. Feb. Savage, Jeffrey Anthony Atty., U. S. Heiman, Atty., Seattle, Asst. both of
Wash., appellant Marshall.