#### GEORGINE ISELIN v. THE UNITED STATES1

[No. B-96.

Decided May 5, 1924]

*On the Proofs*

*Internal revenue tax; tax on admission.*— -Persons who are subject to the license tax imposed by paragraph 5 of section 800 (a) of the act of February 24, 1919, 40 Stat. 1057, 1120, and have paid a tax thereunder, are also subject .to the tax imposed by paragraph 3 of said section.

*655*The Reporter's*statement of the case:

*Mr. Charles P. Howland*for tlie plaintiff. Rush-more, *Bisbee <&*Stern, and *Mr. Harris Barlach*were on tlie briefs.

*Messrs. Fred K. Di/av*and *Charles T.*Hendler, witli ■whom was *Mr. Assistant Attorney General Robert H.*Lovett, for the defendant. *Mr. Nelson T. Mart-son*was on tlie brief. A

The following are the facts of the case as found by the court:

I. At all times material to this action the plaintiff, Georgine Iselin, was and now is the owner of three hundred shares of the capital stock of Metropolitan Opera and Neal Estate Company (hereinafter referred to as the Metropolitan’Company), a corporation organized under the laws of the State of New York and having its principal office at No. 150 West Fortieth Street, city of New York, N. Y.

II. The objects of the Metropolitan Company are stated in its certificate of incorporation, which is attached to the petition of the. plaintiff marked “ Exhibit A,” and made a part hereof by reference-. At all times material to this action the Metropolitan Opera Company owned and now owns the premises known as the Metropolitan Opera House in the block bounded by Broadway, Seventh Avenue, Thirty-Ninth and Fortieth Streets, in the borough of Manhattan, city of New York.

III. In and by a certain lease and agreement dated April 51, 1908, which is still in force and effect, the Metropolitan Company leased the said Opera House and other property to the Conried Metropolitan Opera Company, the name of which was l'ater changed to Metropolitan Opera Company (hereinafter referred to as the Opera Company), a corporation organized under the laws of the State of New York. Under the terms of said lease and agreement, and in consideration of the letting of the property referred to therein, the Opera Company covenanted and agreed to reserve for the use of the Metropolitan Company or such persons as it might designate at every representation of grand opera given during the term of said lease all of the boxes situated *656on tlie parterre tier of the said Opera House; tliat “ six free 'admissions shall be allowed for each of the parterre boxes reserved as aforesaid ”; to pay the Metropolitan Company a yearly rent or sum of $67,000; and to give a season of not less than sixty and not more than seventy regular representations of grand opera at the said Opera House in each year of the terms of said lease. JJnder the terms of said lease and agreement the Metropolitan Company covenanted and agreed to pay to the Opera Company as a subsidy the sum of $1,000 for each of the regular performances of grand opera to be given as provided therein. During all the times material to this action such subsidy amounted to $70,000 for each season, which was duly paid. The lease and agreement above referred to is attached to the petition of the claimant marked “ Exhibit B,” and is made a part hereof by reference.

IV. At all times material to this action the by-laws of the Metropolitan' Company have contained and now contain the following provision:

“ ARTICLE VII

“ SectioN 4. Each holder or holders of 300 shares of stock shall have a license to use a designated box upon the parterre tier of the opera house. The license to use a box, above referred to, shall entitle the stockholder or stockholders, to whom such box is allotted, to occupy the box at all representations of grand opera, subject to such assessments and under such general rules 'and regulations as the board of directors may, from time to time, determine. No stockholder who is indebted to the company shall be allowed to use his box until such indebtedness is fully paid.”

V. The stockholders óf the Metropolitan Company entered into a further agreement, dated February 15, 1916, with the Metropolitan Company and with the Guaranty Trust Comp'any of New York (successor to the New York Guaranty and Indemnity Company), as trustee, providing among other things:

“First: Such of the stockholders of the company [i. e., the Metropolitan Company] as shall sign this agreement, each for himself and his or her representatives, executors, administrators, and assigns, severally agree with each other *657and with the company, that they will, from timé to time, contribute to and for the use of the company such amounts of money in addition to the assessments provided for in said agreement of March 7, 1893 (not exceeding however the additional sum of five dollars for each share of stock in any one year), as the directors of the company may in their discretion see fit to call for.”

Said agreement is attached to the petition of the claimant as “ Exhibit C,” and made 'a part hereof by reference.

VI. The stockholders of the Metropolitan Company entered into an agreement, dated March 7,1893, with the Metropolitan Company and with the New York Guaranty and Indemnity Company, as trustee. S'aid agreement provides among other things:

“ *First.*— The stockholders,- each for himself and his or her representatives, executors, administrators, and assigns, severally agree with each other, and with the company [i. e. the Metropolitan Company], that they will, from time to time, contribute to and for the use of the said company such amounts of money (not exceeding $10 for each share of stock in any one year) as the directors of the said company may in their discretion see fit to call for.”

Said agreement is attached to the petition of the claimant as *“*Exhibit D,” and is made a part hereof by reference.

VII. On or about March 28,1905, the plaintiff became the owner and holder of 300 shares of the capital stock of the Metropolitan Company, and thereby acquired a license to use the box numbered lo upon the parterre tier of the said opera house. At all times thereafter the plaintiff continued to own and now oaviis said shares of stock and the license to use said box.

VIII. Pursuant to the provisions of the by-laws set forth in proposition 5 above, and to the rules and regulations of the board of directors of the Metropolitan Company, the plaintiff duly signed and became, a .party to each of said agreements, Exhibit C and Exhibit D. In each and every year during which the plaintiff has held said stock in the Metropolitan Company she has duly paid the annual assessment called for by the directors of the Metropolitan Company and has been allowed to use said box; in November, 1919, the directors called for an assessment of $3,000, which *658she duly paid. The Metropolitan Company has never realized any annual profit, and has never distributed any profits to its stockholders.

IX.In consideration of the sum of $9,525 the plaintiff transferred the license to use said box for 47 performances during the grand opera season extending from November, 1919, to April, 1920, both inclusive, for a consideration computed as follows:

1 Opening night performance_ $550

11 Monday night performances, at $275 each_3, 025

11 Monday night performances, at $200 each_2, 200

23 Friday night performances, at $150 each_3, 450

1 “ Prince of Wales ” performance, November 18, 1919_ 300

47 9,525

X. Prior to the opening of said opera season six tickets of admission to the parterre box of the plaintiff were issued to her for each performance during the opera season. The plaintiff employed an agent to sell and dispose of the said tickets for her; said agent sold said tickets, which gave the purchasers thereof the right to use said box for the performance for which the tickets were sold. The said agent submitted to the plaintiff the names of the persons to whom the tickets were sold, and she transferred to such persons the license to use said box in consideration of the amount for which she, through her agent, sold said tickets. The plaintiff paid to said agent a commission for his services.

XI. On or about December 30, 1919, the plaintiff without protest, made a return and paid tax thereon under the provisions of section 800(a), paragraph (5), of the revenue act of 1918, said return being based upon an admission price of $60 per performance.

XII. On or about August 4, 1919, the attorneys for the Metropolitan Company asked the Commissioner of Internal Revenue for a ruling with respect to the application of section 800(a) of the revenue act of 1918 to transactions such as are set forth above. Under date of December 24, 1919. the Commissioner of Internal Revenue ruled as follows (p. 59) :

“Any stockholder of the Metropolitan Opera and Real Estate Company selling a ticket for admission to any of the boxes in question, whether direct or through the opera house *659bos office, is subject to the tax imposed by paragraph (3) of this section of the statute and must mark such ticket in accordance with article 51 of the enclosed regulations. The basis for computing this tax is the dilference between the established price of the box seat in the second tier for that performance, as determined by article 17 of the enclosed regulations, and the price for which the ticket is sold.”

The established price at which the boxes situated in the second tier, which is the tier above the parterre boxes in the said Opera House and known as the grand tier boxes, were sold for the performances at the box office to the general public was $60 for each performance.

XIII. The boxes described as the grand tier boxes, the price of which is fixed at the box office of the opera house at $60 per performance and which seat six persons, are uniform in size with the boxes of the stockholders known as the parterre boxes, which also seat six persons and are substantially similar thereto.

XIII. In compliance with said ruling the plaintiff on or about January 28, 1920, made a return to the collector of internal revenue for the second district of New York, setting forth said transactions, and the plaintiff paid to said collector of internal revenue the sum of $3,352.50, being a tax equivalent to 50 per centum of the excess of said sum of $9,525 over an amount equal to $60 for each of said 47 performances, said return being filed and said payment being made under protest and because of duress and in order to avoid the imposition of penalties. Thereafter, on October 23, 1920, the plaintiff presented to the Commissioner of Internal Revenue a claim for the refunding of said tax and alleged the same to have been erroneously or illegally collected. Said claim for refund was duly filed with the Commissioner of Internal Revenue according to the provisions of law in that regard and the regulations of the Secretary of the Treasury established in pursuance thereof. On or about May 27, 1921, the Commissioner of Internal Revenue rendered a decision on said claim and rejected the same, ruling that said alleged tax was payable under the provisions of paragraph (4) of Section 800 (a) of the revenue act of 1918.

1

 Appealed.

*660Hay, Judge,

delivered the opinion of the Court:

The plaintiff is the owner and holder of 300 shares of the capital stock of the Metropolitan Company, and thereby is entitled to a license to use box No. 15 upon the parterre tier of the Metropolitan Opera House.

On December 30, 1919, the plaintiff without protest made a return and paid tax thereon under the provisions of section 800 (a), paragraph (5) of the revenue-act of 1918, said return being based upon an admission price of $60 per performance during the opera season extending from November 1919, to April, 1920, both inclusive.

On December 24, 1919, the Commissioner of Internal Revenue made a ruling that any, stockholder of the Metropolitan Company selling a ticket for admission to any of the boxes held by the stockholders of said company, whether the sale of tickets was direct or through the opera house box office, was subject to the tax imposed by paragraph (3) of section 800 (a) of the revenue act of 1918.

In compliance with that ruling the plaintiff on January 28, 1920, made a return to the collector of internal revenue for the second district of New York, setting forth that she had, in consideration of the sum of $9,525 sold tickets to her box in the said opera house for 47 performances during the grand opera season from November, 1919, to Arpil, 1920, both inclusive; and the plaintiff paid to the said collector the sum of $3,352.50, being a tax equivalent to 50 per centum of the excess of said sum of $9,525' over an amount equal to $60 for each of said 47 performances, said return being filed and said payment being made under protest. Thereafter, on October 23,1920, the plaintiff presented to the Commissioner of Internal Revenue a claim for the refunding of said tax and alleged that the same was erroneously or illegally collected. On May 27, 1921, the Commissioner of Internal Revenue rendered a decision on said claim and rejected the same. Whereupon the plaintiff brought this suit to recover from the United States the said sum of $3,352.50.

The decision of this case depends upon the construction which is to be placed upon paragraph (3) of section 800 *661(a) of the revenue act of 1918, taken in connection with, paragraph (5) of the same section and act.

Paragraph (5) reads as follows:

> “ In the case of persons having the permanent use of boxes or seats in an opera house or any place of amusement or a lease for the use of box or seat in such opera house or place of amusement (in lieu of the tax imposed by paragraph (1)), a tax equivalent to 10 per centum of the amount for which a similar box or seat is sold for each performance or exhibition at which the box or seat is used or reserved by or for the lessee or holder, such tax to be paid by the lessee or holder.”

Under this paragraph the plaintiff made a return and paid the tax. In making said return she fixed the price of the box which she holds at $60, which was equivalent to $10 for each ticket sold for said box, it appearing that six tickets for said box for each performance are issued to the holder of the box, prior to the opening of the opera season. The plaintiff in this case employed an agent to sell and dispose of the said tickets for her. The agent sold the tickets, and after deducting his' commission for his sendees turned over the proceeds of said sales to the plaintiff. The taxes were paid by the plaintiff without protest, and she does not now make any claim for the refund of the taxes paid by her under paragraph (5).

Paragraph (3) of section (800) (a) of the revenue act of 1918 reads as follows:

> (3) Upon tickets or cards of admission to theaters, operas, and other places of amusement, sold at news stands, hotels, and places other than the ticket offices of such theaters, operas, or other places of amusement, at not to exceed 50 cents' in excess of the sum of the established price therefor at such ticket offices plus the amount of any tax imposed under paragraph (1), a tax equivalent to 5 per cent of the amount of such excess; and if sold for more than 50 cents in excess of the sum of such established, price plus the amount of any tax imposed under paragraph (1), a tax equivalent to 50 per cent of the whole amount of such excess, such taxes to be returned and paid, in the manner provided in section 903, by the person selling such tickets.

It will be observed that under this paragraph the tax is imposed on the persons selling the tickets.

*662The tax is imposed upon persons who sell tickets at news stands, hotels, and places. other than the ticket offices of theaters, operas, or other places of amusement. From the wording of the statute, then, it makes no difference where the tickets are sold by the person selling them. It is enough if they are sold, and it can not be said that in order to be subject to the tax the person selling them must sell them at news stands, hotels, and places of like character. If that were so the intent and purposes of the act would be defeated and the payment of the tax could very easily lie evaded.

Manifestly it was the intent and purpose of Congress that if tickets were sold for more than 50 cents in excess of the established price, plus the amount of the tax imposed under paragraph (1), a tax equivalent to *50*per centum of the whole amount of such excess should be imposed. Such tax was not confined to tickets sold at news stands, hotels, and similar places, but was to apply to all sales of tickets and to all persons selling them wherever sold. The plaintiff is not exempt from the tax imposed by paragraph (3) unless she can demonstrate that the tickets sold by her are not included in the provisions of that paragraph.

The plaintiff in order to do this contends that having paid the tax imposed by paragraph (5) she is exempt from paying the tax imposed hv paragraph (3). no matter at what price she may have sold the tickets for her box.

When Congress enacted paragraph (5) of the statute the evident purpose was to reach by a larger tax persons who were able to have the permanent use of boxes in an opera house, or who had a lease for such boxes. Tt. was not assumed that such persons would sell tickets for these boxes, or if it was. Congress might well have considered that paragraph (3) would apply as well to such persons as to other sellers of tickets. There is nothing in paragraph (5) which of itself exempts'the holders of boxes from the provisions of paragraph (3).

The plaintiff lays much stress upon the alleged fact that there was no established price for the tickets sold by her, and argues that if there was no established price for said tickets she does not come under the provisions of paragraph *663(3) ; tbat an established price for said tickets must be shown to exist, or to be in effect at the time of the sale, before the tax can be imposed.

The Government in ascertaining the tax for which the plaintiff was liable under paragraph (5) fixed the price of the box of the plaintiff at $60 or $10 for each ticket. She paid this tax without protest and thereby acquiesced in and agreed that $60 was the price of the box for purposes of taxation under paragraph (5). If, then, $60 was the price which was recognized both by the plaintiff and the Government as being the price established for purposes of taxation under paragraph (5) it necessarily became the established price upon which to base the tax imposed by paragraph (3) if plaintiff was liable for said last-named tax, as any person would be who sold tickets for more than 50 cents in excess of the sum of the established price.

It seems to be the contention of the plaintiff that a price must be established by some person having the power of establishment. Who other than the plaintiff had the x>ower to establish the price of a box, or seats in a box, over which she had absolute control? And so when it came to establishing a price for her box for purposes of taxation she acquiesced in the price.

It is true that she sold her box for the 47 performances for a price which was far in excess of the $60. But because she established one price at one time and another price at another time, can she thereby be relieved of taxation by alleging that there was no established price as required by the statute? If so, then the statute is nugatory, not only as to the plaintiff but as to all others who might have it in their power to establish prices for tickets at first one price and then another.

The statute must be construed in the light of reason and common sense, and it is not perceived why the plaintiff should be exempted from the tax imposed by paragraph (3). She sold the tickets and obtained for them more than 50 cents in excess of the sum of the established price. The intent and purpose of Congress was to impose a tax in just such a. case, and the fact that the plaintiff paid another and *664a different tax upon a box whicli she owned can not excuse her from paying the tax. Nor does it seem a great hardship even if the $3,000 assessment paid by her is taken into consideration, for after paying the assessment on her shares of stock and the tax she has still something over $3,000 as the result of her ticket sales.

These being the views of the majority of the court the petition of the plaintiff must be dismissed. It is so ordered.