Source: https://law.justia.com/cases/federal/appellate-courts/F2/452/741/174675/
Timestamp: 2018-10-15 18:00:59
Document Index: 165470094

Matched Legal Cases: ['§ 331', '§ 348', '§ 349', '§ 335', '§ 465', '§ 335', '§ 396']

Bryan L. Stevens and Bryan L. Stevens As Surviving Spouse Ofalma Stevens, Deceased, Petitioner-appellant, v. Commissioner of Internal Revenue, Respondent-appellee.bryan L. Stevens and Bryan L. Stevens As Surviving Spouse Ofalma Stevens, Deceased, Petitioner-appellee, v. Commissioner of Internal Revenue, Respondent-appellant, 452 F.2d 741 (9th Cir. 1971) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Ninth Circuit › 1971 › Bryan L. Stevens and Bryan L. Stevens As Surviving Spouse Ofalma Stevens, Deceased, Petitioner-appel...
Bryan L. Stevens and Bryan L. Stevens As Surviving Spouse Ofalma Stevens, Deceased, Petitioner-appellant, v. Commissioner of Internal Revenue, Respondent-appellee.bryan L. Stevens and Bryan L. Stevens As Surviving Spouse Ofalma Stevens, Deceased, Petitioner-appellee, v. Commissioner of Internal Revenue, Respondent-appellant, 452 F.2d 741 (9th Cir. 1971)
U.S. Court of Appeals for the Ninth Circuit - 452 F.2d 741 (9th Cir. 1971)
The determination of both appeals involves primarily the applicability and scope of the decision of the Supreme Court in Squire v. Capoeman, 1956, 351 U.S. 1, 76 S. Ct. 611, 100 L. Ed. 883. In that case the taxpayers' lands had been granted to them under the General Allotment Act of 1887, 24 Stat. 388, 25 U.S.C. § 331 et seq. The Act provides that at the expiration of the trust period the United States will convey the land by patent "in fee, discharged of said trust and free of all charge or incumbrance whatsoever." 25 U.S.C. § 348. An amendment to Section 6 of the Act, 25 U.S.C. § 349, gives the Secretary of the Interior discretionary power to issue a fee patent which would remove "all restrictions as to sale, incumbrance, or taxation of said land * * *." The Court held that under these provisions income derived from the sale of timber from the allotted lands was exempt from capital gains taxes.
The Court recognized that "to be valid, exemptions to tax laws should be clearly expressed" and that the "Government's promise to transfer the fee 'free of all charge or incumbrance whatsoever' * * is not expressly couched in terms of nontaxability," but referred to its prior holding in Carpenter v. Shaw, 1930, 280 U.S. 363, 367, 50 S. Ct. 121, 74 L. Ed. 478, that "Doubtful expressions are to be resolved in favor of the weak and defenseless people who are the wards of the nation, dependent upon its protection and good faith," quoting the words of Chief Justice Marshall in Worcester v. State of Georgia, 6 Pet. (31 U.S.) 515, 582, 8 L. Ed. 483, that, "The language used in treaties with the Indians should never be construed to their prejudice." 351 U.S. at 6-7, 76 S. Ct. at 615.
"(U)nable, by implication, to impute to Congress under the broad language of our Internal Revenue Acts an intent to impose a tax for the benefit of the Federal Government on income derived from the restricted property of these wards of the nation; property the management and control of which rests largely in the hands of officers of the Government charged by law with the responsibility and duty of protecting the interests and welfare of these dependent people. In other words, it is not lightly to be assumed that Congress intended to tax the ward for the benefit of the guardian." 34 Op.Atty.Gen. 439, 445 (1925) as quoted in Capoeman, 351 U.S. at 8, 76 S. Ct. at 616.
Capoeman is not a technical or narrow decision; nor is its holding limited to capital gains taxes. Rather the Court found implicit in Section 5 and the amendment to Section 6 of the General Allotment Act a "congressional intent to subject an Indian allotment to all taxes only after a patent in fee is issued to the allottee."7 351 U.S. at 8, 76 S. Ct. at 616.
The provisions of the General Allotment Act were extended to lands purchased for the benefit of Indians by the Act of February 14, 1923, 42 Stat. 1246, 25 U.S.C. § 335. That Act reads:
It is the position of the Department of the Interior10 that "the reference to trust patents in the Act of March 3, 1921, and the discretionary authority given the Secretary of the Interior to prescribe rules and regulations, authorized the issuance, as was done here, of allotments under the 1921 Act having the same guarantees as allotments under the General Allotment Act of 1887."Section 5 of the Indian Reorganization Act of 1934, 48 Stat. 985, 25 U.S.C. § 465, authorized the Secretary of the Interior "in his discretion, to acquire, through purchase, relinquishment, gift, exchange, or assignment, any interest in lands * * including trust or otherwise restricted allotments." It further provided that title "shall be taken in the name of the United States in trust for the Indian tribe or individual Indian for which the land is acquired, and such lands * * * shall be exempt from State and local taxation."
As the agency charged with the administration of the Indian laws and responsible for drafting many of them, Interior's interpretation is entitled to "great weight" and "is not to be overturned unless clearly wrong * * *." United States v. Jackson, 1930, 280 U.S. 183, 193, 50 S. Ct. 143, 146, 74 L. Ed. 361. Cf. Board of County Commissioners v. Seber, 1943, 318 U.S. 705, 710-711, 63 S. Ct. 920, 87 L. Ed. 1094; Bowman v. Udall, D.D.C. 1965, 243 F. Supp. 672, 681-683, aff'd sub. nom; Hinton v. Udall, 1966, 124 U.S.App.D.C. 283, 364 F.2d 676, cert. den., 1966, Hinton v. United States, 385 U.S. 878, 87 S. Ct. 159, 17 L. Ed. 2d 105.
The General Allotment Act of 1887, "with its various amendments, constitute part of a single system evidencing a continuous purpose on the part of the Congress. The statutes are in pari materia, and must be so construed." United States v. Jackson, supra, 280 U.S. at 196, 50 S. Ct. at 147. The Joint Resolution of 1902, the Acts of March 3, 1921 and March 14, 1923, and the Indian Reorganization Act of 1934 are also a part of the system and must be construed with the General Allotment Act.
It is the position of the taxpayer and the Interior Department that the Secretary acquired the lands pursuant to Section 5 of the Indian Reorganization Act of 1934, that this acquisition was subject to the General Allotment Act of 1887 by reason of the 1923 Act, 25 U.S.C. § 335, supra, extending the provisions of the General Allotment Act to "all lands * * which may hereafter be purchased by authority of Congress for the use or benefit of any individual Indian * * *," and that the income derived from these lands is therefore exempt under Capoeman. The Tax Court, however, held that "section 335 is referring to land purchased by the United States for the use of Indians and not to lands purchased by the Indian himself."
Source Acreage Original Allotment in 1941 519.47 Gift from mother in 1951 522.11 Purchase in 1948 from James Shawl estate 332.40 Purchases from noncompetent Indians Joseph Shawl in 1947 (362.59 722.59 acres) and Lillian Werle in 1951 (360.00 acres) Leases (15,628.02 from Tribal government 2,490.15 from relatives). 18,118.17 Hay Permit 332.40 --------- Total 20,547.14
The Court also quoted with approval from Cohen, Handbook of Federal Indian Law, 265, where "Felix S. Cohen, an acknowledged expert in Indian law," said "that 'it is clear that the exemption accorded tribal and restricted Indian lands extends to the income derived directly therefrom."' The Court noted also that Mr. Cohen "distinguished cases permitting the imposition of income taxes upon income derived from unrestricted lands, and upon reinvestment income." 351 U.S. at 8-9, 76 S. Ct. at 616
The Commissioner cites St. Marie v. United States, 9 Cir. 1940, 108 F.2d 876, cert. den. 1940, 311 U.S. 652, 61 S. Ct. 35, 85 L. Ed. 417, for the proposition that this Act "was not intended to extend the General Allotment Act to Indians who had received their allotments under these special statutes." The purpose of the 1923 Act was to make it clear that the General Allotment Act applied to "purchased land." In St. Marie the majority of the court held that specific provisions of the Mission Indian Act were contrary to the General Allotment Act, following an interpretation of the Secretary of the Interior. To the extent that the opinion may hold that the General Allotment Act and special statutes are not to be construed in pari materia, it is inconsistent with subsequent decisions of this court. See United States v. Arenas, 9 Cir. 1946, 158 F.2d 730, 751-752, cert. den. 1947, 331 U.S. 842, 67 S. Ct. 1531, 91 L. Ed. 1853; Arenas v. United States, 9 Cir. 1952, 197 F.2d 418, 422; Kirkwood v. Arenas, 9 Cir. 1957, 243 F.2d 863, 866-867
The purchase by the United States for the individual Indian is analogous to the purchase of property by a conventional trustee with funds provided by the beneficiary. The United States is more than the mere holder of a legal title. There is little a noncompetent Indian can do with his land without the consent of his "trustee". All sales or leases of trust land require the consent of the Secretary, 25 U.S.C. §§ 396, 404, 405, 25 C.F.R. Secs. 121.9, 131.5(a), and the terms and conditions of sale are rigidly regulated. Even such common place uses of land as grazing or lumbering are subject to regulation. 25 C.F.R. Secs. 141, 142, 151
In Squire v. Capoeman the Court referred to "the tax exemption afforded by the General Allotment Act, and the solemn undertaking in the patent," concluding that to tax respondent under the circumstances of that case "would, in the words of the court below, be 'at the least, a sorry breach of faith with these Indians."' 351 U.S. at 10, 76 S. Ct. at 617