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Commissioner of Internal Revenue v. Church.

March 28, 1939

COMMISSIONER OF INTERNAL REVENUE
v.
CHURCH.



Appeal from the United States Boaord of Tax Appeals.

Author: Davis

Before DAVIS, MARIS, and BUFFINGTON, Circuit Judges.

DAVIS, Circuit Judge.

There are two questions involved in this appeal. The first is whether or not this court has jurisdiction to review the order o the Boaord of Tax Appeals in this case, and the second is whether or not the compensation received by Alonzo Church, deceased, as a master and special master of the Court of Chancery of New Jersey, for the year 1933, is taxable under the federal income tax law.

As to jurisdiction, it appears from the record that the decedent failed to file an income tax return for the year 1933; that a return dated March 1, 1935, was prepared for him by an internal revenue agent and marked "3176 R. S. Delinquent"; that this return was signed by the deputy collector and by the revenue agent; that it was filed in the office of the collector of internal revenue, at Newark, New Jersey, on March 2, 1935, and that on August 20, 1935, an amended and corrected return was prepared and signed by the commissioner of internal revenue, though it does not appear that this latter return was ever filed at Newark.

Section 3176 of the Revised Statutes (26 U.S.C.A. § 1512) provides in part as follows:

"(a) Authority of collector. If any person fails to make and file a return * * * the collector or deputy collector shall make the return * * * from his own knowledge and from such information as he can obtain * * * .

"(b) Authority of commissioner. In any such case the Commissioner may, from his own knowledge and from such information as he can obtain * * * .

"(1) To make return. Make a return, or

"(2) to amend collector's return. Amend any return made by a collector or deputy collector."

Since the original return bore the signature of the deputy collector, it will, in the absence of compelling reasons to the contrary, be considered as a compliance with the terms of the statute. Section 3176, R.S. As the original return was filed in due course, the subsequent return, prepared by the commissioner, will be considered as an amended return within the provisions of subsection (b)(2) of the Act.

Under the facts in this case, it would appear that this court has jurisdiction of the cause for a decision of the Board of Tax Appeals is reviewable by the Circuit court of Appeals for the circuit in which the collector's office to which return was made, is located. Section 1002 of the Revenue Act of 1926, as amended by section 519 of the Revenue Act of 1934, 26 U.S.C.A. § 641(b).

The second question is whether or not the taxpayer's income as master and special master in Chancery of New Jersey was taxable. He was appointed to such position for life by the Chancellor. Before entering upon his duties he took the required oath of office. His duties were prescribed by statute. He presided over divorce cases, over cases involving the sale of the land of infants, over cases involving the auditing of the accounts of trustees and receivers, at the sale of mortgaged premises where the sheriff was not authorized to serve, and over other proceedings referred to him by the Chancellor. He had the power as master and special master to subpoena witnesses and conduct hearings in accordance with the rules of chancery. He made "advisory" reports upon the cases heard by him which, when adopted by the Chancellor, became the decisions of the Court of Chancery. Such decisions are appealable directly to the Court of Errors and Appeals, the court of last resort in the state.

The taxpayer's compensation, as master and special master, was made up of fees which arose out of the individual cases over which he presided. The fees were fixed and determined by statute or by the rules of court, and were paid either directly or indirectly (depending upon the type of case) by the parties involved. In divorce cases, for example, the fees were paid by the litigant to the clerk of the court and then by the clerk to the taxpayer but in cases involving the auditing of the accounts oif trustees or receivers, the fees were paid ...


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