The opinion of the court was delivered by: MARSH
This is an action to recover income taxes allegedly unlawfully assessed and collected under the Internal Revenue Code of 1939, as amended, 26 U.S.C.A.
At the pre-trial conference held pursuant to Rule 16, Fed.R.Civ.P., 28 U.S.C.A., it was agreed by the parties, and the Court so finds, as follows:
1. Plaintiffs, Samuel A. Newman and Helen B. Newman, are husband and wife.
2. The income taxes involved were paid to defendant who was then Collector of Internal Revenue for the 23rd District of Pennsylvania.
3. Samuel A. Newman was a Lieutenant Commander in the United States Naval Reserve. He was called into active service on or about February 16, 1941 and was thereafter assigned to the Island of Guam where he was captured by the Japanese on December 11, 1941 and removed to a prison camp in Japan. He was released in August of 1945.
4. The plaintiffs owned a dwelling house in Pittsburgh as tenants by the entireties; the furniture therein was owned by them in the same manner. This house was rented furnished during the years 1942, 1943 and 1944, and the gross rental income at the rate of $ 1,500 per year was received by Mrs. Newman.
5. When called into active service, Mr. Newman was an employee of the Gulf Oil Corporation in its Pittsburgh, Pennsylvania, office.
6. Mr. Newman's employer, Gulf Oil Corporation, pursuant to an arrangement with its employees in military service paid certain sums to Mrs. Newman during the years 1942, 1943 and 1944.
7. Such sums paid to Mrs. Newman by Gulf Oil Corporation represented Samuel A. Newman's compensation paid to his family.
8. Mr. Newman received his service pay, accumulated while he was a prisoner of war, in Washington, D.C., after his release in 1945.
9. The parties have agreed that the claim for refund of 1945 income taxes is barred by the statute of limitations.
10. Plaintiffs filed timely income tax returns for the calendar years 1942, 1943 and 1944.
11. Thereafter, plaintiffs filed timely claims for refund of income taxes for 1942, 1943 and 1944, asserting that the United States Navy service pay of Samuel A. Newman, attributable to the period of time during which he was a prisoner of war, is exempt from taxation under § 251(i) of the Internal Revenue Code of ...