(C. C. A.) 300 F. 5, 1924 A. M. C. 903; G. the market value at the time of acquisition F. Brady, 1927 A. M. C. 1621. Let a decree go for libelant for the amount sued for, with interest and costs. TINDLE et al. v. HEINER, Collector of District Court, W. D. Pennsylvania. June 20, 1928. No. 3432. Internal revenue 7(19)—Value of house, when abandoned as residence and leased, exceeding its subsequent value March 1, 1913, difference between latter value and subsequent sale price is deductible from owner's gross income for year of sale. For purpose of income tax, one who in 1901 abandoned his residence as such and leased it for profit, and in 1920 sold it, is entitled to deduction from his gross income for 1920 of the difference between the sale price and its greater value on March 1, 1913; its then value being less than in 1901. At Law. Action by James R. Tindle and another, coexecutors of Philander C. Knox, deceased, against D. B. Heiner, Collector of Internal Revenue. Judgment for plaintiffs. James Walton, of Pittsburgh, Pa., for plaintiffs. John D. Meyer, U. S. Atty., of Pittsburgh, Pa., and John A. McCann, Sp. Atty., C. M. Charest, General Counsel, and T. H. Lewis, Jr., Sp. Atty., Bureau of Internal Rev., all of Washington, D. C., for defend ant. THOMSON, District Judge. This case is before the court for a new trial. I shall endeavor in my conclusion to be guided strictly by the opinion of the Supreme Court, reversing the judgment, as I understand that opinion, concerning myself with no other question of fact than that submitted for determination. Let us see the exact situation. The Supreme Court, in its opinion (48 S. Ct. 326, 72 L. Ed. held: First. That the purpose to use the property as a residence came to an end when it was leased in 1901, and from that date until it was sold it was devoted exclusively to the production of a profit in the form of rent values. Second. It is not questioned that, in case of a property acquired by gift, bequest, or devise, where market value at the time of acquisition, and not cost, is necessarily the basis of computing the tax, the difference between (after March 1, 1913), and the sale price, is deductible under subsection a-5. Third. That for the purpose of computing the loss in this particular transaction it must stand on the same footing as losses resulting from a similar use of property acquired by gift or devise, and that whenever needful the fair value of the property at the time when the transaction for profit was entered into may be taken as the basis for computing the loss. Fourth. That the transaction entered into for profit, which resulted in loss, was not the purchase of the property, but its appropriation to rental purposes, and that the loss occurred in the sale of the property so used. Fifth. That the only loss deductible here is that incurred in the transaction entered into for profit, later than the date of the purchase, and that, from all that appears in the findings, the loss which had occurred between the date of purchase and March 1, 1913, may have occurred before the property was devoted to rental purposes, and for that reason the findings do not support the judgment. The cause was, therefore, remanded for a new trial, so that the court may find the value of the property when rented, October 1, 1901. Sixth. We were then instructed that, if that value is larger than the value of March 1, 1913, the deduction made by the taxpayer should be allowed; if less, only the difference, if any, between its then value, and the sale price should be allowed. The elucidation of the reasons supporting this conclusion in the Supreme Court's opinion is so clear that there appears no reasonable ground for misapprehension, no excuse for wandering into strange fields. The court has heretofore found that the fair market value of the property on March 1, 1913, was $120,000; this finding being based on sufficient evidence. Under the testimony offered and all the facts surrounding the case; the cost of the property in 1888, $172,000.00; the fact that the chief cost was in the buildings, the land cost being only $16,400; the fact that the land was steadily increasing in value because of its location, the improvements on the property, and the general improvement in the neighborhood, while the value of the buildings was steadily decreasing, perhaps about 22 per cent. per annum, because of the natural deterioration, and resulting depreciation in value; the steadily decreasing rental value of the property from 1901 to 1913, and beyond, and the value of the property, $120,000, in 1913all these facts, taken into consideration with 27 F.(24) 1013 others, which might be mentioned, induces the conclusion that the value of the property on October 1, 1901, was much greater than on March 1, 1913, such value being estimated and found by the court to be $140,000. Finding of Fact. I find as a fact that the fair value of the property here in question, on October 1, 1901, was greater than that on March 1, 1913, and I estimate and find that value to be $140,000. Conclusion of Law. I find as a conclusion of law that plaintiff is entitled to a judgment against the defendant in the amount sued for, as set forth in the statement of claim, together with costs and interest, subject, however, to adjustment and modification in the amount of $4,863.04, which has already been refunded to the plaintiff, and such further adjustment as results from revising or correcting the loss on the sale of the former residence, from $47,000 to $46,293.21. A formal order for judgment to that effect will be signed when presented. MASON et al. v. UNITED STATES. District Court, D. Massachusetts. March 27, 1928. No. 2622. Internal revenue 9 (23)-Association organized to acquire corporation's assets held not subject to excise tax for "doing business" while financing corporation prior to acquiring assets (Revenue Act 1918, § 1000 (a), (1); Comp. St. § 5980n (a) (1). Association, which was organized for purpose of engaging in business for profit by acquiring assets of corporation, and which made advances to corporation from proceeds of sale of shares, held not subject to special excise tax under Revenue Act 1918, § 1000 (a) (1), Comp. St. § 5980n (a) (1), for, carrying on business, during period prior to association's acquisition of assets of corporation. [Ed. Note. For other definitions, see Words and Phrases, First and Second Series, Doing Business.] 1013 BREWSTER, District Judge. The plaintiffs, as trustees of Bukidnon Associates, bring this petition to recover capital stock taxes erroneously and illegally assessed against, and paid by, them for the taxable periods ending June 30, 1924, and June 30, 1925. For the first period a tax of $267 was assessed and paid, and for the second period $394. Claims for refund were duly made and were rejected. The question is whether, during the period between July 1, 1923, and June 30, 1925, the association was engaged in business, so excise tax imposed by the Revenue Act of as to render the trustees liable to the special 1918 (Act Feb. 24, 1919, c. 18, § 1000; Comp. St. § 5980n (a) (1), which imposed with respect to carrying on or doing busiupon such association "a special excise tax ness, equivalent to $1 for each $1,000 of tal stock for the preceding year ending June so much of the fair average value of its capi30 as is in excess of $5,000." The Bukidnon Associates was organized under an indenture of trust dated February 3, 1922. The beneficial înterest was represented by shares without par value. It was organized for the purpose of acquiring the assets of the Bukidnon Corporation, which owned the shares of Yriarte & Co., a limited partnership doing business in the Philippines. While the statement of facts does not show it, I gathered from statements made during the course of the argument that the ownership of the shares in Yriarte & Co. carried with it the active management of the affairs of that company. The Bukidnon Associates was to assume all the liabilities of the Bukidnon Corporation and to issue to the corporation 21,712 shares of the Associates. The issuance of the shares was duly authorized, and the shares were issued to the corporation, but during the period in question the assets of the corporation were never transferred to the Associates. During this period the shareholders and trustees held meetings, passed votes, and engaged in such activities as would be necessary and proper in order to acquire capital the sale of shares, advances were made from by the sale of its shares. From proceeds of time to time to the Bukidnon Corporation, which presumably used the funds in the conduct of the business of the limited partner Richard W. Hale and Hale & Dorr, all of ship; but it was the corporation, and not Boston, Mass., for petitioners. J. M. Leinenkugel, Sp. Asst. U. S. Atty., of Boston, Mass., for the United States. the Associates, that derived the immediate benefit from the employment of the funds advanced. It is clear that we are dealing with an association that was organized for the purpose of engaging in business for profit, but until it had acquired the assets of the Bukidnon Corporation it was not carrying on the business for which it was created. The tax involved is a special excise tax, imposed with respect to carrying on or doing business. Liability for the tax would not attach until the Associates had actually begun the business contemplated. It could hardly be said that the association was, during the two years ending June 30, 1925, pursuing the ends for which it was organized. See Edwards v. Chile Copper Co., 270 U. S. 452, 46 S. Ct. 345, 70 L. Ed. 678. The fact that it loaned money to the Bukidnon Corporation would not, in my opinion, be sufficient to bring the corporation within the purview of the act. See, in this connection, Zonne v. Minneapolis Syndicate, 220 U. S. 187, 31 S. Ct. 361, 55 L. Ed. 428; United States v. Emery, Bird, Thayer Realty Co., 237 U. S. 28, 35 S. Ct. 499, 59 L. Ed. 825; Anderson v. Morris & Essex Railroad Co. (C. C. A.) 216 F. 83; Lewellyn v. Pittsburgh, B. & L. E. R. Co. (C. C. A.) 222 F. 177. I find and rule that the plaintiff is entitled to recover in accordance with the petition. A decree may be entered accordingly. THACHER, District Judge. When Paolo Citorello, a Sicilian sailor, sang and played his guitar on a long ocean voyage, Sicilian folk songs he had heard and forgotten came back to his memory. He did not know how to read music, and such parts of the words and music as he could remember he sang and played by ear. What he could not remember he improvised. In this way he learned a song which he claimed as his own composition. At the end of the voyage he sang and played it to the representative of a company manufacturing phonograph records. The score was arranged for him by another, and upon his application a copyright was obtained, which he assigned to the plaintiff. The defendants have copied the copyrighted song, claiming that it is an old Sicilian folk song, the words of which were published as early as 1871. How much of Citorello's composition was subconscious repetition of this old song, as he had heard it sung, and how much of it was original with him, no one can say. No doubt he had heard some variation of the old song and was trying to remember it, but the product differed in words and music from any version of it that has been proved, although the theme was the same and the music quite similar. To the extent of such differences he was the author of the new arrangement of the words and music of an old song. That these differences were of some importance may be inferred from the plaintiff's commercial success in selling it and the defendants' desire to appropriate it. There must have been something which Citorello added which brought the old song back into popularity with his own people in this country, and sufficient, I think, to support his claim of copyright. Gerlach-Barklow Co. v. Morris & Bendien, 23 F. (2d) 159 (C. C. A. 2d). Of course, the defendants could make their own improvisation of the old song, or free to copy the original, but not to copy could copy it without change. They were Citorello's variation. I am satisfied that they did not go back to the original, but Frank, Weil & Strouse, of New York simply appropriated the Citorello song, makCity, for plaintiff. ing colorable changes in a clumsy effort to Levisohn, Niner & Levisohn, of New conceal their infringement. York City, for defendants. Decree for plaintiff in usual form. THE CARRISO. 27 F.(2d) 1015 District Court, N. D. California, S. D. April 2, 1928. No. 194451. 1. Shipping 141 (2)-Ship, under bill of lading permitting deck stowage, held not liable for damage to cork board stowed on deck, resulting from contact with sea water. Where bill of lading permitted deck stowage, ship was not liable for damage to cork board, resulting from contact with sea water, on theory of improper stowage, because of fact that it was stowed on deck after being crated and dunnaged. 2. Shipping 141 (2)-Clause in bill of lading permitting deck stowage held valid (Har ter Act). Clause in bill of lading permitting deck stowage held valid under the Harter Act, as not being expressly barred by terms of statute and in accord with old maritime rule permitting cargo to be carried on deck with consent of shipper. In Admiralty. Libel by R. K. Davidson and others, doing business under the name of Davidson & Strauss, a copartnership, against the American motorship Carriso, her tackle, apparel, and furniture, etc., wherein Carriso, Incorporated, was claimant. Decree for respondents. Derby, Sharp, Quinby & Tweedt, of San Francisco, Cal., for libelants. Andros, Hengstler & Dorr, of San Francisco, Cal., for respondents. KERRIGAN, District Judge. This is a libel for damage to certain cork board shipped from Lisbon to San Francisco as deck load on the motorship Carriso. The cork board arrived in a damaged condition, the damage being due to sea water. The bill of lading provided that the ship had "liberty to carry the goods and any other goods on deck or under deck." Libelants urge that this clause is invalid, because it is in conflict with the Harter Act, and deprives the shipper of his right to recover for cargo damage under that act. They also contend that, if the option for deck stowage be construed to be valid, respondents are nevertheless liable for improper stowage, in view of the known nature of the cork board and its susceptibility to serious damage if brought into contact with sea water. [1] The evidence shows that the cork board was crated and that it was dunnaged, except as to the portion stowed forward, where the mate considered, properly, I think, that it was hardly likely that the ship would take water. The mate also testified that complete dunnaging would not have prevented the damage. Under these circumstances, I cannot hold respondents liable for improper stowage, assuming the bill of lading clause permitting the deck stowage to be valid. Armour & Co., Ltd., v. Walford, 28 Com. Cases, 37. [2] Libelants cannot recover, therefore, unless the bill of lading clause in question is invalid. Armour & Co., Ltd., v. Walford, supra, is not authority supporting the validity of this clause, in view of the fact that there is in England no statute similar to the Harter Act controlling the decisions of the courts. I am nevertheless of the opinion that the clause is valid, and not in conflict with the Harter Act. It accords with an old maritime rule that cargo may be carried on deck with the consent of the shipper. Lawrence v. Minturn, 17 How. (58 U. S.) 100, 15 L. Ed. 58. Such stipulation is not expressly barred by terms of the statute. Being valid under American law before the act, and not expressly covered, the clause giving the ship liberty to stow cargo on deck is valid. Hughes, Admiralty (2d Ed.) 193; The Portuguese Prince (D. C.) 209 F. 995. Let a decree be entered for respondents, each party to bear his own costs. MEMORANDUM DECISIONS Theodore ABBEY v. UNITED STATES. Circuit Court of Appeals, Sixth Circuit. June 13, 1928. No. 5168. Appeal from the District Court of the John W. BLODGETT v. Charles HOLDEN, U. S. Collector of Internal Revenue for the Fourth Collection District of Michigan, Revived in Name of Marie Sprague Holden, Executrix of Last Will of Charles Holden, Deceased. United States for the Northern District of Circuit Court of Appeals, Sixth Circuit. April Ohio; John M. Killits, Judge. Walter S. Ruff, of Canton, Ohio, and Grabien & Pilliod, of Cleveland, Ohio, for appellant. A. E. Bernsteen, U. S. Atty., and Howell Leuck, Asst. U. S. Atty., both of Cleveland, Ohio. PER CURIAM. Decree of District Court affirmed in part, and reversed in part, and cause remanded for further proceedings. 2 Alfred J. ANDREWS v. UNITED STATES. 13, 1928. No. 4631. In Error to the District Court of the United States for the Western District of Michigan; Fred M. Raymond, Judge. Norris, McPherson, Harrington & Waer, of Grand Rapids, Mich., for plaintiff in er ror. Edward J. Bowman, U. S. Atty., of Grand Rapids, Mich., for defendant in error. PER CURIAM. Judgment of District Court [11 F. (2d) 180] reversed, and cause Circuit Court of Appeals, Sixth Circuit. May remanded, etc., upon authority of revised 8, 1928. No. 5140. In Error to the District Court of the United States for the Eastern District of Kentucky; Andrew M. J. Cochran, Judge. Hobbs & Hansen, of Lexington, Ky., and Hogan Yancey, of Lexington, Ky., for plaintiff in error. opinion of Supreme Court in this matter, 275 U. S. 142, 276 U. S. 594, 48 S. Ct. 105, 72 L. Ed. filed February 20, 1928, and opinion in Untermyer v. Anderson, 276 U. S. 440, 48 S. Ct. 353, 72 L. Ed. filed April 9, 1928. 5 Sawyer A. Smith, U. S. Atty., of Cov- BURNING CREEK COAL COMPANY, a Corington, Ky. PER CURIAM. Dismissed pursuant to stipulation of counsel. 3 James BADALAMENTI v. UNITED STATES. Circuit Court of Appeals. Sixth Circuit, June 30, 1928. No. 5177. In Error to the District Court of the United States for the Southern District of Ohio; Benson W. Hough, Judge. Henry Lavine, of Cleveland, Ohio, for plaintiff in error. W. B. Bartels, Asst. U. S. Atty., of Columbus, Ohio. PER CURIAM. Judgment of District Court affirmed. poration, Appellant, v. Mrs. D. M. McCORMICK, Miss Elizabeth McCormick, Miss Charlotte Carter McCormick, Rebecca C. Davis, J. Keene Daingerfield, Henderson Daingerfield Norman, Bessie P. Daingerfield, Juliet P. Daingerfield, Mary J. D. Van Winkle, and Foxhall A. Daingerfield, Appellees. Circuit Court of Appeals, Fourth Circuit. May 1, 1928. No. 2712. United States for the Southern District of Appeal from the District Court of the West Virginia, at Huntington. F. M. Livezey, of Huntington, W. Va., for appellant. Henry Simms, of Huntington, W. Va., for appellees. PER CURIAM. Appeal dismissed, at the cost of appellant. Order filed. |