Carver v. United States

412 F.2d 233, 188 Ct. Cl. 202

Opinion

Per Curiam:

* These cases were consolidated for trial, and at the trial the issue of liability was severed from the determination of the amount of recovery, if any.

It is our opinion that the plaintiff¹ is entitled to a partial recovery.

I

In case No. 882-65, the plaintiff, A. E. Carver, sues as an individual taxpayer, and as executor of the estate of his deceased wife, Kate W. Carver (by reason of the filing of joint federal income tax returns by husband and wife during the years in question, 1955 and 1956).

In case No. 888-65, the same A. suing as the alleged transferee of assets of Chase National Company, Inc. (hereinafter referred to as Chase National). The years involved are 1954-1958.

Eecovery is sought of the following amounts of income tax, penalties, and interest:

Chase National was incorporated under the laws of Florida in 1925. Mr. Carver was one of the incorporators. Its purpose was to obtain financing for the construction of a combination bank and office building in Lakeland, Florida. Upon deterioration of economic conditions, the original plan was abandoned. Four years later the other incorporators assigned their stock subscription rights to Mr. Carver. Thereafter, from 1929 into 1957, he used the corporate name in a variety of transactions related to his law practice and personal investments in real estate and real estate mortgages.

Throughout the period of Mr. Carver’s use of Chase National, the corporation was in reality a mere shell. The issuance by the State of Florida of a corporate charter gave it status as a legal entity, but no stock certificates were issued, no directors or officers were elected, no books were kept, and no federal tax returns were filed.

On June 15, 1957, all real property with record title in Chase National, and all notes, claims, liens, leases, and mortgages shown of record to be in the name of Chase National were formally conveyed to Mr. Carver. On April 29, 1960, the corporation was officially dissolved by proclamation of the Governor for failure to pay the state capital stock tax.

The parties have agreed to the following statement (as contained in the next succeeding paragraph) of the position of the Commissioner of Internal Eevenue in assessing the taxes for which plaintiff is suing, although plaintiff does not accept the contents of the statement as factually accurate in relation to Chase National.

With respect to the calendar years 1954-1958 (earlier years were barred by the statute of limitations), the Commissioner of Internal Eevenue determined that Chase National was an active business corporation engaged in real property and loan transactions. As such, he determined that Chase National should have reported as taxable income or loss any gains or losses from the sale of real property in its name and any interest income received from borrowers, excepting certain transactions carried out in the name of Chase National by Mr. Carver for his clients (as to which no taxes were assessed).

The Commissioner assessed income tax deficiences (plus interest) against Mr. and Mrs. Carver as recipients of dividend income from Chase National in the amounts that he was treating as income to Chase National. These amounts had been paid either directly or indirectly (through a bank account listed in the name of Chase National) to the Carvers during tbe years Commissioner recognized that the Carvers had previously reported this income (from interest and on gains and losses from the sale of the real estate) on their joint federal income tax returns. The income tax deficiencies and interest assessed against the Carvers were as follows:

The Commissioner also assessed income tax deficiencies (plus interest and penalties for failure to file returns) against Mr. Carver as transferee of Chase National’s assets in the following amounts:

Because of various adjustments not here in issue, overas-sessments resulted in 1957 and 1958 in the amounts of $100.82 ■and $258.75, respectively.

All assessed amounts were paid. Timely were filed (except for the amount of $165.04 assessed against Mr. and Mrs. Carver for the year 1954). The claims for refund were denied, and the present actions were timely instituted for the claimed amounts, plus interest.

II

Defendant contends (1) that the activities of Chase National and the purposes underlying Mr. Carver’s use thereof warranted its being taxed as a viable corporate entity; (2) that Mr. Carver’s receipt of Chase National’s property in liquidation warranted his being treated as a transferee of assets of the corporation, so that its unpaid tax obligations could be collected from him; and (3) that amounts received by Mr. Carver from proceeds of sales and loan transactions by Chase National constituted constructive dividend income to him from Chase National.

Plaintiff asserts that under Florida law Chase National, during its entire existence, never owned any assets and was never in receipt of income, earnings, or profits.

The threshold issue, therefore, is whether or not the Commissioner of Internal Revenue was warranted in treating Chase National as a viable, taxable, corporate entity.

For the proposition that the Commissioner was so warranted, defendant relies on the landmark case of Moline Properties, Inc. v. Commissioner, 319 U.S. 436 (1943) and a line of cases resting thereon.²

The corporation in Molme was organized as a security device in the purchase of real property, with control of it in the lender. When the debt was paid, the stock reverted to the individual who had organized the corporation, and he continued it to hold title to the real estate. No books were kept by the corporation and it had no bank account. Following payment of the debt and the reverter of the stock, the corporation (1) refinanced the mortgage, (2) leased a portion of the property for a parking lot, and (3) ultimately sold the property for a substantial gain. The corporation contended that the gain was taxable to the sole stockholder and not to the corporation. The court rejected its contentions of alter ego and agency³ and held the gain taxable to the corporation.

Defendant submits that, as specifically stated in Moline, and as confirmed by the other cases cited, the corporate entity must be recognized for tax purposes where either

(1) the corporation was formed for business purposes, or

(2) its creation is followed by the on activity. Moline also refers to the “equivalent of business activity,” in the following quotation:⁴

The doctrine of corporate entity fills a useful purpose in business life. Whether the purpose be to gain an advantage under the law of the state of incorporation or to avoid or to comply with the demands of creditors or to serve the creator’s personal or undisclosed convenience, so long as that purpose is the equivalent of business activity or is followed by the carrying on of business by the corporation, the corporation remains a separate taxable entity.

The fact that the business purposes for which Chase National was organized were abandoned is immaterial, as defendant says. And as for Chase National being a “shell” or “dummy” corporation, defendant cites the language of this court in the Lone case, supra:5

That a corporation is regarded as a “straw,” a “dummy,” a “phantom,” in itself proves nothing. The concept of the corporation is itself a fiction. A corporation is an artificial person. It operates under a charter granted it by the state, conferring certain rights, and also conferring certain privileges and exemptions in return for complying with certain rules or conditions. The decision to recognize or not to recognize the tax identity of a corporation depends upon what the corporation does, not what it is called, how many or how few own it, or how they regard it. Whether much or little use was made by plaintiffs of the Leado corporation, it was available to them at all times, lite the musket behind the door, for use when needed or when occasion should arise. We hold that they did in fact use it to such an extent that its separate identity must be recognized.

Defendant emphasizes the extent of the use of Chase National by Mr. Carver as showing that it “was a most active corporation,” as indeed it was:

* * * At the very least, Cbase National bought and sold real property, borrowed money, lent money, maintained two bank accounts, made improvements to property titled in its name, instituted litigation, paid commissions on sales of property and for collecting rentSj sold timber and citrus on of its properties and entered into contracts to convey property, deeds, leases, options, notes, mortgages, and satisfactions of mortgages.

“These facts alone,” defendant’s brief continues, “are enough to require the conclusion that the corporation was a taxable entity.”

Ill

Plaintiff’s brief develops three lines of argument: (1) That the Moline decision has no application to the facts of the present case because .the Commissioner of Internal Eevenue taxed Chase National only to the extent of the beneficial interests of the Carvers, making no pretense of treating the corporation as a viable, taxable entity for all of its transactions; (2) that in the application of a federal revenue act, state law controls in determining the nature of the legal interest which the taxpayer had in the property; and (3) that under relevant Florida law, Chase National had no property interest whatever, either in land, money, or choses in action.

"Whether or not the Commissioner was warranted in limiting the effect of the Moline doctrine to the beneficial interests of the Carvers and excluding from taxation transactions carried out for clients is discussed in a later section of this opinion.

In support of his second point, plaintiff cites a line of cases⁶ holding that when Congress makes the application of a federal revenue act depend upon property rights created by the individual states, the actual incidents of ownership are determined by reference to state law. Following is a quotation from one of the Supreme Court decisions so cited:⁷

* * * It would indeed be anomalous to say that the taxpayer’s “property and rights to property” included property in which, under the relevant state law, he had no property interest at all.

So saying, the main thrust of plaintiff’s case is his contention that Chase National was at all times the holder of mere naked record title, with neither legal nor equitable ownership of property. Lack of ownership, legal or equitable, is the predicate of his argument that Chase National’s receipts did not constitute corporate earnings or profits, and that its holdings (real estate titles, notes, mortgages, or bank balances) were not corporate assets.

Plaintiff’s brief asserts:

The law in Florida is clear and unequivocal. Where a dry, passive trust of property has been created, the Florida Statute of Uses, Florida Statutes, § 689.09, has been held to nullify the trust and to vest both the legal and equitable title in the designated beneficiary or beneficiaries. Hamilton v. Flowers, 183 So. 811 (Fla. 1938); Elvins v. Seestedt, 193 So. 54 (Fla. 1940); McGriff v. McGill, 62 So. 2d 28 (Fla. 1952); Baum v. Corn, 167 So. 2d 740 (2d D.C.A. Fla. 1964).⁸

On this point, Trial Commissioner Evans said in his opinion : “Careful analysis, including a review of the origin and development of the statute of 27 Henry VIII (which is the Statute of Uses of common law derivation in the American states), has convinced the writer that the foregoing statement from plaintiff’s brief is an accurate assessment of Florida law.

“The Florida statute of uses executes the use of a dry or passive trust. Consequently, a conveyance of land to Chase National passed the legal as well as the equitable title to the beneficial owner. Chase National held the mere naked legal title of record. The use does not have to be expressed, although it can generally be inferred, technically, from the bargain and sale. Florida law, as illustrated by the cases cited in plaintiff’s brief (and listed hereinabove), distinguishes between active and passive trusts by what is said in the deed. If no active duties are imposed, the trust is passive, and its existence may be established by parol evidence of the intention of the parties.

“Chase National, as has been noted, was the holder of personal as well as real property. Deposits in and disbursements from bank accounts were made in its name. It held notes and gave notes; it received rents and profits from land not in its name. If one wonders how it could be said to have no income and hold no assets in personalty (since the statute of uses operates only upon conveyances of land), the answer lies in Florida equity. There is no suggestion in the Florida cases of the execution of a use in personalty. But, the rents and profits from land (whether or not title to the land resided in the passive trustee) belong to the beneficial owner, and from this base the Florida courts have not hesitated to declare the beneficial owner entitled to any and all emoluments rightfully his, irrespective of any corporate body which might stand between the emoluments and the beneficial owner.

“It is concluded that under Florida law Chase National owned no property at any time. The corporation received no income which could be characterized under Florida law as corporate earnings or profits, and it held no rights or substance which could be characterized under Florida law as corporate assets.”

The court deems it unnecessary to determine whether or not this view of Florida law is correct.

IV

Even if plaintiff’s logic (in relation to the statute of uses and Florida equity) is impeccable, the Supreme Court’s rejection of the practical application for which plaintiff contends is adamant, as indicated by the following excerpts from Tomlinson v. Miles, supra:9

The taxpayers contend that the effect of [their] arrangement was to create the corporation as a naked trustee of title for the taxpayers who were the beneficial owners and, under the Florida law of trusts, also the legal owners of the property. The Government, on the contrary, contends that, having elected to have the transaction bandied in corporate not be excused from reporting tbe transactions resulting in a profit as its own profit, and paying taxes on this income entirely separately from tbe tax obligations of the individual taxpayers who were really stockholders of the corporation. The answer to this question is to be found by placing the facts of this case against the formula announced by the United States Supreme Court in Moline Properties v. Commissioner of Internal Revenue, * * *.

* * * [Taxpayers] the holder of a mere naked record title with neither legal nor equitable ownership of the property and that therefore such business as was carried on by the corporation does not fall within the formula * * *. We find no such limitation in the formula adopted by the Supreme Court in the Moline Properties case. That no such limitation is intended is made clear by the Court’s subsequent opinion in National Carbide Corporation v. Commissioner of Internal Revenue, 336 U.S. 422, 69 S. Ct. 726, 93 L. Ed. 779. The Court there expressly called attention to its holding in the Moline Properties case, notwithstanding the findings of the Tax Court that full beneficial ownership of the property there involved was in the sole stockholder. The Court said:

“Undoubtedly the great majority of corporations owned by sole stockholders are ‘dummies’ in_ the sense that their policies and day-to-day activities are determined not as decisions of the corporation but by their owners acting individually. * * * We reversed the Board of Tax Appeals in Moline Properties in the face of its findings that ‘‘Full beneficial ownership was in Thompson [the sole stockholder] who continued to manage and regard the property as his own individually.’ ” (Emphasis added).

* * * It goes without saying that where the Supreme Court has clearly established legal principles in dealing with the subject matter in litigation, we look to these principles for guidance. They are controlling on us. Particularly in light of the gloss which National Carbide Corporation v. Commissioner, supra, has placed on the Moline Properties, Inc. case, we are unable to agree with the taxpayers here that their activities do not fall within the language of the formulation set down by the Supreme Court in the Moline Properties case.

In Moline and National Carbide, the Supreme Court has established and reaffirmed a formida which goes the whole distance in attributing to a corporation, as its own for tax purposes, income, earnings, profits, and assets that are, according to state law, beneficially (legally and equitably) owned by others.

Y

After rejecting the agency contentions of the taxpayer in National Carbide Corp. v. Commissioner, supra, the Supreme Court expressed the following qualification:¹⁰

What we have said does not foreclose a true corporate agent or trustee from handling the property and income of its owner-principal without being taxable therefor. Whether the corporation operates in the name and for the account of the principal, binds the principal by its actions, transmits money received to the principal, and whether receipt of income is attributable to the services of employees of the principal and to assets belonging to the principal are some of the relevant considerations in determining whether a true agency exists. If the corporation is a true agent, its relations with its principal must not be dependent upon the fact that it is owned by the principal, if such is the case. * * *

While the court’s discussion centers on requirements for proof of a valid agency relationship, similar requirements would, if met, ostensibly establish a valid trust relationship.

When the Commissioner of Internal Revenue assessed taxes against Mr. Carver to the extent of his beneficial interests in Chase National transactions but excluded transactions wherein the beneficial interests belonged to Mr. Carver’s clients, he drew the line improperly as to one transaction, because of the presence of a manifest relationship of either agency or trust or both.

In 1935, Mr. Carver joined with L. N. Pipkin, at Mr. Pip-kin’s request, in the purchase of some 800 acres of raw land in Hillsborough County, then up for foreclosure. Mr. Pipkin was president of the Bank of Mulberry. At his request, title to the land was taken in the name of Chase National, and arrangements were made whereby Chase National obtained a loan from and opened an account in the Bank of Mulberry. Mr. Pipkin, as the moving force in the transaction, saw to the payment of the loan with funds contributed by himself and Mr. Carver. Twenty years later, in 1955, Mr. negotiated a sale of the land for a substantial profit.¹¹ The sale proceeds were paid to Messrs. Pipkin and Carver, and did not go through Chase National, although the deed of conveyance came, of course, from Chase National, since it held the legal title.

There is in evidence a copy a 1935, signed “Chase National Company,” by A. R. Carver, vice president, certifying that Chase National “is holding the title” of the Hillsborough County land “for the use and benefit of” the Pipkins, one-half, and the Carvers, one-half, “said property to be dealt with or conveyed upon the joint direction of said parties.”

Considering the evidence of record of the Pipkin transaction, including the document referred to above, the conclusion is inescapable that Chase National was either the agent of or the trustee for Mr. Pipkin, who was admittedly not an owner or stockholder of Chase National. If that relationship was valid for Mr. Pipkin, it must have been equally valid, under all of the circumstances, for Mr. Carver.

The plaintiff is therefore entitled to recover to the extent of taxes assessed to him by reason of Chase National’s connection with this transaction.¹²

VI

Plaintiff argues vigorously that the differentiation by the Commissioner of Internal Revenue between the beneficial ownership of the Carvers and that of Mr. Carver’s clients is capricious (citing the Pipkin transaction as an illustration), and that it should vitiate the whole action by the Commissioner, leaving the Moline doctrine no application to the present cases.¹³

The Mólme doctrine, attributing to a corporation by federal judicial fiat, the ownership of property recognized by the state as residing in others, reflects a broad sweep of policy. The justification for such a broad sweep must lie in the need for automatic protection of the federal revenue from erosion behind the corporate veil through the evasion or avoidance of taxes. The aim is not accomplished by piercing the corporate veil; it is attained by enveloping the corporation as a whole under one umbrella.

The evidence offers no explanation, other than as stated at the outset of this opinion, of the action by the Commissioner of Internal Bevenue in making the differentiation as he did. In any event, the Commissioner’s differentiation cannot be deemed to vitiate the whole of his action.

Plaintiff is not entitled to recover except as hereinabove indicated.

FINDINGS oe Fact

The court, having considered the evidence, the report of Trial Commissioner W. Ney Evans, and the briefs and arguments of counsel, makes findings of fact as follows:

1. (a) These cases were consolidated for trial, and at the trial the issue of liability was severed from the determination of the amount of recovery, if any.

(b) In case No. 382-65, the plaintiff, A. B. Carver, sues as an individual taxpayer, and as executor of the estate of his deceased wife, Kate W. Carver (by reason of the filing of joint federal income tax returns by husband and wife during the years in question, 1955 and 1956).

(c) In case No. 383-65, the same A. B. Carver is plaintiff,¹ suing as the alleged transferee of assets of Chase National Company, Inc. (hereinafter referred to as Chase National). The years involved are 1954-1958.

(d) Becovery is sought of the following amounts of income tax, penalties, and interest:

2. (a) Chase National was incorporated under the laws of Florida in 1925. Mr. Carver was one of the incorporators. Its purpose was to obtain financing for the construction of a combination bank and office building in Lakeland, Florida. Upon deterioration of economic conditions, the original plan was abandoned. Four years later the other incorporators assigned their stock subscription rights to Mr. Carver. Thereafter, from 1929 into 1957, he used the corporate name in a variety of transactions related to his law practice and personal investments in real estate and real estate mortgages.

(b) Throughout the period of Mr. Carver’s use of Chase National, the corporation was in reality a mere shell. The issuance by the State of Florida of a corporate charter gave it status as a legal entity, but no stock certificates were issued, no directors or officers were elected, no books were kept, and no federal tax returns were filed.

(c) On June 15, 1957, all real property with record title in Chase National, and all notes, claims, liens, leases, and mortgages shown of record to be in the name of Chase National were formally conveyed to Mr. Carver. On April 29, 1960, the corporation was officially dissolved by proclamation of the Governor for failure to pay the state capital stock tax.

3. (a) The parties have agreed to the following statement of the position of the Commissioner of Internal Revenue in assessing the taxes for which plaintiff is suing, although plaintiff does not accept the contents of the statement as factually accurate in relation to Chase National:

With respect to the calendar years 1954r4958 (earlier years were barred by the statute of limitations), the Commissioner of Internal Revenue determined that Chase National was an active business corporation engaged in real property and loan transactions. As such, he determined that Chase National should have reported as taxable income or loss any gains or losses from the sale of real property in its name and any interest income received from borrowers, excepting certain transactions carried out in the name of Chase National by Mr. Carver for his clients (as to which no taxes were assessed).

(b) The Commissioner assessed income tax deficiencies (plus interest) against Mr. and Mrs. Carver as recipients of dividend income from Chase National in the amounts that he was treating as income to Chase National. These amounts had been paid either directly or indirectly (through a bank account listed in the name of Chase National) to the Carvers during the years 1954, 1955, and 1956. By way of offset, the Commissioner recognized that the Carvers had previously reported this income (from interest and on gains and losses from the sale of the real estate) on their joint federal income tax returns. The income tax deficiencies and interest assessed against the Carvers were as follows:

(c) The Commissioner also assessed income tax deficiencies (plus interest and penalties for failure to file returns) against Mr. Carver as transferee of Chase National’s assets in the following amounts:

Because of various adjustments not here in issue, over-assessments resulted in 1957 and 1958 in the amounts of $100.82 and $258.75, respectively.

(d) All assessed amounts were paid. Timely claims for refund were filed (except for the amount of $165.04 assessed against Mr. and Mrs. Carver for the year 1954). The claims for refund were denied, and the present actions were timely instituted for the claimed amounts, plus interest.

4. Mr. Carver began the practice of law in Lakeland,² Florida, in 1915, and was still in active practice at the time of the trial of these cases in February 1968. Almost from the beginning his law practice was real estate oriented. Following the collapse of the Florida real estate boom of the mid-1920’s, and beginning in 1929 and the early 1930’s, Mr. Carver adopted a method which was then or later became a familiar feature of Florida real estate transactions, wherein corporations were used as nominal holders of title, subject always to the will and command of the beneficial owners. Among the three corporations so used by Mr. Carver was Chase National. It was the only one of the three used extensively by Mr. Carver during the years in issue in these companion cases.

5. (a) Chase National was incorporated under the laws of Florida on December 4, 1925. The original subscribers of its stock and designees as members of its first board of directors were (in addition to Mr. Carver), Messrs. W. W. Chase, A. H. DeVane, and E. C. Flanagan. The corporation was organized for the purpose of obtaining financing for the construction of a combination 'bank and office building in Lakeland. The incorporators anticipated renting office space to the corporation itself and to the State Bank of Lakeland, of which Messrs. DeVane and Chase were officers.

(b) Within a year or so after the incorporation of Chase National, the land boom was in marked decline. The construction project was abandoned, and Chase National never embarked upon the business purpose for which it was created.

In fact, the organization of Chase National was never fully completed. Articles of incorporation were signed, and a corporate charter was issued. It thus became a legal entity under Florida law. A corporate seal was obtained, and stock subscription books were purchased, but no stock subscription was ever paid, and no stock certificate was ever issued.

'(c) In May 1929, Mr. Carver solicited from Messrs. DeVane, Chase, and Flanagan their stock subscription rights in Chase National, saying that he had an opportunity to use the corporation for some personal benefits. The other incor-porators acquiesced and all subscription rights were transferred to Mr. Carver. He never exercised the subscription rights, however. The corporate shell — without paid-in capital, without shares subscribed or issued, without a board of directors or elected officers — served his purpose. He simply used the corporate shell in various transactions. From 1929 through the tax years in issue (1954-1957),³ in all Chase National transactions, Mr. Carver signed either as president or vice president, and whoever was handy signed (at Mr. Carver’s direction) as secretary.

(d) Mr. Carver kept meticulous records of the real estate and other transactions conducted 'in the name of Chase National, and of receipts and disbursements by it, but no books of account were kept by or for the corporation. The records were kept in individual files set up by Mr. Carver for the identity and interest of beneficial owners of lands, rents, loans, and other properties or transactions, insofar as the real estate or funds passed into or through the corporate hands. No records were kept in terms of corporate earnings or of corporate assets, as such, since there was no recognition by Mr. Carver of corporate ownership or right to income or other assets.

6. (a) The background of the Chase National transactions at issue in these oases is interwoven with the personal and business affairs and legal career of Mr. Carver, and the bistory of tbe community (Lakeland, Florida) in which he lived.

(b) In 1916, Mr. Carver was appointed a city judge of Lakeland, and served in that capacity (with the exception of a period during World War I) until late in 1922. In 1923, he was appointed assistant city attorney of Lakeland, moved up to city attorney in 1933, and served in that capacity until the latter part of 1939. He was thus intimately concerned with the legal problems of the municipality during both the Florida boom-and-bust of the middle and late 1920’s and the Great Depression of the 1930’s. All the while he carried on an active private practice of the law.

(c) Since Lakeland (situated some 30 or 35 miles west of Tampa) was in the wake of the Florida land boom-and-bust, and since the economics of municipal management were characterized during this time and later in the Depression by recurrent crises resulting from the inflation and subsequent deflation of real estate values, it followed that Mr. Carver’s law practice, by reason of his location and position, should become progressively involved in real estate transactions and the legal activities associated therewith.

7. (a) He personally began the acquisition of citrus grove lands in 1919 and 1920, and in some 30 years acquired more than 170 acres of such lands. Thereafter, he became disenchanted with them and sold off the bulk of his acreage. A single deed was used for a substantial part of this disposition. It was signed by Mr. and Mrs. Carver, in their individual capacities, and by all three of the corporations he was then using: Chase National Company, Inc.; Lakeland Land Corporation ;⁴ and Kathleen Citrus Land Company.⁵ The corporate signatures were required because the bulk of the lands conveyed had been held by the corporations as holders of record title.

(b) Except for the taking of title to the grove lands in the names of the three corporations first one; then another ⁶), no corporate activity was involved in the acquisition, operation, or disposition of the grove properties or of the produce grown thereon. No consideration passed out of any of the corporations for the purchase of the lands. It all came from Mr. Carver; and he engaged all the labor, paid for the fertilizer, and disposed of all the crops. The corporations merely held nominal record title, thereby veiling Mr. Carver’s identity as the purchaser.

(c) The disposition of the grove lands reflected a change of investment policy by Mr. Carver. He continued to acquire properties, for himself and for his clients. Many of his own properties, including some of his grove lands, were improved (by placing buildings on them) and rented. Titles to some of those acquisitions were taken in the name of one corporation or another; titles to others were taken in his own name.

8. (a) In 1935, one of Mr. Carver’s clients (Mr. L. N. Pip-kin) approached him with a proposition to acquire some 800 acres of raw land in the adjoining county of Hillsbor-ough then available through a foreclosure action. Mr. Pipkin, president of the Bank of Mulberry, asked Mr. Carver to join with him as purchaser, to take title in the name of Chase National, to have Chase National procure a loan from and to open an account in the Bant of Mulberry. The transaction was consummated accordingly. Once the conveyance was made, Mr. Carver prepared a declaration of trust⁷ (keeping copies in his office in the name of himself and in the name of Mr. Pipkin) setting forth the individual ownership of the property.

(b) The bank loan (Bank of Mulberry to Chase National) was retired by Mr. Pipkin, to whom Mr. Carver contributed his proportionate part.

(c) Sometime later, Mr. and Mrs. Pipkin transferred some additional land (200 or 300 acres) into the name of Chase National. Mr. Carver had no interest in this land, but he did place in his files a supplemental declaration of trust on behalf of Chase National.

(d) Twenty years later (1955), Mr. Pipkin negotiated a sale of the land to the American Cyanamid Company from which a very substantial gain was realized. The sale proceeds were paid to Messrs. Pipkin and Carver, and did not go to or through Chase National, although Chase National was, of course, the grantor in the deed.

(e) Mr. Carver duly reported his share as a capital gain in the joint income tax return filed on behalf of himself and Mrs. Carver for 1955.⁸ The Internal Eevenue Service now charges this portion of the gain to Chase National. None of the gain of the Pipkins was so charged.

9. Over the years numerous persons requested Mr. Carver to make investments for them, largely in the nature of loans secured by real estate mortgages. Mr. Carver obliged in somewhat unusual fashion. He made the loans and took the mortgages, as requested. If the borrower failed to pay, the lender was given an option: he could take the security (through a foreclosure made by Mr. Carver without expense), or Mr. Carver would repay the money (principal and interest) and take over the security himself (unless the borrower repaid the loan). Some of these transactions were consummated in the name of Chase National as holder of the mortgage.

10. Commencing in 1930 and continuing through the years here in issue (1954^1957), the name of Chase National, as used 'by Mr. Carver on behalf of himself and his clients, appeared in the following transactions and activities:⁹

(a) Conveyances were made (sales and exchanges) of real estate titled in the corporate name.¹⁰

(b) Real properties titled in the name of Chase National were rented in its name in leases to commercial tenants and by oral agreements with residential tenants.

(c) Money was borrowed in the name of Chase National on five occasions in connection with real estate transactions in which the properties involved were titled in the corporate name.

(d) Money was loaned in the name of Chase National in exchange for notes and mortgages showing Chase National as payee and mortgagee.

(e) Litigation was instituted in the name of Chase National in 10 instances during the years 1936 through 1955. Six were for mortgage foreclosures.

(f) Checking accounts were established in Chase National’s name (1) in the Bank of Mulberry and (2) in the Peoples Bank of Lakeland.¹¹

(g) Miscellaneous transactions conducted in the name of Chase National included contracts to convey properties, deeds, leases, options, notes, mortgages, and satisfaction of mortgages.

11. (a) Mr. Carver gave tire following reasons¹² for transacting business in corporate names (including Chase National) :

(1) Each corporation was a legal entity.¹³

(2) He did not want to be known as a money lender, and neither did he want to have the reputation of profiting from the inability of others to pay local property taxes.¹⁴ The corporate name enabled him to conceal his identity.¹⁵

(3) The use of a corporate name facilitated the conveyance of property, particularly in those instances involving interests held jointly with others, by simplifying the problem of signatures.¹⁶

(b) While the evidence suggests that in some instances Mr. Carver may have charged and received a legal fee in a Chase National transaction which he would not have charged or received had the corporate name not been used, no details were presented. There is no intimation that he ever charged to or received a fee from Chase National or either of the other two corporations.

12. On June 15, 1957, all real property titled in the name of Chase National, and all notes, claims, liens, leases, and mortgages standing in Chase National’s name were conveyed to Mr. Carver.¹⁷ On April 29,1960, Chase National was dissolved by proclamation of the Governor of Florida for failure to pay its capital stock fee.

13. Following determination by the Commissioner of Internal Eevenue that Chase National was a taxable entity, the Internal Eevenue Service taxed the corporation only to the extent of the beneficial interests of Mr. and Mrs. Carver. Credit was given to them for the tax payments they had made, which included all such beneficial interests. No effort was made by the Internal Eevenue Service to reconstruct the affairs of Chase National throughout the years in suit as a basis for assessing income or other taxes upon the full sequence of the corporate transactions.

14. Mr. and Mrs. Carver never accumulated or held real estate for sale in the ordinary course of business.

15. In the Pipkin transaction (involving land in Hills-borough County, bought in 1935 and sold in 1955), Chase National served as agent or trustee (or both) of the Pipkins and the Carvers.

CONCLUSION or Law

Upon the foregoing findings of fact, which are made a part of the judgment herein, the court concludes as a matter of law that the plaintiff is entitled to recover, together with interest as provided by law, on the claims relating (1) to the so-called Pipkin transaction and (2) to the overassessments conceded by defendant, and judgment is entered to that effect. The amount of the recovery will be determined in subsequent proceedings under Eule 41 (c). The court further concludes as a matter of law that the plaintiff is not entitled to recover on the other claims set out in the petitions, and the petitions are dismissed as to such claims.

This opinion Incorporates the opinion of former Trial Commissioner W. Ney Evans, with minor changes.

1 Although A. R. Carver sues In various capacities, he is the claimant in both cases and is therefore referred to as the plaintiff, in the singular.

2 Defendant’s citations include: National Carbide Corp. v. Commissioner, 336 U.S. 422 (1949) ; Love v. United States, 119 Ct. Cl. 384, 95 F. Supp. 919 (1951) ; Given v. Commissioner, 238 F. 2d 579 (8th Cir. 1956) ; Skarda v. Commissioner, 250 F. 2d 429 (10th Cir. 1957) ; Commissioner v. State-Adams Corp., 283 F. 2d 395 (2d Cir. 1960), cert. denied, 365 U.S. 844 (1961) ; Hagist Ranch, Inc. v. Commissioner, 295 F. 2d 351 (7th Cir. 1961) ; and Tomlinson v. Miles, 316 F. 2d 710 (5th Cir.) cert. denied, 375 U.S. 828 (1963).

3 The corporation (as the petitioner-taxpayer in Moline) urged that it was a mere agent for its sole stockholder. In rejecting this premise, the court said (319 U.S. at 440-441): “There was no actual contract of agency, nor the usual incidents of an agency relationship. Surely the mere fact of the existence of a corporation with one or several stockholders, regardless of the corporation’s business activities, does not make the corporation the agent of its stockholders. Therefore the question of agency or not depends upon the same legal issues as does the question of identity [alter ego] previously discussed.”

4 319 U.S. at 438-439.

5 119 Ct. Cl., at 405 ; 96 F. Supp., at 922.

6 Cases cited include: Aquilino v. United States, 363 U.S. 509 (1960); Morgan v. Commissioner, 309 U.S. 78 (1940), and cases therein cited; Thomas v. Perkins, 301 U.S. 655 (1937) ; Palmer v. Bender, 287 U.S. 551 (1933) ; Burnet v. Harmel, 287 U.S. 103 (1932) ; and specifically as to Florida, Tracy v. Commissioner, 25 BTA 1055 (1932). See also Commissioner v. Estate of Bosch, 387 U.S. 456 (1967).

7 Aquilino, supra, 363 U.S. at 513, n. 3.

8 The text of the Florida statute of uses is set forth in. the opinion in Elvins v. Seestedt, 193 So. 54 (Fla. 1940), at 58.

9 316 E\ 2d at 713->15.

10 836 U.S. at 437.

11 Mr. Carver reported the gain on his 1955 Income tax, indicating a gain of close to $80,000. His costs had been $8,000, and his one-half interest brought $88,000. not have

12 Defendant conceded at the been taxed on interest income received after June 15, 1957, the date of the blanket conveyance by Chase National to Mr. Carver. Plaintiff is therefore entitled also to recover to- the extent of the taxes so assessed.

13 Excerpts from plaintiff’s brief: “A theory so cannot be a sound basis for imposing tax. * * * ,Tho doctrine of ‘separate corporate entity’ simply cannot be applied to a situation where the government attempts to sort out some of the transactions in the name of that ‘separate corporate entity’ and says that they are taxable to that corporate entity; and that others, similarly of record, are not. * * «”

1 Although A. R. Carver sues in various capacities, he is the claimant in both cases and is therefore referred to as the plaintiff, in the singular.

2 Lakeland Is In Polk County, of which Bartow Is the county seat.

3 During the period in which the corporation was used by Mr. Carver, corporation reports and tax returns (filed spasmodically in the name of Chase National with the State of Florida) showed the corporation as dormant or inactive. When state capital stock taxes were paid, the payments were made by Mr. Carver, using either his personal check or that of his law firm. The charter of the company was declared forfeit at least twice, for failure to make timely payment of the annual capital stock tax. No federal income tax returns were filed in the name of Chase National.

4 Lakeland Land Corporation was organized in the late 1920’s by Mr. Carver for use by the State Bank of Lakeland, which found itself being forced to take over numerous real estate titles from defaulting borrower-owners. The bank wanted to dispose of each property as rapidly as possible, for the sake of liquidity. Placing title to the property in a separate entity hid the actual ownership from the comptroller, and notes executed by the corporation to the bank improved the appearance of the bank’s financial statement. The State Bank of Lakeland closed its doors during the Depression, terminating its use for the corporation.

Thereafter, Mr. Carver (then city attorney) used the corporation as a nominal title-holding company for the city of Lakeland, as a conduit with which to extinguish tax liens (considered uncollectible) and to restore properties to the tax rolls in other hands, facilitating conveyances without the panoply of municipal action.

After the city’s use of the corporation was terminated, Mr. Carver used it in his own transactions.

5 Kathleen Citrus Land Company was incorporated by Mr. Carver’s law firm for clients who used it to hold title to a small citrus grove. After the sale of the citrus grove, the corporation became dormant. A local realtor later reactivated it to hold title to lands under development as a subdivision. The sale of lots became impossible in 1926, and the corporation was again dormant until 1936, when it was dissolved for failure to pay corporate stock taxes. Mr. Carver nevertheless continued the use of the corporate name, primarily in connection with a series of transfers by the realtor to Mr. Carver in payment of delinquent legal fees. In 1948, the corporate name was taken over by others for use in tax certificate speculations, after Mr. Carver had caused all titles still held in the name of Kathleen Citrus to be transferred to Chase National.

6 Mr. Carver testified that during his use of the three corporations, his selection of one over another for use in a particular transaction was as casual as his selection of the day’s cravat from his tie-rack.

7 The document (copy of which is in evidence) was dated August 30, 1935. It was signed Chase National Company, by A. R. Carver, vice president. It certified that Chase National “is holding the title” of the Hillsborough County land “for the use and benefit of" the Pipkins, one-half, and the Carvers, one-half, “said property to be dealt with or conveyed upon the joint direction of said parties.”

8 On the basis of a cost of $8,000 and a sale for $88,000 (for the Carvers' half), the Carvers’ gain was $80,000.

9 This listing is intended to supplement the foregoing illustrations without going into the details of the several transactions.

10 Many transactions were carried out in Chase National’s name for Mr. Carver’s clients. In the majority of these instances, Mr. Carver advanced the purchase money or received the sales proceeds. Where clients advanced the purchase money or were entitled to the sales proceeds, they either received participation certificates showing their beneficial ownership, or notations were made in Mr. Carver’s files showing their interests,

11 Little use was made of the former. Deposits in the latter account included sales proceeds, interest payments, rents, fruit sales proceeds, timber sales proceeds, and various advances by Mr. Carver and his clients for loans and for purchases of property. Expenditures from the account included real estate purchase money, loans to borrowers, repayment of corporate bank loans, recording fees, building repairs and improvements, commissions on sales and rent collections, real property taxes, abstracting costs, insurance expenses, and surveying costs.

Some of these receipts (deposits) and expenditures related to properties the titles to which were not in the name of Chase National. Conversely, some realty sales proceeds from properties titled in the name of Chase National were not deposited in the account.

12 The verity of Ms assertions was not questioned by defendant, and they are here accepted as factual.

13 Earlier in his practice, Mr. Carver had used the name Southern Loan Company (not a corporation) for certain loan transactions wherein no real estate mortgages were taken as security. The Southern Loan Company name was not used when documents were to be recorded, because it was a trade name, and not an entity, under Florida law, only a legal entity (a corporation or a trust) could appear on a recorded instrument without disclosure of the underlying owners.

14 When the Depression of the 1930’s compounded the collapse of the real estate boom of the 1920’s, the tax situation in (and around) Lakeland became desperate. Many of Mr. Carver’s transactions during these years represented favors to the delinquent taxpayers and to the municipality as well.

15 There is no evidence to suggest that the identities of the corporations were concealed from beneficial owners of properties acquired or conveyed by the corporations.

16 Instances wherein Chase National was listed on a document as agent or trustee for others, if any there were, were the exception rather than the rule.

17 The only substance remaining in Chase National’s name after this transfer was $561.37 in the corporation’s bank account in the Peoples Bank of Lakeland. This account was closed by Mr. Carver in March 1958.