Appeal from the District Court of the United States for the Northern District of Illinois, Eastern Division; William H. Holly, Judge.
Before EVANS, TREANOR, and KERNER, Circuit Judges.
The defendant appeals from a judgment which directed a refund of $7400.67,*fn1 and interest, theretofore paid under protest by plaintiff to the Government as capital stock taxes for the years 1933, 1934, and 1935. The basis of the refund was a finding by the court that plaintiff was not "doing business" and therefore was not subject to a capital stock tax for any of these years.
Plaintiff was organized to do lumbering business.*fn2 Though a 100% owned subsidiary, the Garyville Land Company, it held 32,209.63 acres of cut over swamp land and 77.97 acres of pine lands in Louisiana. It also owned 38,990.92 acres of timber land in Oregon, acquired through its purchase of the stock of the Continental Timber Land Company. The latter company's stock was held by nearly the same stockholders and in the same relative amounts as the stockholders who owned the stock of plaintiff. Continental owed $900,000 and plaintiff had more than this amount on hand in cash. Plaintiff was an Illinois corporation, organized in 1902. it maintained licenses to hold real estate in Oregon and Louisiana. It had cut practically all the timber on its Louisiana land by 1931 and had ceased lumbering operations there.
Our inquiry is of necessity directed to an examination of the evidence to ascertain plaintiff was not doing business in the years in question. The applicable statute reads:
Revenue Act of 1934, c. 277, 48 Stat. 680.
"Sec. 701. Capital Stock Tax.
"(a) For each year ending June 30, beginning with the year ending June 30, 1934, thee is heeby imposed upon every domestic corporation with respect to carrying on or doing business for any part of such year an excise tax of $1 for each $1,000 of the adjusted declared value of its capital stock." 26 U.S.C.A. Int. Rev. Acts, page 787.
To refute the finding that plaintiff was not "carrying on business" the Government cites the following facts:
I. Plaintiff executed oil leases on its Louisiana land. The terms of the leases, as they appear from a summary in plaintiff's corporate minutes, are set forth below."*fn3
II.Plaintiff sold some second growth timber from its Louisiana land.
III. Plaintiff made some trapping leases on that land.
IV. Plaintiff sold a few tracts of timber land in Oregon.
V. It maintained an office, paid overhead of office, made investments of sizable sums of money.
VI. It maintained licenses to own land in Louisiana and in Oregon.
VII. It authorized its officers and directors each year to borrow money and invest its money as in their judgment seemed wise.
VIII. It maintained arrangements with an experienced sales organization through which it sought to sell its holdings advantageously. It so sold small tracts.
The Government stresses all these items in an effort to apply the legal tests announced by the courts in determining when a company is "doing business."*fn4
Plaintiff, on the other hand, maintains that its corporate activities were those necessary to its awaiting an opportune time for liquidation; that its activities were not "doing business"; that they were foreign to the corporate purposes enumerated in its charter. It insists that all its activities were incidental to the process of its liquidation, which in this instance proceeded solwly because of adverse economic conditions prevalent in the lumber industry since 1930.
Plaintiff relies on the cases which announce a more favorable rule and permits activity to protect assets, without creating a liability for capital stock tax.
Two questions arise preliminarily. What is business?What, "doing business"?
We assume that "business" is a most comprehensive term and embraces everything that occupies the time, attention, and labor of men and women for the purpose of earning a livelihood, or profit. 1 Bouv. Law Dict., Rawl's Third Revision, p. 406; Flint v. Stone Tracy Co., 220 U.S. 107, 171, 31 S. Ct. 342, 55 L. Ed. 389, Ann. Cas. 1912B, 1312. Obviously the size or volume of a corporation's business is not determinative of its "doing business" character.Von Baumbach v. Sargent Land Co., 242 U.S. 503, 37 S. Ct. 201, 61 L. Ed. 460. Large sums may pass through the corporation as a conduit, yet be insufficient to constitute "doing business." Nor may a court ignore any of the corporate activities; they must be judged as a whole. Edwards v. Chile Copper Co., 270 U.S. 452, 46 S. Ct. 345, 70 L. Ed. 678. Likewise the past history of the corporation should be read and studied for the light it may throw on its current doings or its inactivity.
Significant indeed in the instant case is the 1929 purchase of a large tract of land with its heavy timber growth. While holding 32,209 acres of land from which the timber had been removed and a small amount (77 acres) of pine land in Louisiana, plaintiff acquired, through purchase of the stock of the Continental Lumber Co., a timber tract ...