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Rochelle v. Commissioner of Internal Revenue.

November 26, 1940

LA ROCHELLE
v.
COMMISSIONER OF INTERNAL REVENUE.



Petition for Review of Decision of United States Board of Tax Appeals.

Author: Evans

Before EVANS and KERNER, Circuit Judges, and LINDLEY, District Judge.

EVANS, Circuit Judge.

A deficiency income tax was assessed against attorney Lee LaRochelle for the year 1932, based upon sums he received for services in collecting delinquent personal property taxes for Cook County.

Petitioner asserts, and respondent denies, that the amounts thus received were exempt from Federal income tax liability because petitioner was "an officer or employee" of the State of Illionis, and the sums received were paid him in his capacity of officer or employee of Cook county, Illinois. Respondent successfully contended before the Board of Tax Appeals that LaRochelle was an independent contractor.

The Facts. The petitioner had served as an assistant state's attorney for Cook County since 1924. He resigned on May 31, 1932.

he and three others were immediately employed by the County Board, with the approval of the Chief Justice of the Circuit Court, as special counsel, pursuant to the terms of a contract hereinafter more fully set forth.

Broadly speaking the four attorneys were employed to collect some two hundred thousand delinquent personal property tax obligations which the state's attorney's staff was unable to vigorously enforce because of inadequate appropriations. Assessment and collection of taxes had been lax in Cook County. When vigor was injected into the policy of collection, the taxpayers "went on a strike," and refused or failed to pay their obligations.

Important provisions of the contract are herewith set forth.

"Now, therefore, In consideration of the premises and of the mutual undertakings and covenants herein contained, it is contracted and agreed as follows:

"That said 'Board' hereby authorizes, employs and retains said 'attorneys' to bring suits to collect the above described taxes.

"That as compensation the aforementioned attorneys shall receive a percentage of the total amount collected, the maximum of which shall not be over ten per cent, for the entire staff, and that the individual attorneys shall each receive not more than three nor less than two per cent. and this is to be distributed as follows:

"Mr. Lee R. LaRochelle is to receive three per cent, Mr. Elmer M. Walsh is to receive two and one-half per cent, Mr. James J. McDermott is to receive two and one-quarter per cent, and Mr. Samuel F. Block is to receive two and one-quarter per cent making a maximum total of ten per cent. out of which all expenses incurred in the filing, investigation, and trial of these cases is to be borne by each of the aforementioned attorneys in equal amounts, that is, each shall bear one-quarter of the total expenses incurred in the prosecution of these suits and for the employment of all necessary help and other necessary expenses. Payments shall be made to the attorneys monthly upon certified statements of the collections for the preceding month.

"That the aforementioned contract shall be paid from funds which are received from penalties exacted on the delinquent tax and the ...


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