Petition for Review of Decision of the United States Board of Tax Appeals.
Before MAJOR, KERNER, and MINTON, Circuit Judges.
W. M. L. Fiske, a citizen of the United States, was vice-president of Dillon, Read & Company, investment bankers, from 1922 until his death in New York City on October 5, 1940. He resided in Chicago,Illinois, from 1906 until 1924, when he went to Paris, France, to take charge as manager of the Company's Paris office. His wife, son, and daughter accompanied him and there they resided in an apartment which he furnished under leases for terms of three or more years. The daughter returned to the United States after her marriage in 1929. The son, after graduating from college in 1930, worked in the New York and London offices of Dillon, Read & Company.
Fiske made four trips to the United States while residing in France. On the first three he arrived for the Christmas season, and returned in January or February. Early in December, 1935, he and his wife came to visit their daughter at San Mateo, California, where the daughter had leased for them, for three months, a furnished house. They intended to return to Paris at the end of that period. In January, 1936, Fiske became ill, and was forced to go to a hospital for treatment for several weeks.Thereafter, until October, 1936, he was cared for in the house at San Mateo, when he left for New York intending to sail for France. Upon his arrival in New York he had a recurrence of the illness and was not able to return to Paris until March, 1937. Upon his return to Paris, he resumed and continued his duties as manager until May, 1940, when he was forced to leave because of the German invasion.
While away from the United States Fiske used a United States passport. In his application for a passport in November, 1936, he stated that he was domiciled in the United States and that his permanent residence was 134 South LaSalle Street, Chicago, Illinois.
While sojourning in California, the apartment in Paris was ready for occupancy, his servants living therein.In August, 1940, he decided to reside permanently in the United States and made plans to have his household furnishings removed from France.
During his stay in the United States from December, 1935, to March, 1937, he was completely incapacitated, continually under the care of physicians, and performed no service for Dillon, Read & Company, but was paid $37,400 as salary for the year 1936.
Fiske, in his income tax return for the year 1936, did not include the $37,400 received as salary. The petitioner, as Commissioner of Internal Revenue, determined that this income was taxable to Fiske and found a deficiency in taxes against him. Respondent, as executor of the last will and testament of W. M. L. Fiske, deceased, filed a petition to review the Commissioner's determination. The Board of Tax Appeals held that Fiske was a bona fide nonresident of the United States during all of the year of 1936, and that the amount in question was paid to him as compensation for personal services actually rendered outside of the United States and was exempt from taxation.
The question is whether Fiske's salary for 1936 was subject to the payment of an income tax.
Before discussing the cases claimed to be applicable, it is well that we dispose of respondent's contention that the conclusion of the Board that Fiske was a bona fide nonresident of the United States during 1936 is not reviewable here, since that represents a finding of fact.
In our case, the facts are not in dispute, and the problem is one of construction. In such situations, the courts have repeatedly held that where the ultimate finding is a conclusion of law or at least a determination of a mixed question of law and fact, it is subject to judicial review. Bogardus v. Commissioner, 02 U.S. 34, 39, 58 S. Ct. 61, 82 L. Ed. 32, and Deputy v. Du Pont, 308 U.S. 488, 499, 60 S. Ct. 363, 84 L. Ed. 416.
By § 116(a) of the Revenue Act of 1936, 26 U.S.C.A. Int. Rev. Code § 116(a), Congress granted an exemption from gross income to an individual citizen of the United States who is a bona fide nonresident of this country for more than six months during the taxable year, for amounts received from sources without the United States (except amounts paid by the United States or any agency thereof) if such amounts would constitute earned income as defined in § 25(a).
Deductions from gross income are allowed as a matter of legislative grace, White v. United States, 305 U.S. 281, 292, 59 S. Ct. 179, 83 L. Ed. 172, and are strictly and narrowly construed, Pacific Co. v. Johnson, 285 U.S. 480, 491, 52 S. Ct. 424, 76 L. Ed. 893; Helvering v. Northwest Steel Mills, 311 U.S. 46, 49, 61 S. Ct. 109, 85 L. Ed. 29; and United States v. Stewart, 311 U.S. 60, 71, 61 S. Ct. 102, 85 L. Ed. 40. In construing a claimed exemption, we must consider the objects and purposes of the statute and give it such a construction as will carry out the true intent and meaning of Congress, Helvering v. New York, etc., Co., 292 U.S. 455, 54 S. Ct. 806, 78 L. Ed. 1361, and in so ...