Opinion of the Court 95 C. Cls. plaintiff had realized a profit in 1922 upon the sale of his own stock in the Tribune Company and also upon the sale of the stock owned by the trust under his father's will. The Commissioner's determination of profit was based upon the difference between the total sale price of the stock, less expenses, and discounts to bring the value of the notes down to their present worth, and the cost or other basis of the stock in the hands of plaintiff and the trust. Additional taxes and interest for 1922 were accordingly assessed and collected in the amount of $13,372.66. Plaintiff filed a timely claim for refund and upon its rejection instituted this suit. Plaintiff contends that he and the trust did not, in 1922, receive from the sale of the Tribune stock any amount which could properly be regarded as gross income, because, as he contends, the transaction was incomplete. He claims, in the alternative, that if he received any amount of income, it was only $20,080.23, the amount by which the cash which he received in 1922 from the sale exceeded the stock's basis. We think plaintiff received in 1922, within the meaning of the statute and the applicable regulations, the amount which the Commissioner used to compute his assessment. The sale of the stock was complete in that year. The warranties and covenants made by the vendors no more kept the transaction inchoate than would a warranty of title, or a covenant to observe certain building restrictions on land retained, or not to compete with the vendee, keep a sale of land from being complete for income tax purposes. Cases such as Virginia Iron, Coal & Coke Co. v. Commissioner, (C. C. A. 4) 99 F. (2d) 919, involving an executory contract for the sale of land are not apposite. In such cases it cannot be determined until later whether the property will ever be sold or the taxpayer will continue to own it. If the option is not exercised or if the vendee under the contract fails to perform his part of the contract, there will be no question of capital gain or loss for the vendor will still have his capital. We conclude, therefore, that there was a completed sale in 1922. Plaintiff's second contention is, as we have said, that assuming that there was a sale in 1922, he "received" for 109 Opinion of the Court tax purposes in that year, only the amount which came into his hands and that of the trust, and can be taxed only on the excess of that amount over the base value of the stock. The cash and notes all came, in 1922, into the hands of Fulmer. The cash, less expenses, was distributed and plaintiff received his share. The notes had a "readily realizable market value" within the meaning of Section 202 (a) (3) (c) of the Revenue Act of 1921 (42 Stat. 227, 230), and of Treasury Regulations 62 (1922 edition), article 1564. Although they were payable to Fulmer, he was the agent or trustee of plaintiff for plaintiff's proportionate share of them. If plaintiff had been the sole beneficiary of Fulmer's agency or trusteeship of the notes, he could have demanded their transfer to him. As it was, he was as much entitled to have possession of them as any partner or other co-owner is entitled to have possession of the common property. In short, his proportionate share of the notes became, in 1922, his property in the hands of his agent or trustee. In view of what is said in the next paragraph of this opinion, the fact that a small amount, some $12,000, of the funds in Fulmer's hands was in 1922 by court order subjected to a trust to satisfy the possible outcome of the Stappenbeck litigation does not affect our conclusion. Plaintiff's right, as well as those of Fulmer and the other majority stockholders to retain all the proceeds of their sale, was attacked in litigation beginning in 1922, and concluding adversely to them some years later. But this fact did not, under the authorities, postpone plaintiff's tax liability until the outcome of the litigation was known. North American Oil Consolidated v. Burnet, 286 U. S. 417, 424. The court said in that case: If a taxpayer receives earnings under a claim of right and without restriction as to its disposition, he has received income which he is required to return, even though it may still be claimed that he is not entitled to retain the money, and even though he may still be adjudged liable to restore its equivalent. See also McDuffie, Trustee, v. United States, 85 C. Cls. 212; Schramm v. United States, 93 C. Cls. 181. Concurring Opinion by Judge Jones 95 C. Cls. Our conclusion is that plaintiff was not overtaxed and is not entitled to recover. His petition is, accordingly, dismissed. It is so ordered. WHITAKER, Judge; LITTLETON, Judge; and WHALEY, Chief Justice, concur. JONES, Judge, concurring: I concur in the result, but for a different reason. Plaintiff is endeavoring to escape the consequences of an illegal transaction, as disclosed by his own pleadings and the documentary evidence of record. Since suits were filed by minority stockholders during the taxable year, 1922, the year of receipt, it is doubtful whether the taxpayer received the earnings "under a claim of right with full power of control and disposition." The exercise of any such power over a portion, at least, of such funds was prevented by court order made in 1922. Even conceding that the taxes were properly assessed in 1922, there is some question whether plaintiff might not have the right to a refund on the facts, later revealed, showing that he did not own a certain percentage of the monies and notes that were received, but that such percentage actually belonged to the minority stockholders. On that percentage plaintiff had paid taxes on property that belonged not to him but to others. On account of the apparent fraud on the minority stockholders, with which plaintiff was intimately connected, or at least had knowledge and with such knowledge became, or was willing to become, the beneficiary, he is not equitably entitled to recover. To avoid any possibility that a subsequent taxpayer with a just cause might be foreclosed on the other issues, I prefer to place the decision on the latter ground. Plaintiff having sought to benefit from an illegal transaction may not now recover on the showing that his attempt failed. 125 Reporter's Statement of the Case RUST ENGINEERING COMPANY v. THE UNITED STATES [No. 43302. Decided December 1, 1941] On the Proofs Government contract; specifications carelessly written and ambiguous. Where plaintiff entered into a contract with the Government to furnish all labor and materials and to perform all work required for the construction of a complete steam generating plant, to be known as the Central Heating Plant for Public Buildings, in the District of Columbia; said contract including furnishing and installing all necessary electrical wiring, as set forth in the specifications, and for which electrical work plaintiff contracted with a subcontractor, which subcontractor based its bid on wiring and insulation approved by the National Electrical Code, as called for under one paragraph of the original specifications; and where said original specifications were carelessly written and contradictory; and where under amended specifications plaintiff was required to install, and did install, a more expensive insulation; it is held by the court that the ambiguity in the original specifications should be resolved in plaintiff's favor, and plaintiff is entitled to recover. Same. Where the specifications are carelessly written and ambiguous, contractor is not licensed to disregard such portions as are plain. Same; illegal installation.-If an owner invites bids for an illegal installation, the bidder is not privileged to submit a bid, and, if it is accepted, claim that he has a contract for a much cheaper lawful installation. The Reporter's statement of the case: Mr. Alexander M. Heron for plaintiff. Messrs. Bynum E. Hinton and William L. Owen were on the brief. Mr. Herman J. Galloway was of counsel. Mr. H. A. Bergson, with whom was Mr. Assistant Attorney General Francis M. Shea, for the defendant. Mr. Joseph C. Duggan was on the brief. The court made special findings of fact as follows: 1. Plaintiff is a corporation organized under the laws of the State of Delaware, with an office and place of business in the city of Pittsburgh, Pennsylvania. 449973-42-CC-vol. 95-10 Reporter's Statement of the Case 95 C. Cls. 2. On December 21, 1932, the defendant, represented by Assistant Secretary of the Treasury Ferry K. Heath as contracting officer, entered into a contract designated T1SA 3859 with plaintiff whereby for $1,489,900 plaintiff agreed to furnish all labor and materials, and perform all work required for providing a complete steam generating plant, to be known as the Central Heating Plant for Public Buildings, to be situated at a determined location in the District of Columbia. Made a part of the contract were specifications dated October 27, 1932, addenda thereto dated November 7, 1932, November 21, 1932, November 23, 1932, and November 25, 1932. 3. The furnishing and installation of electrical wiring was included in plaintiff's contract, and forms the sole subject matter of this suit. This work included furnishing and installing (1) wiring outside the building, running underground and in tunnels, most of which was power and light cable to carry 600 volts or less; (2) wiring under the basement floors, and in the basement walls and ceilings, to carry 600 volts or less; (3) wiring on the main floors of the building around and above the boiler locations, most of which was to carry 600 volts or less; (4) wiring on the main floors of the building, in the portions separated from the boiler spaces by brick walls, to carry 600 volts or less; and (5) wiring in the building to carry 2,300, 4,000, and 5,000 volts. Wires and cables to carry less than 600 volts were required to have 600 volt insulation and wires and cables to carry more than 600 volts and up to 5,000 volts were required to be insulated with 5,000 volt insulation. The wires consisted of copper conductors around which was placed insulating material. The size of each copper conductor was precisely specified in the contract requirements in terms of the accepted commercial designation as to size. All wiring was required by the specifications to be placed in conduits, which are a form of steel tubing or pipe usually installed in the concrete walls or floors of the building at the time of their construction. The electrical wiring was to be installed before the project was put into operation. |