SECTION 1033.-INVOLUNTARY CONVERSIONS 26 CFR 1.1033 (a)-1: Involuntary conversions; nonrecognition of gain. Rev. Rul. 59-173 An award received from a condemning authority may be considered as having been received as severance damages only where such designation has been stipulated by both contracting parties. When it is not clearly shown that the award includes a specific amount as severance damages it will be presumed that the proceeds were given in consideration of the property taken by the condemning authority. See G. C. M. 23698, C. B. 1943, 340; and Marshall C. Allaben et al. v. Commissioner, 35 B. T. A. 327. SECTION 4061.-IMPOSITION OF TAX Rev. Rul. 59-193 The manufacturers excise tax on automobile parts and accessories imposed by section 4061 (b) of the Internal Revenue Code of 1954 applies to sales of a load carrying scale which is used in connection with certain highway trucks and trailers. Advice has been requested concerning the applicability of the manufacturers excise tax on automobile parts or accessories to the sale of a load carrying scale which is installed on certain trucks and trailers. The scales are mounted on the vehicle frame in a position to carry the load at all times. The device gives the vehicle operator an approximate weight of his load to prevent overload violations. Section 4061 (a) of the Internal Revenue Code of 1954 imposes a tax on the sale by the manufacturer, producer, or importer of certain motor vehicle articles, including automobiles and automobile trucks. Section 4061 (b) of the Code imposes a tax on the sale by the manufacturer, producer, or importer of parts or accessories (other than tires and tubes and other than automobile radio and television receiving sets) for any of the articles enumerated in section 4061 (a) of the Code. It is held that, since the load carrying scale described above is primarily used on highway trucks and trailers, it is an automobile part or accessory within the meaning of section 4061 (b) of the Code. Accordingly, the manufacturer is liable for the tax imposed by that section in connection with his sales of these articles. Rev. Rul. 59-194 The manufacturers excise tax on automobile parts or accessories imposed by section 4061 (b) of the Internal Revenue Code of 1954, applies to the sale of an automatic throttle control which is designed and primarily adapted for use in a taxable automobile. Advice has been requested concerning the applicability of the manufacturers excise tax on automobile parts or accessories to sales of automatic throttle controls. Various companies manufacture and sell automatic throttle controls which are designed for use as speed control devices. A control may be attached to the carburetor of an automobile for the purpose of automatically maintaining a predetermined speed. The desired speed is preset by means of a push-button or other type of speed selector mounted on the dashboard of the automobile. These devices are intended to provide greater comfort for the vehicle operator during long continuous trips. Section 4061 (b) of the Internal Revenue Code of 1954 imposes a tax on the sale by the manufacturer, producer, or importer of parts or accessories (other than tires and tubes and other than automobile radio and television receiving sets) for any of the articles enumerated in section 4061 (a) of the Code. Section 316.55 (a) of Regulation 46, made applicable to the 1954 Code by Treasury Decision 6091, C.B. 1954-2, 47, defines the terms "parts or accessories" for an automobile truck or other automobile chassis or body to include (1) any article the primary use of which is to improve, repair, replace, or serve as a component part of such vehicle or article, (2) any article designed to be attached to or used in connection with such vehicle or article to add to its utility or ornamentation, and (3) any article the primary use of which is in connection with such vehicle or article whether or not essential to its operation or use. The throttle controls described above are considered to be designed and primarily adaptable for use on or in connection with taxable automobiles. Accordingly, it is held that they are automobile parts or accessories within the meaning of section 4061 (b) of the Code and sales of such controls by a manufacturer, producer, or importer are subject to the manufacturers excise tax imposed by that section of the Code. SECTION 4293.-EXEMPTION FOR UNITED STATES AND POSSESSIONS Exemption of the United States from tax on payments for certain leases of business machines. See Secretary's authorization, page 25. SECTION 6103.-PUBLICITY OF RETURNS AND LISTS OF TAXPAYERS 26 CFR 301.6103(a)-101: Inspection of those 6103 (d) of the Internal Revenue Code (Also Part II, Section 55.) E. O. 108151 Inspection of income, excess-profits, estate, and gift tax returns by the Committee on Un-American Activities, House of Representatives. By virtue of the authority vested in me by sections 55 (a), 508, and 729 (a) of the Internal Revenue Code of 1939 (53 Stat. 29, 111; 54 24 F.R. 8474. Stat. 989, 1008; 26 U.S.C. 55(a), 508, and 729 (a)), and by section 6103(a) of the Internal Revenue Code of 1954 (68A Stat. 753; 26 U.S.C. 6103 (a)), it is hereby ordered that any income, excess-profits, estate, or gift tax return for the years 1945 to 1959, inclusive, shall, during the Eighty-sixth Congress, be open to inspection by the Committee on Un-American Activities, House of Representatives, or any duly authorized subcommittee thereof, for the purpose of carrying on those investigations authorized by clause 17 of Rule XI of the Rules of the House of Representatives, agreed to January 7, 1959, such inspection to be in accordance and upon compliance with the rules and regulations prescribed by the Secretary of the Treasury in Treasury Decisions 6132 [C.B. 1955-1, 142] and 6133 [C.B. 1955-1, 335], relating to the inspection of returns by committees of the Congress, approved by me on May 3, 1955. This order shall be effective upon its filing for publication in the Federal Register. THE WHITE HOUSE, April 29, 1959. DWIGHT D. EISENHOWER. (Filed by the Division of the Federal Register on April 29, 1959, 4:40 p.m., and published in the issue of the Federal Register for May 1, 1959, 24 F.R. 3474.) SECTION 6331.-LEVY AND DISTRAINT 26 CFR 301.6331-1: Levy and distraint. Levy on accrued salaries of state employees. See Ct. D. 1837, below. SECTION 6332.-SURRENDER OF PROPERTY SUBJECT TO LEVY 26 CFR 301.6332-1: Surrender of property subject to levy. (Also Section 6331; 301.6331-1.) Ct. D. 1837 INCOME TAX-INTERNAL REVENUE CODE OF 1954-DECISION OF COURT 1. PROPERTY SUBJECT TO LEVY-ACCRUED SALARIES OF STATE EM- Accrued salaries of State employees are subject to levy for the col- 2. JUDGMENT AFFIRMED. Judgment of the United States Court of Appeals for the Fourth SUPREME COURT OF THE UNITED STATES Edgar B. Sims, Petitioner, v. United States of America. On Writ of Certiorari to the United States Court of Appeals for the Fourth Circuit. [March 23, 1959] MR. JUSTICE WHITTAKER delivered the opinion of the Court. The Commissioner of Internal Revenue assessed an income tax deficiency against each of three residents of West Virginia and forwarded the assessment lists to the Director of Internal Revenue at Parkersburg for collection. The deficiencies remaining unpaid for more than 10 days after demand for payment and the taxpayers being then employed by the State of West Virginia, the Director issued notices of levy directed to the State of West Virginia and served them on petitioner, as the State Auditor, seizing the accrued salaries of the taxpayers pursuant to § 6331 of the 1954 Internal Revenue Code, 26 U.S.C. (Supp. V) § 6331. Petitioner refused to honor the levies and instead issued and delivered payroll warrants to the taxpayers for their then accrued net salaries aggregating $519.71. Thereafter the Government brought this suit in the Federal District Court against petitioner under § 6332 of the 1954 Internal Revenue Code, 26 U.S.C. (Supp. V) § 6332,' to recover from him personally the $519.71 that he had so paid to the taxpayers in disobedience to and defeat of the Government's levies. The District Court rendered judgment for the Government and the Court of Appeals affirmed, 255 F. 2d 434. Certiorari was sought on the grounds that § 6331 does not authorize a levy on the accrued salaries of employees of a State, and that, if it be held that it does, petitioner was not a person "obligated with respect to" the accrued and seized salaries, within the meaning of § 6332, and, therefore, is not personally liable for refusing to surrender them to the Government. We granted the writ to determine those questions. 358 U.S. 809. Nothing in the Constitution requires that the salaries of state employees be treated any differently, for federal tax purposes, than the salaries of others, Helvering v. Gerhardt, 304 U.S. 405 [Ct. D. 1343, C.B. 1938-2, 246]; Graves v. State of New York ex rel. O'Keefe, 306 U. S. 466 [Ct. D. 1390, C.B. 1939-1 (Part 1), 129], and it is quite clear, generally, that accrued salaries are property and 126 U.S.C. (Supp. V) § 6331, in pertinent part, provides: "(a) Authority of Secretary or delegate.-If any person liable to pay any tax neglects or refuses to pay the same within 10 days after notice and demand, it shall be lawful for the Secretary or his delegate to collect such tax. . . by levy upon all property and rights to property (except such property as is exempt under section 6334) belonging to such person or on which there is a lien provided in this chapter for the payment of such tax. Levy may be made upon the accrued salary or wages of any officer, employee, or elected official, of the United States, the District of Columbia, or any agency or instrumentality of the United States or the District of Columbia, by serving a notice of levy on the employer "(b) Seizure and sale of property. The term 'levy' as used in this title includes the power of distraint and seizure by any means. In any case in which the Secretary or his delegate may levy upon property or rights to property, he may seize and sell such property or rights to property (whether real or personal, tangible or intangible)." The assessment against each of the taxpayers substantially exceeded in amount the accrued salary owing to each at the time of the levies. 26 U.S.C. (Supp. V) § 6332 provides: "(a) Requirement.-Any person in possession of (or obligated with respect to) property or rights to property subject to levy upon which a levy has been made shall, upon demand of the Secretary or his delegate, surrender such property or rights (or discharge such obligation) to the Secretary or his delegate, except such part of the property or rights as is, at the time of such demand, subject to an attachment or execution under any judicial process. "(b) Penalty for violation.-Any person who fails or refuses to surrender as required by subsection (a) any property or rights to property, subject to levy, upon demand by the Secretary or his delegate, shall be liable in his own person and estate to the United States in a sum equal to the value of the property or rights not so surrendered, but not exceeding the amount of the taxes for the collection of which such levy has been made, together with costs and interest on such sum at the rate of 6 percent per annum from the date of such levy. "(c) Person defined.-The term 'person,' as used in subsection (a), includes an officer or employee of a corporation or a member or employee of a partnership, who as such officer, employee, or member is under a duty to surrender the property or rights to property, or to discharge the obligation." rights to property subject to levy. In plain terms, § 6331 provides for the collection of assessed and unpaid taxes "by levy upon all property and rights to property" belonging to a delinquent taxpayer. Pursuant to that statute a regulation was promulgated expressly interpreting and declaring § 6331 to authorize levy on the accrued salaries of employees of a State to enforce collection of any federal tax. Although not disputing these principles, petitioner advances two arguments in support of his claim that the statutes do not authorize a levy on the accrued salaries of employees of a State. First, he contends that a State is not a "person" within the meaning of § 6332, and, second, he argues that Congress, by specifically authorizing in § 6331 a levy "upon the accrued salary or wages of any officer, employee, or elected official, of the United States, the District of Columbia, or any agency or instrumentality" thereof, but not similarly specifically authorizing levy upon the accrued salaries or wages of employees of a State, evinced its intention to exclude the latter from such levies. Though the definition of "person" in § 6332 does not mention States or any sovereign or political entity or their officers among those it "includes" (Note 3), it is equally clear that it does not exclude them. This is made certain by the provisions of § 7701 (b) of the 1954 Internal Revenue Code that "The term ‘includes' and 'including' when used in a definition contained in this title shall not be deemed to exclude other things otherwise within the meaning of the term defined." 26 U.S.C. (Supp. V) § 7701(b). Whether the term "person" when used in a federal statute includes a State cannot be abstractly declared, but depends upon its legislative environment, Ohio v. Helvering, 292 U.S. 360, 370 [Ct. D. 836, C.B. XIII-1, 531 (1934)]; Georgia v. Evans, 316 U.S. 159, 161. It is clear that § 6332 is stated in all-inclusive terms of general application. "In interpreting federal revenue measures expressed in terms of general application, this Court has ordinarily found them operative in the case of state activities even though States were not expressly indicated as subjects of tax." Wilmette Park Dist. v. Campbell, 338 U.S. 411, 416 [Ct. D. 1726, C.B. 1950-1, 143], and cases cited. We think that the subject matter, the context, the legislative history, and the executive interpretation, i.e., the legislative environment, of § 6332 make it plain that Congress intended to and did include States within the term "person" as used in § 6332. Nor is there merit în petitioner's contention that Congress, by specifically providing in § 6331 for levy upon the accrued salaries of federal employees, but not mentioning state employees, evinced an intention to exclude the latter from levy. The explanation of that action by Congress appears quite clearly to be that this Court had held in Smith v. Jackson, 246 U.S. 388, that a federal disbursing officer might not, in the absence of express congressional authorization, set off an indebtedness of a federal employee to the Government against the employee's salary, and, pursuant to that opinon, the Comptroller General ruled that an "administrative official served with [notices of levy] would be without authority to withhold any portion of the current salary of such employee in satisfaction of the notices of levy and distraint." 26 Comp. Gen. 912 (1947). It is evident that § 6331 was enacted to overcome that difficulty and to subject the salaries of federal employees to the same collection procedures as are available against all other taxpayers, including employees of a State. Accordingly we hold that §§ 6331 and 6332 authorize levy upon the accrued salaries of state employees for the collection of any federal tax. This brings us to petitioner's contention that even if the salaries of state employees are subject to levy, he is not personally liable to the Government for refusing to honor its levies because, contrary to the holding of the courts 4 Glass City Bank v. United States, 326 U.S. 265, 268 [Ct. D. 1651, C.B. 1945, 330]; United States v. Long Island Drug Co., 115 F. 2d 983, 986 (C.A. 2d Cir.); 9 Mertens, Law of Federal Income Taxation (Rev.), § 49.205. The only property exempt from levy is that listed in § 6334 (a) of the 1954 Internal Revenue Code, 26 U.S.C. (Supp. V) § 6334(a), consisting of certain personal articles and provisions. It does not exempt salaries or wages. Section 301.6331–1 (a) (4) (ii) of Treasury Regulations relating to Seizure of Property for Collection of Taxes (1954), 26 CFR § 301.6331-1 (a) (4) (ii), in pertinent part, provides: "State and municipal employees.-Accrued salaries, wages, or other compensation of any officer, employee, or elected or appointed official of a State or Territory, or of any agency, instrumentality or political subdivision thereof, are also subject to levy to enforce collection of any federal tax." This Regulation became effective on January 1, 1955, 1955-1 Cum. Bull., p. 195, § 7851, and therefore prior to the service on petitioner of the Government's notices of levy in October 1955. |