Petition for Writ of Certiorari — Commissioner v. Guardian Agency, Inc.

Supreme Court brief1969

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‘SEP 5 1969 |

“JOHN F. DAViS, . CLERK *

tates

IN THE

Supreme Court of the Bnited

OcToBER Term, 1969

Local Finance Corporation

Local Finance Corporation of South Marion

Local Finance Corporation of Elkhart

Local Finance Corporation of Gas City |

Local Finance Corporation of Rushville

Local Finance Corporation of Danville

Pb tec Local Finance, Inc. _

~ Local Finance Co., Inc., of Gary

Local Finance Company, Inc.,

= Petitioners

Commissioner of Internal Revenue . _

PETITION FOR WRIT OF CERTIORARI

TO THE COURT OF APPEALS .

FOR THE SEVENTH CIRCUIT

| and

RESPONSE TO THE COMMISSIONER’S PROTECTIVE

PETITION FOR WRIT OF CERTIORARI

-in

Commissioner of Internal Revenue,

Petitioner,

| . Vv. ogre

Guardian Agency, Inc. and _.

Beneficial Insurance Agency, Inc.

SNe Wutam A. CROMARTIE

Wisur S. Leee ‘ Tipwarp W. RorHe::

R. R. McManan - Hopxins, Sutter, Owen, °

Lorp, Bissett & Brook ~ Mutroy,; Wentz & Davis

135 South La Salle Street One North La Salle Street

Chicago, Illinois 60603 Chicago, Illinois 60602

Counsel for Petitioners

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PAGE

OPINIONS BELOW ...............ccceccecsecves 2

II 6 irri ds occ dh UN hawk ok bso keas 2

~ QUESTION PRESENTED Se ee Crh Peay ye Sp ae a 2

STATUTES AND REGULATIONS I INVOLVED .. 3

. STATEMEN T sens weleniveaebedbaceks eee wees 5

| ‘The Undisputed Facts ror eas 5S wieicde wae oe OS

The. Tax Court Opinions Shy hy es: Sperer emer 8

The Court of Appeals pe n i ia heeees 9

‘ REASONS FOR GRAN TING T THE WRIT . : ree 11

I. The Courts Below’ Have Misinterpreted and

Misapplied this Court’s ‘Section 61 Decisions.. 11

_ II. The Use of Section 482 to Allocate Income

Which Cannot Lawfully be Received Raises an

Important Question of Federal Tax Law .... 14

III. The Result Reached by the Courts Below Con-

flicts with the Treatment Accorded Comparable

Business Arrangements in Other Cases ..... 19

IV. The Heart of the Matter :. The Exercise of -

Reciprocity Power is not Subject to Income

WOE s kbss 2b 5040s ver hewawbesee conmnes a

OO ois hs hoists ec oe

APPENDIX

Table of ‘Pending Chie Involving Allocation’ of

Income from Insurance Companies to Related —

Companies, Insurance Agencies, or Stockholder 24

Cases Pending in the Tax Court .............. 4

Cases Pending in the District Court for the South-

ern District of Indiana .:................. eee 36

ii ~

TABLE OF AUTHORITIES CITED

CASES: a r ;

_ Alabama-Georgia Syrup Co. v. Commissioner,

36 T.C. 47 (1961), rev’d on other

groundsy Aub. nom. Whitfield v. Commissioner,

311 F.2d 640 (5th Cir, 1962) ..........- eee eee. 22

PAGE

Alinco, Life Insurance Company v. United States, .

F.2d 336 (Ct. Cl. 1967) ........ 1s cewsnces 21

Ba Kimball vy. United States,

rs Gs Ge CIE ID 2a 6 base's 60 s50 00 sd 20

Bear Valley Mutual Water Co. v. Riddell,

283 F. Supp. 949 (C.D. Cal, 1962) .;.. eben 12

Burnet v. Harmel,

237 US. 108 (1932) sk Sy te hapatenaatesteieces 13

Campbell County State Bank, Inc. vy. Commissioner,

37 T.C. 430 (1961), rev’d on other grounds,

31t F.2d 374 (8th Cir. 1963) OU RE Pee: 20

Corliss v. Bowers, * :

i rrr caeeuas tees 12

Crowley v. Commissioner,

Se ee HES COUEED sce ncce ne cvedcdesucurevetecs - 22

Eisner v. Matomber, . | |

252 U.S. 189 (1920) ........ ihéttanewetes pieces: ee

err :

First Security Bank v. United States,

213 F. Supp. 362 (Mont. 1967), aff'd, B34: me

eee Ee GN Re BED occ cacvcecvecdscdewrcds 20:

First State Bank v. United States,

(D.C.8.D., decided June 25, 1962; -./

unofficially reported at 62-2 U.S.T.C. 79613) .... 20

) iii

\ | PAGE —

-Gaddy Motor Campany, Inc. v. Commissioner,

- ™.C, Memo. 1958-189 (17 T.C.M. 944) ....... fcc ae

Gregory v. Helvering,

293 U.S. 465 (1935) ......... Piao ae agree tee nen 19

- Grenada Industries, Inc. v. Commissioner,

17 T.C. 231 (1951), aff’d, 202 F.2d 873 (5th Cir.

1953), cert. denied, 346 U.S. 819 CTRGS) vcccecas 18

Harrison v. Schaffner, | ne

Oe i SE CEE o cciccancovcctansiacness “12

Helvering v. Horst, ;

*311 U.S. 112 (1940) ...... cece cece ee rereeeees 8,12

Jaeger Motor Car Co. v. Commissioner, oO

T.C. Memo. 1958-223 (17 T.C.M. 1098), aff’d,

284 F.2d 127 (7th Cir. 1969), cert. denied,

365 U.S. 860 (1961) ......-- cece eee cere cece eens 20

James v. United States,

366 U.S. 313 (1961) ......cceccccccvecccevvcves 13

Lucas v. Earl,

981 U.S. 111 (1930) ......cceeeeeeeedeeveevers 8,11

Moke Epstein, Inc. v. Commissioner, . :

. 99 T:C. 1005 (1958) ..... cece cece cece ccceces 20

‘Moline Properties, Inc. v. Commissioner,

319'U.8. 486 (1943) . ccc cece cece encvees eee

Morgan v. Commissioner, :

BOO U.S. 78 (1940) ... cc cccccccccvcccccccccces .13

Nat Harrison Associates, Inc. v. Commissioner,

42 T.C. 601 So ee Oy Tren Ob heed ee one 22

"National Carbide Corp. v. Commissioner,

° $86 US. 422 (1949) <2... 2.00, apne Sperry Pore 19

Nichols Loan Corp. v. Commissioner,

T.C. Memo. 1962-149 (21 T.C.M. 805), rev'd on

other grounds, 321 F.2d 905 (7th Cir: 1963) .... 20

Paramount Finance Co. v. United States,

304 F.2d 460 (Ct. Cl. 1962) ........eeeeeeeeeees 20

, PAGE

Poe v. Seaborn, i,

Ee Te 11,13

Ray Waits Motors, Inc. v. United States, .

145 F. Supp. 269 (E.D. 8.Car. 1956) eee - 20

L. E. Shunk Latex Products, Inc. v. Commissioner,

18 EE ego dbecestvesstcasecpeces -16,17

Teschner v. Commissioner,

ip a CED ccvccsscnsecss ee 13

STATUTES:

Internal Revenue Code of 1954 (26 U.S.C.):

ee ek Set 'ea 2, 3, 11, 18, 20, 22

eer 2, 3, 8, 9, 11, 14, 16, 17, 18, 20, 21, 22

IR EE ae a ae 2

28 U.S.C. § 1254(1) ............ i cia 2

| i MISCELLANEOUS:

Asbill Jr., The Application of Section 482

to Domestic Taxpayers—Current Status and

Trends, 19 So. Calif. Tax Institute 673 (1967) .. 18-

Comment, New Importance for Section 482 of the

Internal Revenue Code, 7-W & M L.Rev. 345

i Ps vhe Cucbhdeedbeseekeussed cms reecoss 18

H. Rep. No. 2, 70th Cong., p. 16 (1939-1

Pe BE BD oe cccescencccces er 14

Seieroe and Gerber, Section 482—Still Growing at

the Age of 50, 46 Taxes CE Kticivnedce-cee 17.

Spaeth, Section 482—Past and Future, =

47 Taxes 45-(1969) eee ccceewecsegeces reneeooess 17

_ Treasury Regulations On Income Tax:.

| S DPE co cccceccses 7 See eeu 3

barca icks. cbdwkwnséese os ces 4

§ LABZA(C) oes eeeeeeeeeeee. cnlaeiradcuves 4

IN THE

reo Court of the Anited States

Ocroser TERM, 1969 .

No.

Local Finance Corporation

Local Finance Corporation of South Marion

Local Finance Corporation of Elkhart

Local Finance Corporation of Gas City

Local Finance Corporation of Rushville

Local Finance Corporation of Danville

Local Finance, Inc.

Local Finance Co., Inc., of Gary

Local Finance Company, Inc.,

Petitioners .

Vv.

Commissioner of Internal Revenue

PETITION FOR WRIT OF CERTIORARI

TO THE COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Petitioners pray that a writ of certiorari issue to review

the judgments of the Court of Appeals for the Seventh Cir-

cuit affirming decisions of the Tax Court of the United

States upholding income tax deficiencies in the aggregate

sum of $418,977.31 determined by the Commissioner of

Internal Revenue for the calendar years 1958 through 1962.

OPINIONS BELOW

The opinions of the Court of Appeals and of the Tax

Court are reported at 407 F.2d 629. and 48 T. C. 773. They

are printed as Appendix A and Appendix C, respectively,

of the Commissioner’s protective petition for writ of cer-

tiorari in the related cases involving Guardian Agency,

Ine. and Beneficial. Insurance Agency, Inc. Appendix ref-

erences in this petition are to those Appendices, unless

otherwise indicated. |

JURISDICTION |

. The judgments of the Court of Appeals were dated and ™

entered on February 28, 1969. A petition for rehearing was

denied on April 9, 1969. As a result of orders signed by

Mr. Justice Marshall on June 27 and August 1, 1969, the

time within which to petition for certiorari was extended

to.and including September 6, 1969. :

This Court has jurisdiction to review the judgments of

the Court of Appeals for the Seventh Circuit by writ of

certiorari under Section 7482(a) of the Internal Revenue

‘Code of 1954 (26 U.S.C. § 7482 (a)) and 28 U.S.C. § 1254(1).

QUESTION PRESENTED

Whether, because the petitioning loan companies handled

the clerical details involved in selling and servicing credit

life.insurance on their borrowers and were in a position

to select the insurance carrier, they can be taxed (under

Sections 61 or 482 of the Internal Revenue Code) on (1)

commissions paid by the carrier to related insurance agen-

_ cies or (2) premiums paid by the carrier to a related life

insurance company to reinsure the risks, where the loan

companies were prohibited by state law from deriving any

income from credit life insurance. ©

oe, |

STATUTES AND REGULATIONS INVOLVED

Internal Revenue Code of 1954 (26 U.S.C.)

~ §61.. GROSS INCOME DEFINED.

. Q

(a) General Definition. Except as otherwise pro-

vided in this subtitle, gross income means all income

from whatever source derived, including (but not lim-

ited to) the following items:

(1) Compensation for services, including fees, com-

missions, and similar items;

§ 482. ALLOCATION OF, INCOME AND DEDUC-

. TIONS AMONG TAXPAYERS. '

In any case of two or more organizations, trades, or

businesses (whether or not incorporated, whether or.

not organized in the United States, and whether or not

affiliated) owned or controlled directly or indirectly by -

the same interests, the Secretary or his delegate may .

distribute, apportion, or allocate gross income, deduc-

tions, credits, or allowances between or among such... ,

organizations, trades, or businesses, if he determines

that such distribution, apportionment, or allocation

is necessary in order to prevent. evasion of taxes

or clearly to reflect the income of any such organiza-

tions, trades, or businesses. _ \

.: Treasury Regulations on Income Tax

§ 1.4821. DETERMINATION OF THE TAXABLE

_ INCOME OF A CONTROLLED TAXPAYER. (26 CFR

§ 1.482-1, added by TD. 6595, April 13, 1962, 1962-1 Cum.

Bull. 49.) |

(a) Definitions. When used in this section— . .

Pre * ~ * *

(6) The term “true taxable income” means, in the

ease of a controlled taxpayer, the taxable income (or,

4 :

as the case may: be, any item or Fement affecting tax-

able income) which would have resulted to the con-

trolled taxpayer, had it in the conduct of its affairs. (or,

as the case may be, in the particular contract, transac-

tion, arrangement, or other act) dealt avith the other

member or members of the group at arm’s length. It

does not mean the income, the deductions, the credits,

the allowances, or the item or element of income, de-

ductions, credits, or allowances, resulting to the con-

trolled taxpayer by reason of the particular contract,

transaction, or arrangement, the controlled taxpayer,

or the interests controlling it, chose to make (even

though such contract, transaction, or arrangement be

legally binding upon the parties thereto).

(b) Scope and purpose——(1) The purpose of see-

tion 482 is to place a controlled taxpayer on a tax

parity with an uncontrolled taxpayer, by determining,

~ according to the standard of an uncontrolled taxpayer,

the true taxable income from the property and business

of a controlled taxpayer. The interests contfolling a

“group of controlled taxpayers are assumed to have

complete power to cause each controlled taxpayer so

to conduct its affairs that its transactions and account-

ing records truly reflect the taxable income from the

property and business of each of the controlled tax-

payers. If, however, this has not been done, and the °

taxable incomes are thereby understated, the district

director shall intervene, and, by making such distribu-

tions, apportionments, or allocations as he may deem

necessary of gross income, deductions, credits, or

allowances, or of any item or element affecting taxable

income, between or among the controlled taxpayers

constituting the group, shall determine the true tax-

able income-of each controlled taxpayer. The standard

to be applied in every case is that of an uncontrolled

taxpayer dealing at arm’s length with another uncon-

trolled taxpayer. -

e ct * *. -

trolled taxpayer and another will be subjected to spe-

cial scrutiny to ascertain whether the common control

is being used to reduce, avoid, or ‘escape taxes. In

determining the true taxable income of a controlled |

taxpayer, the district director is not restricted to the

case of improper accounting, to the case of a fraudu-

lent, colorable, or sham transaction, or to the case of

a device designed to reduce or avoid tax by shifting or

distorting income, deductions, credits, or allowances.

The authority to determine true taxable income extends

to any case in which either by inadvertence or design

the taxable income, in whole or in part, of a controlled

taxpayer, is other than it would have been had the tax-

payer in the conduct of his affairs been an uncontrolled

taxpayer dealing at arm’s length with another uncon-

trolled taxpayer.

| STATEMENT

The Undisputed Facts

The basic facts, which are undisputed,. are taken from ~

the Tax Court’s findings of fact. (App. C, pp. 22 et seq.)

- Petitioners, Local Finance Corporation and eight wholly

owned subsidiaries, are gosaged in the small loan business

in Indiana.

Since 1936, the loan companies have made available to‘

their customers credit life insurance, which pays off the

debt in case the borrower dies during the term of the,Jean.

When a customer elected to take coverage, the necessary

insurance paper work was done by the loan company’s em-

_ ployees simultaneously with the preparation of the. loan

papers. Weekly lists of insurance policies issued and pre-

miums received from customers were sent to Guardian

Agency, Inc. and Beneficial Insurance Agency, Inc., whose

stock was owned by persons who owrfed over 70% of the

stock of the loan companies. The insurance agencies, in

turn, submitted monthly reports and premiums to an inde-

—

eae

es eer eee ore

. ‘ —

oN °

pendent life insurance underwriter (Ola as aens Life

Insurance Company).

The annual cost of servicing credit life insurance was

about $12,000‘to the loan companies and about $2,200 ”

the insurance agencies.

Borrowers paid the going premium for credit life insur-

ance in Indiana ($1 per $100 of ingyrance), a rate which

was sufficient to allow insurance undérwriters te pay acqui- ”

sition costs. However, the Indiana Small Loan Act -pro-

hibited loan companies from receiving anything other than

the charges permitted by the statute. In order to- avoid

penalties for violating the Small Loan Act (which included

_ fines and imprisonment, forfeiture of the right to collect

- both principal and interest, and revocation of small loan

license), the loan companies consistently refused to: accept

any compensation for handling credit life insurance. Never-

_ theless, the loan companies benefited from\offering eredit —

life insurance: it constituted an added action to cus-

tomers (which . competitors were also offering), provided

for repayment of insured loans in case of death, and im-

proved public relations by eliminating demands for pay-

ment upon the families of deceased borrowers.

Prior to July 1, 1958, insurance commissions were, for

a period of time, paid by Old Republic directly to the in-

‘suranee agencies. Later,‘ commissions were paid to the

insurance agencies indirectly through’ Donald Miller, an

officer of the insurance agencies, as well as of the loan com.

panies. Miller was. Old Republic’s agent, but endorsed his

commission checks over to the insurance agencies. 1 This ar-

- The Cominissioner’s protective petition for writ of certiorari

in the Guardian and Beneficial cases erroneously states (p. 3) that

_ the independent insurance carrier at first “paid Local Finance” a

commission and that, subsequently, “Local Finance assigned the

-. Commission income to, Guardian.” (See App. A, pp. 9-10; ane. C,

PP. 25-29.)

rangement ‘was designed to.comply with Indiana tilanaiiig”

law, which prohibited the payment of life insurance com-

missions to corporate insurance agents. Subsequently, tHe

Indiana insurance ‘department ruled that such indirect

commission payments were equaily in violation of the in-.

surance law and Old Republic »ecame concerned over the

possibility of losing its Indiana license. Consequently, an

entirely new arrangement was instituted as of July 1, 1958.

A life_insurance company (Grand National Life Insur-

ance Company) was formed and persons who owned 98%

_of Guardian’s stock subscribed for 99% of Grand National’s ~.

stock. Grand National entered into a reinsurance treaty

with Old Republic and assumed all of, the insurance risk in

return for 90.5% of the premiums paid to Old Republic by

the loan companies’ borrowers. Neither Old Republi¢ nor

Grand National paid any commissions on this insurance.

_ The Commissiongr of Internal Revenue attributed to the

loan companies additional income, in the form of. insurance

commissions, equal to 50% of.the premiums collected dur- .

ing 1958 through 1962. For the period January 1 ‘through |

June 30, 1958, the amounts allocated to the loan companies

were out of commission income which had been received

and reported for tax purposes by the insurance agencies,

Guardian and Beneficial. For the remaining period (J uly

1, 1958 through December 31, 1962), the allocation was of

income which had been received as insurance premiums by

Gtand National and. reported by it for tax purposes.’

_ 2. Alternatively, the Commissioner allocated 50% of premiums

‘for this period to the insurance agencies. ‘It is this alternative

allocation which is involved in the Commissioner’s protective peti-

tion for certiorari:

Rone

* ‘The Tax Court Opinions

A divided Tax Court upheld the Commissioner’s alloca-

’ tion of income to the lean companies and denied his alterna-

tive allocation to the insurance agencies. °

The majority opinion found that Grand National “was

a bona fide insurance company, that it did assume liability

for reinsurance of the policies written by [Old] Republic,

and that it was entitled to compensation for assuming such

reinsurance risk.” (App. C, p. 50.) Nevertheless, the major-

ity concluded that it was the loan companies that “per-

formed all the services in connection with the sale and

servicing of the insurance,” that it was they who “earned,

and, controlled .thé disposition of, thé commission income,”

-and that they had exercised “their power to dispose of such

income by having. Miller assign it to Guardian and Benefi-

eial” and, after July 1, 1958, by having it paid by Old

Republic to Grand National. as reinsurance premiums.

(App. C, pp. 46-48.) This, it was held, constituted a basis

for taxing to the finance companies income which they had

— not received—and ‘could not lawfully receive. In so hold-

ing, the majority relied principally on Section 61 of the

Code, as they conceived it to have been interpreted by this —

Court in such cases as Lucas v. Earl, 281 U.S. 111 (1930)

and Helvering v. Horst, 311 U.S. 112 (1940). They appar-

ently considered Section 482 to be only a vehicle for the -

_ application of the general principles evolved in the Section ©

61 cases to situations involving commonly ——_e busi-

ness entities. (App. C, Pp. 46.)

Judge Tannenwald (Judge Dawson, agreeing) concurred

with’ the majority result on the ground tlt the finance

companies had performed selling and serv¥eiy® functions

for which they had not been compensated. He saw no pur-—

pose in “entering the mare’s nest of the decided cases”

/ ’

under Section 61 and placed his reliance solely on. the

broad discretion granted to the Commissioner in Section

482. (App. C, p. 63.)

Chief Judge Drennen dissented on the ground that the .

majority decision: could ‘not be squared : with precedent. i

(App. C, p. 63.)

Judge Fay also dissented (App. C, p. 64) because: (1)

the majority opinion is contrary to existing case law and

an unwarranted application of the statute, (2) the minimal

services performed by the loan companies; costing about

$60,000 during the five years involved, did not justify the -

Commissioner’s allocation (over $600,000 of income), and

(3) the majority was really attempting to vitiate the effect

_ of the paftial tax deferral granted by the Internal Revenue

Code to life insurance companies—a matter for legislative,

not judicial, concern. He pointed out that, despite repeated

attacks by the Commissioner, this is the first time a court

has taxed a lending institution on income from the sale of

insurahce to its customers where some other bona fide

entity had in fact received the income and the lending in;

stitution was prohibited by law from receiving it.

The Court of Appeals Opinion

The Seventh Circuit affirmed the Tax Court, relying

heavily on the broad discretionary power to allocate inceme

among related entities granted to the Commissioner in

Section 482. |

The court held that. sihoontin of income under Section

482 turns on who actually earned the income and that the

Commissioner’s allocation merely compensated the loan

companies for the selling and processing services per-

| formed by their employees, which, however minimal, were

the sine qua non of the credit insurance business. '

‘

‘ *

The court rejected the argument that the loan com-

panies cannot be taxed on income they did not~and could

not lawfully—receive. In reaching that conclusion, it held

that “the criteria of what constitutes income under Section

61 and the appropriateness of an allocation under Section

482 are matters of federal law” (citing, Burnet v. Harmel,

287 U.S. 103 (1932). The federal law relied on by the court

consisted of two lines of cases which have held that, under

certain circumstances, income may be taxed to one who did

not actually receive it (e.g., Lucas v. Earl, 281 U.S. 111

(1930)) and that one may be taxed on income actually—

though unlawfully—received (e¢.g., James v. United States,

366 U.S. 213 (1961). (App. A, pp. 14-15.)

REASONS FOR GRANTING THE WRIT

I. i ee ae es

This Court’s Section 61 Decisions

While the courts below appear to rely primarily on the

Commissioner’s broad discretionary power to allocate -in-

come under Section 482 of the Code, it is apparent that they

determined the propriety of the exercise of that power in |

light of this Court’s decisions that income may sometimes

be taxed to one who does not actually receive it—the so-

ealled Section 61 assignment of income cases. In so doing, Sy

they failed to grasp the rationale of those decisions and

ignored the carefully articulated limitation on the doctrine,

viz., that the taxpayer must have the legal right to take the

income for himself.

Lucas v. Earl, 981 U.S. 111 (1930), does indeed hold that

the burden of taxation cannot be shifted by a breadwinner

to his wife through an anticipatory assignment of his in-

come. But in Poe v. Seaborn, 282 U.S. 101, 117 (1930), the

Court distinguished Earl and upheld the right of a wife -

to file a separate return, treating one-half of the husband’s

earnings as her separate property under Washington com-

munity property law:

“The very assignment in that case [Karl] was bot-

tomed on the fact that the earnings would be the hus-

band’s property, else there would have been nothing

on which it could operate.That case presents quite a

different question from this, because here, by law, the

earnings are never the property of the husband, but

that of the community. a

Thus, the Court spociteallly recognized the taxpayer's ina-

bility to take the income for himself because of a state-

imposed, rather than a self-created, disability.

- The assignment of income cases decided after Earl have

consistently held that it is the taxpayer’s ability to take

~ the income for himself that justifies taxing him. In Corliss

- v. Bowers, 281 U.S. 376, 378 (1930), a husband was taxed

‘on the income of a revocable trust established for his wife,

but only because—

“*** income that is subject to a man’s unfettered com-

mand and that he is free to enjoy at his own option

may be taxed to him as his income, whether he sees

fit to enjoy it or not.” (Emphasis supplied.)

In Helvering v. Horst, 311 U.S. 112, 119 (1940), a father

was taxed on bond interest represented by a coupon clipped

and given to his son prior to its maturity because he was

“entitled to receive it” and had exercised his “power to

dispose ‘of it in procuring satisfaction which he would

otherwise procure only by the use of the money when re-—

ceived.” (Emphasis supplied.) |

And in Harrison v. Schaffner, 312 U.S. 579, 582 (1941),

a mother was taxed on future trust income\which she, as

beneficiary, had assigned to her children because she was

“vested with the right to receive income” and, by exercising.

her command over the income, enjoyed its benefit:

No decision of this Court deviates from the concept that

it is the exercise of the taxpayer’s option either to take the

income for himself or to divert it to another that justifies

the imposition of the tax. This Court has yet to hold that

someone can be taxed on income which hé did not receive

and which he could never become entitled to receive.

’ Moreover, until the decisions of the courts below in t

case, the lower courts have recognized the importance of

legal impediments to the receipt of-income and have re-

fused to attribute income to taxpayers who “did not re-

ceive and [were] not entitled to receive” it. Bear Valley

——,

Mutual Water Co. v. Riddell, 283 F. Supp. 949, 955 (C. D.

Calif. 1968). In Teschner v. Commissioner, 38 T.C. 1003

(1962), the Tax Court itself refused to tax a father who, .

disqualified by contest rules from receiving a prize, sub-

mitted a winning entry in his daughter’s name: :

“Where an individual neither receives nor has the

right to receive income, he is not the taxable individual

within the contemplation of the statute. There is no

basis in the’ statute or in the decided cases for a con-

struction at variance with this fundamental rule.” 38

T.C. at 1009.

The Tax Court flatly rejected the Commissioner’s broad ~

contention—now approved in ‘the decisions below—that the

touchstone of taxation is whether the taxpayer earned or

generated the income through his own efforts. The court

recognized that this was not enough. The taxpayer must, -

in addition, either have received the income or have had

the right to do so. 38 T.C. at 1007.

Like the community property law in Poe v. Seaborn, 282 .

U.S. 101 (1930), and the contest rules in Teschner, Indiana

law precluded the loan companies from becoming entitled

em by the Commis-

the supremacy of federal tax Mw, as the courts below as-

sumed. There is no attempt here to superimpose state

property classifications on federal tax laws, as there was in

Burnet v.. Harmel, 287 U.S. 103 (1932). Rather, this is a»

case where state law has determined that the taxpayer can

have no “legal interests and rights” upon which federal tax

law may operate. -Morgan v. Commissioner, 309 U.S. 78,

80-81 (1940). Nor is there any attempt here to derogate

from this Court’s holding that actual—though unlawful—

receipt of income, by an embezzler for example, is a basis

for taxation. James v. United States, 366 U.S. 213 (1961).

One who, like these petitioners, has never had either pos-

session or the right to possess income does not have the

necessary “command” over income to justify taxation. He

is not “free ut gad at his own option” income the receipt

of which would entail a’violation of state law. To hold

otherwise would result in the total disregard of petitioner's’

attempts to structure their business: affairs in compliance

with state law. In addition, it would virtually force tax-

payers to violate state law and take the income attributed

to them for tax purposes in order to pay the tax on such

income. Cf. Eisner v. Macomber, 252 U.S. 189, 213 (1920).

II. The Use of Section 482 to Allocate Income Which

Cannot Lawfully ‘pe Received Raises an Important

Question of Federal Tax Law

Section 482 authorizes the Commissioner to allocate -

income and deductions among commonly controlled busi-

ness entities if he determines that such allocation is neces-

sary in order to preyent “evasion of taxes or clearly to

reflect the income” of any of such entities. This provision,

which first appeared in its- present form in the Revenue

Act, of 1928, was designed—

“*** to prevent evasion (by the shifting of profits, the

making -of fictitious sales, and other methods fre-

quently adopted for the purpose of ‘milking’), and in

order clearly to reflect their true tax liability. a *

Rep. No. 2, 70th Cong., p. 16 (1939-1 Pt. 2 Cum, Bull.

395). |

The test for determining whether an aNoention:is war-

ranted under Section 482 is whether— <

“*** the taxable income, in whole or in bart, of a con-

trolled taxpayer, is other than it would have been had

the taxpayer in the conduct of his affairs been an un-

controlled taxpayer dealing at arm’s length with an-

other uncontrolled taxpayer.” Reg. sic 482-1 (c), supra,

p. 5.

15.

The way in which the credit insurance business was

handled in this case (payment of commissions to the insur-

ance agencies prior to July 1, 1958 and reinsurance with

Grand National thereafter) did not result in any “milk-

ing” of the loan companies or “shifting of profits” from

them to related entities because the loan companies could

not lawfully take any profit from the credit insurance busi-

ness and there is no basis for assuming that, absent the

commission and reinsurance arrangements, they would

have taken income in violation of state law. Contrary to

the Court of Appeal’s assumption (App. A, p. 16), the Tax

Court made no finding’ that, had it not been for Grand Na-

tional, commissions would have been paid to Local Finance.

Applying the test propounded by the Regulation, the tax-

able income of the loan companies would not have been any

greater even if the insurance agencies and: Grand National

were not related entities and the loan companies had dealt

with them at arm’s length.

It may well be that, if the insurance agencies and Grand |

National had not been related parties, the commission and

‘reinsurance arrangements would never have been made.

But this does not justify an attribution to the loan compa-

nies of income which they could not fhave lawfully received

in any event..The Court 6f Appeals clearly misunderstood

the purpose of the arm’s length test when it said—

“the. Commissioner is empowered *** to determine

whether [transactions between commonly controlled

entities] are such as would have been consummated in

an arm’s length negotiation between strangers and to

make an allocation when they fail to meet that

standard,” (App. A, p. 11.)

The question is not whether the transactions are the same

-as would have been entered into betwéen strangers, but

whether the income of the controlled entity to which the

( 16.

income is allocated would have been any different if it had

been dealing at arm’s length with a’stranger. Only then is

the Commissioner authorized to reallocate income. Here,

there is no basis for assuming that .the loan companies

‘would have received any income from credit life insurance ~

regardless of iow or with whom the mechanics might. have

been handled. ;

Likewise, the courts below misunderstood the import

.of the only precedent involving the application of Section

482 where the taxpayer is precluded by law from receiving

the income sought .to be allocated.’ L. E. Shunk Latex |

Products, Inc. v. Commissioner, 18 T.C. 940 (1952), involved

the classic economic sitnation which Section 482 was de-

‘signed to ‘prevent: the price for rubber prophylactics -

charged by the manufacturer to its commonly controlled

wholesaler was lower than current market conditions war-

ranted. The price had been established in 1937 and never

changed in a sharply rising market. The manufacturer’s —

failure to increase prices shifted profits to its related

wholesaler, which took advantage of the rising market to

increase its prices to retailers. Nevertheless, the Tax Court |

refused to allow the Commissioner to allocate income to

. the manufacturer because the applicable OPA regulation‘

had frozen the igictarer s price as of December 1, 1941

and it could not “ve lawfully charged more—whether to

_its own wholesaler or to an independent wholesaler.

The Court of Appeals sought to distinguish Shunk on the

ground that—

“The OPA regulations in Shunk prevented the genera-.

tion of the income which the Commissioner sought to

allocate; here Indiana law merely prohibited the

receipt of the commission income by the finance com-

panies.” (App. A, pp. 17-18; emphasis. supplied.)

But no such distinction is tenable. The income which

the Commissioner sought to allocate was the income gen-

erated by th holesaler’s ability to purchase from its

affiliated cate

refused to tax that income to the manufacturer only be-

cause the OPA regulations had the effect of—

“* * * prohibiting petitioners from receiving the very

income sought to be attributed to them. We think that

the Commissioner had-no authority to attribute to

petitioners income whch they could not have received.”

(18 T. C. at 961; emphasis supplied.)

In truth, there is no substantive difference between the situ-

ation in Shunk and the situation we have in this case. By

disregarding the OPA ceiling the manufacturer in Shunk

could have charged more for its product. Likewise, the

loaw companies here might have commanded compensation

for selling and servicing credit life insurance had they been

willing to violate state law. In-both instances, however,

legal prohibitions deprived the taxpayers of the option to

realize the economic benefit otherwise available to them.

The intervention of the OPA regulation in Shunk and the

Indiana Small Loan Act here broke the causal relationship

between the common control of the related entities and

what otherwise would have been the most natural economic

consequences. Hence, there is nothing on which Section 482

can. operate.

‘This court has never had occasion to consider and inter-

- pret Section 482—-perhaps because, although Section 482

and its predecessors have been. a part of the incéme tax

law for over 40 years, the Commissioner has only rather

recently begun to use the provision vigorously. See Spaeth,

Section 482—Past and Future, 47 Taxes 45 (1969); Sei-

eroe and Gerber, Section 482—Still Growing at the Age

cturer at less than market. The Tax Court ~

smbgepe =

aha

of 50, 46 Taxes 893 (1968) (disenssing = criticizing the

novel. result in this case); Asbill, Jr., The Application

of Section 482 to Domestic Tax payers—Current Status and

Trends, 19 So. Calif. Tax Institute 67 3, 673-674, 729 (1967) ;

Comment, New. Importance for Section 482 of the Internal

Revenue Code, TWE&ML. Rev. 345 (1966).

It has been held that, under Section: 482,: the Commis-

sioner’s determination that an allocation is necessary is.

~ subject to review only if it is unreasonable, arbitrary, or.

capricious. Grendda Industries, Inc. v. Commissioner, 17

T.C. 231 (1951), aff'd, 202 F.2d 873 (5th Cir. 1953), cert.

denied, 346 U.S. 819 (1953). The taxpayer’s burden of

proof under this standard is significantly greater than

under the ordinary standard, where proof of mere error

is sufficient. If, as the Tax Court thajority says (App. C,

p. 46), Section 482 is merely a specific vehicle for applying -

_ Section 61 principles in situations involving commonly con-

trolled business entities, Section 482 is surplusage. More-

over; there could develop a curious and irrational dicho-:

tomy between the functions of Section 61 and Section 482:

where family income-splitting arrangements are involved,

the taxpayer’s burden would be lighter than where arrange-

ments-~between commonly controlled business entities are

involved. There is, therefore, urgent need for this Court

to provide guidance to the Commissioner and the courts

on the relationship between Sections 61 and 482 while the

Commissioner’s use of his new-found.power is still in the

development stage. As interpreted and applied by the two

courts below, Section 482 confers upon the Commissioner

protean power to restructure business transactions involv-

ing related business entities—a power that transcends the

limitations imposed..by. this Court. in the Section 61 cases.

The importance of this Court’s reviewing the use of Sec-

tion 482 to allocate“in income which cannot be lawfully re-

ceived is illustrated by the fact that, in addition ‘to these

cases, there are 1,399 cases pending in the lower couits

involving the allocation of $232,470,659 of income from

insurance companies to related loan companies, insurance

agencies, or their stockholders. Pertinent information con-

cerning those cases, many of which involve alternative

allocations of the same income, is contained in n the Appendix

to this petition.

IIL. The Result Reached by the Courts Below Conflicts

' With the Treatment-Accorded —— —

ments in Other Cases.

Over the years, dines such as banks, finanse com-

panies, and automobile dealers, precluded by state law

from receiving compensation from the sale of insurance to

their customers, have devised different methods of han-

dling their affairs so as to allow related | parties to profit —

where they ‘themselves could not. Using as his pivotal

argument the fact that employees of these businesses sold

the insurance and hahdled the necessary. paper work, the

Commissioner has tried every weapon in his arsenal to _

restructure these transactions. Until thé decisions in this .

- cease, the lower courts have rebuffed the Commissioner at

every turn, recognizing the problem posed by state law and -

the right of taxpayers to structure their business affairs

_as they choose,* regardless of tax savings.*

- . é

The most common arrangement was for the individual |

owner of the corporation to take out an insurance. agency

license and receive insurance commissions personally. The .

courts readily accepted such arrangements, where the pres-

3. Moline Properties, I nd v. Commissioner, 319 U.S. 436

(1943) ; National Carbide Corp. v. ——— 336 U.S. 422,

(1949).

4. Gregory v. Helvering, 293 U.S.’ 465 (1985).

° #

Mey ‘“ X

idents and principal shareholders of family automobile busi-

nesses acted as casualty insurance agents—even though the

- .acttial work may have been done by the employees. of the

corporation without additional compensation. Ray Waits

Motors, Inc. v. United States, 145 F. Supp. 269 (E.D. S.Car.

1956); Moke Epstein, Inc..v. Commissioner, 29 T.C. 1005

(1958) ; Gaddy Motor Company, Inc. v. Commissioner; T.C.

Memo. 1958—189 (17 T.C.M. 944); Jaeger Motor Car Co.

v. Commissioner, T.C. Memo. 1958—223 (17 T.C.M. 1098),

— aff’d, 284 F.2d 127 (7th Cir. 1960), cert. denied, 365 U.S.

860 (1961).

Similarly, in the field of credit life insurance such indi-

vidual or’partnership insurance agencies have been upheld

and no’ attribution of commission income to the related

financial institutions has been permitted, despite various

arguments that, under Section 61 of the Code, the insurance

agencies should be disregarded as a “sham,” that the in-

come was really earned by the corporation whose employees

sold and serviced the instrance, and that Section 482 au-

thorized a reallocation of income. Campbell County ‘State

Bank, Inc. v. Commissioner, 37 T.C. 430 (1961), rev’d on

other grounds, 311 F.2d 374 (Sth Cir. 1963); Paramouni

Finance Co. v. United States, 304 F.2d 460 (Ct. Cl. 1962) ;

Bank of Kimball v. United States, 200 F. Supp. 638 (S.D.

1962); Nichols Loan Corp. v. Commissioner, T.C. Memo.

1962—149 (21 T.C.M. 805), rev’d on other grounds, 321

F.2d 905 (7th Cir. 1963) ;3 First Security Bank v. United

States, 213 F. Supp. 362 (Mont. 1963), aff’d, 334 F.2d 120

(9th Cir. 1964); First State-Bank v. United States, (D.C.

S.D., decided June 25, 1962 ;. sasararaig/ reported at 62-2

U. ~ T.C. 7 9613)..

5. The court,-in Nichols, also refused. to disallow to the finance

company, as an ordinary and’ ‘necessary qgpisiness expense deduction,

_ - the cost of selling and servicing the insurance program because

the cost was minimal and the insurance program was beneficial to

the loan business. *

Another technique, developed subsequently, was to elimi-

nate the insurance agency “middle man” and form a sepa-

rate insurance company to arrange with the unrelated

‘ » insurance carrier for reinsurance of the mortality risk.

Although this meant giving up guaranteed commissions,

_ there was a possibility of a greater profit through the as-

sumption ef an underwriting risk. Moreover, because of

the fact that much of the premiums must be set aside to

fund the risk, insurance companies are taxed differently—

often more advantageously—than ordinary ¢orporations.

In Alinco Life Insurance Company v. United States, 373:

. F.2d 336 (Ct. Cl. 1967), the Commissioner attacked this ar-

rangement, contending that, under Sectio 69, the reinsur-

ance company was not entitled to be taxed as a life in-

surance company under Section 801 et seg. of the Code

because it ad heen formed primarily to avoid taxes by se-

curing the benef of life insurance status. The Court of

Claims, however, -held that it was not tax avoidance to

structure business affairs in response to the requirements,

oof state law and that there could be no objection to arrang-

ing one’s ‘affairs to take adv antage of the treatment af-

forded to life insurers by the Code. |

* The courts below have swept aside all of these prece-

dents in order to tax the loan companies on insurance com- ‘

missions received by Guardian and Beneficial and reinsur-

ance premiums received ‘by Grand National, by cross-

fertilizing misinterpretations of the anticipatory assign-

ment of income doctrine under Section 61 and the purpose

of allocations of income under Section 482.

IV. The Heart of the Matter: The peeriien of pesca

Power Is Not Subject to Income Taxation

’ The heart of the matter is that while the loan companies

_ could not take any compensation from credit life insurance,

‘i Ie

they were in a position to arrange for a related corpora-

tion (owned by persons who owned about 70% of the

stock of the loan companies) to perform a function for

which the unrelated insurance carrier was wiMing and able

to pay compensation—at first, for acting as insurance agent

and placing the business with the unrelated insurance com-

‘pany and, later, for reinsuring the risks of the unrelated

insurance company. The power to place another person

(even though: closely related) in a position to per-

’ form such a function has never before been considered the

touchstone of taxability—even though the effort required

to perform the function is minimal in relationship to the

compensation paid. Crowley v. Commissioner, 34 T.C. 333

(1960); Alabama-Georgia Syrup Co. v. Commissioner,

TC, 747°(1968) rev'd on,other grounds, sub. nom. Whit-

field vi Commissioner, 311 F.2d 640 (5th Cir. 1962); Nat

— Associates, Inc. v. Commissioner, 42 T.C. 601

(1964) |

CONCLUSION

This case follows § in the tradition of the eases in which

this Court has evolved the role and defined the limits of

Section 61: cases involving assignments of income, family

income-splitting, transactions lacking business purpose,

substance versus form, family partnerships, family trusts,

and illegal ineome actually received. It draws together, for

consideration in a business reciprocity context, some of the

mest difficult and fundamental issues in federal tax law:

what are the economic and legal bases for taxing income to

someone other than the recipient under Section 611; what

6. What reason is there for assuming, for example, that the

insurance risk undertaken by Grand. National is less signifi-

cant than the paper, work done by employees of the loan com-

panies? -

‘ is the extent of the Commissioner’s power under Section

482 to restructure bona fide business transactions under-

taken in compliance with state law?; what ‘are the limita-.

tions on the right of taxpayers to structure their business

transactions in the most advantageous way for tax pur-

pokes ?; and what is the relationship between Section 61 and

Section 482? These questions go to the very heart of in-

come tax theory concerning what is taxable income and to

whom it shall be taxed. This court should exercise its power

of review to correct the lower courts’ misinterppetation of

the role of state law in the resolution of these wuestions.’

Respectfully submitted,

Wituiam A, Cromartie

Wrsvur §S. Leae

Epwarp W. Rornue

R. R. McManan

Counsel for Petitioners

7. If certiorari is granted, petitioners agree that the Court

should also grant the Commissioner’s protective petition for certi-

orari in the Guardian and Beneficial cases, so that the Court will

have before it for consideration both of the Commissioner's alterna-

tive theories of income attribution—primarily from the insurance

agencies and the reinsurance company to the loan companies and

secondarily from the reinsurance company to the ‘insurance

agencies. . .

ee Ee ]

APPENDIX

TABLE OF PENDING CASES

INVOLVING

ALLOCATION OF INCOME

FROM

INSURANCE COMPANIES

RELATED LOAN COMPANIES, INSURANCE

Cases Pending in the Tax Court:

1663-65

Amount

Docket No. Allocated

~1190-63 $ 361,276

1216-63 405,220

1294-63 36,639,159 |

4680-64 1,056,047

4681-64 291,417

4682-64 221,315

4683-64 32,347

4684-64 101,358

4685-64 74,118

4686-64 43,840

1649-65 135,042

1650-65 202,010

1651-65 6,483

1652-65 853

1653-65 °324,064

1655-65 609,461

1656-65 100,491

1657-65 66,903

1658-65 13,225

1659-65 3,854

1660-65 7,129

1661-65 2,926

1662-65 43,681

1,951

AGENCIES, OR STOCKHOLDERS

Amount

1687-65

Docket No. Allocated

1664-65 $ 154,239

1665-65 9,269

1666-65 23,621

: 1667-65 1,145

1668-65 6,823

1669-65 3,327

1670-65 35,252 -

1671-65 180,013

1672-65 19,395

1673-65 8,203

1674-65 5,723

1675-65 30,331

1676-65 7,442

1677-65 267,031

- 1678-65 99,532

1679-65 16,185

1680-65 138,723

1681-65 73,964

1682-65 17,845

1683-65 11,202

1684-65 7,573

1685-65 12,412

1686-65 51,470

18,781

”

Docket No.

1688-65

_ 1689-65

1690-65

1691-65

1692-65.

1930-65

1931-65.

1932-65

1933-65

1934-65

1965-65

1966-65

1967-65

1968-65 _

1969-65

1970-65

1975-65

1976-65

~ 1977-65

1978-85

1979-65

1980-65

1981-65

1982-65

1983-65

2019-65

2020-65

2021-65

2022-65

2023-65

2024-65

2025-65.

2026-65

2027-65

203368

203

2035-65 ~

Amount

Allocated

8,981

18,335

8,210

1,842

12,321

56,261

155,035

30,744

47,908

624,127

2,138

1,104,072

370,770

40,681

18,002

141,723

1,819,742

50,518

4,724

694,830

335,392.

2,075 -

197,656

8,482

347,704

139,146

7,696

97,163

873

21,523

185,970

120,098

2,704

7,565,745

72,741

200,184

1,179,757

Amount

Docket No. Allocated

2036-65 $ 361,941.

2037-65 708,098

2038-65 229,473

2039-65 12;884

2040-65 215,344 =

2041-65 155,419

2099-65 630,645

5440-65 32,381,882

5500-65 19,107,529

6617-65 10,328,356

6814-65 1,795,314

6856-65 10,459

6858-65 13,030

~ 6895-65 242,079

6926-65 9,839

6996-65 2,502,195

7011-65 - 1,062,031

2652-66 1,908,107

2653-66 1,739,473

2654-66 52,462

2655-66 124,574

2656-66 5,890

2657-66 73,439

2658-66 19,417

2659-66 13,376

2660-66 158,554

2661-66 - 29,453

2662-66 48,828

_ 2663-66 . 87,954

2664-66 92,026

2665-66 & §,298

2666-66 3,141

2667-66 _ 33,062

2668-66 15,749

2669-66 70,831

2670-66 1,943

2671-66 8,576

’

RNS eB AR Ss ;

Amount

Docket No. Allocated

_ 2672-66 $ 21,37]

2673-66 9,612

2674-66 17,378

2675-66 10,895

2676-66 35,520

2677-66 8,736

2678-66 "38,995

2679-66 6,279

2680-66 11,329

2681-66 63,285

2682-66 15,963

2683-66 19,983

2684-66, 12,399

2685-66 ~ .77,650

2686-66 8,375

2687-66 31,359

2688-66 85,800

2689-66 57,269

2690-66 31,920

2691-66 122,214

2692-66 156,758

\ 2693-66 8,505

2694-66 23,497

2695-66 . 399,562

2696-66 135,984

2697-66 . 976

2699-66 67,408

2700-66 *~ = 279,449

2701-66 463,417

2702-66 58,581

2703-66 4,816

2704-66, 18,667 °

2705-66 | 99,424

2706-66 4,748

2707-66 — 167

2708-66 48,478

2709-66

51,859

Amount

Docket No. ” Allocated

2710-66 $ , 22,203

2711-66 56,950

2712-66 - 8,904,481

2713-66 102,736

2767-66 18,254 ©

2768-66 . 133,553

2769-66 - 83,272 .

2770-66 _ 289,835

2771-66 264,756

2772-66 135,747

2773-66 "2.983 ©

2774-66 36,701

2775-66 76,277

2776-66 .. 403,156

2777-66 - 39,841

2778-66 131,205 .

2779-66 21,263

2780-66 27,609

2781-66 29,779

2782-66 15,762

2783-66 18,567

2784-66 17,559

2785-66 9,911

2786-66 16,286 -

2787-66 ’ 18,027

_ 2788-66 “4 19,076

2789-66 * 76,675

2790-66 4,610

2791-66 6,240.

2793-66 55,855

2794-66 22,681

2822-66 182,817

' 2893.66 19,293

2824-66 141,570

2825-66 803.274

2826-66 19

2827-66 12,288

Amount

Docket No. Allocated

2853-66 18,641

2854-66 26,704

2855-66 265,287

2857-66 15,207

2858-66 56,027

2859-66 13,692

2861-66 11,277

2862-66 73,277

2864-66." 137,776

2865-66 4,119

2866-66 238,803

4993-66 17,118,117

6340-66 2,640,875

1197-67 1,047,490

1225-67 1,246,021

1226-67 1,816,714

1227-67 2,276,309

5004-67; . 866

9992-67 © 20,903 ©

5993-67 1,400

9994-67 10,856

5995-67 - 3,705

5996-67 . 9,007

_: 5997-67 2,150)

9998-67 3,618

5999-67 1,630

6000-67 4,248

6001-67. 2,693

6002-67 5,636

6003-67 2,313

6005-67 9,909

6006-67 1,834

6007-67 3,546

6008-67 9,094

6009-67 2,794

6010-67 1,986

6011-67 2,164

Docket N. 0.

Amovat

Allocated

6012-67. 3,717

6013-67 2,521

6014-67 1,245

6015-67 2,027

- 6016-67 2,507

» 6017-67 2,415

6018-67 1,960

6019-67 564

6020- 7 7,609

6021 2,359

6022-67 3,812

6023-67 ' 2,861

* 6024-67. 4,719

6025-67 ‘2,956

6026-67 2,422

6027-67 5,091

6028-67 3,315

6029-67 3,688

6030-67 1,997

6031-67 9,793

6032-67 3,253

6033-67 1,883

6034-67 4,476

6035-67 4,101

6036-67 4,602

6037-67 713

6038-67 5,142

6039-67 991,

6040-67 1,671

6041-67 3,710

6042-67 ; 9:376

6043-67 1,972

6044-67 ° 3,834

6045-67 3,775

- 6046-67 3,570

- 6047-67 3,536

6048-67 1,673

—ee

Amount

Docket No.. _— Allocated

6049-67 _ $ 973

6050-67 = —-— 1,930

6051-67 3,326

6052-67 2,980

6053-67 1,678:

6054-67 1,310

6055-67 2,241

6056-67 @ 2,785

6057-67 6,283

6058-67 1,946

6059-67 15,845

- 6060-67 4,854 -

6061-67 2,115 -

6062-67 7717

6063-67 . 1,649

6064-67 _ 5,090

6065-67 2,078

6066-67 4,676

6067-67 | 3,042 °

6068-67 4,995

6069-67 3,861

6070-67 2,210

6071-67 1,359

6072-67 4,067

6073-67 1,730

6074-67 3,055

6075-67 1,197

6076-67 952

. 6077-67 4,259

6078-67 3,731

._ 6079-67 12,124

~~ 6080-67 2.914

6081-67 4,272

6082-67 . 2,968

6083-67 1,149

6084-67 4,109

6085-67 - 2,857

Amount

6122-67

Docket No. Allocated .

6086-67 $ 5,024

6087-67 1,531 |

6088-67 ‘9,889 .

6089-67 1,838

- 6090-67 ~ 1,668

6091-67 1,470

6092-67. 2,916

6093-67 "3.417 °

6094-67 3,500

6095-67 4,387

6096-67 3,746

6097-67 6,010

6098-67 2,227

6099-67 1,007

6100-67 6,898

6101-67 1,985

6102-67 - 4,916

6103-67 3,937

6104-67. 2,297

6105-67 10,641

6106-67 4,945.

- 6107-67 8,036

6108-67 14,090

6109-67 4,495

6110-67 2,588

_ 6111-67 3,846

6112-67 5,251

6113-67 2,573

6114-67 2,960

6115-67 ~ 8,730

6116-67 7,166

6117-67 2,301

6118-67 3,904.

6119-67 3,718

6120-67 5,631

6121-67 6,405

2,001

7,634

1,655 °

Amount

Docket No. . Allocated

6123-67 $ — 3,522-

6124-67 ‘1,671 .

6125-67 3,301

6126-67 1,165

6127-67 1,328

6128-67" 3,860

6129-67 8,725

6130-67 2,567

6131-67 3,453

6132-67 4,057

« 6133-67 1,357

6134-67. 2,688

6135-67 1,530

6136-67 | 2,674 —

6137-67 5,201

_ 6138-67 786

6129-67

6140-67 5,553

6141-67 7,397

6142-67 2,266

6143-67 1,758

6144-67 1,015

6145-67 - 8,702

6146-67 2,017

6147-67 _ “4862

6148-67 1,668

6149-67 2,894 -

6150-67 1,989

6151-67 1,265

6152-67 5,645

6153-67 2,939

6154-67 3,989

6155-67

6156-67 4,947

6157-67 2,695

6158-67 ~ 3,580

6159-67 *

7,489

: Amount

Docket No. Allocated

6160-67 $ 10,319

6161-67 ~ 3939

6162-67 10,091

6163-67 8,778

“6164-67 15,838

' 6165-67 O,079

6166-67 - 10,882

- 6167-67 3,435

6168-67 9,128

6169-67 104

6170-67. 11,540

6171-67 10,754

6172-67 - 6,994

6173-67 « * 6,596

6174-67. 8,576

6175-67 3,385

6176-67 3,703

6177-67 3,922

- 6178-67 5,039

6179.67 8,816

6180-67 8,054

6181-67 7,749

6182-67 9,644

6183-67 5,918

6184-67 14,700

6185-67 2,444

6186-67 2,050

_ 6187-67 4,947

6188-67 24,618

6189-67 6,814

6190-67 11,241

6191-67 2,380

92-67 2,400

193-67 12,642

6194-67 3,959

6195-67 8,796

6196-67 7,445

— et a SD

Docket No.

Amount

Allocated

6197-67 $ ‘17,432

6198-67 8,389

6199-67 12,450

6200-67 5,086

6201-67 _ 44,060

6202-67 10,703

6203-67 - 10,533

6204-67 B24

6205-67 11,232

- 6206-67 8,205 -

207-67 8,198 °

6208-67 11,805

6209-67 9,360

6210-67 1,666

6211-67. 4,190

6212-67. 6,046

6213-67 — 7,423

6214-67 10,392

6215-67 8,579

6216-67 2,947

6217-67 ¥” 2960

6218-67 7,179

6219-67 . 10,177

6220-67 7,897

6221-67, 38,662

6222-67 1,899

, 6223-67 1,693

6224-67 7,268

6225-67 5,902

6226-67 4,927 -

6227-67 10,568

6228-67 3,194

6229-67 4,483

_ 6230-67 4,618

. 6231-67 5,405

6232-67 . - 25,193

6233-67 | 11,020

Allocated

6234-67 11,020

6235-67 | 4,923

— 6236-67 | 4,203

6237-67 5,135

6238-67 2,491

(6239-67 1,786

6240-67 3,170

6241-67 2,395

6242-67 1,849

6243-67 2,595

6244-67 2,326

6245-67 2,234

6246-67 1,979

6247-67 1,104

6248-67, 16,375

6249-67 1,019

6250-67 9,449

6251-67 10,550 .

6252-67 6,966

6253-67 7,516

6254-67 7,617

6255-67 -- 2,238

6256-67 12,910

6257-67 3,555

6258-67 | “22,997

6259-67 16,885

. 6260-67 7,498

6261-67 790

6262-67 1,948

' 6263-67 8,582

“’ 6264-67 13,031

: 6265-67 5,070

- 6266-67 6,157

- 6267-67 7,128 °

6268-67 4,188

6269-67 4,052

Docket. No.

Amount

6270-67.

4,053

6307-67

2 ieee Amount

~- Docket No. Allocated

6271-67 $ 3,476

6272-67 4,959

6273-67 6,080

6274-67 . 4,729

6275-67 5,062

6276-67 30,486

6277-67 22,997

‘6278-67 45,270

6279-67 14,937

6280-67 14,457

6281-67 59,329

- 6282-67 32,549.

6283-677 ~ 1,598

6284-67 336

6285-67 1,240°

- 6286-67 1,093

6287-67 948

6288-67 - 401

6289-67 478

6290-67 1,002

6291-67 1,393,

6292-67 3,501

6293-67 1,693

6294-67 3,451

6295-67 1,067

6296-67 1,505

6297-67 1,514

6298-67 1,644

6300-67 3,342

6301-67 1,040

6302-67 981

6303-67 5,208

6304-67 1,901

6305-67 784

6306-67 690

1,941

% Amount

Docket No. Allocated

6308-67 $ 469

‘6309-67 1,953

~ . 6310-67 2,002

6311-67 | 476

6312-67 806

6313-67 846

6314-67 1,289 -

6315-67 2,173

6316-67 1,532

6317-67 1,421

6318-67 3,418

6319-67 TSS

6320-67 1,083:

6321-67 670

6322-67 900

6323-67 1,695

6324-67 1,490

6325-67 1,492 »

6326-67 1,673

6327-67 773

6328-67 4,023

6329-67 9,332

. 6330-67 _ 5,875

6331-67 2,319

6332-67 8,353

6333-67 14,126

6334-67 7,545

6335-67 «+ 12,037

6336-67° 15,395

6337-67 -12,118

6338-67 9.504

6339-67 7,452

6340-67 7,808

6341-67 . 51,024

6342-67 42,663

6343-67 35,391

6344-67 7,470 °

co hy mevmeengamensan naan

% ee

We Amount

Docket No. Allocated

6345-67 $ 6,270

6346-67 2,068

6347-67 697

6348-67 4,845

6349-67 | 5,148

6350-67 32,077 |

6351-67 S512

6352-67 9,148

6353-67 9,605

6304-67 - 5,090

6355-67 0,260. °

6356-67 | 1,661 .

6357-67 8,583

6358-67 _ —-:1,923.,

~ 6359-67 7,767

6360-67 7,036

6361-67 6,134

6362-67 7,780

6363-67 17,393

. 6364-67 9,186

~ 6865-67 9,658

6366-67 . 15,628

6368-67 16,577

6369-67 2,390

6370-67 12,546

6371-67 95,491

6372.67 a

6373-67 1,529.

6374-67 943

6375-67 _ O14

6387-67 1,088,877

384-68 756,517

385-68 239,603

386-68 31,964

387-68 | 243,628

388-68

82,485

Amount

Docket No. Allocated

_ 389-68 18,454

390-68 110,271

391-68 78,461

392-68 85,811

393-68 7,005

2334-68 321,390

2335-68 60,340

2336-68 9,236

2337-68 11,422

2338-68 29,701

2339-68 39,6Q1

2340-68 14,854

2341-68 30,383

2342-68 16,623

2343-68 12,306

2344-68 24,556

2345-68 25,646

2346-68: 13,833

2347-68 77,567

2348-68 1,720,579,

2349-68 87,185\, 2

- 2350-68 257,389

2351-68 257,389

2352-68 37,435

2353-68 37,435

9354-68 114,803

2355-68 114,803 .

2356-68 114,803

2357-68 78,815

2358-68 248,970

-2359-68- 1,268,994

2360-68 1,268,994. .

2361-68 58,811

2389-68 27,744

2390-68 17,399

— 2391-68 7,022

2392-68

5,375

Docket No.

Amount

Allocated

2393-68 $ 13,932

2394-68 16,905

2396-68 23,352

2397-68 11,467.

2398-68 31,972

2399-68 - 21,101

2400-68 22,885

2468-68 417

2471-68 72,052

2472-68 10,459

2473-68 17,883

2479-68 78,028

2480-68 3,077

2481-68 3,077

2482-68 3,077,

2483-68 3,077

2484-68 3,077

2485-68 3,077

. 2486-68 3,077

2487-68 3,077

2488-68 ' 3,077

2489-68 3,077

2490-68 3,077 «5

2491-68 3,077

2492-68 3,077 ~

2493-68 3,077

2494-68 ty a

- 2495-68 srk ®

2496-68 3,07

2497-68 3,077

- 2498-68 3,077

2499-68 3,077 -

2500-68 3077 _.-

2501-68 3,077

_ 2502-68 3,077

2503-68 — 3,077

2504-68 ° 647,596

Docket No.

a Amount

Allocated

2505-68

4432-68

0653-68

5656-68

5657-68

5663-68

5664-68

0665-68

5666-68

5669-68

5670-68

5671-68

5673-68

— 5674-68

5675-68

0676-68

9677-68

5678-68

5679-68

5680-68

0681-68

0682-68

5683-68

5684-68

0685-68

5686-68

0688-68

0689-68

5690-68

5692-68

- 5693-68

5694-68

5695-68

5696-68

5697-68

5698-68

5699-68

13,249

26,278

2,571,793

2,148,724

124,900.

41,808

49,350

74,634

66,848

283,160

108,088

29,082

37,162

29,238

48,268

15,540

30,902

93,170

116,688

25,330

28,122

66,256

9,840

13,546

42,366

34,724

108,066

93,080 .

9,452

42,638 °

11,126

. 87,216 -:

” 62:346 ~

28,384 |

33,890 -

30,178

31,128

Docket No.

Amount ©

Allocated

5700-68 $ 23,580.

5701-68 101,726 °

5702-68 49,496

- 5703-68 . 16,944

5704-68 32,446

5705-68 20,852

5708-68 104.524

5709-68 18,148.

5710-68 20,930 \.

5719-68 39,894: -

5713-68 33,500

5714-68 48,692

» 5715-68 7,652

5716-68 152,804

5717-68 21,618

5718-68 "57,590

5719-68 97.272

5721-68 18,392

5722-68 37,929

5723-68 12,454

5724-68 299/996

5725-68 15,100

5726-68 18.516

5727-68 92026

5728-68 15,552

5729-68 10,686

5733-68 254.044

5734-68 330,310

1010-69 24.958

1011-69 14.270

1012-69 17,293

1013-69 11101

1014-69 8.936.

1015-69 71.723

1016-69 12,949

1017-69 16,859

1018-69 - 13,318

Amount

Docket No. _ ~ Allocated

1019-69 $ 4,180

1020-69 17,318

1021-69 °- 12,608

1022-69 76,548

1025-69 13,182

1026-69 16,108

1027-69 ' 29,765

1028-69 14,422 ~

1029-69 31,855

1030-69 14,304

1031-69 24,957

- 1032-69 15,324

1034-69 15,657

1035-69: 4,868

1036-69 6,422

1037-69 7,729

1038-69 10,274

1039-69 10,544

1040-69 15,279

1041-69 > 7,040

2222-69 ~ 51,757

2223-69 64,471 |

2224-69 143,352

2225-69 ~~ ~—261,730

2228-69 194,528

2229-69 46,818

2230-69 34,551

2231-69 90,855

2939-69. 45,259

2233-69 1,944

- 2234-69 17,651

2235-69

54,983

2270-69

~~ er”

Docket No. Allocated

2236-69 52,704

2237-69 28,449

* 2238-69: 2,025

' 2239-69 74,297

2240-69 6,708

2241-69 37,192

2242-69 51,277

. 2243-69 4,730

2244-69 86 "054

2245-69 6,719

2246-69 ° 72,126

2247-69 78,430

~ 2248-69 46,925

2249-69 87,828 .

2250-69 - 1,685

2251-69 100,124

2252-69 26,854

2253-69 9,098

2254-69 84,069

- 2255-69 ~ 98,131

2256-69 36,080

2257-69 — 92.788

2258-69 22,612

2259-69 3,393

2260-69 - 32,945

2961-69 29,326

_ 2262-69 39,745

2263-69 79,764

2264-69 284,380

2265-69 66,109

2266-69 9 734

_ 2267-69 96,576

2268-69 32,897

2269-69 25,596

. Amount

Docket No. Allocated

2271-69 $ ~. 1,209

- 2272-69 25,940

2273-69 3,752

2274-69: 8,652

2275-69 6,223

2276-69. 58,113

2278-69 _ 5,167

2279-69 ° - 3,014

2280-69 44,878

2432-69 81,422

2434.69 961,181

2435-69 145,237

2436-69. 705,050

2437-69 248,345

2438-69 192,391

2439-69 7,489

_ 2440-69 172,391

2441-69 24,552

244249 - — 417,237

2443-69 40,686

2444.69 13,771

2445-69 58,558

2446-69 «255,29

2447-69 48,179

2448-69 640,377,

2449-69 304,696

2450-69 * 277,135

2451-69: 97,880

2452-69 107,059

” 2453-69 ‘7,746,895

2455-69 27,368,

2456-69 154,054

3105-69 .

17,973,301.

Cases Pending in the District Court for

the Southern District of Indiana:

Docket No. Amount Allocated

IP-65-C. No. 262 $481,814

IP-68-C No. 203 . | 36,579

IP-68-C No. 204 3,023

IP-68-C No. 205 21,587

IP-68-C No. 206 215,543

IP-68-C No. 207 _ 24,079

IP-68-C No. 208 27,017

IP-68-C No. 209 22,366

IP-68-C° No. 210 . 4,791

IP-68-C No. 211 «5,468

IP-68-C No. 212 20,565 ~

IP-68-C No., 213 30,441

IP-68-C No. 214 27,259

IP-68-C No. 215 11,491 °

IP-68-C No. 216 33,744

- IP-68-C No. 217 28,921

IP-68-C No. 220 - 12,947

IP-68-C No. 296 - 10,276

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