
    SIGURD N. HERSLOFF AND JOSEPH J. STERN, TRUSTEES ON DISSOLUTION, PURSUANT TO SECTION 8819 OF THE COMPILED LAWS OF SOUTH DAKOTA, FOR THE UNITED STATES ASPHALT REFINING COMPANY AND INTEROCEAN OIL COMPANY, DISSOLVED CORPORATIONS v. THE UNITED STATES
    [No. 126-58.
    Decided December 5, 1962.
    Plaintiffs’ motion for rehearing denied February 6, 1963] 
    
    
      
      Herbert Plant for the plaintiffs. Hamid O. Bastían and Charles E. Scribner were on the briefs.
    
      Conrad T. Hubner, Jr., with whom was Assistant Attorney General Louis F. Oberdorfer, for the defendant. Edward S. Smith, Lyle M. Turner and Philip B. Miller were on the brief.
    
      
       Plaintiffs’ petition for writ of certiorari denied by tbe Supreme Court, 373 U.S. 923.
    
   Davis, Judge,

delivered the opinion of the court:

This refund suit concerns the status for income tax purposes, in 1949,1953, and 1954, of two affiliated South Dakota corporations, United States Asphalt Refining Company and Interocean Oil Company, which had earlier been dissolved under the law of their incorporation. The plaintiffs’ claim is that the two corporations were dead and buried in the taxable years, and therefore no longer subject to the federal income tax. The Government parries with the defense that the companies, though dissolved, were carrying on sufficient activities, through their liquidating trustees, to be deemed still in existence.

Asphalt was dissolved by a South Dakota court in 1928; Interocean’s charter expired in 1937. Under South Dakota law providing for “trustees of the creditors and stockholders” of a dissolved corporation, two of the then surviving directors of Asphalt became such trustees on its dissolution in 1928; on the dissolution in 1937 of Interocean (Asphalt’s parent), the same men became the trustees of that corporation. Thereafter, by a series of orders of the South Dakota court, successor trustees were appointed on the death of earlier trustees, so that the present plaintiffs, Sigurd N. Hersloff and Joseph J. Stern, are now the duly appointed trustees empowered to sue on the present tax claims.

These claims have their seed in the days of World War I. During that conflict both Asphalt and Interocean chartered steamers which were lost at sea through the acts of Germany. In August 1926, before the dissolution of either company, the Mixed Claims Commission — which was set up to arbitrate claims for the destruction by Germany of American property in the First World War (see Z. & F. Assets Realization Corp. v. Hull, 311 U.S. 470 (1941))—made an award to both corporations for their lost vessels. The award to Asphalt was $150,000, with interest at 5 per cent from November 11, 1918, to the date of payment; Interocean’s award was $447,000, with 5 per cent from August 13, 1916, to the date of payment. Under the arrangement between this country and the Weimar Republic, Germany was obligated to pay the amounts of such awards to the United States; but in 1926 no funds had as yet been provided for their satisfaction. Payments on the awards were authorized by the Settlement of War Claims Act of 1928, 45 Stat. 254, and under that Act and its amendments the Treasury, beginning in August 1928, made intermittent payments of principal and interest to the two corporations and, after their respective dissolutions, to the trustees. In February 1953 the United States concluded with Germany a debt settlement agreement under which Germany was to make annual payments on such awards to a stated total sum over a 26-year period, commencing on April 1, 1953, and ending in 1979. This case involves income taxes paid by the trustees, on behalf of Asphalt and Interocean, on the interest on the original awards received in 1949,1953, and 1954, and it may well have an impact on the plaintiffs’ tax liability for the succeeding years as well.

During their long period of stewardship, the trustees have carried on certain activities and performed functions from which the parties draw differing conclusions. As the result of a suit for fees by the attorneys who represented Asphalt and Interocean before the Mixed Claims Commission, the District Court for the District of Columbia (then called the Supreme Court of the District) entered a compromise decree (in August 1931) which established the attorneys’ right to recover from the corporations and the trustees a percentage of all amounts thereafter paid on the awards, with an equitable lien on all funds to be used for such payments. To enforce these rights, the decree, which was to bind all successors and all funds from which payments would be made, provided that the Treasury was to deliver payments on the awards to the companies and trustees only through the Riggs National Bank in Washington; that bank was to forward the check or warrant to its New York correspondent for endorsement by the payees (the trustees) and return it to Riggs to be cashed and disbursed as required by the decree, i.e.y a percentage to the attorneys and the rest to the companies and trustees (through a check to Interocean which would discharge payments due Interocean, Asphalt (Interocean’s subsidiary) , and the trustees). The corporations and trustees were also enjoined from seeking from the Treasury payment in any other manner. In or before 1939, the trustees assigned various other portions of the payments on the awards to other attorneys who had rendered legal services to them. In the period before and including the taxable years involved here, the trustees received payment through the system set up by the 1931 decree — satisfying the bank fees, trustees’ commissions, and sums due the various attorneys pursuant to the decree and assignments, and then paying over the balance to the stockholders of Interocean pro rata.

When Interocean’s charter expired in 1937, it had certain potential assets, two of which are now relevant. The so-called “British claim” was against the British Government, which had requisitioned two tankers from Interocean in World War I, for paying charter hire at less than the market rate. In 1927, the State Department rejected the claim as invalid and refused to present it to Great Britain. Nevertheless, Interocean’s attorneys persistently pressed it thereafter. A new claim was filed with the State Department in 1938 and actively pursued in the manner of such international claims. There were conferences in 1950, and the claim was again rejected in 1951. In 1956, Interocean’s trustee referred the claim to a Washington attorney who investigated it and discussed it again with the State Department in March 1958. He reported to the general counsel for the trustees that the Department was willing to arbitrate the matter, but the general counsel decided to abandon it since previous arbitrations had held the rates paid by the British to be adequate. Another possible asset was the “Azua property”, 15,000 acres of oil land and 150,000 acres of timberland, in the Dominican Republic; these appear to have been of little value, but the trustees made some efforts to realize on them; further investigation by the trustees’ counsel in 1951 and 1952 revealed either that Interocean did not originally have title or that it had been lost through nonpayment of taxes or confiscation.

On these facts we are to decide whether Interocean and Asphalt were subject to the corporate income tax in 1949, 1953, and 1954. That issue is to be determined by federal, not state, law. Ochs v. United States, 158 Ct. Cl. 115, 119 (1962), 305 F. 2d 844, 847, cert. denied, 372 U.S. 968. The first two of the taxable years (1949, 1953) are governed by the Internal Revenue Code of 1939, the third (1954) by the 1954 Code. Both statutes (Sec. 52(a), 1939 Code; Sec. 6012(b)(3), 1954 Code) provide in substance that, where receivers, trustees in bankruptcy, or assignees hold or operate the property or business of the corporation, the receivers, trustees, or assignees shall make returns and pay taxes for the corporation in the same manner and form as are required of corporations. Tbe controlling regulations under tbe 1939 Code (Treas. Eeg. Ill, Sec. 29.22(a)-20, and Treas. Eeg. 118, See. 39.22 (a)-20) declared, under the heading “Gross income of corporation in liquidation,” that on dissolution the “corporate existence is continued for the purpose of liquidating the assets and paying the debts, and such receiver or trustees [i.e., receiver or trustees in dissolution] stand in the stead of the corporation for such purposes. * * * Any sales of property by them are to be treated as if made by the corporation for the purpose of ascertaining the gain or loss. * * *” The comparable regulation under the 1954 Code (Treas. Eeg. on Income Tax, 1954 Code, Sec. 1.336-1, “General rule on liquidation of corporation”) provides that “* * * gain or loss is recognized to a corporation on all sales by it, whether directly or indirectly (as through trustees or a receiver)” — with one exception not now relevant.

The cases under the 1939 Code and regulation hold that after dissolution the corporation-in-liquidation continues for federal income tax purposes as a taxable entity in those instances in which its affairs are substantially unsettled, it possesses, sells or seeks assets, or its liquidating agents carry on any substantial activities on its behalf. As the Second Circuit put it in O'Sullivan Rubber Co. v. Commissioner, 120 F. 2d 845, 847 (1941), “the collection of assets, the payment of obligations, and other acts required to terminate its affairs and business” are “corporate purposes, contemplated as such from the birth of the corporation; the declining years of a corporation are part of its life; * * For tax purposes such liquidation by a receiver or a trustee-on-dissolution “is treated as a continuation of the corporate business.” J. Ungar Inc. v. Commissioner, 244 F. 2d 90, 92 (C.A. 2, 1957); Fairfield S. S. Corp. v. Commissioner, 157 F. 2d 321, 323 (C.A. 2, 1946), cert. denied, 329 U.S. 774. In view of the similarity of the statutory provisions and regulations, the test under the 1954 Code must be the same. The necessary corollary under both Codes is that income received by the trustees during such a period of continued corporate existence must be reported as the corporation’s income.

In the perspective of the entire history of the trustees’ tenure as well as from the standpoint of their functioning during the taxable years, we must regard the activities of the plaintiffs (and their predecessors as trustees-on-dissolution), considered together with the status of the corporate affairs, as more than sufficient under the accepted test to show that the corporations remained in existence. The record proves that the companies were far from wholly dormant ; they had and claimed assets; they made some efforts to realize on their claims; they had certain debts; and they regularly distributed monies to attorney-creditors as well as to stockholders. In particular, from 1928 to 1958, the companies and the trustees received 29 separate payments on the awards of the Mixed Claims Commission; over the years since 1931 they made regular payments to lawyers who had served the companies prior to dissolution or thereafter; in the early 1930’s they defended a suit by some of these attorneys for compensation; they pursued the “British claim” on various occasions from 1927 to 1958, and similarly made intermittent attempts to obtain a return on the “Azua property” in the Dominican Republic until about 1952. (The trustees also obtained commissions for their activities.) The other side of the coin is that the companies were not yet substantially debt-free — they owed monies to the attorneys who had represented them before the Mixed Claims Commission, to those who had served them in the fee-litigation with the earlier counsel, and to the attorneys who aided the trustees in the course of administration. Most of this was specifically true of the companies in the particular taxable years (1949,1953, and 1954); the only noteworthy exception is that in the latter two the Dominican Republic property had apparently been written off. Whatever the precise minimal standard for marking continued corporate existence for income tax purposes, the activities and condition of Asphalt and Interocean were measurably above the line in the years involved here.

The plaintiffs suggest that this standard should not be applied to Asphalt and Interocean because the 1931 decree ending the litigation with their attorneys forecloses the trustees from fully liquidating the companies and distributing all the remaining assets to the stockholders. We are far from convinced that the District Court could not be persuaded for good cause to alter the terms of its decree, but in any event the 1931 decree is simply a hard fact of these companies’ corporate life which requires them to stay alive longer than they wish. “The operation of a going concern is not a condition precedent to tax liability. Petitioner suggests no reason why its position should be held so anomalous that it does not fit into a framework in which business units of every description, of long or short duration, must share in the cost of society. This is the price of existence.” O'Sullivan Rubber Co. v. Commissioner, supra, 120 F. 2d at 847.

We point out, finally, that the decisions plaintiffs cite, in which dissolved corporations were held no longer liable for income tax, did not concern a live corporate status or activities of the kind we have here, but rather companies which had been fully liquidated. In Novo Trading Corp. v. Commissioner, 113 F. 2d 320 (C.A. 2, 1940), all the corporate assets had been distributed to the stockholders, the company had paid all its debts, carried on no affairs, and remained completely dormant although not legally dissolved; a subsequent refund of customs duties was therefore held not to be income to the corporation. United States v. Horschel, 205 F. 2d 646 (C.A. 9, 1950), and Telephone Directory Advertising Co. v. United States, 135 Ct. Cl. 670, 142 F. Supp. 884 (1956), both involved corporations which had already conveyed all their assets to their stockholders; there were no liquidating trustees, no debts, no business being settled, and no claim that the corporations remained in existence. The cases turned on the Government’s attempt to tax certain income to the companies on the ground that the prior distribution of the assets had amounted to an anticipatory assignment of income already earned by the corporations. For a similar case, see United Mercantile Agencies v. Commissioner, 34 T.C. 808 (1960). In Commissioner v. Henry Hess Co., 210 F. 2d 553 (C.A. 9, 1954), the corporation had likewise distributed to its stockholders all its assets, including a claim against the War Shipping Administration, but that agency erroneously refused to make payment on the claim to anyone other than the company, which immediately handed over the money to the shareholders; on these facts the court held that the company, which was in fact fully liquidated, could not be said to have continued its existence just because of the Government’s mistaken insistence on treating it as such. The present case is also different from Cold Metal Process Co. v. Commissioner, 247 F. 2d 864, 873-74 (C.A. 6, 1957), in which the corporation had distributed all its assets and had no debts or disbursements; after dissolution, the remaining stockholder brought suit or maintained existing suits, using the corporate name, on claims arising out of pre-dissolution activity; the court found, however, that these actions were solely for the benefit of the stockholder and not in the corporation’s “own right.” Here, the course of continued corporate conduct is significantly greater.

The plaintiffs are not entitled to recover and their petition is dismissed.

Dureee, Judge; Labamoee, Judge; Whitakee, Judge; and JoNes, Chief Judge, concur.

FINDINGS OF FACT

The court, having considered the evidence, the report of Trial Commissioner W. Ney Evans, and the briefs and argument of counsel, makes findings of fact as follows:

1. (a) The United States Asphalt Refining Company (hereinafter Asphalt) was incorporated under the laws of the State of South Dakota on September 5, 1911. On October 22, 1928, pursuant to a motion filed by Asphalt, the Circuit Court of the State of South Dakota decreed that Asphalt be dissolved and its charter annulled. All of Asphalt’s capital stock at all times was owned by the Inter-ocean Oil Company (hereinafter Interocean), and none of it was disposed of by Interocean.

(b) Interocean was incorporated under the laws of South Dakota on December 6, 1912, and, according to the provisions of its certificate of incorporation, was to continue in existence for a period of 25 years, at the end of which period its charter expired, and no application was ever filed for an extension.

2. (a) Section 8819, 2 South Dakota Code (1919), as amended by chapter 76, South Dakota Session Laws (1927), provides as follows:

Trustees on Dissolution. Unless other persons are appointed by the court, the directors or managers of the affairs of any corporation at the time of its dissolution shall be trustees of the creditors and stockholders or members of such corporation, and have full power to settle its affairs, sell and convey its property, collect and pay the corporate debts, and divide among the stockholders and members the property, or the proceeds of the sale thereof, which remain after the payment of debts and necessary expenses; and for such purposes may maintain and defend actions in their own names by the style of the trustees of such corporation dissolved, naming it; and no action to which any such corporation is a party shall abate by reason of such dissolution.

(b) Pursuant to this section, on October 22, 1928, as the then surviving directors of Asphalt, O. E. Thurber and Nils B. Hersloff became “trustees of the creditors and stockholders” of Asphalt. On December 6, 1937, they similarly became “trustees of the creditors and stockholders” of Inter-ocean. Thereafter, on April 23,1941, Thurber died, leaving Nils B. Hersloff as the sole surviving trustee.

3. (a) On February 27, 1956, an order was made by the Circuit Court of South Dakota on the petition of the said trustee Nils B. Hersloff, which said order appointed petitioner Sigurd N. Hersloff and Louis G. Bernstein as trustees to act with the said Nils B. Hersloff with the provision that, upon the death, resignation, or incapacity of any such trustee or trustees, the survivors or survivor thereof shall continue to act with full power, the said order providing in part, as follows:

it is foetheR ordered that Sigurd N. Hersloff of Long Point, Oxford, Maryland, and Louis G. Bernstein of 25 Rosalind Place, Lawrence, Long Island, New York, be, and they are hereby appointed as trustees for the stockholders of United States Asphalt Refining Company, a corporation, and The Interocean Oil Company, a corporation;
it is further ordered that said Sigurd N. Hersloff and Louis G. Bernstein act as trustees with the now surviving trustee of said dissolved corporations, that is to say Nils B. Hersloff, and
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it is further ordered that said trustees are appointed for the purpose of liquidating or winding up the affairs of the two dissolved corporations.

(b) On August 15, 1956, the said Nils B. Hersloff died, leaving the said Sigurd N. Hersloff and Louis G. Bernstein as surviving trustees.

(c) Louis G. Bernstein, one of the trustees, died July 28, 1958, and by order of the South Dakota Circuit Court, Sixth Judicial District, dated October 15,1958, William A. Sands, Jr., was appointed as successor trustee in his place; the said order providing, in part, as follows:

it is further ordered that William A. Sands, Jr., of 180 Central Park South, New York, N.Y., be, and is hereby, appointed as trustee for the stockholders of United States Asphalt Refining Company, a corporation, and The Interocean Oil Company, a corporation;
it is further ordered that said William A. Sands, Jr., act as trustee with the now surviving trustee of said dissolved corporations, that is to say Sigurd N. Hersloff, and
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it is further ordered that said trustee is appointed for the purpose of liquidating or winding up the affairs of the two dissolved corporations.

(d) William A. Sands, Jr., the successor trustee appointed as above, died on April 1, 1959, and by order of said South Dakota Circuit Court dated June 11, 1959, the above-named Joseph J. Stern was appointed as successor trustee in his place, to serve with Sigurd N. Hersloff, the said order providing in part, as follows:

it is further ordered that Joseph J. Stern of 40 Wall Street, New York 5, N.Y., be, and is hereby, appointed as trustee for the stockholders of United States Asphalt Refining Company, a corporation, and The Interocean Oil Company, a corporation;
it is further ordered that said Joseph J. Stern, act as trustee with the now surviving trustee of said dissolved corporations, that is to say Sigurd N. Hersloff, and
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it is further ordered that said trustee is appointed for the purpose of liquidating or winding up the affairs of the two dissolved corporations.

(e) Said Sigurd N. Hersloff and Joseph J. Stem are now serving as surviving trustees; and they, as trustees, are the only persons entitled to assert the claims presented in this case.

4. Upon the hearing before the commissioner of this court, the plaintiffs moved to substitute the said Joseph J. Stem as trustee, in the place and stead of William A. Sands, Jr., deceased; and the commissioner ruled that the title of the action, insofar as it concerned the plaintiffs, should be changed to read “Sigurd N. Hersloff and Joseph J. Stem, trustees on dissolution, pursuant to Section 8819 of the Compiled Laws of South Dakota, for the United States Asphalt Refining Company and Interocean Oil Company, dissolved corporations, as plaintiffs,” without deciding or intending to decide whether the said persons were acting as trustees for the stockholders or as trustees for the two dissolved corporations.

5. On October 22, 1928, Asphalt had as an asset an award of the Mixed Claims Commission, United States and Germany, made on August 13, 1926, in favor of Asphalt in the sum of $150,000 with interest at the rate of 5 percent per annum from November 11, 1918, to date of payment, which award represented the value of the interest of Asphalt as charterer of certain steamers, the “Cymbeline,” the “Rosalind,” and the “Silvia,” lost through acts of Germany during World War I.

6. On December 6, 1937, one of Interocean’s assets was an award of the Mixed Claims Commission, United States and Germany, made on August 13, 1926, in favor of Interocean, in the sum of $447,000, with interest at the rate of 5 percent per annum from August 13,1916, to date of payment, which award represented the value of the interest of Interocean as charterer of a certain steamer, the “Christian Knudsen,” lost through acts of Germany during World War I.

7. (a) The awards of the Mixed Claims Commission, United States and Germany, referred to above, provided that the Government of Germany was obligated to pay the amount of the awards to the Government of the United States on behalf of Asphalt and Interocean, respectively.

(b) Notices of the said awards were given by two letters from the agent of the Mixed Claims Commission, dated September 28, 1926. The said notices advised the recipients that the granting of the awards did not mean immediate payments as no funds as yet had been provided for the satisfaction of the claims.

8. (a) Pursuant to section 2(b) of the Settlement of War Claims Act of 1928, the Secretary of the Treasury was authorized and directed to pay Asphalt $218,547.95, consisting of the principal of the award in the amount of $150,000, plus $68,547.95, representing interest on the $150,000 at the rate of 5 percent per annum from November 11, 1918, to January 1, 1928.

(b) Pursuant to this same section, the Secretary of the Treasury was authorized and directed to pay Interocean $698,054.79, consisting of the principal of the award in the amount of $447,000, plus $251,054.79, representing interest on the $447,000 at the rate of 5 percent per annum from October 8,1916, to January 1,1928.

9. On account of the awards referred to in findings 5 and 6, payments were made to the trustees of Asphalt and Inter-ocean, less a statutory deduction of one-half of 1 percent for administrative expenses as follows:

10.The balance due on the awards was as follows on the stated dates:

Dato Interocean Asphalt

Principal Interest Principal Interest

Aug. 8,1931_ $237,472.24 $78,706.48

Aug. 18,1931_ $82,983.56 $19,165.75

Oct. 15,1941-157,381.67 167,349.00

Oct. 20, 1941. 31,196.60 36,682.58

Dec. 1, 1953._ 157,381.67 212,995.60 31,196.60 44,927.44

June 1,1958 — - 157,381.67 177,177.17 31,196.60 36,960.67

11. (a) The Act of August 6, 1947 amended the War Claims Act of 1928 and provided for the deposit into the German Special Account of certain funds held in the Alien Property Trust Fund for payment of the awards of the Mixed Claims Commission.

(b) On February 27, 1953, a debt settlement agreement was made with Germany, subsequently duly ratified, where-under annual payments were to be made by Germany for the holders of awards, including the awards of Interocean and Asphalt, to a stated total amount over a period of 26 years, commencing April 1,1953.

12. (a) After the making of the said awards, litigation ensued by Bainbridge Colby and Edward D. Brown, who had served as counsel for Interocean and Asphalt in the prosecution of the claims stated above before the Mixed Claims Commission, in the then Supreme Court of the District of Columbia, with respect to the amount of their counsel fees to be paid out of the proceeds of the aforementioned awards.

(b) The litigation was settled. Pursuant to the settlement, the court entered a decree dated August 4,1931, which, among other things, provided that Colby and Brown should recover for legal services theretofore rendered, the sum of $131,020.39 from Interocean, Asphalt, and Thurber and Hersloff, as trustees, with reference to the sum of $454,560.45 already received by Interocean, Asphalt, and Thurber and Hersloff in part payment of the awards referred to in findings 5 and 6, and also with reference to the sum of $174,337.41 then available in the Treasury of the United States for further part payment of said awards; and that Colby and Brown should recover from the same corporations and trustees 21% percent of all sums thereafter to be paid on account of principal and interest on said awards (exclusive of the $174,-337.41, above-mentioned, then ready for payment by the Treasury).

(c) The said decree also provided that Colby and Brown should have an equitable lien on the funds then held or which might thereafter be held by the Secretary of the Treasury and the Treasurer of the United States for payment of said awards, and on any check or warrant issued in payment thereof. To assure the payment of such percentage in the future, the decree directed the Secretary of the Treasury and the Treasurer of the United States to deliver to Inter-ocean, Asphalt, and the trustees all checks and warrants in payment of said awards only through and in care of the Biggs National Bank of Washington, D.C., such bank to forward same to its New York City banking correspondent for endorsement by the payees and return to the bank to be cashed and disbursed as provided in said decree, that is, to pay the said Colby and Brown the 21% percent as their fees and thereafter to pay the remainder of the sums so received to Interocean, Asphalt, and the trustees after the bank deducted its reasonable compensation.

(d) The decree also provided that the payments to Inter-ocean, Asphalt, and the trustees should be made by check of the bank to the order of Interocean, whose receipt should fully discharge and acquit the bank for all payments due Interocean, Asphalt, and the trustees.

(e) The decree also provided that Interocean, Asphalt, and the trustees were perpetually enjoined from applying for, demanding of, or receiving from the United States or from any officer thereof any warrant, draft, check, or order in payment of the awards or any part thereof, otherwise than as provided for in said decree.

(f) The decree also provided that all of its provisions should apply to the funds provided by the then present law for the payment of the said awards and to any funds which should be provided by any subsequent law, treaty, or otherwise for the payment of said awards, and that the decree should be binding upon Interocean, Asphalt, Thurber, Her-sloff, and their agents, successors, assigns, heirs, administrators, and executors, and binding upon and inuring to the benefit of the plaintiffs, Colby and Brown, their agents, attorneys, heirs, administrators, executors, and assigns.

13. (a) Thereafter and prior to February 21, 1939, the trustees of Asphalt and Interocean assigned an interest of 1% percent in said awards to Walter M. Bastían, and Harvey D. Jacob, the attorneys who represented them in the aforesaid litigation in the then Supreme Court of the District of Columbia, in payment of their fees as said attorneys.

(b) Thereafter and on February 21, 1939, the trustees of Asphalt and Interocean assigned to (1) Ell wood M. Babenold, and others, constituting the law firm of Rabenold, Scribner and Miller, general counsel for the trustees, in payment for their legal services to the trustees, 10 percent of the net balance of said awards, together with interest thereon, after deducting therefrom the 21% percent directed to be paid to Colby and Brown, and the 1% percent assigned to Bastían and Jacob; and (2) Edward D. Brown, and Edgar A. Pollack, constituting the law firm of Brown & Pollack, attorneys for the trustees in certain matters, in payment for their legal services to the trustees, 5 percent of the net balance of said awards, together with interest thereon, after deducting therefrom the 21% percent directed to be paid to Colby and Brown, and the 1% percent assigned to Bastían and J acob.

(c) About 1939, an attorney, Harvey Jacob, of Washington, represented Interocean in a tax case with Internal Revenue Service. He claims Interocean owes him for part of his fee, and he is holding stock of Interocean as security for his claim. The stock has never been canceled. The certificates for the stock of Interocean had been delivered to said Harvey J acob on May 26, 1938, and he gave a receipt therefor. The certificates for all said stock were endorsed in blank, except a certificate for 50 shares of common stock in the names of five trustees under a trust agreement dated October 29,1917, which was not endorsed.

14. Since a time prior to the tax years for which, deficiencies were assessed (as hereinafter stated), the trustees (a) received payments on account of the awards through the Biggs National Bank of Washington pursuant to the decree of August 4, 1931; (b) paid the bank fees, trustees’ commissions, and amounts due attorneys pursuant to the decree and assignments hereinabove described; and (c) divided and paid over the balance of the payments to the stockholders of Interocean pro rata. Other activities of the trustees are set forth in findings 18,19, and 20.

15. There were no payments of principal or interest on account of the awards to Asphalt or Interocean or the trustees between September 30, 1931, and July 10,1941. In this interval another class of claimants against Germany, known as the “Black Tom” sabotage claimants, asserted a right to participate in the same fund from which the trustees of Asphalt and Interocean were to be paid their awards or on account thereof; and on or about June 15, 1939, the “Black Tom” claims were allowed in the total amount of $50,000,000 and held able to participate in the same fund.

16. In October 1941, the Treasury Department advised the trustees of Asphalt and Interocean that the Secretary of the Treasury had determined that there were sufficient funds available in the German Special Deposit Account to make a small payment on account of principal; and it also advised that such amount to be distributed would exhaust the funds in such German Special Deposit Account and that the payments to be made would complete the payments to American nationals under the provisions of paragraph 5 of section 4 of the Settlement of War Claims Act of 1928. The payments referred to in the communications from the Treasury Department were paid October 15 and 20, 1941.

17. (a) When Interocean’s charter expired in 1937, the potential assets of Interocean and Asphalt consisted of (1) the two awards of the Mixed Claims Commission, described in findings 5 and 6, and (2) three claims, hereinafter described in findings 18,19, and 20, under the headings “British claim,” “Azua property,” and “Carteret property.”

(b) After the payments of October 15 and 20, 1941, described in finding 16, counsel for the trustees were of the opinion that the assets and claims of Interocean (including Asphalt) were of doubtful or no value, and they so reported on September 16,1942, to the executors of the estate of O. E. Thurber (who died on April 23, 1941). Thurber had been the owner of a substantial amount of the stock of Interocean.

(c) In Schedule F of the Federal estate tax return of the Thurber estate, the executors referred to the said opinion of counsel for the trustees and reported that said stock interest and a claim for money advances made by the decedent in his lifetime to Interocean and one of its subsidiaries were of no value. The lack of value so reported was accepted by the Internal Revenue agent.

18. (a) “British claim.” In May 1915 and August 1916, the Government of Great Britain, through the British Admiralty, requisitioned two tankers, the “Rosalind” and the “Georgian Prince,” from a wholly owned subsidiary of Interocean. The British Admiralty paid to Interocean’s subsidiary charter hire at the so-called “Blue Book” rate. Inter-ocean claimed that such rate was less than the market rate. The claim was presented by Interocean to the United States Department of State in 1927 on the theory that it fell within the scope of the arrangement effected by an exchange of notes between the United States and Great Britain, signed on May 19,1927.

(b) The claim was considered by the legal adviser, the Under Secretary of State, and the Secretary of State, prior to the signing of the agreement on May 19,1927, and it was their unanimous conclusion that the claim had no merit. The State Department advised Interocean’s counsel on August 31, 1927, that the Department did not regard the claim as a valid one. Nevertheless, the claim was persistently pressed thereafter by Interocean’s attorneys.

(c) In 1938, Interocean filed with the State Department a claim against Great Britain for 344,082 pounds sterling, or, converted into dollars, an amount in excess of $1 million. Thereafter, it actively pressed the claim. In 1950, the trustee for Interocean and Ms attorneys went to the State Department and conferred with the officials handling the claim. By letter of March 20, 1951, the claim was rejected.

(d) On September 10, 1956, the trustee of Interocean referred the claim to an attorney in Washington for Ms evaluation. The attorney investigated the claim, and on March 3,1958, he went to the State Department to determine the status of the claim and to discuss it with the legal adviser. Since then, no further action has been taken with respect to this claim.

(e) Before the trustee referred the claim to the WasMng-ton attorney in 1956 and in 1952, the attorney who had represented Interocean in connection with the said matter recommended that the claim be dropped. The Washington attorney reported to general counsel of the trustees on March 6, 1958, after his visit to the State Department on March 3, 1958, that the Department would be willing to submit the matter to arbitration although the Department adhered to its position that the claim was without merit. The trustees’ general counsel thereupon reviewed the decisions of prominent Federal judges who had acted as arbitrators in similar matters in which they had held that the so-called “Blue Book” rates were adequate compensation; and general counsel decided to abandon the claim.

19. (a) “Azua property.” TMs “property” consisted of two parcels of land, one oil land and one timberland, in the Dominican Bepublic. Neither parcel was surveyed. Prior to 1942, Interocean had been unable to sell these properties at any price. In 1942, however, counsel for the trustees were of the opinion that Interocean owned the two parcels, and estimated that the oil land contained 15,000 or 20,000 acres and that the timberland contained 150,000 acres. Interocean’s title to these lands had been certified by an attorney.

(b) The oil lands were tested (date unspecified) and found to have no oil in commercial quantity.

(c) Further investigation by counsel for the trustees in 1951 and 1952 revealed that Interocean did not have title originally or that title had been lost by reason of nonpayment of taxes or through confiscation.

20. (a) “Carteret property.” This property consisted of three parcels of land located in the Borough of Carteret, Middlesex County, New Jersey. Title was held by a subsidiary of Interocean.

(b) In 1942, two of the tracts were subject to a mortgage of $50,000 in favor of O. E. Thurber, a trustee of Interocean and Asphalt, and the third parcel was subject to a mortgage of $20,000 in favor of Nils B. Hersloff, another of the trustees. At that time counsel for the trustees were of the opinion that the parcels could not be sold for a price equal to the mortgages.

(c) In 1943, the two tracts mortgaged to Thurber were sold for $52,000. Of this sum, $40,900 was paid to the Thurber estate in satisfaction of the mortgage.

(d) In 1947, Nils B. Hersloff sued to foreclose the mortgage in his favor. The tract was sold for an undisclosed price to a purchaser who paid $1,500 above the amount re' quired to satisfy the mortgage.

(e) Thereafter, in July 1947, following payment of expenses of $850, the net balance of $650 was paid to the trustees of Interocean.

21. The books and records for Asphalt and Interocean and the trustees named herein were kept and their Federal tax returns prepared on the cash basis and for calendar years ending December 31.

22. Corporate income tax returns were filed for Asphalt and Interocean for the years 1928-1931,1941, and 1948. On these returns, the payments made with respect to the two awards were reported as income, and a tax was paid on account thereof. For these years, no refund claim has been filed or tax refunded on the ground that either corporation was no longer in existence for tax purposes.

23. For the years 1952, 1953, and 1954, the trustee Nils B. Hersloff filed fiduciary returns on Form 1041, reporting as income payments from the Mixed Claims Commission. The returns showed no tax due, a deduction being claimed for attorneys’ fees, and the balance of the income as having been distributed.

24.On May 31, 1956, deficiencies in corporate income tax were assessed against trustee Nils B. Hersloff as follows:

Year Asphalt Interocean

1949 _ $226.15 $1,069.57

1953 _ 393.63 1,914.78

1954 _ 400.97 1,924.90

25. (a) The assessments of tax and interest against Asphalt were satisfied by a payment of $1,128.42 on June 24, 1955. The assessments of tax and interest against Inter-ocean were satisfied by a payment of $5,416.11 on June 24, 1955. Such payments were accompanied by a letter from the attorneys for the trustee stating that the payments were made without waiting for assessment in order to avoid the further running of interest, and that it was proposed to file promptly claims for refund.

(b) On November 5, 1956, plaintiffs filed with the said District Director claims for refund of the taxes paid for 1949, 1953, and 1954, in the total amount of $6,544.53.

(c) On April 10, 1958, statutory notices of disallowance were issued with respect to these six claims for refund.

26. The parties have agreed that if the plaintiffs are entitled as a matter of law to recover, judgment shall be entered in favor of the trustees of Asphalt for $1,128.42, and judgment shall be entered in favor of the trustees of Inter-ocean for $5,416.11, plus interest on both amounts as provided by law.

CONCLUSION OB LAW

Upon the foregoing findings of fact, which are made a part of the judgment herein, the court concludes as a matter of law that plaintiffs are not entitled to recover, and the petition is therefore dismissed. 
      
       Asphalt had no assets, potential or actual, aside from the award by the Mixed Claims Commission.
     
      
       Another asset, the “Carteret property” in New Jersey, is not now pertinent because it was finally disposed of in 1947, prior to the earliest taxable year (1949) in the present ease.
     
      
       The South Dakota statute (see finding 2) provides that the trustees of the corporation on dissolution “have full power to settle its affairs, sell and convey its property, collect and pay the corporate debts, and divide among the stockholders and members the property, or the proceeds of the sale thereof, which remain after the payment of debts and necessary expenses.”
     
      
       The differences In wording between tbe two Codes are not significant for the present case.
     
      
       See Taylor Oil & Gas Co. v. Commissioner, 47 F. 2d 108, 109 (C.A. 5, 1931); Burnet v. Lexington Ice & Coal Co., 62 F. 2d 906, 909 (C.A. 4, 1933); Hellebush v. Commissioner, 65 F. 2d 902, 903-04 (C.A. 6, 1933); Northwest Utilities Securities Corp. v. Helvering, 67 F. 2d 619, 621-22 (C.A. 8, 1933); Whitney Realty Co. v. Commissioner, 80 F. 2d 429, 430-31 (C.A. 6, 1935); Tazewell Electric Light & Power Co. v. Strother, 84 F. 2d 327, 328, 330 (C.A. 4, 1936); First Nat. Bank of Greeley, Colo. v. United States, 86 F. 2d 938, 941 (C.A. 10, 1936); O’Sullivan Rubber Co. v. Commissioner, 120 F. 2d 845, 847 (C.A. 2, 1941); Fairfield S. S. Corp. v. Commissioner, 157 F. 2d 321, 323 (C.A. 2, 1946), cert. denied, 329 U.S. 774; J. Ungar Inc. v. Commissioner, 244 F. 2d 90, 92 (C.A. 2, 1957); Smith v. Commissioner, 26 B.T.A. 1178, 1184-86 (1932); Caswell v. Commissioner, 36 B.T.A. 816, 823-24 (1937).
     
      
       One attorney claims Interocean owes him part of a fee for representing it before the Internal Revenue Service in a tax matter, and he is holding Inter-ocean stock as security.
     
      
       Plaintiffs say that they requested the Treasury Department to recognize assignments of future payments to trustees for the stockholders, but the Treasury was unwilling to honor such an assignment, at least in the absence of consent by all interested parties. However, there is no showing of any effort to have the District Court change its decree; we do not read the injunc-tive provisions of that order as in any way prohibiting application for its modification.
     
      
      
        Williamson v. United States, 155 Ct. Cl. 279 (1961), 292 F. 2d 524, Is a ease of this type in which it was held that there was an impermissible anticipatory assignment of earned income by the dissolved corporation.
     
      
       45 Stat.254.
     
      
       The amounts shown In findings 9 and 10 under the heading “Principal” are amounts paid or payable under section 2(b) of the Settlement of War Claims Act of 1928 and consist in part of the original award and in part of interest on the original award for a period prior to January 1, 1928. The amounts shown in findings 9 and 10 under the heading “Interest” are amounts of interest paid or payable under section 2(c) of the Settlement of War Claims Act of 1928.
     
      
       Before payments of that date.
     
      
       After payments of that date.
     
      
       61 Stat. 789.
     
      
      
         Since 1941, payments have been made oí interest only.
     
      
       Treaty Series No. 756.
     
      
       Prior to the assessments, the trustee was sent 30- and 90-day letters.
     
      
       Payments were treated as income of the corporations for the years received. The checks dated December 31, 1948 (see finding 9) were received by the trustee in January 1949. Payments made in 1953 were received in 1953 ; and payments made in 1954 were received in 1954.
     