holms Bank case, nor even by looking merely at all of section 217. The statute as a whole must be taken into consideration. Reading the statute as a whole, it plainly intends to tax nonresident aliens and foreign corporations on net income from sources within the United States. Section 217 contains the rules for determining the source of items of gross income, and the manner in which net income from sources in the United States is to be computed. It also exempts one item of gross income from a source within the United States, namely, interest on deposits in banks in the United States, when such income is paid to a nonresident alien individual or a nonresident foreign corporation. But "gross income" is defined in section 213. Subsection (a) of section 213 enumerates various items which the term "gross income " includes. Interest is an item specifically included. Subsection (b) enumerates certain items of income which are not included in the term 66 gross income" and which are specifically exempted from tax. Among the items of gross income enumerated in subsection (b) as exempt from tax is interest on "obligations of the United States," but in the case of obligations of the United States issued after September 1, 1917, such exemption applies only if and to the extent provided by the act authorizing the issue thereof. Subsection (b) (4) (C). It has been held that the expression "obligations of the United States," as used in section 213 (b) (4) (C), in connection with the word "issued," has acquired a restricted meaning and that the exemption of such obligations and the interest thereon is based on the policy of safeguarding the public credit, and is strictly limited to this object. Kansas City Southern Ry. Co. v. Commissioner, supra; affirmed on this point, 52 Fed. (2d) 372; certiorari denied, 284 U. S. 676. It has also been held that interest on a refund of income tax is not interest on an "obligation of the United States," within the meaning of this provision of section 213 (b), but is taxable under section 213 (a). American Viscose Corp., 19 B. T. A. 937; affd., 56 Fed. (2d) 1033; certiorari denied, 287 U. S. 615. Demonstrably, then, such interest as is here involved is not exempted under section 213 (b). It is taxable income in nature. The only question left is whether it is gross income from a source within the United States. Viewed from the standpoint of fact and logic, to say that the Government of the United States, which is the "source" of the interest here involved, is not within the United States, would be to utter a palpable absurdity. The imperium or sovereignty of the United States is coextensive with its territorial domain, and the United States as a body politic and corporate exists or resides within that domain. An obligation issuing from it, which is created by its will and consent, must, therefore, derive (226) from source within the United States." Consequently, I have no difficulty in reaching the conclusion that the interest here in question is within the meaning of section 217 (a) 1. Certainly, any intention to exempt such an item of income on the part of Congress would have to be plainly and unmistakably expressed. There is no such expression. If it had been the intention to exempt all interest paid by the United States to nonresident aliens and foreign corporations, Congress could have written in such exemption just as it has written in the exemption of interest on bank deposits paid to nonresident aliens and nonresident foreign corporations. If a technical argument were necessary to achieve the desired end, it might be pointed out that under section 3220 of the Revised Statutes, as amended by the Revenue Act of 1926, "The Commissioner of Internal Revenue * is authorized to remit, refund, and pay back all taxes erroneously or illegally assessed or collected," and under section 1116 interest, at the rate of 6 per cent per annum from the date such tax was paid to the date of the allowance of the refund, is to be allowed and paid on such refund. The Commissioner is an officer of the United States. Congress has imposed on him the duty and lodged in him the power to assess and collect all income taxes. It is his duty to refund all unlawful or erroneous exactions of taxes. The refund is his obligation. He is the "source." He is a resident of the City of Washington, the seat of the Federal Government, and certainly within the ambit of section 217 (a) 1. That the Commissioner is to be treated as the "source" of the interest paid by the United States on a refund, also appears from section 221, the provisions of which, except as to rate of withholding, are made applicable to nonresident foreign corporations by section 237. Section 221, entitled "Payment of Individual's Tax at Source," provides: all officers All persons, in whatever capacity acting, including and employees of the United States, having the control, receipt, custody, disposal, or payment of interest (except interest on deposits with persons carrying on the banking business paid to persons not engaged in business in the United States and not having an office or place of business therein), of any nonresident alien individual, shall (except in the cases provided for in subdivision (b) and except as otherwise provided in regulations prescribed by the Commissioner under section 217) deduct and withhold from such income a tax equal to 5 per centum thereof. [Italics mine.] The Commissioner has not issued any regulations under section 217 relieving officers and employees of the United States from the duty of withholding the tax from the items of income specified in section 221. It would seem, therefore, that tax should have been withheld at the source from the interest paid on the refunds made to the Stockholms Enskilda Bank, a nonresident foreign corporation. The possibilities of a tax-free yield of 6 per cent to foreign corporations and nonresident aliens, which the decision in the Stockholms Bank case opens up, will not be overlooked, particularly by resident foreign corporations. Under our system of self-assessment, there is nothing to prevent such corporations from including in the return of income and paying income tax on items of foreign income or, even for that matter, tax-exempt income from United States sources, such as interest on Liberty Bonds and municipal bonds, knowing full well that a claim for refund filed within the statutory period, two years, based on the erroneous inclusion in gross income of items of income from sources without the United States and items of tax-exempt income, will be allowed and that the amount of such refund will draw interest at the rate of 6 per cent from the date the tax was paid to the date of the allowance. The statute does not now require that the tax be paid under protest in order to obtain a refund. In the instant case the parties stipulated that the petitioner, a resident foreign corporation, received in 1925 a refund of Federal income and profits taxes for 1917, and at the same time interest on such refund in the amount of $132,407.17; and that in 1926 the petitioner received a refund of income and profits taxes for 1918 and 1919 and interest upon such refund in the amount of $1,394,357.64. If the above amounts had been paid to a citizen, resident, or domestic corporation, they would have been taxed. There is no reason of public policy why they should not be taxed when paid to a nonresident alien or a foreign corporation. They are from a source in the United States-the Government itself. The statute does not expressly exempt such interest from tax. I think, therefore, the decision in the Stockholms Enskilda Bank case should be overruled, and judgment found for the respondent in this case. ACACIA PARK CEMETERY ASSOCIATION, INC., PETITIONER, V. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Docket No. 30210. Promulgated December 7, 1932. A corporation sold cemetery lots under purchase agreements that "The purchase price hereof shall include perpetual care." Purchasers were advised that 10 per cent of the sale price of lots would be placed in a perpetual care fund, the income from which would be devoted to perpetual care of the cemetery. In 1924 the petitioner deposited $6,500 in a trust fund, and agreed that additional amounts should be deposited in the fund; that the income should be used for perpetual care; and that any excess income should be turned over to the corporation for corporate purposes. No further amount was deposited by the petitioner to care. Leonard L. Cowan, Esq., for the petitioner. Arthur Carnduff, Esq., for the respondent. This is a proceeding for the redetermination of deficiencies in income tax as follows: 1922, $6,147.09; 1923, $19,398.61; 1924. $10,552.98; and 1925, $10,859.25. Certain allegations of error in the petition have been disposed of by stipulation of the parties. Those not disposed of are: (1) The refusal of the Commissioner to allow petitioner to include the sum of $100,000 for perpetual care fund liability on the first section of petitioner's cemetery as part of the cost of the cemetery lots in the first section and to include a portion of perpetual care fund liability in determining the profit and loss on cemetery lots sold. (2) The refusal of the Commissioner to allow petitioner to include the sum of $100,000 for perpetual care fund liability on the second section of petitioner's cemetery as part of the cost of the cemetery lots in the second section and to include a portion of the perpetual care fund liability in determining the profit and loss on cemetery lots sold. FINDINGS OF FACT. The petitioner was organized under the laws of Illinois in 1922, and in July of that year began to construct its cemetery located on West Irving Park Boulevard, near the City of Chicago. The first section of the cemetery comprised approximately 252 acres and was divided into 5,896 four-grave lots. Lots were sold by the petitioner under contracts which provided that "The purchase price hereof shall include perpetual care." Salesmen were instructed to represent to purchasers of lots that a fund of $100,000 was being established and that 10 per cent of all sales would be put into that fund with respect to the first 252 acres, and that the income of the fund would be used for perpetual care of lots in that section. They made such representations to prospective purchasers. The amount of $100,000 was arrived at by considering that the total sale price of the lots in the first section would be $975,000 and that 10 per cent thereof would be approximately $100,000. The same thing was done with respect to the second tract of land developed in 1924, which consisted of approximately 46 acres and was divided into approximately 9,564 four-grave lots. The officers of the company contemplated setting up a perpetual care fund of approximately $100,000 for the perpetual care of this section of the cemetery and the salesmen represented to prospective purchasers that 10 per cent of the sale price of lots would be placed in such fund. Certain literature given prospective purchasers contained the following: All modern cemeteries have a perpetual care fund, the income of which is expended for cutting and sprinkling the lawns, in trimming the trees and shrubbery, and planting flowers to beautify the grounds. Acacia Park Cemetery will have a perpetual care fund of $100,000. This fund is now rapidly accumulating and before the cemetery is completed that entire amount will have been realized. This fund is placed in the hands of trustees whose duty it is to invest and reinvest the principal in high grade safe securities and to expend the income on the care of lots and graves. The general care and upkeep of the driveways, pathways, structures and such portions of the cemetery as are not used for burial purposes, will not be charged to the perpetual care fund, but will be paid for by the association out of the general income from all sources. This is also true as to the cost of operating the sprinkling system and the making of improvements. Another circular distributed to prospective purchasers contained the following: All property in Acacia Park is under perpetual care. From each sale of property, a percentage is set aside in the perpetual care fund. Only the income from this fund can be used, and this income is entirely administered for upkeep. On February 1, 1924, the petitioner executed an agreement with the Citizens State Bank of Chicago, under the provisions of which the petitioner made a deposit of $2,500 and agreed to make further deposits from time to time, but in any event, within one year from the date thereof, would increase such trust fund until the principal fund, as distinguished from accrued interest and income therefrom, should amount in market value to at least $52,000. Such sums were to be invested by the bank in interest-bearing securities, which were to be held by the bank as a trust fund so long as the cemetery remained a place for the burial of the dead. The seventh paragraph of the agreement provided in part as follows: It is understood and agreed by the parties hereto that the said Company is, and is at all times hereafter to remain, the absolute owner of the Trust Fund hereby created and of all of said Securities and the written evidences thereof forming a part of the same, subject, however, to the trust hereby created and the provisions hereof; that it is intended by this instrument to provide a principal Trust Fund, which is to remain in existence as such as long as said |