United States v. Mitchell B. Howe

This is an appeal from a judgment in favor of the appellee taxpayer for the amount of excise taxes paid to the Newport Bay Company, doing business as the “Balboa Bay Club”, for the use of slip and mooring facilities during the years 1956 and 1957. Two related questions are presented: (1) whether the Balboa Bay Club is a “social, athletic, or sporting club or organization” within the meaning of section 4241(a) of the Internal Revenue Code of 1954 ; and (2) whether the sums paid by the taxpayer as boat mooring fees constitute “dues” within the meaning of section 4242(a). Jurisdiction was conferred on the district court by 28 U.S.C. § 1346 , and this court has jurisdiction by virtue of 28 U.S.C. § 1291 .

The Newport Bay Company, a California corporation owned principally by two life insurance companies, leases a bay-front site of approximately fifteen acres from the City of Newport Beach. It formed the Balboa Bay Club as a profit-making venture. The object of the club as stated in its bylaws is “to promote out-of-doors recreation and sports for and social activities among its members”. A club publication, the Bay Window, describes the club as a “private and restricted club serving…