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allottee is determined to be competent to manage his or her own
affairs, a fee patent can be issued to the allottee with respect
to the allotted land. The Indian General Allotment Act serves to
preserve the value of the land in trust until such time as the
Secretary of the Interior determines that the allottee is
competent to hold title to the land in fee simple. County of
Yakima v. Confederated Tribes & Bands of the Yakima Indian
Nation, 502 U.S. 251 (1992).
In Squire v. Capoeman, supra, the Supreme Court concluded
that a Federal income tax exemption was created by the Indian
General Allotment Act for income that an allottee derives
directly from the land held in trust for him. In that case, the
Supreme Court reasoned that there existed a congressional intent
to exempt allotted lands from all charges and encumbrances until
after the fee interest was conveyed to the allottee. It held
that income received by an incompetent Indian from the sale of
standing timber logged off his own allotment was exempt from
Federal income tax, but "reinvestment income" was not. Id. at 9.
The Court stated: "It is clear that the exemption accorded
tribal and restricted Indian lands extends to the income derived
directly therefrom." Id. (quoting Cohen, Handbook of Federal
Indian Law, 265, (1941); emphasis added). The stated rationale
for the "derived directly" standard was that the logging of the
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