- 12 -
Big Eagle v. United States, 156 Ct. Cl. 665, 300 F.2d 765 (1962)
(royalties from mineral deposits tax exempt).7
The courts have confined the exemption to income received
from activities that diminish or exploit the value of the land
(such as logging, mining, or farming). Income earned through the
investment of capital or labor, such as restaurants, motels,
tobacco shops, and similar improvements to the land, fail to
qualify for the exemption, although the activity takes place on
land held in trust. See Hoptowit v. Commissioner, 78 T.C. at 145
(income received from the operation of a smokeshop on allotted
land was taxable); see also Cross v. Commissioner, 83 T.C. at
566; Beck v. Commissioner, T.C. Memo. 1994-122, affd. without
published opinion 64 F.3d 655 (4th Cir. 1995) (rental income
derived from apartments located on Indian reservation land was
not exempt); Critzer v. United States, 220 Ct. Cl. 43, 597 F.2d
708 (1979) (exemption denied for income received from the
operation of a motel, a restaurant, a gift shop, and from the
rental of a craft shop and apartment units). Under the rationale
of these cases, the income derived from the operation of a casino
would not be derived directly from the land.
7
Citing these cases, in Cross v. Commissioner, 83 T.C. 561,
566 (1984), affd. sub nom. Dillard v. United States, 792 F.2d 849
(9th Cir. 1986), this Court adopted a narrow reading of the
"derived directly" exemption, observing that it had been applied
only in situations where there is exploitation of the land
itself.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011