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24 Stat. 388, 25 U.S.C. sec. 331-358 (1998) for income that an
individual Indian allottee derives directly from the land held in
trust for him. The 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
individual allottee. It held that income received by a
noncompetent3 Indian from the sale of standing timber logged off
of his own allotment was exempt from Federal income tax.
In Fry v. United States, 557 F.2d 646 (9th Cir. 1977),
Indian taxpayers contracted with a non-Indian concern to cut
timber from unallotted lands of an Indian reservation. The
taxpayers argued that their logging income should not be subject
to tax since the income that the tribe itself received from the
logging was not subject to tax, citing Squire v. Capoeman, supra,
and Stevens v. Commissioner, 452 F.2d 741 (9th Cir. 1971), affg.
in part, revg. in part 54 T.C. 351 (1970). The opinion of the
Ninth Circuit Court of Appeals in the Fry case pointed out that
there was no treaty or statute that exempted the tribal lands in
question from Federal income taxation. It also stated that, "In
both Squire and Stevens, the income which was held to be exempt
3The trust under which the United States holds the allotted
lands makes the individual allottee "noncompetent" to alienate it
without permission of the United States. The term "noncompetent"
"does not denote mental incapacity." Stevens v. Commissioner,
452 F.2d 741, 742 n.1 (9th Cir. 1971), affg. in part, revg. in
part 52 T.C. 330 (1969).
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