Jan Casimir Lewenhaupt v. Commissioner of Internal Revenue

Jan Casimir Eric Emil Lewenhaupt (Count Lewenhaupt) (plaintiff) was a Swedish count who was a nonresident alien at the time relevant to this case. Count Lewenhaupt had been involved in the import and export business before World War II. Count Lewenhaupt received property in America under a trust established by an American grandfather, Serranus Hastings. The trust existed until 1942, and on the trust’s termination, Clinton LaMontagne was the trustee who distributed trust property until 1945. In 1941, Count Lewenhaupt received American property under a trust from his mother’s will, which included four parcels of real property and securities in the United States. At that time, Count Lewenhaupt appointed LaMontagne, who was American, as Count Lewenhaupt’s agent to manage the property he would receive from the two trusts. Count Lewenhaupt gave LaMontagne a broad power of attorney, which LaMontagne used to transact business on Count Lewenhaupt’s behalf. LaMontagne never took significant action without consulting Count Lewenhaupt or Lewenhaupt’s father. During the calendar year of 1946, Count Lewenhaupt owned multiple lots in Modesto, California, two in San Francisco, California, and another in San Mateo, California. The property in Modesto, California, was sold in 1946 with a long-term capital gain of $152,555.87. The main concern was whether Count Lewenhaupt was engaged in trade or business in the United States during the 1946 tax year. The Internal Revenue Code provided that nonresident aliens engaged in a trade in the United States are taxable just the same as United States citizens in terms of income derived from sources within the United States. The Commissioner of Internal Revenue (the commissioner) (defendant) argued that Count Lewenhaupt was engaged in business in the United States, and Count Lewenhaupt disagreed. During the year in question, LaMontagne, as Count Lewenhaupt’s agent, had executed leases and rented the properties, collected rents, kept accounts for the properties, supervised repairs, paid taxes, insured the properties, and brought about the sale of the Modesto properties. The commissioner argued that Count Lewenhaupt had underpaid taxes for 1946 for $33,820.30. Count Lewenhaupt denied the underpayment and claimed he had overpaid $4,345.95.