This is a children’s book that was read to us in class during the mid-1970s, and I think it was more contemporary. It was humorous tales of mountain life. I believe it was from the perspective of a young boy. It is a collection of humorous short stories. In one of them, one of the characters gets his toe gets lopped off by an axe. The toe is buried in a tobacco tin. The amputee is tormented by burning sensation where the toe used to be. He believes it is burning because the tobacco is irritating the severed toe, so the boy has to find the tin, rinse the tobacco off. They do, and coincidentally (?) his pain is relieved.
This website suggests that the story is an old Yukon legend. The book itself was published too recently to be your book, but maybe this will give you something more to go on.
http://www.publishersweekly.com/978-0-7613-1493-6