Flora v. United States, 5502.
Citation | 246 F.2d 929 |
Decision Date | 01 July 1957 |
Docket Number | No. 5502.,5502. |
Parties | Walter W. FLORA, Appellant, v. UNITED STATES of America, Appellee. |
Court | United States Courts of Appeals. United States Court of Appeals (10th Circuit) |
A. G. McClintock, Cheyenne, Wyo., for appellant.
John N. Stull, Washington, D. C., (Charles K. Rice, Asst. Atty. Gen., A. F. Prescott and David O. Walter, Attorneys, Department of Justice, Washington, D. C., and John F. Raper, Jr., U. S. Atty., Cheyenne, Wyo., on the brief), for appellee.
Before PHILLIPS, PICKETT and LEWIS, Circuit Judges.
By complaint filed in the United States District Court for the District of Wyoming, plaintiff Flora1 sought recovery of the sum of $5,058.54 paid to the government in partial satisfaction of a deficiency personal income tax assessment for the year 1950 in the amount of $27,251.13. Taxpayer alleged the deficiency to be erroneously assessed and the payment to be illegally collected because of a determination by the Commissioner of Internal Revenue that certain losses occurring to the taxpayer during the tax period and reported by him as ordinary losses were properly capital losses within the meaning of that term as defined by sec. 117(a) (1) of the Internal Revenue Code of 1939, 26 U.S.C.A. § 117(a) (1).
Jurisdiction is alleged to exist under the provisions of 28 U.S.C.A. § 1346.2 Responding to the complaint, the government alleged that the action could not be maintained in the District Court because the entire amount of the assessment had not been paid and, without waiving this special defense, counterclaimed for the unpaid balance. The District Court denied the special defense3 but entered judgment upon the merits for the government on its counterclaim.
We are of the opinion that determination of a single question is dispositive of the case: Can a taxpayer maintain a personal income tax refund suit in the District Court without first paying the entire amount of the tax assessed for the period in question?
Beginning with the comments of Mr. Justice Miller in Cheatham v. United States, 92 U.S. 85, 23 L.Ed. 561, and continuing through many decisions,4 the Supreme Court has consistently indicated that full payment of a tax deficiency is a prerequisite to a judicial claim for refund. And such has been the established policy of our tax system.5
In 1924, Congress, recognizing both the desirability of maintaining a minimum of judicial interference with the collection of taxes and the concomitant hardship imposed on taxpayers by an inflexible "pay first, litigate later" rule, established the Board of Tax Appeals (now the United States Tax Court) as a place where the validity of a tax assessment could be initially questioned. In creating the Board of Tax Appeals the House Committee on Ways and Means stated:
Since the establishment of the tax court the distinctive purpose of its creation has been judicially recognized and its intended powers guarded. In Old Colony Trust Co. v. Commissioner, 279 U.S. 716, 721, 49 S.Ct. 499, 501, 73 L.Ed. 918, the Supreme Court stated:
And in Dobson v. Commissioner, supra, the court stated 320 U.S. 489, 64 S.Ct. 247:
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