279 U.S. 716 (1929), 130, Old Colony Trust Co. v. Commissioner of Internal Revenue

Docket Nº:No. 130
Citation:279 U.S. 716, 49 S.Ct. 499, 73 L.Ed. 918
Party Name:Old Colony Trust Co. v. Commissioner of Internal Revenue
Case Date:June 03, 1929
Court:United States Supreme Court

Page 716

279 U.S. 716 (1929)

49 S.Ct. 499, 73 L.Ed. 918

Old Colony Trust Co.


Commissioner of Internal Revenue

No. 130

United States Supreme Court

June 3, 1929

Argued January 10, 11, 1929

Reargued April 15, 1929




1. A proceeding before the circuit court of appeals, under Revenue Act of 1926, §§ 283(b), 1001 et seq., in which a taxpayer sought review of a decision of the Board of Tax Appeals finding a deficiency in his income tax return, held to present a " case or controversy " cognizable by that court under the judicial article of the Constitution. Pp. 722 et seq.

2. A proceeding begun by an administrative or executive determination may be a "case or controversy" when it comes on review before a court if it calls for the exercise of judicial power only; nor is it essential that there should be power to award execution where the final judgment establishes a duty of an executive department and is enforceable through action of the department. P. 722.

3. Under §§ 1001-1005 of the Revenue Act of 1926, the courts authorized to review decisions of the Board of Tax Appeals have power to award execution of their final judgments. P. 726.

4. Assuming that, under § 283(b) of the Revenue Act of 1926, a taxpayer whose appeal to the Board of Tax Appeals was taken before the date of that Act and decided adversely to him after it may resort both to the circuit court of appeals by way of review and to the district court by way of an action to recover the tax (having first paid it), this does not prevent the circuit court of appeals, being a constitutional court, from having jurisdiction under the Act, since, on the principle of res judicata, if both remedies were pursued, the judgment first in time would be a final adjudication conclusive on both courts. P. 727.

5. A certificate by the circuit court of appeals of a question of law involved in a review of a decision of the Board of Tax Appeals held within the appellate jurisdiction of this Court under the Constitution. P. 728.

6. Payment by an employer of the income taxes assessable against the compensation of an employee, made in consideration of his services, constitutes additional taxable income of the employee under the Revenue Act of 1918. P. 729.

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7. The objection that this construction would lead to an absurdity not contemplated by Congress if the employer were called upon to pay the tax on the additional income and a further tax on that payment, and so on, will not he considered, no attempt having been made by the Treasury to collect further taxes upon the theory that payment of additional taxes creates further income. P. 730.

Response to a question of law certified by the circuit court of appeals, arising upon review of a decision of the Board of Tax Appeals approving a finding by the Commissioner of Internal Revenue of deficiencies in income tax returns. See 7 B.T.A. 648. This case was reargued and decided with the one next following. *

Page 718

TAFT, J., lead opinion

MR. CHIEF JUSTICE TAFT delivered the opinion of the Court.

We have before us for consideration two questions certified from the same circuit court of appeals, No. 130 and No. 129. They are presented upon different statements of facts, and the cases reach the certifying court in different ways, but the questions are so nearly alike that the certifying judges deemed it convenient to present them in consolidated form. We prefer to separate the questions, discuss and decide No. 130 first, and then consider No. 129.

No. 130 comes here by certificate from the Circuit Court of Appeals for the First Circuit. The action in that court was begun by a petition to review a decision of the United

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States Board of Tax Appeals. The petitioners are the executors of the will of William M. Wood, deceased. On June 27, 1925, before Mr. Wood's death, the Commissioner of Internal Revenue notified him by registered mail of the determination of a deficiency in income tax against him for the years 1919 and 1920, under the Revenue Act of 1918 (40 Stat. 1057). The deficiency was revised by the Commissioner August 18, 1925. An appeal was taken to the Board of Tax Appeals, which was filed October 27, 1925. A hearing before the Board, April 11, 1927, resulted in a decision November 12, 1927. The Board approved the action of the Commissioner, and found a deficiency in the federal income tax return of Mr. Wood for the year 1919 of $708,781.93, and for the year 1920 of $350,837.14. The petition for review was perfected December 23, 1927, pursuant to the Revenue Act of 1926, § 283(j), and §§ 1001 to 1005, c. 27, 44 Stat. 9, 65, 109, and Rule 38 of the First Circuit Court of Appeals.

The facts certified to us are substantially as follows:

William M. Wood was president of the American Woolen Company during the years 1918, 1919, and 1920. In 1918 he received as salary and commissions from the company $978,725, which he included in his federal income tax return for 1918. In 1919, he received as salary and commissions from the company $548,132.87, which he included in his return for 1919.

August 3, 1916, the American Woolen Company had adopted the following resolution, which was in effect in 1919 and 1920:

Voted: That this company pay any and all income taxes, state and Federal, that may hereafter become due and payable upon the salaries of all the officers of the company, including the president, William M. Wood; the comptroller, Parry C. Wiggin; the auditor, George R.Lawton, and the following members of the staff, to-wit: Frank H. Carpenter, Edwin L. Heath, Samuel R. Haines,

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and William M. Lasbury, to the end that said persons and officers shall receive their salaries or other compensation in full without deduction on account of income taxes, state or federal, which taxes are to be paid out of the treasury of this corporation.

This resolution was amended on March 25, 1918, as follows:

Voted: That, referring to the vote passed by this board on August 3, 1916, in reference to income taxes, state and federal, payable upon the salaries or compensation of the officers and certain employees of this company, the method of computing said taxes shall be as follows, viz.:

The difference between what the total [49 S.Ct. 501] amount of his tax would be, including his income from all sources, and the amount of his tax when computed upon his income excluding such compensation or salaries paid by this company.

Pursuant to these resolutions, the American Woolen Company paid to the collector of internal revenue Mr. Wood's federal income and surtaxes due to salary and commissions paid him by the company, as follows:

Taxes for 1918 paid in 1919 . . . . $681,169 88

Taxes for 1919 paid in 1920 . . . . 351,179 27

The decision of the Board of Tax Appeals here sought to be reviewed was that the income taxes of $681,169.88 and $351,179.27 paid by the American Woolen Company for Mr. Wood were additional income to him for the years 1919 and 1920.

The question certified by the...

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