302 U.S. 517 (1938), 48, United States v. Andrews

Docket Nº:No. 48
Citation:302 U.S. 517, 58 S.Ct. 315, 82 L.Ed. 398
Party Name:United States v. Andrews
Case Date:January 03, 1938
Court:United States Supreme Court

Page 517

302 U.S. 517 (1938)

58 S.Ct. 315, 82 L.Ed. 398

United States



No. 48

United States Supreme Court

Jan. 3, 1938

Argued December 8, 9, 1937



1. The taxpayer made timely claim for overpayment of income tax due to failure in the return to deduct for loss on worthless shares of certain corporations. After expiration of the two-year limitation (Revenue Act of 1928), he sought to amend by including another overpayment for the same year which resulted from returning as dividends payments received from another corporation which were not dividends and, should have been reported as giving rise to a capital gain, of less amount.


(1) That the second claim was not properly an amendment of the first, but a separate claim on a new and unrelated ground, and was barred by the statute. P. 520.

(2) The fact that the first claim, though for a specific transaction, contained also a "general relief" demand for any other or greater sum which might be found due to the taxpayer could not justify the amendment. P. 524.

(3) Neither could it be upheld because the Commissioner, before the statute ran, had learned from the corporation which had made the payments that they were not dividends, but the proceeds of a sale of shares owned by the taxpayer, and had so informed the revenue agent, it not appearing that, prior to the attempted amendment, the Commissioner knew that the taxpayer was a shareholder in that company or knew that the reported receipt of dividends had reference to such payments. P. 526.

2. In deciding whether a tax refund claim is subject to an amendment, the analogies of pleading are helpful, but they will not be so followed as to ignore the necessities and realities of administrative procedure. P. 523.

A claim which demands relief upon one asserted fact situation, and asks an investigation of the elements appropriate to such relief, cannot be amended to discard that basis and invoke action requiring examination of matters previously not germane.

84 Ct.Cls. 460, 17 F.Supp. 980, reversed.

Certiorari, post, p. 664, to review a judgment sustaining a claim based upon an overpayment of income tax.

Page 518

ROBERTS, J., lead opinion

MR. JUSTICE ROBERTS delivered the opinion of the Court.

In this case, we are called upon to determine whether a claim for refund of income tax, asking repayment of a definite sum upon a specific ground, is susceptible of untimely amendment to recover a greater sum on a new and unrelated ground.

The respondent, on behalf of the estate she represented, paid the income tax shown to be due by her return, which exhibited an item of gross income of $110,891 as "dividends from domestic corporations." Of this total, $36,750 was erroneously reported as dividends from the M. A. Hanna Company. This amount was paid her pursuant to a recapitalization of the company in which the estate owned preferred stock, and, instead of being returned as a dividend, should have been treated as giving rise to a capital gain of $7,411.50.

In December, 1931, the respondent was advised by an internal revenue agent that her return, reporting the receipt as a dividend, was considered correct, subject to the approval of the Bureau in Washington, and that, if later information should indicate a material change in the amount of tax, the statutes would require a redetermination of tax liability. October 6, 1932, as a result of conferences with representatives of the Hanna Company, the Commissioner of Internal Revenue advised the

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agent in charge at Cleveland, Ohio, that the cash received by preferred stockholders in the recapitalization of the company represented proceeds from a sale, and that gain or loss therefrom should be determined upon the basis of the cost of the original stock. The respondent was not notified of the ruling until August 22, 1934.

February 1, 1933, respondent filed a claim for the refund of $995.52, based upon an alleged loss in the taxable year due to the worthlessness of stocks of two corporations. Consideration and action thereon were delayed pending the outcome of litigation which would affect the soundness of the claim. In 1936, this claim was rejected in part but allowed to the extent of $160, which was refunded.

[58 S.Ct. 317] June 29, 1934, after expiration of the statutory period for filing refund claims,1 the respondent presented a claim for $6,454.09 in which she stated that it was "filed as an amendment and amplification of claim for refund filed February 1, 1933," and asserted that the sum of $36,750 reported as a dividend, was not such, but represented the proceeds of sale of stock of the Hanna Company at a profit of $7,411.50, and that the error in the return resulted in an overpayment of $6,454.09.

November 2, 1935, the Commissioner advised the respondent that, while an overpayment had been made, a refund would be denied because the claim of June, 1934, was wholly unrelated to that of February 1, 1933, being an independent demand based upon an entirely different ground. Pursuant to the Commissioner's holding that the latter claim was not filed within the period prescribed by law, and therefore could not be allowed, official notice of rejection was mailed December 16, 1935. The respondent brought suit in the Court of Claims, which gave judgment for her in the amount of $5,536.97.2

Page 520

Upon petitioner's representation that the decision is in conflict with decisions of this Court and of two circuit courts of appeals, we granted the writ of certiorari. We hold that the so-called amendment was, in fact, a new claim, and its allowance was barred by the statutory provision limiting the time for presentation of claims for refund.

Notwithstanding the reliance of each of the parties on recent decisions of this Court, none of them rules the precise question now presented. They point the way, however, to a correct decision.

In United States v. Memphis Cotton Oil Co., 288 U.S. 62, the claim merely stated that there had been an erroneous overpayment, the amount of which was shown by stating the taxpayer's true net income, the tax due thereon, and the amount previously paid. The claim asked repayment of the difference or any greater sum which might be found to be due. Upon the footing of this general claim, a complete audit of the taxpayer's books was made and an overpayment in excess of the amount claimed was determined. After notification of this fact, but before rejection, the taxpayer amended the claim by making it specific and setting forth the supporting facts in detail. The amendment was held effective.3

In United States v. Factors & Finance Co., 288 U.S. 89, additional assessments were made subsequent to payment of the amount shown to be due by the respondent's return. After paying part of the sum so assessed, the taxpayer filed a claim for abatement of the unpaid balance. In connection with that claim, the Commissioner ordered a full examination of the taxpayer's affairs, which was made. While this audit was in progress, the taxpayer filed a claim for refund, couched in general terms, stating that, as there had been no final audit of its return, the purpose of the claim was to save the taxpayer's

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rights under the statutes and permit the Commissioner to refund any excess paid beyond the amount found to be due. No statement of grounds for the claim was included. After the period of limitations had expired, an amended claim was filed setting forth the grounds in detail and asking special assessment under § 210 of the Revenue Act of 1917, 40 Stat. 307. In the interval between the filing of the first and the amended claim, the Commissioner had disposed of the claim for abatement, but not of the claim for refund. After the receipt of the amendment, the...

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