42 F.2d 177 (2nd Cir. 1930), 286, Phillips v. Commissioner of Internal Revenue

Docket Nº:286.
Citation:42 F.2d 177
Case Date:June 09, 1930
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit

Page 177

42 F.2d 177 (2nd Cir. 1930)




No. 286.

United States Court of Appeals, Second Circuit.

June 9, 1930

Page 178

The findings of fact and opinion of the Board appear in 15 B.T.A. 1218. The facts were stipulated. In September, 1919, Coombe Garment Company, a Pennsylvania corporation, was dissolved, and all its property was distributed among its eleven stockholders in proportion to their respective holdings. Prior thereto the corporation had filed its returns and paid the taxes therein indicated for the calendar years 1918 and 1919. Subsequently a deficiency tax for each of said years was assessed against the corporation, and on June 16, 1926, the Commissioner notified I. L. Phillips, a former stockholder, that he proposed to assess against him as a 'transferee' the entire amount of said deficiency taxes, pursuant to the provisions of section 280 of Revenue Act of 1926 (44 Stat. 61, 26 USCA § 1069). Said Phillips had received as liquidating dividends more than the amount of said taxes. No proceeding was initiated by the Commissioner to assess or collect from any other stockholder. The executors of the estate of I. L. Phillips, deceased, petitioned the Board of Tax Appeals for a redetermination, but the Board confirmed the Commissioner's action.

Page 179

Herman Goldman, of New York City (Milton J. Levitt and Arthur Rothstein, both of New York City, of counsel), for appellants.

G. A. Youngquist, Asst. Atty. Gen., Sewall Key and John Vaughan Groner, Sp. Assts. to Atty. Gen. (C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, and Allin H. Pierce, Sp. Atty., Bureau of Internal Revenue, both of Washington, D.C., of counsel), for respondents.

Before MANTON, SWAN, and AUGUSTUS N. HAND, Circuit Judges.

SWAN, Circuit Judge (after stating the facts as above).

The appellants first challenge the constitutionality of section 280 of the Revenue Act of 1926 (26 USCA § 1069), and secondly assert that, even if it be constitutional, their liability is only for a pro rata share of the corporation's unpaid taxes.

Before passing to a consideration of these primary contentions, it is necessary to dispose of a jurisdictional question, although not urged by the appellee. That question is whether a 'transferee' is given the same right of judicial review of the Board's decision as is a 'taxpayer.' The statute provides for review by the court upon petition filed by 'either the Commissioner or the taxpayer' (26 USCA § 1224); and it may be argued that by the language of section 280 (26 USCA § 1069) Congress has differentiated between taxpayers and transferees by referring to the liability of the latter as 'the liability, at law or in equity, of a transferee of property of a taxpayer, in respect of the tax * * * imposed upon the taxpayer. ' But section 280 directs that the liability of the transferee shall be 'assessed, collected and paid in...

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