Allen v. Atlanta Stove Works

• Decision Date: 28 October 1943
• Docket Number: No. 10595.,10595.
• Citation: 138 F.2d 452
• Parties: ALLEN, Collector of Internal Revenue, v. ATLANTA STOVE WORKS, Inc.
• Court: U.S. Court of Appeals — Fifth Circuit

138 F.2d 452 (1943)

ALLEN, Collector of Internal Revenue, v. ATLANTA STOVE WORKS, Inc.

No. 10595.

Circuit Court of Appeals, Fifth Circuit.

October 28, 1943.

Joseph M. Jones and Sewall Key, Sp. Assts. to the Atty. Gen., Samuel O. Clark, Jr., Asst. Atty. Gen., and T. Hoyt Davis, U. S. Atty., of Macon, Ga., for appellant.

Bertram S. Boley and E. D. Smith, Jr., both of Atlanta, Ga., for appellee.

Before SIBLEY, HOLMES, and WALLER, Circuit Judges.

SIBLEY, Circuit Judge.

Atlanta Stove Works paid additional income taxes demanded of it, sought a refund of $715.35 and interest as illegally exacted, which was refused, and prosecuted a suit against the Collector, which was successful. The Collector appeals.

The undisputed facts are that the taxpayer prior to 1935 made returns on an accrual basis and for a fiscal year ending March 31. By permission of the Commissioner a shift was made in 1935 to a calendar year basis, resulting in a short term return, still on an accrual basis, for the period April 1 to Dec. 31, 1935. Theretofore state, county and municipal ad valorem taxes had been taken as a deduction as of the date of their actual payment in the latter part of the year preceding the return. Those so paid in 1935 were deducted in the short term return. The deduction was wholly disallowed by the Commissioner on the ground that the taxes accrued in January, 1935, before the short term period began. The resulting additional assessment was paid, but the refund sought was only for nine-twelfths of the taxes, since only nine months were included in the short term. This prorated amount was sued for and recovered.

The appellant Collector admits that the judgment is in accordance with the decision of this Court in Citizens Hotel Co. v. Commissioner, 5 Cir., 127 F.2d 229, but contends that Magruder v. Supplee, 316 U.S. 394, 62 S.Ct. 1162, 86 L.Ed. 1555, states the law otherwise, and that these taxes, which become liens and personal charges against the taxpayer on January 1, (state and county), and January 31, (municipal), accrued on those dates, and cannot be apportioned. The taxpayer contends that the Magruder case is not in point at all, but leaves the Citizens Hotel Company case intact, as was held in the Third Circuit in Commissioner v. Schock, Gusmer & Co., 3 Cir., 137 F.2d 750.

The Magruder case did not deal at all with the question here involved. The question there was whether a purchaser of property during the year, after the taxes had become a personal debt against the vendor and a lien on the property, who paid a proportion of the taxes according to the purchase agreement, could deduct what he paid as "taxes paid" by him. Applying the Treasury Regulation which declares "In general taxes are deductible only by the person upon whom they are imposed", the Court held the purchaser had paid no taxes of his own, but those of the vendor, which as to the purchaser were part of the agreed purchase price. The present case has nothing to do with a purchase. The taxes under Georgia law are the personal debt of this owner of property on January 1 and January 31, secured by a general lien on all its property. The taxpayer certainly paid...