American Viscose Corporation v. Com'r of Int. Rev.

Decision Date23 March 1932
Docket NumberNo. 4579.,4579.
Citation56 F.2d 1033
PartiesAMERICAN VISCOSE CORPORATION v. COMMISSIONER OF INTERNAL REVENUE.
CourtU.S. Court of Appeals — Third Circuit

Robert T. McCracken and C. Russell Phillips, both of Philadelphia, Pa., and Lee I. Park and Charles D. Hamel, both of Washington, D. C., for petitioner.

G. A. Youngquist, Asst. Atty. Gen., and John H. McEvers and J. Louis Monarch, Sp. Assts. to Atty. Gen., for respondent.

Before BUFFINGTON, WOOLLEY, and DAVIS, Circuit Judges.

BUFFINGTON, Circuit Judge.

In 1926 the government refunded to the taxpayer $3,896,663.14 income and profit taxes illegally assessed and collected for the years 1917-1919. This sum, together with $1,409,856.46 interest, was paid to the taxpayer in 1926. Thereupon the question here involved arose, namely, whether interest paid by the United States in 1926, pursuant to section 1116 of the Revenue act of 1926 (26 USCA § 153 note) on money refunded as overpayments of federal income and profits taxes, is interest upon "obligations of the United States," and therefore exempt from tax under section 213 (b) (4) of said act, 26 USCA § 954 (b) (4), which provides: "The term `gross income' does not include the following items, which shall be exempt from taxation under this title: * * * (4) Interest upon (A) the obligations of a State, Territory, or any political subdivision thereof, or the District of Columbia; or (B) securities issued under the provisions of the Federal Farm Loan Act, or under the provisions of such Act as amended; or (C) the obligations of the United States or its possessions."

The simple question, therefore, is, Was this refund of illegal taxes an "obligation of the United States" and the interest paid thereon exempt from taxation? That the interest was income is apparent, and that it, as such, is taxable, is equally clear, unless the refund was one of the obligations of the United States Congress meant to exempt. The Tax Board, following the principle stated in Kansas City Southern Railway Co. et al. v. Commissioner, 16 B. T. A. 665, held this refund was not exempt by the act. We agree with that conclusion. The exemptions of Congress were evidently meant to aid in the flotation of government bonds and securities by making them tax free and, therefore, more attractive to investors. We see no reason why the construction of the statute should be so broadened as to cover a transaction which had no relation to the flotation of...

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17 cases
  • Nichols v. Comm'r of Corps. & Taxation
    • United States
    • United States State Supreme Judicial Court of Massachusetts Supreme Court
    • June 30, 1943
    ...27, 44 U.S.Sts. at Large 9, §§ 217(a)(1), 233(b), 26 U.S.C.A. Int.Rev.Acts, pages 170, 185. See, also, American Viscose Corp. v. Commissioner of Internal Revenue, 3 Cir., 56 F.2d 1033.Seaside Improvement Co. v. Commissioner of Internal Revenue, 2 Cir., 105 F.2d 990, 994, relied on by the ta......
  • City of Tucson, Ariz. v. C.I.R.
    • United States
    • U.S. Court of Appeals — District of Columbia Circuit
    • September 24, 1987
    ...404, 406 n. 5, 692 F.2d 128, 130 n. 5 (1982) (citing J. Chommie, Federal Income Taxation Sec. 36 (1973)); American Viscose Corp. v. Commissioner, 56 F.2d 1033, 1034 (3d Cir.), cert. denied, 287 U.S. 615, 53 S.Ct. 17, 77 L.Ed. 534 (1932); Drew v. United States, 551 F.2d 85, 87 (5th Cir.1977)......
  • Commissioner of Internal Revenue v. Wodehouse 10 13, 1948
    • United States
    • U.S. Supreme Court
    • June 13, 1949
    ...v. Macomber, 252 U.S. 189, 203, 40 S.Ct. 189 (191), 64 L.Ed. 521, 9 A.L.R. 1570.' Although Congress intended, as the court held in the Viscose case, supra (American Viscose Corp. v. Commissioner, 3 Cir., 56 F.2d 1033), to include interest on a tax refund made to a domestic corporation, we a......
  • Commissioner of Internal Revenue v. Kieselbach
    • United States
    • U.S. Court of Appeals — Third Circuit
    • April 7, 1942
    ...issue in the instant case, because the problem there was the scope of the exemption provision. Cf. American Viscose Corp. v. Commissioner of Internal Revenue, 3 Cir., 1932, 56 F.2d 1033. 6 Helvering v. Drier, 4 Cir., 1935, 79 F.2d 501; Commissioner of Internal Revenue v. Speyer, 2 Cir., 193......
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