Chestnut Securities Co. v. United States, 46235.
| Decision Date | 01 October 1945 |
| Docket Number | No. 46235.,46235. |
| Citation | 62 F. Supp. 574 |
| Parties | CHESTNUT SECURITIES CO. v. UNITED STATES. |
| Court | U.S. Claims Court |
Maxwell M. Mahany, of Tulsa, Okl., for plaintiff.
John A. Rees, of Washington, D. C., and Samuel O. Clark, Jr., Asst. Atty. Gen. (Robert N. Anderson and Fred K. Dyar, both of Washington, D. C., on the brief), for defendant.
Before WHALEY, Chief Justice, and LITTLETON, WHITAKER, JONES, and MADDEN, Judges.
The plaintiff, a Delaware corporation, reported and paid its federal income tax on the accrual basis. In the year 1940 it paid to the State of Oklahoma $5,575.19, with interest thereon, for state income taxes for the years 1936, 1937, and 1938, on the income of certain intangible personal property. The reason the plaintiff had not paid those taxes to the state in the years 1936, 1937, and 1938 was that it thought, because of a decision of the Supreme Court of Oklahoma, that the intangible personal property referred to did not have a taxable situs in Oklahoma and that therefore neither it nor its income could be taxed by that state.
In 1940, however, the state proposed to assess the tax for the years 1936, 1937, and 1938. The plaintiff protested, a hearing was had before the State Tax Commission which held that the tax was owed, and the plaintiff paid the tax, with interest, giving statutory notice of its intention to sue to get it back. Under the Oklahoma law the state held taxes so paid in a separate fund until the litigation was decided. The plaintiff sued in the United States District Court and lost, in the year 1940. The Circuit Court of Appeals affirmed and the Supreme Court of the United States denied certiorari in 1942.
In 1941 when the plaintiff filed its federal income tax return for the year 1940, it took deductions for taxes paid and interest paid to the State of Oklahoma in 1940 as recited above. The Commissioner of Internal Revenue disallowed the deductions and required the plaintiff to pay its taxes without the benefit of the deductions, which the plaintiff did, and filed a timely claim for refund. It sues here to recover $1,013.33, the amount which the disallowance of the deductions added to its income tax for 1940.
The Government concedes that under Section 23 of the Internal Revenue Code, 26 U.S.C.A. Int.Rev.Code, § 23, the plaintiff would have been entitled to the deductions claimed, if it had been making its returns on a cash basis. But the Government urges, since the plaintiff's accounts were kept and its tax returns made on the accrual basis, it could not take its deduction for the taxes and interest paid to the State of Oklahoma until the year 1942, when its suit...
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