GATENS INVESTMENT COMPANY v. COMMISSIONER OF INTERNAL REVENUE

• Citation: 36 BTA 309
• Decision Date: 13 July 1937
• Docket Number: Docket No. 78693.
• Parties: GATENS INVESTMENT COMPANY, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
• Court: U.S. Board of Tax Appeals

36 B.T.A. 309 (1937)

GATENS INVESTMENT COMPANY, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Docket No. 78693.

Board of Tax Appeals.

Promulgated July 13, 1937.

Robert T. Jacob, Esq., for the petitioner.

Clay C. Holmes, Esq., and F. R. Shearer, Esq., for the respondent.

OPINION.

DISNEY:

The petitioner, an Oregon corporation organized September 29, 1931, by deed dated September 28, 1931, which was recorded October 28, 1931, received certain real estate situate in Portland, Multnomah County, Oregon, in exchange for all of its capital stock, without any agreement with the grantor respecting payment of taxes assessed against the property prior to the exchange.

The petitioner kept its books and filed its returns on the cash basis. During 1932 the petitioner paid taxes to the County of Multnomah on the property in the amount of $2,061.01. In his determination of a deficiency of $383.66 in income tax against the petitioner for 1932, the respondent disallowed the tax payment as a deduction on the ground that the taxes represented a liability of the grantor. Whether the amount is deductible as a tax paid during 1932 is the only question in issue.

The statement attached to the deficiency notice sets forth that the amount was disallowed as tax levied for 1931. The petition alleges that the petitioner accepted the property subject to the payment of 1931 taxes. This allegation was denied by the respondent in his answer to the petition. Neither the testimony, which is limited to a showing that no agreement was entered into between the grantor and the grantee respecting payment of taxes assessed against the property prior to the exchange, nor the stipulation of facts, establishes the year for which the taxes were paid, but on brief the respondent states that the question involves a deduction for 1931 taxes, and the petitioner acquiesces. In view of this assumption, though this material fact is not established by the record, we will decide the issue on its merits.

The Revenue Act of 1932 allows as a deduction from gross income, with certain exceptions of no importance here, "Taxes paid or accrued within the taxable year." Sec. 23 (c). The respondent contends that the taxes were a charge against the property prior to its acquisition by the petitioner and represent an additional cost of the asset.

The statutes of Oregon provide that the assessor shall require all persons subject to taxation in his county to furnish him with a list of the taxpayer's taxable property and the cash value thereof. The assessor makes a return to the county clerk on an assessment roll of all property owned by taxpayers as of 1 a. m., March 1, and gives notice of the setting on the last Monday of August of the board of equalization to examine and correct the assessment roll. The roll contains, among other things, the names of all taxable persons and a description of the property assessed against them. The assessment is against the person, and not specifically against the property. The state tax commission meets on the third Monday in October to equalize assessments of the several counties of the state. The county court meets during its December term to estimate the amount of money to be raised by taxation and to levy taxes. The estimate and levy are made at the same term of court. Oregon Railway & Navigation Co. v. Umatilla County, 47 Or. 198; 81 Pac. 352. Within 15 days after the apportionment and levy of taxes by the county court of Multnomah County, the county clerk delivers a copy of the assessment roll to the tax collector, with a warrant commanding him to collect the taxes. The taxes levied are payable in equal installments on or before the 5th day of May and November next following. Taxes are a lien upon the property assessed from and including March 1 of the year in which the levy is made, "but as between the grantor and the grantee the procedure in regard to the lien shall be as set forth in sec. 69-710, Oregon Code." Oregon Code Annotated, secs. 69-240; 27-2016; 69-428; 69-601; 69-602; 27-2017; 69-720; 69-722.

The laws of Oregon fix March 1 of each year as "tax day." City of Portland v. Multnomah County, 135 Or. 469; 296 Pac. 48. Tax assessed on the basis of ownership at that time is an encumbrance against the property from March 1, even though the amount of the tax has not been determined. Logan v. Luukinen, 113 Or. 52; 231 Pac. 184. In Crown Willamette Paper Co., 14 B. T. A. 133, we held that taxes of Oregon accrue during the year in which they are assessed.

The tax incidence is first upon the person who is owner on March 1, and his personal and primary liability can not be avoided by conveying the property after that date. In Covey v. Hurlburt, 207 Pac. 166, we find a positive statement from the Supreme Court of Oregon on this question. Section 4268, Oregon Laws, there being considered, is the general statute outlining and...