Glover v. Commissioner of Internal Revenue
| Decision Date | 23 April 1958 |
| Docket Number | No. 15877.,15877. |
| Citation | 253 F.2d 735 |
| Parties | Burl P. GLOVER, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. |
| Court | U.S. Court of Appeals — Eighth Circuit |
W. S. Miller, Jr., Little Rock, Ark. (E. Chas. Eichenbaum, Leonard L. Scott and Eichenbaum, Scott & Miller, Little Rock, Ark., were with him on the brief), for petitioner.
Joseph F. Goetten, Atty., Dept. of Justice, Washington, D. C. (Charles K. Rice, Asst. Atty. Gen., Lee A. Jackson, Robert N. Anderson and Carolyn R. Just, Attys., Dept. of Justice, Washington, D. C., on the brief), for respondent.
Before GARDNER, Chief Judge, and JOHNSEN and VAN OOSTERHOUT, Circuit Judges.
This matter is before us on taxpayer's petition to review an adverse decision of the Tax Court. The taxes involved are those allegedly accruing in the taxable years 1949, 1950 and 1951. During the period here involved taxpayer was engaged in the business of selling motor vehicles and was operating under the trade name of Glover Motors. In the course of his business he sold cars on credit receiving notes of purchasers representing the balance due on the purchase price. These notes he sold and transferred to a finance company known in the record as the Universal C. I. T. Credit Corporation. The sales of these notes to the finance company were made pursuant to a written contract prepared by the finance company. Certain classes of these notes were transferred without recourse while others were transferred with full recourse. On transfer and delivery of the notes the taxpayer received 97% of the face value of the notes and the finance company withheld 3% and this transaction was evidenced on the books of the finance company by an entry of this 3% withheld in an account called the dealer's reserve account. A similar entry was reflected in the books of the taxpayer. The contract between the parties with reference to this dealer's reserve account provided that three times in each twelve months period the finance company would, if the dealer were not then indebted to it, pay to the dealer the accumulated reserves in excess of 3% of the then aggregate unpaid balances on notes purchased from the dealer, but that if the finance company should stop buying notes from the dealer it might hold and apply all reserves until liquidation of all paper was completed.
At the end of the taxable year 1949 there was withheld by the finance company the sum of $3,885.71 in the dealer's reserve account, at the end of the taxable year 1950 there was withheld by the finance company the sum of $7,601.07, and at the end of the taxable year 1951 there was withheld by the finance company the sum of $7,952.41 in the dealer's reserve account. These reserves withheld by the finance company represented 3% of customers' notes outstanding at the close of each respective taxable year. These amounts had not been received by taxpayer during the taxable year and were not reported by him as part of his income for the respective years, but taxpayer reported all sums paid to him from the reserve account during each year. The Commissioner, however, determined a deficiency in taxpayer's income taxes for the respective years by including these funds withheld by the finance company as a part of taxpayer's income. The single issue presented by this appeal is whether the funds withheld in the dealer's reserve account at the end of each respective taxable year were taxable income to taxpayer in the respective year in which they were withheld by the finance company in the dealer's reserve account.
Taxpayer kept his books on the accrual basis and filed his income tax returns on the accrual basis for all years involved. He contended before the Tax Court, and he renews the contention here, that these funds withheld by the finance company were not taxable because he had neither possession nor control of, nor right to receive the 3% withheld during the taxable year. The question here involved can no longer be considered as one of first impression. As said by the Supreme Court in Spring City Foundry Co. v. Commissioner, 292 U.S. 182, 54 S.Ct. 644, 645, 78 L.Ed. 1200:
In the instant case there was never a time in the taxable years at which the taxpayer had a right to demand or receive payment of the funds...
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