Heyward v. South Carolina Tax Commission, 17920

CourtUnited States State Supreme Court of South Carolina
Citation240 S.C. 347,126 S.E.2d 15
Docket NumberNo. 17920,17920
PartiesRoger M. HEYWARD as Executor for the Estate of Nathalie H. Miller, Appellant, v. SOUTH CAROLINA TAX COMMISSION, Respondent.
Decision Date05 June 1962

Page 15

126 S.E.2d 15
240 S.C. 347
Roger M. HEYWARD as Executor for the Estate of Nathalie H.
Miller, Appellant,
No. 17920.
Supreme Court of South Carolina.
June 5, 1962.

Page 16

[240 S.C. 348] N. Heyward Clarkson, Jr., Harry M. Lightsey, Jr., Columbia, for appellant.

Daniel R. McLeod, Atty. Gen., James M. Windham, Asst. Atty. Gen., Columbia, for respondent.

[240 S.C. 349] MOSS, Justice.

Roger M. Heyward, As Executor of the Estate of Nathalie H. Miller, the appellant herein, brought this action against the South Carolina Tax Commission, the respondent herein, under Sections 65-2661 et seq., as amended, Code of 1952, to recover income taxes with interest thereon, which the appellant paid under protest. The case was heard in the Court below upon the pleadings and an agreed stipulation of the facts. This appeal is prosecuted from an order awarding judgment in favor of the respondent.

Mrs. Nathalie H. Miller owned certain stock which had a cost to her for tax purposes of $1,000.00, and she sold such stock in the year 1956 for the sum of $40,000.00, resulting in a gain or profit to her of $39,000.00. The stock was sold on an installment basis, payable $10,000.00 in cash on the date of the sale, and the remaining $30,000.00 was payable in four annual installments of $7,500.00 each. The deferred installments were evidenced by a note of the purchaser. Mrs. Miller collected the down payment of $10,000.00 in 1956 and paid the income taxes thereon, electing to return the gain from the sale on an installment basis. This method of treating the gain or profit

Page 17

was accepted and approved by the respondent in accordance with its custom and rulings. In 1957 Mrs. Miller collected the first annual installment payment of $7,500.00 and, thereafter, died testate on September 18, 1957, and by the terms of her will she appointed Roger M. Heyward as executor thereof. He filed a 1957 income tax return and included the profit portion of the $7,500.00 installment collected in that year as taxable income. The appellant collected the annual installments for the years 1958 and 1959 when due and filed like returns for those years. On May 9, 1960, the respondent assessed [240 S.C. 350] additional income taxes, including interest, against the estate of Mrs. Miller of $1,210.66, on the ground that the profit portion of all installments due after her death should be included as income for the year 1957 because of the death of Mrs. Miller in that year. The amount of additional assessed income taxes and interest was paid by the appellant under protest and this action instituted to recover the same.

Section 65-221 of the Code imposes an income tax upon every individual which shall be levied, collected and paid annually with respect to the entire net income of the taxpayer, and this includes income earned from the sale of property within this State. Section 65-251 of the Code provides:

'The words 'gross income' mean the income of a taxpayer derived from * * * sales or dealings in property, whether real or personal, growing out of the ownership or use of or interest in such property, * * * and income derived from any source whatsoever. The amount of all such items shall be included in the gross income of the income year in which received by the taxpayer unless, under the methods of accounting permitted under this chapter, any such amounts are to be properly accounted for as of a different period.'

Section 65-202(11) of the Code provides:

'The word 'received' for the purpose of the computation of net income under this chapter means 'received or accrued' and the words 'received and accrued' shall be construed according to the method of accounting upon the basis of which the net income is computed under this chapter.'

Section 65-281 of the Code has to do with the method of accounting and provides as follows:

'The net income of a taxpayer shall be computed in accordance with the method of accounting regularly employed in keeping the books of such taxpayer. But if such method does not clearly reflect the income, the computation shall be made in accordance with such method as in the opinion of the Commission does clearly reflect the income.'

[240 S.C. 351] The appellant asserts that the respondent is estopped from requiring the inclusion of all profit in the unmatured installments as income in the year of such taxpayer's death because of acquiescence in and approval of the taxpayer's election of the installment method of reporting profit on the sale of the stock in question. We do not think that this record shows any sound basis for an estoppel. This Court has refused to recognize the merits of a similar contention in several cases. We have held that the State may be subject to the doctrine of estoppel in its contractual relations. Byars v. Cherokee County, 237 S.C. 548, 118 S.E.2d 324. However, the doctrine of estoppel will not be applied to deprive the government of the due exercise of its police power, or to effect public revenues or property rights, or to frustrate the purpose of its laws or thwart its public policy. Powell v. Board of Commissioners of Police Insurance & Annuity Fund, 210 S.C. 136, 41 S.E.2d 780, 1 A.L.R.2d 330.


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