McConkey v. Commissioner of Internal Revenue

• Decision Date: 10 November 1952
• Docket Number: No. 6462.,6462.
• Citation: 199 F.2d 892
• Parties: McCONKEY et ux. v. COMMISSIONER OF INTERNAL REVENUE.
• Court: U.S. Court of Appeals — Fourth Circuit

199 F.2d 892 (1952)

McCONKEY et ux. v. COMMISSIONER OF INTERNAL REVENUE.

No. 6462.

United States Court of Appeals Fourth Circuit.

Argued October 15, 1952.

Decided November 10, 1952.

Robert Ash, Washington, D. C., for petitioners.

George F. Lynch, Sp. Asst. to Atty. Gen. (Charles S. Lyon, Acting Asst. Atty. Gen., Ellis N. Slack, A. F. Prescott and Fred E. Youngman, Sp. Assts. to Atty. Gen., on brief), for respondent.

Before PARKER, Chief Judge, and SOPER and DOBIE, Circuit Judges.

DOBIE, Circuit Judge.

This appeal involves the federal income tax liability of James G. McConkey and his wife, Claudine W. McConkey, for the taxable year ended December 31, 1947. The case is brought to this court by a petition for review filed by the taxpayers. The jurisdiction of this Court is invoked under Section 1141(a) of the Internal Revenue Code, as amended by Section 36 of the Act of June 25, 1948, 26 U.S.C.A. § 1141(a).

After a revenue agent had tentatively proposed a deficiency in tax against the petitioners for 1947, the petitioners paid the Collector of Internal Revenue the amount of the tentative deficiency. The payments were accepted by the Collector as "Payments in Suspense." Subsequent to the payments mentioned, the Collector sent petitioners a "notice of deficiency" which determined the deficiency in tax as found by the revenue agent and advised petitioners of their right to appeal to the Tax Court. Taxpayers appealed to the Tax Court. No assessment of the tax had been made prior to the time the money was paid to the Collector, the notice of deficiency issued and the appeal taken to the Tax Court. The Commissioner moved to dismiss the appeal on the ground that the tax had been paid and, as there was no deficiency in tax, the Tax Court was without jurisdiction. The Tax Court granted the motion to dismiss and it is this decision of the Tax Court that we are asked to review.

The question before us is whether the Tax Court had jurisdiction to review the action of the Commissioner of Internal Revenue in purporting to assert a deficiency in income tax charges against taxpayers where the amount proposed as a deficiency had in fact been paid to the Collector of Internal Revenue, with interest, prior to the date on which the Commissioner's statutory notice was mailed. We think this question must be answered in the negative and that the Tax Court properly granted the motion to dismiss for lack of jurisdiction.

It is the position of the taxpayers that, for the jurisdiction of the Tax Court, it is quite immaterial that, prior to a determination of deficiency by the Commissioner, the tax in question has already been paid. The Commissioner contends that since there was no deficiency when the Commissioner issued his determination and notice, the Tax Court is without jurisdiction to review the liability of taxpayers for 1947.

So far as this case is concerned, a "deficiency" within the meaning of Section 271 (a), 26 U.S.C.A. § 271(a), would be the excess of the correct tax due, as determined by the Commissioner, over the amount shown on the return plus any amounts previously assessed or collected without assessment. Under the facts of this case taxpayers had paid the $11,277.46 later found by the Commissioner to be due for 1947, and when the Commissioner mailed his deficiency notice there was no excess over the amount shown on their return plus the amount previously collected without assessment. There was thus no "deficiency" upon which the jurisdiction of the Tax Court could operate. Compare Standard Portland Cement Co. v. Commissioner of Internal Revenue, 3 Cir., 80 F.2d 585, 587.

Section 272 of the Internal Revenue Code, 26 U.S.C.A. § 272, provides:

"If in the case of any taxpayer, the Commissioner determines that there is a deficiency in respect of the tax imposed by this chapter, the Commissioner is authorized to send notice of such deficiency to the taxpayer by registered mail. Within ninety days after such notice is mailed (not counting Saturday, Sunday, or a legal holiday in the District of Columbia as the ninetieth day) the taxpayer may file a petition with The Tax Court of the United States for a redetermination of the deficiency. * * *"

Taxpayers here rely heavily upon the cases of H. Milgrim & Bros., Inc. v. Commissioner, 24 B.T.A. 853 and O'Meara v. Commissioner, 11 B.T.A. 101. The Commissioner contends that those two cases have no application to the facts of our case, and insists that the case most nearly in point here, which should be controlling, is Anderson v. Commissioner, 11 T.C. 841. Taxpayers, without denying its applicability, attack the soundness of the Anderson decision. Some discussion of these three cases is, thus, clearly in order.

In the O'Meara case, a consolidated return had been filed by two corporations and the tax shown thereon was paid by check of the parent corporation, although the subsidiary had contributed the portion of tax allocated to it on the consolidated return. The Commissioner later determined that separate returns should have been filed and asserted deficiencies on that basis. In his notices of deficiency he gave credit to the parent corporation for the amount assessed on the consolidated return, thus showing the full separate tax liability on a deficiency, although the amount...