Moran v. Commissioner of Internal Revenue, 2810.

• Decision Date: 10 November 1933
• Docket Number: No. 2810.,2810.
• Citation: 67 F.2d 601
• Parties: MORAN v. COMMISSIONER OF INTERNAL REVENUE.
• Court: U.S. Court of Appeals — First Circuit

67 F.2d 601 (1933)

MORAN v. COMMISSIONER OF INTERNAL REVENUE.

No. 2810.

Circuit Court of Appeals, First Circuit.

November 10, 1933.

James F. Armstrong, of Providence, R. I. (Harold A. Andrews and Hinckley, Allen, Tillinghast, Phillips & Wheeler, all of Providence, R. I., on the brief), for petitioner.

Francis H. Horan, Sp. Asst. to Atty. Gen. (Pat Malloy, Asst. Atty. Gen., and J. Louis Monarch, Sp. Asst. to Atty. Gen., on the brief), for the Commissioner.

Before WILSON and MORTON, Circuit Judges, and HALE, District Judge.

MORTON, Circuit Judge.

This is a petition on behalf of the taxpayer to review a decision by the Board of Tax Appeals (26 B. T. A. 1154), involving income taxes for the year 1928. The taxpayer, Thomas J. Moran, died in 1930, and the petition is prosecuted by his executrix.

There is no dispute as to the facts. The items in controversy consist of interest on certain certificates of deposit held by Mr. Moran. From time to time he deposited substantial amounts of money in two trust companies in Providence, R. I., and took therefor certificates of deposit. The earliest of these deposits appears to have been made in January, 1915, and the latest in March, 1928. The certificates bore interest, the rate of which might be varied on notice to the holder. No interest was credited on the companies' books to any particular certificate or person, until the certificate was presented, when the interest on it was figured and paid. Such payments were charged to a general interest-due account on the books of the trust companies.

For a number of years before 1928 Mr. Moran did not present some of his certificates and collected no interest on them. In March, 1928, he presented all of them and collected back and current interest on them amounting to about $24,000. As much of this interest as was earned in 1928 he returned as income for that year. He did not return the amount received as interest for prior years; nor had he reported such interest in the years in which it accrued. Neither party contends that Moran acted fraudulently; and there is no such finding by the Board of Tax Appeals. The Commissioner included all the interest received in 1928 as income for that year; and the Board of Tax Appeals affirmed his action.

It is argued for the executrix that the interest was "constructively received" by Mr. Moran in the years in which it accrued, and should therefore be taxed in those years, and not as a lump sum in 1928. For the earlier years the tax is outlawed, and as to them the contention is that the tax has been lost. The Commissioner urges (1) that Moran, having elected to treat the interest as not received until actually collected, and having acted on that election in making his tax returns for the prior years in which the interest accrued, cannot now be heard to say that the interest should have been returned and taxed in the years in which it became payable, and that Moran's estate stands in no better position, and (2) that the interest in question was not received by Moran until he collected it.

In our opinion, the Commissioner's first contention must be sustained. Assuming — as we are bound to assume on the record before us — that Moran acted honestly, his conduct, in not including the interest as it accrued in his early returns, evidenced an election on his part to treat it...