Reo Motors v. Commissioner of Internal Revenue

• Decision Date: 23 February 1955
• Docket Number: No. 11300.,11300.
• Citation: 219 F.2d 610
• Parties: REO MOTORS, Inc., Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
• Court: U.S. Court of Appeals — Sixth Circuit

219 F.2d 610 (1955)

REO MOTORS, Inc., Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.

No. 11300.

United States Court of Appeals, Sixth Circuit.

February 23, 1955.

Lee I. Park, K. Martin Worthy, Arthur Peter, Hamel, Park & Saunders, Washington, D.C., for petitioner.

H. Brian Holland, Asst. Atty. Gen., Ellis N. Slack, Melva M. Graney, Special Assts. Atty. Gen., for respondent.

Before ALLEN, MILLER and STEWART, Circuit Judges.

STEWART, Circuit Judge.

In the Tax Court petitioner sought a redetermination of a claimed deficiency in its excess profits tax for 1942. The sole question in issue was whether a capital loss sustained in 1941 could be carried over to 1942 and deducted from gross income for that year as an ordinary operating loss. It was stipulated by the parties in the Tax Court that the Commissioner's computation of petitioner's excess profits net income and excess profits credit, based on invested capital, were correct when computed without the claimed net operating loss deduction or net operating loss deduction adjustment.

The Tax Court decided against the petitioner and entered its decision determining a deficiency in the petitioner's excess profits tax for 1942 in the amount originally determined by the Commissioner. The Tax Court's decision was affirmed by this court, 170 F.2d 1001, and by the Supreme Court. 338 U.S. 442, 70 S.Ct. 283, 94 L.Ed. 245. The mandate of the Supreme Court issued on February 14, 1950, and the Tax Court's decision accordingly became "final" thirty days thereafter. Section 1140(b) (3) Internal Revenue Code for 1939, 26 U.S. C.A. § 1140(b) (3).

Thereafter, on May 12, 1950, petitioner filed in the Tax Court its "Motion for Leave to File Motion to Withdraw and Reform Stipulation, for Further Hearing and Reconsideration, and to Revise Decision" and an accompanying "Motion to Withdraw and Reform Stipulation, for Further Hearing and Reconsideration, and to Revise Decision." In the substantive motion the petitioner alleged that, because of a mutual mistake of fact, an error had been made in the stipulation of its excess profits credit resulting from the omission from its invested capital of more than two million dollars paid in for stock; that if the correct excess profits credit had been used there would have been no deficiency in petitioner's excess profits tax for 1942; that the Commissioner had admitted this error in connection with another proceeding involving petitioner's excess profits tax liability for 1943; that in 1949 the petitioner had sought relief from its excess profits tax for the year 1942 under § 722 of the Internal Revenue Code of 1939, 26 U.S. C.A. § 722, in response to which the Commissioner had contended that no § 722 relief could be given because the allowance of the petitioner's proper credits would result in no excess profits tax liability for the year 1942, making inapplicable the relief provisions of § 722.¹

In view of the circumstances, the motion stated, "The revision of the decision of this Court in this cause appears to be the only way to correct an obvious mutual mistake and to avoid a gross injustice to petitioner. For these reasons the petitioner urgently prays this Court to permit petitioner to withdraw and reform its stipulation, to withdraw its agreement to, and file a substitute recomputation of, excess profits tax liability under Rule 50 26 U.S.C.A. § 1111 and further prays the Court to reconsider the case, to grant further hearing if necessary and to revise its decision to the end that the tax may be correctly determined and a gross injustice avoided."

The motion for leave to file was summarily denied by the Tax Court, and the petitioner has sought review here of the order of denial. The Tax Court gave no reason for its denial, but it is assumed by both parties on this review that the ground for the denial of leave to file was the supposed lack of jurisdiction of the Tax Court to entertain the substantive motion, and we make the same assumption. The petitioner contends that, although the Tax Court's decision had become final before leave to file the motion for reconsideration was sought, the Tax Court should have granted leave to file the motion as one in the nature of a writ of error coram nobis. The petitioner points out that because of a lack of continuity of its officers and accounting personnel through receivership and reorganization, the management was not aware that its books did not reflect its true historical invested capital, and that the use of the correct excess profits credits would have entirely eliminated petitioner's excess profits tax liability...