Stuart v. United States

• Decision Date: 05 April 1955
• Docket Number: No. 214-54.,214-54.
• Citation: 131 Ct. Cl. 174,130 F. Supp. 386
• Parties: E. H. STUART v. The UNITED STATES.
• Court: U.S. Claims Court

130 F. Supp. 386

131 Ct. Cl. 174

E. H. STUART v. The UNITED STATES.

No. 214-54.

United States Court of Claims.

April 5, 1955.

Numa L. Smith, Jr., Washington, D. C., for plaintiff. Musick, Peeler & Garrett and Miller & Chevalier, Los Angeles, Cal., were on the brief.

John A. Rees, Washington, D. C., with whom was H. Brian Holland, Asst. Atty. Gen., for defendant. Andrew D. Sharpe and Ellis N. Slack, Washington, D. C., were on the brief.

Before JONES, Chief Judge, and LITTLETON, WHITAKER, MADDEN and LARAMORE, Judges.

LITTLETON, Judge.

This is an action for the recovery of additional income taxes assessed by the defendant and paid by the plaintiff on his Federal income tax return for the calendar year 1944, in the amount of $25,180.46, together with interest collected thereon in the amount of $2,791.07, together with interest.

The case is before the court on the defendant's motion for a summary judgment dismissing the plaintiff's petition upon the ground that the allegations of facts in the petition fail to set forth any cause of action within the jurisdiction of the court because plaintiff's claim for refund was neither filed within three years after the return was filed nor within two years from the date of payment of the amount to which it relates.

Defendant contends that no suit can be maintained in this court upon a disallowed claim, which claim was filed after the statutory period of time had elapsed, unless it properly may be said that the formal claim which was not timely filed, constitutes an amendment of some prior claim that was filed during the period of time allowed by law. Plaintiff contends that the document referred to below, which was filed with the defendant on July 19, 1946, was a timely filed informal claim for refund which was perfected by his formal claim for refund of taxes paid.

Plaintiff on his 1944 income tax return claimed a deduction of $37,343.75 on account of amortizable bond premiums. Defendant, in accordance with its practice at that time, disallowed the entire $37,343.75 deduction. This disallowance resulted in a proposed income tax deficiency of $34,534.40 for 1944. In the same audit, the defendant examined plaintiff's return for 1945, during which year the bonds were sold, and proposed an adjustment of the capital gain thereon, reflecting an overassessment of $9,335.94 for 1945. On July 18, 1946, defendant requested plaintiff to execute and file Treasury Form 870, "Waiver of Restrictions on Assessment and Collection of Deficiency in Tax" in the amount of $34,534.40 for 1944, and Treasury Form 873, "Acceptance of proposed Overassessment" of $9,335.94 for 1945. Plaintiff, upon the advice of counsel, refused to execute either of the forms but did execute a typewritten document entitled "Waiver of Restriction on Assessment and Collection of Deficiency in Tax," as follows:

"Pursuant to the provisions of Section 272(d) of the Internal Revenue Code 26 U.S.C.A. § 272(d), and/or corresponding provisions of prior Internal Revenue laws, the restrictions provided in Section 272 (a) of the Internal Revenue Code; and/or the corresponding provisions of prior Internal Revenue laws, are hereby waived and consent is given to the assessment and collection of a deficiency in income tax for the taxable year ended December 31, 1944, in the sum of $34,534.40, together with interest as provided by law.

"This waiver and consent is given on the condition that there be credited upon said deficiency the sum of $9,335.94 as an overpayment of income tax by the taxpayer for the taxable year ended December 31, 1945, together with interest as provided by law, it being the intention of the taxpayer to consent to the collection of only the difference between said deficiency, together with interest, if any, and the amount of said overpayment, together with interest.

"This waiver and consent is given subject to the following further conditions:

"(1) that the same shall not prejudice any amortizable bond premium claimed by taxpayer for the taxable year ended December 31, 1944, or any election to claim any such deduction;

"(2) that the same shall not be construed as a final closing agreement under Section 3760 of the Internal Revenue Code 26 U.S.C.A. § 3760, or as barring any future claim for refund."

Plaintiff, on July 19, 1946, delivered the typed document referred to above and his check for $25,198.46 representing the excess deficiency — $34,534.40 for 1944 over the overassessment, $9,335.94 for 1945, and his check for $2,791.07 covering the interest due on the deficiency. At the time of the determination of the deficiency and at the time of the execution by plaintiff of the above-quoted document, the question which gave rise to the deficiency of $34,534.40 for 1944, through the disallowance of the deduction claimed by plaintiff for amortization of bond premiums, was in litigation.

After the United States Court of Appeals for the Second Circuit upheld the deductibility of the amortization of bond premiums on this type of bond in the case of Commissioner of Internal Revenue v. Korell, 2 Cir., 176 F.2d 152, on June 8, 1949 (rehearing denied July 14), plaintiff filed with the Collector of Internal Revenue a formal claim for refund on Treasury Form 843, perfecting his reservation and informal claim of July 19, 1946, for the refund of $27,971.53, representing taxes and interest overpaid for 1944, together with interest, less the sum of $18 refunded to plaintiff by defendant. This formal claim was filed on June 19, 1949. In the formal claim plaintiff specifically referred to his informal claim for refund filed on July 19, 1946, and amended it by setting forth the facts on which he had originally claimed the deduction in his 1944 return, which facts were, for all practical purposes, a part of his informal claim of July 19, 1946, and legal arguments relative to the deductibility of the amortizable bond premium.

The Commissioner of Internal Revenue refused to refund the overpayment and denied the claim for refund (Form 843), on the ground that it was filed after the expiration of the statute of limitations.

The defendant admits the overpayment and the only question to be decided is whether the formal claim for refund filed by the plaintiff on June 19, 1949, can be held to have been a perfection of an informal claim filed with the collector on July 19, 1946.

Section 322(b) (1) of the Internal Revenue Code, 26 U.S.C. § 322(b) (1) (1952), provides as follows:

"Unless a claim for credit or refund is filed by the taxpayer within three years from the time the return was filed by the taxpayer or within two years from the time the tax was paid, no credit or refund shall be

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