United States v. Greenfield Tap & Die Corporation

• Decision Date: 30 July 1928
• Docket Number: No. 2917.,2917.
• Citation: 27 F.2d 933
• Parties: UNITED STATES v. GREENFIELD TAP & DIE CORPORATION.
• Court: U.S. District Court — District of Massachusetts

27 F.2d 933 (1928)

UNITED STATES v. GREENFIELD TAP & DIE CORPORATION.

No. 2917.

District Court, D. Massachusetts.

July 30, 1928.

Frederick H. Tarr, U. S. Atty., and J. M. Leinenkugel, Sp. Asst. U. S. Atty., both of Boston, Mass., and C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, of Washington, D. C. (Frank J. Ready, Jr., Sp. Atty., Bureau of Internal Revenue, of Washington, D. C., of counsel), for the United States.

Samuel Freedman, of Boston, Mass., for defendant.

BREWSTER, District Judge.

The United States brings this proceeding in equity to enforce its rights to collect the balance due on 1920 income and excess profits taxes from the respondent as transferee of all the assets of the Lincoln Twist Drill Company. The respondent has asked to have the bill dismissed, averring that section 280 of the Revenue Act of 1926 (26 USCA § 1069) provides an exclusive method of enforcing the liability, at law or in equity, of a transferee of property of the taxpayer. This statute, so far as material to the respondent's motion, is as follows:

"Sec. 280(a). The amounts of the following liabilities shall, except as hereinafter in this section provided, be assessed, collected, and paid in the same manner and subject-to the same provisions and limitations as in the case of a deficiency in a tax imposed by this title (including the provisions in case of delinquency in payment after notice and demand, the provisions authorizing distraint and proceedings in court for collection, and the provisions prohibiting claims and suits for refunds):

"(1) The liability, at law or in equity, of a transferee of property of a taxpayer, in respect of the tax (including interest, additional amounts, and additions to the tax provided by law) imposed upon the taxpayer by this title or by any prior income, excess profits, or war profits tax act. * * *"

26 USCA § 1069 (a, 1).

I assume, as the allegations of the bill would indicate, that the government did not act pursuant to the provisions of section 274(a) of the act (26 USCA § 1048), which set out the procedure to be followed in the determination of deficiencies, including a 60-day notice of deficiency. This section reads in part that no "proceeding in court" for the collection of the deficiency "shall be * * * begun or prosecuted until such notice has been mailed to the taxpayer, nor until the expiration of such 60-day period."

These provisions of the Revenue Act of 1926, the respondent contends, leave the court without power to entertain an equity suit to establish the liability of the transferee according to the theory that the assets in the hands of the transferee constitute a trust fund for the payment of taxes due the United States from the Lincoln Twist Drill Company.

To uphold this contention is to bring the provisions of section 280 in direct conflict with other federal enactments, as well as with other provisions of the 1926 act. Thus section 3213 of the Revised Statutes provides that "taxes may be sued for and recovered in the name of the United States, in any proper form of action, before any * * * District Court of the United States for the district within which the liability to such tax is incurred, or where the party from whom such tax is due resides at the time of the commencement of the said action." 26 USCA § 142; Comp. St. § 5937. I look upon this section as operating not only to fix the venue of the action, but to confer upon the proper administrative officer authority to sue, at law or in equity, in the name of the sovereignty, for the recovery of any taxes due the United States.

But, referring to the act of 1926, we find two sections that cannot be reconciled with the position taken by the respondent.

Section 278(d) provides: "Where the assessment of any income, excess profits, or war profits tax imposed by this title or by prior act of Congress has been made (whether before or after the enactment of this act), * * * such...