United States v. Updike
| Decision Date | 19 May 1930 |
| Docket Number | No. 340,340 |
| Citation | 50 S.Ct. 367,74 L.Ed. 984,281 U.S. 489 |
| Parties | UNITED STATES v. UPDIKE et al |
| Court | U.S. Supreme Court |
The Attorney General and Mr. G. A. Youngquist, Asst. Atty. Gen., for the United States.
Messrs. Francis A. Brogan and Alfred G. Ellick, both of Omaha, Neb., for respondents.
Prior to the passage of the Revenue Act of 1917, the Updike Grain Company, a Nebraska corporation, filed its income tax and excess profits tax returns for the eleven months ending June 30, 1917, that being the end of the fiscal year which the corporation had selected as its annual period for federal taxation. The returns in form complied with the provisions of the law then in force, and were correct in point of fact. The full amount of the tax, as shown by the returns, was paid. In August, 1917, the corporation was lawfully dissolved and its assets, after payment of all debts, were distributed among its stockholders. Shortly after the passage of the Revenue Act of October 3, 1917 (40 Stat. 300), which, among other changes, increased the rate of taxation, the Commissioner of Internal Revenue issue a regulation providing that corporations which had dissolved in 1917 prior to the date of that act should file tax returns in accordance with its provisions for the period preceding dissolution. A blank form for that purpose was mailed to the corporation, but was returned by its former secretary unexecuted, with the information that the corporation, prior to its dissolution, had filed tax returns and paid all taxes due under existing laws.
In October, 1918, a revenue agent examined the books of the corporation and made a return in regular form, upon which, in January, 1920, additional income and excess profits taxes were assessed for the period ending June 30, 1917. The return so made was not verified or signed in behalf of the corporation, or otherwise. The present suit to recover the amount was brought against respondents, stockholders of the corporation, in 1927, more than seven years after the assessment. The theory upon which the suit was begun and prosecuted is that the assets of the corporation distributed to the stockholders, to the extent of the additional taxes, became trust funds received to the use of the United States. The federal District Court entered a decree dismissing the bill. 25 F.(2d) 746. Upon appeal, the Circuit Court of Appeals affirmed the decree upon the ground that the suit was barred by the provisions of section 278(a)(c) and (d) of the Revenue Act of 1926, c. 27, 44 Stat. 9, 59; U. S. Code Supp., title 26, §§ 1058, 1060, 1061 (26 USCA §§ 1058, 1060, 1061), 32 F.(2d) 1.
The principal question presented here, and the only one we need consider, is whether the suit, having been brought more than six years after the assessment, was barred by the provisions of section 278 quoted below.
'(a) In the case * * * of a failure to file a return the tax may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time. * * *
'(d) Where the assessment * * * has been made (whether before or after the enactment of this Act) within the statutory period of limitation properly applicable thereto, such tax may be collected by distrint or by a proceeding in court (begun before or after the enactment of this Act), but only if begun (1) within six years after the assessment of the tax * * *.' U. S. Code Supp., title 26, §§ 1058, 1061 (26 USCA §§ 1058, 1061).
In accordance with the claim of the government, the court below held that there was a failure to file a return within the meaning of paragraph (a). See, also, Updike v. United States (C. C. A.) 8 F.(2d) 913. We assume without deciding the correctness of that view and consider the case accordingly.
The government contends: (1) That section 278(d) relates only to proceedings to collect taxes qua taxes, and not to suits in equity to recover 'trust funds,' and that the present suit is of the latter character; but (2) that the present case is not within the provisions of that section even if a suit against the stockholders be controlled by the same rule as a proceeding against the corporation itself.
First. The first point turns upon the question whether this is a proceeding to collect a tax, as to which it is said that the provision of section 278(d) that 'such tax may be collected * * * by a proceeding in court,' etc., refers only to a direct proceeding against the taxpayer; and that this view is borne out by a consideration of section 280 (chapter 27, 44 Stat. 9, 61; U. S. Code Supp., title 26, § 1069 (26 USCA § 1069)),1 which prescribes a mode of procedure against transferees of the property of a taxpayer.
The contention is that by the language of section 280 Congress has clearly differentiated between taxpayers and transferees by referring to the liability of the latter as 'the liability, at law or in equity, of a transferee of property of a taxpayer, in respect of the tax * * * imposed upon the taxpayer,' and then, apparently realizing that the limitation periods as to the collection of taxes qua taxes would have no application to the remedy against transferees, creating a distinct period of limitation in respect thereof.
This view of the statute is not admissible. The plain words of § 280(a) are that, 'except as hereinafter in this section provided,' the liability of the transferee shall be 'assessed, collected, and paid,' subject, among other things, to the same 'provisions and limitations as in the case of a deficiency in a tax imposed by this title (including * * * the provisions authorizing * * * proceedings in court for collected * * *).' Nothing thereinafter provided in that section affects the application to the present case of these general words in respect of limitations, for, while the succeeding paragraphs contain provisions of limitation in respect of assessment, they contain none in respect of collection. It seems plain enough, without stopping to cite authority, that the present suit, though not against the corporation but against its transferees to subject assets in their hands to the payment of the tax, is in every real sense a proceeding in court to collect a tax. The tax imposed upon the corporation is the basis of the liability, whether sought to be enforced directly against the corporation or by suit against its transferees. The aim in the one case, as in the other, is to enforce a tax liability; and the effect of the language...
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