finding substantial compliance with regulation governing election by taxpayer to have sole proprietorship taxed as domestic corporation, despite failure to include formal statement of election with tax return
How later courts described this case
- finding substantial compliance with regulation governing election by taxpayer to have sole proprietorship taxed as domestic corporation, despite failure to include formal statement of election with tax return
- taxpayer filed timely election to have business taxed as partnership, but failed to attach a supporting statement
- "'Generally those directions which are not of the essence of the thing to be done, but which are given with a view merely to the proper, orderly and prompt conduct of the business, and by the failure to obey no prejudice will occur to those whose rights are protected by the statute, are not commonly considered mandatory.'" (quoting 2 Sutherland, Statutory Construction, sec. 2802, at 216 (3d ed.))
- failure to follow procedural details in election of a proprietorship to be taxed as a corporation
Written by the judges who cited it.
The opinion
Tkain, J., dissenting. I respectfully dissent.
Section 7805 gives the Secretary general authority to prescribe “all needful rules and regulations” for the Code’s enforcement. However, in section 1861 Congress saw fit to add with particularity that the election under that section is to be made under regulations prescribed by the Secretary, most probably in recognition of the fact that such an election might involve administrative problems whose resolution could best be left to administrative regulation.
The decision of the majority turns upon whether the regulatory requirements of T.D. 6124 are “mandatory” or “directory.” So phrased, I believe this approach simply obscures the issue. The regulation here in question is neither unreasonable nor otherwise invalid. I do not understand the majority to suggest to the contrary. Under these circumstances, I see no basis whatsoever for sanctioning noncompliance, no matter what characterization or semantic label one attaches to the regulation.
Essentially, I believe the majority has concluded that the regulatory requirements are not really important to the administration of the section, effectively substituting, in this respect, the judgment of the Court for that of the Secretary.
OppeR and Baum, JJ., agree with this dissenting opinion.