# Alvin v. Graff v. Commissioner of Internal Revenue

> Court of Appeals for the Fifth Circuit · April 22, 1982 · 673 F.2d 784

URL: https://www.frixlaw.com/law-library/cases/9469016

## Case

- **Full name:** Alvin v. GRAFF, Petitioner-Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee
- **Court:** Court of Appeals for the Fifth Circuit
- **Decided:** April 22, 1982
- **Citations:** 673 F.2d 784; 49 A.F.T.R.2d (RIA) 1212; 1982 U.S. App. LEXIS 19884
- **Precedential status:** Published
- **Opinion:** Concurrence by Brown
- **Judges:** Brown, Goldberg, Gee
- **Cited by:** 82 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/9469016

## How later opinions describe it (automated extraction)

- explaining that section 235 HUD mortgage payments on behalf of low and moderate income families are “direct general welfare benefits not taxable”
- discussing the traditional elements of equitable estoppel

## Opinion text

JOHN R. BROWN, Circuit Judge,
concurring:
The Court today holds that the interest reduction payments were properly includable in Graff’s gross income and that, under those circumstances, he may take them as a corresponding deduction. That holding, which is both sensible and correct, given the broad definition of income under § 61, Internal Revenue Code, means, in non-tax lingo, that both sides of the scale are now equal. Graff erred in attempting to deduct interest installments that he never paid when he never reported as income the money to make those payments. To deduct an expense, one must first have paid it. Graff wanted to deduct the cost of his cake and eat it, too. That he cannot do. Under our holding, the accounting scale balances: income comes in (the HUD interest reduction payments), income goes out (the HUD interest reduction payments). In other words, it is largely a wash. I would emphasize that much the same result would have occurred had the Commissioner or this Court determined that Graff had no income from the transaction but could'deduct no interest payments above the one percent that he paid. No income comes in, so none goes out.
Graff also argues that since HUD, putting visions of sugar plum fairies and hefty tax deductions in his head, enticed him to enter into this project, the Government is now estopped to deny him those deductions. *786 We agree entirely with the tax court that no estoppel applies. In U. S. v. Stewart, 311 U.S. 60 , 61 S.Ct. 102 , 85 L.Ed. 40 (1940), the only case directly on point cited by either side, the Supreme Court declined to estop the Commissioner from taxing income on federal farm loan bonds, although the Farm Loan Board had advertised that the bonds were tax-exempt. The Court reasoned that determinations by the Board in an area well beyond its authority could not bind the IRS, the only arm of the government charged with administration of the tax laws. That holding governs here. Whatever the conduct of the HUD officials in an area of the law in which they had neither statutory responsibility nor expertise, their mistaken assessment of the tax effect of the interest reduction payments cannot bind the Commissioner. One simple solution presented itself to Graff: make further inquiries. Either a lawyer or the IRS could have reviewed the proposal. Either would, no doubt, have noticed and pointed out the serious tax problems involved. Just as the prospective purchaser of the Brooklyn Bridge should seek another opinion before acting, so Graff, receiving tax advice that quite literally was too good to be true, should have looked before he leaped. With these comments added, I concur.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/9469016. Public record. Not legal advice.