noting that “ ‘it is not the decision which the Tax Court makes but the fact that the taxpayer resorted to that court which ends his opportunity to litigate in [another court] his taxa-bility for the year in question’”
How later courts described this case
- noting that “ ‘it is not the decision which the Tax Court makes but the fact that the taxpayer resorted to that court which ends his opportunity to litigate in [another court] his taxa-bility for the year in question’”
- “It is not the decision which the Tax Court makes, but the fact that the taxpayer has resorted to that court which ends his opportunity to litigate in the District Court his tax liability for the year in question.”
- “It is immaterial that the issue sought to be litigated in the District Court was not presented to the Tax Court, or could not have been presented because based on subsequent events.”
- “[T]he Tax Court lacked power to allow as a credit against the 1938 income tax, by way of recoupment, the gift tax paid in 1936.”
Written by the judges who cited it.
The opinion
L. HAND, Circuit Judge
(concurring in the result).
The Board of Tax Appeals was without jurisdiction to all'ow the payment of the gift tax in 1936 as a credit against the deficiency assessed in 1938 ; 1 but the plaintiffs’ unsuccessful attempt did not prejudice any other remedy which they had; one never loses one’s actual remedies by resorting to one which in fact does not exist. 2 Having failed to secure the credit they asked, they paid the tax assessed upon their 1938 income without deduction; and then in season filed with the Commissioner a claim preparatory to the action at bar, demanding a refund of part of the tax so paid in 1938; and later they began, also in season, the action at bar for the same relief. I think that the district court had jurisdiction over that action, although the complaint was subject to dismissal. It claimed as a refund a payment of the gift- tax in 1938, and that was *425 untrue; the complaint itself showed that it had been paid in 1936, and had merely been set up as a credit in 1938. Besides being untrue, the complaint, as it read, was outside the jurisdiction of the district court, because it-purported to ask for the refund of a payment made in the year for which the taxpayers had sought to review their deficiency, which § 322(c) forbad.
Nevertheless I think that the court had jurisdiction over the action, as distinguished from the pleading. In spite of the plaintiffs’ mistaken legal theory, all the facts appeared which would have entitled them to a recovery of the gift tax; and under the freedom of amendment now available it does not seem to me that we should refuse them any relief open under the facts. If the action be understood to be for a refund of the gift tax paid in 1936, § 322(c) has no application; for it affects only claims for credit or refund arising in the same year as the deficiency under review, and it does not conclude a taxpayer from suing for a refund arising in an earlier year, which the Board has no jurisdiction to consider. This must be so, else no taxpayer could seek to review a deficiency assessment in any year without forfeiting the right to recover any refunds he might have for all past years.
However, the action, so understood, was barred by the statute of limitations, and the complaint was bad for this reason, unless Bull v. United States, supra, 3 applied to the situation. That decision, as I understand it, permits a taxpayer without penalty to assert his version of a transaction, until it is finally decided against him. That is to say, if the transaction is susceptible of two interpretations, and the taxpayer has paid a tax which was required by the interpretation he puts upon it, he does not forfeit his right to a refund of that tax, because the statute of limitation has run against him before the courts have finally decided that his interpretation was wrong; the statute is tolled. I am not dear whether the plaintiffs’ action — amended as I would allow it to be amended — would be within the last decision of the Supreme Court; 4 that is to say whether there were here two separate “transactions”; but I shall give the plaintiffs the benefit of the doubt, because even if there was only a single “transaction,” I think that they are not in a position to invoke. Bull v. United States, supra. 5
That decision granted a favor to enable a taxpayer honestly to contest deficiency assessments without forfeiting rights which would be his if he was wrong; but these plaintiffs were not engaged in an honest contest of their deficiency assessment. The Board decided, and upon this appeal it cannot be disputed, that they never made a gift at all; but that they executed false documents, purporting to create rights which the parties had privately agreed should not arise. These were intended as a screen, deliberately set up to bemuse the Treasury and allow the plaintiffs to escape taxes to which they should become liable. I would not toll the statute in favor of taxpayers engaged in such an effort; it is one thing so to arrange one’s affairs as to reduce taxes as far as possible; everybody does that, and everybody is entitled to do so; but it is, toto coelo, a different thing to prepare a set of papers which as little represent what the parties have agreed upon as though -they had been executed in jest. For these reasons I concur, except that I would modify the judgment so as to dismiss the complaint upon the merits, and not for defect of jurisdiction.
Commissioner v. Gooch Milling & Elevator Co., 320 U.S. 418 , 64 S.Ct. 184 , 88 L.Ed. 139 .
295 U.S. 247 , 55 S.Ct. 695 , 79 L.Ed. 1421 .
Rothensies v. Electric Storage Battery Co., 329 U.S. 296 , 67 S.Ct. 271 .
295 U.S. 247 , 55 S.Ct. 695 , 79 L.Ed. 1421 .