Petition for Writ of Certiorari — Shahadi v. United States

=

Cttice-Supreme Court, U.S.

oy FILED

* MAR 15. 1965

JOHN F. DAVIS, CLERK

IN THE :

Supreme Court of the United States

Cctober Term, 1964.

No. 989

ALBERT N. SHAHADI: JOSEPHINE SHAHADI: GUAR-

ANTEE BANK AND TRUST COMPANY OF ATLAN-

TIC CITY, NEW JERSEY: COUNTY OF ATLANTIC,

NEW JERSEY and FRANK S. FARLEY. Treasurer

of the County of Atlantic.

ALBERT N. SHAHADI,

Petitioner,

vs.

UNITED STATES OF AMERICA,

Respondent.

PETITION FOR ALLOWANCE OF WRIT OF CERTIO-

RARI TO THE UNITED STATES COURT OF AP-

PEALS FOR THE THIRD CIRCUIT AND APPENDIX.

GeEorGE P. WALKER,

427 Cooper Street,

Camden 2, New Jersey,

Rosert M. Tay or,

2215 Land Title Building,

Philadelphia 2, Pa.,

Attorneys for Petitioner.

Huntzinger Printing Corp., Appellate Printers, Camden, N. J. woe

TABLE OF CONTENTS OF PETITION

PAGE

SE CE a ha) peace cawe nck wen ve tiene rers 1

I ea Geen are dA aah eee Rees Oa) 2

Question Presented for Review .................... : 2

Statement of the Case ............. aig ede eee sane 2

Reasons for Allowance of the Writ .................. 4

Avge ......... ee tee te ek ee PE 6

IED)... 5 iy ean be One e Heer aeea sc eee ene 2e

TABLE OF CITATIONS

CASES:

Bartmer Automatic Self Service Laundry, Inc. v.

a eo Sy re 22

Bowers v. .:ew York and A. Lighterage Co., 71 U. S.

Supreme Court Reports, page 676 ............ 25

Emery v. Commissioner, 166 F. 2d 27,1 A. L.R. 2d 409 23

Holy Trinity Church v. U. S., 143 U. S. 457 ....... 23

Iacone, Estate of v. Commissioner, decided April 13,

Sg Re ee err er ree 22

Markham v. Cabell, 326 U. S. 404 ................ 23

Mutual Lumber Co. v. Poe, 66 F. 2d 904 ........... 22

TABLE OF CONTENTS

PAGE

Old Colony R. R. Co. v. Com., 284 U.S. 552 ......... 25

Peter Pan Fabrics, Inc. v. Martin Weiner Corp., 2

BR ae 22

United States v. American Trucking Association, 310

ON NE Oe lla Pee Ae 25

United States v. Barber, 24 F. Supp. 229 ........... 21

United States v. Covel, decided April 4, 1961 ....... 22

United States v. O’Connor, 291 F. 2d 520 .......... 5

United States v. Shepard’s Estate, 196 F. Supp. 281 .. 22

Untrep STATES JUDICIARY CODE:

le Te Me cs NE UE io odd kw cdccccudanoans 2

INTERNAL REVENUE Cope or 1939:

et eens 2, 21

es Ce eh pve kaa aa atin 6s 8, 12

I oa ie cc dnau ctiaweyy cds ane 12, 23

AAS A ap oe ae pe re 2,7, 11,21

a te et es 21

ie. : ice Uln ue lees bh eceae eo haw ee ee 2

EE RS BR GI mance ER eae ee Oy my ina 2, 13

EES are, Se USN ME Mar See Sv 6

Section 277 .......... 2, 6, 10, 12, 13, 14, 15, 21, 22, 23, 24

DER bl d,s caaNnas aes dui uiuctuaseuiaes 14

AEN a oa es alo ep ge Es Oe 11

TABLE OF CONTENTS

AUTHORITIES: PAGE

Congress House Report No. 2, 70th Cong., Ist Sess.,

23-24 (1939-1 Cum. Bull. (Part 2) 384, 539-400) 24

Mertens Law of Income Taxaticn (Vol. 10, Par.

Ss SS bic onaekeakesacnolscvatdas 15, 19, 21

TABLE CF CONTENTS OF APPENDIX

PETITION FOR ALLOWANCE OF WRIT OF CERTIO-

RARI TO THE UNITED STATES COURT OF AP-

PEALS FOR THE THIRD CINCUIT.

TO THE HONORABLE, THE CHIEF JUSTICE AND AS-

SOCIATE JUSTICES OF THE SUPREME COURT OF

THE UNITED STATES:

The petitioner, Albert N. Shahadi, prays your Honorable

Court for allowance of a writ of certiorari to review the

order and judgment of the United States Court of Appeals

for the Third Circuit entered January 8, 1965 affirming the

judgments of March 6, 1964 and March 10, 1964 of the

United States District Court for the District of New Jerse,

and in support thereof, submits the following data and

argument:

OPINION BELOW.

The opinion of the Court of Appeals for the Thira Cir-

cuit filed January 8, 1965 is not as yet reported. A copy

of same is contained in the appendix hereof at page 2a.

Copies of the District Court’s opinion of March 6, 1964

and March 10, 1964 respectively are contained on pages

7a-9a in the petiticner’s appendix.

JURISDICTION.

The statvtory provision conferring jurisdiction on this

honor2ble Supreme Court of the United States to review

said judgment and decision by writ of certiorari is that

invoked under Section 1254 of the United States Judiciary

Code, 28 U. S.C. A., Section 1254.

QUESTION PRESENTED FOR REVIEW.

I. Did the lower appellate court misinterpret, miscon-

strue or misapply the proper interpretations to be given

Sections 272(a), 273, 275. 276 and 277 as found in the

Internal Revenue Code of 1939?

STATEMENT OF THE, CASE.

On January 7, 1954, pursuant to the Internal Revenue

Code of 1939, Section 273, jeopardy assessments were made

by the Commissioner of Internal Revenue against the

petitioner, Albert N. Shahadi, for income taxes for the

years 1944 through 1949, inclusive. Petitioner filed no

bond to stay collection on said jeopardy assessments at any

time. On February 11, 1954. the Commissioner maiied

statutory notices (a breakdown of the jeopardy as-«ss-

ments). Within the time allotted by statute, the petitioner

filed petitions for redeterminations on said jeopardy assess-

ments with the .ax Court (May 10, 1954). The Commis-

sioner during all this time proceeded to collect by distraints

and levies on said jeopardy assessments and, as a result of

same, did collect a substantial amount of said assessments.

3

In addition, he liened and levied (but did not sell) stocks

owned by the petitioner, which were «her and are now held

by a bank as collateral for a loan which it had made to

petitioner some time ago. At the time the Commissioner

liened and levied on said stocks, there was a substantial

equity in the stocks above the loan which the -bank had

made to the petitioner. Neither the Commissioner nor his

agents have been able to give any explanation as to why

the Commissione: 0: his agents failed to proceed and sell

said stocks and apply the proceeds thereof to the jeopardy

assessments as was being done regarding all other assets

of the petitioner, including his salary as a County Solicitor

of Atlantic County, New Jersey.

The Commissioner, as a result of his constant and con-

tinued levies and distraints, did collect approximately $60,-

000.00. However, because of the fact that he failed to sell -

the stocks upon which he had already made a levy, there

has been inflicted upon the petitioner an additional $42,-

000.0. in interest. Had the Commissioner sold the stocks

under the levy, there would przctically be no tax due, if

any, a nominal amount.

On June 2, 1961, the Commissioner filed, his complaint

in the instant case and asked for a money judgment on the

balances of said jeopardy assessments. In his complaint,

he failed to set up any exception or reason for the suit hav-

ing been brought more than six years after the date of

the jeopardy assessments, and no amendment to his com-

plaint was made at any time either during the arguments

or the trial below.

A motion for summary judgment was made by the plain-

tiff and a cross-motion for summary judgment was made by

the petitioner, together with an oral motion to dismiss the

action of the plaintiff because of its failure to plead an ex-

ceptior to the running of the statute of limitations. Judg-

ment was entered for the plaintiff.

During the course of the oral argument before the lower

appellate court, counsel for the Commissioner was con-

4

stantly asked whether he could give any reason as to why

the petitioner’s stocks had not been sold. He could not

give any reason. Although the lower appellate court kept

constantly questioning this tremendous increase of interest

and the fact that same was caused by the Commissioner

sitting or his hands as it were, the Commissioner through

his counsel could give no reason for its omission in not

proceeding to an immediate sale of said petitioner’s stocks.

REASONS FOR ALLOWANCE OF THE WHIT.

We believe the question involved herein is one of great

importance and will have importance far beyond the par-

ticular facts and parties involved herein, and it is therefore

vital that the question should be decided finally by this

honorable Supreme Court. The statute of limitations as

applied to the 1939 Revenue Code and the 1954 Code has

had conflicting interpretations applied by the various cir-

cuit courts. In most of the instances, the circuit courts

have adopted a position of treating the sovereign as one

distinct and separate from the average citizen appearing

in those courts. This we say runs contrary to the general

principles as established in law and equity. There has

as yet, in our opinion, not been set forth, a decent and legal

logical yardstick for measuring the proper application of

the statute of limitations and jeopardy assessments in taxing

matters. There should not be a sovereign distinction as in

our opinion is clearly demonstrated by the various decisions

forthcoming from the circuit courts and as is clearly demon-

strated in the instant case. We feel that this case should

once and for all decide that the Commissioner of Internal

Revenue with respect to a taxpayer is no different than the

creditor and debtor and the general principles of law and

equity that apply to creditor and debtor situations should

5

be adhered to regardless of who the creditor or debtor is.

We further feel that when the Courts are called upon to

interpret a fair meaning of a statute, they are bound to

take into deep consideration any resultant injustice which

might occur as a result of said interpretation and said

Courts should not rule as in this case, that regardless of the

injustice done to a party, they must take a position of pure

protection of the sovereign’s revenue.

The instant case reflects an admission by the lower ap-

pellate court that an injustice was done by an omission on

the part of the creditor in increasing to a tremendous

amount an interest accumulation, but they take the position

that they are without judicial power to rectify this situa-

tion because they might, as they say, have to declare a cer-

tain portion of the statute a nullity. This runs counter to

the general rules of interpretation and is brought about

only because the so called creditor happens to be the

sovereign. We feel that under all these circumstances a

clear and definitive measuring rod should be set up by this

honorable Court for conditions such as these, to take effect

in preventing injustices, which no court hesitates to do in

ordinary circumstances involving creditors and debtors. We

also set forth the fact that this certiorari should be allowed

because there is a conflict existing between the third cir-

cuit and the second circuit in that the second circuit in

the case of United States v. O'Connor, 291 F. 2d 520, did hold

in its findings of fact, in a case similar on all points and

facts to the one at hand, that the statute of limitations ap-

plies to a jeopardy assessment even though there was pend-

ing a petition in the Tax Court requesting a redetermina-

tion and said petition for redetermination did suspend the

running of the statute as in other cases. We quote from

the above case as foliows:

“On September 12, 1951, the Commissioner made

jeopardy assessments against Raymond O’Connor and

his wife Bertha for deficiencies in income taxes under

273(a), Int. Rev. Code of 1939. Thereafter taxpayers

6

filed a petition in the Tax Court requesting a redeter-

mination. No bond to stay collection of the tax was

filed. The Commissioner answered and taxpayers re-

plied.

“On August 23, 1957, just before the six-year statute

of limitations would have run on the O’Connor assess-

ments, the Government brought this action under 7403.”

(Emphasis added.)

We submit that the above cit»1 case in which Judge

Friendly made the quoted finding of fact was not probably

on a point argued, but none the less, all of the judges did

agree as to the finding of fact as quoted and it did appear

that it was clear to them that the jeoparcy assessment under

those circumstances ran out after six years.

ARGUMENT.

It is apparent that the most important and probably the

sole issue of argument in this case is the interpretation that

is to be given to section 277 of the 1939 Code and its applica-

bility to the present facts.

Petitioner herein submits pertinent excerpts of the

statutes involved from which argument will be made con-

cerning the history of Section 277 of the 1939 Code.

Section 276, Subparagraph (c) of the Internal Revenue

Code of 1939 provides as follows:

“(c) Collection after assessment.

Where the assessment of any income tax imposed by

this chapter has been made within the perio’ of limita-

tion properly applicable thereto, such tax may be col-

lected by distraint or by a proceeding in Court, but

only if begun (1) within six years after the assessment

of the tax, or (2) prior to the expiration of any period

for collection agreed upon in writing by the Commis-

7

sioner and the taxpayer before the expiration of such

six year period. The period so agreed upon may be

extended by subsequent agreements in wriiing made

before the expiration of the period previously agreed

upon.”

Section 273 of the Internal Revenue Code of 1939 pro-

vides as follows:

“Jeopardy Assessments.

(a) Authority for making. If the Commissioner be-

lieves that the assessment or collection of a deficiency

will be jeopardized by delay, he shall immediately

assess such deficiency (together with all interest, addi-

tional amounts, or additions to the tax provided for by

law) and notice and demand shall be made by the

collector for the payment thereof.

(b) Deficiency letters. If the jeopardy assessment

is made before any notice in respect of the tax to which

the jeopardy assessment relates has been mailed under

Section 272(a), then the Commissigner shall mail a

notice under such subsection within sixty days after

the making of the assessment.

(f) Bond to Stay Collection.

When a jeopardy assessment has been made the tax-

payer, within 10 days after notice and demand from

the collector for the payment of the amount of the

assessment may obtain a stay of collection of the whole

or any part of the amount of the assessment by filing

with the collector a bond in such amount, not exceeding

double the amount as to which the stay is desired, and

with such sureties, as the collector deems necessary,

conditioned upon the payment of so much of the

amount, the collection of which is stayed by the bond.

as is not abated by a decision of the Board which has

become final, together with interest thereon as pro-

J

8

vided in Section 297. If any portion of the jeopardy

assessment is abated-by the Commissioner before the

decision of th« Board is rendered, the bond shall, at

the request of the taxpayer, be proportionately reduced.

(g) Same further conditions.

if the bond is given before the taxpayer has filed his

petition with the Board under Section 272 (a), the bond

shall contain a further condition that if a petition is

net filed within the period provided in such subsec-

tion, then the amount, the collection of which is stayed

by the bond will be paid on notice and demand at any

time sfter the expiration of such period, together with

the interest thereon at the rate of 6 per centum per

annum from the date of the jeopardy notice and demand

to the date of notice and demand under this subsection.

(h) Waiver of stay.

Upon the filing of the bond the collection of so much

of the amount assessed as is covered by the bond shall

be stayed. The taxpayer shall have the right to waive

such stay at any time in respect of the whole or any

part of the amount covered by the bond, and if as a

result of such waiver any part of the amount covered

by the bond is paid, then the bond shall, at the request

of the taxpayer, be proportionately reduced. If the

Board dciermines that the amount assessed is greater

than the amount which should have been assessed, then

when the decision of the Board is rendered the bond

shall, at the request of the taxpayer, be proportionately

reduced.”

Section 272 of the Internal Revenue Code of 1939 pro-

vides as follows:

“(a) (1) Petition to Board of Tax Appeals.

If in the case of any taxpayer, the Commissioner

determines that there is a deficiency in respect to the

tax imposed by this chapter, the Commissioner is au-

9

thorized to send notice of such deficiency to the tax-

payer by registered mail. Within ninety days after

such notice is mailed (not counting Sunday or a legal

holiday in the District of Columbia as the ninetieth

day) the taxpayer may file a petition with the Board

of Tax Appeals for a redetermination of the deficiency.

No assessment of a deficiency in respect of the tax im-

posed by this chapter and no distraint or proceeding in

court for its collection shall be made, begun or prose-

cuted until such notice has been mailed to the taxpayer,

nor until the expiration of such ninety day period, nor,

if a petition has been filed with the Board, until the

decision of the Board has become final. Notwithstand-

ing the provisions of Section 3653(a) the making of

such assessment or the beginning of such proceeding

or distraint during the time such prohibition is in force

may be enjoined by a proceeding in a proper court...”

(2) Cross References.

Fer exceptions to the restrictions imposed by this

subsection, see subsection (d) of this section, relating

to waivers by the taxpayer; subsection (f ) of this

section relating to notifications of mathematical errors

appearing on the face of the return; Section 273, relat-

ing to jeopardy assessments; Section 274, relating to

nXankruptey and receiverships; and Section 1145, re-

jJating to assessment or collection of the amount of the

deficiency determined by the Board pending Court

review.

‘“(c) Failure to file petition.

If the taxpayer does not file a petition with the Board

within the time prescribed in subsection (a) cf this

section, the deficiency, notice of which has been mailed

to the taxpayer, shall be assessed, and shall be paid

upon notice and demand from the collector.

“(d) Waiver of Restrictions.

The taxpayer shall at any time have the right, by a

1¢

signed notice in writing filed with the Commissioner,

waive the restrictions provided in subsection (a) of

this section on the assessment and collection of the

whole or any part of the deficiency.

“(f) Further deficiency letters restricted.

If the Commissioner has mailed to the taxpayer

notice of a deficiency as provided in subsection (a) of

this section, and the taxpayer files a petition with the

Board within the time prescribed in such subsection,

the Commissioner shall have no right to determine any

additional deficiency in respect of the same taxable

year, except in the case of fraud, and except as pro-

vided in subsection (e) of this section, relating to as-

sertion of greater deficiencies, before the Board, or in

Section 273(c), relating to the making of jeopardy

assessments. If the taxpayer is notified that, on account

of mathematical error, such notice shall not be con-

sidered (for the purposes of this subsection, or of sub-

section (a) of this secticn, prohibiting assessment and

collection until notice of deficiency has been mailed, or

of section 322(c) prohibiting credits or refunds after

petition to the Board of Tax Appeals) as a notice of a

deficiency, and the taxpayer shall have no right to file

a petition with the Board based on such notice, nor

shall such assessment or collection be prohibited by the

provisions of subsection (a) of this section.”

Section 277 of the Internal Revenue Code of 1939 pro-

vides as follows:

“Suspensio., of running of statute.

The running of the statute of limitations provided in

Section 275 or 276 on the making of assessments and

the beginning of distraint or a proceeding in court for

collection, in respect of any deficiency, shall (after the

mailing of a notice under Section 272(a) ) be suspended

for the period during which the Commissioner is pro-

11

hibited from making the assessment or beginning dis-

traint or a proceeding ir court (and in any event, if a

proceeding in respect of the deficiency is placed on the

docket of the Board until the decision of the Board

becomes final), and for sixty days thereafter.”

Section 1145 of the Internal Revenue Code of 1939 pro-

vides as follows:

“Bond to Stay Assessment and Collection.

Notwithstanding any provision of law imposing re-

strictions on the assessment and collection of deficien-

cies, the review under Section 1142 shall not operate

as a stay of assessment or collection of any portion of

the amount of the deficiency determined by the Tax

Court unless a petition for review in respect of such

portion is duly filed by the taxpayer, and then only if

the taxpayer (1) on or before the time his petition for

review is filed has filed with the Tax Court a bond in a

sum fixed by the Tax Court not exceeding double the

amount of the portion of the deficieney in respect of

which the petition for review is filed, and with surety

approved by the Tax Court, conditioned upon the pay-

ment of the deficiency as finally determined, together

with any interest, additional amounts, or additicys to

the tax provided by law, or (2) has filed a jeopardy

bond under the income or estates tax laws. If as a re-

sult of a waiver of the restrictions on the assessment

and collection of a deficiency any part of the arnount

determined by the Tax Court is paid after the tiling

of the review bond, such bond shall, at the request of

the taxpaver, be proportionately reduced.”

The petitioner herein contends that jeopardy assessments

were made by the Commissioner for all the years involved,

and said Commissioner did send notices of same to the pe-

titioner informing him that he made said assessments under

authority of Section 273 of the 1939 Code. Section 273 of

12

the 1939 Code is an exception to the making of an assess-

ment as stated under Section 272(a). The exception is

clezcly spelled out in Section 272(a)(2). This is a most

important provision as it appears in the aforementioned

Section 272(a) (2) because it clearly excepts any and all

jeopardy assessments from the provisions of the making

of an assessment on a deficiency, as is more fully stated in

Section 272(a). It is then clear that Congress, by the very

wording of the exception, never interded a jeopardy assess-

ment to be included in the suspension as stated in Section

277. Without a doubt, under the sections of the Code as

above discussed, the Commissioner was not prohibited from

collecting on the jeopardy assessments even though the case

concerning said assessment was docketed with the Tax

Court. in fact, the Commissioner, under his jeopardy as-

sessments, could not be restrained, prohibited, or prevented

in any manner from collecting on the assessment or from

bringing an action in the proper district court for judgment

on same; this, despite the fact that the matter was already

in the Tax Court. The only time, as set forth in the Code,

that the Commissioner can be prevented from proceeding

on the jeopardy assessment is when the taxpayer puts up

a bond in double amount of the assessment. his specific

purpose being to stay collection. In such a cass, it is in-

teresting to note that the Commissioner has a double ad-

vantage; first, he has actual cash in the form of the bond;

second, he would have a contract for payment and a new

period for collection on the contract which would run from

the day of default.

Despite the allegations and arguments of the petitioner as

above, the lower court took the position as set forth by the

respondent, namely that Section 277 applies, more specifi-

cally, the parenthetical portion of Section 277 [and in any

event * * * ] and makes no distinction between a jeopardy

assessment and a deficiency notice as such.

It is the petitioner’s contention that there is no reported

decision which can be termed as authority upon the prob-

13

lem involved herein. All the cases as cited by the respond-

ent in his brief below, in the opinion of the petitioner, were

not dispositive of the present question. Said cases were

differen. in facts in that they concerned waivers, assess-

ments and not collections, and the particular problem

herein was not advanced so that serious consideration could

be given same and in many instances, it was not touched

upon at all. In the two or three cases which apparently

dealt with the question on hand, the lower court (Tax

Court) merely leaned over backwards and gave an “Alice

in Wonderiand” approach to the interpretation of the words

[in any event * * * ]. Petitioner will discuss the cases in

detail later on.

Section 277, without a doubt, creates an exception to

the running of the statute of limitations as set forth in Sec

tion 276. It suspends the runniig of the statute of limita-

tions during the time the Commissioner’s hands are tied or

prohibited from collecting.

The parenthetical portion upon which the respondent

rests his case treats solely with the docketjng of a case in the

Tax Court. It was put there for one purpose only—to pro-

tect the Commissioner as to the running out of his time for

the making of an assessment (not collection). The legisla-

tive history, which will be discussed later on, clearly shows

the purpose as outlined herein. Assuming arguendo at this

~ int that this is so, it would be correct then to say that the

Commissioner would have no stake in this part of the sec-

tion when his problem is one of collecting, not of assessing.

In this instant case, the appellant has never challenged the

assessment. His contention is that the period for collecting

has run out. To read the parenthetical portion otherwise

would produce a ludicrous result, for anyone versed in tax

laws knows that you can only get to the Tax Court for re-

determinaticn if there is no assessment and the redeter-

mination is only on a deficiency which is a propcsed assess-

ment. The only exception to this proviso insofar as the Tax

Court is concerned is a jeopardy assessment which is made,

14

as in this case, prior to there ever having been « deficiency

created. How could the Commissioner be ever concerned

with the running out of time on a jeopardy assessment? He

can always proceed for collection on the jeopardy regard-

less of the Tax Court and in fact, he can always start suit

to reduce to judgment the jeopardy assessment. The only

manner in which the taxpayer can stay or tie his hands

would be, as said before, to put up a bond in double the

amount.

Further, it is quite evident that the Commissioner as to

a jeopardy assessment, even though review of same is being

had in the Tax Court, can start proceedings to reduce said

jeopardy assessment to a judgment in the proper district

court or he can dijstrain for collection. It is interesting to

note further that even if a district court were to issue an

injunction against the Commissioner from proceeding on a

jeopardy assessment, he can still proceed to file a complaint

to reduce same to a judgmer“ if he feels that the statute is

about to run out. We respectfully submit that all of the

above would clearly show that the Commissioner could

have no stake in the parenthetica! section of 277(b) with

respect to collection. His only stake in same is a protection

for assessing. A legal interpretation of this parenthetical

section must clearly show that, in effect, this parenthetical

section with respect to the Tax Court actually extends the

statute of limitations by adding sixty days; and with rela-

tion to suspension of the statute, one would have to go back

outside of the parenthetical section to the regular wording

of Section 277, namely, when the Commissioner is pro-

hibited from proceeding, etc., etc. (hands tied).

The respondent would have you understand that [in any

event * * * | means not only a deficiency that is docketei

but also a jeopardy assessment—this, despite the fact that

the reason for the insertion in the s2ction was made clear

by the legislative history covering same. As was said

above, Congress could not mean what the respondent con-

tends because the language used does nothing for the Com-

15

missioner that he cannot already do and has done. In view

of the above, the petitioner contends that the entire Section

277 must be ruled in favor of the taxpayer.

To completely understand the meaning of Section 277

of the Internal Revenue Code of 1939, and varticularly to its

wording (and in any event, if a proceeding in respect of the

deficiency is placed on the docket of the Board, until the de-

cision of the Board becomes final), and for sixty days there-

after, it is necessary to trace the legislative history of the

addition of this provision in Section 277.

Mertens Law of Income Taxation (Vol. 10, 2ar. 57.73),

Ist Ed., gives the following background of this section, to

wit:

“The Internal Revenue Code, the 1938, 1936, 1934,

1932 and 1928 Acts provide, ‘the running of the statute

of limitations provided in Section 275 or 276 on the

making of assessments and the begii.: ing of distraint

or a proceeding in Court for collection, in respect of

any deficiency, shall (after the notice of a mailing of

a notice under section 272 (a)) be suspended for the

period during which the Commissioner is prohibited

from making the assessment or beginning distraint or

a proceeding in Court (and in any event, if a proceed-

ing in respect of the deficiency is placed on the docket

of the Board, until the decision of the Board becomes

final), and for sixty days thereafter.”

There are three periods of suspension provided for in

the 1928, 1932 and 1934 Acts for income taxes for 1928 and

subsequent years: (a) during the period of prohibition

and in any event (b) until the decision of the Board be-

comes final, where an appeal is filed, and (c) in either case

(a) or (b) for 60 days after the end of the suspension period

so provided. Where no appeal is filed the period is there-

fore extended 120 days under the 1932, 1928 Acts and 150

days under the Internal Revenue Code, the 1938, 1936 and

1934 Acts from the date of inailirs the deficiency notice.

16

The 1928 Act amended the 1926 Act, making it read the

same as the 1928 Act, except for paragraph references.

This amendment affected only cases in which the period of

limitations had not expired prior to the enactment of the

1928 Act.

The 1926 Act, as originally enacted, provided:

“(b) The running of the statute of limitations pro-

vided in this section or in section 278 on the making of

assessments and the beginning of distraint or a pro-

ceeding in Court for collection, in respect of any de-

ficiency, shall (after the mailing of a notice under sub-

division (a) of section 274) be suspended for the period

during which the Commissioner is prohibited from

making the assessment or beginning distraint or a pro-

ceeding in Court, and for 60 days thereafter.”

Provision was also made in the 1926 Act for adding to

tae period of suspension in the case of taxes imposed by

prior acts, the time during which the Commissioner was

prohibited from making the assessment or beginning dis-

traint or proceeding in Court prior to the enactment of the

1926 Act. It was provided:

“In the case of any income, war-profits, or excess

profits tax imposed by prior Act of Congress, in com-

puting the period of ‘limitations provided in section 277

or 278 of this Act on the making of assessments and

the beginning of distraint or a proceeding in Court, the

running of the statute of limitations shall be consid-

ered to have been suspended (in addition to the period

cf suspension provided for in subdivision (b) of sec-

tion 277) for any per:od prior to the enactment of this

Act during which the Commissioner was prohibited

from making the assessment or beginning distraint

cr proceeding in Court.”

The 1924 Act provided:

17

“The period within which an assessment is required

to pe made by subdivisior (a) of this section in re-

spect of any deficiency shall be extended (i) by 60

days if a notice of such deficiency has been mailed to

the taxpayer under subdivision (a) of section 274 and

no appeal has been filed with the Board of Tax Appeal,

or (2) if an appeal has been filed, then by the number

of days between the date of the mailing of sich notice

and the date cf the final decision by the Board.”

Acts prior to the 1924 Act contained no provision ex-

tending or suspending the statute oi limitations other than

those with respect to waivers or consents.

The sections above quoted indicate a legislative attempt

to correct in later Acts defects in the earlier legislation.

It will be noted that the 1924 Act provided simply, when

a deficiency notice was sent and no appea! was filed for an

extensior. of 69 days from the date when the assessment

against the taxpayer would have been required if no de-

ficiency notice had been mailed, or if an appeal were filed,

an extension equal to the number of days between the date

of the mailing of the 60 day notice and the date of the final

decision by the Board. These provisions of the 1924 Act

were subject to several objections. The Commissioner was

required, if an appeal were filed, to assess the tax before

the expiration of time after the final decision of the Board

equal to the period of time between the sending of the 60-

day letter and the expiration of the normal statutory period

of limitations. Another objection was that an extension of

time in eacess of 60 days was provided for only in the event

that “an appeal has been filed.” “In the case of an invalid

or ineffectua’ appeal the extension provided for was non-

operative because there was no appeal.” Frequently the

invalidity of the appeal was not discovered until after the

normal period of limitations had run.

The 1926 Act partly remedied these defects. It provided

for the “suspension of tne statute”, as distinguished from

18

the “extension of the statute”, for the period during which

the Commissioner is prohibited from making the assess-

ment or beginning distraint or a proceeding in Court and for

60 days thereafter. This provision gave the Commissioner

two extensions—one equal to the period in which he was

“prohibited” from acting and a further extension at the

end of such extended period of an additional 60 days. This

covered one of the defects in the 1924 Act noted above.

The suspension of the statutory period when an appeal

was taken to the Board was still a matter of doubt, since

the Commissioner was by other sections of the Act pro-

hibited from assessing “if a petition has been filed with

the Board.” It was extremely doubtful whether the statute

was suspended in the event an improper or ineffective peti-

tion were filed.

The important change made by the 1928 Act was the

provision (contained in the parentheses) that the statute

should be suspended “in any event, if a proceeding in re-

spect to the deficiency is placed on the docket of the Board,

until the decision of the Board becomes final.” These pro-

visions were designed to avoid a technical defect of collec-

tion by a dismissal of the petition after the expiration of the

ordinary statutory period.

As previously indicated, this provision was applied retro-

actively to the 1926 Act, where the period of limitation

hed not expired prior to the enactment of the 1928 Act.

Of course, in computing the limitation period where there

was no effective appeal or petition, no time is added fcr

the period during which the “appeal” was docketed with

the Board, except, however, that where the limitation

period has not expired (disregarding any such extension)

at the time of the 1928 Act, the statute will be suspended

for the entire period, both before and after the enactment

of the 1928 Act, during which the appeal was docketed.

The result of these changes in the 1928 Act is that the

Commissioner is not forced at his own risk to determine

the validity of petitions and appeals. The “appeal” must,

19

however, have been made by the taxpayer. The statute is

not extended by an “appeal” filed by a non-interested party

or an interloper.

Mertens further states, page 242, fo ote 87:

“The basis for such dismissal might be that the peti-

tion was not filed within the 60-day period, or because

the paper filed was not sufficient to constitute a peti-

tion, or because the required bond was not filed with

the petition for review, or because a waiver filed by the

taxpayer was found to be invalid. In Ways and Means

Committee Report No. 2, 70th Cong., Ist Sess. p. 23, it

is said in explanation of this provision: ‘Under existing

law and under the provisions of the bill, the running of

the limitation period on assessments is suspended while

an appeal is pending before the Board, subsequently

the Board may dismiss the appeal on the ground that

the petition was not filed within the 60-day period, or

for example, because the paper filed within the period

was not sufficient to constitute a petition. The deci-

sion dismissing the appeal may not be made until

months after the proceeding * was begun and there is

some question whether in such cases the statute of limi-

tations on assessment is actually suspended during the

pendency of the proceeding. It is specifically provided

in s2ction 277 that the limitation period shall be sus-

pended, if any proceeding is placed on the docket of the

Board, until the decision of the Board in respect thereof

becomes finai and for 60 days thereafter.

“This provision also takes care of any uncertainty as

to the suspersion of the statute where, after the decision

of the Board, a petition for review is filed without the

required bond. It also provides for the situation where

a taxpayer files a waiver of the restrictions on the

Commissioner as to assessment or collection where the

legal sufficiency of the waiver may not be determined

for a considerable period of time after it is filed.

“It seems obvious that the enforcement of a decision

20

of the Board which has become final shoulda not be

thwarted, and that the decisior: of the above matters

should not be forced into injunction proceedings. Ac-

cordingly, in all the foregoing cases the limitation on

assessment is definitely suspended by section 277 until

the decision of the Board has become final and for 60

days thereafter.

“There is a similar provision ir Section 311(d) with

respect to the period of limitation on assessment of the

liability of a transferee or fiduciary.

“It was suggested to the Committee that language

be inserted to show that the running of the statute

should be suspended not only when the Commissioner

is under the prohibition of Section 272(a) but also

when he is restricted by order of Court from making

assessment or collection, The Committee feels the

language of the present statute is perfectly definite on

this point aad no clarificatior: iz necessary. The state-

ment of the conferees in connection with amendment

No. 83 to the Revenue Act of 1926 was specific on the

point and clearly indicated that the intention was to

suspend the running of the statute for the period dur-

ing which, for any reason at all, the Commissioner’s

hands were tied. See to the same effect Finance Com-

mittee Report No. 960, 70th Cong., Ist Sess., p. 31.”

(Emphasis supplied.)

A studied reading of the Congressional background and

reasoning fer the additional wording in the section can only

jead to one conclusion and that is, the phrase (and in any

event, if a proceeding in respect to the deficiency is placed

on the docket of the Board until the decision of the Board

becomes final) refers only to procedural operation and coes

not have the broad meaning that the statute of limitations

is suspended whether the Commissioner’s hands are or are

not tied as to collection where a jeopardy assessment is

involved and no bong to stay collection has been filed.

21

That it referred only to cases where the Commissioner was

prohibited from assessing and not to cases where there were

jeopardy assessments involved.

As Section 277 refers to 272(a) it is well to study and

dissect that section. As shown in the 1939 Internal Rev-

enue Code this section 272(a) is divided into parts (1) and

(2), and purt (2) refers to cross references which indicates

that there are five exceptions to the restrictions imposed

by this subsection which exception, No. 3, includes section

273, relating to jeopardy assessments. It is interesting to

note that these exceptions referred in section 272(a) (2)

are the same exceptions contained in section 274(a) of the

Revenue Act of 1926, and subsequent acts.

Referring again to Mertens Law of Federal Income Tax-

ation, Vol. 10, Ist Edition, page 91—, it states, “The re-

strictions imposed by the Code upon the assessment and

collection of the tax by the Commissioner do not apply to

‘jeopardy assessments’.” A jeopardy assessment is a means

whereby the Commissioner may assure the collection of the

tax in cases which he believes that the use of the usual

methods of assessment and collection, with their consequent

delay, may result in the failure of ultimate collection. Sec-

tion 273 therefore gives the Commissioner the immediate

right to assess and collect without hindrance.

Mertens further states on pages 92 and 93, “If a jeopardy

assessment is made before a notice of deficiency (..e., 90-

day letter) has been sent in respect to the tax to which the

jeopardy assessment relates, the Commissioner is required

to mail a notice of deficiency within sixty days after the

making of the assessment.” This notice is in every respect

like an ordinary notice of deficiency and the taxpayer may

appeal to the Board within 90 days after it is mailed, for a

redetermination of the tax. If the Commissioner fails to

send the notice by registered mail within the 60-day period,

the assessment is nullified and the tax cannot be collected.

In the case of United States v. Barber, 24 F. Supp. 229,

the Government reiterates all of the above history as it

22

pertains to Section 277. See footnotes therein. Plaintiff

below has cited cases which apparently, at first blush, are

dispositive of the prob.ems at hand, such as Bartmer Auto-

matic Self Service Laundry, Inc. v. Commissioner, 35 T. C.

317; Iacone, Estate of v. Commissioner, decided April 13,

1961 (Tax Court); Mutual Lumber Co. v. Poe, 66 F. 2d

904; United States v. Covel, decided April 4, 1961; United

States v. Shepard’s Estate, 196 F. Sup. 281.

As to the Bartmer case, it is not dispositive either as to

the facts or the law. There is no discussion or reasoning

of the exception re a jeopardy assessment. The Honorable

Judge therein takes for granted the meaning of the words

of Section 277 and does not read same in connection with

the entire section. The case concerns a transferee liability

and the exception, as the petitioner discusses in this matter,

was never even raised by the parties therein. As to the

Tacone case, here again the learned Tax Court Judge made

an “Alice in Wonderland” approach and declared the words

[in any event * * *] taken by themselves as being clear

and meaning just what she wanted them to mean without

even a discussion respecting the exception of a jeopardy

assessment. It would appear that in all of the other cases,

the learned judges completely overlooked proper statutory

interpretation and the significant Congressional intent in-

volved. In each case, it is apparent that the words [in any

event * * *] were given judicial blessing without a thought

to the exception in the jeopardy assessment.

In above cited cases, each of the Judges gave a literal

interpretation to the words “in any event” and declared

same to be clear despite any comparisons with the rest of

the statute. All of said Judges were silent as to the voice

of Congress as set forth in the legislative history pertain-

ing to Section 277. We respectfully submit that their in-

terpretation was erroneous and should have been as was so

ably stated by Judge Learned Hand in the case of Peter

Pan Fabrics, Inc. v. Martin Weiner Corp., 2 Cir., 274 Fed.

2d 487-489:

23

“It is commonplace that literal interpretation of the

words of a statute is not always a safe guide to its

meaning. Indeed, in extreme situations this doctrine

has been carried so far that language inescapably cov-

ering the situation has been disregarded when it de-

feats the manifest purpose of the statute as a whole.”

Holy Trinity Church v. U. S., 143 U. S. 457;

Markham v. Cabell, 326 U. S. 404.

“The legislative intent is to be determined not by

taking the word or clause involved in a taxing statute

from its setting and viewing it apart, but by consider-

ing it in connection with the context, the general pur-

pose of the statute, the occasion and circumstances of

its use and other appropriate tests for ascertaining

legislative will.”

Emery v. Commissioner, 166 F. 2d 27,1 A. L. R. 2d

409.

‘It is interesting to note that the lower circuit court in

making its interpretation of Section 277, takes a parenthet-

ical part of a total section and in effect says that the paren-

thetical part restricts and practically overrules the entire

meaning of the whole section. We respectfully submit that

this is having the tail wag the dog and we further submit

that had Congress intended this to be so, they could and

would have created a total new section. It is apparent that

the lower circuit court refuses the persuasion as set forth

by the brief of the petitioner on the ground that if they

accepted same, they would have to declare the parenthet-

ical section of 277 a nullity and this they refuse tn do. We

respectfully submit that this is not so. The lower circuit

court could just as well and should have found the paren-

thetical section as one which is not a resiricticn upon the

total section, but rather an additional explanation with re-

gard to the suspension of the statute in the making of an

assessment particularly with regard to a situation involv-

ing the nullity of a petition which would have been filed

24

in the Tax Court. The lower circuit court refers to a Con-

gressional Committee Report as being most helpful in ar-

riving at its decision (Congress House Report No. 2, 70th

Cong., Ist Sess., 23-24 (1939-1 Cum. Bull. (Part 2) 384,

399-400) ) and upon a close reading of said so-called help-

ful Committee Report, we see clearly that the argument

as set forth throughout by the petitioner with respect to

the distinction between assessment and collection under

277 is clearly brought out by said Committee Report. We

quote from said Report as set forth in the opinion of the

lower circuit court:

“Under existing law and under the provisions of the

bill, the running of the limitation period on assess-

ments is suspended while an appeal is pending before

the Board. Subsequently the Board may dismiss the

appeal on the ground that the petition was not filed

within the 60-day period or, for example, because the

paper filed within the period was not sufficient to con-

stitute a petition. The decision dismissing the appeal

may not be made until months after the proceeding

was begun and there is some question whether in such

cases the statute of limitations on assessment is actu-

ally suspended during the pendency of the proceeding.

It is specifically provided in section 277 that the limita-

tion period shall be suspended, if any proveeding is

placed on the docket of the Board, until the decision

of the Board in respect thereof becomes final and for

60 days thereafter.”’

We respectfully submit that the lower Circuit Court of

Appeals fell into error in believing that a fair interpreta-

tion of this Committee Report in any way gives meaning

to the words in any event as meaning under any circum-

c.ances. We further respectfully submit that the words in

any event under Section 277 should not be given the broad

scope as declared by the lower circuit court, where to do so

would fly in the face of traditional American notions of fair

play. We say to subject a taxpayer to additional interest

25

running into as high as 80 or 90%, caused by the creditor

sitting on its hands, and in addition, its omission to act by

virtue of its power of levy and lien, prevent the taxpayer

from use of its own money or property so that he could do

something with regard tc defeating the tremendous in-

creases of additional tax caused by said omission on the

part of the respondent, is a k ‘each of fair play. Bowers v.

New York and A. Lighterage Co., 71 U. S. Supreme Court

Reports, page 676; Old Colony R. R. Co. v. Com., 284 U. S.

552; United States v. American Trucking Association, 310

U. S. 534-543, “Sections of a statute should not be inter-

preted literally if the result would be plainly at variance

with the legislative intent as a whole.”

We respectfully submit that all of the cases as cited by

the lower circuit court are not dispositive and are clearly

distinguishable by the present facts. We will not burden

this court with the distinctions invoi.ed, because we feel

that the present issue is of sufficient importance and has for

the first time been clearly set forth, for a clarification as

requested, in this case.

CONCLUSION.

It is respectfully submitted that in consideration of the

foregoing reasons and in the interest and pursuit of equity

and justice, the petition of Writ of Certiorari should be

granted by this Honorable Court. It is certified that this

petition is not filed for delay.

WHEREFORE, Petitioner prays that a Writ of Certiorari

be granted.

Respectfully submitted,

GEORGE P. WALKER,

z 427 Cooper Street,

— Camden 2, New Jersey,

ROBERT M. TAYLOR,

2215 Land Title Building,

Philadelphia 2, Pa.,

Attorneys for Petitioner.

. =

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wee ail

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’

Appendix

UNITED STATES COURT OF APPEALS.

For THE THIRD CIRCUIT.

No. 14873.

UNITED STATES OF AMERICA

Vv.

ALBERT N. SHAHADI; JOSEPHINE SHAK4DI: GUARANTEE BANK

AND Trust COMPANY OF ATLANTIC City, NEW JERSEY;

County or ATLANTIC, NEW JERSEY and FRANK S. Far-

Ley, Treasurer of the County of Atlantic.

‘ ALBERT N. SHAHADI,

Appellant.

On APPEAL FROM THE UNITED STATES DISTRICT COURT FOR

THE District OF NEW JERSEY.

Argued November 19, 1964.

Before: STALEY, GANEY and FREEDMAN,

Circuit Judges.

OPINION OF THE COURT.

(Filed January 8, 1965.)

By STALEY, Circuit Judge.

This appeal requires us to decide whether under the In-

ternal Revenue Code of 1939 the six-year statute of limita-

tions on suits for collection based on jeopardy assessments

is tolled while the determination of liability underlying the

assessment is under consideration in the Tax Court. The

district court found that the statute was suspended and that

the proceediny for collection before it on complaint by the

United States was therefore timely. The correct:.ess of

that decision is the only question before us on this appeal.

The operative facts were stipulated in the district court

and can be summarized as follows. Jeopardy assessments,

based on asserted liabilities of the taxpayer for the years

1944 through 1951 and of his wife for 1950 and 1951 were

made on January 7, 1954. A notice of deficiency (90-day

letter) was mailed on February 11, 1954. On May 10 of

the seme year, a petition for redetermination of liabiJivy

was filed with the Tax Court.1 The Tax Court rendered

its decision by judgment on July 31, 1958. Shanadi v.

Commissioner, 29 T. C. 1157 (1958). This court affirmed.

266 F. 2d 495 (1959). A petition for a writ of certiorari

to the Supreme Court was denied on October 26, 1959.

361 U. S. 874.

1 The petition filed on this date concerned tax liability for all years

named except 1947. <A petition covering 1947 was filed earlier and ‘

consolidated with the instant petitions for Tax Court hearing. The

difference in dates is of no consequence for purposes of this appeal.

2 The denial of a petition for writ of certiorari renders the decision

of the Tax Court final. 26 U.S.C. §1140(b)(2) (1952 ed.). Thus the

statute was tolled, if at all, for the entire period between the filing

of the petition for redetermination in the Tax Court and the denial

of the petition for writ of certiorari.

3a

From the time of the making of the jeopardy assessments

in 1954, considerable efforts were made by the District Di-

rector of Internal Revenue to collect on them. When, in

1961, a liability of $67,211.11 remained outstanding, the

United States brought suit on June 2 of that year to re-

duce the liability to judgment. -Cross-motions for sum-

mary judgment were filed in the case, and judgment was

entered for the United States. The defense of the statute

of limitations interposed by the taxpayer was rejected by

the district court for the reason that the Tax Court pro-

ceedings tolled the statute. It must be conceded that if

the statute of limitations was suspended, the suit here was

timely.

The pertinent section of the Internal Revenue Code of

1939 reads as follows:

“$277. Suspension of Running of Statute.

“The running of the statute of limitations provided

in section 275 or 276 on the making of assessments and

the beginning of distraint or a proceeding in court for

collection, in respect of any deficiency, shall (after the

mailing of a notice under section 272(a)) be suspended

for the period during which the Commissioner is ro-

hibited from making the assessment or beginning dis-

traint or a proceeding in court (and in any event, if

a prozeeding in respect of the deficiency is placed on

the docket of the Board [Tax Court], until the decision

of the Tax Court becomes final), and for sixty days

thereafter.” (Emphasis ours.)

It is obvious that the statute, on its face, firmly supports

the conclusion of the district court by providing that the

running of the statute of limitations on suit for collection

is suspended during proceedings in the Tax Court under

any circumstances.

The taxpayer, however, argues that the provision for

jeopardy assessments under $273 is an exception to the

4a

general assessment provisions of §272.° From this it is ar-

gued that §277 does not apply to jeopardy assessments be-

cause that section refers only to §Z72(a). The conclusion

simply does not follow from the premise. There is no ques-

tion that the procedure under §273 (jeopardy assessments )

differs from the procedure provided under $272. But

§273(b), like §272(a), requires the mailing of a notice of

deficiency to the taxpayer. Indeed, the statute specifically

provides that the notice following a jeopardy assessment

shall be mailed under §272(a). 26 U.S. C. §$273(b) (1952

3 Sections 272 and 273 in pertinent part read, respectively, as fol-

lows:

“Internal Revenue Code of 1939:

Ҥ272. Procedure in General.

“(a)() Petition to the Tax Court of the United States—If in the

Commissioner is authorized to send notice of such deficiency to

the taxpayer by registered mail. Within ninety days after

notice is mailed (not counting Saturday, Sunday, or a legal

aur te es Set a ends as Ue, coe ees es ta

payer may file a petition with the Tax Court of the United States

for a redetuimination of the deficiency. No assessment of a defi-

ciency in respect of the tax imposed by this chapter and no dis-

traint or proceeding in court for its collection shall be made,

begun, or prosecuted until such notice has been mailed to the

taxpayer, nor until the expiration of such inety-day period, nor,

if a petition has been filed with the Tax Court, until the decision

of the Tax Court has become final. * * *” 26 U.S.C. $272 (1952 ed.).

3 (continued)

“$273. Jeopardy Assessments.

“(a) Authority for Making—If the Commissioner believes that

the assessment or collection of a deficiency will be jeopardized

by delay, he shall immediately assess such deficiency (together

with all interest, addition=! amounts, or additions to the tax pro-

vided f.r by law) and notice and demand shall be made by the

collector for the payment thereof.

“(b) Deficiency Letters—If the jeopardy assessment is made

before any notice in respect of the tax to which the jeopardy

assessment relates has been mailed under section 272(a), then

the Commissioner shall mail a notice under such subsection

within sixty days after the making of the assessment.” 26 U.S.C.

$273 (1952 ed.).

5a

ed.). More importantly, the statutory scheme calls for the

same chain of events whether a jeopardy assessment has

been made or not. In either case, the taxpayer has the

opportunity to secure a redetermination of his liability in

the Tax Court.

The taxpayer next notes that the Commissioner was not

barred from proceeding to collect on the assessment while

the matter was before the Tax Court. On the basis of this,

it is urged that §277 suspends the running of the statute of

limitations only if the Commissiorer is so prohibited, or,

as he puts it, only as long as “the Commissioner’s hands are

tied.” But the very .anguage of §277 refutes the argument.

For the clause suspending the statute during the period the

Commissioner is barred from acting is immediately {ol-

lowed by the parenthetical clause “(and in any event,

etc.).” Taxpayer’s reading of the statute is persuasive

only if the parenthetical clause is regarded as a nullity.

We are obviously entirely without power to amend stat-

utes of Congress in this or any other fashion.

In support of this ‘atter argument, the taxpayer refers

us to the Congressional history of the section. Nothing in

the reports or debates, however, would indicate that Con-

gress did not intend what the plain words of the statute

mean. The following language, taken from the 1928 House

Committee Report, which was made at the time the present

parenthetical phrase “(and in any event, etc.)”” was pro-

posed to and approved by Congress, H. Rep. No. 2, 70th

Cong., Ist Sess., 23-24 (1939-1 Cum. Bull. (Part =) 384,

399-400); S. Rep. No. 960, 70th Cong., Ist Sess., 31-32

(i939-1 Cum. Bull. (Part 2) 409, 431), is as helpful as

anything to which we have-been referred:

“(Inder existing law and under the provisions of

the bill, the running of the li:nitation period on assess-

ments is suspended while an appeal is pending before

the Board. Subsequentiy the Board may dismiss the

appeal on the ground that the petition was not filed

within the 60-day period or, for example, because the

6a

paper filed within the period was not sufficient to con-

stitute a petition. The decision dismissing the appeal

‘ maynot’ ade until inonths after the proceeding was

begun .d there is some question whether in such

cases .ne statute of limitations on assessment is actu-

ally suspended during the pendency of the proceeding.

It is specifically provided in section 277 that the limi-

tation period shall be suspended. if any proceeding is

placed on the docket of the Board, until the decision of

the Board in respect thereof becomes final and for 60

days thereafter.

“This provision also takes care of any uncertainty

as to the suspension of ihe statute where, after the

decision of the Board, a petition for review is filed

without the required bond. It also provides for the

situation where a taxpayer files a waiver of the restric-

tions on the Commissioner as to assessment or collec-

tion where the legal sufficiency of the waiver may nox

be determined for a considerable period of time after it

is filed.”

A fair reading of this report seems to make ii clear that

in adding “(and in any event, etc.)” to the statute, it was

intended to provide that the statute of limitations be sus-

pended in any and all situations where action is taken by

the taxpayer to have deficiencies redetermined by proceed-

ings in the Tax Court.

The conclusiun reached on the basis of our analysis of

the statute and legislative history has ample support in

the decided cases. Estate of Iaconi, April 21, 1961, 761,106

P-H Memo T.C.; Bartmer Automatic Self Service Laundry,

Inc. v. Commissioner, 35 T.C. 317 (1960)., The cases con-

struing $277 have uniformly construed it.in the broadest

fashion, to stop the running of the statute when matters

are being litigated in the Tax Court under any circum-

stances. Green Spring Dairy, Inc. v. Commissioner, 208

F.2d 471, 476-477 (C.A. 4, 1953); American Equitable As-

ja

surance Co, of New York v. Commissioner, 68 F.2d 46 (C.A.

2, 1933); Mutual Lumber Co. v. Poe, 66 F.2d 904 (C.A. 9,

1933); United States v. Shepard’s Estate, 196 F. Supp. 281

(N.D.N.Y., 1961).

The judgment of the district court will be affirmed.

A True Copy:

Teste:

Clerk of the United States Court of

Appeals for the Third Circuit.

JUDGMENT.

This matter coming on for hearing before this Court on

November 14, 1963, and the parties appearing through their

respective counsel; and counsel being unable to agree com-

pletely upon the form of judgment to be entered;

It is hereby ORDERED, ADJUDGED and DECREED

that the United States of America recover of the defendant,

Albert N. Shahadi, the sum of $107,946.08, which sum is

made up of $65,298.05 tax assessment for the years 1945,

1946, 1947, 1948 and 1949, together with lien charges and

interest calculated up to and including March 6, 1964;

It is further ORDERED, ADJUDGED and DECREED

that interest shall run at the rate of six per cent on the

unpaid balance of the tax of $65,298.05 until the same is

paid, or, at the same rate, upon any unpaid balance thereof.

It is further ORDERED that this judgment be entered

without costs.

March 6, 1964.

THOMAS M. MADDEN,

Chief Judge.

SUPPLEMENTAL ORDER.

This matter having come on for hearing on October 11,

1963, and for further hearing on November 14, 1963, and

the plaintiff, United States of America, having moved for

summary judgment against the defendants, Albert N.

Mhahadi and Josephine Shahadi, and the defendant, Albert

N. Shahadi, having moved for summary judgment against

the plaintiff, United States of America, it is determined by

the Court as follows:

It is the judgment of this Court that the Statute of Lim-

itations was suspended during the time that this mat*er

was before the Tax Court, and on appeal therefrom before

the United States Court of Appeals in and for the Third

Circuit, and while certiorari was pending therefrom before

the United States Supreme Court.

It is the further judgment of this Court that the lien, the

assessment, and the amount due thereon are controiled bv

the doctrine of res judicaia, This is based upon the fact

that the same matter was heard by the United States Tax

Court and the Tax Court made a determination therein

and fe.uund the amount due, that this determination was

appealed to the United States Courts of Appeals in and

for the Third Circuit, and that this Court has no authority

under these circumstances to make inquiry into the validity

of the lien or the amount due thereon.

It is the further judgment of this Court that the de-

fendant, Albert N. Shahadi, and the deferdant, Josephine

Shahadi, are validly married and that che property on

South Delencey Street-in Atlantic City 1s held by them as

husband and wife as tenants by the entirety, and that the

lien is solely against the defendant, Albert N. Shahadi, it

being stipulated by the parties hereto that the wife, Jose-

phine, is not indebted to the Government up to the current

9a

year and that therefore there is no lien of the Government

that attaches to her interest in the property.

It is the further judgment of this Court that the applica-

tion on the part of the plaintiff, United States of America,

for marshalling of assets and the sale of the South Delan-

cey Street property be and the same is denied.

It is the further judgment of this Court that the plaintiff,

United States of America, will have judgment against the

defendant, Albert N. Shahadi, in accordance with the Order

entered March 6th, 1964.

It is the further judgment of this Court that the motion

by the defendant, Albert N. Shahadi, for summary judg-

ment is dismissed and the motion by the plaintiff, United

States of America, for summary judgment is granted as

hereinbefore set forth.

It is the further order of the Court that the oral state-

ments made by the Court at the conclusion of the hearings

on October 11, 1963, ard November 14, 1963, are annexed

hereto and made a part of the record in this matter.

Dated: March 10, 1964.

THOMAS M. MADDEN,

Chief Judge.