Source: https://en.m.wikisource.org/wiki/Helvering_v._Taylor/Opinion_of_the_Court
Timestamp: 2019-04-21 05:18:55+00:00

Document:
In August, 1927, respondent acquired all the stock of four utilities at a total cost of $96,030, organized a holding company, and October 13 transferred to it all the utilities stock and received therefor all the shares of the holding company-1,000 of preferred having no par value, entitled to a dividend of $6 annually, $100 on liquidation and callable at $105 per share; 2,500 of no par value class A common callable at $35 per share; 5,000 of no par value class B common stock having the voting power. As this transaction was 'reorganization' under Revenue Act of 1926, § 203(b)(2), 44 Stat. 12, 26 USCA § 934(b)(2), no taxable gain resulted.
The Commissioner, holding the taxpayer not entitled to charge the cost of all to the preferred, apportioned between the preferred and common. He made his calculation upon the assumption that the cost, in 1927, attributable to the preferred shares, bears the same relation to cost of all the shares then acquired as the amount respondent received, in 1928, for the preferred, bears to the amount paid the holding company by Colonial Corporation for all the utilities shares.  On that basis, he found that of the total 1927 cost, $96,030, there was chargeable to the preferred only $48,771.16, which, deducted from $99,000 received by respondent for the preferred in 1928, leaves $50,228.84 upon which he determined the deficiency of $9,156.69.
The Commissioner does not contend that, in cases where Circuit Courts of Appeals properly reverse determinations of the Board, they are without power to remand for further hearing in the nature of a new trial.  His contention is that in this case the burden on the taxpayer was not only to prove that the Commissioner's determination is erroneous, but to show the correct amount of the tax. In substance he says that, because of the taxpayer's failure to establish facts on which a fair apportionment may be made, the Board's redetermination at the Commissioner's erroneous figure was valid, and, there being no error of law, should have been sustained by the court. And he maintains that, in the absence of error on the part of the Board, the court was without power to remand for further hearing.
Unquestionably the burden of proof is on the taxpayer to show that the Commissioner's determination is invalid. Lucas v. Structural Steel Co., 281 U.S. 264, 271, 50 S.Ct. 263, 74 L.Ed. 848; Wickwire v. Reinecke, 275 U.S. 101, 105, 48 S.Ct. 43, 72 L.Ed. 184; Welch v. Helvering, 290 U.S. 111, 115, 54 S.Ct. 8, 78 L.Ed. 212. Frequently, if not quite generally, evidence adequate to overthrow the Commissioner's finding is also sufficient to show the correct amount, if any, that is due. See, e.g., Darcy v. Commissioner (C.C.A.) 66 F. (2d) 581, 585. But, where as in this case, the taxpayer's evidence shows the Commissioner's determination to be arbitrary and excessive, it may not reasonably be held that he is bound to pay a tax that confessedly he does not owe, unless his evidence was sufficient also to establish the correct amount that lawfully might be charged against him. On the facts shown by the taxpayer in this case, the Board should have held the apportionment arbitrary and the Commissioner's determination invalid. Then, upon appropriate application that further hearing be had, it should have heard evidence to show whether a fair apportionment might be made and, if so, the correct amount of the tax. The rule for which the Commissioner here contends is not consonant with the great remedial purposes of the legislation creating the Board of Tax Appeals.  The Circuit Court of Appeals rightly reversed and remanded the case for further proceedings in accordance with its opinion.
^4 The Commissioner cites: Hubinger v. Commissioner (C.C.A.) 36 F.(2d) 724; Sanderson v. Commissioner (C.C.A.) 42 F.(2d) 160; Autosales Corp. v. Commissioner (C.C.A.) 43 F.(2d) 931; Onondaga Co. v. Commissioner (C.C.A.) 50 F.(2d) 397; Darcy v. Commissioner (C.C.A.) 66 F.(2d) 581, 585. Saxman Coal & Coke Co. v. Commissioner (C.C.A.) 43 F.(2d) 556; Williams v. Commissioner (C.C.A.) 45 F.(2d) 61; Alexander Sprunt & Son v. Commissioner (C.C.A. 64 F.(2d) 424; Atlantic Bank & Trust Co. v. Commissioner (C.C.A.) 59 F.(2d) 363; Lightsey v. Commissioner (C.C.A.) 63 F.(2d) 254; Matern v. Commissioner (C.C.A.) 61 F. (2d) 663; Atlanta Casket Co. v. Rose (C.C.A.) 22 F.(2d) 800; Becker v. United States (C.C.A.) 21 F.(2d) 1003.
^5 House Report No. 179, p. 7; Senate Report No. 398, pp. 8-9, 68th Congress, 1st Session. Warren Mfg. Co. v. Tait (D.C.) 60 F.(2d) 982, 984; Old Colony Tr. Co. v. Com'r of Int. Rev., 279 U.S. 716, 731, 49 S.Ct. 499, 73 L.Ed. 918.

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