Source: https://supreme.justia.com/cases/federal/us/279/370/
Timestamp: 2019-04-24 11:54:14+00:00

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Justia › US Law › US Case Law › US Supreme Court › Volume 279 › United States v. John Barth Co.
United States v. The John Barth Co.
1. A limitation of five years declared by §§ 250(d) of the Revenue Acts of 1918 and 1921, and § 277(a)(2) of the Revenue Act of 1924, upon the time within which income and profits taxes may be assessed and suits begun to collect them, is inapplicable to a suit on a bond given within that time under par. 14(a), § 234(a), of the Revenue Act of 1918, to secure payment, with interest, of taxes which have been returned and assessed but payment of which has been postponed pending decision of a claim for abatement submitted by the taxpayer. P. 279 U. S. 374.
2. The making of the bond in such case gives the United States a cause of action separate and distinct from the already existing cause of action to collect the taxes, and the taxpayer, by thus securing postponement of collection, waives the limitation of five years that would have applied had no bond been given. P. 279 U. S. 375.
3. Section 1106(a) of the Revenue Act of 1926, providing that the bar of the statute of limitations against the United States in respect of any internal revenue taxes shall not only bar the remedy, but shall extinguish the liability, does not affect an action on a bond given ut supra. P. 279 U. S. 376.
Certiorari, 278 U.S. 597, to review a judgment of the circuit court of appeals which affirmed a judgment of the district court dismissing the complaint in an action to enforce a bond given by The John Barth Company and its surety to secure payment of taxes. See also 276 U.S. 606.
"on notice and demand by the collector . . . any part of such tax found by the Commissioner to be due, with interest at the rate of 12 percent per annum from the time such tax would have been due, had no such claim been filed."
The Barth Company filed its claim of abatement on the ground that it had sustained a substantial loss resulting from a material reduction of the value of its inventory for the taxable year and from actual payment after the close of the taxable year of rebates in pursuance of contracts entered into during such year upon sales made during the year.
was notified of the rejection of the abatement claims in the sum above stated, and of the amount and interest due, but that company also refused payment. The suit was authorized by the Commissioner of Internal Revenue.
"for the reason that . . . the action was not commenced within the time limited by law which time is prescribed by §§ 205d [250d] of the Revenue Acts of 1918 and 1921, and §§ 277a-2, 278d, and 278e of the Revenue Act of 1924, and §§ 277a-3, 278d, 278e, and 1106a of the Revenue Act of 1926."
The district court sustained the demurrer, the United States elected to stand on its complaint, and judgment was entered dismissing the complaint.
The United States carried the judgment on writ of error to the circuit court of appeals, which, after an unsuccessful effort to certify to this Court certain questions, which were dismissed (276 U.S. 606), heard the writ of error, and affirmed the judgment of the district court. 27 F.2d 782. The case is now here on writ of certiorari.
Commissioner, conditioned for the payment of any part of such tax found to be due, with interest. If any part of such claim is disallowed, then the remainder of the tax due shall, on notice and demand by the collector, be paid by the taxpayer with interest at the rate of 1 percentum per month from the time the tax would have been due had no such claim been filed."
"Except in the case of false or fraudulent returns with intent to evade the tax, the amount of tax due under any return shall be determined and assessed by the Commissioner within five years after the return was due or was made, and no suit or proceeding for the collection of any tax shall be begun after the expiration of five years after the date when the return was due or was made."
of § 250(d) has no application to a situation following a claim of abatement and the giving of bond.
The plain purpose of paragraph 14(a) was to effect a substitution for the obligation arising under the return and assessment to pay the tax, of the contract entered into in the bond to pay any part of the tax found to be due upon the subsequent determination of the Commissioner, and this with interest at the rate of 1 percent per month from the time the tax would have been due had no such claim been filed. Of course, it is not difficult, in the somewhat complicated provisions, to suggest, as on behalf of respondent it has been suggested, that some other than the ordinary inference to be given to this set of facts should be drawn, but the common sense view of the return and the delay in the payment due after the claim of abatement and the giving of the bond is as already stated. The making of the bond gives the United States a cause of action separate and distinct from an action to collect taxes which it already had. The statutes now pleaded to bar the suit cannot be extended by implication to a suit upon a subsequent and substituted contract. The postponement of the collection of the taxes returned was a waiver of the statutory limitation of five years that would have applied had the voluntary return of the taxpayer stood and no bond been given. If there is any limitation applicable to a suit on the bond, it is conceded that it has not yet become effective.
Revenue Act of 1926, c. 27, 44 Stat. 9, 113, provides that the bar of the statute of limitations against the United States in respect of any internal revenue tax shall not only operate to bar the remedy, but shall extinguish the liability. This last Act was repealed as of the date of its enactment. See § 612, c. 852, 45 Stat. 791, 875.
The government contends that this restores and gives life to the tax retroactively. It is not necessary for us to examine this claim, for the reason that the Act of 1926 does not affect, and was not intended to affect, the obligation arising out of the bond. Such bonds are not referred to in the amendments of 1921 or 1924 or 1926, nor in any way is the taxpayer expressly or impliedly relieved from such contracts. To avoid the result usually ensuing from the return which he himself made, the taxpayer was permitted by a bond temporarily to postpone the collection and to substitute for his tax liability his contract under the bond. The object of the bond was not only to prevent the immediate collection of the tax, but also to prevent the running of time against the government. The taxpayer has obtained his object by the use of the bond, and he should not object to making good the contract by which he obtained the delay he sought.
It is hardly necessary to refer to authority to justify this conclusion, but it is sustained by United States v. Onken Bros. Co., 23 F.2d 367; Gray Motor Co. v. United States, 16 F.2d 367; United States v. Rennolds, 27 F.2d 902; McCaughn v. Philadelphia Barge Co., 27 F.2d 628; United States v. United States Fidelity & Guaranty Co., 221 F. 27; Raymond v. United States, Fed.Cas. No. 11596.
The judgment of the circuit court of appeals should be reversed, and the cause remanded for further proceedings.

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