Document: 357 U.S. 28 78 S.Ct. 1033 2 L.Ed.2d 1119 The COLONY, Inc., Petitioner,v.COMMISSIONER OF INTERNAL REVENUE. No. 306. Argued April 3, 1958. Decided June 9, Mr. A. Robert Doll, Louisville, Ky., for petitioner. Joseph F. Goetten, Washington, D.C., respondent. Justice HARLAN delivered the opinion of Court. 1 sole question in this case is whether assessments by Commissioner two asserted tax deficiencies were barred three-year statute limitations provided Internal Revenue Code 1939. Under 1939 general governing assessment federal income fixed at three years from date on which taxpayer filed his return, § 275(a), 53 Stat. 86, 26 U.S.C.A. except cases involving a fraudulent return or failure to file where may be assessed any time. 276(a), 87. A special five-year period when taxpayer, even though acting good faith, 'omits gross an amount properly includible therein excess 25 per centum stated * *.' 275(c), 86. In either limitation extended written waiver executed within statutory limitation. 276(b), 87.1 3 taxpayer's taxes each fiscal ending October 31, 1946, and 1947, waivers more than but less five after returns filed. There was no claim that had inaccurately reported its receipts. Instead, based upon Commissioner's determination understated profits sales certain lots land residential purposes as result having overstated 'basis' such erroneously including their cost unallowable items development expense. fraudulent. 4 Tax Court sustained Commissioner. It held substantial portions costs disallowed, these errors resulted understatement total 77.2% 30.7%, respectively, amounts taxable 1946 1947. addition, circumstances 275(c) applicable. took view language, therein,' embraced not merely omission item received accruing also resulting miscalculation through erroneous inclusion excessive cost. T.C. 30. On appeal Appeals only raised governed deficiencies. Adhering earlier decision Reis v. Commissioner, 6 Cir., 142 F.2d 900, affirmed. 244 75. We granted certiorari because conflicted with rulings other Courts same issue,2 proper scope although resolved future 6501(e)(1)(A) 1954, 6501(e)(1)(A), 1037, 1038, infra, remains one importance administration laws years. 355 811, 51, 29. 5 determining correct interpretation we start critical therein.' states draftsman's use word 'amount' (instead of, example, 'item') suggests concentration quantitative aspect error—that is, much 25%. This somewhat reinforced if, reading above-quoted phrase, touches lightly 'omits' bears down hard words 'gross income,' overstated, before us, affected degree gross-receipt completely omitted return. hand, contends fails take full account 'omits,' Congress selected it could have chosen another verb 'reduces' 'understates,' would pointed significantly direction. points out normally 'statutory are presumed used ordinary usual sense, meaning commonly attributable them.' De Ganay Lederer, 250 376, 381, 39 524, 525, 63 L.Ed. 1042. 'Omit' defined Webster's New International Dictionary (2d ed. 1939) 'to leave unmentioned; insert, include, name,' Sixth Circuit has elsewhere similarly word. Ewald 141 750, 753. Relying definition, says limited situations specific receipts accruals left computation income. For reasons below agree position. 7 Although inclined think face lends itself plausibly interpretation, cannot said language unambiguous. turn legislative history 275(c). find persuasive evidence addressing situation actually some receipt accrual income, generally arising causes. 8 Section first appeared Act 1934. 48 680. As introduced House bill simply added gross-income provision 276 1932, 47 169, relating been filed, carried limitations. intended coverage proposed Report Ways Means Subcommittee follows: 9 'Section provides without regard false intent evade tax. 10 'Your subcommittee should apply large amount, fraud established. therefore, recommended shall failed disclose percent Government penalized so negligent magnitude return.' Hearings Committee Means, 73d Cong., 2d Sess., p. 139. 11 purpose proposal related following colloquy between Congressman Cooper Tennessee, speaking Subcommittee, Roswell Magill, representing Treasury: 12 'Mr. Cooper. What really mind just kind situation: Assume out, say, million dollars; he forgot it. felt whenever found did ought get money it, 13 Magill. I will argue against you score. 14 words, if man forgetful, whatever reason overlooks amounting opportunity getting money.' Hearings, supra, 149. 15 revealed attitude report: 16 'It believed taxpayers who accorded privilege pleading bar statute.' H.R.Rep. 704, 35. 17 Senate Finance approved bill, kept open indefinitely honest taxpayer. Its report stated: 18 '* Your committee accord policy expressed section bill. However, makes mistake, unfair keep indefinitely. instance, might arise dividend advised officers corporation paid capital year belonged year. Accordingly, your 5-year cases.' S.Rep. 558, pp. 43—44. 19 Except embodying limitation, passed, reflects change original basic objective underlying enactment. 20 rebutting indications failures particular accruals, intend understated, stresses occasional phrase 'understates income' materials. force contention diluted, however, observed wherever immediately illuminated phrases 'failed disclose' out' See Uptegrove Lumber Co. 204 570, 572. 21 enacting primarily concerned providing longer contained relatively adversely affecting Treasury, effect can given adopting Government's broad construction statute. But theory does persuade us. mere size error principal concern Congress, expected cast terms due net unable solid support history. excerpts set above illustrate, shows our satisfaction exception restricted type already described. 22 manifested broader give additional investigate where, item, disadvantage detecting errors. instances clue existence item. when, here, arises reporting disclosed disadvantage. And seem one, deductions, parts To accept impose affect they do not, read broadly justified evident enactment, create patent incongruity law. page 573. 23 Finally, accords interpretations recent decisions four different Appeals. note 2, supra. reasoning opinions recognized present case, indicated agreed those courts matter res nova circuit. 76. doing noting speculative debate parties intention clarify Code, observe conclusion reach harmony unambiguous 1954.3 24 hold both us Reversed. CHIEF JUSTICE BLACK follow consistently many affirm judgment case. cited Note Court's opinion. pertinent provisions are: 275. Period collection. 'Except 276— '(a) General rule. imposed chapter proceeding court collection begun expiration period. '(c) Omission If omits assessed, assessment, time filed.' 276. Same—exceptions. False '(b) Waiver. Where prescribed 275 tax, consented writing time, prior upon. subsequent agreements made previously upon.' conflict 570; Deakman-Wells 213 894; Slaff 220 65; Davis Hightower, 230 549; Goodenow 238 20. Claims contrary Lazarus United States, F.Supp. 897, 136 Ct.Cl. 283. Three antedating Foster's Estate 131 405; Ketcham 996; O'Bryan 148 456. neither nor regarded controlling authority respective circuits distinguishable facts. maintained current regularly upheld E.g., American Liberty Oil 386; Gibbs 443. '§ 6501. Limitations '(e) income.—Except otherwise subsection (c)— '(1) Income taxes.—In subtitle A— '(A) rule.—If subparagraph— '(i) trade business, term means accrued sale goods services (if required shown return) diminution services; '(ii) there taken into statement attached manner adequate apprise Secretary delegate nature item.' 68A 803, 804, 805.

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