Court Opinion

ID: 7370046
Source: CourtListenerOpinion
Date Created: 2022-07-28 00:10:02.27084+00
Date Added: 2024-06-11T16:20:52.466206
License: Public Domain

On Rehearing
We are taken to task for our statement above as to appellants' position on the appeal. In brief, counsel asseverates: "But that was not appellants' position at all. The assessment appealed from disallowed part of taxpayersdeduction for federal income taxes claimed in their 1943 return. It did so by means of an unauthorized 'adjustment' by grouping the two years 1942 and 1943 together. Appellants' sole position was that they had been deprived of the deduction
allowed by Title 51, Section 385. * * * The question of the statute of limitation was not only not appellants' main
contention but it is not so contended at all. * * * The statute of limitation is not involved."
The statement in argument on submission that if "the Department [could] go back into a previous year and disallow deductions lawfully taken at the time and charge them as additional income in a later year * * * the statute of limitations would be of no effect whatever," etc., along with other such argument, was construed by us as importing a contention to the effect stated. But whether that interpretation be correct or not in no wise could affect the result attained. We disposed of this contention, however it be stated, by pointing out that "the Department of Revenue has not, in its assessment, grouped together the transactions of the taxpayer for 1942 and 1943, making a combined calculation of income and deductions for the two years," as contended by appellants.
On careful re-examination of the proceedings set forth in the transcript before us, we are not persuaded that we were in error in the quoted conclusion and that the Department in fact lumped the two years. In the notice to the taxpayers we find this "Explanation: To adjust for federal income tax accrued and deducted for 1942 but discharged as of September 1, 1943," followed by a tabulation of the 1943 accrual, plus one-fourth of the 1942 tax; the total tax for 1942 and 1943; less amount accrued and deducted on 1942 return, showing the balance deductible on 1943 return of $22,098.41. This is followed by the amount deducted on 1943 return of $59,648.54, which by deducting the deductible amount of $22,098.41, left a balance of "excess deduction or additional income of $37,550.13." This latter amount forms the basis of the Department's assessment against appellants for *Page 435 
additional State income tax for the year 1943. Whatever else this calculation may be said to show, it discloses merely a method of arriving at what seems to us to be the inescapable conclusion that appellants claimed a deduction of federal income tax for the year 1943 in excess (in the amount here involved) of what they actually paid; in other words, that they had had credit on the 1942 State tax of an amount which they again claimed in the 1943 return. As we held in First National Bank v. State, 249 Ala. 68, 71-72, 29 So.2d 673, 675: "It is immaterial what language is used to declare a result. The result here was that the amount of the 1942 tax was presumably paid in 1943, but that amount was added in and became part of what was called the 1943 tax, and paid as such, but it was paid only once. The taxpayer cannot profit by any such fiction. He is not entitled to it as an accrued tax in 1942 and to a deduction of the same amount as accrued in 1943, or as paid in 1943. * * * "
With somewhat added vehemence, the brief belabors us for our rationalizing to the conclusion that the amount of the 1942 tax "forgiven" by the federal government in 1943 (and for which appellants had had credit on the 1942 State tax) constituted additional income for the year 1943. We did not, as counsel seem to think, treat the cancellation of a part of the tax by the federal government as a "refund." In fact, we gave full effect to our case of First National Bank v. State, supra (cited by appellants as holding in effect that such is not a refund), which specifically holds that such a discharge or forgiveness by the federal government is not a gift and that a deduction like unto that here claimed was not permissible. Appellants' reiterated contention that the forgiveness or remission of tax by the federal government is a gratuitous discharge and could not result in the realization of income is, we think, wholly untenable and sufficiently answered in our original opinion.
But we forego further comment except to say the application is not well taken.
Application for rehearing overruled.
LIVINGSTON, C. J., and BROWN, FOSTER, and STAKELY, JJ., concur.