Court Opinion

ID: 9464613
Source: CourtListenerOpinion
Date Created: 2023-08-04 23:38:20.308415+00
Date Added: 2024-06-11T17:38:43.889738
License: Public Domain

KENNEDY, Circuit Judge,
concurring in part and dissenting in part:
I concur in the majority’s opinion except insofar as it states that the wagering excise tax on the receipts in question did not constitute an accrued liability. As to that holding, I respectfully dissent.
The cases cited by the majority, United States v. Consolidated Edison Co., 366 U.S. 380, 81 S.Ct. 1326, 6 L.Ed.2d 356 (1961), and Security Mills Co. v. Commissioner, 321 U.S. 281, 64 S.Ct. 596, 88 L.Ed. 725 (1944), are inapposite to the problem presented here. The Consolidated Edison case addressed the question whether a property tax liability was properly accrued as a deduction in computing federal tax, even though the taxpayer was contesting the property tax in a separate state proceeding. The Security Mills case considered whether the taxpayer could deduct as an accrued liability an agricultural processing tax, notwithstanding that it was contesting the constitutionality of that tax in court proceedings.
In the case before us, the taxpayer has not contested his liability for the excise tax, except in the general sense that he asserts that he is not liable for the income tax. He does so by denying that certain transactions occurred. Once it has been established that the taxpayer earned a certain amount of unreported income for the taxable year in question, neither the Internal Revenue Service nor the taxpayer would dispute that the excise tax is due. Further, the amount of excise tax is fixed to a certainty by the identical determination that establishes the amount of unreported income. The taxpayer’s liability for the excise tax becomes established by reason of this and not some other proceeding. As the tax court observed: “In a situation such as this, where a deduction is a direct function of the income, in one-to-one correspondence with it, proper matching of income and expense require that both are taken in the same year.” 63 T.C. at 505. I would affirm the tax court’s holding allowing the excise tax as a properly accrued deduction for the tax year in question.