Court Opinion

ID: 9651304
Source: CourtListenerOpinion
Date Created: 2023-08-23 16:13:05.744807+00
Date Added: 2024-06-11T13:27:50.210473
License: Public Domain

GOODRICH, Circuit Judge
(dissenting in part).
The dissent in this case is upon a narrow point, but one which seems to the writer so important that the dissent should be recorded. There is full agreement in the majority’s conclusion that the taxpayer is a personal holding company. There is also agreement with the proposition that the taxpayer who presents his facts to a lawyer or certified public accountant and relies on the advice given him by either one of these persons has proved that he has acted with reasonable cause and has negatived the. charge of .wilful neglect. An analogy in the law of malicious prosecution at once suggests itself. There, the uniform holding is that one who presents his facts to an attorney at law and relies upon him in the initiation of the prosecution has established, as a matter of law, that he acted with reasonable and probable cause. An additional analogy is found where corporate directors rely upon a lawyer’s advice as to the propriety of a dividend declaration. Stratton v. Anderson, 1936, 278 Mich. 499, 270 N.W. 764. With regard to tax matters, reliance upon the certified public accountant on the part of a lay taxpayer should be treated as an equivalent to the advice of a lawyer, since the Treasury has long recognized the propriety of the accountant’s representation of the taxpayer with regard to tax matters.
But the Tax Court in the instant case did not make a finding that the taxpayer relied upon the accountant’s advice. There are facts stated in the majority opinion which would lend support to such finding if the *636Tax Court had made it. But that Court did not make a finding either way on the point. Doubtless because of the view it took of the matter, it considered such a finding irrelevant. The Supreme Court in Commissioner v. Lane-Wells Co., cited in the majority opinion, says in so many words that a finding that failure was due to reasonable cause and not due to wilful neglect is one of fact “in the first instance for the Board’s determination”. [321 U.S. 219, 64 S.Ct. 514.] Circuit Courts of Appeal are not to make such findings. Their duty is limited to an examination to see if a finding made by the Tax Court is supported by the evidence. Commissioner v. Scottish American Inv. Co., 1944, 323 U.S. 119,1 65 S.Ct, 169, 89 L.Ed. 113.
The proposition that a taxpayer’s reliance upon an accountant’s advice is reasonable cause is one of law and we may properly declare it, even though the Tax Court disagrees. But the question whether the taxpayer relied upon such advice is one of fact and we should not, ourselves, draw the inference. The case should, in my view, be remanded to the Tax Court for proceedings not inconsistent with the legal rule as declared by us.

 While the majority quotes language from the opinion in the case cited to the effect that the appellate court may make its own conclusions when substantial basis is lacking for those of the Tax Court, this statement assumes, it is urged, that the Tax Court has first made its finding. It has not done so in this case.