Court Opinion

ID: 9643643
Source: CourtListenerOpinion
Date Created: 2023-08-22 20:36:11.18004+00
Date Added: 2024-06-11T18:11:02.050734
License: Public Domain

PARKER, Circuit Judge
(dissenting).
I regret that ■ I must dissent from the opinion of the Court. Much is to be said for the desirability of apportioning the deduction for taxes paid for a given year in accordance with the period of ownership. I think, however, that the principle is well settled that only he who owns property when the lien for taxes attaches is entitled to the deduction, and that in this case the lien for the taxes had attached prior to the acquisition of title by the taxpayer. I think, also, that any attempt to distinguish between a lien for taxes and a charge attaching to property for taxes assessed, is merely to draw a distinction without any *641real difference and to introduce confusion into a subject where it is important that no confusion exist.
There can be no question here but that at the time of the acquisition of the property by the taxpayer it was subject to a lien for the taxes for the year ending June 30, 1936. Taxes for the year had been assessed and constituted a charge upon the property for which it might have been sold and which could not have been avoided, by transfer or otherwise. “ * * * the property itself stands charged with the tax and may be levied upon. An unencumbered deed cannot be given, nor obtained, until the tax is paid”. Tumulty v. District of Columbia, 69 App.D.C. 390, 102 F.2d 254, 259. This is a lien, whether specifically called such in the statute or not; for there is a lien where there is a claim which is a charge on property and which can be satisfied by resorting to the property and, if necessary, having it sold. 37 C.J. 311; and see Bouvier’s Law Dictionary, Rawle’s Third Revision, “Lien” and “Tax Lien”. The statute here authorizes the sale of real estate for taxes assessed against it; and “the effect of a statute authorizing the sale of the land for taxes is undoubtedly to make, in effect, the taxes a lien on the land, since any purchaser or encumbrancer acquires his interest subject to the possibility of such sale unless the taxes are paid.” Tiffany, Real Property, 2d ed., vol. 3, p. 2791; Dunlap v. County of Gallatin, 15 Ill. 7; Hoglen v. Cohan, 30 Ohio St. 436; Lyon v. Alley, 130 U.S. 177, 188, 9 S.Ct. 480, 32 L.Ed. 899. Certainly, such charge gives the state the same sort of interest in the property that is given by the lien for taxes specifically described as such, and furnishes the same basis for the application of the theory that the state is part owner to the extent of the lien or charge. Cf. Com’r v. Coward, 3 Cir., 110 F.2d 725, 727.
I have considered whether ownership upon the date when the tax becomes due, rather than the date when the lien attaches, should not be determinative of the right to the deduction; but the rule is well settled by the decisions that the date of the attachment of the lien is determinative. Com’r v. Plestcheeff, 9 Cir., 100 F.2d 62; Lifson v. Com’r, 8 Cir., 98 F.2d 508; Walsh-McGuire Co. v. Com’r, 6 Cir., 97 F.2d 983; Merchants Nat. Bank v. Helvering, 8 Cir., 84 F.2d 478, 481; Helvering v. Missouri State Life Ins. Co., 8 Cir., 78 F.2d 778, 781; Falk Corp. v. Commissioner, 7 Cir., 60 F.2d 204; Banfield v. Com’r, 42 B.T.A. -. The rule is thus tersely stated by Judge Sanborn in Lifson v. Com’r, supra [98 F.2d 510] : “When one purchases land which is subject to a lien for taxes, the subsequent payment of those taxes by the purchaser does not constitute an allowable deduction from gross income, for the reason that the taxes accrued while the land was in other ownership and the payment of them is merely a payment of a part of the cost of acquiring the property.”
And the rule of the decisions seems to me to be logically inescapable; for, after the lien attaches, the owner can convey an unencumbered title only by paying the tax. The burden of the tax falls upon the property, therefore, when the lien attaches, not when the tax falls due or is paid; only the person owning the property at that time is subjected to the burden which the law imposes; and only the person who has been thus subjected to the burden of the tax is entitled to a deduction for paying it. Payment by a subsequent purchaser is not the discharge of a burden which the law has placed upon him, but is actually as well as theoretically a payment of purchase price; for, after the lien attaches and the taxing authority becomes pro tanto an owner of an interest in the property, payment of the tax by a purchaser is nothing but a part of the payment for unemcumbered title. Such a purchaser cannot be distinguished either in fact or theory from any other purchaser of property subject to an existing encumbrance which he must pay to protect his title. If the sale is made, not subject to encumbrances, but with a warranty against encumbrances the purchaser would be entitled to recover from the seller any tax which had become a charge upon the land at the time of the conveyance. Manifestly he is not entitled to deduct a tax which he is thus entitled to recover of the seller; and it is equally clear that his right to a deduction for a tax paid cannot depend upon a contract which he has made or failed to make with the seller.
The decision in Commissioner v. Coward, 3 Cir., 110 F.2d 725, proceeds on the assumption that the lien for taxes had not attached, an assumption which, 'for reasons heretofore stated, I do not think permissible here. It should be noted also that in that case a statute of New Jersey apportioned liability for the taxes between vendor and purchaser. Carondelet Building Co. v. *642Fontenet, 5 Cir., 111 F.2d 267, is not in point, for the lien there did not attach until after the acquisition by the purchaser. The right of accrual there discussed was the right of the purchaser, unquestionably entitled to a deduction,, to accrue the tax in months of a tax year which expired before the lien attached. No question of the purchaser’s being entitled to the deduction, as distinguished from the seller’s being so entitled, was involved; and the case is in no sense authority for the proposition that a purchaser who acquires the property after the lien has attached is entitled to a deduction.
It is true of course, that the purchaser of the property enjoys the rents and profits for the portion of the tax year that has not elapsed, and that tax liability should offset these; but, if the rule- remains settled as the decisions have heretofore fixed it, this will be taken care of in adjustment of the price. Nothing, I think, but confusion will result from departure from the well settled rule that only he who owns the property when the tax accrues is entitled to the deduction, and that the tax is deemed to accrue when it becomes a charge or lien upon the property.