Court Opinion

ID: 4490497
Source: CourtListenerOpinion
Date Created: 2020-01-17 22:02:24.070023+00
Date Added: 2024-06-11T15:02:28.277562
License: Public Domain

*1113OPINION.
James:
It appears that .the taxpayer, by the petition, sought to raise what presumably is the issue in this appeal, namely, that the Commissioner in the audit of the taxpayer’s return presumably included in gross income for the year 1918 the above amount of $21,250, which presumably the taxpayer originally did not report as income. Neither of these important facts are pleaded as facts by the taxpayer nor set forth in the assignments of error with sufficient definiteness to identify what we judge is the real issue. It would be entirely proper to base our determination entirely upon the above-mentioned defects in the pleadings. Inasmuch, however, as the amount involved is substantial and the issue apparently sought to be raised is not difficult of solution, we feel constrained to decide the appeal on what would seem to be the issue attempted to be pleaded.
It appears from the facts which we are able to find that the taxpayer received cash dividends of $12,500 on February 15, 1918, and $11,250 dividends paid by notes on October 1, 1918. It further appears that after the close of 1918 it was determined that a portion of these dividends should be returned, namely, $10,000 of the dividends paid in cash in February and all of the dividends paid by notes in October, and that the taxpayer duly returned the notes and $10,000 in cash during the year 1919. This is manifestly a transaction quite different from that involved in the case of United States v. Mellon, 281 Fed. 645. In that case the taxpayer had received dividends under an understanding and a plan whereby the dividends were immediately returned for stock in the corporation, and it was there held that such an arrangement was the equivalent of a stock dividend and the amounts so received were not subject to taxation as income. But the taxpayer here received, apparently without qualification, the amounts of dividends as set forth in the findings of fact and thereafter, pursuant to a resolution of the directors of the corporation, he consented to reinvest in the corporation certain sums equivalent to a portion of those dividends. These are two separate and distinct transactions, wholly unrelated even as to the year in which they occurred, and the second transaction can not be regarded as in any manner modifying the income received by the taxpayer through the first, or as justifying a deduction in 1919 for the amount paid back in that year. The taxpayer appealed, as above stated, from the determination of a deficiency for the year 1919. Deficiencies for 1918, 1919, and 1920, are set forth in the Commissioner’s *1114letter, and it would appear that the taxpayer intended to appeal from the determination for the year 1918. The appeal has been construed for the purpose of the foregoing as one involving either or both years.