Court Opinion

ID: 4480832
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:14:33.309302+00
Date Added: 2024-06-11T14:53:59.787546
License: Public Domain

Leech, J., dissenting on the second point: The Commissioner has determined deficiencies in income taxes against petitioner for several years and has asserted admittedly criminal and civil fraud liabilities, under sections 145 and 293 (b) of the Internal Revenue Code, respectively. Under section 3761 of the code, petitioner obtained a release from both these liabilities by paying an amount of money to the Commissioner. True, no arrest or conviction had occurred, otherwise no release, under section 3761, could have been secured from the Commissioner. Let us assume a situation that is by no means unlikely. Suppose that in order to escape possible, even probable, conviction of fraud, the attendant adverse publicity, and even imprisonment of its officers under section 145 (b), the taxpayer had paid to the Commissioner an amount aggregating the total of the deficiencies, interest thereon, the civil fraud penalties, and $10,000, assuming that was the amount of the maximum fine that could have been imposed against its officers under section 145 (b). In that picture could it reasonably be held that such a release was “too remote” from criminal liability to base a disallowance of .the deduction of either the $10,000 or the expenses of the taxpayer in negotiating such a release ? I think not. Nor does the Supreme Court in either Commissioner v. Heininger, 320 U. S. 467, or Bingham v. Commissioner, 325 U. S. 365, support of deduction of either item.1 Yet, precisely that, in effect, is the holding in the majority opinion. True the only issue here is the propriety of the deduction of the expenses. They are expressly allowed. But the same treatment, I think, would have to be accorded to the ten thousand dollar item. The two items are on the same footing. Burroughs Building Material Co. v. Commissioner, 47 Fed. (2d) 178, affirming 18 B. T. A. 101; Helvering v. Superior Wines & Liquors, Inc., 134 Fed. (2d) 373. The petitioner had the burden of proof. The amount paid by the taxpayer to the Commissioner in securing the release here is not revealed. That amount was deliberately omitted from the stipulation. The report refuses for present tax purposes “to place the petitioner in the same category with those” convicted of crime. But the assertion of criminal liability by the Commissioner coupled‘with the admitted compromise of that liability did that. Helvering v. Superior Wines & Liquors, Inc., supra. And, in my opinion, there is nothing in this record which establishes error in that action. I do not think that any more of the expenses incident to obtaining the present release were deductible than such part, if any, as was properly allocable to obtaining the release from the asserted civil liability. Helvering v. Superior Wines & Liquors, Inc., supra.2  Mellott, Jagrees with this dissent.   Following the excerpts from the opinion of the Supreme Court In the Ileininger case, supra, quoted in the majority opinion, appears the following: “If the respondent’s litigation expenses are to be denied deduction, it must be because allowance of the deduction would frustrate the sharply defined policies of 39 U. S. C. §§ 259 and 732 which authorized the Postmaster General to Issue fraud orders. The single policy of these sections is to protect the public from fraudulent practices committed through the use of the malls. It is not their policy to impose personal punishment on violators ; such punishment is provided by separate statute,11 [Footnote 11, Criminal Code, Bee. 215] and can he imposed only in a judicial proceeding in which the accused has the benefit of constitutional and statutory safeguards appropriate to trial for a crime. Nor is it their policy to deter persons accused of violating their terms from employing counsel to assist in presenting a bona fide defense to a proposed fraud order. It follows that to allow the deduction of respondent’s litigation expenses would not frustrate the policy of these statutes; and to deny the deduction would attach a serious punitive consequence to the Postmaster General's finding which Congress has not expressly or impliedly indicated should result from such a finding. » * *”    Neither the Heininger case nor the Bingham case, supra, upon which the majority rely, in my opinion reversed Helvering v. Superior Wines & Liquors, Inc., supra. Rather, I think, the Heininger case approved it. See footnote 1.