Court Opinion

ID: 8874854
Source: CourtListenerOpinion
Date Created: 2022-11-26 18:50:26.232773+00
Date Added: 2024-06-11T17:06:17.950355
License: Public Domain

ON PETITION FOR REHEARING
Before KALODNER, Chief Judge, and McLaughlin, staley, hastie, GANEY, SMITH and FREEDMAN, Circuit Judges.
PER CURIAM.
The petition for rehearing in this tax case appeal is completely based on Mc-Eachern v. Rose, 302 U.S. 56, 58 S.Ct. 84, 82 L.Ed. 46 and Section 6514 of the 1954 Code. We did not deal with McEachern in the court opinion because it concerns a situation substantially differing from that in Bull v. United States, 295 U.S. 247, 55 S.Ct. 695, 79 L.Ed. 1421. This would seem to be conceded in McEachern as it makes no reference whatsoever to Bull.
In Bull a taxpayer sought to recoup a barred overpayment of estate taxes against a subsequent income tax on the same sum with all .the equities in his favor. McEachern involved an attempt by the government to set off a barred deficiency against a timely suit for refund. There the government was barred by a statute of limitations which prevented collecting a deficiency for 1928 at the time when taxpayer was suing for a refund for overpayment for the years 1929, 1930 and 1931. The court refused to permit the government to invoke the doctrine of Stone v. White, 301 U.S. 532, 57 S.Ct. 851, 81 L.Ed. 1265, because there, “Equitable considerations not within the reach of the statutes denied a recovery.” McEachern, supra, 302 U.S. p. 63, 58 S.Ct. p. 87. Also, the government in McEachern endeavored to impose an estoppel upon the taxpayer to prevent him from raising the defense of the statute of limitations as to the deficiency for 1928. The court held that *238§ 609 of the 1928 Revenue Act precluded this.
Regarding Section 6514 it need only be noted that the court in Bull held that the predecessors of § 607 and § 609 of the 1928 Revenue Act, i.e. § 1012 of the Revenue Act of 1924 and § 1112 of the 1926 Act would not preclude the court from granting equitable recoupment. Speaking of the recoupment theory, the court stated, “Such a defense is never barred by the statute of limitations so long as the main action itself is timely.” Bull, supra, 295 U.S. p. 262, 55 S.Ct. p. 700. The above cited sections of the Revenue Acts of 1924 and 1926 are the predecessors of Section 6514 of the 1954 Internal Revenue Code.
Petitioner urges that in the Bull suit, the statute of limitations had not run so as to bar a claim for refund on the tax originally asserted and paid, at the time that the deficiency for the second tax was asserted. In connection with this it must be pointed out that at the time the deficiency for the second tax was asserted, the statute of limitations on the suit for refund of the estate taxes had one month to go. It was paid in August of 1921 and the assessment for the income tax deficiency was not asserted by the Commissioner until July of 1925. At the time, pursuant to Section 1012 of the 1924 Revenue Act, the statute of limitations on a suit for refund was four years. The Board of Tax Appeals did not tell the taxpayer until April 9, 1928 that the sum in question was to be considered both corpus and income to the estate. By then it was too late for the taxpayer to sue for a refund of the estate tax. Bull, supra, p. 258, 55 S.Ct. p. 699. In the present appeal the petitioner waited about seven months after the statute of limitations had run (which time lapse of itself barred a suit for refund of estate taxes by the estate) before it asserted the income tax deficiency. Such assertion made then could have been and has been used in an effort to circumvent the possibility of the taxpayer invoking the Bull doctrine. That tactic cannot aid the government in this instance because it was not the issue upon which the Bull opinion turned. Actually the Court in Bull, supra, at p. 259, 55 S.Ct. p. 699, states that there was no tolling of the statute of limitations; that the taxpayer’s relief was to be found elsewhere, i.e. in equitable recoupment. The statute of limitations had barred a suit for refund of the estate taxes at the time the taxpayer sued for a refund of the income tax and obtained it by way of a recoupment of the estate tax.
Our opinion, soundly based upon the Bull case, properly prevents the unjust double taxation that is the palpable result of the unwarranted refusal of peti--tioner to recognize and accept taxpayer’s true predicament.
The petition for rehearing will be denied.
FREEDMAN, Circuit Judge, dissents from the denial of the petition for rehearing.