NASH
v.
COMMISSIONER OF INTERNAL REVENUE
Petitioner, the taxpayer, raises this question : Does the refund of a state income tax theretofore unconstitutionally exacted, the annual amount of which was deducted by the taxpayer in his Federal income tax return, constitute income for Federal tax purposes in the year in which it is refunded ?
The facts: Petitioner, pursuant to the Wisconsin state income tax law,’ paid $81,-346.50 income taxes upon his wife’s income during the years 1926 to 1931. He deducted these payments in his Federal tax returns. In 1931, the United States Supreme Court held the state tax enactment to be unconstitutional as to the particular provision involved (Hoeper v. Tax Comm., 284 U.S. 206, 52 S.Ct. 120, 76 L.Ed. 248), and the State of Wisconsin in 1932 refunded to Mr. Nash $81,346.50 (the sum in dispute) and $20,420.76, interest. The. interest item is conceded by petitioner to be taxable and is therefore not before us. Further assessment of Federal taxes for the years 1926 to 1931, to correct the assessments for those years, is barred by the statute of limitations.
Petitioner paid his ificome taxes for the .year 1932 with this item of $81,346.50 included in his income; hence the form of this proceeding is a claim for refund, being in excess of a deficiency assessed and not here in issue. The Board included the $81,346.50 in petitioner’s 1932 income. Petitioner made his return on the cash receipts and disbursement basis.
Petitioner argues that the refund does not constitute income as defined in section 22 (a), Revenue Act of 1932 (26 U.S.C.A. § 22 and note),1 or the Regulations.2
It is the Commissioner’s contention that a refund resulting from the return of taxes previously paid under a mistaken view of the validity of a state tax is taxable income. Reliance for this view is placed on Burnet v. Sanford & Brooks Co., 282 U.S. 359, 51 S.Ct. 150, 75 L.Ed. 383; Chicago, R. I. & P. Ry. Co. v. Commissioner (C.C.A.) 47 F.(2d) 990; Houbigant, Inc. v. Commissioner, 31 B.T.A. 954, affirmed (C.C.A.) 80 F.(2d) 1012.
We accept the views expressed in these opinions.
The order of the Board of Tax Appeals is affirmed.
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Union Tr. Co. of Indianapolis v. Commissioner of Internal Revenue, 111 F.2d 60 (7th Cir. 1940)
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Sneed v. Commissioner of Internal Revenue, 119 F.2d 767 (5th Cir. 1941)
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First Tr. & Sav. Bank OF Taylorville v. United States, 614 F.2d 1142 (7th Cir. 1980)
Previewing 3 of 10 citing cases — full citator treatment, depth of discussion, and citing context are member features.
Join FLexlaw to unlock all legal intelligenceAuthorities Cited
- Burnet v. Sanford & Brooks Co., 282 U.S. 359 (U.S. 1931)
- Hoeper v. Tax Comm'n of Wis., 284 U.S. 206 (U.S. 1931)
- Chicago v. Commissioner of Internal Revenue, 47 F.2d 990 (7th Cir. 1931)
- In re Caspar W. Hodgson, 80 F.2d 1012 (2d Cir. 1935)
- Houbigant v. Commissioner OF Internal Revenue, 80 F.2d 1012 (2d Cir. 1936)