Opinion
No. M-134.
March 13, 1933.
Albert E. James, of Washington, D.C., for plaintiff.
John A. Rees, of Washington, D.C., and Charles B. Rugg, Asst. Atty. Gen., for the United States.
Before BOOTH, Chief Justice, and WILLIAMS, WHALEY, LITTLETON, and GREEN, Judges.
Action by the Lang-Kidde Company, Inc., against the United States. On special plea in the nature of a demurrer.
Plea sustained, and petition dismissed.
The petitioner is a corporation duly organized under the laws of the state of New York and brings this suit to recover additional income taxes in the sum of $4,563.95 on the ground that the taxes were illegally collected.
The plaintiff filed its 1919 income tax return timely in 1920 and paid the tax shown thereon in quarterly payments, the last payment being made on December 14, 1920, in the total sum of $7,034.04. Thereafter, and prior to April 18, 1929, the Commissioner of Internal Revenue audited the return made by plaintiff and determined and assessed an additional tax in the amount of $4,563.95 for the year 1919, and this sum was duly paid by the plaintiff on April 18, 1929. A claim for refund was duly filed on June 11, 1929, and was rejected by the Commissioner on March 7, 1930. The refund claim was on the refusal of the Commissioner to allow a deduction of a loss of $5,000 claimed by plaintiff in its 1919 return.
The defendant has interposed a special plea in bar in which it is alleged that at the time plaintiff paid the additional assessment there was also due and owing to the defendant as interest, collectible according to law, upon the delayed payment of the additional taxes assessed and collected, the further sum of $2,690.60, and payment of this sum was demanded of the plaintiff; that on July 3, 1930, the plaintiff filed with the collector of Internal Revenue for the second district of New York a written offer in compromise of its obligation to pay the sum of $2,690.60 and tendered the sum of $1,345.30 in full and final settlement of its liability to the defendant. The collector recommended its acceptance and the general counsel of the Bureau in writing also recommended its acceptance to the Commissioner. The Acting Deputy Commissioner likewise recommended its acceptance, and the Commissioner of Internal Revenue accepted it and transmitted it to the Secretary of the Treasury, who approved it on November 25, 1930. Plaintiff was notified of its acceptance by letter dated December 5, 1930.
The plaintiff has filed a replication to the special plea in which it alleges "said offer in compromise and the acceptance thereof were and were intended to be a compromise solely of the said unpaid liability for interest in the said amount of $2,690.60 and were not intended to be a complete, full, and final settlement of the entire tax liability of plaintiff for the said year 1919 and were not and were not intended to be by either party a settlement of the then pending dispute concerning plaintiff's income and profits-tax liability for said year."
The sole question in the case is what was intended by the parties when the offer of compromise of the interest was submitted by the plaintiff and accepted by the defendant. From the papers in the case it appears the plaintiff endeavored to compromise the additional assessment, but the offer was rejected, and, after the refusal of the offer of compromise, paid the tax and filed refund claims which were also rejected. There only remained the accumulated interest which ran at the rate of 1 per cent. a month, and it was in reference to this interest that the offer of compromise was made and accepted.
In the offer in compromise, which was duly sworn to, the plaintiff says:
"In making this offer, and as part of the consideration thereof, the taxpayer hereby