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MCKENNA v. GRANGER

January 21, 1953

McKENNA
v.
GRANGER. Collector of Internal Revenue (two cases)



The opinion of the court was delivered by: GOURLEY

Were the issue posed in this case one of first impression, decision would not be free from difficulty; for section 6 is the only section of the Current Tax Payment Act of 1943, other than the introductory section, which does not begin with language specifically amending some portion of the Internal Revenue Code; and the legislative history of the Current Tax Payment Act of 1943 does cast doubt upon the question whether the omission of an amendatory clause in section 6 was intentional or inadvertent. Moreover, in Amy Guest, 10 T.C. 750 (1948), the Tax Court adopted the position of the Commissioner, promulgated in Treasury Regulations 111 and reasserted in the arguments before this Court, that the phrase 'imposed by this chapter', first expressed in the Act of October 28, 1943, c. 290, 57 Stat. 584, 26 U.S.C.A. Internal Revenue Acts beginning 1940, p. 416, refers to Chapter One of the Internal Revenue Code, of which the Current Tax Payment Act of 1943 was not made a part.

The Amy Guest decision, however, was reviewed by the United States Court of Appeals for the Fifth Circuit, which, in Guest v. Commissioner of Internal Revenue, 1949, 175 F.2d 868, specifically rejected the holding of the Tax Court and held that 'the tax imposed by chapter one must be computed with full regard to Section 6(a) of the Current Tax Payment Act of 1943.' 175 F.2d at pages 869, 870. Subsequent to that decision, in Emily Marx, 13 T.C. 1099 (1940), the Tax Court withdrew from its former position and adopted that of the Fifth Circuit. The opinion of the Tax Court included the comment that 'It seems unreasonable to suppose that Congress, in enacting the forgiveness feature of the Current Tax Payment Act in Section 6, intended thereby to exclude some of the tax liability of a taxpayer from the computation of a deficiency or from the computation of a rebate, the definitions of which include the words 'imposed by this chapter'.' 13 T.C. 1103.

 In Linwood A. Gagne, 16 T.C. 498 (1951)- which involves a Pennsylvania taxpayer- and in Stanley S. Moore, 10 T.C.N. 1005 (1951), 515 CCH Standard Federal Tax Reports Para. 7812(M), the Tax Court reiterated its decision that the interpretation of the United States Court of Appeals in the Guest case was proper and that its own decision in that case would no longer be followed.

 Unquestionably, whatever interpretation prevails for Section 6(a) of the Current Tax Payment Act of 1943 would apply with equal force to Section 6(b) of that Act. Giving due weight to the acknowledged expertise of the Tax Court, particularly when it has chosen to reject its original view and when a uniformity of interpretation of the statutory provisions now exists, this Court can perceive no valid reason why it should strain to reach a different result. In fact, the equities in this case would appear to lie clearly with the taxpayer.

 Findings of Fact

 and

 Conclusions of Law

 All facts essential to decision have been stipulated by the parties. The findings of fact which follow hereinafter are in accordance with the stipulations.

 Findings of Fact

 1. Plaintiff Philip M. McKenna ('Philip') and plaintiff Alexander G. McKenna ('Alexander') are resident of Westmoreland County, Pennsylvania. Each filed a timely 1942 income tax return and a timely 1943 income and victory tax return.

 2. Philip's 1943 income and victory tax return disclosed an income and victory tax liability of $ 714,519.61, which sum he paid to defendant in installments during 1943, 1944, and 1945. Alexander's 1943 income and victory tax return disclosed an income and victory tax liability of $ 113,729; in 1943 Alexander paid $ 153,088.99 in installments, in discharge 1943 income and victory tax.

 3. By valid consents timely executed by plaintiffs and the Commissioner of Internal Revenue, the period for the assessment of income and victory tax for the year 1943 was extended to December 31, 1949.

 4. After auditing the 1943 return of plaintiffs, the Commissioner determined a deficiency of $ 37,699.24 in Alexander's 1943 income and victory tax liability. The Commissioner assessed the said deficiency against Phlip, and refunded or credited the amount of the said overassessment to Alexander.

 5. When Philip received a notice and demand from defendant on October 11, 1949, in the amount of $ 14,901.14 (of which $ 11,892.76 was the alleged deficiency and $ 3,008.38 the interest thereon), he ...


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