Internal Revenue Commissioner

“ Moreover, the complexity of the Commissioner's approach ill serves the goal of administrative convenience that underlies the realization requirement. In order to apply the Commissioner's test in a principled fashion, the Commissioner and the taxpayer must identify the relevant market, establish whether there is a regulatory agency whose views should be taken into account, and then assess how the relevant market participants and the agency would view the transaction. ”

“ Mr. Boutwell organized the Office of Internal Revenue and was the first internal revenue commissioner, receiving his appointment while at Cairo in the service of the War Department. He arrived in Washington July 16, and entered upon his duties the following day. Within a few days the Secretary of the Treasury assigned him a single clerk, then a second, and afterward a third, and the clerical force was increased from time to time until at his resignation of the office of commissioner on March 3, 1863, it numbered 140 persons. ”

“ Funds made available by this or any other Act to the Internal Revenue Service shall be available for improved facilities and increased staffing to provide sufficient and effective 1–800 help line service for taxpayers. The Commissioner shall continue to make improvements to the Internal Revenue Service 1–800 help line service a priority and allocate resources necessary to enhance the response time to taxpayer communications, particularly with regard to victims of tax-related crimes. ”

“ The commissioner of internal revenue, subject to regulations prescribed by the secretary of the treasury, is authorized, on appeal to him made, to remit, refund, and pay back all taxes erroneously or illegally assessed or collected, all penalties collected without authority, and all taxes that appear to be unjustly assessed, or excessive in amount, or in any manner wrongfully collected ”

“ I think there is no merit in the taxpayer's theory that the Commissioner must disregard the corporate entity of the subsidiary. If a taxpayer itself creates and uses a corporation, he cannot require the Commissioner to say it isn't there. ”

“ Instead, as the excerpts set out above illustrate, this history shows to our satisfaction that the Congress intended an exception to the usual three-year statute of limitations only in the restricted type of situation already described.
We think that in enacting § 275 (c) Congress manifested no broader purpose than to give the Commissioner an additional two years to investigate tax returns in cases where, because of a taxpayer's omission to report some taxable item, the Commissioner is at a special disadvantage in detecting errors. ”

“ That the Commissioner was particularly intended by Congress to have broad rule-making power under the regulation was manifested by the first words in the new installment basis section which only permitted taxpayers to take advantage of it 'Under regulations prescribed by the Commissioner with the approval of the Secretary * * *.' The clause is still contained in § 44 of the code. ”

“ The Commissioner, with the approval of the Secretary, is authorized to prescribe all needful rules and regulations for the enforcement of this Act.'
Sections 41, 42, and 62, Revenue Act of 1928, c. 852, 45 Stat. 791 (26 USCA §§ 2041, 2042, 2062) , are substantially like corresponding ones quoted from the 1924 act. Similar provisions appear in the Revenue Act of 1918 and all subsequent ones. ”

“ Once the Commissioner produces evidence linking the taxpayer to an income-producing activity, the presumption of correctness applies and the burden of production shifts to the taxpayer to rebut that presumption by establishing that the Commissioner’s determination is arbitrary or erroneous. ”

“ If the Commissioner chooses not to stand on his own formal or detailed requirements, it would be making an empty abstraction, and not a practical safeguard, of a regulation to allow the Commissioner to invoke technical objections after he has investigated the merits of a claim and taken action upon it. Even tax administration does not as a matter of principle preclude considerations of fairness.
Since, however, the tight net which the Treasury Regulations fashion is for the protection of the revenue, courts should not unduly help disobedient refund claimants to slip through it. ”

“ It is unnecessary for us to take so broad a ground, even if it is correct. [2] Dealing only with the particular presumption now before us, we find nothing to indicate that Congress attached exceptional probative value to the margin evidence, or that it desired for any other reason to tilt the scales sharply against the Commissioner rather than merely to even them somewhat in behalf of claimants. There is, for example, no reason to suppose that the Commissioner is better able than the processor to prove where the tax burden fell. ”

“ The pro rata allocation of the membership dues in monthly amounts is purely artificial and bears no relation to the services which petitioner may in fact be called upon to render for the member. [20] Section 41 vests the Commissioner with discretion to determine whether the petitioner's method of accounting clearly reflects income. We cannot say, in the circumstances here, that the discretionary action of the Commissioner, sustained by both the Tax Court and the Court of Appeals, exceeded permissible limits. ”

“ But to recognize the increment in value as affecting earnings and profits would no more harmonize with the taxless character of the transaction than to treat a realized gain as doing so. The same policy which carries over the transferor's basis for purposes of the corporation's income tax, § 113 (a) (8) , requires carrying it over for determining the taxability of its distributions as the Commissioner's regulation directs: gains and losses are to be brought into earnings and profits at the time and 'to the extent' that they are recognized under § 112. ”

“ We confront today only the specific tax treatment of ceding commissions for indemnity reinsurance.↑ Petitioner suggests that § 1.461-1 (a) (2) is not an accrual accounting rule because its prescription applies equally to cash-basis taxpayers. Under petitioner's argument, NAIC accounting principles would dictate all questions of accounting save in those rare instances where Congress or the Commissioner had promulgated a special rule applicable only to accrual-basis taxpayers. ”

“ Mr. Justice BURTON, whom Mr. Justice CLARK joins, concurring in part and dissenting in part.
I join in the Court's opinion insofar as it holds (a) that the Commissioner did not abuse his discretion under § 3791 (b) of the Internal Revenue Code of 1939 when, in 1946, he revoked previous rulings exempting petitioner from federal income taxes and directed petitioner to file returns for 1943 and 1944, and (b) that assessment of deficiencies for those years was not barred by the statute of limitations. ”

“ Congress has given discretion to the Commissioner to prescribe by regulation forms of returns and has made it the duty of the taxpayer to comply. It thus implements the system of selfassessment which is so largely the basis of our American scheme of income taxation. ”

“ In these assessments, among other items, the Commissioner claimed deficiencies in the respondent's income tax payments based upon his above-described 1938 and 1941 receipts. The respondent, in a petition to the Tax Court for a redetermination of such deficiencies, not only contested the additional taxes assessed against him, which were based upon the full amounts of those receipts, but he asked also for the refund to him of the amounts which had been withheld, for income tax purposes, from each such payment. ”

“ The years 1944 and 1945 were years of profit for the taxpayer. For the years 1946 and 1947, the taxpayer incurred net operating losses which were allowed by the Commissioner as carry-back deductions to the years 1944 and 1945. The taxpayer sought to augment its net operating loss for 1946 by the amount of excess profits taxes which it paid in 1946 on account of its 1945 excess profits tax liability. The Commissioner disallowed the deduction and the Tax Court sustained the Commissioner. ”

“ It seems entirely proper for the Commissioner not only to provide for a reasonable allowance for depletion when advance royalties are paid but also to provide for the situation when the expected depletion did not take place. Annual deductions were made by the taxpayer from his income. These were allowed to compensate for the exhaustion of capital. An event occurred in 1937, the termination of the lease, which restored the deductions for depletion to income. This requirement is, we think, within the delegation of authority to the Commissioner. ”

“ Section 170, the present provision, was enacted in 1954; it requires a taxpayer claiming the deduction to satisfy a number of conditions. [6] The Commissioner's stipulation in this case, however, has narrowed the statutory inquiry to one such condition: whether petitioners' payments for auditing and training sessions are "contribution [s] or gift [s] " within the meaning of § 170. ”

“ If a depreciable asset is sold for less than its adjusted basis, it would seem to follow from the Commissioner's construction that the asset has 'cost' the taxpayer an additional amount and that further depreciation should be permitted. However, Revenue Ruling 69-92 does not extend to such a case and the Commissioner had expressly refused to make it do so. ”

“ All that we decide is that a liability cannot be fastened upon the collector, a ministerial officer, for the enforcement of an assessment for taxes regular on its face, made by the commissioner of internal revenue. ”

“ In the case of a failure to make and file an internal-revenue tax return required by law, within the time prescribed by law or prescribed by the Commissioner in pursuance of law, if the last date so prescribed for filing the return is after the date of the enactment of this Act, if a 25 per centum addition to the tax is prescribed by existing law, then there shall be added to the tax, in lieu of such 25 per centum ”

“ An additional argument of the petitioner need not detain us long. It urges that taking the claims filed by Niagara and petitioner together, they furnish all the date required by the regulations. But it is not enough that somewhere under the Commissioner's roof is the information which might enable him to pass on a claim for refund. The protection of the revenue authorizes the Commissioner to demand information in a particular form, and he is entitled to insist that the form be observed so as to advise him expeditiously and accurately of the true nature of the claim. ”

“ His contention-and upon no other ground could his claim be sustained-is, that, without reference to the rate of commissions which purchasers received, although it may have been the highest allowed, he was, nevertheless, given by the statute, to his own use, and as his personal allowance or compensation for distributing stamps, under sect. 170, the highest rate of commissions allowed to any one buying from the Commissioner of Internal Revenue. ”

“ See Spring City Foundry Co. v. Commissioner of Internal Revenue, 292 U.S. 182, 185, 54 S.Ct. 644, 78 L.Ed. 1200; compare Washington Land Co. v. Com'r of Internal Revenue, 10 B.T.A. 503; Atlantic Coast Realty Co. ”

“ Commissioner, 5 Cir., 127 F.2d 572, 573, 574. In each instance the taxability is determined from the circumstance surrounding the receipt and holding of the money rather than by the disastrous use to which it is put. ”

“ For the tax years in question, 1932 and 1933, he claimed the salaries and expenses incident to looking after his properties were deductible under Section 23 (a) of the Revenue Act of 1932. [1] The Commissioner refused the deductions. ”

“ Commissioner of Internal Revenue, 2 Cir., 175 F.2d 711, 713-714 (where an overcharge under the Emergency Price Control Act, 50 U.S.C.A.Appendix, § 901 et seq., was allowed to be deducted because it did not frustrate any 'sharply defined policies' of the Act) . ”

“ We agree that these decisions held invalid a regulation like Art. 23 (m) -10 (c) which includes in income for a taxable year deductions allowed in prior years. The effect of the Commissioner's acquiescence is uncertain. Cf. C.B. XIII-2-IV. During the period of acquiescence, the regulation continued in existence and was republished n the edition of December 1, 1931, approved February 15, 1929, of Regulations 74 under the Revenue Act of 1928, Art. ”