Inland Products Co. v. Commissioner

INLAND PRODUCTS CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Inland Products Co. v. Commissioner Docket No. 6330. United States Board of Tax Appeals 10 B.T.A. 235; 1928 BTA LEXIS 4150; January 26, 1928, Promulgated *4150 Amounts voluntarily paid as beverage taxes in error of law held not deductible from gross income as losses sustained in the years in which such payments were made. Eustace LeMaster, C.P.A., for the petitioner. J. E. Marshall, Esq., for the respondent. LANSDON *235 The respondent has asserted deficiencies in income and profits taxes for the years 1919 and 1920, in the respective amounts of $5,364.86 and $1,016.19. The only issue is whether certain amounts paid in error to the collector of internal revenue as beverage taxes may be deducted from gross income in the years involved. All facts are stipulated by the parties and only the question of law is submitted to the Board. *236 FINDINGS OF FACT. The petitioner is a Washington corporation, with its principal office at Spokane. During the years 1919 and 1920 it was engaged in the manufacture and sale of sweet apple cider and other beverages and food products. In the year 1919 the petitioner paid the collector of internal revenue for the district of Washington the amount of $360.11, as beverage taxes on sweet apple cider, under the provisions of section 313(b) of the Revenue*4151 Act of 1917, and article 31 of Regulations 44; in the same year it paid to such collector the amount of $14,097.26, as beverage taxes on sweet apple cider, under the provisions of section 628(a) of the Revenue Act of 1918, and of article 13 of Regulations 52. In the year 1920 it paid the amount of $10,097.26 in the same manner, for the same purposes, and under the same provisions of the law and the regulations of the Commissioner. The petitioner made the above specified payments of beverage taxes voluntarily, without protest, without separate notice and demand, threat or duress by the collector of internal revenue. The portions of article 31 of Regulations 44 and of article 13 of Regulations 52 relating to the taxability of sweet apple cider were in error of law. In its income and profits-tax return for the years 1919 and 1920 the petitioner deducted from its gross income for each of such years the amounts erroneously so paid. Such deductions were disallowed by the respondent and the deficiencies here involved were asserted on June 22, 1925. The amounts of beverage taxes erroneously but voluntarily paid in the taxable years were refunded to the petitioner in the year 1924. *4152 OPINION. LANSDON: The petitioner paid the amounts now claimed as deductions from its income for the respective years by reason of an error of law. The parties agree and stipulate that such payments were voluntarily made, and having been so made, could not be recovered either from the collector or the Government by an action at law. This being true, it seeks to deduct the amounts so paid as losses sustained in the taxable years. The petitioner argues that we must decide this matter without any relation to events subsequent to the end of the taxable year, that at the close of such year it was without its money and without any legal remedy for recovery. This is doubtless true, but it is also true that at the end of the year 1920 its tax liability had not been determined for either of the years in question, and that such liability was not *237 finally determined until June 22, 1925, which was something like a year after the amounts paid in error had been refunded. Notwithstanding the fact that the petitioner had no remedy at law, we are of the opinion that it should not assume that the Government will not refund a payment which both parties agree was made in error of*4153 law. The Government returned the petitioner's money before it finally determined its tax liability. In these circumstances we are of the opinion that the action of the respondent should be approved and that the deficiencies here involved should be collected. Judgment will be entered for the respondent.