149 C. Cls.

TAXES-Continued

CLAIMS FOR REFUND.

COURT OF CLAIMS.

Jurisdiction.

Neither the Tax Court nor the Court of Appeals on an appeal from
the Tax Court has jurisdiction to allow a refund of taxes nor do
they have the authority to determine whether a credit made by the
Director or Commissioner of Internal Revenue is illegal, such a
question being one which can only be determined in a suit for refund
of taxes in the District Court or in the Court of Claims.
774.

Internal Revenue 1631, 1701

DEFENSES.

Recoupment.

Santos,

Where property acquired by inheritance is later sold by the benefi-
ciaries and the actual fair market value of the property at the time
of the testator's death was far greater than the value shown by a
grossly undervalued appraisal submitted for estate tax purposes
by the estate executors, so that the beneficiaries received a benefit
from the executors' undervaluation, the doctrine of recoupment
(Bull v. United States, 295 U.S. 247, and Stone v. White, 301 U.S.
532) does not apply since more than one taxable event was involved.
Rothensies v. Electric Storage Battery Co., 329 U.S. 296. Ford, 558.
Internal Revenue 2050

FILING OF CLAIMS.

Prerequisite to court suit.

The filing of a claim for refund is a prerequisite to suit to recover
taxes paid. 26 U.S.C. (I.R.C. 1939) § 322(b)(1). Rosengarten, 287.
Internal Revenue 2024

INFORMAL CLAIM.

What constitutes.

Conversations in 1953 between plaintiff's accountant and an agent
of the Internal Revenue Service about the availability of 1951
excess profits tax relief is no substitute for a written claim for
refund. Sicanoff Vegetable Oil Corp., 278.
Internal Revenue

2024

LIMITATION OF ACTIONS.

Amendment of claim.

Claims for refund filed after the statutory period will not serve to
perfect allegedly informal claims previously presented where no
informal claims for the specific year in question had actually been
filed within the statutory period. 26 U.S.C. (I.R.C. 1939) § 322
(b) (1). Rosengarten, 287.

Internal Revenue 2025

149 C. Cls.

TAXES Continued

CLAIMS FOR REFUND-Continued

LIMITATION OF ACTIONS-Continued

Amendment of claim-Continued

A purported amendment to a claim for refund of taxes which actu-
ally changes the entire basis of the original claim long after the
statutory period for filing the claim has elapsed, is not an amend-
ment but is a new claim and will be rejected as untimely. 26 U.S.C.
(I.R.C. 1939) §§ 322 (b) (1), 3772(a)(1). Sicanoff Vegetable Oil

Corp., 278,

Internal Revenue 2025

Pending litigation-effect of.

The statute of limitations applicable to the filing of a claim for
refund of taxes will not be tolled by the pendency of litigation
which has nothing to do with the particular claim. Thus, where the
litigation in question had to do with whether or not the plaintiff
corporation was a personal holding company for tax purposes and
the claim asserted beyond the statutory period involved plaintiff's
right to excess profits tax relief under a statute which had been in
effect prior to the commencement of the litigation and was applica-
ble to the plaintiff whose position had consistently been that it was
not a personal holding company and was therefore subject to excess
profits tax, there could be no tolling of the period within which
plaintiff's claim for excess profits tax relief must be filed. 26 U.S.C.
(I.R.C. 1939) §§ 322 (b)(1), 3772(a)(1). Sicanoff Vegetable Oil
Corp., 278.

The Commissioner of Internal Revenue may, under some circum-
stances, waive defects in claims for refund, but he may not pay a
claim which is actually barred by the statute of limitations appli-
cable to the filing of claims for refund. 26 U.S.C. (I.R.C. 1939)
§§ 322 (b) (1), 3772(a)(1). Sicanoff Vegetable Oil Corp., 278.

PRESUMPTIONS AND BURDEN OF PROOF.

Presumption of receipt of claim by Commissioner.

Where there is evidence of the proper preparation, addressing and
mailing of a claim for refund which the tax authorities state was
not received in the Collector of Internal Revenue's office, there
arises a presumption of receipt strong enough to overcome the pre-
sumption that a Government official has acted correctly. But where
there is a failure of proof of mailing the claim for refund, the
presumption of receipt by the Collector does not arise. Rosengarten,

149 C. Cls.

TAXES-Continued

CORPORATE DISTRIBUTIONS AND ADJUSTMENTS.
CORPORATE LIQUIDATIONS.

Gain or loss on sale or exchange.

Involuntary transfers.

The purpose of the statutory provision that if within a 12-month
period following the adoption of a plan of liquidation all of the
assets of the corporation are distributed in liquidation no gain or
loss shall be recognized to the corporation, is to exempt the corpo-
ration from liability for tax on capital gain and to collect the tax
from stockholders. The gain from involuntary conversion during
such liquidation is not subject to tax. 26 U.S.C. (1954) §§ 331, 337.
Towanda Textiles, 123.

Internal Revenue 457, 481

Where a corporation, after adopting a plan of complete liquidation,
suffers an involuntary conversion of part of its assets through a
fire, and the amount of insurance exceeds the adjusted tax basis of
the property loss, gain from such an involuntary conversion must
be deemed to be the result of a sale or exchange of a capital asset
within the meaning of section 1231 of the Internal Revenue Code of
1954, and under the provisions of section 337 of the Code which
provides that no capital gain or loss is to be recognized to a corpora-
tion in liquidation from the "sale or exchange" of its property
within the 12-month period following the date of the plan of liqui-
dation, the gain is not recognized to the corporation. Towanda
Textiles, 123.

Internal Revenue 457, 481

ESTATE TAX.

REFUND OF TAXES.

Estate tax credit based on State inheritance taxes.

Under section 813 (b) of the Internal Revenue Code of 1939, refunds
of Federal estate taxes allowed on the basis of the credit which
the estate is entitled to because of State inheritance taxes paid,
does not draw interest; but it must appear clearly that the refund
was "based on" a State inheritance tax credit. Morgan Guaranty
Trust Co., et al., Executors, 735.

Where at the time of filing and paying its Federal estate tax, the
plaintiff has claimed a credit for State inheritance taxes which it
expects to pay in an amount in excess of the State inheritance taxes
ultimately determined to be due, and where, because of other adjust-
ments, the plaintiff receives a refund of Federal estate tax, the
refund was not "based on" the State inheritance tax credit within
the meaning of section 813 (b) of the Internal Revenue Code of 1939,
and it is entitled to interest on such refund. Fahnestock v. United

States, 119 C. Cls. 41; J. P. Morgan & Co. v. United States, 136 C.
Cls. 748. Morgan Guaranty Trust Co., et al., Executors, 735.
Internal Revenue 1968

149 C. Cls.

TAXES Continued

EXCISE TAX.

CREDITS AND REFUNDS.

Allowances.

Statutes-construction and operation.

The statutory criteria of section 3441 of the Internal Revenue Code
of 1939 relative to what elements should be included in the "sale
price" subject to excise tax are different from the criteria of section
3443 of the Code relative to what constitutes a discount, rebate or
allowance on the basis of the sale price so taxed and which may
form the basis for a credit or refund of the excise tax paid. Thus,
while the manufacturer's cost of advertising his product may not
be excluded from the sale price subject to excise tax under section
3441 of the Code, a percentage of the purchase price refunded at a
later date to a purchaser of the product who fulfills his agreement
with the seller to advertise the product locally, may be an allow-
able credit against the excise tax paid on the purchase price within
the meaning of section 3443 of the Code. General Motors Corp., 749.
Internal Revenue 1143

What constitutes.

Where the seller of merchandise agrees with the buyer that if the
buyer, within a specified time, advertises the product locally and
in a prescribed manner, the seller will refund to the buyer a set
percentage of the purchase price of the article of merchandise so
advertised, the refund when made constitutes an "allowance" on
the purchase price within the meaning of section 3443 of the Inter-
nal Revenue Code of 1939 and may be used as a credit against the
excise tax paid on the purchase price by the manufacturer. F. W.
Fitch Co. v. United States, 323 U.S. 582, and Ayer Co. v. United
States, 93 C. Cls. 386, distinguished. General Motors Corp., 749.
Internal Revenue 1143

WAGERING.

What constitutes.

In order to be liable for the wagering tax imposed by section 3285
of the Internal Revenue Code of 1939 (section 471 (a) of the Revenue
Act of 1951, c. 521, 65 Stat. 452, 529), a person must be engaged in
a business in which he risks his money in a game of chance in which
he may win or lose, depending on the eventuality. Accordingly,
when a former baseball pool operator leases his premises and gives
the right to operate the pool to another for a fixed rental, he is not
engaged in the business of wagering despite the fact that he lends
the new operator working capital, permits his former employees to
work for the new operator, and sells the tickets to the new operator
for use in the new enterprise. Rahke, 33.
Internal Revenue

1085

149 C. Cls.

TAXES-Continued

INCOME TAX.

CAPITAL GAINS.

Gains or losses in case of timber or coal.

Under section 117(k) (1) of the Internal Revenue Code of 1939
providing that if a taxpayer so elects, the cutting of timber during
the year by a taxpayer who owns or has contract right to cut timber
shall be considered as a sale or exchange of the timber, the taxpayer
must have some property right in the logs cut to entitle him to
capital gains treatment. Gilmore, 54.

Internal Revenue 409.3

Where the taxpayer's contract to cut timber contained no direct
provision permitting him to sell the timber to persons of his choice
but also did not expressly forbid such a sale, it is reasonable to
conclude that the taxpayer, despite his express contractual obliga-
tion to deliver the logs to a specific dump, could have disposed of
the logs as he chose. The fact that the taxpayer did not in fact
attempt to sell the logs to anyone other than the other contracting
party is immaterial as there was no necessity to look for another
purchaser under the circumstances. Gilmore, 54.
Internal Revenue 409.3

Property held for sale to customers.

Where realty sales were made by liquidating trustees of bondholders'
property acquired on foreclosure to enforce a debt as the only means
of obtaining satisfaction, and the trustee did not delay sale of the
land in the hope of speculative increases in future prices, the sales
were made by a broker who defrayed promotion costs from commis-
sions and the trustees did not engage in extensive development
work even though it took 28 years to liquidate half of the land hold-
ings and even though the frequency and continuity of the sales dur-
ing the four years in suit would be sufficient to hold, if the decision
were dependent on such sales alone, that gains were from sales in
the ordinary course of business, the sales were sales of capital assets
and the proceeds were subject to treatment as capital gains for
tax purposes. Cebrian, 357.

Internal Revenue 409.8

CORPORATIONS.

Associations taxable as corporations.

Trusts as associations.

Whether or not an association is taxable as a corporation or as a
trust depends upon whether the association substantially resembles
a trust or a corporation under the various criteria laid down by
the courts and the regulations of the Treasury Department. Thus,
where the association does not own property as an entity, has no
continuity of existence and has no limitation on personal liability,