Phillips v. Commissioner, 283 U.S. 589 (1931)

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Phillips v. Commissioner of Internal Revenue

No. 455

Argued April 23, 1931
Decided May 25, 1931
283 U.S. 589

CERTIORARI TO THE CIRCUIT COURT OF APPEALS

FOR THE SECOND CIRCUIT

Syllabus

1. Stockholders who have received the assets of a dissolved corporation may be compelled to discharge therefrom the unpaid federal taxes on the income and excess profits of the corporation. P. 592.

2. Under the Revenue Act of 1926, § 280(a)(1), and Act of May 29, 1928, this liability of the transferee, "at law or in equity," may be enforced summarily in the same manner as that of any delinquent taxpayer, as well as by proceedings to enforce the tax lien or by actions at law or in equity. Id.

3. The rule that the United States may collect its internal revenue by summary administrative proceedings if adequate opportunity be afforded for a later determination of legal rights applies to taxes assessed against transferees of corporate property. P. 593.

4. The procedure provided in § 280(a)(1) satisfies the requirements of due process because two alternative methods of eventual judicial review are available to the transferee: (a) he may contest his liability by bringing an action, either against the United States or the Collector, to recover the amount paid, or (b) he may avail himself of the provisions for immediate redetermination of the liability by the Board of Tax Appeals, and, if dissatisfied, may have a further review by the Circuit Court of Appeals, and possibly by this Court on certiorari. P. 597.

5. The review by the Board of Tax Appeals and the Circuit Court of Appeals is not to be deemed constitutionally inadequate because the tax may be collected while the case is before that court unless a bond is filed, or because the Board’s findings of fact are to be treated by that court as final if there is any evidence to support them. P. 599.

6. The right of the taxpayer to stay payment pending immediate judicial review, by filing a bond, is a privilege granted by the sovereign as an act of grace. Id.

7. Save as there may be an exception for issues presenting claims of constitutional right, such administrative findings on issues of fact are accepted by the court as conclusive if the evidence was legally sufficient to sustain them and there was no irregularity in the proceedings. P. 600.

8. The method of assessment and collection permitted by § 280(a)(1) was intended to apply, and is constitutionally applicable, where the transfer of assets occurred before the enactment of the Revenue Act, of 1926. P. 601.

9. Assuming that the liability "at law and in equity" of the transferees of corporate assets to meet federal taxes incurred by their corporation may vary according to the laws of the States of incorporation, this does not make the tax provision invalid either as an unconstitutional delegation of federal taxing power to the States or as a departure from the requirement of geographical uniformity. P. 602.

10. The time within which the summary proceeding to enforce liability for the tax of a corporation may be taken against a stockholder transferee of its assets is determined by the federal Act, and not by the state statute of limitations on suits against stockholders. P. 602.

11. One who receives corporate assets upon dissolution of the corporation is severally liable, to the extent of the assets received, for the payment of income and excess profits taxes of the corporation. P. 603.

12. In a summary proceeding under § 280, Revenue Act of 1926, to collect such taxes from one such transferee, the Government is not obliged to join other transferees and marshal the assets of the corporation so as to adjust the rights of the various stockholders. P. 604.

42 F.2d 177, affirmed.

CERTIORARI, 282 U.S. 828, to review a judgment affirming the action of the Board of Tax Appeals, 15 B.T.A. 1218, in sustaining certain deficiency tax assessments.