Howard Sheep Co. v. Commissioner

Board of Tax Appeals

Howard Sheep Co. v. Commissioner

1 B.T.A. 966, 1925 BTA LEXIS 2736

CourtUnited States Board of Tax Appeals

DecidedApril 7, 1925

DocketDocket No. 1128.

StatusPublished

Cited by2 cases

This text of 1 B.T.A. 966 (Howard Sheep Co. v. Commissioner) is published on Counsel Stack Legal Research, covering United States Board of Tax Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook

Howard Sheep Co. v. Commissioner, 1 B.T.A. 966, 1925 BTA LEXIS 2736 (bta 1925).

Pincite

Opinion

Ivins :

The taxpayer in its income-tax return for 1918 claimed a deduction from gross income of $15,000 for officers’ salaries. The Commissioner indicated an intention of disallowing $12,600 of this deduction. The taxpayer then made application to have its tax determined under the provisions of sections 327 and 328 of the Kev-enue Act of 1918, claiming abnormality due to payment of low salaries to officers and due to the large amount of borrowed capital [967]*967used in the business. The Commissioner computed the tax under the provisions of section 328 and found a deficiency of $14,151-97. From this the taxpayer appealed claiming that, instead, its salary deductions should have been allowed.

To the taxpayer’s appeal the Commissioner filed a plea in bar (which we treat as equivalent to a motion to dismiss) claiming that the taxpayer, after having made application for special assessment, which application was granted, is estopped from questioning the Commissioner’s disallowance of its salary deduction.

The doctrine of estoppel in pais is a rule of equity that the courts are rather reluctant to apply. In order to be allowed to invoke the doctrine one must show: (1) That there has been a false representation concerning material facts; (2) that the representation was made with knowledge of the facts; (3) that the party to whom it was made must have been permissibly ignorant of the truth of the matter; (4) that the representation must have been made with the intention that it should be acted upon; and (5) it must have been acted upon to the damage of the party acting. See Bigelow on Estoppel, p. 26; Bou-vier’s Law Dictionary, tit. “ Estoppel.”

We do not think that in this case there was any misrepresentation of facts. The taxpayer represented the facts to the Commissioner as it represents them to this Board. The Commissioner refused to accept its representations, and then the taxpayer said, “Well, if you are going to disallow our salary claims, you should at least give us special assessment.” Had the relief under special assessment resulted in a sufficient reduction of the tax to satisfy the taxpayer, it would have dropped the matter, but when it found that the relief under section 328 still left it with a considerable deficiency, it decided to appeal to this Board upon its main proposition — that its salary deduction should not be disallowed. We cannot see that there has been any false representation of facts by the taxpayer, that the Commissioner was ignorant of the facts, or that the Commissioner has taken any action to his damage. Therefore the doctrine of estoppel in pais has no application.

The Commissioner’s motion to dismiss is denied, and he will be allowed twenty days in which to answer the petition.

Free access — add to your briefcase to read the full text and ask questions with AI

Ivins :

The taxpayer in its income-tax return for 1918 claimed a deduction from gross income of $15,000 for officers’ salaries. The Commissioner indicated an intention of disallowing $12,600 of this deduction. The taxpayer then made application to have its tax determined under the provisions of sections 327 and 328 of the Kev-enue Act of 1918, claiming abnormality due to payment of low salaries to officers and due to the large amount of borrowed capital [967]*967used in the business. The Commissioner computed the tax under the provisions of section 328 and found a deficiency of $14,151-97. From this the taxpayer appealed claiming that, instead, its salary deductions should have been allowed.

To the taxpayer’s appeal the Commissioner filed a plea in bar (which we treat as equivalent to a motion to dismiss) claiming that the taxpayer, after having made application for special assessment, which application was granted, is estopped from questioning the Commissioner’s disallowance of its salary deduction.

The doctrine of estoppel in pais is a rule of equity that the courts are rather reluctant to apply. In order to be allowed to invoke the doctrine one must show: (1) That there has been a false representation concerning material facts; (2) that the representation was made with knowledge of the facts; (3) that the party to whom it was made must have been permissibly ignorant of the truth of the matter; (4) that the representation must have been made with the intention that it should be acted upon; and (5) it must have been acted upon to the damage of the party acting. See Bigelow on Estoppel, p. 26; Bou-vier’s Law Dictionary, tit. “ Estoppel.”

We do not think that in this case there was any misrepresentation of facts. The taxpayer represented the facts to the Commissioner as it represents them to this Board. The Commissioner refused to accept its representations, and then the taxpayer said, “Well, if you are going to disallow our salary claims, you should at least give us special assessment.” Had the relief under special assessment resulted in a sufficient reduction of the tax to satisfy the taxpayer, it would have dropped the matter, but when it found that the relief under section 328 still left it with a considerable deficiency, it decided to appeal to this Board upon its main proposition — that its salary deduction should not be disallowed. We cannot see that there has been any false representation of facts by the taxpayer, that the Commissioner was ignorant of the facts, or that the Commissioner has taken any action to his damage. Therefore the doctrine of estoppel in pais has no application.

The Commissioner’s motion to dismiss is denied, and he will be allowed twenty days in which to answer the petition.

Cite This Page — Counsel Stack

Bluebook (online)

1 B.T.A. 966, 1925 BTA LEXIS 2736, Counsel Stack Legal Research, https://law.counselstack.com/opinion/howard-sheep-co-v-commissioner-bta-1925.

Opinion

Related

Cite This Page — Counsel Stack