186 Opinion of the Court formerly had before us a suit for rent under the same lease for a prior period, for which we had given judgment. We held that the defendant was not precluded from raising defenses in the second suit which it had not raised in the first, since the causes of action were different, citing, among other cases, Cromwell v. County of Sac, 94 U. S. 351, where this question is fully discussed. In Tait v. Western Maryland Railway Co., supra, a tax suit involving amortization of discount on bonds, the court discussed the petitioner's suggestion that he was not bound by a former decision on the same question for a prior year, because "significant facts were stipulated in the present case which were not made to appear in the former proceeding." The Court found that the facts in the two proceedings were the same, but clearly indicated that had they been different, the former judgment would not have been res judicata. It said: The petitioner may not escape the effect of the earlier judgment as an estoppel by showing an inadvertent or erroneous concession as to the materiality, bearing or significance of the facts, provided, as is the case here, the facts and the questions presented on those facts were before the court when it rendered its judgment. [Italics ours.] Where the causes of action are the same, plaintiff on the second trial will not be permitted to introduce additional or even newly discovered evidence, because this would be in effect a rehearing of a case already tried by a tribunal of concurrent jurisdiction. But where the causes of action are different, and the question presented has not been decided on account of a failure of proof, the plaintiff has not had its day in court and, therefore, may present any additional evidence it may find to support its claim. It is evident from a reading of the opinion of the Board of Tax Appeals in this case that the plaintiff in introducing its proof proceeded upon the theory that the transaction between it and the Harvey Coal Company was a nontaxable reorganization, because proof seems to have been introduced as to the cost of these assets to its predecessor, the Harvey Opinion of the Court 92 C. Cls. Coal Company, but no proof was introduced as to the cost of them to the plaintiff. The Board, however, held that the transaction was not a reorganization and, therefore, that the question was the cost of the assets to the plaintiff, and not their cost to its predecessor. The plaintiff, having taken a different view of the transaction, had introduced no such proof and, therefore, and for this reason only, its claim for depreciation was denied. It would be manifestly inequitable to hold that under such circumstances this would preclude it from introducing proof of such cost in a suit to recover taxes for later years. We hold, accordingly, that the decision of the Board of Tax Appeals is not res judicata as to the cost of these assets to petitioner. Depreciation on them will be allowed based on a cost of $139,204.93 and a remaining useful life of fifteen years. The defendant says that the plaintiff abandoned certain assets in 1925, 1926, and 1927, and that the depreciation subsequently allowed on these assets should now be restored to income. We think this is correct. As stated above, the plaintiff acquired the assets of the Harvey Coal Company in return for its stock and the assumption of liabilities amounting to $52,086.16. The Commissioner prorated this sum over the fifty-five months remaining of the Hazard-Jellico Coal Company lease and allowed plaintiff a deduction accordingly in each year. This was erroneous. Whatever amount has been deducted for the years in question on account of the assumption of these liabilities of $52,086.16 will be restored to plaintiff's income for the proper year. Entry of judgment will be delayed until the filing of a stipulation by the parties, or in the absence of a stipulation, until the incoming of a report by a commissioner as to the correct amount due plaintiff, if any, computed in accordance with this opinion. It is so ordered. LITTLETON, Judge; GREEN, Judge; and WHALEY, Chief Justice, concur. 201 Reporter's Statement of the Case CENTRAL HANOVER BANK & TRUST COMPANY, HERBERT J. MARX AND WILLIAM L. HERNSTADT, EXECUTORS OF THE ESTATE OF LEOPOLD NEWBORG, DECEASED, v. THE UNITED STATES [No. 44896. Decided December 2, 1940] On the Proofs Income tax; individual losses on securities offset against partnership profits. Following the decision in Neuberger v. Commissioner, 311 U. S. 83, it is held that under section 23 (r) of the Revenue Act of 1932, a loss sustained by the taxpayer, engaged in the business of trading in securities, on his individual transactions in stocks and bonds held for 2 years or less may be offset against his share of partnership profits realized from similar transactions during the same period. The Reporter's statement of the case: Mr. Wilbur H. Friedman for the plaintiffs. Mr. J. W. Hussey, with whom was Mr. Assistant Attorney General Samuel O. Clark, Jr., for the defendant. Messrs. Robert N. Anderson, Fred K. Dyar, and John A. Rees were on the brief. The court made special findings of fact as follows, upon the stipulation of the parties: 1. Plaintiffs are the executors of the will of Leopold Newborg, who was a citizen of the United States prior to the date of his death on March 22, 1938. 2. Plaintiff, Central Hanover Bank & Trust Co., is a domestic corporation, the address of which is 70 Broadway, New York City, New York. Plaintiffs, Herbert J. Marx and William L. Hernstadt, are citizens of the United States, whose addresses, respectively, are 30 Broad Street and 42 Broadway, New York City, New York. 3. Prior to Leopold Newborg's death on March 22, 1938, he was sole owner of the claim involved, and the claim constituted a part of his estate. The claim has never been assigned. Plaintiffs and Leopold Newborg have at all times borne true allegiance to the Government of the United Reporter's Statement of the Case 92 C. Cls. States and have not voluntarily aided, abetted, or given encouragement to rebellion against the Government. 4. On March 15, 1934, Leopold Newborg, hereinafter referred to as taxpayer, filed an income tax return for the calendar year 1933 with the Collector of Internal Revenue for the second New York District, showing no tax due. 5. During the year 1933 taxpayer was engaged in the business of trading in securities. He was a member of the New York Stock Exchange. He was also a member of the partnership of Newborg & Co., which likewise traded in securities. As a partner in this firm, taxpayer shared in the profits and losses of the business to the extent of 75%. 6. Taxpayer individually maintained four accounts on the books of the partnership, three of which represented classes of securities held for him, and the fourth represented free funds left with the firm by him. The firm charged taxpayer interest on the debit balances and paid him interest on the credit balances of these accounts at the rate of 3% per annum. During the first six months of 1933 there was an excess debit balance in respect of these four accounts. 7. During the year 1933 taxpayer's share of profits of the partnership was $97,880.31, of which amount $19,260.16 represented taxpayer's share of the profits realized by the partnership from trading in securities owned by the partnership and held by it less than two years. On taxpayer's 1933 return the sum of $19,260.16 was offset by losses incurred by the taxpayer in the course of his individual business on the sale of securities owned by him individually and held less than two years. 8. During the year 1933 taxpayer realized a profit of $1,887.44 on the sale of United States Government bonds owned by him individually and held for less than two years. On his return taxpayer offset this sum of $1,887.44 by losses incurred by him on the sale of other stocks and bonds owned by him individually and held for less than two years. The transactions referred to in this paragraph were made in the course of taxpayer's individual business of trading in securities. 9. The Commissioner of Internal Revenue added the aforesaid sums of $19,260.16 and $1,887.44 to taxpayer's 201 Reporter's Statement of the Case income upon the authority of Sections 23 (r) and 23 (t) of the Revenue Act of 1932. 10. During the year 1933 taxpayer paid to the partnership of Newborg & Co. interest in the net amount of $1,837.03 on debit balances arising out of the purchase and carrying for taxpayer's account of Government bonds. This amount of $1,837.03 was deducted by the taxpayer on his 1933 return as interest paid, and was included in the net income shown on the 1933 partnership return of Newborg & Co. The Commissioner of Internal Revenue denied taxpayer the deduction claimed for the aforesaid sum of $1,837.03, upon the authority of Section 23 (b) of the Revenue Act of 1932. (47 Stat. 169.) 11. During the year 1933 taxpayer paid brokerage commissions to the partnership in the amount of $279.25 on the sale of securities held individually by him for less than two years and on which he incurred a loss. These commissions were not separately deducted on taxpayer's return but were included in the net income shown in the 1933 partnership return of Newborg & Co. 12. During the year 1933 taxpayer paid brokerage commissions to the partnership in the amount of $197.50 on the purchase of securities individually held by him and which he sold during 1933 at a loss. These commissions were not separately deducted on taxpayer's return but were included in the net income shown in the 1933 partnership return of Newborg & Co. 13. Because of adjustments to income occasioned by the foregoing transactions and because of other adjustments not here in controversy, taxpayer was assessed an additional tax for the year 1933 in the amount of $3,423.36, which amount, plus interest of $389.51, was paid on February 24, 1936. 14. On February 8, 1938, taxpayer filed a claim for refund a copy of which is attached to the petition marked Exhibit A and by reference is made a part hereof. 15. Except to the extent of $1,303.17 with respect to items not here in controversy, the claim for refund was rejected by registered letter from the Commissioner of Internal Revenue under date of September 8, 1938. |