HOLMES AND BREWSTER'S George Edwin Federal Tax Appeals BY KINGMAN BREWSTER of the Massachusetts and District of Columbia Bars and JAMES S. Y. IVINS of the New York and District of Columbia Bars JOHN BYRNE & CO. Washington, D. C. 1927 PREFACE The inauguration of a Federal system of income taxation, under the Sixteenth Amendment, by the Revenue Act of 1913, brought into existence a new and important branch of the law. In the formulation of the four successive Revenue Acts of 1916, 1917, 1918, and 1921, legislative attention was directed of necessity to those provisions clarifying and amplifying the substantive matters of income, excess, and war-profits taxes. Little consideration was given to the administrative provisions of the law until the 1921 Act had been in force for some three years. In the Revenue Act of 1924 Congress, for the first time, incorporated that principle in taxation long since announced by Adam Smith as fundamental - namely, that the assessment and collection of taxes should be administered by separate bodies of the Government. The Board of Tax Appeals was created as an independent tribunal to which a taxpayer, in specific instances, might resort for the determination of his tax liability before payment. This important innovation entirely changed the procedure in Federal tax cases. Although declared by the statute to be an agency of the Executive Branch of the Government, the Board has functioned under a procedure that has been judicial both in form and effect. In every practical sense, the Board of Tax Appeals is a court in which both the taxpayer and the Commissioner of Internal Revenue are parties litigant. The taxpayer strives for a determination of his tax liability so that an assessment cannot be authorized, or, in some cases, so that a refund may be ordered. The Commissioner contends for a decision which would permit assessment and collection. The Board, just as a court, determines the issue. The experience of practitioners before the Board under the Revenue Act of 1924 emphasized several matters meriting remedial legislation. The review of the revenue laws by the last Congress afforded an opportunity for the correction of those apparent defects in the system. The most important change provided in the Revenue Act of 1926 was to eliminate the Federal district courts as a step in the process of review of the Board's decisions, and to permit a direct review by the circuit courts of appeals. This change places the Board on a basis of dignity and responsibility equivalent to that of the district courts. The taxpayer after the receipt of a 60-day letter is given an election either to pay the tax and proceed as formerly before a district court or the Court of Claims, or not to pay the tax and resort to the Board for its determination. Furthermore, a taxpayer may pay the tax, and notwithstanding, continue his appeal to the Board. With the availability, under the present system, of several judicial tribunals for the ultimate determination of income tax and estate tax liability, the authors have endeavored in this work to cover the entire field of procedure in relation to tax appeals. In revising their previous volume on "Procedure and Practice Before the Board of Tax Appeals," it has become necessary, by reason of these statutory changes, to set forth the procedure in all branches of the Government with respect to the determination, assessment, and adjustment of income and estate taxes. The present volume, accordingly, embraces a discussion on practice and procedure: (1) In the Bureau of Internal Revenue, (2) Before the Board of Tax Appeals, and (3) In the several Federal courts. It is hoped that this volume may meet with as cordial a reception as the first edition, and that it may prove as helpful to the practitioner in this technical field. The authors desire to acknowledge their indebtedness to O. R. Folsom-Jones, of the District of Columbia Bar; to Jacob Mertens, Jr., of the New York Bar, and to Edmund S. Kochersperger, of the Massachusetts Bar, for their helpful suggestions and aid in the preparation of this edition. 815 Fifteenth St., N. W., Washington, D. C. KINGMAN BREWSTER, |