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Gulf States Steel Co. v. United States, 287 U.S. 32 (1932)

Gulf States Steel Co. v. United States

No. 24

Argued October 20, 1932

Decided November 7, 1932

287 U.S. 32


1. While a claim for abatement of a deficiency assessment was before the Commissioner of Internal Revenue, and when the period of limitation on collection was about to expire, the taxpayer, in order to secure delay and opportunity to present further proofs, filed a bond to indemnify the Collector against any resulting loss. After the period of limitation had run, the taxpayer filed a second bond, for the purpose of releasing the surety on the first and substituting a pledge of securities; then a third bond releasing the pledge and introducing another surety. Each of the later bonds recited the assessment, the pendency of the claim for abatement, and the preceding bond, and was conditioned upon payment to the Collector of such amount of the tax "as is not abated." Thereafter, the Commissioner rejected the claim for abatement and sustained the assessment, but the Board of Tax Appeals, which was not established until after the second bond had been given, held at the instance of the taxpayer that no tax deficiency existed, since collection

Page 287 U. S. 33

was barred by limitations. The United States sued on the third bond.


(1) The bonds must be construed together in the light of the circumstances. P. 287 U. S. 42.

(2) The purpose of the later bonds was to continue the protection afforded by the first against any loss from delay, whether through extinguishment of rights under the statute of limitations or otherwise. Id.

(3) The possible abatement referred to was partial reduction or annulment of the assessment by the action of the Commissioner, or, possibly, by a decision of the Board of Tax Appeals on the merits. Pp. 287 U. S. 43-44.

(4) The action of the Board of Tax Appeals, announcing the bar of the statute of limitations at the instance of the taxpayer, but not determining the merits, was not an abatement within the meaning of the bonds. P. 287 U. S. 44.

2. Section 906(e) of the Revenue Act of 1924, as amended by the Acts of 1926 and 1928, which provides that, if the assessment or collection of any tax is barred by limitations, the decision of the Board of Tax Appeals to that effect "shall be considered as its decision that there was no deficiency in respect of such tax" does not release the taxpayer and surety from a bond, given before the section was passed, for the purpose of protecting the United States from loss that might result from according the taxpayer further time within which to contest the validity of an assessment. Pp. 287 U. S. 43, 287 U. S. 45.

3. A literal construction of a statute leading to absurd results should be avoided if possible. P. 287 U. S. 45.

56 F.2d 43 affirmed.

Certiorari, 286 U.S. 536, to review the affirmance of a judgment recovered by the United States in an action on a bond.

Page 287 U. S. 34

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