Equitable Considerations Held Not Applicable to Defense of Lack of Overpayment–Dysart v. United States

Taxpayer treated the proceeds of a judgment recovered in 1954 as capital gain. Although the Commissioner of Internal Revenue did not object to the capital-gain treatment, he assessed a penalty tax for failure to report the judgment in a declaration of estimated income for 1954. In 1958 the regulation providing for the penalty tax was declared invalid, and taxpayer filed a timely claim for refund. Although an independent affirmative action by the Commissioner contesting the 1954 return would have been barred by the statute of limitations, the Commissioner disallowed the refund, contending that because the proceeds of the 1954 judgment should have been treated as ordinary income, the taxpayer had not in fact overpaid his 1954 tax. On taxpayer’s motion to the Court of Claims for summary judgment, held, denied, two judges dissenting. When a taxpayer sues for a refund, the Commissioner’s right to offset against the overpayment an underpayment of tax with respect to a separate item in the same tax return is subject neither to the statute of limitations nor to equitable considerations.