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Government's claim for additional taxes. The Supreme Court
explained this as follows:
If the claim for income tax deficiency had been the
subject of a suit [by the Government], any counter
demand for recoupment of the overpayment of estate tax
could have been asserted by way of defense and credit
obtained notwithstanding the statute of limitations had
barred an independent suit against the Government
therefor. This is because recoupment is in the nature
of a defense arising out of some feature of the
transaction upon which the plaintiff's action is
grounded. Such a defense is never barred by the
statute of limitations so long as the main action
itself is timely.
The circumstance that both claims, the one for
estate tax and the other for income tax, were
prosecuted to judgment and execution in summary form
does not obscure the fact that in substance the
proceedings were actions to collect debts alleged to be
due the United States. It is immaterial that in the
second case, owing to the summary nature of the remedy,
the taxpayer was required to pay the tax and afterwards
seek refundment. This procedural requirement does not
obliterate his substantial right to rely on his cross-
demand for credit of the amount which if the United
States had sued him for income tax he could have
recouped against his liability on that score. [Bull v.
United States, 295 U.S. at 262-263; fn. ref. omitted.]
In Bull v. United States, supra, and United States v. Dalm,
494 U.S. at 602-605, the Supreme Court made it clear that the
purpose of "equitable recoupment" was to replicate the role that
"recoupment" would have played had the Government actually
brought suit to collect the additional tax. It is instructive
then to look at how recoupment would have applied if the
Government had brought suit to collect the additional estate tax
liability that it claimed as a deficiency in the instant case.
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