- 34 -
The Court of Claims reversed the trial court and held for
the taxpayers, stating that it was obliged by Rothensies v.
Electric Storage Battery Co., 329 U.S. 296 (1946), to give the
single-transaction requirement a narrow, inflexible
interpretation. See Wilmington Trust Co. v. United States, 221
Ct. Cl. 686, 610 F.2d 703, 713 (1979). In finding that the
single-transaction requirement was not satisfied, the court
stated:
The income tax refund is based upon the
deductibility from ordinary income of the timber
operations expense. The estate tax deficiency,
however, exists because the estate deducted the
additional income taxes reflecting those expenses that
it paid and now is recovering. The recoupment claim
thus arises from a different transaction (the reduced
deduction from the estate tax) than the refund claims
(the increased deductions from ordinary income). The
government is not seeking to offset against each other
two taxes levied on the same transaction, but to offset
the tax on one transaction against the tax on another.
* * * [Id. at 714.]
Thus, although the precipitating transaction was the
deduction of the business expenses, the Court of Claims did not
find this sufficient.18
In 1939, the taxpayers (children) in Ford v. United States,
149 Ct. Cl. 558, 276 F.2d 17 (1960), received stock in a closely
18Academic commentators have almost invariably supported the
Herring-Bowcut analysis over the conclusion of the Court of
Claims. See Andrews, supra at 630-650; Willis, "Some Limits of
Equitable Recoupment, Tax Mitigation, and Res Judicata:
Reflections Prompted by Chertkof v. United States", 38 Tax Law.
625, 642-645 (1985).
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