Action by Frederick W. Schramm against the United States to recover income taxes paid.

Petition ordered dismissed.

This case having been heard by the Court of Claims, the court, upon the stipulation of the parties, makes the following special findings of fact:

1. During the years 1923 to 1925, plaintiff purchased 102 shares of the capital stock of Schramm Manufacturing Company. On January 10, 1928, plaintiff purchased an additional 102 shares, increasing his holdings to 204 shares out of 1,000 shares outstanding. These shares were purchased at an aggregate price of $20,400.

2. On December 31, 1928, the Schramm Manufacturing Company was dissolved and its assets transferred to a trustee who was to liquidate them and distribute the proceeds to the stockholders. The distribution of the proceeds was made by the trustee during the year 1929 and plaintiff received as his share of such distribution $52,110.26, representing a profit to him over the purchase price of $31,710.26.

3. On March 12, 1930, plaintiff filed his income-tax return for the year 1929, showing a net taxable income of $38,729.84, included in which were items totaling $31,670.26, reputedly representing plaintiff's profits from the liquidation of the Schramm Manufacturing Company. The tax disclosed by the return was paid in installments as follows:

March 12, 1930 .................. $595.83 June 16, 1930 ................... 595.83 September 10, 1930 .............. 595.82 December 13, 1930 ............... 595.82

Upon examination by the Bureau of Internal Revenue of the plaintiff's return, an additional tax of $172.41 was assessed, which, together with interest of $16.86, was paid October 30, 1931.

4. By a letter dated February 24, 1931, the Commissioner of Internal Revenue advised the Schramm Manufacturing Company of a deficiency in tax of $21,137.36 for the year 1928, due primarily to restoring to 1928 gross income the profit on the sale of the assets of the corporation transferred to the trustee and sold by him in 1929. Since the corporation possessed no assets in 1931 from which to pay this tax, the distributees of the proceeds of the sale contributed to the corporation sufficient funds to pay the tax plus interest thereon, and plaintiff contributed in that year as his share the sum of $4,868.05. In the year 1934 it was stipulated by the interested parties and the Commissioner of Internal Revenue that, since the sale of the corporate assets had taken place in 1929, the deficiency was properly assessable for that year rather than 1928. As a result of that agreement, the corporation received a refund, of which plaintiff's share amounted to $720.93.

5. On December 15, 1931, plaintiff filed a claim for refund for the year 1929 with the Collector of Internal Revenue at St. Louis, Missouri, in the amount of $660.54, assigning the following grounds therefor: "This taxpayer was a stockholder in the Schramm Mfg. Co., and as such received a share of the physical assets when said company was dissolved prior to the close of 1928. These assets were later sold at a considerable profit, and this taxpayer's share thereof was duly reported as income. The Commissioner contends this income belonged to the corporation; that the corporation should have paid a tax thereon of approximately $24,000.00. It follows that, if the Commissioner is correct, then this taxpayer has overpaid his tax by his proportionate share of this $24,000.00."

6. Plaintiff's claim for refund was rejected by the Commissioner of Internal Revenue December 1, 1936, on the ground that the income taxed was received under a claim of right and without restriction as to its disposition, and as the plaintiff kept his books on the cash receipts and disbursements basis, was taxable in the year in which it was received notwithstanding the plaintiff might subsequently have been required to pay part of the amount received to another.

PER CURIAM.

The sole question presented to the court for determination is whether profit derived by the plaintiff during the year 1929 as a liquidating dividend was properly included in his gross income for that year in its entirety, notwithstanding the fact that he was obliged to return a portion thereof to the corporation during the year 1931 to satisfy an additional assessment by the Commissioner for the year 1928. The findings show that the amount of the liquidating dividend distributed to the plaintiff in 1929 was received by him without restriction or limitation on its use or disposition. It was acquired under a claim of right and without knowledge of any infirmity of title. As this situation existed at the close of the year 1929, the amount of profit in the liquidating dividend constituted income for that year.

The fact that plaintiff during the year 1931 was obliged to restore to the corporation a portion of the amount received by him in 1929 to satisfy in part an additional assessment by the Commissioner of Internal Revenue for the year 1928 does not alter the amount of plaintiff's gross income for the year 1929 but may afford a basis for a deduction from gross income in 1931.

In North American Oil Consolidated v. Burnet, 286 U.S. 417, 424, 52 S.Ct. 613, 615, 76 L.Ed. 1197, the Supreme Court said: "If a taxpayer receives earnings under a claim of right and without restriction as to its disposition, he has received income which he is required to return, even though it may still be claimed that he is not entitled to retain the money, and even though he may still be adjudged liable to restore its equivalent [citing other authorities]."

The rule laid down above has been followed in other cases and repeated by the Supreme Court in Heiner v. Mellon, 304 U.S. 271, 58 S.Ct. 926, 82 L.Ed. 1337.

Plaintiff's petition must be dismissed and it is so ordered.