ment.5 Where a person accepts from the Government without objection a refund of a sum illegally exacted he gives up his right to sue for interest.52 The ground for refusal to allow interest is the presumption that the Government is always ready and willing to pay its ordinary debts. When, however, an illegal tax has been collected, the citizen who has paid it, and has been obliged to bring suit against the collector, is entitled to interest in the event of recovery from the date of the illegal exaction.53 In a case where there had been a delay of thirty years in prosecuting a claim to recover internal revenue taxes, interest was not allowed from the date of payment of the taxes, but was allowed from the time of commencing the suit.54 It seems clear that in a suit against a collector of internal revenue interest may be recovered whether or not the same rule applies to suits against the United States.55 On recovery of a judgment against a collector of internal revenue for the amount of an internal revenue tax illegally collected, the plaintiff is entitled to have the judgment state that it is with interest.56 Where judgment is recovered in an action against a collector, interest may be recovered up to the time final judgment is entered and a certificate from the trial court that there was probable cause for the collection of the tax has been given. Upon giving such certificate the claim becomes one against the United States, stopping the right to further interest, unless a review of the judgment by an appellate court is obtained, in which event

51 U. S. v. Bayard, 127 U. S. 260, 8 Sup. Ct. Rep. 1156. 52 Stewart v. Barnes, 153 U. S. 456.

53 Erskine v. Van Arsdale, 15 Wall. 75.

54 Burrough v. Abel, 105 Fed. 366.

55 Conant v. Kinney, 162 Fed. 581.

56 New York Mail and Newspaper Transportation Company v. Anderson, 234 Fed. 590.

the judgment upon the mandate of the appellate court will be treated as a final judgment, to the rendition of which interest will be allowed, unless the plaintiff unduly delays the presentation of his claim.57 A suit against a collector is a private suit and there is no claim against the Government until a certificate of probable cause, under Section 989, Revised Statutes, has been obtained from the court, at which time the Government assumes a definite liability of the collector, which does not include the payment of interest thereafter; neither is there any further personal liability on the part of the collector. The interest which may be recovered is that put into the judgment before there is any certificate of probable cause, and if none has been put in, the Government assumes no part of the liability of the defendant. The liability assumed by the Government includes interest and costs forming part of the recovery, but does not include interest after judgment.58

Costs. Section 3220 of the Revised Statutes authorizes the Commissioner of Internal Revenue to repay to any collector or deputy collector the full amount of such sums of money as may be recovered against him in any court, for any internal taxes collected by him, with the cost and expenses of suit; also all damages and costs recovered against any collector, deputy collector, or inspector, in any suit brought against him by reason of anything done in the due performance of his official duty. Under this section costs may be recovered against the collector.59 Judgment is usually given in the District Court for costs and interest.

57 Klock Produce Co. v. Hartson, 212 Fed. 758.

58 White v. Arthur, 10 Fed. 80.

59 De Bary v. Carter, 102 Fed. 130. However, see Treat v. Farmers Loan and Trust Company, 185 Fed. 760, 763, as to costs in the Supreme Court and Circuit Court of Appeals.

F. I. Tax.-29

1

CHAPTER 40

INFORMATION AT THE SOURCE

A new administrative provision added to the 1916 Law requires that information be furnished by brokers as to their customers, by corporations as to dividend payments and interest payments, by first collection agencies as to foreign items, and by persons, corporations and partnerships generally as to payments of income to others, in order that the Treasury Department may have data on which to audit the returns of annual net income. Rulings and regulations applying these provisions have not been issued at the time of this writing. The several classes of payments which are required to be reported, and the provisions with respect to each, are discussed in the following paragraphs.

Miscellaneous Income, Gains and Profits. Payments of interest, rent, salaries, wages, premiums, annuities, compensation, remuneration, emoluments, or other fixed or determinable gains, profits and income of $800 or more in any taxable year must be reported. "Fixed or determinable gains, profits and income" as used in this section would seem to include payments of all the kinds expressly enumerated and all payments of a simi

1 Act of September 8, 1916, §§ 26, 27 and 28, added by Act of October 3, 1917.

lar kind or nature. In the case of collection at the source the payments must be annual or periodical, while in the case of information at the source the law does not contain such limitation. Hence any payments of the kind described, whether made in isolated cases or from time to time, must be reported. It is immaterial whether or not an employee is employed for the full year or his wages are fixed in advance or paid according to the amount of work he does. The only exception is in the case of payments which do not amount to $800 or more in any taxable year. If the aggregate of several payments made to the same payee equals or exceeds $800 in any taxable year the gross amount should be reported. The payments may be from different forms of income, as, for instance, from interest and rent, or interest and salary. In such cases, it seems, the total is required by law to be reported, if the aggregate of all payments in the year to the same payee equal or exceed $800. The income required to be reported under this provision of the law and subject to the minimum limitation of $800 does not include any of the classes of income specifically required to be reported as indicated in the following paragraphs.3

Gains and Losses of Customers of Brokers. Every person, corporation, partnership or association, doing business as a broker on any exchange or board of trade or other similar place of business, is required to disclose to the Commissioner of Internal Revenue the names of customers for whom such broker has trans

2 Letter from Treasury Department dated October 25, 1917; I. T. S. 1917, ¶ 2470.

3 Act of September 8, 1916, § 28, added by Act of October 3,

acted any business, with such details as to the profits, losses, or other information which the Commissioner may require, as to each of such customers.4

Dividends on Stock of Taxable Corporations. Every corporation subject to the tax imposed by the 1916 Law is required to disclose its payments of dividends, whether made in cash, or its equivalent, or in stock. including the names and addresses of stockholders and the number of shares owned by each, and the tax years and the applicable amounts in which such dividends were earned.5

It

Dividends on Stock of Foreign Corporations. seems that the law contemplates that if the foreign corporation is a "resident" corporation, subject to the tax imposed by the 1916 Law, having an office or place of business in this country, and paying its dividends from such office in this country, it shall report its dividend payments in the same manner as indicated in the preceding paragraph. When dividends from stock of foreign corporations are not payable in the United States the duty of reporting the name of the payee falls upon the first collection agency collecting such foreign payment.

Interest on the Obligations of Domestic Corporations. In the case of payments of interest upon bonds and mortgages or deeds of trust or other similar obligations of corporations the name of the payee is to be reported regardless of the amount of interest paid."

4 Id. § 27.

5 Id. § 26. 6 Id. § 28. 7 Id. § 28.