RESPONDENT: United States
LOCATION: New York State Police
DOCKET NO.: 76-1835
DECIDED BY: Burger Court (1975-1981)
LOWER COURT: United States Court of Appeals for the Sixth Circuit
CITATION: 436 US 238 (1978)
ARGUED: Feb 22, 1978
DECIDED: May 22, 1978
Bennet Kleinman - for petitioner
Deputy Solicitor General Barnett -
Facts of the case
Media for Slodov v. United StatesAudio Transcription for Oral Argument - February 22, 1978 in Slodov v. United States
Audio Transcription for Opinion Announcement - May 22, 1978 in Slodov v. United States
William J. Brennan, Jr.:
I have for an announcement number 76-1835, Slodov versus United States which is here from the Court of Appeals of the Sixth Circuit.
This is another tax case.
A food vending business withheld from it’s employees' wages some $250,000 of income and social security taxes.
The withheld moneys were not however paid over to the internal revenue service at the time required by law.
The petitioner bought the business.
The sellers told him that the $250,000 that had been withheld was on deposit in bank accounts, maintained by the business and the petitioner promptly drew checks on the accounts in favor of the Internal Revenue Service to pay over the withheld taxes.
However, the sellers had lied to the petitioner.
There wasn’t had cent in any one of the business bank accounts.
The sellers had in fact dissipated the entire $250,000 of withheld taxes and petitioner there upon requested the Internal Revenue Service for some guidance as to what to do and there was evidence that the IRS officials advised him that they had no objection to his continuing the business, so long as current taxes were paid and petitioner there upon carried on for some months and gross receipts of the business averaged a $130,000 a week.
Petitioner properly turned over withheld taxes from these current operations, the yields, the rest of them $130,000 a weekly proceeds to pay current bills for supplies, wages, inventory and wasn’t able to and didn't pay anything on the account of the $250,000 arrears.
The business finally failed leaving that full amount still owed.
There upon the petitioner who by the way is an orthodontist by trade and by profession rather than not a businessmen, instituted the proceeding for a personal arrangement under Chapter 12 of the Bankruptcy Act.
The IRS filed a claim against petitioner personally in that proceeding under Section 6672 of the Internal Revenue Code.
Now Section 6672 imposes personal liability for withheld taxes due from an employer, that personal liability and I am quoting the statute “imposed on any person required to collect on behalf of the employer truthfully account for and pay over any tax imposed by the code, that's the way statute leads.
The Court of Appeals for the Sixth Circuit held that petitioner was personally liable under that Section to pay that $250,000, rejecting petitioner’s contention that because he wasn’t the person responsible for collection of the taxes withheld had nothing whatever they do with the business when they were collected before he bought it, Section 6672 imposed no duty upon him to pay the taxes withheld and dissipated by his predecessors.
Well we disagree and we reverse the Court of Appeals.
We reject the government's argument that Section 6672 impressed a trust on the $130,000 weekly realized by petitioner while they carried on the business.
We hold that Section 6672 could make petitioner liable and respective moneys withheld before he acquired the business only to the extent that such funds were still on hand at the time he bought the business and then as I said, there wasn’t sent on him because the sellers to him, the orthodontist had dissipated all of them.
Mr. Justice Rehnquist joining the Court’s opinion has also filed a concurring opinion.
Mr. Justice White joined by the Chief Justice and Mr. Justice Blackmun dissents and has filed a dissenting opinion.