United States v. Dalm

PETITIONER: United States
RESPONDENT: Dalm
LOCATION: California Superior Court, Marin County

DOCKET NO.: 88-1951
DECIDED BY: Rehnquist Court (1988-1990)
LOWER COURT: United States Court of Appeals for the Sixth Circuit

CITATION: 494 US 596 (1990)
ARGUED: Jan 10, 1990
DECIDED: Mar 20, 1990

ADVOCATES:
Christine Desan-husson - on behalf of the petitioner
Robert B. Pierce - on behalf of the Respondent

Facts of the case

Question

Media for United States v. Dalm

Audio Transcription for Oral Argument - January 10, 1990 in United States v. Dalm

Audio Transcription for Opinion Announcement - March 20, 1990 in United States v. Dalm

William H. Rehnquist:

The opinion of the Court in No. 88-1951, United States against Dalm will be announced by Justice Kennedy.

Anthony M. Kennedy:

United States versus Dalm is a tax case.

In 1976 and 1977, the respondent, Frances Dalm, receives two payments from the estate of her deceased employer.

She treated both payments as gifts and paid gift tax on one of the payments.

Some years later, while auditing her income tax returns, the IRS determines that the payment should have been treated as income for her services as administratrix of the estate.

She challenged the IRS determination that she owed additional income tax in the Tax Court.

Now, this litigation over her income tax liability eventually settled with Dalm paying some additional income tax.

Based upon the income tax payments, Dalm filed a claim for refund of the gift tax.

The IRS denied her claim and she sued in Federal Court for a refund.

She contended that under the theory of equitable recoupment, she was entitled to a refund of the gift tax because the estate tax payments have been taxed twice under inconsistent theories.

The District Court dismissed her suit on the ground that the statute of limitations for seeking a refund of the gift tax are already run.

The Court of Appeals for the Sixth Circuit reversed holding that the doctrine of equitable recoupment applied and constituted an exception to the statute of limitations.

In an opinion filed today with the Clerk, we reverse the judgment of the Court of Appeals.

We hold that the doctrine of equitable recoupment is not an exception to the statute of limitations and does not by itself grant the District Court jurisdiction to entertain a refund suit.

The doctrine maybe used to reconcile inconsistent taxes when one of the taxes is properly within the court’s jurisdiction.

But in this case, Dalm litigated her liability for income tax and then in a separate proceeding, attempted to litigate her equitable recoupment claim.

The doctrine of equitable recoupment cannot justify such a fragmented approach.

Justice Stevens has filed a dissenting opinion in which Justices Brennan and Marshall join.