Unpublished Disposition, 889 F.2d 1096 (9th Cir. 1989)

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U.S. Court of Appeals for the Ninth Circuit - 889 F.2d 1096 (9th Cir. 1989)

James L. SIMS and Margaret Sims, Husband and Wife,Plaintiffs-Appellants,v.UNITED STATES of America, Defendant-Appellee.

No. 88-4047.

United States Court of Appeals, Ninth Circuit.

Submitted Oct. 23, 1989.* Decided Nov. 27, 1989.

Before ALARCON, O'SCANNLAIN and LEAVY, Circuit Judges.


* Taxpayers James L. and Margaret Sims brought this refund action seeking to recover income tax paid on their joint 1979 return and interest on the payment. The Sims appeal the district court's order of summary judgment in favor of the United States. We affirm.


It is long-settled law that a taxpayer, who has used a valid method of reporting a gain on his tax return, has no right to amend his return to use instead another method of reporting the gain. See Pacific National Co. v. Welch, 304 U.S. 191, 194-95 (1938) ("By reporting income from the sales in question according to the deferred payment method, petitioner made an election that is binding on it and the commissioner"); Mamula v. Commissioner, 346 F.2d 1016, 1018 (9th Cir. 1965) ("Once a taxpayer makes an election of one of two or more alternative methods of reporting income, he should not be permitted to convert, of his own volition, when it later becomes evident that he has not chosen the most advantageous method"). The reasons are simple: To allow amendment at the taxpayer's option "would require recomputation and readjustment of tax liability for subsequent years and impose burdensome uncertainties upon the administration of the revenue laws. It would operate to enlarge the statutory period for filing returns to include the period allowed for recovering overpayments." Pacific National, 304 U.S. at 194 (citations omitted).

The Sims do not dispute that, on their original 1979 return, they reported the Rogers and Berkenshire sales under the closed-transaction method. Because this is a valid reporting method, the Sims therefore fall within the Pacific National rule. Their attempts to distinguish Pacific National on the ground that they made a mistake of fact (viz., not knowing how to report under the installment method) are unavailing. There is no mistake-of-fact exception to the rule, nor would the rationales underlying it (efficient administration and prevention of the effective enlargement of the period for filing returns) admit of such an exception. Similarly unhelpful to the Sims are their attempts to fall within the Mamula corollary to the Pacific National rule. Mamula held that amendment of returns is permissible where the failure to use the installment method on the original return was due to the use of an alternative invalid method of reporting gains. See 346 F.2d at 1019 (noting also that this did not run afoul of the Pacific National rule because " [a] recalculation is necessary no matter which method is adopted"). Because the Sims did not employ an invalid method, they do not fit under Mamula.



The panel unanimously finds this case suitable for submission on the record and briefs and without oral argument. Fed. R. App. P. 34(a), Ninth Circuit Rule 34-4


This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by Ninth Circuit Rule 36-3