United States v. Dixieline Financial, Inc.

Section 3505(b) of the Internal Revenue Code of 1954 (the Code), 26 U.S.C. § 3505 (b), imposes liability on one who supplies funds to an employer to enable him to meet a payroll, knowing that the employer does not intend to, or will be unable to pay the taxes required to be withheld and paid to the government. The liability imposed is equal to the amount of tax due and unpaid. The Code, § 6501(a), requires that “the amount of any tax imposed by this title shall be assessed within 3 [three] years after the return was filed * * * and no proceeding in court without assessment for the collection of such tax shall be begun after expiration of such period.” -

The question presented here is whether § 6501(a) applies to the liability created by § 3505(b) and requires, as a condition to suit, that that liability be assessed within three years against the supplier of funds.

Appellee, Dixieline Financial, Inc. (the supplier), in 1970 loaned money to Framing Systems, Inc. (the employer). The latter company filed its Employer’s Quarterly Federal Income Tax Returns for the third and fourth quarters of 1970 but failed to pay the amount of taxes withheld from wages when due. Timely assessments…