United States v. Dalm

Frances Dalm (plaintiff) was Harold Schrier’s secretary for many years. When Schrier passed away, his brother wanted Dalm to be the administrator of Schrier’s estate. Dalm was paid for her administrative duties by both the estate and the brother. On her taxes, Dalm claimed these payments as gifts and paid the appropriate gift tax. The Internal Revenue Service (IRS) audited Dalm and determined that the gifts should not have been taxed as gifts, but rather as income. Dalm petitioned the tax court for a redetermination. Dalm and the IRS reached a settlement for the income-tax deficiencies. Dalm then promptly filed a claim with the IRS to recover the previously paid gift tax. However, the statute of limitations to bring a claim for an overpaid tax refund had already run. The IRS did not act on Dalm’s claim. Dalm brought suit against the United States government (government) (defendant) in the United States District Court for the Western District of Michigan, seeking a refund. The government filed motions to dismiss and for summary judgment. The district court granted the motions, finding a lack of jurisdiction because the statute of limitation had run. The United States Court of Appeals for the Sixth Circuit reversed, holding that the district court could exercise jurisdiction under a theory of equitable recoupment. The United States Supreme Court granted the government’s petition for certiorari.