Flora v. United States

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1958 United States Supreme Court case

Flora v. United States, 357 U.S. 63 (1958), affirmed on rehearing, 362 U.S. 145 (1960), was a case in which the Supreme Court of the United States held that a taxpayer generally must pay the full amount of an income tax deficiency assessed by the Commissioner of Internal Revenue before he may challenge its correctness by a suit in a federal district court for refund under 28 U.S.C. § 1346(a)(1).[1] The Supreme Court agreed with the Commissioner of Internal Revenue , stating that the full payment rule requires the entire amount of an asserted deficiency to be paid before a refund suit may be maintained.

Importance

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If the taxpayer chooses to pay less than the deficiency asserted, the taxpayer's only remedies are (A) a deficiency proceeding in the Tax Court [2] or, (B) in a bankruptcy case, a determination under section 505(a) of the US Bankruptcy Code .[3] That rule can be a problem for a taxpayer who lets the 90-day period (following the issuance of a statutory notice of deficiency, during which he may file a Tax Court petition) expire and then cannot fully pay because of insufficient assets.