Mulford v. Commissioner , 25 B.T.A. 238 ( 1932 )

COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Mulford v. Commissioner

Docket No. 33490.

United States Board of Tax Appeals

25 B.T.A. 238; 1932 BTA LEXIS 1555;

January 19, 1932, Promulgated

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1. STATUTE OF LIMITATIONS. Collection of the deficiency held not barred.

2. Id. WAIVERS - DURESS. It is not duress on the part of the Commissioner to give the taxpayer notice that he is going to use the means provided by law to assess and collect the tax. Burnet v. Chicago Ry. Equipment Co.,282 U.S. 295">282 U.S. 295.

Robert A. Littleton, Esq., for the petitioner.

C. H. Curl, Esq., for the respondent.

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BLACK

This proceeding is for the redetermination of a deficiency in income tax for the calendar year 1917, amounting to $36,354.47. The only ground of error alleged by the petitioner is that the collection of the deficiency was barred by the statute of limitations at the time it was assessed under the jeopardy assessment of December 23, 1925, and is still barred.

FINDINGS OF FACT.

Petitioner is an individual residing at Wyncote, Pennsylvania, and filed his income-tax return for the calendar year 1917 with the collector of internal revenue at Philadelphia, on March 30, 1918.

To sustain his contention that the statute of limitations has not barred the collection of the asserted deficiency, the respondent relies upon three written documents, referred to as "income and profits tax waivers."

The first of said documents bears the date of February 5, 1923, is signed by both the taxpayer and the Commissioner, and reads as follows:

INCOME AND PROFITS TAX WAIVER

In pursuance of the provisions of subdivision (d) of Section 250 of the Revenue Act of 1921 (Spencer K. Mulford) of (Wyncote, Pennsylvania) and the Commissioner of Internal Revenue, hereby consent to a determination, assessment, and collection of the amount of income, excess-profits, or war-profits taxes due under any return made by or on behalf of the said ( ) for the years ( ) under the Revenue Act of 1921, or under prior income, excess-profits, or war-profits tax Acts, or under Section 38 of the Act entitled "An Act to provide revenue, equalize duties, and encourage the industries of the United States, and for other purposes," approved August 5, 1909, irrespective of any period of limitation.

This waiver expires one year from date.

At the time this waiver was signed the only contested tax liability which petitioner had pending before the Bureau of Internal Revenue was that which related to the calendar year 1917. On December 10, 1923, petitioner signed another assessment and collection waiver in regular form covering the year 1917 and the same was filed with the Bureau on December 15, 1923. This waiver, by its terms, expired December 31, 1924. On December 8, 1924, another assessment and collection waiver concerning the year 1917, in regular form, was filed, extending the limitation for assessment and/or collection until December 31, 1925.

The additional tax which the Commissioner was asserting was assessed December 23, 1925. After the Commissioner made the assessment, a claim in abatement was filed and the same was rejected by the Commissioner in his notice of final determination dated November 4, 1927, from which notice the taxpayer brings this proceeding.

Shortly prior to December 10, 1923, James A. Councilor, certified public accountant of Washington, D.C., was employed by the taxpayer as his attorney in fact to represent him before the Bureau of Internal Revenue. On or about December 8, 1923, the said Councilor filed with the Bureau of Internal Revenue his power of attorney from the taxpayer to act as his legal representative before the Bureau in his tax matters for the year 1917. The power of attorney from the taxpayer to Councilor was the first evidence filed with the Bureau that Councilor was the legal representative of the taxpayer. On December 10, 1923, Councilor, as the legal representative of the taxpayer, received a telephone call from an official of the Bureau by the name of Phillips, who stated to said Councilor that there was on file with the Bureau an income-tax waiver by the taxpayer for the year 1917 that would expire in a short time after December 10, 1923, and that, unless a renewal waiver were filed by the taxpayer immediately, an immediate assessment of the deficiency in tax then proposed would be made. Relying on said statement of an official of the Bureau, that the taxpayer had theretofore given a waiver for the year 1917 for a later determination, assessment and collection of taxes for the year 1917, that would shortly expire, and, unless renewed, an immediate assessment of a tax would be made, the said Councilor, on December 10, 1923, wrote a letter to the taxpayer's son, Spencer K. Mulford, Jr., who was looking after his father's personal matters, including all his tax matters. Said letter was as follows:

RE: SPENCER K. MULFORD, SR.

MAHLON R. BRYAN

The Revenue Bureau is willing to grant further extensions in the above matters if new waivers are granted. The ones now on file expire about the end of this year. In the absence of such waivers they will assess the tax as it now stands. I have, therefore, told them that we would secure these waivers immediately. I am, therefore, enclosing an original and duplicate copy of such documents to be signed by both your father and Mr. Bryan. You will note that I have limited these to expire December 31, 1924. Will you please have the originals executed and returned to me at once, keeping the duplicate for your file.

The taxpayer's son received said letter of December 10, 1923, and either showed the letter to his father, or stated to him the contents, and handed to him for signing the enclosed waiver for the year 1917. The waiver enclosed in Councilor's letter of December 10, 1923, is dated as of the date of December 10, 1923, and was signed by the taxpayer and filed with the Bureau. Afterwards it was signed by the Commissioner.

When the official of the Bureau called Councilor, the taxpayer's representative, on December 10, 1923, and stated that the waiver on file by the taxpayer for 1917 was about to expire and requested the execution of a new waiver for 1917, or an assessment would be made, Councilor did not know that there was a waiver on file for 1917, and when he advised the taxpayer to execute the waiver of December 10, 1923, he relied upon the representation by an official of the Bureau that a prior waiver for 1917 had been executed by the taxpayer and was on file with the Bureau. The waiver of December 8, 1924, was executed upon the same reliance.

OPINION.

BLACK: In support of his allegation that collection of the deficiency is barred by the statute of limitations, petitioner assigns the following reasons:

1. Because the document of February 5, 1923, does not specify the year for which it was given, it is void as a waiver for the year 1917.

2. The statement by an official of the Bureau on December 10, 1923, to the taxpayer's legal representative, that there was a waiver on file for the year 1917 that would shortly expire, was the misrepresentation of an existing fact, made for the purpose of inducing the taxpayer to execute the waiver of December 10, 1923, as the renewal of a prior waiver.

3. The waiver of December 10, 1923, was induced by the misrepresentation of an existing fact; obtained under duress, and is void.

4. The waiver of December 8, 1924, is the renewal of prior void waivers, and is also void.

5. The deficiency assessed and proposed to be collected is barred by the statute of limitations, and there is no deficiency in tax due from the taxpayer for the year 1917.

The reasons relied upon by petitioner in support of his contention that the deficiency is barred by the statute of limitations are so closely related that they may be discussed together, without treating them separately. If the waiver executed by petitioner on February 5, 1923, is valid to arrest the running of the statute of limitations against collection of the tax due under petitioner's return for the calendar year 1917, admittedly petitioner's appeal fails. His whole contention that the collection of the deficiency is barred by the statute of limitations is based upon the proposition that the waiver filed February 5, 1923, is void for uncertainty.

The blank space contained in the waiver for the insertion of the year or years to which it was applicable was not filled in and petitioner contends that such space should have been filled in with the figures "1917" and that because this was not done, the waiver is void for uncertainty. We do not agree to this contention. The evidence shows that the only contested tax case which the petitioner had pending with the Bureau of Internal Revenue at the time this waiver of February 5, 1923, was signed by the petitioner and the Commissioner, related to the year 1917.

It seems perfectly plain from the facts introduced in evidence, that the waiver was intended to cover the year 1917; the Commissioner accepted it for that purpose, acted upon it, and granted petitioner the delay necessary for the further and more deliberate consideration of his claim that the additional tax liability which the Commissioner was asserting for 1917 was wrong.

The consent in writing waived the statute of limitations as to the determination, assessment and collection of the amount of taxes due under "any return made by or on behalf of the said ( ) for the years ( ) under the Revenue Act of 1921, or under prior income, excess-profits or war-profits tax or under Section 38 of the Act entitled 'An Act to provide revenue, equalize duties and encourage the industries of the United States and for other purposes', approved August 5, 1909, irrespective of any period of limitations. This waiver expires one year from date." The language would seem broad enough to waive the statute of limitations for the period of one year as to any tax return which petitioner had filed under the Revenue Act of 1921 or prior revenue acts. However, we are only called upon to decide its validity as to the year 1917 and we hold it a valid waiver for that year. In , the taxpayer had filed a waiver purporting to waive the statute of limitations as to any taxes "due under any return made by or on behalf of said taxpayer for the year 1922, seven months ended July 31 [italics supplied] under existing revenue acts or under prior revenue acts." Notwithstanding the ambiguity in the waiver, we held it valid for the calendar year 1922.

Where the taxpayer, by the execution of the waiver, has obtained delay in the collection of additional taxes and a more deliberate and thorough consideration of his claim in abatement, and where the waiver is regular in form, except in the respect which we have enumerated, and is in the possession of the proper governmental bureau, every presumption should be taken in favor of its validity and binding effect. Cf. ; .

On the authority of the above cited cases we hold the waiver of February 5, 1923, a valid waiver. The waiver of February 5, 1923, being a valid waiver, there was no duress exerted by the Commissioner in securing petitioner's signature to the renewal waiver of December 10, 1923. The Commissioner's representative, Phillips, merely stated to petitioner's legal representative that unless the waiver then on file was renewed, an immediate assessment of the tax claimed would be made against petitioner. It is not duress on the part of the Commissioner to give the taxpayer notice that he is going to use the lawful means provided by the statute to assess and collect the tax. .

The assessment made by the Commissioner against petitioner December 23, 1925, was not barred by the statute of limitations when made. The assessment having been made after the effective date of the Revenue Act of 1924, the Commissioner had six years from the date of the assessment in which to collect the tax, and the collection was not barred at the time the Commissioner rejected petitioner's claim in abatement - November 4, 1927, nor at the time petitioner filed his petition in this proceeding. Section 278(d), Revenue Acts 1924 and 1926. ; .

Decision will be entered for the respondent.