Lieber v. Commissioner , 13 B.T.A. 1175 ( 1928 )

COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Lieber v. Commissioner

Docket Nos. 9720, 9721, 19163.

United States Board of Tax Appeals

13 B.T.A. 1175; 1928 BTA LEXIS 3094;

October 23, 1928, Promulgated

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Bonds do not have the effect of extending the period for the assessment or collection of taxes.

Charles D. Hamel, Esq., and R. S. Doyle, Esq., for the petitioners.

A. H. Murray, Esq., for the respondent.

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TRAMMELL

These proceedings are for the redetermination of deficiencies in income taxes for the year 1917, in the case of Docket No. 9720 and Docket No. 9721, and for the year 1918 in the case of Docket No. 19163, in the amounts of $7,997.82, $8,410.36, and $13,534.70, respectively.

The three proceedings were consolidated for the purpose of hearing and decision and the hearing of these proceedings was limited to the question as to whether the deficiencies are barred by the operation of the statute of limitations.

FINDINGS OF FACT.

H. W. Lieber and Carl Muller, Executors of the Estate of Carl Muller, Docket No. 9720 - Year 1917.

Carl Muller, the decedent, filed with the collector of internal revenue on March 30, 1918, his income-tax return for the calendar year 1917, showing a tax liability of $16,859.70, which was duly paid.

The respondent, on March 6, 1923, made a jeopardy assessment of taxes against Muller for the calendar year 1917 in the amount of $12,517.20 and notified him of said assessment by letter dated March 19, 1923, and on April 5, 1923, Muller filed with the collector of internal revenue a claim in abatement in the full amount of said jeopardy assessment.

The respondent, on January 7, 1925, issued a certificate of overassessment for 1917 in the amount of $4,519.38, which amount was abated. On January 19, 1925, the collector demanded payment of the balance of $7,997.82 of the said jeopardy assessment made on March 6, 1923, together with $1,199.67 interest thereon, and Muller, through his attorney, caused to be executed and filed with the collector, under threat of the collection of the said tax and interest by warrant of distraint, an instrument in which Muller was described as principal and the Fidelity & Deposit Co. of Maryland was described as surety, together with a claim in abatement for the said tax and interest. The instrument is as follows:

KNOW ALL MEN BY THESE PRESENTS:

That, CARL MULLER, 160 Broadway, New York, N.Y., as Principal, and FIDELITY AND DEPOSIT COMPANY OF MARYLAND, a corporation having an office and principal place of business at 120 Broadway, New York, N.Y., as Surety, are hereby and by these presents held and firmly bound unto the United States of America in the sum of TEN THOUSAND ($10,000.00) DOLLARS, lawful money of the said United States of America, for payment of which well and truly to be made unto Frank K. Bowers, Collector of Internal Revenue of the Second District of New York, or his successor in office, the parties hereto bind themselves, their heirs, executors, administrators, successors and assigns.

SIGNED AND SEALED this 19th day of January, 1925.

THE CONDITIONS OF THE ABOVE OBLIGATION are such that

WHEREAS, the said CARL MULLER has been assessed a tax by the Commissioner of Internal Revenue in the principal sum of $9197.48, and WHEREAS, the said CARL MULLER has filed his claim in abatement against said tax;

Now, THEREFORE, that if the said claim in abatement shall be denied in whole or in part by the Bureau of Internal Revenue, and upon notice and demand of the said Frank K. Bowers, Collector of Internal Revenue, or his successor in office, the said CARL MULLER pays to the said Frank K. Bowers, as Collector of Internal Revenue, or his successor in office, the said tax, or such amount thereof as may be found due, together with such penalties and interest as may accrue thereon, then this obligation to be null and void; otherwise to be and remain in full force and effect.

(Signed) CARL MULLER

BY HENRY W. LIEBER

His attorney in Fact.

FIDELITY AND DEPOSIT COMPANY OF MARYLAND,

By (Signed) ROBERT L. BRENNAN

Attorney in Fact.

Attest:

(Signed) ERNEST L. HICKS

Attorney in Fact.

The said claim in abatement for $9,197.48 was rejected by the respondent on or about October 9, 1925, and no suit or proceeding for the collection of any alleged additional tax for the calendar year 1917 has even been begun by the collector, the respondent, or the United States, and no agreements, contracts, and/or consents waiving the statute of limitations with respect to the collection of the said $7,997.82 have ever been executed or entered into by Muller or his agents or attorneys or by his executors after his death.

On March 14, 1928, counsel for the petitioner notified the respondent by letter that the instrument in which Carl Muller is described as principal and the Fidelity & Deposit Co. of Maryland is described as surety, was executed under duress and threat of collection by warrant of distraint and that the executors of the estate of Carl Muller have manifested the intention to avoid any and all liability under said instrument and have so notified the Fidelity & Deposit Co. of Maryland.

Muller's return was not made falsely or fraudulently with the intention to avoid taxes, nor was there any deduction taken on the return similar to that provided in paragraph 9, subdivision (a) of section 214 of the Revenue Act of 1921, nor any losses or other deductions, the settlement of which was tentatively allowed by the Commissioner upon a determination of the exact amount deductible.

William Schall, Docket No. 9721 - Year 1917.

William Schall, petitioner, filed with the collector of internal revenue on March 30, 1918, his income-tax return for the calendar year 1917, showing a tax liability of $39,463.90, which was duly paid.

The respondent on March 6, 1923, made a jeopardy assessment of taxes against the petitioner for the calendar year 1917 in the amount of $15,721.71 and notified the petitioner of said assessment by letter dated March 19, 1923, and on April 6, 1923, the petitioner filed with the collector of internal revenue a claim in abatement in the full amount of said jeopardy assessment.

The respondent on January 31, 1925, issued to petitioner a certificate of overassessment for the year 1917 in the amount of $7,311.35, and the collector abated $7,311.35 of the said jeopardy assessment made on March 6, 1923.

On February 11, 1925, the collector demanded the payment of the balance of $8,410.36 of the said jeopardy assessment made on March 6, 1923, together with $925.14 interest thereon, and the petitioner, through his attorney, caused to be executed and filed with the collector, under threat of collection of the said tax and interest by warrant of distraint, an instrument in which the petitioner was described as principal and the Fidelity & Deposit Co. of Maryland was described as surety, together with a claim in abatement for the said tax and interest.

The said instrument is similar in all respects and the conditions of the obligation are the same as are contained in the instrument above set out in full executed by Carl Muller by his attorney in fact.

The said claim in abatement for $9,335.50 was rejected by the respondent on or about October 12, 1925, and no suit or proceeding for the collection of any of the alleged additional income taxes for the calendar year 1917 has ever been gegun by the collector, the respondent, or the United States, and no agreements, contracts and/or consents waiving the statute of limitations with respect to the collection of the said tax of $8,410.36 have ever been executed or entered into by the petitioner or his agents and attorneys on his behalf.

The return of the petitioner was not made falsely or fraudulently or with the intent to evade tax, nor was there any deduction taken on the return similar to that provided in paragraph 9, subdivision (a) of section 214 of the Revenue Act of 1921, nor any losses or other deductions, the final settlement of which was tentatively allowed by the Commissioner pending a determination of the exact amount deductible.

On March 14, 1928, counsel for the petitioner notified the respondent by letter that the instrument in which William Schall is described as principal and the Fidelity & Deposit Co. of Maryland as surety was executed under duress and threat of collection by warrant of distraint of the taxes and interest alleged to be due and owing the United States in the aggregate amount of $9,335.50 and that the said William Schall has manifested his intention to avoid any and all liability under this instrument and has so notified the Fidelity & Deposit Co. of Maryland.

William Schall, Docket No. 19163 - Year 1918.

The respondent by his deficiency letter dated June 10, 1926, determined a deficiency in tax due from William Schall, a citizen of the United States, in the amount of $13,534.70 for the year 1918.

The petitioner filed with the collector of internal revenue on March 16, 1919, his income-tax return for the calendar year 1918, showing a tax liability of $9,437.96, which was duly paid.

The respondent on February 17, 1924, made a jeopardy assessment of taxes against the petitioner for the calendar year 1918 in the amount of $17,416.65, and notified the petitioner of said assessment by letter dated February 25, 1924, and on March 4, 1924, the petitioner filed with the collector of internal revenue a claim in abatement in the full amount of said jeopardy assessment.

On March 24, 1924, the collector demanded the payment of the said jeopardy assessment of $17,416.65 made on February 17, 1924, and the petitioner, through his attorney caused to be executed and filed with the collector, under threat of collection of the said tax by warrant of distraint, the following document:

AGREEMENT FOR SECURITY FOR PAYMENT OF TAX, ETC.

To the COLLECTOR OF INTERNAL REVENUE,

Second District of New York,

New York, New York.

William Schall & Company, of 160 Broadway, New York City, by Carl Muller, a partner do hereby certify that there has been deposited with them by William Schall the sum of $17,416.65, which the firm of William Schall & Company undertake and agree to hold for the benefit of the Collector of Internal Revenue of the 2nd District of New York, to assure him of the payment by said William Schall of such taxes, interest and penalties as may be demanded from the said William Schall should the claim for abatement and refund filed by the said William Schall in the amount of $17,416.65 be denied in whole or in part. If upon denial of claim for abatement and refund the said William Schall neglects or refuses to make such payment when demanded by the Collector of Internal Revenue, the said firm of William Schall & Company undertake and agree to deliver to the Collector of Internal Revenue at the Custom House, New York, N.Y., the above mentioned sum of $17,416.65 upon the demand therefor by the said Collector of Internal Revenue of the 2nd District of New York, which the said William Schall authorizes and directs said firm of William Schall & Company so to deliver.

Witness our hand and seal this 24th day of March, 1924.

(Signed) WILLIAM SCHALL

By C. MULLER, Partner.

The undersigned William Schall, acting by Henry W. Lieber, his attorney-in-fact thereunto duly authorized, hereby consents to and empowers and directs said firm of William Schall & Company to deliver to said Collector of Internal Revenue aforementioned the sum of $17,416.65 upon demand of said Collector of Internal Revenue, provided the default be made in whole or in part in payment of such taxes, interest and penalties.

Witness my hand and seal this 24th day of March, 1924.

(Signed) WILLIAM SCHALL

Taxpayer

By HENRY W. LIEBER

his attorney-in-fact.

Witness:

GEORGE O. CASTELL.

The respondent on June 15, 1926, issued to petitioner a certificate of overassessment for the year 1918 in the amount of $3,882.95, and the collector abated $3,882.95 of the said jeopardy assessment made on February 17, 1924.

The said claim in abatement for $17,416.65 was rejected by respondent on or about June 10, 1926, in the amount of $13,534.70, and no suit or proceeding for the collection of any of the alleged additional income taxes for the calendar year 1918 has ever been begun by the collector, the respondent, or the United States, and no valid agreements, contracts and/or consents waiving the statute of limitations with respect to the collection of the said tax of $13,534.70 have ever been entered into by the respondent and the petitioner or by the said collector of internal revenue and the petitioner.

The return of the petitioner was not made falsely or fraudulently or with the intent to evade tax, nor was there any deduction taken on the return as provided in paragraph 9, subdivision (a) of section 214 of the Revenue Acts of 1918 and 1921, nor any losses or other deductions, the final settlement of which was tentatively allowed by the Commissioner pending a determination of the exact amount deductible.

On March 14, 1928, counsel for the petitioner notified the respondent by letter that the instrument designated as "agreement for security for payment of tax, etc." signed and executed by "William Schall & Company, by Carl Muller, Partner, and William Schall, Taxpayer, by Henry W. Lieber, as Attorney In Fact," was executed under threat of collection by warrant of distraint of the taxes alleged to be due and owing the United States in the amount of $17,416.65, and that the said William Schall has manifested his intention to avoid any and all liability under this instrument and has so notified William Schall & Co.

OPINION.

TRAMMELL: These proceedings were heard upon the question of the statute of limitations.

With respect to the year 1917 the question is whether the bonds signed by the petitioner in connection with abatement claims had the effect of extending the period within which the tax might be collected. There is no controversy over the fact that if the instruments in question did not have that effect the collection of the tax was barred prior to the time of the notice from the respondent which is made the basis of these proceedings. On this question we think that the cases are controlled by our decision in the case of , and , wherein we held that the bonds did not have the effect of extending the period of limitation for the collection of the deficiencies.

With respect to the proceeding of William Schall, Docket No. 19163, no consents in writing were signed by the taxpayer and the Commissioner extending the statutory period for the assessment and collection of the tax. This leaves for 1918, in the case of this petitioner, only the question as to whether the bonds or so-called agreement for security of payment of the taxes in which instrument William Schall was named as principal and William Schall & Co., a partnership, was described as surety, as set out in the findings of fact, is sufficient to toll the statute of limitations. This so-called security for the payment of the taxes is not a consent in writing for the collection of the tax after the expiration of the period of limitations to any greater extent than the bonds above referred to.

For the foregoing reasons, it is our opinion that the collection of the deficiencies involved is now barred by the operation of the statute of limitations.

Reviewed by the Board.

Judgments of no deficiency will be entered.