J. F. Anderson Lumber Co. v. Commissioner , 15 B.T.A. 475 ( 1929 )

J. F. ANDERSON LUMBER CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

J. F. Anderson Lumber Co. v. Commissioner

Docket No. 9103.

United States Board of Tax Appeals

15 B.T.A. 475; 1929 BTA LEXIS 2844;

February 19, 1929, Promulgated

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Collection of a deficiency determined for the calendar year 1918 held to be barred by the statute of limitations.

L. W. Scott, Esq., for the petitioner.

J. L. Backstrom, Esq., for the respondent.

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SMITH

This is a proceeding for the redetermination of deficiency in income and profits tax for the calendar year 1918 in the amount of $46,540.34. The only issue is whether the collection of the deficiency is barred by the statute of limitations.

FINDINGS OF FACT.

The petitioner is a corporation of South Dakota, which now has its principal office in Minneapolis, Minn. Prior to June, 1920, its principal office and place of business was Mitchell, S. Dak.

On June 14, 1919, petitioner duly filed its corporation income and profits-tax return for the calendar year 1918 with the collector of the district of South Dakota. The return was executed by J. F. Anderson, president, and J. V. Dobson, secretary. The treasurer of the corporation at the time was O. T. Litchfield. The office of the treasurer was a nominal one. The by-laws of the corporation specifically provided:

The President or Vice-President may also hold the office of Treasurer, but the offices of President, Vice-President and Secretary shall be held by different persons.

The treasurer to the corporation at the time was ill and totally incapacitated to perform any business duties. He died in October, 1919. Checks of the corporation were signed by the secretary during 1919, and the signature of the treasurer was not required upon them. The return filed on June 14, 1919, showed a tax due of $112,939.54. With the return the petitioner filed a claim for the abatement of $12,881.59 of the tax shown to be due. There was also filed a bond conditioned upon the payment of the tax covered by the claim in abatement in the event the claim was rejected by the Commissioner. Of the amount of tax shown by the return the petitioner duly paid the collector $100,057.96. The total tax shown to be due by the return, namely, $112,939.84, was assessed by the Commissioner on January 17, 1920.

On April 27, 1920, the petitioner filed an amended return for the calendar year 1918, which showed a total tax liability of $127,150.33 or $14,210.79 more than the tax shown to be due by the original return. With the amended return there was simultaneously filed an application for assessment under section 328 of the Revenue Act of 1918. In February, 1921, the Commissioner assessed the additional tax shown by the amended return, namely, $14,210.79.

The return filed on June 14, 1919, was filed in good faith and there were no omissions of income therefrom or failures on the part of the petitioner to report its full income therein.

The Commissioner audited the petitioner's returns (original and amended) and on May 1, 1923, determined that the total tax due from the petitioner for the calendar year 1918 was $78,777.96. Theretofore, and on June 8, 1921, the Commissioner notified the petitioner of his determination aforesaid and suggested that petitioner file a claim for the abatement of the overassessment indicated. In June, 1923, the Commissioner duly issued a certificate of overassessment which disclosed a total overassessment of $48,372.37. Of this amount $27,092.37 was duly abated and the overpayment by the petitioner in the amount of $21,280 was on June 9, 1923, credited to petitioner's tax liability for the calendar year 1921.

On April 9, 1924, the Commissioner notified the petitioner by letter that he had determined additional taxes of $46,540.34 to be due from the petitioner for the calendar year 1918. His computation of the correct tax liability for 1918 was as follows:

Income Tax
Net income, taxable year		$276,855.53
Less -
War profits tax and excess profits tax	$104,926.86		$104,926.86
Exemption	2,000.00
		106,926.86
Balance taxable at 12%		169,928.67
Income tax			20,391.44
Total profits and income tax			125,318.30
Tax assessed -
Original return (June 1919, Acct. #402460)		$112,939.54
Amended return (January 1921 Page 2, Line 1)		14,210.79
Total		127,150.33
Less -
Overassessment (May 23, 1923)		48,372.37
Net tax assessed		78,777.96	78,777.96
Additional tax liability			46,540.34

On May 6, 1924, the Commissioner advised the petitioner by letter that it was entitled to appeal from his determination. The letter notified the petitioner to waive the statute of limitations and consent to a later determination of the tax. Petitioner, however, never waived the statute of limitations or consented to a later collection of the additional tax liability for 1918 so asserted. On May 28, 1924, the Commissioner advised the petitioner by letter that the additional tax liability for 1918 of $46,540.34 had been listed for assessment and advised the petitioner that a claim for the abatement of the same would be entertained by him. The additional tax liability of $46,540.34 referred to in the Commissioner's letter of April 9, 1924, was assessed by the Commissioner on May 29, 1924.

On May 17, 1924, the petitioner duly filed with the respondent a protest against his determination of additional tax liability for 1918, therein contending that the collection of the same was barred by the statute of limitations. On June 10, 1924, the petitioner filed a claim for the abatement of the additional tax liability of $46,540.34, which had been assessed on May 29, 1924. On November 23, 1924, the Commissioner advised the petitioner by letter that the records of his office showed an overpayment of $21,280 and further stated the manner in which credits for overpayment in that amount had been applied. On September 17, 1925, the Commissioner by letter advised the petitioner that he therein rejected petitioner's protest of May 17, 1924, and its claim for abatement filed June 10, 1924.

No suit or distraint has ever been instituted by the Commissioner, the United States of America, or on their behalf, to collect the assessment of May 29, 1924, of $46,540.34.

On April 17, 1926, the petitioner filed a bond with the collector in and for the district of Minnesota, which provided:

* * * The condition of the foregoing obligation is such that if said Principal shall fail to prosecute its appeal to the United States Board of Tax Appeals or if said Board of Tax Appeals refused or declines to take jurisdiction of said matter and/or shall reject the abatement claim of said principal or any portion of said claim, and the said Principal shall on notice and demand by the Collector of Internal Revenue duly pay any tax found to be dur from the Principal, together with interest and penalties which may have accrued according to law, and shall otherwise well and truly perform and observe all the provisions of law and the regulations, then this obligation is to be vold, but otherwise to remain in full force and effect.

This bond was filed with the collector to avoid his threat of collection of the additional tax liability for 1918 assessed as aforesaid.

OPINION.

SMITH: It is the contention of the petitioner that the collection of the additional tax liability for the calendar year 1918 is barred by section 250(d) of the Revenue Acts of 1918 and 1921. In short, these provisions of law require that the amount of income, excess-profits or war-profits taxes due upon prior income-tax returns shall be assessed and collected within five years from the date the return was filed, except in the case of false or fraudulent returns with intent to evade the tax. There is no contention made on the part of the respondent in the proceedings at bar that the return filed by or for the petitioner for 1918 was false or fraudulent. It is contended, however, by the respondent that the return filed on June 14, 1919, was not a return required by the Revenue Act of 1918, since it was not executed by both (1) the president, vice president, or other principal officer, and (2) the treasurer or assistant treasurer. The return was executed by the president and by the secretary. In , the question was whether a return sworn to by the taxpayer's vice president and secretary was in the circumstances of that case a valid return. We held that it was. We stated:

The prime object of the legislative intention was manifestly to require that the specified information be furnished under oath by the corporate officers, and where such information is fairly and honestly given in a return sworn to by the vice president and secretary of the corporation the legislative purpose is achieved in no less degree than if the return had been sworn to by the vice president and treasurer or assistant treasurer.

To the same effect was the decision of the Board in .

In the proceeding at bar the functions of the treasurer were being exercised by the persons who signed the return. We therefore think that the return was properly executed.

The return was filed on June 14, 1919. The additional tax claimed to be due for 1918 in the amount of $46,540.34 was assessed on May 29, 1924. No action was, however, taken by the respondent for the collection of the tax within five years from June 14, 1919. The filing of the bond on April 17, 1926, was not a valid consent extending the time within which the claimed deficiency could legally be collected. C. B. Shaffer, 12B.T.A. 298; ; The assessment of the tax claimed to be due on May 29, 1924, did not operate to extend the period for collection. .

Reviewed by the Board.

Judgment of no deficiency will be entered for the petitioner.