DocketNumber： Docket Nos. 30302, 30303, 30304.
Judges： Marquette
Filed Date： 11/25/1931
Status： Precedential
Modified Date： 11/2/2024
*1568 1. Where a corporation distributed assets to its stockholders as a final liquidating dividend, and the assets had a known value, such stockholders are transferees within the meaning of section 280 of the Revenue Act of 1926.
2. The statute of limitations has not barred assessment against the petitioners as transferees of the assets of a corporation.
*915 These proceedings, which were consolidated for hearing, are for the redetermination of deficiencies in income taxes for the year 1920 asserted by the respondent against the petitioners as transferees of the assets of the Maxwelton Amusement Company. The errors alleged are: (1) That petitioners are not transferees of the property of the Maxwelton Amusement Company within the meaning of the statute; (2) that the assessment as to petitioners are barred by the statute of limitations; and (3) that section 280 of the Revenue Act of 1926 is unconstitutional.
At the hearing respondent, by amendment to his answers to the petitions, prayed for judgment against Maxwell Goldman in the amount of $2,278.76, *1569 and against F. L. Cornwell in the amount of $7,894.42.
FINDINGS OF FACT.
Petitioners were stockholders in a corporation known as the Maxwelton Amusement Company, which had a capital stock of $50,000. During the year 1920 the company sold certain of its assets, but in its income-tax return for that year it reported no taxable income.
*916 In 1923 the company distributed to its stockholders cash and securities amounting to $22,787.55, as a final liquidating dividend. At the time petitioner Maxwell Goldman owned one-tenth of the company's capital stock and received $2,278.76 of the amount distributed; petitioner F. L. Cornwell owned four-tenths of the capital stock and received that proportion of the amount distributed, or $9,115.02; petitioner Sam Hamburg, Jr., owned none of the company's capital stock and did not share in the distribution of assets.
The corporation's income-tax return for 1920 was filed on April 9, 1921. On February 25, 1926, respondent sent to the company by registered mail, at the last known address of the company, notice of deficiency in income tax for the year 1920 in the amount of $7,849.42. The letter was returned to respondent's office*1570 with the notation "Not found at address given" stamped on the envelope. The company filed no appeal for the redetermination of the deficiency proposed. During May, 1926, the full amount of the proposed deficiency was assessed against the Maxwelton Amusement Company by the respondent. No written consent extending the period of limitation for assessment and collection of the deficiency was filed by the company.
By letters under date of June 13, 1927, the respondent proposed to assess against the petitioners, as transferees of the assets of the Maxwelton Amusement Company, proportionate amounts of the company's deficiency, as follows:
| Maxwell Goldman | $798.61 |
| F. L. Cornwell | 3,194.45 |
| Sam Hamburg, Jr | 1,597.23 |
On August 11, 1927, each petitioner filed with this Board his appeal for redetermination.
OPINION.
MARQUETTE: Section 280(a)(1) of the Revenue Act of 1926 provides for collection of income tax from the transferee of property of the original taxpayer. Petitioners contend that the section is in violation of the Constitution. Their contention has been decided, adversely to them, in *1571 .
The record shows that petitioner Sam Hamburg, Jr., was not a transferee, as he owned none of the capital stock and received none of the assets of the Maxwelton Amusement Company when its final liquidating dividend was distributed in 1923. But the other petitioners were stockholders and received their pro rata share of the company's assets. Therefore, if the notices of liability were timely sent to petitioners Goldman and Cornwell, they are liable severally under section 280(a)(1) of the Revenue Act of 1926 for the full amount of the deficiency against the Maxwelton Amusement Company, *917 to the extent of the assets of the corporation received by them.
The deficiency here involved relates to income taxes for 1920 under the Revenue Act of 1928. By section 277(a)(3) of the Revenue Act of 1926 it is provided that income taxes under the 1918 Act shall be assessed within five years after the tax return was filed. In the present instance the Maxwelton Amusement Company filed its return for 1920 on April 9, 1921. *1572 Within five years thereafter, on February 25, 1926, the respondent mailed to the company a notice of deficiency. Under section 274(a) and section 277(b) of the Revenue Act of 1926 the running of the five-year period of limitations as to assessments were suspended for 120 days from the date of mailing of the deficiency notice, or, in these proceedings, until June 25, 1926. Here, the assessment was made in May, 1926. Section 280(b)(1) and (d) of the Revenue Act of 1926 limits the assessment of liability against a transferee to one year after the expiration of the period of limitation for assessment against the original taxpayer and suspends the operation of the statute of limitation for 120 days from the date of the mailing of notice of liability to the transferee.
The assessment against the corporation was made within the time prescribed by statute and notices of liability as transferee were mailed to these petitioners on June 13, 1927, which was within one year after the expiration of the period of limitation for assessment against the corporation. Within sixty days after June 13, 1927, the petitioners filed their petitions with this Board. In view of these facts it is clear*1573 that the bar of the statute of limitations does not operate as to petitioners Maxwell Goldman and F. L. Cornwell. Cf. . We therefore hold that petitioners Goldman and Cornwell are liable as transferees of the assets of the Maxwelton Amusement Company to the extent of the assets of said company received by them, and that the petitioner Sam Hamburg, Jr., is not liable as such transferee.