Amalgamated Sugar Co. v. Commissioner

THE AMALGAMATED SUGAR COMPANY, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Amalgamated Sugar Co. v. Commissioner

Docket No. 39185.

United States Board of Tax Appeals

24 B.T.A. 143; 1931 BTA LEXIS 1689;

September 24, 1931, Promulgated

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1. Petitioner is liable as transferee of taxes of a predecessor company.

2. Assessment is not barred by the statute of limitations.

H. C. Bickford, Esq., for the petitioner.

J. R. Johnston, Esq., for the respondent.

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VAN FOSSAN

This proceeding was brought to redetermine the liability of the petitioner as transferee for a deficiency in income tax asserted against the Lewiston Sugar Company for the period from March 1 to December 19, 1914, inclusive, in the amount of $1,726.97. The report of a Division of the Board in this proceeding, promulgated July 27, 1931, was thereafter, by direction of the Chairman, reviewed by the Board and is superseded by this report.

The petitioner alleges the following errors:

(1) The respondent erroneously determined that the petitioner is liable for an alleged deficiency in income tax as transferee of the Lewiston Sugar Company under the provisions of section 280 of the Revenue Act of 1926.

(2) Appropriate statutes of limitation bar the assessment of the deficiency against the transferor and also the proposed assessment against the petitioner as transferee of the assets of the Lewiston Sugar Company.

FINDINGS OF FACT.

From the stipulated facts and the record of this proceeding we find the following facts:

The petitioner, The Amalgamated Sugar Company, is a corporation, organized on December 19, 1914. It is engaged in the business of manufacturing and refining sugar from sugar beets. It was formed for the purpose of taking over and operating the properties, rights, and franchises of the Lewiston Sugar Company and Amalgamated Sugar Company, corporations engaged in the same business.

The petitioner was organized pursuant to a "certificate of agreement between and consolidation of Amalgamated Sugar Company and Lewiston Sugar Company" and under the provisions of sections 888 and 889 of the Compiled Laws of Utah, 1917, vol. 1, codified as sections 340 and 341, respectively, in the preceding code. The terms of the agreement, governing the acquisition of the business of Amalgamated Sugar Company and Lewiston Sugar Company, were as follows:

The aggregate fair net cash value of all the properties, assets, rights, good will and interests of both the said Amalgamated Sugar Company and the said Lewiston Sugar Company is Six Million Fifty-four Thousand six hundred seventy dollars in excess of all liabilities against either and both of said companies, as more fully appears from the affidavit of Angus T. Wright, Robert Anderson, and Charles Pond, hereunto attached and marked "Exhibit A", which affidavit is hereby made a part hereof, and to which reference is hereby made. The said assets, properties, rights and interests being described in greater detail in those certain conveyances this day made and executed by the proper officers of the said Amalgamated Sugar Company and of the said Lewiston Sugar Company, and by the respective Boards of Directors of each of said companies authorized to be delivered to the said The Amalgamated Sugar Company, upon the issuance by the Secretary of State of the Certificate of Consolidation and of Incorporation to the said The Amalgamated Sugar Company. This corporation, the said The Amalgamated Sugar Company, hereby agreeing to assume and pay, and hereby expressly covenanting and obligating itself to assume and pay all legal accounts and debts outstanding and unpaid, as well as to discharge all other liabilities, contracts and duties now existing against both said Amalgamated Sugar Company and against said Lewiston Sugar Company. All of said assets and properties, whether real or personal, and whether legal, equitable, vested or contingent, together with the business of each of said companies, and their and each of their entire capital stock, as well as all bonds, promissory notes, choses in action, moneys, merchandise, buildings, machinery, horses, livestock, farming implements, sugar, molasses, seed, beets, bags and other supplies, and all other rights, causes of action, defences and interests, of whatsoever name or kind, heretofore and now owned by, or that may hereafter be discovered or accrue in favor of either of the constituent companies, shall be and are hereby agreed and acknowledged to be the assets and properties of this resulting consolidated corporation, the said The Amalgamated Sugar Company; and said assets and properties are hereby transferred to the said The Amalgamated Sugar Company; and are by this corporation hereby received as full consideration for the obligations assumed by this corporation, and for the cash payments made or to be made to the stockholders of said constituent companies as well as payment in full for each and all of the shares of capital stock of this corporation, issued or to be issued to the stockholders of each of the constituent companies in the manner following, to-wit: This corporation, the said The Amalgamated Sugar Company hereby agrees, in payment and exchange for all of the aforesaid net assets and properties, to forthwith issue, deliver and pay Fifty-eight Thousand Two Hundred Seventy-one shares of the capital stock of this corporation, together with Two Hundred Twenty-seven Thousand Five Hundred Seventy dollars in cash belonging to this corporation, to be distributed as follows, to-wit: Thirty-eight thousand two hundred seventy-one shares of the capital stock of this corporation, together with One Hundred Twenty-seven Thousand Five Hundred Seventy Dollars in cash shall be issued, delivered and paid to the stockholders of said Amalgamated Sugar Company in the rateable proportion to which each of said stockholders shall be entitled, as evidenced by, and upon the cancellation and surrender to this corporation of his, her or its certificates of capital stock in said Amalgamated Sugar Company; and Twenty Thousand shares of the capital stock of this corporation, together with One Hundred Thousand dollars in cash, shall be issued, delivered and paid to the stockholders of said Lewiston Sugar Company, in the rateable proportion to which each of said stockholders shall be entitled, as evidenced by, and upon the cancellation and surrender to this corporation of his, her or its certificates of capital stock in said Lewiston Sugar Company. The remaining One Thousand seven hundred twenty-nine shares of the authorized capital stock of this corporation shall be issued and disposed of at such times, in such manner, upon such terms and for such purposes as shall be determined by the Board of Directors of this corporation.

The above terms were complied with and, from and after December 19, 1914, the businesses which theretofore had been conducted separately by the Lewiston Sugar Company and Amalgamated Sugar Company were operated thereafter by the petitioner. The Lewiston Sugar Company and Amalgamated Sugar Company discontinued business as of such date and shortly thereafter were dissolved. Payment for the assets, properties, rights and interests of the Lewiston and Amalgamated companies was made by the petitioner in accordance with the appraisement, fixing the reasonable fair net cash value of such assets as $6,054,670 in excess of all liabilities due from either or both of the said companies. Such payment was as follows:

Paid to -	Stock of The	Cash	Total
	Amalgamated
	Sugar Co.
Stockholders of Amalgamated	$3,827,100	$127,570	$3,954,670
Sugar Co., in proportion to
stock holdings
Stockholders of Lewiston	2,000,000	100,000	2,100,000
Sugar Co., in proportion to
stock holdings
Total	5,827,100	227,570	6,054,670

Both the Lewiston Sugar Company and Amalgamated Sugar Company had, for the taxable year ended February 28, 1914, kept their books of account on the basis of a fiscal year ending February 28 and had filed their tax returns upon such fiscal year basis. The Amalgamated Sugar Company followed the same practice for the year ended February 28, 1915.

On April 23, 1915, a single tax return was filed by The Amalgamated Sugar Company, which reflected the combined net income of the Lewiston Sugar Company, Amalgamated Sugar Company and The Amalgamated Sugar Company for the twelve-month fiscal year ending February 28, 1915. No other return has been filed for any of such twelve-month period by the Lewiston Sugar Company or Amalgamated Sugar Company, the predecessor companies.

Accompanying the return so filed was a letter signed by Fred G. Taylor, secretary and treasurer of the petitioner, reading in part as follows:

APRIL 23RD, 1915.

Mr. WM. C. WHALEY,

Collector of Internal Revenue, Helena, Montana.

DEAR SIR: I have just returned from a two months absence in Central America, and find your recent correspondence with reference to submitting our Income Tax report, and upon reviewing the situation, it seems impracticable, if not impossible, to make a report as requested by you, for the old Amalgamated Sugar Company and Lewiston Sugar Company up until December 19th, 1914, with an additional report of the operation of the new Company, from the fact that we made no formal closing of our books upon that date, but simply merged the accounts into one in the same set of books, and the profits of the old companies were not accounted. Under our system of bookkeeping it will be practically impossible to account them, up until that period of the year, as it had no reference to a closing date, and occurred in the middle of our campaigns.

So we have taken the combined results of the three Companies, as evidenced by our books, and are making a complete return in this report.

Thereafter the respondent mailed to Lewiston Sugar Company a letter dated April 7, 1923, which read, in part, as follows:

An examination of the information submitted, together with the Revenue Agent's reports dated June 14, 1918, and July 30, 1921, for the period from March 1, 1914 to December 19, 1914, has been made and the result thereof outlined in the accompanying schedules.

In accordance with Section 250(d) of the Revenue Act of 1921, you are granted thirty days from the date of this letter within which to file an appeal and show cause or reason why the case should not be closed on this basis. No particular form of appeal is required but if filed it must be in triplicate and set forth specifically the exceptions upon which it is taken, shall be under oath, contain a statement that it is not for the purpose of delay and the facts and evidence upon which you rely must be fully stated. The appeal if filed must be addressed to the Commissioner of Internal Revenue, Washington, D.C., for the specific attention of IT:SA:CR:E-VW, which will be referred to the Income Tax Unit before transmittal to the agency designated for the hearing of such appeals.

You may, if desirable, request a conference before the Income Tax Unit in connection with the appeal, to be held within the period prior to the expiration of five days after the time prescribed for filing the appeal. If the Income Tax Unit is unable to concede the points raised in your appeal it will be transmitted together with the recommendation of the Income Tax Unit to such agency as the Commissioner may designate for final consideration.

Where a taxpayer has been given an opportunity to appeal and has not done so as set forth above, the Collector of Internal Revenue for the District concerned will be officially notified not less than thirty days from the date of the letter containing the findings as indicated in a statement attached to such letter.

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SCHEDULE 1

Lewiston Sugar Company Period from March 1, 1914 to Dec. 19, 1914.

NET INCOME

Net income as disclosed by Agent's Report dated July 30, 1921 --- $172,696.63

No change

The taxable net income for the period from March 1, 1914 to December 19, 1914, has been determined as shown in the Agent's Report (no return filed by the Lewiston Sugar Company for this period the net income being reflected in the return of the new corporation, The Amalgamated Sugar Company, for the fiscal year ended February 28, 1915.)

No protest was filed by said Lewiston Sugar Company and on March 13, 1924, assessment was made against the Lewiston Sugar Company in the amount of $1,726.97. Thereafter a claim in abatement was filed by The Amalgamated Sugar Company on behalf of the Lewiston Sugar Company, Ogden, Utah, which was received in the claims section, Bureau of Internal Revenue, on April 14, 1924. This claim was never allowed, but was returned to the collector of internal revenue for adjustment on or about July 28, 1925. The assessment made against the Lewiston Sugar Company, as above stated, on March 13, 1924, in the amount of $1,726.97 is still outstanding.

A claim for refund had been filed for and in behalf of The Amalgamated Sugar Company with the collector for the district of Montana, August 8, 1919, which was transmitted to the Bureau of Internal Revenue, Washington, D.C., and received in the claims division thereof, August 20, 1919, by which the sum of $2,311.84 was claimed as refundable to The Amalgamated Sugar Company for the fiscal year ended February 28, 1915, as representing "difference between taxes paid and taxes assessable as per detailed statement submitted with report of investigation in June, 1918, and as arising from relocation of income by difference in method of reporting it as between original return and amended statements."

This claim was adjusted by the allowance of an overassessment in the amount of $7,757.55 on schedule 9676, signed by the Commissioner, March 15, 1924.

On April 10, 1928, a notice of deficiency was mailed to the petitioner, The Amalgamated Sugar Company, which was as follows:

In accordance with Section 274 of the Revenue Act of 1926 you are advised that the determination of your tax liability for the period March 1, 1914, to December 19, 1914, discloses a deficiency of $1,726.97, as shown in the attached statement, as transferee of the Lewiston Sugar Company, formerly Ogden, Utah, under Section 250 of said Act.

Attached to said notice was a statement in the following form:

The section of the law above mentioned allows you an appeal to the United States Board of Tax Appeals within sixty days from the date of the mailing of this letter. However, if you acquiesce in this determination, you arerequested to execute the inclosed Form A and forward it to the Commissioner of Internal Revenue, Washington, D.C., for the attention of IT:C:P-7.

STATEMENT

In re: Amalgamated Sugar Company, Ogden, Utah.

Under authority of Section 280 of the Revenue Act of 1926 there is proposed for assessment against you the amount of $1,726.97 constituting your liability as transferee of the assets of the Lewiston Sugar Company, formerly of Ogden, Utah, for unpaid income tax in the above amount due from the corporation (plus any accrued penalty and interest) for the period begun March 1, 1914 and ended December 19, 1914, as shown by the following statement:

Year		Deficiency in Tax
Period ended December		$1,726.97
19, 1914
Income
Net income as disclosed		172,696.63
by Agent's report dated
June 30, 1921
Taxable at 1%	$172,696.63	1,726.97
Previously assessed		None.
Additional Tax		1,726.97

Section 281 of the Revenue Act of 1926 provides that notice of a deficiency or other liability, if mailed to the taxpayer or other person subject to liability at his last known address, shall be sufficient for the purposes of this title even if such taxpayer or other person is deceased, or is under a legal disability, or, in the case of a corporation, has terminated its existence.

No waivers of the statute of limitations were filed at any time for and on behalf of Lewiston Sugar Company or the petitioner with reference to the taxable period from March 1, 1914, to December 19, 1914, here involved.

OPINION.

VAN FOSSAN: We will first consider the issue relating to the applicability of the statute of limitations. The petitioner relies on Section II, G(c) of the Revenue Act of 1913, which provides, in part, as follows:

All assessments shall be made and the several corporations, * * * shall be notified of the amount for which they are respectively liable * * * Provided, That every corporation, * * * shall pay the taxes due under its assessment within one hundred and twenty days after the date upon which it is required to file its list or return of income for assessment; except incases of refusal or neglect to make such return, and in cases of false or fraudulent returns, in which cases the Commissioner of Internal Revenue shall, upon the discovery thereof, at any time within three years after said return is due, make a return upon information obtained as provided for in this section or by existing law, and the assessment made by the Commissioner of Internal Revenue thereon shall be paid by such corporation, * * *

The petitioner, moreover, contends that section 250 of the Revenue Act of 1921 does not repeal or supersede the provisions of Section II, G, of the Revenue Act of 1913.

Section 250(d) provides in part as follows:

The amount of income, excess-profits, or war-profits taxes due under any return made under this Act * * * shall be determined and assessed by the Commissioner within four years after the return was filed, and the amount of any such taxes due under any return made under this Act for prior taxable years or prior income, excess-profits, or war-profits tax Acts, * * * shall be determined and assessed within five years after the return was filed * * * Provided further, that in the case of a false or fraudulent return with intent to evade tax, or of a failure to file a required return, the amount of tax due may be determined, assessed, and collected, and a suit or proceeding for the collection of such amount may be begun, at any time after it becomes due.

The terms of this section are clear and unmistakable. If no return was filed the tax may be determined, assessed and collected at any time after it becomes due. See . The Lewiston Sugar Company filed no return for the period from March 1, 1914, to December 19, 1914, inclusive, nor was any return made for it by the Commissioner. Under similar circumstances we have held repeatedly that a return was required. ; affd., ; certiorari denied, ; ; . Since no return was filed by the transferor, the statute of limitations did not run and the provisions of section 280(b) of the Revenue Act of 1926 are not applicable. The liability against the transferor may be asserted at any time. .

The petitioner challenges the liability of itself as transferee solely on the theory that assessment against it is barred by the operation of section 280(b)(2) of the Revenue Act of 1926. The provisions of that section apply only in cases in which the period of limitation has expired, but assessment was made against the transferor within such period. In the case at bar there was no period of limitation and, hence, the ensuing words of limitation relating to the transferee do not apply. From the facts we find ample ground to conclude that the petitioner is liable as transferee for the deficiencies in income tax asserted against the Lewiston Sugar Company for the period from March 1 to December 19, 1914, inclusive.

Reviewed by the Board.

Judgment will be entered for the respondent.

MATTHEWS dissents.