Guardian Trust Co. v. Commissioner

GUARDIAN TRUST CO., EXECUTOR, ESTATE OF HUGH HAMILTON, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Guardian Trust Co. v. Commissioner

Docket No. 14061.

United States Board of Tax Appeals

15 B.T.A. 1256; 1929 BTA LEXIS 2698;

April 4, 1929, Promulgated

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">*2698 The six-year period for collection after assessment provided in the 1924 Revenue Act, does not apply to an assessment made before June 2, 1924, the date on which the act was approved, and if the unabated portion of the tax so assessed is not collected within the statutory period as extended by waivers, if any, the collection of such tax by the Commissioner is thereafter barred. Russell v. United States,278 U.S. 181">278 U.S. 181.

W. W. Spalding, Esq., for the petitioner.

Shelby S. Faulkner, Esq., for the respondent.

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MURDOCK

">*1256 The deficiency in this case results from the denial in part of a claim in abatement for the year 1918 as shown by a letter from the Commissioner dated February 26, 1926. An additional assessment of $23,473.60 was later reduced to $17,721.94, against which the Commissioner applied credit for overpayments in other years in the amount of $11,433.26 to arrive at the amount of $6,288.68 as the amount due. The petition alleges that the statute of limitations has run against the assessment and collection of any additional tax for the year 1918 and also that the additional tax was not finally determined and assessed">*2699 within one year after April 18, 1924, on which date the petitioner made a request that the income-tax liability be determined and assessed within one year in accordance with section 250(d) of the Revenue Act of 1921.

FINDINGS OF FACT.

The petitioner is the duly appointed and acting executor of the estate of Hugh Hamilton, who died on August 5, 1922.

On March 15, 1919, Hugh Hamilton duly filed his income-tax return for the calendar year 1918 showing an income tax due of $4,086.88. On January 30, 1924, the Commissioner of Internal Evenue sent a letter to the petitioner, this letter being what is commonly known as the 30-day letter. It contained the following paragraph:

In the event that the adjustments made are not satisfactory and it is desired to perfect the appeal provided for below, it will be necessary that you execute and forward with that appeal the attached waiver form.

A blank form of waiver was enclosed with this letter.

On or about February 15, 1924, the petitioner filed an amended return for Hugh Hamilton for the calendar year 1918 showing tax due in the amount of $16,146.60. With this return the petitioner ">*1257 enclosed a letter to the Commissioner">*2700 of Internal Revenue and also enclosed the so-called waiver in the following form:

IT:NR-F9

JEW-1865

INCOME AND PROFITS TAX WAIVER

In pursuance of the provisions of subdivision (d) of Section 250 of the Revenue Act of 1921, Estate of Hugh Hamilton (Guardian Trust Co.) [in ink] of 1918 [in ink] 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. This waiver is in effect from the date it is signed by the taxpayer and will remain in effect for period of one year after the expiration of the statutory period of limitation, or the statutory period of limitation as extended by any waivers already on file with the Bureau, within which assessments of taxes may be made for the year or years mentioned.

[Stamp] ESTATE">*2701 OF HUGH HAMILTON

Taxpayer

[Signed in ink] Guardian Trust Co. Executor

by C. M. Malone

V-P

Commissioner

If this waiver is executed on behalf of a corporation, it must be signed by such officer or officers of the corporation as are empowered under the laws of the State in which the corporation is located to sign for the corporation, in addition to which, the seal, if any, of the corporation must be affixed.

The so-called waiver enclosed with the amended return filed February 15, 1924, was never signed by the Commissioner or by anyone acting for him.

The return, the letter and the so-called waiver were duly received by the Commissioner of Internal Revenue on or about February 19, 1924.

On March 13, 1924, the Commissioner of Internal Revenue signed a jeopardy assessment list on which appeared an assessment against the estate of Hugh Hamilton, deceased, for 1918, of $23,473.60, this being the only assessment list upon which any such additional assessment appeared. On March 17, 1924, the collector of internal revenue served on the petitioner his notice and demand for the payment of said additional assessment. On March 20, 1924, the petitioner filed with the collector">*2702 its claim for the abatement of the additional assessment of $23,473.60. On April 12, 1924, the petitioner filed an amended abatement claim for the full amount.

On April 18, 1924, the petitioner mailed a letter to the Commissioner of Internal Revenue, the body of which was as follows:

In the matter of additional taxes for the years 1916 to and including August 5, 1922, assessed and to be assessed, with credits for over-payments, against the ">*1258 Estate of H. Hamilton. We desire that in accordance with the provisions of Section 250-D these taxes be determined and assessed by the Commissioner within one year from the date hereof.

Mr. Hamilton died August 5, 1922.

On May 3, 1924, the Commissioner of Internal Revenue mailed a letter to the petitioner, the body of which was as follows:

Receipt is acknowledged of your letter dated April 18, 1924, requesting that all taxes due on account of income received during the lifetime of Hugg Hamilton, deceased, be determined and assessed within one year in accordance with the provisions of Section 250(d) of the Revenue Act of 1921.

The tax liability will be determined as requested.

Under date of November 18, 1925, the">*2703 internal revenue agent in charge at San Antonio, Tex., submitted to the Commissioner of Internal Revenue his report of an investigation of the books of account and records of Hugh Hamilton for the years 1917 to 1922, inclusive. On October 31, 1925, the petitioner signed and delivered a paper in connection with this report in the following form:

AGREEMENT CONSENTING TO DEFICIENCY AS ASSESSED

The undersigned taxpayer hereby waives the right of appeal under Section 279(b) of the Revenue Act of 1924 from the decision of the Commissioner of Internal Revenue on a claim for abatement filed in accordance with Section 279(a) with respect to the items listed below,* and consents to the deficiency in resulting therefrom as assessed. These items form (a part of) a deficiency in tax amounting to $11,290.68 as indicated by the report of the Internal Revenue Agent in Charge at San Antonio, Texas

dated

"This agreement is executed with reservation by the Taxpayer to hereafter raise and prosecute by Protest, Appeal, or proceedings under claim for refund, or otherwise, the question of whether any part of the Tax for the period in question (Years 1917 to 1921 inc. and to date of decedent's">*2704 death in 1922) is barred by the Statutes of Limitation or the question as to the validity of any WAIVERS filed under any of the returns for the years mentioned."

(Attach additional sheets if necessary).

ESTATE OF HUGH HAMILTON DECEASED

BY GUARDIAN TRUST COMPANY EXECUTOR AND TRUSTEE,

(Name)

Houston, Texas.

(Address)

(Signed) by W. BROWNE BAKER, Vice-President.

Dated October 31st, 1925.

* Where the taxpayer consents to the entire assessment the items need not be listed; reference may be made to the letter.

Note: This agreement is subject to the approval of the Commissioner and is not an agreement as provided under Section 1006, Revenue Act of 1924.

On December 3, 1925, the petitioner filed with the internal revenue agent in charge at San Antonio, Tex., its protest against the additional assessment proposed in the said report, on the ground that the statute of limitations barred the assessment and collection of any ">*1259 additional taxes for the year 1918. On February 26, 1926, the Commissioner of Internal Revenue mailed to the petitioner a letter. This letter in so far as it pertained to the petitioner's tax liability for the year 1918, was">*2705 as follows:

Reference is made to the individual income tax returns of Hugh Hamilton, deceased, for the years 1917 to 1921, inclusive, and for the period January 1, 1922 to August 5, 1922.

You are advised that the report of the Internal Revenue Agent dated October 10, 1925, covering an investigation of the tax liability of the estate of Hugh Hamilton for the years 1917 to 1921, inclusive, and for the period January 1, 1922 to August 5, 1922, has been approved as submitted with the following exceptions:

* * *

1918

The amount of tax previously assessed is $27,560.48 instead of $4,096.88. [sic.]

The adjustment of this item is shown as follows:

Original assessment	$4,086.88
Additional assessment March, 1924	23,473.60
Total assessment	27,560.48
Less: Tax liability	21,808.82
Overassessment	5,751.66

* * *

The evidence discloses that the decedent's original return for the calendar year 1918 was filed on March 14, 1919, and his return for the calendar year 1919 was filed on March 13, 1920. On March 1, 1924, prior to the expiration of the five-year period prescribed by the Revenue Act for making assessments for the year 1918 an additional assessment">*2706 of $23,473.60 was made on the 1918 return under the provisions of Section 250(d) of the 1921 Act. On March 20, 1924, your claim for the abatement of the additional assessment of $23,473.60 was accepted by the Collector of Internal Revenue for the first district of Texas. On April 18, 1924, you submitted a written request that all taxes due on account of income received during the life time of Hugh Hamilton for the years 1916 to 1921, inclusive, and for the period from January 1, 1922, to August 5, 1922, the date of the death of the decedent, be determined and assessed within one year from the date of April 18, 1924, in accordance with the provisions of Section 250(d) of the Revenue Act of 1921. In February 1925, within the five-year period prescribed by the Revenue Act of making assessments for the year 1919, and within one year from the date of your written request for immediate assessment the item of $3,560.78 was assessed on the 1919 return under the provisions of Sections 274(d) and 277(a)(3) of the 1924 Act and your claim for abatement of this amount was accepted by the Collector in accordance with the provisions of Section 279 of the 1924 Act. The effect of the abatement">*2707 claims was to stay the collection of additional assessments for 1918 and 1919, pending the final disposition of the claims.

Under date of November 18, 1925, the Internal Revenue Agent in Charge at San Antonio, Texas, submitted his report of the investigation of the decedent's books of account and records for the years 1917 to 1922 inclusive.

It is noted that you signed an agreement consenting to the determination of the tax liability as disclosed by agent's report, but reserved the right to hereafter raise or prosecute, by protest, appeal, or proceedings under claim for refund, or otherwise, the question whether any part of the tax for the ">*1260 period in question is barred from assessment or collection by the statute of limitations, or the question as to the validity of any waivers filed for any of the years concerned.

* * *

On April 28, 1926, the petitioner and the Hartford Accident & Indemnity Co. executed and delivered to the collector of internal revenue a bond in the penal sum of $8,800. This bond was executed and delivered when the demand was made for payment of the additional tax as set forth in the Commissioner's letter of February 26, 1926.

The Commissioner">*2708 of Internal Revenue made and mailed to the petitioner certificates of overassessment for the following years in the following amounts, which overassessments the collector of internal revenue credited against the additional assessment for 1918.

1916	$101.98
1917	1,254.38
1917	2,165.31
1921	$4,074.89
Jan. 1, to Aug. 5, 1922	3,836.50
1918	5,751.66

The overassessment for 1916 of $101.98 and the overassessment for 1917 of $1,254.38 were credited against the additional assessment for 1918 on April 24, 1924. The overassessment for 1917 of $2,165.31, the overassessment for 1921 of $4,074.89 and the overassessment for the period January 1 to August 5, 1922, of $3,836.50 were credited against the additional assessment for 1918 on March 29, 1926.

No suit or proceeding for the collection of any taxes due from the petitioner on from Hugh Hamilton, deceased, for the year 1918 was begun up to the date of hearing in this case of June 20, 1928.

OPINION.

MURDOCK: The petitioner has alleged that the taxes in controversy are for the calendar years 1916, 1917, 1918, 1921, and for the period from January 1, 1922, to August 5, 1922. It appears, however, that the Commissioner">*2709 has determined overassessments for all of these years and that except for the year 1918 there has been no denial of a claim in abatement giving rise to a deficiency. Therefore, except as to the year 1918 we have no jurisdiction, and as to the other years and the period mentioned, the proceedings are dismissed.

The Board has jurisdiction in a case like this. See , and . Neither the giving of a bond nor the filing of a claim in abatement extends the period of limitation for the assessment or collection of the tax. ; ; ; ; .

In , the Supreme Court of the United States decided that the six-year period for collection after assessment provided in the 1924 Revenue Act does not apply to an assessment made before June 2, 1924, the date on which the ">*1261 Act was approved. That decision">*2710 is controlling here. Hugh Hamilton filed his income-tax return for the calendar year in question on March 15, 1919. On March 13, 1924, the Commissioner made his first and only additional assessment of tax for the calendar year 1918. Thereafter, on June 2, 1924, the Revenue Act of 1924 was approved.

The so-called waiver of February 15, 1924, was never signed by the Commissioner or anyone acting for him and was not a "consent in writing to a later determination, additional assessment and collection of tax", within the meaning of section 250(d) of the Revenue Act of 1921. ; . Thus the Commissioner after March 15, 1924, was barred from determining a deficiency in tax for the year 1918 and was barred from collecting any additional tax or, to state it differently, on February 26, 1926, it was too late for him to determine the deficiency and mail a notice thereof, and from and after March 15, 1924, he was barred from collecting the amount of $17,721.94 which he has now determined is due from this petitioner. ">*2711 There is no deficiency. ; ; ; .

Judgment will be entered for the petitioner.