Carney v. Commissioner

NORA M. CARNEY, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

B. F. PERKINS, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

WILLIAM ROY CARNEY, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

ELIZABETH S. WRIGHT, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

QUINTON JOHNSTONE, JR., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

C. B. SEYMOUR, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

J. JOSEPH WRIGHT, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

W. J. CARNEY, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

C. B. SEYMOUR, ADMINISTRATOR, ESTATE OF ANNIE L. SEYMOUR, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

WILLIAM ROY CARNEY, ADMINISTRATOR, ESTATE OF MARGARET CUNNINGHAM, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Carney v. Commissioner

Docket Nos. 27604-27613.

United States Board of Tax Appeals

22 B.T.A. 721; 1931 BTA LEXIS 2080;

March 12, 1931, Promulgated

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">*2080 1. TRANSFEREE PROCEEDINGS. - Where the Board has decided that there is no deficiency on the part of the taxpayer for certain years, and the time for taking an appeal has elapsed without appeal by either party, the respondent is bound by the decision and may not assert a transferee liability against the stockholders of the taxpayer.

2. Id. - LIMITATIONS. - Under section 280(b)(2) of the Revenue Act of 1926 notices mailed to transferees on February 26, 1927, are timely. Burnet v. Willingham Loan & Trust Co.,282 U.S. 437">282 U.S. 437.

Laurence Graves, Esq., for the petitioners.

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

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ARUNDELL

">*722 The respondent, in his notices to petitioner proposed for assessment against them as transferees of the assets of the Carney Coal Company the amounts hereinafter set forth, and by amended answers moved to increase the amounts of the liabilities determined as follows:

Petitioner	Docket No.	Originally determined	Claimed in amended answers
Nora M. Carney	27604	$39,476.36	$66,026.12
B. F. Perkins	27605	29,465.67	66,026.12
William Roy Carney	27606	8,287.14	36,500.00
Elizabeth S. Wright	27607	5,506.69	24,333.00
Quinton Johnstone, Jr	27608	3,685.58	16,222.00
C. B. Seymour	27609	23,940.01	66,026.12
J. Joseph Wright	27610	18,417.06	66,026.12
W. J. Carney	27611	64,578.96	66,026.12
C. B. Seymour, Adm'r	27612	8,029.69	35,364.00
William Roy Carney, Adm'r	27613	8,634.01	38,024.00

">*2081 The amounts originally determined by the respondent against these petitioners represent the apportioned total of the deficiencies which had then been determined against the Carney Coal Company, whose petition for redetermination was then pending before the Board. By his amended answers the respondent alleges that the liability of the Carney Coal Company is as follows:

Fiscal year ended:	Amount
May 31, 1917	$4,607.84
May 31, 1918	9,453.45
May 31, 1919	33,246.84
May 31, 1920	18,717.99
Total	66,026.12

This amount, $66,026.12, or such part thereof as equals the amount received by each petitioner on liquidation, the respondent now proposes to assess against each transferee. By amended answer the respondent, as shown above, proposes for assessment against Quinton Johnstone, Jr., the amount of $16,222. In his brief counsel for respondent asks that that amount be increased to $24,333 to conform to the proof that Johnstone received that sum in liquidation of the Carney Coal Company.

Petitioners allege that they are not liable as transferees for the fiscal years ended May 31, 1917, 1918, and 1919, because of the decision of the Board holding that there are">*2082 no deficiencies in the case of the Carney Coal Company for those years, and that the assessment proposed for the fiscal year ended May 31, 1920, is barred by the statute of limitations.

FINDINGS OF FACT.

The Carney Coal Company was a corporation organized under the laws of Wyoming, and had its principal office and place of business ">*723 at Chicago, Ill. On or about December 31, 1919, the Carney Coal Company sold its physical assets and mining property for the sum of $1,250,000, and was not engaged in active business subsequent to May 31, 1920. The Company subsequently distributed its entire assets and property to its stockholders in proportion to their stockholdings and in liquidation of its capital stock, and thereafter it had no assets or property whatever.

As a result of the liquidation of the Carney Coal Company the petitioners herein received liquidating dividends as follows:

Name of petitioner	Docket No.	Amount received in liquidation
Nora M. Carney	27604	$173,872
B. F. Perkins	27605	129,779
William Roy Carney	27606	36,500
Elizabeth S. Wright	27607	24,333
Quinton Johnstone, Jr	27608	24,333
C. B. Seymour	27609	105,446
J. Joseph Wright	27610	81,110
W. J. Carney	27611	$284,451
C. B. Seymour, administrator estate of Annie L. Seymour	27612	35,365
William Roy Carney, Administrator of estate of Margaret Cunningham	27613	38,025

">*2083 The Carney Coal Company has been dissolved since distributing its assets to the stockholders.

In a decision of the Board promulgated March 15, 1928, and reported at , it was held that by reason of the operation of the statute of limitations there were no deficiencies due from the Carney Coal Company for the fiscal years ended May 31, 1917, and May 31, 1919. When the proceedings came on for hearing under Rule 50, counsel for respondent conceded that under the decision in , collection of the deficiency determined for the fiscal year ended May 31, 1918, was also barred. As to all three of those years final decision was entered holding that there were no deficiencies, the statute of limitations for each year having run before the enactment of the Revenue Act of 1926. As to the fiscal year ended May 31, 1920, we decided that there was an overassessment to be abated of $144,422.62 and a deficiency in payment of $18,717.99.

The letters to the petitioners in these proceedings, notifying them of their liabilities as transferees were mailed on February 26, 1927.

OPINION.

ARUNDELL: As set out">*2084 above, counsel for the respondent in his brief asks that in the case of Quinton Johnstone, Jr., Docket No. 27608, the sum of $24,333 be substituted as the liability of Johnstone in lieu of the amount of $16,222 set out in the amended answer. The purpose and effect of this motion is to increase the amount of petitioner Johnstone's liability. We think it improper to present a ">*724 claim for an increased liability in this manner, particularly where, as in this case, the parties were directed to file briefs without exchange. Under such circumstances the opposite party has no opportunity to present objections. It will be denied. Cf. .

When the case of the transferor, Carney Coal Company, was before the Board, we held that there were no deficiencies for the fiscal years 1917, 1918, and 1919. See , and the final decision entered May 22, 1929. As long as that decision remains unreversed it is binding on the respondent and he may not assert a liability against the petitioners as transferees for years for which we decided there were no deficiencies. ">*2085 Cf. , and , holding that stockholders may not, in transferee proceedings, attack deficiencies determined against the taxpayer corporation. We said in the Jahncke case:

It seems well settled, in the absence of fraud or collusion, that a judgment rendered by a tribunal of competent jurisdiction is conclusive against the parties to the suit and against all persons represented by the parties.

This rule applies to the respondent as well as to stockholders of corporate taxpayers. In these proceedings the respondent attempted to show lack of jurisdiction in the case of the transferor, Carney Coal Company, but failed in his proof.

The fact that section 280 extends the statutory period in the case of transferees under certain circumstances is of no aid to the respondent, as the statutory period expired before the enactment of the Revenue Act of 1926. . We accordingly hold that there is no liability on the part of these petitioners as transferees of the Carney Coal Company for the fiscal years ended May 31, 1917, 1918, and">*2086 1919.

As to the fiscal year ended May 31, 1920, a different situation exists. The return of the Carney Coal Company was filed on July 23, 1920, and the respondent assessed the deficiency within five years, to wit, on July 17, 1925. This assessment being timely made and after the enactment of the 1924 Act, the additional period of six years for collection applied. Counsel for the petitioners concedes that in view of these facts and under section 280(b)(2) of the Revenue Act of 1926 the respondent could assess the transferees if he acted not "later than one year after the enactment" of the 1926 Act. The 1926 Act having been enacted on February 26, 1926, and the notices having been mailed to the petitioners on February 26, 1927, the notices were timely sent under the decision in .

Decision will be entered under Rule 50.