Case Name: Alice Wilson, Petitioner, v. Commissioner of Internal Revenue, Respondent
Court: United States Board of Tax Appeals
Jurisdiction: United States
Decision Date: 1931-06-10
Citations: 23 B.T.A. 644
Docket Number: Docket No. 30079
Parties: Alice Wilson, Petitioner, v. Commissioner of Internal Revenue, Respondent.
Judges: SterNhageN and AeuNdell agree with this concurring opinion.
Reporter: Reports of the United States Board of Tax Appeals
Volume: 23
Pages: 644–653

Head Matter:
Alice Wilson, Petitioner, v. Commissioner of Internal Revenue, Respondent.
Docket No. 30079.
Promulgated June 10, 1931.
Louis Loeffier, Esq., for the petitioner.
L. A. Luoe, Esq., for the respondent.

Opinion:
OPINION.
Smith :
The respondent asserts a deficiency in income tax for the year 1922 in the amount of $2,969.76. The only issue is whether at June 4, 1927, the date of the deficiency notice, the statute of limitations had tolled the Commissioner's power to determine, assess, and collect the tax liability herein involved. The stipulated facts may be summarized as follows:
On April 3, 1923, the petitioner's 30-day extension having been granted from March 15, filed her income-tax return for the calendar year 1922.
On March 9, 1927, the respondent mailed the petitioner a notice in which he asserted a deficiency in income tax for the year 1922 in the amount of $251.06.
The petitioner filed no appeal in respect of the deficiency asserted on March 9, 1927; the respondent assessed the tax on May 28, 1927; on June 13, 1927, the petitioner paid the tax so assessed, together with interest thereon in the respective amounts of $251.06 and $58.72.
On June 4, 1927, the respondent mailed the petitioner a notice asserting a deficiency in income tax for the year 1922 in the amount of $2,969.76. The statement attached to such notice indicates that the deficiency asserted on March 9 and assessed on May 28, 1927, was credited against a total tax liability of $3,220.30. On August 1, 1927, petitioner filed an appeal from the determination of the respondent asserted on June 4. Petitioner has never signed any waiver extending the time for determination, assessment or collection of any taxes due on account of her income-tax return for 1922.
The limitation provision applicable here is section 277 (a) of the Revenue Act of 1926, which provides, so far as material, as follows:
(a) Except as provided in section 278 [not applicable here]—
* ⅜ ⅜ ⅛ *
(2) The amount of income, exeeSs-profits, and war-profits taxes imposed by the Revenue Act of 1921, and by such Act as amended, for the taxable year 1921 and succeeding taxable years, * ⅜ * shall be assessed within four years after the return was filed, and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of such period.
Section 277 (b) of the Revenue Act of 1926 provides, so far as material, as follows:
The running of the statute of limitations provided in this section on the making of assessments and the beginning of distraint or a proceeding in court for collection, in respect of any deficiency, shall (after the mailing of a notice under subdivision (a) of section 274) be suspended for the period during which the Commissioner is prohibited from making the assessment or beginning distraint or a proceeding in court and for 60 days thereafter.
In connection with the sending out of notices of deficiency the Revenue Act of 1926, in section 274, provides, so far as material, as follows:
(a) If in the case of any taxpayer, the Commissio-aer determines that there is a deficiency in respect of the tax Imposed by this title, the Commissioner is authorized to send notice of such deficiency to the taxpayer by registered mail. Within 60 days after such notice is mailed (not counting Sunday as the sixtieth day), the taxpayer may file a petition with the Board of Tax Appeals for a redetermination of the deficiency. Except as otherwise provided in subdivision (d) or (f) of this section or in section 279, 282, or 1001, no assessment of a deficiency in respect of the tax imposed by this title and no distraint or proceeding in court for its collection shall be made, begun, or prosecuted until such notice has been mailed to the taxpayer, nor until the expiration of such 60-day period, nor, if a petition has been filed with the Board, until the decision of the Board has become final. Notwithstanding the provisions of section 3224 of the Revised Statutes the making of such assessment or the beginning of such proceeding or distraint during the time such prohibition is in force may be enjoined by a proceeding in the proper court.
⅜
(f) If after the enactment of this Act the Commissioner has mailed to the taxpayer notice of a deficiency as provided in subdivision (a), and the taxpayer files a petition with the Board within the time prescribed in such subdivision, the Commissioner shall have no right to determine any additional deficiency in respect of the same taxable year, except in the case of fraud, and except as provided in subdivision fe) of this section or in subdivision (c) of section 279. If the taxpayer is notified that, on account of a mathematical error appearing upon the face of the return, an amount of tax in excess of that shown upon the return is due, and that an assessment of the tax has been or will be made on the basis of what would have been the correct amount of tax but for the mathematical error, such notice shall not be considered, for the purposes of this subdivision or of subdivision (a) of this section, or of subdivision (d) of section 284, as a notice of a deficiency, and the taxpayer shall have no right to file a petition with the Board based on such notice, nor shall such assessment or collection be prohibited by the provisions of subdivision (a) of this section.
The petitioner, relying on the stipulated facts and the provisions of law above set forth, contends that at June 4, 1927, the statute of limitations had tolled her tax liability for the year 1922. The re spondent, basing his conclusion on the same facts and law, holds that his determination of June 4, 1927, was timely. To settle the single issue here it remains only for us to apply the law to the undisputed facts.
The return in question was due on March 15,1923, but extension for the filing of the return was duly granted and it was filed and accepted on April 3, 1923. The four-year statute of limitations began to run on April 4, 1923, and unless extended by some act or consent of the parties, expired on April 3, 1927. Willingham Loan & Trust Co., 15 B. T. A. 931; Burnet v. Willingham Loan & Trust Co., 282 U. S. 437. On March 9, 1927, and within the statutory period of limitations, the respondent mailed a deficiency notice to the petitioner from which no appeal was taken to this Board. Under the provisions of section 274 (a) of the Revenue Act of 1926, the respondent could not move in respect of the collection of the deficiency therein asserted until the expiration of the 60-day period within which petitioner might file an appeal. On May 8 such 60-day period expired and thereafter the assessment could be made during a limited period. It was made on May 28. Thereafter, on June 4, 1927, the deficiency notice which is the basis of this proceeding was mailed to the petitioner. In this notice the deficiency asserted was much greater than that determined as of March 9, and was based upon different alleged facts. It is this notice that petitioner maintains was not timely because mailed after the statute had run. This is true unless the notice of March 9 effected an extension of the statute of limitations.
The question presented by this proceeding is the effect to be given to the provision of section 277 (b) of the Revenue Act of 1926, which " suspends " the running of the statute of limitations—
(after the mailing of a notice under subdivision (a) of section 274) for the period during which the Commissioner is prohibited from making the assessment or beginning distraint or a proceeding in court and for 60 days thereafter.
The respondent argues that the suspension of the statute for the making of the assessment is tantamount to extending the statute for a like period for the determination of the tax liability. The petitioner contends that the statute is not susceptible of such interpretation.
We are of the opinion that the contention made by the petitioner is well founded. The House members on the Conference Committee on the 1926 Revenue Act made the following report to the House concerning section 277 (b) :
The House bill provided that the running of the statute of limitations on the assessment and collection of a deficiency should be suspended for the period during which, under the provisions of the income tax title, the commissioner is prohibited from making t.he assessment or collection. The Senate amendment suspends the running of the statute for the period during which, for any reason, the commissioner's hands are tied, and m addition assures him, a period of at least 60 days after he is free in which to make the assessment or bring proceedings for collection. The House recedes. [Italics supplied.]
The statute of limitations is not "extended " by section 277' (b), but is merely " suspended." The word " suspend " is defined in Webster's Universal Dictionary as "to make to depend on." The statute, in section 277 (b) suspends the statute in section 277 (a) (2) on condition that a notice of deficiency has been issued within time, and the time is set forth in section 277 (a) (2). If this notice is issued within time, then it operates for the purpose of enabling the completion of the object and purpose of that notice. The word " extend " means " to lengthen," " to enlarge," or, in other words, implies the idea of scope and permanence in force and effect. Hence, had the statute used the word " extend " instead of " suspend " the effect thereof might have been different.
If section 277 (b) were construed to extend the statute, or suspend it, for any purpose, as well as for the specific purpose of making the assessment proposed in the particular notice mailed within the time limit of section 277 (a) (2), then it must be held that the mailing of a deficiency notice at any time during the four-year limitation period operates to lengthen the period of limitations rather than to suspend it. For instance, suppose a deficiency notice is mailed within the first two years after the return is filed, and no petition is filed with the Board, then after the expiration of the four-year period of limitation prescribed in section 277 (a) (2) the respondent determines that there is a further adjustment he should make and then determines a further deficiency and mails such further or new notice within 120 days after the four-year limitation period has expired, would a further notice thus mailed be held to have been mailed in time? Or, in other words, would it be held that the first notice (mailed several years prior to the expiration of the statute of limitations) operated to extend the statute of limitations for 120 days by reason of section 277 (b) and thereby lengthen the period of limitations prescribed in section 277 (a) (2) from four years to four years and 120 days, and that by reason thereof the second or further notice was timely mailed? And would it then also be held that a third notice mailed within 120 days after the mailing of said second notice also was timely mailed? We do not believe that it can be seriously contended that section 277 (b) is susceptible of such a construction; yet, to say that the notice of deficiency of June 4, 1927, was timely mailed, as contended by respondent, is tantamount to giving a construction to section 277 (b) so that it would operate identically as above set forth.
We believe that the construction placed upon section 277 (b) by the petitioner is both logical and in harmony with a practical plan in the law. The determination of the deficiency contained in the June 4, 1927, notice of deficiency has no bearing upon the assessment and collection of the deficiency referred to in the notice of deficiency mailed to the petitioner on March 9, 1927. We are of the opinion that a notice of deficiency mailed on March 9, 1927, from which no appeal was taken to this Board, did not operate to extend the statute of limitations applicable to the determination of deficiency made after the four-year period of limitation. The statutory period of limitation is a statute of repose. It is a part of the taxing statute and such laws are to be interpreted liberally in favor of taxpayers. Eidman, v. Martinez, 184 U. S. 578; Shwab v. Doyle, 258 U. S. 529; Bowers v. New York & Albany Lighterage Co., 273 U. S. 346.
Reviewed by the Board.
Judgment of no deficiency wihl be entered.