Court Opinion

ID: 4632209
Source: CourtListenerOpinion
Date Created: 2020-11-21 03:11:19.413876+00
Date Added: 2024-06-11T07:59:26.367711
License: Public Domain

STERN BROTHERS & CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Stern Bros. & Co. v. CommissionerDocket No. 9254.United States Board of Tax Appeals17 B.T.A. 848; 1929 BTA LEXIS 2233; October 10, 1929, Promulgated *2233  1.  Assessment and collection of the deficiency here are not barred by the statute of limitation.  2.  It is not necessary to the validity of consents to a later determination and assessment of taxes that the Commissioner notify the taxpayer of his acceptance of such written consents.  Paul R. Stinson, Esq., W. H. Hays, Esq., and Frank A. Boys, Esq., for the petitioner.  A. H. Fast, Esq., for the respondent.  LITTLETON*848  The Commissioner determined a deficiency of $59,262.56 for 1918.  At the hearing the parties stipulated that the correct deficiency is $11,892.25 and the only question for decision is whether assessment and collection of this deficiency are barred by the statute of limitation.  FINDINGS OF FACT.  Petitioner is a Delaware corporation with office and place of business at Kansas City, Mo.  On March 15, 1919, it filed a tentative return and request for extension of time within which to file its return for the year 1918.  The return showing the items of gross income, deductions, net income and invested capital was filed June 16, 1919.  In this return the claim was made that $136,666.66 of the earnings reported were earned*2234  under such conditions as to entitle the corporation to a computation of its tax as a part personal service corporation under the provisions of section 303 of the Revenue Act of 1918.  November 21, 1923, the claim for "classification as a part personal service corporation" was denied and petitioner was notified *849  that an audit of the return disclosed an additional tax of $59,262.56.  In this notice petitioner was advised that: In accordance with the provisions of Section 250(d) of the Revenue Act of 1921, you are granted thirty days within which to file an appeal and to show cause or reason why this tax or deficiency should not be paid.  The appeal, if filed, must be addressed to the Commissioner of Internal Revenue, Washington, D.C., for the specific attention of IT:CA:PU-2303-2-App.  Treasury Decision No. 3492, setting forth the privileges of taxpayers in cases of appeal, is attached for your information and guidance.  January 7, 1924, the Commissioner wrote the petitioner as follows: Reverence is made to your appeal dated December 18, 1923, wherein you take exceptions to the proposed assessment of taxes in the amount of $59,262.56, as set forth in office letter*2235  of November 21, 1923, for the year 1918.  You are informed that inasmuch as your appeal has been submitted of your own volition, it will be necessary in order that the collection of the tax for the year 1918 may not be jeopardized by the delay incident to giving consideration to your appeal that a waiver for the year 1918 be signed by two officers of the corporation and the seal affixed thereto and returned immediately to this office for which purpose the enclosed form may be used.  With this letter to the petitioner the Commissioner enclosed an unsigned and undated written consent form.  This consent was executed by the petitioner on January 9, 1924, by its president and vice president, with the seal of the corporation affixed, and was returned by mail to the Commissioner and was signed by him.  This consent follows: JANUARY 9, 1924.  In pursuance of the provisions of subdivision (d) of Section 250 of the Revenue Act of 1921, Stern Bros. & Co. of Kansas City, Mo., 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*2236  said corporation for the year 1918 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 for one year from the date it is signed by the taxpayer.  STERN BROTHERS & COMPANY, Taxpayer.By SIGMUND STERN, Pres.By MORRIS STERN, V.P.Signed D. H. BLAIR, Commissioner.(SEAL) On January 14, 1924, the Commissioner mailed to petitioner the following letter: Receipt is acknowledged of your appeal sworn to on December 18, 1923, containing a request for a conference in connection with the proposed assessment of additional tax for the year 1918.  *850  No conference has been arranged at this time for the reason that the appeal does not meet the requirements of Treasury Decision 3492.  The appeal should be addressed to the Commissioner of Internal Revenue and should be signed and sworn to by an officer of the corporation.  In order that the interests of the Government may be protected, it is necessary as*2237  a condition precedent to a consideration of the appeal that the enclosed waiver for the year 1918 be executed and returned to this office.  A final extension of time not to exceed fifteen days, from the date of this letter is hereby granted in which to submit a completed appeal and a properly executed waiver.  Upon receipt of this additional data, further consideration will be given to the request for a conference before the Income Tax Unit, which under no circumstances can be held sooner than five days subsequent to the receipt of the completed appeal.  There are enclosed copies of Department Circular #230, Conference Memorandum #1185, and Treasury Decision 3492, which govern the recognition of agents before the officers of the Treasury Department and outline the conference procedure relative thereto.  With this letter the Commissioner enclosed an unsigned and undated written consent form.  This consent was executed by petitioner on January 19, 1924, by its president and vice president with the seal of the corporation affixed.  It was returned by mail to the Commissioner with the following letter: In accordance with the requirements set forth in your letter of January 14th, *2238  we are submitting herewith a corrected appeal on behalf of Stern Brothers & Co., in the matter of their income and excess profits tax liability for the period ending December 31, 1918.  You will please note that this appeal is addressed to the Commissioner of Internal Revenue, that it is sworn to by the president of Stern Brothers & Co., and certifies to the fact that this appeal is not taken for the purpose of delaying a collection of tax justly due by this corporation.  There is also submitted herewith a waiver for the year 1918, properly executed by the officers of the corporation.  You are further advised that this is the second waiver executed for the year 1918.  Under date of January 7th, we requested that an oral conference be granted in order that we might present further arguments in connection with the appeal filed herewith.  In as much as the appeal will not be received in time to hold a conference on January 28th as originally requested, we respectfully ask that a conference be granted on February 4, 1924.  This consent was signed by the Commissioner and was as follows: JANUARY 19, 1924.  In pursuance of the provisions of subdivision (d) of Section 250 of the*2239  Revenue Act of 1921, Stern Brothers and Company of Kansas City, Mo. 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 Stern Brothers and Co., for the year 1918 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 a period of one year after the expiration of the statutory *851  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.  The Commissioner did not formally advise petitioner of the receipt and execution by him of the aforementioned consents.  Subsequent to the filing of the appeal with the Commissioner and the aforementioned correspondence, *2240  conferences were had between the Commissioner and the petitioner relative to the petitioner's tax liability for 1918.  On September 23, 1925, the Commissioner notified petitioner by registered mail of his final determination of a deficiency of $59,262.56, as follows: An audit of your income and profits tax return for the year ended December 31, 1918, has resulted in the determination of a deficiency of $59,262.56, as shown by Bureau letter dated May 31, 1924.  In accordance with the provisions of Section 274 of the Revenue Act of 1924, you are allowed 60 days from the date of mailing of this letter within which to file an appeal to the United States Board of Tax Appeals contesting in whole or in part the correctness of this determination.  Within the time allowed by law, petitioner filed a petition with the Board.  No portion of the deficiency as originally determined by the Commissioner or as now agreed upon, has been assessed or collected.  OPINION.  LITTLETON: The only question here is whether under the written consents, hereinbefore set forth, the deficiency is barred by the statute of limitations.  Petitioner contends, first, that the consents were of no effect because*2241  the Commissioner did not give petitioner notice of his acceptance and signing of them; that "under rudimentary principles the taxpayer's January 9th offer to enter into a consent in writing with the Commissioner had to be unconditionally accepted and notice of such acceptance promptly communicated in order to bind either party.  Either a failure to communicate such acceptance or a secret acceptance, was a rejection of the offer." Secondly, that the burden of proof in respect of the statute of limitation is upon the Commissioner and he has not sustained this burden.  Thirdly, that, assuming the consent of January 9, 1924, to be valid, the language of the January 19, 1924, consent that "This waiver is in effect from the date it is signed by the taxpayer and will remain in effect for a 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," conveys the meaning that if there were any other waivers then on file, *852  the limitation period as extended by them was not further extended, *2242  but merely preserved.  Fourthly, assuming that these consents were effective when made to extend the limitation period for assessment and collection to January 9, 1926, the deficiency is nevertheless barred under sections 277(b) and 278(d) of the Revenue Act of 1924 and section 270(d) of the Revenue Act of 1926.  We are of the opinion that the contentions of the petitioner are without merit.  Notice by the Commissioner of his acceptance of consents is not necessary to their validity. Greylock Mills,9 B.T.A. 1281">9 B.T.A. 1281; affd., 31 Fed.(2d) 655. The statute provides that if the taxpayer and the Commissioner consent in writing the tax may be assessed within the period agreed upon.  The consents were sent to the petitioner by the Commissioner with a request that they be executed; they were signed and were returned to the Commissioner and were then signed by him.  They were then valid consents under the statute.  There is no showing that the consents were not signed by the Commissioner within a reasonable time.  *2243 Keeler Brass Co.,10 B.T.A. 3">10 B.T.A. 3; Premier Packing Co.,12 B.T.A. 637">12 B.T.A. 637. The language of the two consents is not identical, and the mere fact that the petitioner and the Commissioner entered into two consents does not render either of them invalid.  They must be construed together.  Pictorial Printing Co.,12 B.T.A. 1407">12 B.T.A. 1407. Petitioner had a right, had it desired, to refuse to sign the first consent or, having signed it, to stand upon it and decline to execute another one.  In view of our conclusion that the consents were valid, the second contention that the Commissioner has not overcome the prima facie showing that the statute had run is not well taken.  The consent of January 19, 1924, by its terms extended the period of limitation one year beyond the period of five years from the date the return was filed, or for a period of one year beyond the limitation fixed by the waiver already on file.  The first waiver extended the period of limitation to January 9, 1925.  The second waiver of January 19, 1924, therefore operated to extend the period of limitation to January 9, 1926.  *2244 Trustees for Ohio & Big Sandy Coal Co. et al.,9 B.T.A. 617">9 B.T.A. 617. The last contention that the period for assessment and collection expired on January 9, 1926, and was not further extended by the Revenue Acts of 1924 and 1926, was decided by the Board contrary to the claim here made.  Trustees for Ohio & Big Sandy Coal Co., supra. See, also, Loewer Realty Co. v. Anderson, 31 Fed.(2d) 268. Reviewed by the Board.  Judgment will be entered for the respondent.