Court Opinion

ID: 4610041
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:46:01.90101+00
Date Added: 2024-06-11T07:53:59.887920
License: Public Domain

CHADBOURNE & MOORE, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Chadbourne & Moore v. CommissionerDocket No. 17066.United States Board of Tax Appeals16 B.T.A. 961; 1929 BTA LEXIS 2478; June 10, 1929, Promulgated *2478  1.  A waiver signed by the taxpayer but not executed by the Commissioner, or by one on his behalf, is not binding on any one, and does not extend the period of limitation.  2.  Waivers executed on behalf of the taxpayer by parties not authorized to execute the same are not effective to stay the running of the statute of limitation.  Donald Horne, Esq., for the petitioner.  John D. Foley, Esq., for the respondent.  LOVE *962  This is a proceeding for a redetermination of the deficiency asserted by the Commissioner in his notice of deficiency dated April 13, 1926.  The taxes in controversy are excess-profits taxes for the calendar year 1917 in the amount of $9,963.74.  The petitioner alleges that the determination of the tax set forth in said notice of deficiency is based upon the following errors: (a) In the disallowance of $10,632.45 as depreciation on tangible assets as a deduction from gross income; (b) In reducing petitioner's invested capital by $25,726.40 for depreciation alleged to have been sustained in prior years; and (c) In asserting the deficiency for the year 1917 after the statute of limitation had run.  On motion of counsel*2479  for the petitioner, an order was entered on May 25, 1928, to confine the hearing in the first instance to the question (c) above, concerning the statute of limitation.  FINDINGS OF FACT.  The partnership of Chadbourne & Moore consisted of Joseph H. Chadbourne and Walter B. Moore.  There were no other partners.  The junior partner died April 24, 1919, and the senior, May 7, 1926.  The business of the partnership was conducted at 179 Lincoln Street, Boston, Mass.  The partnership return was filed April 12, 1918.  On February 24, 1921, Chadbourne & Moore executed a partnership waiver in the words following: WAIVER (PARTNERSHIP) We, Chadbourne & Moore, a partnership in consideration of the assurance given us by officials in the Income Tax Unit of the Bureau of Internal Revenue that our liability for all Federal taxes imposed by the Act of Congress, approved September 8, 1916, as amended by the Act of Congress, approved October 3, 1917, on our net income received from all sources in said year, shall not be determined except after deliberate, intensive and thorough consideration, hereby waive any and all statutory limitations as to the time within which assessments based upon such*2480  liability may be entered.  It is understood, however, that we do not, by the execution of this waiver, admit in advance the correctness of any assessment which may be made against us for said year by the officials of the Income Tax Unit.  (Signed) CHADBOURNE & MOORE By JOSEPH H. CHADBOURNE Member of partnership, 179 Lincoln St., Boston, Mass.D. H. BLAIR, Commissioner.LH STATE OF MASS.County of Suffolk, ss:Subscribed and sworn to before me this 24 day of Feb. 1921.  WALTER C. STONE, Notary Public.(SEAL) *963  This waiver did not provide for any date of expiration.  On February 6, 1923, what purported to be a second "Income and Profits Tax Waiver" was signed, as below: FEB. 6TH, 1923.  (Date) INCOME AND PROFITS TAX WAIVER In pursuance of the provisions of subdivision (d) of Section 250 of the Revenue Act of 1921, Moore & Chadbourne, of 179 Lincoln St., Boston, Mass., 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 company for the year 1917 under the*2481  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, irrespective of any period of limitations.  (Signed) CHADBOURNE AND MOORE, INC. Taxpayer.BY JOSEPH H. CHADBOURNE Treas.  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.  This waiver will be effective only for one year from date of signing.  This document was never executed by the Commissioner or on his behalf.  A third "Income and Profits Tax Waiver" for the years 1917, 1918, and 1919 was executed as for Chadbourne & Moore under date of December 12, 1924.  It is signed "Chadbourne & Moore, Inc., By Everett B. Moore, Pres. & Asst. Treas.  It bears also the signatures of Joseph H. Chadbourne, Treas., and of the Commissioner, *2482  and bears on its face the note, apparently added in pencil: "This also covers partnership and extends to 3/27/26." It is transcribed below: 12/12/24 (Date) INCOME AND PROFITS TAX WAIVER In pursuance of the provisions of existing Internal Revenue Laws, Chadbourne and Moore, a taxpayer, of Boston, Mass. and the Commissioner of Internal Revenue, hereby consent to extend the period prescribed by law for 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 said taxpayer for the years 1917, 1918 and 1919 under the Revenue Act of 1924, or under prior income, excess-profits, or war-profits tax Acts, or under Section 38 *964  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 period of limitation within which assessments of taxes may be made for the year or years mentioned, or the statutory period of limitation as*2483  extended by Section 277(b) of the Revenue Act of 1924, or by any waivers already on file with the Bureau.  (Signed) CHADBOURNE & MOORE, INC., Taxpayer.By EVERETT B. MOORE, Pres. & Asst. Treas.JOSEPH H. CHADBOURNE, Treas.D. H. BLAIR, Commissioner.This also covers partnership and extends to 3/27/26.  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.  Still a fourth "waiver" was executed for "Chadbourne & Moore," covering the years 1917 and 1918, and signed "Chadbourne & Moore, By Everett B. Moore, Administrator of the Estate of Walter B. Moore, deceased." This paper, also, is signed on behalf of the Commissioner.  It is not dated, but it is stamped as having been received (presumably by the Bureau of Internal Revenue) December 14, 1925.  It is in the following words and figures: INCOME AND PROFITS TAX WAIVER For Taxable Years Ended Prior to January 1, 1922.   , 192 In pursuance of*2484  the provisions of existing Internal Revenue Laws Chadbourne & Moore, a taxpayer of 179 Lincoln Street, Boston, Massachusetts, and the Commissioner of Internal Revenue hereby waive the time prescribed by law for making any assessment of the amount of income, excess-profits, or war-profits taxes due under any return made by or on behalf of said taxpayer for the year (or years) 1917 and 1918 under existing revenue acts, or under prior revenue acts.  This waiver of the time for making any assessment as aforesaid shall remain in effect until December 31, 1926, and shall then expire except that if a notice of a deficiency in tax is sent to said taxpayer by registered mail before said date and (1) no appeal is filed therefrom with the United States Board of Tax Appeals then said date shall be extended sixty days, or (2) if an appeal is filed with said Board then said date shall be extended by the number of days between the date of mailing of said notice of deficiency and the date of final decision by said Board.  *965  This waiver is executed without prejudice to taxpayer's contention that time for assessment can not legally be extended and that a waiver executed after the passage*2485  of the Revenue Act of 1924 is invalid.  CHADBOURNE & MOORE, Taxpayer.By EVERETT B. MOORE, Administrator of the Estate of Walter B. Moore, Deceased,D. H. BLAIR, Commissioner.R 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.  All of the above transcriptions are from photostat copies of the originals which were introduced in evidence by the respondent and withdrawn.  Everett B. Moore was never a member of the partnership of Chadbourne & Moore.  He was an employee and in 1917 he was plant manager.  The business was incorporated December 31, 1918, and from then on it existed as a corporation, of which Everett B. Moore was originally, after the incorporation, vice president.  Later he became its president and assistant treasurer.  OPINION.  LOVE: The petitioner divides his third assignment of error (the only one that we are here considering) into three parts: 1.  That the time within which an assessment*2486  of a deficiency could be made against the partnership had expired before the Commissioner mailed the deficiency letter.  2.  That the assessment is barred by the acceptance by the Commissioner of an offer in compromise with respect to penalty and interest, constituting part of the tax for 1917.  3.  That petitioner is entitled to judgment of no deficiency by reason of respondent's default in answering the petition.  We will dispose of these points in reverse order.  In regard to the third point we believe that the petitioner's contention here is based upon misunderstanding of the facts.  The Board's record shows that the petition was filed June 10, 1926, and that the respondent's answer was filed July 19, 1926, well within the 60 days allowed for that purpose by the rules of the Board; therefore, we find no default and dismiss this contention on the part of the petitioner.  The petitioner's second point is concerned with the alleged acceptance by the Commissioner of an offer in compromise.  Inasmuch as *966  this hearing in the first instance is confined to the consideration of the question under the statute of limitations, this allegation on the part of the petitioner*2487  will not be considered herein.  Considering the petitioner's first point, in regard to all unlimited waivers such as that here first presented and which was unquestionably executed by Chadbourne & Moore on February 24, 1921: The record shows that on April 11, 1923, the Commissioner addressed a letter to collectors of internal revenue, internal revenue agents in charge and others concerned, in which, among other things, he said that "Inasmuch as there are many waivers on file signed by the taxpayers containing no limitation as to the time in which assessments for 1917 may be made, all such unlimited waivers will be held to expire April 1, 1924." In , and in , the Board held that, under the authority of that letter, all such unlimited waivers expired with the date set by the Commissioner, unless, of course, they had been lawfully extended.  We do not in this case find such a lawful extension.  The waiver of February 6, 1923, was executed by Chadbourne & Moore, Inc., by Joseph H. Chadbourne, treasurer, but it was never executed by the Commissioner nor on his behalf.*2488  Whether it would have been effective had it been so executed, we are not called upon to determine.  We attach no weight to the third waiver, executed "12/12/24" by "Chadbourne & Moore, Inc.," by its officers, even though one of them, Joseph H. Chadbourne, the treasurer, was the sole surviving partner of the firm of Chadbourne & Moore.  Chadbourne did not sign in his individual capacity as such partner, but as the treasurer of Chadbourne & Moore, Inc.  The act was not his but the act of the corporation, which had no binding effect upon its predecessor partnership.  The explicit provision of section 278(c) of the Revenue Act of 1924, which was in effect when this paper was signed, is that the consent in writing must be by both the Commissioner and "The taxpayer." Chadbourne & Moore, Inc., was not the taxpayer here and is not a party in these proceedings.  We hold that this document was never effective for any purpose.  The fourth waiver offered in evidence by the respondent is not dated but is stamped as received December 14, 1925.  It purports to be a consent by "Chadbourne & Moore, a taxpayer" and it is executed in the name of "Chadbourne & Moore, Taxpayer, by Everett B. Moore, *2489  Administrator of the Estate of Walter B. Moore, deceased," and by the Commissioner by "R." In regard to these waivers, and particularly in regard to the last one (Respondent's Exhibit "D") Moore testified that when he executed the foregoing document on or about December 14, 1925, his *967  father, Walter B. Moore, had been dead since April 24, 1919, and that the then surviving partner, Joseph H. Chadbourne, died in turn on May 7, 1926.  Under rigorous cross-examination he testified that on the date of the signing of the waiver, he knew that it related to the years 1917 and 1918, and he knew that the corporation was not in existence in 1917.  He had no conversation or communication through others with Joseph H. Chadbourne in regard to the signing of this waiver (Exhibit "D") and did not take up the matter with him at all.  He executed the waiver by "the authority" or advice of their accountants, who told him that the waiver had to be signed and that he would have to sign it, and he did so in the only capacity in which he could sign it.  At that time he believed that he was executing the waiver on behalf of the partnership of Chadbourne & Moore.  Chadbourne had not at any time*2490  told him that if anything came up regarding the tax liability of the partnership Moore could take care of it while Chadbourne was sick.  Moore was not clear whether he had made "any attempt" to get Chadbourne's authorization before he (Moore) executed the waiver marked Exhibit "D." Q.  Did you ever tell Mr. Chadbourne you had signed this waiver which had been marked Exhibit D?  A.  I would not say about that.  Q.  Do you know whether he knew you had signed it or not?  A.  Not through anything I had told him personally, no.  It requires no extended reasearch on the part of the Board to determine that a "waiver" covering 1917 and 1918, executed in December, 1925, on behalf of a partnership, by the administrator of the estate of one partner who had died more than six and one-half years before that time, and so executed without consultation with or the knowledge of the partner still surviving though ill, and which administrator was in no wise authorized thereto except by "his accountants," can have no binding effect upon the partnership, and to determine that it was null and void from the beginning, and we do so find and determine.  Nothing that we have said above is to be*2491  construed here or later as an expression of opinion whether or not the last two waivers dated respectively "12/12/24" and as "received Dec. 14, 1925," would have been effective to revive the Commissioner's right to assess upon the partnership the tax for the year 1917, provided that such partnership waivers had been properly executed for that purpose by the surviving partner, Joseph H. Chadbourne, whose death did not occur until May 7, 1926, or by his properly constituted agent duly authorized for that purpose.  But under the circumstances of this case as they are before us, we hold that the Commissioner's authority for such assessment expired with April 1, 1924, and that it was never revived.  Judgment will be entered for the petitioner.