Court Opinion

ID: 4496075
Source: CourtListenerOpinion
Date Created: 2020-01-23 18:14:39.871791+00
Date Added: 2024-06-11T08:00:13.842743
License: Public Domain

TtirneR,
dissenting: I am unable to agree with the majority opinion in its holding that the filing of a fiduciary return of income on form 1041 for the year 1929 by- the petitioner, started the running of the statute of limitations. Such a return is an information return and is not a “return of the tax imposed by this title” within the meaning of section 275 (c) of the Revenue Act of 1928, which provides that “if a corporation makes no return of the tax imposed by this title, but each of the shareholders includes in his return his distributive share of the net income of the corporation, then the tax of the corporation shall be assessed within four years after the last date on *48which any such shareholder’s return was filed.” (Italics supplied.) The evidence in this case shows that only a portion of the petitioner’s shareholders filed amended returns, including therein their distributive shares of petitioner’s net income, even though instructed by petitioner on or about December 12, 1930, to do so. Thus there is no proof that the period of limitations provided in section 275 (c) had run prior to the mailing of the notice of deficiency herein. On the other hand, if the return or returns upon which the period of limitation prescribed by section 275 (c) is based have not been filed, this is a no-return case and under section 276 (a) the tax may be assessed at any time.
It is to be noted that section 275 (a), designated as the general rule, prescribes the period of limitation on the assessment and collection of tax in the ordinary case, while section 275 (b) and (c) covers the cases wherein Congress has recognized the presence of special conditions and circumstances which justify the fixing of different periods of limitation. The exceptions to the periods of limitation so prescribed are set forth in section 276. We have held that the filing of a fiduciary or information return, as distinguished from a tax return, and not predicated upon a liability to tax, but which furnishes information as to income, is the filing of “a return” within the meaning of section 275 (a) and starts the running of the period of limitations in cases where that section is applicable. Abraham Werbelovsky, Executor, 8 B. T. A. 442; Estate of F. M. Stearns, 16 B. T. A. 889; J. R. Brewer, Administrator, 17 B. T. A. 704. See also Hartford-Connecticut Trust Co. v. Eaton, 34 Fed. (2d) 128. None of these decisions was made, however, in a case where the provisions of section 275 (c) were under consideration and none undertakes to define the term “return of the tax imposed by this title”, used in that provision of the statute.
Section 275 (o) first appeared in the Revenue Act of 1926 ánd the reason for its enactment is stated on page 11 of House Report No. 1 of the Committee on Ways and Means, 69th Congress, 1st Session, as follows:
Tliis section provides that if a corporation makes no return of the tax imposed by this bill, but each of the shareholders includes in his return his distributive share of the net income of the corporation, then the tax of the corporation shall be assessed within four years after the last date on which any such shareholder’s return was filed. This provision is limited to taxes imposed under this bill, and it is incorporated in the bill to make certain that if in the future the beneficiaries of a trust or the members of an association include their distributive share in their income-tax return, and if at a later date it should be held that the trust or association is subject to the corporation tax and should have made the return, the statute of limitations as applied to the trust or association shall run from the dates above specified.
*49In considering the applicability of section 275 (c), we can, of course, eliminate a case where a “return of tax” as distinguished from an information return has been filed, since in such a case section 275 (c) by its own terms would not be applicable and the limitation in section 275 (a) would clearly apply. The Board holds here that the filing of an information return brings this case within the provisions of section 275 (a) and also renders section 275 (c) inapplicable. If this interpretation is correct we must read out of section 275 (c) the words “of the tax imposed by this title” used by Congress in describing the return there dealt with and say that if no return of any kind was filed by the association, section 275 (c) would be applicable. Accordingly, Congress could have saved itself the trouble of describing or limiting the term “return” as it is used in section 275 (c) and would have accomplished exactly the same purpose, under the reasoning of the majority opinion, if it had merely said, “If a corporation makes no return but each of the shareholders includes in his return the distributive share of the net income of the corporation, etc.” In Gilbert v. Commissioner, 56 Fed. (2d) 361, the court said: “It is a well-settled rule ,of construction that a statute should, if possible, be so construed as to give meaning to all parts of it”, and in Crooks v. Harrelson, 35 Fed. (2d) 416, the court said:
To hold thus would be to wipe out a plain distinction made by the statute itself, and which has existed in many jurisdictions; to hold thus would, also violate one of the primary canons of statutory constructions — that each clause and each word of a statute should, if reasonably possible, be given meaning and effect.
And later the Supreme Court in the same case, 282 U. S. 49, said:
» * * courts have sometimes exercised a high degree of ingenuity in the effort to And justification for wrenching from the words of a statute a meaning which literally they did not bear in order to escape consequences thought to be absurd or to entail great hardship. But an application of the principle so nearly approaches the boundary between the exercise of the judicial power and that of the legislative power as to call rather for great caution and circumspection in order to avoid usurpation of the latter, Monson v. Chester, 22 Pick. (Mass.) 385, 387.
We can not ignore the plain language of the statute and say that Congress meant nothing by adding to the term “return” the limiting words “of the tax imposed by this title”, and this we must do in order to reach the conclusion contained in the majority opinion. We are not justified in ignoring the plain and unambiguous language used by Congress in the provision of the statute which specifically governs and fixes the period within which the tax of an association or trust, taxable under the revenue acts as a corporation, may be assessed. In my opinion, Congress recognized *50the difficulties often confronting the Bureau of Internal Revenue in determining whether a particular trust or association was such that under the terms of the revenue acts it was to be taxed as a corporation and by this provision of the statute prescribed a longer period of time for the determination of the tax in cases where such associations filed information returns than was allowed where a “return of the tax” was filed. On the other hand, the members of a trust or association were provided with a method whereby they could, by reporting their distributive shares of income in their individual returns, relieve themselves of any burden which might be occasioned by undue delay in the determination of the taxable status of the trust or association. If this was done, Congress said that the Government should be limited to four years in making a determination and assessment of the tax. Furthermore, this placed no additional burden on the members of such a trust or association, since in taking the position that the trust or association was not such as to be taxable as a corporation, they admitted the duty on their part of reporting their distributive shares of income of the trust or association in their individual returns. Under the plain terms of the statute, we are not at liberty to hold that the filing of an information return, in a case such as we have here, caused the running of the period of limitation prescribed by section 275 (a) for by such construction we read out of section 275 (c) clear and unambiguous language which Congress saw fit to place there. This we may not do. Crooks v. Harrelson, supra; Gilbert v. Commissioner, supra; In re Matthews, 109 Fed. 603.
Murdock agrees with this dissent.