Court Opinion

ID: 4602286
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:29:23.583029+00
Date Added: 2024-06-11T07:52:38.532924
License: Public Domain

CALIFORNIA IRON YARDS CO., E. D. KEEFFE, TRUSTEE, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.California Iron Yards Co. v. CommissionerDocket Nos. 11841, 17309.United States Board of Tax Appeals15 B.T.A. 25; 1929 BTA LEXIS 2930; January 24, 1929, Promulgated *2930  1.  An unlimited waiver for the fiscal year ending January 31, 1918, was signed by the duly authorized officers of the company on February 15, 1923.  Held, the assessment and collection of taxes for that year are not barred by the statute of limitations.  2.  The privileges and powers of the company were suspended under the laws of the State of California for nonpayment of dues and waiver was filed January 16, 1925, for the years 1918 and 1919 by one of the directors acting as trustee under the California laws, purporting to extend the statute of limitations to December 31, 1925.  Held, the assessment and collection of taxes for those years is not barred by the statute of limitations.  3.  The statute of limitations with respect to the fiscal year ending January 31, 1920, has not run since assessment was made within the period prescribed by statute.  4.  No claim for amortization was made prior to June 15, 1924, for the years 1918, 1919, and 1920.  Held, that no deduction for amortization may be allowed under section 1209 of the Revenue Act of 1926.  5.  Depreciation allowed by the respondent approved for lack of evidence.  6.  Assessment under the provisions*2931  of sections 327 and 328 of the Revenue Act of 1918 denied for lack of proof of abnormality.  Robert A. Littleton, Esq., W. W. Spalding, Esq., and M. Serf, C.P.A., for the petitioner.  John D. Foley, Esq., for the respondent.  TRAMMELL *26  In this proceeding petitioner seeks a redetermination of the income and profits taxes for the fiscal years ending January 31, 1918, January 31, 1919, and January 31, 1920, for which the Commissioner has determined deficiencies of $544.66, $22,060.35, and $11,440.60 respectively.  The petitioner alleges error on the part of the Commissioner - (1) In endeavoring to assess and collect taxes for the three years involved after the right to assess and collect such taxes has been barred by the statute of limitations.  (2) In restoring to book income for the fiscal year ending January 31, 1919, an item of $798.17 alleged to be 1917 income tax, an item of $714.70 alleged to be a reserve for taxes, and an item of $587.48 alleged to be excessive depreciation.  (3) In restoring to net income for the fiscal year ending January 31, 1919, an item of $22,544 alleged to be 1918 income taxes, an item of $13,143 alleged*2932  to be a franchise tax, and an item of $8,320.12 alleged to be excessive depreciation.  (4) In restoring to net income for the fiscal year ending January 31, 1920, an item of $6,220.56 alleged to be 1919 income taxes, an item of $13,000 alleged to be excessive salaries paid, and an item of $1,748.54 alleged to be excessive depreciation.  (5) In failing to allow for the fiscal periods ending January 31, 1918, January 31, 1919, and January 31, 1920, any deduction for the amortization of the plant and machinery acquired subsequent to April 6, 1917, and used for the production of articles contributing to the prosecution of the war.  (6) In failing to allow adequate depreciation on the plant and equipment for the fiscal years in question.  (7) In failing to allow as a deduction for the fiscal year ending January 31, 1920, a loss sustained by reason of the obsolescence of an acetylene generator which cost the petitioner $500.  (8) In refusing to compute excess-profits taxes for the fiscal years ending January 31, 1919, and January 31, 1920, under the provisions of sections 327 and 328 of the Revenue Act of 1918.  *27  FINDINGS OF FACT.  The California Iron Yards Company*2933  was a corporation organized on or about February 3, 1914, under the laws of the State of California.  It took over the business of buying, selling and dealing in scrap iron theretofore conducted and carried on individually by Wm. H. McDaniel and E. D. Keeffe.  Wm. H. McDaniel, E. D. Keeffe and D. J. A. O'Keeffe became the officers and directors of the petitioner and were acting in that capacity on December 8, 1920, when the business, property and assets of the petitioner were sold, transferred and delivered to the California Iron Yards Corporation, a corporation organized and existing under the laws of the State of California.  On March 5, 1921, the corporate rights, privileges and powers of the California Iron Yards Co. were suspended on account of failure to pay its license tax under the statutes of the State of California.  The following instruments with respect to the fiscal years ending January 31, 1918, January 31, 1919, and January 31, 1920, were introduced in evidence: SAN FRANCISCO, CAL., Feb. 15, 1923.INCOME AND PROFITS TAX WAIVER In pursuance of the provisions of subdivision (d) of Section 250 of the Revenue Act of 1921, California Iron Yards Co., Inc., of San*2934  Francisco, 1923 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 California Yards Co., Inc. for the years Ending Jan. 31, 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, irrespective of any period of limitations.  CALIFORNIA IRON YARDS CO., (Signed) WM. H. MCDANIEL, Pres. TaxpayerBy ANDREW M. STEED Secty.D. H. BLAIR Commissioner.APRIL 9, 1924 INCOME AND PROFITS TAX WAIVER In pursuance of the provisions of subdivision (d) of Section 250 of the Revenue Act of 1921, Calif. Iron Yards Corpn., of San Francisco, Cal., 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 Calif.  Iron Yards*2935 *28  Corpn. for the years 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 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.  CALIFORNIA IRON YARDS CORPN.  TaxpayerBy E. D. KEEFFE, Pres.By ANDREW STEED, Secty.D. H. BLAIR, Commissioner.APRIL 9, 1924 INCOME AND PROFITS TAX WAIVER In pursuance of the provisions of subdivision (d) of Section 250 of the Revenue Act of 1921, Calif. Iron Yards Corpn., of San Francisco, Cal. 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*2936  or on behalf of the said Calif-Iron Yards Corpn. for the year Nineteen hundred and Nineteen, 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 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.  CALIFORNIA IRON YARDS CORPN.  TaxpayerBy E. D. KEEFFE, Pres.By ANDREW STEED, Secty.D. H. BLAIR, Commissioner.JAN. 16, 1925 INCOME AND PROFITS TAX WAIVER (For taxable years ended prior to March 1, 1921) In pursuance of the provisions of existing Internal Revenue Laws California Iron Yards Co., a taxpayer of 34 Missouri Avenue, San Francisco, Calif., and the Commissioner of Internal Revenue hereby waive the time prescribed by law*2937  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 *29  for the year(s) 1918 and 1919 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, 1925, 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.  CORPORATE SEAL: Seal of the California Iron Yards Corporation.  E. D. KEEFFE, Taxpayer Pres.By ANDREW STEED, Secty.D. H. BLAIR, Commissioner.MARCH 27, 1925.  INCOME AND PROFITS TAX WAIVER (For taxable years ended prior to March 1, 1921) In pursuance of the provisions of existing Internal Revenue Laws California Iron Yards Corp., a taxpayer of 554*2938  Bryant St., San Francisco, Calif., 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(s) Fiscal Year Ending January 31, 1920 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, 1925, 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.  CALIFORNIA IRON YARDS CORP.  TaxpayerBy HARRY E. Vice presidentD. H. BLAIR, CommissionerWm. H. McDaniel, president of the petitioner, died on June 3, 1923.  The president of the corporation having died and the charter of the corporation*2939  having been suspended the petition, Docket No. 11841, before this Board was presented by E. D. Keeffe and D. J. A. O'Keeffe, the sole surviving directors of the petitioner, and petition, Docket No. 17309, was filed by E. D. Keeffe before this Board on June 16, 1926, at which time he was the sole surviving director of the petitioner.  The business of the California Iron Yards Co., the petitioner, was that of gathering scrap iron from places in and about the City of san *30  Francisco and shipping the same to its plant or yards, at which place such material was worked into pieces of a size that could be used in open hearth furnaces for melting and fabricating into steel to be used in the construction of ships.  The petitioner did not operate furnaces, but sold the products made by it to concerns who did operate them.  During the calendar year 1917, and particularly after April 6, 1917, when the United States entered the World War as a belligerent, the demand for the petitioner's products materially increased.  The demand made by the furnaces was such that the petitioner was required to improve its facilities for handling and sizing scrap iron.  During the latter part of the calendar*2940  year 1917, the petitioner, by purchase, acquired a piece or parcel of land, consisting of about five acres, to be used in increasing the capacity of its plant.  This piece of land was located in San Mateo County at a place called and designated in the record as South San Francisco.  This piece of land, on which the petitioner erected and constructed its plant.  This piece of land was located in San Mateo County at a Francisco Peninsula, lying between the Bay of San Francisco on the east and the Pacific Ocean on the west.  On this piece of land the petitioner erected buildings, and placed improvements and equipment costing in the aggregate $81,867.97.  The building of the new plant by the petitioner began in about the month of November, 1917, and was completed prior to the month of November, 1918.  The greater portion of the work was done during the month of December, 1917, and the months of January and February, 1918, and from time to time additions were made thereto until about the month of June, 1919.  After the petitioner had acquired and equipped its new plant it agreed and contracted to take from the shipyards in and about San Francisco all the scrap iron and other metallic*2941  material produced by them in building and repairing ships, such as armor plate, boilers, engines, beams and steel or cast iron bulk heads necessary to be discarded.  Large quantities of material of this character were produced by the shipyards during the years 1918 and 1919, but the demand made on the petitioner for its products was in excess of its supply on hand.  The excess demand was supplied from other sources where scrapped and discarded machinery such as engines, boilers, and railroad rails could be found.  A great portion of the material used by the petitioner was of large pieces weighing from 1 to 10 tons.  The business of the petitioner consisted of bringing these large and heavy pieces of material to its plant in South San Francisco, and there breaking them into small pieces and working those pieces down to the size of 5 feet long and 24 inches wide, so they would go into the charging boxes of iron and *31  steel furnaces.  Such material that was gathered that did not need to be reworked or manufactured into smaller pieces, such as bolts, shavings, and borings, would be shipped direct from the point gathered to the furnaces, but the handling of this kind of material*2942  was a very small part of the business.  During the latter part of the calendar year 1919 the demand for the petitioner's products began to diminish, and in about the month of March, 1920, had practically ceased.  The petitioner did not file any claim for amortization with its tax return nor did it file any separate claim for amortization prior to June 15, 1924, for the fiscal years ending June 31, 1918, 1919, and 1920.  On November 26, 1924, the California Iron Yards Corporation submitted to the Commissioner of Internal Revenue a claim for amortization but such claim related to the amortization allowances allowable, if at all, to the predecessors.  The petitioner's equipment and machinery is located near the ocean where climatic and atmospheric conditions were very severe on the metal and wooden parts, causing excessive rust and decay and making the cost of repairs and upkeep excessive.  The petitioner's machinery that was in active use was kept in better condition and repair than that which was not in active use.  The petitioner's machinery was also of such a nature that it was subject to excessive abuses by unskilled and careless employees.  Machinery and equipment of this*2943  character and in this location would in general have a life of about five years if left idle and uncared for and not protected by paint or other protective covering.  The total cost of the machinery and equipment acquired after April 6, 1917, was $81,867.97 and consisted of office buildings, railway yard, railway spur tracks, locomotive train track, 8-foot track, railroad track scales, 6 shears, 2 stiff-leg derricks, magnets, motors, 1 Gantry crane, 1 locomotive crane, acetylene equipment, electric system, and miscellaneous buildings.  This equipment was used to capacity during the years 1918 and 1919, but during the year 1920 only a portion of it was used.  Of the 6 shears purchased for $4,918.96, 4 were subsequently sold in October 1925 for $2,000.  Of the 2 magnets purchased in January and February of 1918 at a cost of $5,254.37, 1 is still being used on the locomotive crane and the other was sold in 1925 for $1,600.  A Gantry crane which was purchased in 1918 at a cost of $22,259.70 was sold in 1925 for $1,750.  An acetylene generator was acquired in February, 1918, at a cost of $500, but it was found that it did not produce sufficient pressure to force the gas through the pipes*2944  and hose so that the acetylene torches could be successfully operated.  The generator was, therefore, never used but remained on the property.  The electric system was acquired *32  and installed in 1918 at a cost of $6,159.17.  It was sufficient to operate all of the equipment of the company, but since 1920 was used to operate but one shear and the locomotive crane.  The bulkhead which the petitioner installed in December, 1917, to June, 1918, at a cost of $4,898.66, was renewed in 1925.  The first return that was filed by the petitioner for the fiscal year ending January 31, 1918, was filed with the collector on or about April 1, 1918.  That return was for 11 months of the calendar year 1917 and 1 month of the calendar year 1918.  On or about August 1, 1922, there was prepared and filed on behalf of the petitioner a corrected income and excess-profits return for the fiscal year ending January 31, 1918.  On or about May 3, 1923, there was prepared on behalf of the petitioner an amended income and excess-profits return for the fiscal year ending January 31, 1918.  The income and excess-profits-tax return of the petitioner for the fiscal year ending January 31, 1919, was filed*2945  on or about the 15th day of July, 1919.  The income and excess-profits-tax return of the petitioner for the fiscal year ending January 31, 1920, was filed on or about the 15th day of April, 1920.  On April 1, 1925, the respondent made a jeopardy assessment of the deficiencies for the fiscal year ending January 31, 1920, under section 274(d) of the Revenue Act of 1924.  OPINION.  TRAMMELL: The petitioner presented no testimony or arguments respecting issues 3, 4, and 5, except in relation to depreciation, which is also covered by issue No. 7.  Therefore, the determination of the respondent in respect to those issues is sustained for lack of proof.  The petitioner pleads the statute of limitations for all years involved.  Five consents in writing were introduced in evidence at the hearing.  Three of these were in the name of the California Iron Yards Corporation and did not purport to be the consents of the petitioner corporation.  They were signed by E. D. Keeffe as president of the California Iron Yards Corporation.  While Keeffe was a director of the petitioner corporation, he did not purport to sign the consents by or in behalf of the petitioner but as president of the California*2946  Iron Yards Corporation, a new corporation.  Obviously these consents have no effect to extend the period of limitation in so far as the petitioner is concerned.  . These three consents, signed in the name of the California Iron Yards Corporation, may therefore be disregarded in consideration of this case.  *33  The next question is whether the consent executed February 15, 1923, for the fiscal year ending January 31, 1918, which purported to consent to a determination, assessment and collection of the income and profits taxes due for the fiscal year ended January 31, 1918, irrespective of any period of limitation, is effective to bind the petitioner corporation, and if so, for what period of time.  Second, whether the consent dated January 16, 1925, in the name of the California Iron Yards Co., the petitioner, and signed by E. D. Keeffe, "taxpayer president by Andrew Steed Secretary," is sufficient in law to have the effect of extending the period for the assessment and collection of the taxes for the fiscal years 1918 and 1919.  The petitioner has acted upon the theory that the petitioner corporation was a dissolved*2947  corporation under the laws of California and the petition was filed by the surviving directors as trustees.  It is claimed that the charter of the corporation was forfeited by operation of law at 6 o'clock p.m., on March 5, 1921, for failure to pay the required license tax to the State of California.  The fact is, however, that the charter was not forfeited, but merely the corporate rights, privileges and powers were suspended.  The Supreme Court of California, in the case of , had occasion to interpret the meaning and effect of the specific statutory provisions under which the powers of this corporation were suspended.  This statute was enacted in 1917 and provides as follows: Section 3669c, subdivision 2, of the Political Code, reads: After six o'clock p.m. of the Saturday preceding the first Monday in March of any year, the corporate rights, privileges and powers of every domestic corporation which has failed to pay said (franchise or other) tax and money penalty shall, from and after said hour of said day, be suspended, and incapable of being exercised for any purpose or in any manner, except to defend*2948  any action brought in any court against such corporation, until said tax with all accrued penalties * * * are paid as hereinafter provided.  The court in interpreting this section said: Before the enactment of these statutes, the penalty imposed upon a corporation for a failure to pay its license and franchise taxes was a forfeiture of its charter (Stats. 1905, p. 493, and amendments thereto; Stats. 1911, p. 530; Stats. 1915, p. 422), which resulted in a dissolution of the corporation.  * * * After such a forfeiture the corporation was governed by the rules relating to dissolved corporations, and all actions prosecuted by or against such a corporation abated, except in those cases where an action against the corporation survived by the terms of section 10 a of the Act of 1905 as added by St. 1906 (Ex. Sess.) p. 25, as amended * * *.  Under the terms of the present statutes, the penalty for nonpayment of license and franchise taxes has been changed, and the result of such nonpayment is no longer a forfeiture of its character and consequent dissolution of the corporation, but only a suspension of its rights, powers, and privileges, with a provision for revival.  * * * It *34 *2949  follows that petitioner did not cease to exist during the period of suspended animation.  Its right, therefore, to maintain the action against Graves is not governed by the rules relating to dissolved corporations, and the question of the power of its directors to maintain the action in the corporate name is not involved.  During the time its taxes were unpaid, petitioner was shorn of all rights save those expressly reserved by the statutes.  The right to institute or maintain actions is not included in this reservation, but is denied to corporations as a part of the penalty.  In view of the law of California as interpreted by the Supreme Court of that State, we think the petitioner was in error in following the procedure prescribed in the case of dissolved corporations.  The fact is that the corporation was not dissolved.  The respondent has raised no question, however, as to the right of the petitioner to maintain this proceeding by and through Keeffe as sole surviving director of the petitioner corporation.  This fact, however, does not obviate the necessity of the Board determining whether it has jurisdiction when the facts are presented on the face of the record.  We think that*2950  the petitioner's officers or directors of the corporation might properly defend the corporation in any proceeding brought against it.  While under the statutes of California the corporation, itself, has no power to institute proceedings, this proceeding before the Board, while initiated by a taxpayer, is in its nature in substance a defensive action.  The Commissioner proposes to assess a tax, and unless reason is shown why it should not be assessed, it will be assessed and collected under the statute.  It is an action to prevent the collection of the tax rather than an action to recover something in behalf of the corporation.  The penalty provisions of the statute were calculated to penalize the corporation and not to penalize its creditors or to penalize the Government or prohibit it from collecting taxes which might be due by proper proceedings.  Nor, in our opinion, was the purpose of the statute to prohibit the corporation at any time from defending itself and having its liability judicially determined, although its power to institute and maintain actions generally is suspended.  Otherwise, a corporation in California whose powers were suspended under the statute here involved, *2951  would never, at any time, have its day in court, either before or after it is required to pay the tax.  In view of the foregoing, it is our opinion that the corporation had the power to institute this proceeding.  The statute provides that when a notice of deficiency is mailed according to law the taxpayer shall have the right to file the petition with the Board.  When the amended petition was filed and at the time of hearing, Keeffe was the sole surviving director.  The corporation has no power to elect other officers to take the places of its officers who had died while its rights and privileges as a corporation were suspended, *35  and the proceeding being instituted in the name of the corporation, the taxpayer, by its only surviving director and officer, it is our opinion that the proceeding was properly instituted, although Keeffe was erroneously designated as a trustee.  He was not in fact a trustee.  The next question is whether the consent which was signed in the name of the corporation February 15, 1923, by the California Iron Yards Co., by William H. McDaniel, president, and by the Commissioner, is sufficient to extend the period wherein any tax due for the fiscal*2952  year ended January 31, 1918, may be determined, assessed and collected, irrespective of any period of limitations as provided in the written consent.  Second, whether the consent dated January 16, 1925, which provides that the California Iron Yards Co., the petitioner, and the Commissioner of Internal Revenue waived the time prescribed by law for making any assessment of the amount of income and profits tax due under any return made by or on behalf of the taxpayer for the years 1918 and 1919, which consent was signed by E. D. Keeffe, "taxpayer president by Andrew Steed, Secretary," and the Commissioner of Internal Revenue, is valid and binds the corporation.  With respect to the first waiver above referred to, which was signed by the taxpayer corporation by its president, we think that it is clearly sufficient to extend the period of limitations.  It provided in its terms no definite period of extension, but was to permit the determination, assessment and collection of the taxes due irrespective of any period of limitation.  Since no period of limitation was provided, in our opinion, this consent was valid and extended the period for a reasonable length of time.  What is a reasonable*2953  length of time is to be determined by all the facts and circumstances in the case.  The Revenue Act here involved permits a taxpayer and the Commissioner to extend the period of limitations prescribed in the statute.  The taxpayer, through its president last elected and who held office when the powers of the corporation became suspended, acted in behalf of the corporation and signed the corporation's name by himself as president to this consent.  In our opinion the corporation is bound by the consent so signed.  While the consent dated January 16, 1925, was not signed by the corporation itself, it purported to be in behalf of the corporation and was signed by E. D. Keeffe.  At the time when this consent was signed by Keeffe he was one of two surviving directors of the taxpayer corporation.  Corporations may act by its directors and the action of directors may be binding upon the corporation to the same extent as acts performed by officers.  We may assume in the absence of any evidence to the contrary, that Keeffe acted with the full knowledge and consent *36  of the other director and officer of the suspended corporation and in the absence of any showing that Keeffe as*2954  a director was not acting within his authority, we think that this consent is sufficient to bind the corporation.  . The consent which was signed on February 15, 1923, with respect to the fiscal year 1918, was sufficient to extend that period of limitations until the consent which was subsequently signed by E. D. Keeffe, the consent of the taxpayer corporation on January 16, 1925, was executed.  It is contended by the petitioner that the later consent was not valid because it bore the seal of the California Iron Yards Corporation and not the taxpayer corporation, but in our opinion, the absence of a proper seal is not sufficient to vitiate the consent.  It was not purported to be by and on behalf of the California Iron Yards Corporation but was in the name of and purported to be by and on behalf of the California Iron Yards Co., the petitioner corporation.  Nor do we think that it is material that Keeffe placed after his name the word "president" when he was not in fact president of the taxpayer corporation but was president of the California Iron Yards Corporation, the successor corporation.  The designation of his office was merely*2955  descriptive of the person.  He was also one of the duly elected directors of the taxpayer corporation.  With respect to the fiscal year ended January 31, 1920, it appears that the tax was assessed after the passage of the Revenue Act of 1924 and within the five-year period prescribed by the statute.  The statute, therefore, has not run upon the collection of the deficiency for 1920.  With respect to the merits of the case, the petitioner claims a deduction on account of amortization of war facilities.  We have set out in our findings of fact the facts relating to this issue.  It appears, however, that the petitioner corporation has never at any time prior to the filing of the petition in this proceeding filed a claim for amortization.  A claim was filed in November, 1924, by the California Iron Yards Corporation, which was not the petitioner in this case.  Section 1209 of the Revenue Act of 1926 provides that the deduction provided for by paragraph 8 of subdivision (a) of section 234 of the Revenue Act of 1918 may (notwithstanding any provisions of the Revenue Act of 1921) be allowed for the taxable years 1918, 1919 and 1920 if claim therefor was made before June 15, 1924.*2956  No claim was filed prior to June 15, 1924, and in our opinion the taxpayer is not entitled to any amortization allowance.  . It is not necessary, therefore, for us to discuss the facts or to determine whether the facts would entitle the petitioner to an allowance if a proper claim had been filed.  *37  Petitioner claims that, if it is not entitled to amortization, it is entitled to a deduction on account of depletion, wear and tear and obsolescence of plant and equipment in amounts substantially greater than those allowed by the respondent.  The only testimony introduced as to the life of the assets and the depreciation sustained was of a very general nature.  It consisted of testimony that machinery left out in the open and unprotected by housing in that locality in which the petitioner's plant was located would have an average life of five years if left idle and not operated or kept up by repairs.  The principal witness, a lawyer by profession, on this question does not appear to have seen the assets until 1923.  During the years 1918 and 1919, however, petitioner's machinery and equipment were operated at full*2957  capacity.  The petitioner was on a fiscal year basis ending January 31.  Only one month of the fiscal year 1920 was in the calendar year 1920.  There was testimony that during the year 1920 a great part of the machinery was idle and a considerable part of it exposed to the weather, but there is no evidence that, during any portion of the fiscal years involved here, such was the case.  The fiscal year 1921, which comprised all the calendar yar 1920 except January, is not before us.  The testimony as to the five-year life on idle equipment does not apply.  It has further been shown that four shears purchased in 1917 or 1918 were sold in October, 1925, by the successor corporation, seven or eight years later, for $2,000 which indicated clearly that at that time they were not fully depreciated as they would have been if they had had a life of 5 years according to the testimony.  It is also shown that two magnets purchased in 1918 were sold seven years later by the successor corporation, and the Gantry crane purchased in 1918 was sold by the successor in 1925 for $1,750.  These three classes of machines represented a substantial part of the petitioner's equipment, and each had a life*2958  in excess of seven years although they had become idle in 1920.  The locomotive crane, one magnet, one set of shears, and the electrical equipment were still in use at the time of this hearing, as were also some of the buildings and part of the trackage.  This evidence does not convince us that petitioner is entitled to a deduction on account of the exhaustion, wear, tear and obsolescence during the years involved in this proceedings at the rate it claims, or in any greater amount than that determined by the respondent.  Petitioner purchased an acetylene generator in February, 1919, at at cost of $500.  After installing the generator and underground piping connected therewith, it found that it was unsuited for its purposes, since sufficient gas pressure could not be obtained.  The generator was therefore not used at any time.  The petitioner has *38  failed to show that there was no market for the generator or that it could not have been sold, nor is there sufficient evidence to warrant us in holding that it was abandoned - merely removing it is not abandonment.  It is apparent that it was not obsolete, as it was new, but was merely unsuited to the taxpayer's business.  The*2959  action of the Commissioner in failing to allow the deduction must be approved.  See . The petitioner claims that it is entitled to assessment under sections 327 and 328 of the Revenue Act of 1918 on account of abnormalities affecting its business during the fiscal years ending January 31, 1919, and January 31, 1920.  After a consideration of all the evidence and facts submitted, we are unable to find that any abnormalities existed in respect to capital or income as contemplated in section 327 of the Revenue Act of 1918.  The mere fact that large earnings were made during the years 1918 and 1919 is insufficient to constitute a basis for special assessment.  See ; . Nor under the facts in this case does the fact that the petitioner neglected to file a claim for amortization bring it within the purview of that section.  There is not sufficient evidence before us to enable us to determine the amount of the deduction, if any, the petitioner has been prevented from having the benefit of, by such failure, even if it be held that such neglect constitutes*2960  an abnormality.  The action of the Commissioner, therefore, in refusing to assess the taxes under the provisions of the articles of sections 327 and 328 of the Revenue Act of 1918 is approved.  Reviewed by the Board.  Judgment will be entered for the respondent.LITTLETON, STERNHAGEN, MORRIS, GREEN, and MURDOCK dissent.