Court Opinion

ID: 4609761
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:45:24.822664+00
Date Added: 2024-06-11T07:53:56.697772
License: Public Domain

AMERICAN TEXTILE WOOLEN COMPANY ET AL., 1 PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.  AMERICAN TEXTILE WOOLEN COMPANY, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.  American Textile Woolen Co. v. CommissionerDocket Nos. 9689, 20921.United States Board of Tax Appeals23 B.T.A. 670; 1931 BTA LEXIS 1837; June 12, 1931, Promulgated *1837  1.  Petition in Docket No. 9689 dismissed as to the subsidiary corporations against which no deficiencies have been asserted.  2.  Article 78 of Regulations 41, as amended by T.D. 3889, providing that consolidated profits taxes for the year 1917 may be allocated by members of an affiliated group as may be agreed among them or that in the absence of such an agreement the tax will be assessed upon each corporation in accordance with the net income and invested capital properly assignable to it, approved.  3.  The respondent's determination that an agreement existed among the members of its affiliated group for the allocation to the petitioner of the entire consolidated profits tax for 1917 and the entire consolidated income and profits taxes for the years 1918 and 1919, approved.  J. Robert Sherrod, Esq., and George M. Wolcott, Esq., for the petitioners.  Harry Leroy Jones, Esq., and A. H. Willey, Esq., for the respondent.  LOVE *670  These are proceedings for the redetermination of deficiencies in income and profits tax indicated by the deficiency letters to be as follows: Docket No.YearAmount96891917$54,326.189689191833,929.20968919191 118,829.7620921192015,692.912092119217,961.28*1838 Upon hearing, petitioner has abandoned all assignments of error as to the years 1920 and 1921, except in so far as adjustments of invested capital may result from our redetermination of tax liability for the preceding years involved.  The parties agree that the above named subsidiaries of the American Textile Woolen Company, hereinafter termed the petitioner, are not proper parties to proceeding, Docket No. 9689, in which they have been joined.  *671  The final amended petition in Docket No. 9689 alleges that in the determinations of the deficiencies involved, the respondent erred as follows: 1.  In refusing to compute petitioner's excess-profits taxes for the year 1917 under the provisions of section 210 of the Revenue Act of 1917.  2.  In failing to select proper comparatives in computing the excess-profit taxes of petitioner for 1918 under the provisions of section 328 of the Revenue Act of 1918.  3.  In determining invested capital of petitioner for the years 1918 and 1919.  4.  In failing to determine that collection of the alleged deficiencies for the years 1917, 1918 and 1919 is barred by the period of limitations.  5.  In allocating*1839  to petitioner all the income and profits taxes which he proposes to assess against it and its subsidiaries for the year 1917.  6.  In allocating to the American Textile Woolen Company for the year 1918 more than its proper share of the total tax liability of its consolidated group.  7.  In proposing to assess against the American Textile Woolen Company for the year 1919 income and profits taxes of its consolidated group not allocated in accordance with section 240, Revenue Act of 1918.  At the hearing petitioner abandoned all allegations of error relating to the years 1917, 1918 and 1919 except those numbered 3, 5, 6 and 7, above, which relate to allocations of taxes of the consolidated group and to adjustments to invested capital for the years 1918 and 1919, by reason of the alleged deficiency for the year 1917.  The respondent concedes error in allocating the entire deficiency of the consolidated group in income tax (but not that in excess-profits taxes) for the year 1917 to the American Textile Woolen Company, since the Revenue Act of 1917 makes no provision for the computation of the income tax of affiliated corporations on a consolidated basis.  The parties have stipulated*1840  that while the deficiency letter in form advises of an overassessment for the year 1919, its substantive effect is the assertion of a deficiency against the American Textile Woolen Company for that year in the amount of $38,990.79.  Most of the facts have been presented by stipulation.  FINDINGS OF FACT.  1.  The American Textile Woolen Company is a Delaware corporation with its principal office at Sweetwater, Tenn.  During the *672  years 1917 to 1921, inclusive, it owned all of the capital stock and acted as the selling agent of each of the following named companies, all of whom were engaged in the manufacture of woolen cloth at the places stated: (a) Sweetwater Woolen Mills, Sweetwater, Tenn., hereinafter termed the Sweetwater Company; (b) Athens Woolen Mills, Athens, Tenn., hereinafter termed the Athens Company; (c) Park Woolen Mills, Rossville, Ga., hereinafter termed the Park Company; (d) Louisville Woolen Mills, Louisville, Ky., hereinafter termed the Louisville Company.  The Sweetwater and Athens Companies were Tennessee corporations, the Park Company was a Georgia corporation, and the Louisville Company was a Kentucky corporation.  During all of the*1841  taxable years involved and until the present time (except as to such of the said corporations as have been dissolved), the officers of each of the five companies involved were, president, F. A. Carter; vice president, James May; secretary and treasurer, C. L. Clark, except as to the Athens Company, of which C. A. Beard was secretary and treasurer.  2.  For the calendar year 1917, each of the corporations mentioned filed separate income-tax returns on Form 1031, and separate excess-profits-tax returns on Form 1103, on the dates and with the collectors of internal revenue located at the places shown below, and disclosing total tax liabilities as indicated: CompanyCollectorFiledTotal tax shownAmericanNashvilleMar. 30, 1918$4,279.55Sweetwater do do9,006.61Athens doMar. 15, 19183,519.93ParkAtlantaMar. 30, 19183,204.58LouisvilleLouisvilleApr. 1, 19184,076.30Total24,086.973.  The taxes shown on the said returns were duly assessed against, and paid by, the respective corporations reporting them, except that the Athens Company paid only $1,706.48, the respondent having on January 2, 1919, abated the said assessment*1842  against it to the extent of $1,813.45.  4.  For the calendar year 1918 each of the corporations involved filed separate income and excess-profits-tax returns on Form 1120, on the dates and with the collectors of internal revenue located at the places shown below, and disclosing total tax liabilities, which were assessed as indicated: CompanyCollectorFiledAssessedTax liability reported and assessedAmericanNashville, TennJune 13, 1919Sept. 8, 1919$30,020.38Sweetwater do do do100,981.30Athens doApr. 15, 1919 do4,582.98ParkAtlanta, GaJune 13, 1919Oct. 1, 191930,661.15LouisvilleLouisville, KyJune 17, 1919June 18, 1919129,364.93Total295,610.74*673  Petitioner paid the liability of $30,020.38 shown due on its separate return for 1918 in four installments during 1919.  The Athens Company likewise paid during 1919 the $4,582.98 shown due on its 1918 return.  Of the $100,981.30 shown due on the 1918 return of the Sweetwater Company, $95,551.48 was paid by that company during 1919 and 1921, and on January 27, 1921, the respondent abated $5,433.50, the balance of the said*1843  assessment.  The payments included interest amounting to $3.68.  Of the $30,661.15 assessed against the Park Company on the basis of its return above mentioned, that company paid $25,120.06 and filed an abatement claim for the balance, amounting to $5,541.09.  No proceeding by distraint or court action has been commenced against the Park Company, but on December 29, 1928, the respondent issued a deficiency letter against the petitioner as an alleged transferee of the assets of the Park Company.  No appeal from the said letter was filed with this Board.  The respondent thereafter assessed petitioner as such transferee and the alleged deficiency, amounting to $5,541.09, was paid by it under protest on March 30, 1929.  6.  On March 14, 1920, each of the five companies filed separate tentative returns for the year 1919.  The said return of petitioner disclosed an estimated total tax liability in the amount of $16,400, none of which was assessed.  Petitioner made a payment of $4,100 when filing its tentative return.  All of these returns, except that of the Louisville Company, were transmitted to the collectors by letter signed by the "American Textile Woolen Company, C. L. Clark, Secretary-Treasurer, *1844  " on letterheads of petitioner.  7.  Each of the five companies filed completed separate income and profits-tax returns for the calendar year 1919, on the dates and with the collectors located at the places named below, the taxes shown on such returns and the dates of assessment thereof also being given: CompanyCollectorFiledAssessedTotal taxAmericanNashvilleMay 15, 19201($17,642.96)Sweetwater do doJune 25, 192063,157.35Athens do do do1,477.71ParkAtlanta doJune 12, 192024,836.51LouisivilleLouisville doMay 29, 192068,348.98Stipulated as total tax assessed161,920.55*674  Upon the figures given the total tax assessed should be $157,820.55 instead of $161,920.55.  On May 15, 1920, at the same time that the separate returns were filed, petitioner filed with the collector at Nashville, a final consolidated return for 1919 on behalf of itself and the four subsidiary companies, disclosing a tax liability for the group in the amount of $185,381.91, which amount was assessed against petitioner on June 15, 1920.  In letters dated May 14, 1920, transmitting the*1845  separate 1919 returns of the American and Athens Companies to the collector at Nashville, it was stated that the parent company (American Textile Woolen Company) was filing a consolidated return for the group, and "the tax will be paid on the consolidated return." In letters dated May 14, 1920, transmitting the separate 1919 returns of the American Textile Woolen and Athens Companies to the collector at Nashville, it was stated that the parent company (American Textile Woolen Company) was filing a consolidated return for the group, and "the tax will be paid on the consolidated return." Letters of May 14, 1920, transmitting the separate 1919 returns of the Sweetwater, Louisville and Park Companies to the appropriate collectors, each advised that petitioner, as the parent company of the consolidated group, was filing a consolidated return.  These letters made no mention of the basis upon which the tax would be paid.  Each of these letters, excepting the one transmitting the return of the Louisville Company, was written on stationery of petitioner.  8.  The Louisville Company paid $17,250 of the above mentioned assessment against it for the year 1919, and filed an abatement claim*1846  for the balance, amounting to $51,098.98.  No proceeding, either by distraint or by court action, has been commenced for the collection of the said balance.  The abatement claim stated that a consolidated return for the group of which the Louisville Company was a member, had been filed with the collector at Nashville.  9.  On August 27, 1920, the Sweetwater Company filed with the collector at Nashville, on Form 1122, an information return for the year 1919, and a claim for abatement of the taxes, in the amount of $63,157.35, shown due on the separate return previously filed by it for that year.  The information return left blank the space provided for answer to question 7, reading as follows: 7.  In case of all consolidated returns, the department prefers that the total tax assessed against the affiliated group be paid by the parent or principal reporting company, instead of being apportioned among the affiliated companies.  If apportionment is made state the amount of income and profits tax for the taxable year to be assessed against the subsidiary or affiliated company making this return $ .  *675  The abatement claim stated that a consolidated return for the group, *1847  of which the Sweetwater Company was a member, had been filed by the American Textile Woolen Company and that the tax paid June 15, 1920, by the American Textile Woolen Company "includes the tax assessed against the Sweetwater Woolen Mills." The information return was signed by F. A. Carter, president, and C. L. Clark, secretary and treasurer of the Sweetwater and American Textile Woolen Companies.  The abatement claim was also signed by C. L. Clark.  No proceeding by distraint, suit or otherwise has been commenced against the Sweetwater Company for collection of the taxes covered in the said abatement claim.  10.  On August 27 and August 28, 1920, respectively, the Athens Company filed with the collector at Nashville a claim for abatement of the tax shown due on its separate return for the year 1919 and an information return, Form 1122, for that year.  The abatement claim stated that the American Textile Woolen Company was a member and that the tax assessed against the Athens Company "is being paid by the parent company." The information return left the space for answer to question number 7 blank.  The abatement claim was signed by C. L. Clark and the information return was signed*1848  by F. A. Carter, president, and C. A. Beard, treasurer.  11.  The Park Company paid $5,750 of the above mentioned assessment against it for 1919, on March 14, 1920.  An abatement claim for the balance of the said assessment, amounting to $19,086.51, and an information return for the year 1919, Form 1122, were filed with the collector for the District of Georgia on September 9, 1920.  No proceeding in court nor by distraint has been commenced against the Park Company for collection of that portion of the said assessment covered by the abatement claim.  December 29, 1928, the respondent issued a deficiency letter to petitioner as an alleged transferee of the assets of the Park Company.  Thereafter the sum of $19,086.51 was assessed against petitioner, as such transferee, and no appeal having been filed with the Board, the said sum, with interest, was paid under protest on March 30, 1929.  The abatement claim of September 9, 1920, stated that the American Textile Woolen Company had filed a consolidated return and that the second, third and fourth installments were being paid to the collector at Nashville on the consolidated return.  It was signed by C. L. Clark, secretary and treasurer. *1849  Inserted in the space provided for answer to question No. 7 on the information return, were the figures "$26,324.23." 12.  By letter of October 26, 1920, the respondent advised petitioner that the five corporations herein involved were affiliated and that a consolidated excess-profits-tax return for the year 1917, and consolidated *676  income and excess-profits-tax returns for the years 1918 and 1919, should be filed.  None of the corporations involved had requested that an affiliated return be required of the group.  $13.  By letter of November 2, 1920, petitioner advised the respondent that a consolidated return for 1919 had already been filed and that such returns would be filed for 1917 and 1918 as soon as they could be prepared.  14.  During 1920 petitioner paid to the collector at Nashville, taxes for the year 1919 in the amount of $162,381.91.  On December 15, 1920, petitioner filed a claim for abatement in the amount of $23,000, representing the difference between the total tax shown due on the consolidated return for the year 1919, and the amount of taxes paid by certain of the subsidiary corporations when they filed separate 1919 returns.  The abatement claim*1850  stated: That the Louisville Woolen Mills, Louisville, Ky., paid to the Internal Revenue Collector of Ky., Mar. 1920$17,250and park Woolen Mills paid to the Internal Col. at Atlanta, Ga5,75023,000which payments should apply on consolidated return filed by the American Textile Woolen Co., Sweetwater, Tenn.  15.  February 12, 1921, petitioner executed and forwarded to respondent, amended returns for the years 1917 and 1918, as follows: (1) For 1917, a consolidated excess-profits-tax return, Form 1103, for the petitioner and the four subsidiaries, disclosing a total profits tax liability in the amount of $18,128.15.  (2) For 1917, a consolidated return, Form 1031, of the income of the petitioner and the four subsidiaries, disclosing a total income and profits-tax liability in the amount of $27,908.26.  (3) For 1918, a consolidated income and profits-tax return, Form 1120, of the petitioner and the four subsidiaries, disclosing a total tax liability in the amount of $351,034.14.  Each of these returns bore on its face the name "American Textile Woolen Company, Sweetwater, Tennessee," but on a schedule attached thereto showed the names and addresses*1851  of the four subsidiaries.  These returns were received by the respondent on February 14, 1921.  16.  March 13, 1921, petitioner filed with the collector at Nashville a consolidated return for itself and the four subsidiary corporations for the year 1920.  This return showed a total income and profits-tax liability in the amount of $9,290.45, which the respondent assessed on May 12, 1921, and which was duly paid.  On March 13, 1921, each of the subsidiaries filed with the appropriate collectors information returns for the year 1920, Form 1122.  In each instance there was written into the space provided for answer to question number 7 on said form, the word "None." *677  17.  In determining a deficiency of $16,692.91 for the year 1920, respondent has allocated the total tax liability of the affiliated group for that year to petitioner, i.e., the liability shown on the return plus the said deficiency.  18.  On November 17, 1921, petitioner mailed to the collector at Nashville its check for $100,000, with the following quoted letter of transmittal: Under date of Oct. 28, 1921, the American Textile Woolen Company, Sweetwater, Tennessee, received from the Internal Revenue Department, *1852  Washington, D.C., a letter notifying us of a tentative assessment of $400,885.61 covering the years 1917, 1918 and 1919.  Inasmuch as the Corporation feels that this tentative assessment is far in excess of any additional taxes, which may be found to be due, and as the Corporation desires to have a hearing on this case before the Commissioner of Internal Revenue at Washington, D.C., in order that we may present facts and figures to show that we are not liable for the amount of taxes as stated, and inasmuch as this hearing cannot be had at once, due to the fact that the Corporation is asking for sufficient time in which to prepare the necessary data to be presented to the Commissioner, we are herewith handing you our check for $100,000 as a voluntary payment to be applied to any taxes which may be found to be due for the years as stated above.  It is expressly understood that the Corporation is making this voluntary payment with the distinct understanding that we do not admit liability in any stated sum, and that when the final adjustment of the case is made, should it be found that the taxes assessed do not equal the amount of this voluntary payment, any overplus is to be immediately*1853  returned to the Corporation, or applied to the payment of taxes for other years as the Corporation may elect.  The collector furnished the petitioner a receipt headed "Taxpayers Receipt for Income and Excess Profits Tax for 1917, 1918 and 1919." By letter of November 19, 1921, petitioner mailed a letter to the respondent advising him of its voluntary payment of $100,000 to apply on taxes due.  On the same date the collector advised respondent of the payment and stated that it had been deposited in his "unidentified account, 9-D" to "await the assessment to the made by your office." Petitioner obtained $30,000 of the $100,000 payment above described from the Louisville Company.  The respondent has applied the entire payment on 1918 taxes of petitioner.  19.  On November 21, 1921, the petitioner's auditor wrote the respondent as follows: Reference is made to your letter of October 28th addressed to the American Textile Woolen Company, Sweetwater, Tenn., in which you advise them of an additional assessment of income and excess profits taxes for the years 1917, 1918 and 1919.  The writer was in Washington a few days ago and had a conference with Mr. Rusch on this case and suggested*1854  to him that we would like to have a new assessment made in this case under sections 210 of the 1917 law, and 327 and *678  328 of the 1918 law.  This is to make a written and formal request that such an assessment by made and we will thank you to have this done.  20.  By letter of January 31, the petitioner requested the respondent to direct the collector at Louisville to make no further requirements as to renewing a bond given with its claim in abatement of 1918 taxes.  21.  March 12, 1922, petitioner filed with the collector at Nashville a tentative consolidated return of net income and invested capital for 1921 on behalf of itself and the four subsidiaries.  This return showed an estimated total tax liability for the group in the amount of $10,000.  The petitioner forwarded its check for $2,500 with the return.  On or about March 12, 1922, separate information returns, Form 1122, were filed on behalf on the four subsidiary companies.  Upon each of these returns the word "None" was written in the space provided for answer to question number 7 of the said form.  22.  June 15, 1922, petitioner filed with the collector at Nashville a final return of the income and profits-tax*1855  liability of the consolidated group for the year 1921.  This return showed a consolidated tax liability in the amount of $11,223.06, which was duly assessed against and paid by the petitioner.  23.  June 14, 1922, the respondent mailed to petitioner an audit letter covering the years 1918 and 1919 and proposing the assessment of deficiencies of the consolidated group for those years against petitioner, in the amount of $299,053.64.  This letter superseded the letter of October 28, 1921, above-mentioned.  24.  By letter of June 25, 1922, petitioner requested a conference with respect to the determination disclosed in the respondent's letter of June 14, 1922.  25.  In further reference to the respondent's audit letter of June 14, 1922, petitioner by letter of June 30, 1922, requested an extension of time in which to prepare its protest against the proposed assessments.  This letter referred to various alleged errors in the revenue agent's report upon which the proposed assessment was based, and indicated that petitioner was hopeful of being able to establish the existence of such errors.  It contained no reference to the allocation of the proposed deficiencies among the members*1856  of the affiliated group.  26.  August 10, 1922, petitioner executed, and later filed with the respondent, a general power of attorney to certain persons named therein.  No similar document was filed by any of the subsidiary corporations.  27.  September 1, 1922, petitioner executed, and filed with the respondent, an appeal from the audit letter of June 14, 1922.  This *679  appeal contained no reference to the allocation of the proposed deficiencies among the members of the affiliated group.  28.  December 6, 1922, respondent mailed to petitioner, and to each of its subsidiaries, separate audit letters covering the calendar year 1917 and certain prior years.  29.  December 18, 1922, petitioner mailed to respondent an appeal from the audit letters of December 6, 1922.  This appeal stated that it was made on behalf of all five members of the affiliated group.  30.  On January 15, 1924, there was filed with respondent a power of attorney executed by "The American Textile Woolen Company," and authorizing certain persons named therein to negotiate for settlement of the taxes now in issue.  None of the subsidiaries filed such documents.  31.  January 16, 1924, petitioner*1857  executed and filed with respondent an appeal from audit letters mailed to each member of the affiliated group on December 6, 1922.  The appeal requested reconsideration of the respondent's preliminary determination of the consolidated tax liabilities for the years 1917, 1918 and 1919.  No mention was made of any allocation of the proposed deficiencies.  32.  March 13, 1924, petitioner executed and filed with the collector at Nashville claims for refunds of taxes for the years 1917 and 1918 in the amount of $45,000 each.  No mention was made in either of these claims of any improper allocation of the proposed deficiencies in consolidated tax liabilities for the years 1917 or 1918.  33.  May 21, 1924, respondent mailed to petitioner an audit letter covering the affiliated group for the years 1917, 1918 and 1919.  34.  Under date of June 13, 1924, petitioner wrote to respondent a letter reading as follows: Referring to your letter of May 21, 1924, asking our acquiescence in the computation of the net income for the years 1917 to 1919, inclusive, please be advised that we accept the net income as shown in the Bureau letter dated May 21, 1924, provided an error is corrected in respect*1858  to our invested capital.  It will be noted on page four of letter above referred to that invested capital has been determined for the beginning of the period (January 1, 1917) as $580,498.38.  This item covers only the value of the real estate, buildings and machinery as revised in accordance with the appraisal report of the American Appraisal Company, as indicated by your letter.  You have, however, failed to include in invested capital the other assets of the consolidated companies as of January 1, 1916, and as shown by Exhibit B of brief filed in protest to your letter of December 6, 1922, and which formed the basis of recent conferences with the Income Tax Unit.  It is agreed that if the computation of invested capital is corrected in accordance with the balance sheet above referred to, which will reflect an invested capital as of January 1, 1916, of $784,094.32, that no further protest will be made to the income as computed by the Income Tax Unit, and we will rely entirely for any further relief on our request for consideration under *680  the provisions of section 210 of the Revenue Act of 1917, and sections 327 and 328 of the Revenue Act of 1918.  35.  September 25, 1924, petitioner*1859  executed and filed with respondent an appeal from the preliminary determination of the consolidated tax liabilities for the years 1917, 1918 and 1919.  The appeal consisted of an application for special assessment under the appropriate sections of the Revenue Acts of 1917 and 1918.  It made no mention of any allocation of the proposed deficiencies according to the respective net incomes of the several corporations involved.  36.  January 12, 1925, respondent mailed an audit letter (30-day letter) to petitioner, proposing to assess against it the entire deficiencies of the affiliated group for the years 1917, 1918 and 1919.  37.  February 11, 1925, petitioner executed and filed with respondent an application for appeal from his preliminary determination of the consolidated income and profits-tax liabilities for the years 1917, 1918 and 1919, as contained in the audit letter of January 12, 1925.  In this application no mention was made of any allocation of the proposed deficiencies according to the respective net incomes of the companies.  38.  April 1, 1925, petitioner executed and filed with the collector at Nashville a claim for refund of 1918 taxes in the amount of $75,000. *1860  The claim made no mention of the respondent's failure to allocate the proposed deficiency in the consolidated tax liability for 1918 among members of the affiliated group.  39.  Under dates of September 8 and September 9, 1925, the collector for the district of Georgia mailed to the Park Company letters in reference to claims in abatement filed by that company for the years 1919 and 1918, respectively.  These letters requested that waivers extending the period for assessment and collection of the taxes shown due on the separate returns of the company for the years mentioned be executed and filed.  40.  The collector's letters of September 8 and 9, 1925, were answered under date of September 11, 1925, on stationery of the American Company and over the signature of F. A. Carter, president and general manager.  The answer stated: We thank you very much for your kind favor of September 8th and 9th in regard to the claims of abatement for the Park Woolen Mills, Rossville, Georgia.  Same has been referred to the writer for reply.  In regard to these two claims would state this claim for abatement was made when our income tax reports were made by the individual mills.  The income*1861  tax department afterwards required us to file a consolidated return which covered the returns for the Park Woolen Mill with our other mills and we understand that this did away with the individual mills returns and should have done away with these claims.  Our whole income tax matter for the years 1918 and 19 is being handled in Washington as a consolidated return for these years and we hope that we will *681  get an adjustment at an early date so we can get a settlement.  Our understanding is that these claims for the individual mills are done away with on account of requiring us to make the consolidated return for these years.  However, we have no objection to signing the waiver as it is of course our intention to pay whatever it is shown that we owe when this matter is finally settled.  41.  October 7, 1925, respondent mailed to the "American Textile Woolen Company, and Subsidiaries, Sweetwater, Tennessee," notice of a final determination of deficiencies for the years 1917, 1918 and 1919.  The parties agree that the deficiency letter was mailed only to the petitioner and that it asserts the entire consolidated deficiencies against the petitioner alone.  Appeal Docket*1862  No. 9689 was taken from the determination set forth in this letter.  42.  The respondent determined the overassessment for the year 1919 by subtracting the amount of the correct total consolidated income and profits taxes, i.e., $224,372.70, from the sum of the assessments previously made against petitioner and the four subsidiaries on both their separate and consolidated returns, which assessments totaled $343,202.46.  The amount of the overassessment so determined is $118,829.76.  The effect of the deficiency letter as intended by the respondent is to assert against the petitioner a deficiency for the year 1919 in the amount of $38,990.79, this being the difference between the total consolidated income and profits taxes as finally determined in the amount of $224,372.70 and the total amount previously assessed against petitioner on the consolidated return, i.e., $185,381.91.  43.  June 8, 1926, respondent mailed an audit letter (30-day letter) to petitioner, proposing to assess against it the entire deficiency of the affiliated group for the years 1920 and 1921.  44.  July 8, 1926, petitioner addressed to respondent a protest against the proposed determination of June 8, 1926. *1863  45.  September 3, 1926, respondent mailed to petitioner a deficiency letter proposing to assess against it the total alleged deficiency of the affiliated group for the years 1920 and 1921.  Appeal, Docket No. 20921, was taken from the determination set forth in this letter.  46.  September 12, 1928, petitioner wrote the collector at Louisville a letter reading as follows: We acknowledge receipt of yours of the 7th addressed to our Louisville Woolen Mills in regard to waivers, and we are referring this matter to our tax attorney and will reply in a short time.  We are at a loss to know why we cannot get this $51,000 cleared out at your office, as no doubt you remember that we filed individual report and then the government came along and made us file consolidated report and all the tax has been paid on the consolidated report.  Therefore, the government should clear us of this 1919 tax as it has been settled.  *682  47.  no issue was ever made of the allocation of the propos(d deficiency assessments prior to the filing of the second amended petitions with the Board on January 29, 1929, and the question was never raised in negotiations with the respondent prior to consideration*1864  of the instant appeals by the Special Advisory Committee in December, 1928.  48.  The following table shows for the calendar year 1917 the separate net income, the consolidated net income, the percentage that the net income of each corporation is of the consolidated net income, the several amounts of profits-tax liability if allocable to each corporation in accordance with respective net incomes and the total income and profits tax determined in respect of each of said affiliated corporations by the respondent in his said audit letter dated January 12, 1925: CompanyNet incomePer centProfits taxTotal income and profits taxAmerican$97,968.28Less: Dividends received from subsidiaries40,000.0057,968.2822$14,100.27$17,532.35Sweetwater56,045.782214,100.2716,617.00Athens22,227.7995,768.296,755.86Park35,129.70138,331.989,939.84Louisville87,846.903421,791.3225,754.65259,218.4510064,092.1376,599.70In the audit letter of January 12, 1925, and in the deficiency letter the respondent allocated to and claimed from the petitioner all of the additional income and profits taxes alleged due on the*1865  consolidated return for the year 1917.  49.  The following table shows for the year 1918 the separate net income of each corporation, the consolidated net income, the percentage that the net income of each corporation is of the consolidated net income, the several amounts of income and profits taxes if allocated in accordance with respective net incomes, and the total consolidated tax liability: CompanyNet incomePer centTotal income and profits taxAmerican$135,771.3920.9$89,773.85Sweetwater159,195.1824.5105,237.29Athens39,082.536.025,772.40Park62,120.099.641,235.83Louisville253,360.6539.0167,520.57Total649,529.84100.0429,539.9450.  In the audit letter of January 12, 1925, and in the deficiency letter dated October 7, 1925, the respondent found a deficiency against petitioner for the year 1918 in the amount of $33,929.20 by *683  determining a total tax liability of the consolidated group in the amount of $429,539.94 and subtracting from it the amount of $395,610.74, representing the total of all assessments made against petitioner and its subsidiaries for the year mentioned.  51.  The following*1866  table shows for the calendar year 1919 the separate net income of each corporation, the consolidated net income, the percentage that the net income of each corporation is of the consolidated net income, the several amounts of income and profits taxes if allocable to each corporation in proportion to their respective net incomes, and the total income and profits tax determined by the respondent in his audit letters dated May 21, 1924, and January 12, 1925: CompanyNet incomePer centTotal income and profits taxesAmerican$124,591.6919.68$44,156.55Sweetwater178,066.5528.1363,116.04Athens24,976.713.958,862.72Park80,880.1412.7828,674.83Louisville224,457.8935.4679,562.56Consolidated632,972.98100.00224,372.7052.  The following table shows for the calendar year 1920 the separate net income of each corporation, the consolidated net income, the percentage that the net income of each corporation is of the consolidated net income, the several amounts of income and profits tax if allocable to the corporations in proportion to their respective net incomes, and the total income and profits tax determined by the respondent*1867  in the audit letter of June 8, 1926, and the deficiency letter of September 3, 1926: CompanyNet incomePer centTotal income and profits taxesAmerican$103,273.3062.00$15,489.68Sweetwater14,330.758.602,148.57Athens(17,404.99)Loss.Park21,445.4812.883,217.86Louisville27,515.2416.524,127.25Consolidated149,159.78100.0024,983.36The amount of $149.159.78 above stated is the net consolidated income after deduction of the loss suffered by the Athens Company.  53.  The following table shows for the calendar year 1921 the separate net income of each corporation, the consolidated net income, the percentage that the net income of each corporation is of the consolidated net income, the several amounts of income and profits tax if allocable to the corporation in proportion to their respective net incomes, and the total income and profits tax determined *684  by the respondent in the audit letter of June 8, 1926, and the deficiency letter of September 3, 1926: CompanyNet incomePer centTotal income and profits taxesAmerican$55,880.2442.58$8,168.69Sweetwater10,844.698.251,582.71Athens66.68Loss.Park3,059.172.33447.00Louisville61,465.6046.848,985.94Consolidated131,083.02100.0019,184.34*1868  After proper deduction of the loss suffered by the Athens Company, the consolidated net income, upon the figures given, should be $131,183.02.  54.  The petitioner held the entire capital stock of the four subsidiaries and its entire income was derived from dividends upon such stock and from commissions as the selling agent of the subsidiaries.  Each of the subsidiaries operated as an independent unit with respect to purchases, payment of bills, borrowing money, and invoicing and collecting their accounts.  55.  Meetings of the stockholders and directors of all the companies were usually held at Sweetwater.  The minute books of all except the Athens Company were kept at Sweetwater, the minute book of the company named being at Athens.  56.  In 1919 the accounts of the Park and Athens Companies, which until that time had been maintained at the respective mills, were transferred to the office of the Sweetwater Company and were thereafter kept in the set of books containing the accounts of that company, the accounts of each of the three companies being separated by thumb tabs.  These accounts were thereafter taken up on one balance sheet.  57.  On January 18, 1922, the stockholders*1869  of the Park, Athens, and Sweetwater Companies adopted resolutions directing their respective directors to effect the dissolution of those companies.  In the resolutions providing for dissolution of the three companies it was provided that all the assets be transferred to the petitioner and that petitioner should "assume or pay all the obligations" of the transferors.  The word "obligations" as used in these resolutions was not limited nor expressly construed in any way when the resolutions were adopted.  There was no discussion among the officers or directors of the corporations involved as to the meaning of the word.  The petitioner took no corporate action respecting the dissolution of the subsidiaries.  The companies named were dissolved on recommendation of petitioner's auditor that it would simplify the conduct *685  of the business and with no intention to defeat or hinder collection of any tax due.  58.  When it was decided to dissolve the three companies, their officers, on advice of the auditor and tax advisor of the petitioner, were of opinion that refunds would be granted for such of the prior years as are in controversy in this proceeding, rather than that additional*1870  taxes would be found due for such years.  Liability for Federal income and profits taxes was not carried on the books of any of the companies except to the extent of the taxes admitted to be due on the basis of the tax returns made.  Prior to the hearing of these proceedings the respondent, although advised through his collectors that the companies were being dissolved, had not been advised of the resolutions providing that the liabilities of the Athens and Sweetwater companies should be assumed or paid by the petitioner.  59.  On January 8, 1923, a petition for dissolution of the Park Company was filed in the Superior Court of Walton County, Georgia.  This petition recited that all property of the company had been sold and all debts paid and that the dissolution could be allowed without injustice "to any person having claims or demands of any character against it." By order of February 25, 1923, the said court dissolved the corporation and provided that its assets "be administered as directed by law." 60.  By deed dated July 29, 1923, all realty owned by the Park Company was conveyed to petitioner.  There was no bill of sale of personalty.  61.  June 30, 1922, the Athens*1871  Company deeded all of its real property to the petitioner.  There was no bill of sale of the personalty.  July 13, 1922, the Secretary of State of the State of Tennessee issued a certificate of dissolution to the Athens Company.  There were no court proceedings in connection with the dissolution and no appointment of a trustee for benefit of creditors.  62.  In furtherance of the resolution adopted by the stockholders of the Sweetwater Company directing its dissolution, all real property owned by the company wad deeded to petitioner.  There was no bill of sale of the personalty.  July 12, 1922, the Secretary of State of the State of Tennessee issued a certificate of dissolution of the Sweetwater Company.  There were no court proceedings in connection with the dissolution and no appointment of a trustee for benefit of creditors.  63.  The petitioner took no corporate action with respect to the liquidation of the subsidiaries.  64.  The property transferred to petitioner by reason of the dissolution of the three subsidiaries as above described was entered upon *686  the petitioner's books during 1922.  The liabilities of the three companies were also entered upon petitioner's*1872  books as its own liabilities.  65.  At the time that the assets and liabilities of the dissolved subsidiaries were taken over by petitioner and when they were set up on the petitioner's books there was no discussion among, nor action by the officers or directors of the four corporations as to the particular liabilities that should or should not be taken up on petitioner's books.  66.  The following named persons comprised the boards of directors of the petitioner, the Park Company, the Athens Company and the Sweetwater Company during the year 1922, with the exception that J. D. Farrell was not a director of the Athens Company and H. T. Burns was a director of the Athens Company only: C. A. Beard, F. K. Berry, W. A. Brown, F. A. Carter, C. L. Clark, S. E. Cleage, J. L. Emerson, J. D. Farrell, J. G. Fisher, W. L. Forrest, John M. Jones, O. K. Jones, A. M. Keith, James May, W. M. Patton, and H. T. Burns.  The persons named as directors of the petitioner were also its directors during 1923.  The directors of the Louisville Company are not shown by the record.  67.  The deficiency letter covering the years 1917, 1918 and 1919 was dated October 7, 1925, and was addressed to "American*1873  Textile Woolen Company and Subsidiaries, Sweetwater, Tennessee." The petition on appeal from the determination set out in the said letter was filed with the Board on December 5, 1925, by the petitioner alone.  It bears Docket No. 9689.  By order of January 14, 1926, on motion of the petitioner and with the consent of the respondent, the petition was amended by inclusion of the four subsidiaries as parties to the appeal.  The letter of October 7, 1925, above described, was not a statutory notice to the said subsidiaries of the respondent's determination of a deficiency against them.  68.  The deficiency letter covering the years 1920 and 1921 was mailed to the "American Textile Woolen Co., Sweetwater, Tennessee" on September 3, 1926.  The petition on appeal from the determination set out in the said letter was filed with the Board by petitioner on October 30, 1926.  It bears Docket No. 20921.  OPINION.  LOVE: We agree with the parties that the subsidiaries of petitioner are not proper parties to proceeding, Docket No. 9689, and accordingly orders will be entered dismissing that proceeding in so far as it relates to them.  *1874 American Creosoting Co. et al.,12 B.T.A. 247">12 B.T.A. 247. With respect to the year 1919, the deficiency letter in form advises of the determination of an overassessment in the amount of $118,829.76.  This determination was arrived at by subtracting the *687  correct total consolidated income and profits taxes, in the amount of $224,372.70, from the total amount of the assessments previously made against the petitioner and the four subsidiaries on both their separate and consolidated returns, which assessments totaled $343,202.46.  The parties have stipulated that the substantive effect of the said determination for the year 1919 is to assert a deficiency against petitioner in the amount of $38,990.79, i.e., the difference between the correct total consolidated tax liability, amounting to $224,372.70, as indicated by the deficiency letter, and the total consolidated tax liability as reported on the consolidated return, which amount was $185,381.91.  The Board therefore has jurisdiction of the proceeding as it relates to the year 1919.  See *1875 George M. Cohan,11 B.T.A. 743">11 B.T.A. 743. The respondent admits error with respect to the year 1917 in the assertion against petitioner of liability for the deficiencies of its subsidiaries in income tax, since there is no provision of law or regulations respecting the consolidation of income tax for that year.  See Regulations 41, article 78; Regulations 33, article 199; section 1331, Revenue Act of 1921; T.D. 3389; Trustees for Ohio & Big Sandy Coal Co. et al.,15 B.T.A. 273">15 B.T.A. 273; and Union Pacific Railroad Co.,17 B.T.A. 793">17 B.T.A. 793. See also Morris County Crushed Stone Co. et al.,6 B.T.A. 800">6 B.T.A. 800, 812. Upon hearing, petitioner abandoned all allegations of error with respect to the years 1920 and 1921, Docket No. 20921, except in so far as adjustments of consolidated invested capital may result from our determination of tax liability for the years 1917, 1918 and 1919.  Petitioner has further abandoned all allegations of error respecting the years 1917, 1918 and 1919, except those relating to the respondent's allocation to it of the entire consolidated profits tax for the year 1917 and the entire consolidated income and*1876  profits taxes for the years 1918 and 1919.  The Revenue Act of 1917, under which income and profits taxes for 1917 were imposed, contained no provision in respect of consolidated returns of affiliated corporations.  Such provisions were first found in articles 77 and 78 of Regulations 41, issued under authority of section 213 of that act.  They provided: ART. 77.  When affiliated corporations must furnish information as to intercorporate relations. - For the purpose of the excess profits tax every corporation will describe in its return all its intercorporate relationships with other corporations with which it is affiliated, and will furnish such information in relation thereto as will enable the Commissioner of Internal Revenue to compute the amount of the tax properly due from each corporation on the basis of an equitable and lawful accounting.  For the purpose of this regulation two or more corporations will be deemed to be affiliated (1) when one such corporation owns directly * * * substantially all the stock of the other or others * * *.  *688  ART. 78.  When affiliated corporations may be required to make consolidated return. - Whenever necessary to more*1877  equitably determine the invested capital or taxable income, the Commissioner of Internal Revenue may require corporations classed as affiliated under article 77 to furnish a consolidated return of net income and invested capital * * *.  In cases where consolidated return of are accepted, the total tax will be computed in the first instance as a unit upon the basis of the consolidated return and will be assessed upon the respective affiliated corporations in such proportions as may be agreed among them.  If no such agreement is made the tax will be assessed upon each such corporation in accordance with the net income and invested capital properly assignable to it.  In the Revenue Act of 1918 Congress substantively adopted the said articles as section 240(a), which provides: That corporations which are affiliated within the meaning of this section shall, under regulations to be prescribed by the Commissioner with the approval of the Secretary, make a consolidated return of net income and invested capital * * * and the taxes thereunder shall be computed and determined upon the basis of such return * * *.  In any case in which a tax is assessed upon the basis of a consolidated return*1878  the total tax shall be computed in the first instance as a unit and shall then be assessed upon the respective affiliated corporations in such proportions as may be agreed upon among them, or in the absence of any such agreement, then on the basis of the net income properly assignable to each.  (b) For the purpose of this section two or more domestic corporations shall be deemed to be affiliated (1) if one corporation owns directly or controls * * * by a nominee or nominees substantially all of the stock of the other or others * * *.  Some doubt having arisen as to the validity of article 77 of Regulations 41, applicable to the year 1917, Congress undertook to ratify that article in section 1331 of the Revenue Act of 1921, which provides: (a) That Title II of the Revenue Act of 1917 shall be construed to impose the taxes therein mentioned upon the basis of consolidated returns of net income and invested capital in case of domestic corporations * * * during the calendar year 1917.  (b) For the purpose of this section a corporation * * * was affiliated with one or more corporations * * * (1) when such corporation * * * owned directly or controlled through closely affiliated interests*1879  or by a nominee or nominees all or substantially all the stock of the other or others.  * * * (c) The provisions of this section are declaratory of the provisions of Title II of the Revenue Act of 1917.  This ratification clearly covers article 77, but contains no expression specifically applicable to article 78.  Subsequent to the passage of the 1921 Act, the Treasury Department issued Treasury Decision 3389 (24 T.D. 1126) whereby articles 77 and 78 of Regulations 41 were amended.  The amendments are not material here, but are mentioned as indicating the perpetuation of article 78 of Regulations 41 under section 1331 of the 1921 Act.  *689  Petitioner contends that because section 1331 expressly ratified the provisions of article 77 of Regulations 41, and made no mention of its companion article, article 78, it is to be inferred that Congress did not consider article 78 as the intended construction of Title II of the 1917 Act.  It would follow that there was no provision in law or lawful regulations for the allocation of the profits taxes to the several members of an affiliated group upon any basis other than that of the proportion which the net income of*1880  each bore to the consolidated net income.  This would mean that even the affiliated corporations themselves could not by agreement determine the allocation of the tax among them upon any other basis.  Allocation of the tax in the manner mentioned would be necessary however, since, under section 29 of the Revenue Act of 1916, as added to by section 1211 of the Revenue Act of 1917, the profits tax was allowed as a credit in the computation of the income tax under the 1917 Act.  Petitioner's objection to the respondent's allocation of the tax involved in the present proceeding appears therefore to rest upon the theory that Congress disclaimed article 78 of Regulations 41 by failing to specifically include it in the declaratory provisions of section 1331 of the 1921 Act.  There has been no questioning in this proceeding of the right of Congress to provide for allocation of the tax as it did in the 1918 Act.  The adoption of the provisions of article 78 in section 240(a) of the 1918 Act was a legislative recognition that its provisions were necessary to collect the tax imposed by the act.  This being so, the provisions of those articles obviously were equally necessary to the collection*1881  of similar taxes imposed by the Revenue Act of 1917.  Considering the above, we are of opinion that article 78 of Regulations 41, and the said article as amended by T.D. 3389, is a proper regulation within the intent of Title II of the Revenue Act of 1917.  We must look further to determine whether or not the respondent's application of article 78 in the present case was proper.  This is a question of whether or not there existed among this petitioner and its subsidiaries an agreement for the allocation of the consolidated profits tax of the group for the year 1917 upon a basis other than in accordance with the net income and invested capital properly assignable to each member of the group.  For the years 1918 and 1919, the sole issue is the same as that now under discussion in relation to the year 1917, except that for the two latter years both income and profits taxes are involved.  In Cincinnati Mining Co.,8 B.T.A. 79">8 B.T.A. 79, we held, under section 240(a) of the 1918 Act, that in the absence of an agreement among members of an affiliated group "it is mandatory upon the respondent to assess the tax upon the basis of the net income properly assignable*1882  to each." *690  Petitioner denies the existence among the members of its affiliated group of any agreement for the allocation of the taxes for the years 1917, 1918 and 1919.  The respondent contends that there was either an expressed or implied agreement that the entire consolidated profits tax of the group for the year 1917, and the consolidated income and profits taxes for the years 1918 and 1919, should be allocated to petitioner.  In Essex Coal Co.,12 B.T.A. 994">12 B.T.A. 994, 998, we discussed the nature of the agreement referred to in section 240(a) of the 1918 Act, saying: The agreement referred to in this statute is one between the corporations included in the consolidated return.  It is not required to be in writing or to be in any particular form or language.  Such a contract may be implied as well as expressed.  Such an agreement does not relate to the payment of the tax but only to its assessment.  Whether such an agreement was made may be shown by circumstantial evidence and the conduct of the parties as well as the testimony of witnesses.  Here the officers of the two corporations were the same individuals.  The individual who represented and acted for*1883  one company as president, acted in the same capacity for the other.  An agreement between the said officers in one capacity and the same individuals in another capacity might have been a mere mental process evidenced only by the outward acts and conduct of the parties.  It would have been a useless process for the president of one company to agree with himself as president of another company, and for the other officers in their respective capacities to agree with themselves by any express language.  An agreement which is inferred from the acts and conduct of parties is just as effective as any other kind of an agreement.  We think that this case is governed by the principles set forth in the case of In re Temtor Corn & Fruit Products Co.,299 Fed. 326, wherein the court stated: It is finally contended on behalf of the trustee in bankruptcy that, even though the tax here in question was properly computed on the basis of the consolidated return, the government in making the assessment should have apportioned the tax between the two companies, as provided in section 240 of the Revenue Act of 1918.  The evidence shows that the tax was computed as a unit, and was not*1884  apportioned, but was all assessed against the Temtor Company.  Under the statute it was proper for the two corporations concerned to agree as between themselves as to the proportion of the entire tax to be assessed against each.  As the entire tax appears to have been assessed against the Temtor Company, and as that company, without objection or request for an apportionment, paid three quarterly installments of the tax, it must be inferred that both companies agreed to the assessment as made.  As already stated, the companies had practically the same officers and directors, and the course followed by them was the legal equivalent of an agreement and request that the entire tax be assessed against the Temtor Company.  In the present posture of the case, I do not think it is open to either company to object to the course taken by the government in assessing the tax.  Considering all the evidence in the case, it is our opinion that an agreement was entered into between the two corporations to the effect that the total tax might be assessed against the petitioner.  It is immaterial how the parties actually paid the tax or how they agreed the tax should be paid.  We are *691  concerned*1885  here only with the question as to how it should be assessed.  In a consolidated group the tax may well be assessed against the parent or principal company and the subsidiaries contribute to the parent company their proportionate part of the tax.  The fact that they do contribute their proportionate part of the tax does not indicate that it was not to be assessed against one of the companies.  We do not think that the statement contained in Form 1122 filed for the previous year with respect to the assessment of the tax has any relation or evidentiary value for the purpose of showing that the same agreement was effective for the taxable year.  On the other hand, if it has any weight at all, it supports the conclusion that we have reached that there was an agreement or understanding that the entire tax should be assessed against the petitioner for the taxable year.  For the previous year when there was no such agreement or understanding to the effect that the entire tax should be assessed against the petitioner, the Commissioner was notified in that form to assess the tax as therein stated, that is, against both companies.  No such form, statement or information was conveyed to the*1886  Commissioner with respect to the taxable year.  On the other hand, the acts of the parties and the other circumstantial evidence convince us that there was an understanding or agreement between the two corporations that the entire tax should be assessed against the petitioner for the taxable year.  We have considered the decision of the Circuit Court of Appeals for the Sixth Circuit, 39 Fed.(2d) 892, reversing our determination in the Essex case, supra. We are of opinion, however, that the principle laid down in the determination mentioned is sound and that the court's decision is only that the facts presented did not warrant our conclusion that an agreement for allocation of the tax existed among the corporations therein involved.  In the instant case we believe that the facts demonstrate the existence of such an agreement and that the tax should be allocated in accordance with it, even though it does not appear that the agreement was in writing or that the respondent was given express notice of it.  Cf. Woodside Cotton Mills Co.,13 B.T.A. 266">13 B.T.A. 266. In the decision mentioned the Circuit Court said: The only questions involved are: Whether the*1887  facts support the conclusions of the Board of Tax Appeals that there was an understanding or agreement between these affiliated companies to the effect that this deficiency in tax should be assessed against the petitioner and whether the petitioner is estopped from denying the existence of such an agreement.  * * * * * * It is conceded that no agreement between the petitioner and its affiliated company was filed with the consolidated return for 1920, nor was Treasury Department form 1122 filed by the Lost Run Coal Company.  The petitioner contends that where no such agreement or form is filed, it becomes the duty of the Commissioner to apportion the tax liability on the basis of the net income properly assignable to each of the affiliated companies.  The basis of the Board of Tax Appeals finding is that the failure of the petitioner to protest against the Commissioner's assessment of the tax against it, and its failure to take any action with respect to notices and demands for payment of the installments directed to it, in view of the close relationship of the affiliated companies, justify the conclusion that an implied agreement existed between the *692  affiliated taxpayers*1888  that the assessment of all taxes should be made against the Essex Coal Company, relying upon the principle set forth in In re Temtor Corn & Fruit Products Co.,292 Fed. 326, affirmed, sub nom. Schlafly v. United States, 4 Fed.(2d) 195 (C.C.A. 8th). We think Section 240(a) of the Revenue Act of 1918 and Article 632 of Regulation 45 prescribed thereunder by the Commissioner of Internal Revenue clearly contemplate some specific notice to the Commissioner of an agreement between the affiliated corporations filing the consolidated return as to the proportion of tax which is to be assessed upon the respective corporations, in the absence of which the Commissioner shall assess the tax on the basis of the net income properly assignable to each affiliated corporation.  Mere failure to object to the assessment of the whole additional tax against the petitioner cannot be construed as an implied agreement to be so taxed.  When no agreement among the affiliated corporations appeared, it became the duty of the Commissioner to apportion the assessment, and his failure to do so cannot be said to be excused by the neglect of the taxpayer to remind him of*1889  such duty.  We do not think the Commissioner can, by assessing the whole tax upon one of the affiliated companies, require affirmative action upon the part of the taxpayer in denying that any agreement exists and thus create an implied agreement.  Whether an agreement between or among the affiliated corporations is to be assumed depends upon the initial action of filing the consolidated return.  If the subsequent conduct or non-action of the taxpayer is to be made the test of what was intended at the time of filing the return, no certainty could be had in any case.  In the Temtor case, supra, relied upon by the Board of Tax Appeals, the referee in bankruptcy held that the payment of three quarterly installments of the tax, without objection or request for an apportionment by the affiliated company against which the tax was assessed, justified an inference that the corporations had agreed to the assessment so made.  If the payment of installments of the tax by one or the other of the affiliated companies is important in determining whether an agreement exists between them, here the taxpayers each paid two equal installments and one-half of the tax.  In the case of *1890 Popular Price Tailoring Company v. Commissioner of Internal Revenue, 33 Fed.(2d) 464, cited by the Commissioner, the court bases its opinion upon the finding of the Board of Tax Appeals in this case, with which we find ourselves unable to agree.  Besides, that case involved acquiescence for five years in the payment of the whole tax by one company.  The statute clearly contemplates the existence of an agreement, or the absence of one, at the time of the filing of the return and the making of the assessment.  The consolidated return shows no agreement between the affiliated companies respecting assessment, nor was any form 1122 filed as provided by the regulation of the Commissioner, and the Commissioner therefore was not authorized to infer the existence of an agreement from other evidence or from the subsequent conduct or non-action of the taxpayer assessed.  Nor do we think the petitioner estopped from denying the existence of an agreement between the affiliated companies.  The Commissioner knew that no agreement between the affiliated companies was filed with the consolidated return and that in the absence the law directed him to assess the total tax on the*1891  basis of the net income properly assignable to each of the affiliated corporations.  Under such circumstances it cannot be said that the Commissioner had the right to rely upon the subsequent conduct of the taxpayers in determining how the tax should be assessed.  But the petitioner and its affiliated corporation, in failing to file an agreement with their consolidated return, *693  disclosed their intention and purpose with respect to the assessment of the tax; no other facts were necessary for the Commissioner's action and he cannot create an estoppel by his own failure to perform the act directed by the plain provisions of the law.  Every fact necessary to be known for the performance of his duty was within his knowledge when the return was filed.  We think there was no evidence to support the Board's findings, and no estoppel.  * * * In the instant case information returns were filed by three of the subsidiaries for the year 1919, and for all four of them for the years 1920 and 1921.  Two of the three information returns for 1919 left the space designated for statement of the amount to be assessed against them blank.  In the information returns for the years 1920 and*1892  1921, the word "none" was inserted in each instance in the space provided for statement of the amount to be assessed against the filing corporation.  The information return of the Park Company for 1919 designated the amount which it desired to have assessed against it.  This is the only instance in the whole record in which such a designation appears.  In the Essex case, supra, the Circuit Court points out the fact that the two affiliated corporations each paid two equal installments and one-half of the tax, i.e., the tax shown due on the return.  In this proceeding it appears that all payments made upon the consolidated returns involved were made by the petitioner, even though in one instance one of the subsidiaries furnished the money with which such a payment was made.  The first consolidated tax return filed by the affiliated group of which petitioner was a member, was the consolidated return for the year 1919, filed May 15, 1920.  The tax shown due on that return, amounting to $185,381.91, was assessed against petitioner on June 15, 1920.  When this consolidated return was filed, petitioner and each of the subsidiary corporations also filed separate returns for the*1893  year 1919.  The tax shown due on petitioner's separate return was not assessed but assessments were made against the subsidiaries in the respective amounts shown due on their separate returns.  In filing these separate returns, the subsidiaries paid a total of $23,000 as installments on the taxes shown due thereon.  Petitioner paid, during 1920, $162,381.90 of the amount assessed against it on the consolidated return, and on December 15, 1920, filed a claim for abatement of the balance of the said assessment upon the grounds: That the Louisville Woolen Mills, Louisville, Ky., paid to the Internal Revenue Collector of Ky., Mar. 1920$17,250and Park Woolen Mills paid to the Internal Col. at Atlanta, Ga5,750$23,000which payments should apply on consolidated returns filed by the American Textile Woolen Co., Sweetwater, Tenn.*694  Subsequent to the filing of the above described consolidated and separate returns and to the assessment against petitioner of the amount shown due on the consolidated return, each of the subsidiaries filed, during 1920, information returns for the year 1919, Form 1122.  Question 7 of the said Form 1122 reads: If apportionment*1894  is being made state the amount of income and profits tax for the taxable year to be assessed against the subsidiary or affiliated company making this return $ .  Form 1122, filed by the Park Company for the year 1919, stated as the answer to the said question 7, "$26,324.23." The record does not show whether or not this amount represented an allocation of tax to the Park Company in accordance with the net income and invested capital properly assignable to it or whether it was an arbitrary allocation.  The Park Company on September 9, 1920, filed a claim for abatement of the difference in tax shown due on its separate return for 1919, i.e., $24,836.51, and the $5,750 paid by it when filing that return.  The payment last mentioned was claimed by petitioner as a credit on the consolidated tax.  The difference between these sums, i.e., $19,086.51, was assessed against petitioner as transferee and was paid by it under protest on March 30, 1929.  The information returns filed by the Athens, Sweetwater and Louisville Companies for the year 1919 left the space for answer to question 7 blank.  February 12, 1921, petitioner executed and forwarded to the respondent returns as follows: *1895  (1) For 1917, a consolidated excess-profits-tax return, Form 1103, disclosing a total profits-tax liability in the amount of $18,128.15.  (2) For 1917, a consolidated return, Form 1031, disclosing a total income and profits-tax liability in the amount of $27,908.26.  (3) For 1918, a consolidated income and profits-tax return, Form 1120, disclosing a total tax liability in the amount of $351,034.14.  The respondent received these returns on February 14, 1921.  Since, as above explained, the respondent concedes that the liability of petitioner, if any, for consolidated taxes of the group for the year 1917 relates only to excess-profits taxes, the return numbered (1) above is the only 1917 consolidated return in which we are now interested.  Petitioner denies the existence of an agreement among the members of its affiliated group that the entire tax shown due on its consolidated profits-tax return for 1917, and its consolidated income and profits-tax returns for 1918 and 1919, should be allocated to it.  We think, however, that the actions of petitioner and the subsidiaries toward the liabilities indicated upon the returns mentioned are inconsonant *695  with the belief*1896  that there was no such agreement.  And as was indicated in Essex Coal Co., supra, this agreement need take no set form but may be gathered from the whole record.  Petitioner accepted the assessment against it of the entire liability shown due on the 1919 consolidated return, which was the first consolidated return filed for its affiliated group.  Of the $185,381.91 shown due on this return as filed May 15, 1920, petitioner paid during that year $162,381.91 and filed claim for abatement of the balance.  This claim was in effect an effort to have credit for certain payments made by two of the subsidiaries on their individual returns applied upon the liability assessed against petitioner on the consolidated return.  The tax reported due May 15, 1920, was assessed against petitioner June 15, 1920.  September 9, 1920, the Park Company, in its information return, directed that $26,324.23 of the amount shown due on the 1919 consolidated return be assessed against it.  The tax had already been assessed against petitioner and, so far as the record indicates, the request of the Park Company for assessment was not complied with.  We believe that the assessment should have been*1897  made as requested, however, and the assessment against petitioner reduced accordingly.  If this was not done, appropriate adjustment will be made on recomputation and the deficiency against petitioner will be disallowed to the extent indicated.  The consolidated returns for 1917 and 1918 were filed February 12, 1921.  Notice of a tentative assessment in the amount of $400,885.61 upon these returns and upon the consolidated 1919 return was given petitioner by letter of October 28, 1921.  Petitioner paid $100,000 on this tentative assessment on November 17, 1921, and on November 21, 1921, requested assessment for the years involved under section 210 of the Revenue Act of 1917, and sections 327 and 328 of the Revenue Act of 1928.  The respondent credited the $100,000 payment on petitioner's 1918 liability.  This was the state of the tax affairs of the consolidated group when on January 18, 1922, the stockholders of the Athens, Park and Sweetwater Companies adopted resolutions directing their respective directors to effect dissolution of those companies.  In the resolutions adopted by the stockholders of the Athens, Park and Sweetwater Companies it was provided that the entire assets*1898  of those companies be transferred to petitioner and that petitioner should "assume and pay all the obligations" of the transferors.  Neither the stockholders nor directors of petitioner took any formal action relative to petitioner's acquisition of the said assets.  It has been stipulated in this proceeding that petitioner was the sole stockholder of the subsidiaries.  The directors of each of the three subsidiaries and of petitioner were the same fifteen men, with the *696  exception that one of these men was not a director of the Park Company, that concern having one director who apparently had no connection with the other companies of the affiliated group.  The officers of petitioner and the subsidiaries were likewise the same persons, with one exception.  Petitioner accepted the transferred assets well knowing that they were transferred upon the provision that it should "assume or pay all the obligations" of the transferors, and well knowing that all three of the companies making such transfers were dissolved or about to be dissolved and left without means of paying such obligations.  By letter of June 14, 1922, the respondent advised the petitioner that as a result*1899  of reconsideration of the consolidated tax liability for the years 1917, 1918 and 1919, the proposed deficiency indicated in the letter of October 28, 1921, was reduced from $400,885.61 to $299,053.64.  Petitioner entered upon its books as its own liabilities all such liabilities of the transferors as had customarily been carried upon the latters' books.  We attach no weight to the fact that upon advice of their auditor the companies were of opinion that they were entitled to refunds for the tax years in controversy, and, therefore, did not contemplate that tax liabilities were among those assumed by petitioner in accepting the transferred assets.  Nor is the fact that liability for the taxes now in controversy was not carried on the books of any of the companies important.  It has been shown that it was not the practice of these companies to carry on their books tax liabilities other than those shown due upon their returns.  Ignoring tax liabilities does not avoid them.  It is argued that the word "obligations" as used in the resolutions adopted by the Park, Athens and Sweetwater stockholders was intended to include only "commercial obligations." It does not appear, however, that*1900  at the time the resolutions were adopted such a limitation was expressed, either in writing or in discussion among the officers and directors.  We are disposed to regard it as a limitation engendered in retrospect and wholly ineffective.  The circumstances surrounding the dissolution of the Athens, Park and Sweetwater Companies and the transfer of their assets to petitioner, indicate, we believe, that an understanding existed among the companies involved that petitioner would be liable for the taxes of the three subsidiaries.  Such an understanding we regard as the agreement contemplated in the law and regulations.  However, we do not rest our determination upon this point alone.  We are of opinion that the entire history of the consolidated returns of the affiliated group for the years 1917, 1918 and 1919 indicates an agreement among the affiliates, either active or passive, that the consolidated income and profits taxes of the group be allocated to petitioner, and *697  this means that our determination involves the Louisville Company as well as the three subsidiaries just discussed.  Whatever their method of handling other business affairs may have been, it is clear that*1901  the subsidiaries looked to the petitioner for the conduct of their consolidated tax matters.  Petitioner assumed this burden, accepted the assessment against itself of such liabilities of the consolidated group as it believed proper assessments, and paid the same.  From the time that the first consolidated return, that for 1919, was filed in May, 1920, until a conference before the Special Advisory Committee in December, 1928, more than eight years later, no objection was ever entered to the respondent's allocation to petitioner of the entire consolidated tax liability for the years involved.  During the eight-year period mentioned there was almost continuous correspondence between the petitioner and the respondent, various protests were filed, and certain conferences were held.  And during that period, on December 5, 1925, appeal Docket No. 9689, relating to the years 1917, 1918 and 1919, was filed, with no mention of the issue now under discussion.  This issue was first raised by a second amended petition filed January 29, 1929.  It may be that the affiliates planned to pay the tax in such proportions as their respective net incomes bore to the consolidated net income or in accordance*1902  with an allocation upon some other basis.  The question before us relates not to the payment of the tax, but to an agreement among them as to its assessment.  Essex Coal Co., supra.Therefore, the fact that the Louisville Company supplied part of the $100,000 paid by petitioner on November 17, 1921, would not be of importance even if we were advised of the arrangement under which the money was furnished, i.e., whether it was a loan to the petitioner or a contribution toward the consolidated tax liability.  Petitioner argues that even if a parent corporation agrees to the allocation to it of the entire consolidated tax shown due on the affiliated returns, this does not mean that deficiencies of the group determined many years later may be so allocated under the same agreement, because it might happen that when such deficiencies are determined the interest of the parent in the subsidiary had ceased through change of ownership or otherwise.  In the instant proceeding, however, petitioner was the sole stockholder of the subsidiaries during all of the tax years involved, was the sole stockholder and presumably the sole distributee upon dissolution of three of them, and*1903  was the sole stockholder of the fourth when the proceeding was heard.  Minor stockholdings must have existed for qualifying purposes, but on the record they were purely nominal.  The interests of petitioner and the subsidiaries are one.  Discussion of each factor influencing our determination is impracticable because the factors are too numerous.  Our decision is *698  not based upon the theory of estoppel advanced by the respondent, and to the extent that it may result in the payment of consolidated taxes upon income on which taxes have already been paid by the companies severally, is reluctantly rendered.  We are, however, of opinion that there existed among the petitioner and its subsidiaries an agreement that consolidated tax liabilities of the affiliated group for the years 1917, 1918, and 1919 should be allocated for assessment to petitioner alone.  See Bermont Oil Co.,22 B.T.A. 182">22 B.T.A. 182, and cases cited therein. Petitioner sought to show that its officers and directors were unaware of the statutory provisions relative to allocations of taxes among members of an affiliated group until advised of such provisions shortly before the second amended petition*1904  was filed.  This explanation is offered as the reason no protest against allocation of the entire consolidated taxes of the group to petitioner was made prior to December, 1928.  In view of the fact that the Park Company's information return for 1919, filed on September 9, 1920, indicated an allocation of a portion of the consolidated tax to it, the petitioner must have been aware it could have objected to the assessment of the entire consolidated tax against itself.  The respondent's allocations are accordingly approved, except as hereinbefore noted.  Reviewed by the Board.  Judgment will be entered under Rule 50.Footnotes1. Sweetwater Woolen Mills, Athens Woolen Mills, Park Woolen Mills, and Louisville Woolen Mills, subsidiaries of the American Textile Woolen Company, joined as appellants in Docket No. 9689. ↩1. Overassessment. ↩1. Not assessed. ↩