Court Opinion

ID: 4500152
Source: CourtListenerOpinion
Date Created: 2020-01-23 18:16:47.671904+00
Date Added: 2024-06-11T15:02:33.910083
License: Public Domain

*638OPINION.
Phillips :
The sole question presented is whether collection of the deficiency is barred by the statute of limitations. The return of the petitioner was filed on April 1, 1918, and, except for the extension of time, the statute would have run on assessment and collection of the tax on April 1, 1923. Prior to that date the parties executed the document set forth in the findings, whereby the petitioner consented to the determination, assessment, and collection of taxes due for 1917 irrespective of any period of limitation.
The Revenue Act of 1921, under which the consent was executed, provided that the amount of any such taxes should “ be determined and assessed within five years after the return was filed, unless both *639the Commissioner and taxpayer consent in writing to a later determination, assessment, and collection of the tax.” It was further provided that no suit or proceeding for the collection of any such taxes should be begun after the expiration of five years after the date when the return was filed. The consent here under consideration provided no definite period within which the determination, assessment and collection were to be made. On April 11, 1923, the Commissioner publicly issued a formal announcement to the effect that waivers for the 1917 taxes containing no limitation as to. the time in which assessments might be made, would be held to expire April 1, 1924. The deficiency here in question was assessed within such period, on September 28, 1923, but the tax has not been collected, for immediately" after the assessment a claim for abatement was filed and it was not until two years thereafter, September 22, 1925, that the petitioner was notified of the rejection of such claim. In the meantime no effort was made to collect the tax. It is the petitioner’s contention that the term of the consent expired on April 1, 1924, and that thereafter no collection of the tax might be made, while the respondent contends that the consent continued in full force and effect.
The instrument under consideration is denominated an “ income and profits-tax waiver.” It is in fact a bilateral undertaking entered into by the parties pursuant to the statute. Technically, it is not a waiver of the statute, for it is made pursuant to the statute. It is not an acknowledgment of any existing obligation or a new promise to pay, from which a new cause of action arises, thus beginning anew the period of limitation. It is not an agreement not to plead the statute of limitations as a defense to any asserted tax liability. In short, it is not something to be considered as in avoidance of the statute. By the statute and by its terms, it operates to extend the time.
The statute provides that in the case of such a consent as we have here, the tax is to be determined, assessed and collected at any time prior to the expiration of the period agreed upon. The consent of the parties is indefinite as to the period within which these acts may be done but it is not to be assumed that it was their intention that there never should be any limitation. In such cases, rather than hold agreements which contain similar provisions void for indefiniteness, courts attempt to arrive at the intent of the parties. Occasionally the courts have construed agreements containing such indefinite terms as terminable at the will of either party, but the more generally accepted construction is either (1) that the contract must be performed within .a reasonable time, or (2) that it continues until terminated by either party upon reasonable notice. And where a reasonable time is allowed, the- party who is first to perform the *640conditions of the contract may, by act, deed or otherwise, fix a limitation beyond which he may not extend the time for performance and upon which the other party to the contract may rely. (See Williston on Contracts, sec. 68, et seq., and cases cited.) We see no reason why the rules laid down by the courts for the purpose of determining the intent of the parties in such cases are not equally applicable to a “ consent in writing ” such as we have here. It was recognized by this Board in the Appeal of Warner Sugar Refining Co., 4 B. T. A. 5, where, having under consideration an instrument which in terms was a waiver of all statutory limitations, the Board said:
No notice was ever served upon the Commissioner by the taxpayer prior to the assessment of the amount here in controversy as to when it would regard the provisions of the waiver as having been fully complied with by both parties and become inoperative.
Here the Commissioner, having given notice that all waivers then on file, containing no limitation as to the time in which assessments for 1917. might be made, would be held to expire on April 1, 1924, fixed the expiration date of this consent by his own act. Any taxpayer who considered the period so long as to be unreasonable might have attempted to shorten the period by notice to the Commissioner or otherwise, but was not required to do so and was entitled to rely upon the act of the Commissioner.
Although it may have no significance, it is interesting to note that the Commissioner’s notice was issued shortly after Congress, on March 4, 1923, had amended section 252 of the Revenue Act of 1921 to provide that when a taxpayer filed a waiver of his right to have taxes for 1917 determined and assessed within five years, credit or refund should be allowed if claim therefor was filed within six years from the time when the return was due. In the case of a taxpayer filing no such waiver, only five years was allowed, indicating that it was the intention of Congress that such waivers should extend the statute in behalf of taxpayers for one year. The action of the Commissioner in limiting such waivers to approximately one year in behalf of the Government is in line with this action on the part of Congress.
It should be noted that in the present case the tax was assessed on September 28,1923, and a claim in abatement was filed on October 14, 1923. This left several months in which to collect the tax, either with or without passing upon the claim for abatement. No further consent in writing was entered into and no action was taken for two years. There is no claim that the petitioner further extended the time for collection, either in writing or otherwise, or that he has acted in such a manner as to estop him from claiming the benefits of the statute. If there had been no public an*641nouncement by the Commissioner fixing the time for which the agreement would remain in effect, we are nevertheless of the opinion that no action was taken within a reasonable time and collection of the tax would be barred.
The provisions of the Kevenue Acts of 1924 and 1926 with respect to collection have no application where the statutory period for collection expired prior to the date of their enactment into law. We therefore conclude that collection of the tax is barred.
Reviewed by the Board.

Decision will be entered for the 'petitioner.