Court Opinion

ID: 4622244
Source: CourtListenerOpinion
Date Created: 2020-11-21 02:48:58.143398+00
Date Added: 2024-06-11T07:59:53.941004
License: Public Domain

FARMERS & PLANTERS TOBACCO WAREHOUSE COMPANY, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Farmers & Planters' Tobacco Warehouse Co. v. CommissionerDocket No. 16450.United States Board of Tax Appeals22 B.T.A. 1331; 1931 BTA LEXIS 1964; April 28, 1931, Promulgated 1931 BTA LEXIS 1964">*1964  Waivers signed by a former officer of a dissolved corporation, after dissolution, and without authorization to act for the corporation, held invalid to extend the statutory period for assessment against the corporation.  Elwood Hamilton, Esq., for the petitioner.  Bruce A. Low, Esq., and L. H. Rushbrook, Esq., for the respondent.  ARUNDELL22 B.T.A. 1331">*1331  Proceeding for the redetermination of deficiencies of $17,189.31 and $311 for the fiscal years ended June 30, 1919, and June 30, 1920, respectively.  The issues are whether petitioner is entitled to special assessment and whether the deficiencies are barred by the statute of limitations.  FINDINGS OF FACT.  The petitioner, a dissolved Kentucky corporation, was organized in October, 1917.  In the taxable year it was engaged in the business of selling on a commission basis loose leaf tobacco delivered to its warehouses in Maysville, Ky., by tobacco growers in Mason and adjoining counties.  The income tax returns of petitioner for the fiscal years ended June 30, 1919, and June 30, 1920, were filed on September 13, 1919, and September 15, 1920, respectively.  On September 20, 1920, the stockholders1931 BTA LEXIS 1964">*1965  of petitioner adopted a resolution to dissolve the corporation and agreeing that "A. L.  22 B.T.A. 1331">*1332  Powers, President, and C. C. Calvert, Secretary, shall settle up the affairs and business of said corporation as speedily as possible." Petitioner did no new business after the adoption of this resolution, and at the time of its dissolution had no outstanding liabilities, except possible liability for further income taxes.  Powers and Calvert agreed to wind up petitioner's affairs.  On October 5, 1920, petitioner transferred its assets to the Farmers and Planters Tobacco Warehouse Company, a partnership consisting of the stockholders of petitioner.  Key was assistant manager of the partnership.  It remained in business for one year and then sold its assets to the Burley Co-Operative Company.  The secretary of the State of Kentucky was notified on October 29, 1920, of the action taken to dissolve, and during the latter part of 1920, a notice of the dissolution of petitioner was published in a local newspaper for four consecutive weeks, in compliance with section 561 of the statutes of Kentucky.  At a special meeting of the board of directors of petitioner held on December 20, 1920, "W. 1931 BTA LEXIS 1964">*1966  Holton Key, Vice-president of R. N. Stickley, Bookkeeper," were authorized to sign, effective from January 1, 1920, monthly reports and inventories on behalf of petitioner with the Bureau of Internal Revenue.  Such mail as was received in Maysville for petitioner after its dissolution was placed in the post-office box of the partnership and received by Key.  Key handled the affairs of petitioner after its assets had been transferred to the partnership, and never consulted its other officers and stockholders in regard thereto.  He described his position with petitioner during that period as "manager by default." On October 16, 1923, a communication on the letter head of "Farmers and Planters Tobacco Warehouse Co. (A Partnership)" was addressed to the respondent, requesting that "our case before the special assessment division" be advanced.  This communication was signed "Farmers & Planters Tobacco Whse. Co., by W. Holton Key, V. Pres." On June 17 and December 2, 1924, letters on the same letterheads and signed in the same way were addressed to the respondent.  The first transmitted a waiver, hereinafter described, and the second related to income and invested capital.  In a letter1931 BTA LEXIS 1964">*1967  to the respondent dated March 25, 1924, Key again signed as vice president of petitioner and attached an affidavit stating that "he was the Vice-President of the Farmers and Planters Tobacco Warehouse Company, now dissolved; that he now represents the former shareholders in connection with the affairs of the former corporation." On June 17, 1924, Key affixed the name "Farmers & Planters Tob. Whse. Co. Inc., by W. Holton Key V. Pres.," to an instrument extending 22 B.T.A. 1331">*1333  the limitation period for the determination, assessment and collection of its income and excess profits taxes for the fiscal year ended June 30, 1919, to one year after the expiration of the statutory period of limitation.  Under the terms of two instruments similarly executed by Key on July 10, 1925, the time for assessment of taxes for both the fiscal years ended June 30, 1919 and 1920, purported to be extended to December 31, 1926.  All of these documents were signed at the request of the respondent.  Neither the petitioner, Powers nor Calvert ever authorized Key to sign the waivers.  He did not consult the other officers of petitioner about signing the waivers, and after signing the documents, did not advise1931 BTA LEXIS 1964">*1968  them or other stockholders of his action.  Calvert was not aware of the execution of the waivers until his deposition was taken in this proceeding.  The notice of the deficiencies involved in this proceeding was mailed on April 3, 1926, and on April 26, 1926, respondent entered a jeopardy assessment of the deficiency determined for the fiscal year ended June 30, 1919.  OPINION.  ARUNDELL: In view of the conclusion we have reached on the limitations issue, it will be unnecessary to decide whether special assessment should be granted, and for this reason we have refrained from finding any facts on the latter issue.  The income tax returns of petitioner for the fiscal years ended June 30, 1919, and June 30, 1920, where filed on September 13, 1919.  and September 15, 1920, respectively.  The deficiency notice was mailed on April 3, 1926, which was more than five years after the returns were filed and beyond the statutory period.  Respondent relies on instruments signed by W. Holton Key as extending the statutory period.  Key, it is shown, had been vice president of petitioner corporation before its dissolution.  Upon dissolution, two officers, other than Key, were designated to1931 BTA LEXIS 1964">*1969  wind up the corporate affairs.  This action was taken pursuant to section 561 of Carroll's Kentucky Statutes, which as far as material here provides that: * * * when any corporation expires by the terms of the articles of incorporation, or by the voluntary act of its stockholders, it may thereafter continue to act for the purpose of closing up its business, but for no other purpose; and it shall be the duty of the officers to settle up its affairs and business as speedily as possible; * * * Key was not designated to close up the business of the corporation.  According to the testimony, Key was never authorized to act in behalf of the corporation after its dissolution except for the authorization given him and Stickley in December, 1920, to sign monthly 22 B.T.A. 1331">*1334  tobacco reports and inventories.  The evidence further is that the officers designated to settle petitioner's affairs were never advised by Key that he had executed waivers.  In fact, Calvert, one of the liquidators, testified that he had never seen the waivers and had no notice of them until the day he appeared to give his deposition in this proceeding. 1931 BTA LEXIS 1964">*1970  Hence, it appears that there was no ratification of Key's acts that would bind the petitioner.  The burden of proof being on the respondent to establish the validity of waivers upon which be relies, and having failed to establish that Key was authorized to act for petitioner, we must hold that the statute had run against assessment for both 1919 and 1920 prior to April 3, 1926, the date of the deficiency notice.  Cf. . The case of , cited by respondent, is not in point.  There the respondent asserted a transferee liability against one of the liquidators who had executed waivers in behalf of the dissolved taxpayer corporation.  The Court held that the liquidator "by signing the waiver estopped himself to question its validity, with the result that he was bound to respond to the assessment." Decision of no deficiency will be entered for the fiscal years ended June 30, 1919, and June 30, 1920.