Court Opinion

ID: 4598846
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:22:08.640441+00
Date Added: 2024-06-11T07:52:01.932773
License: Public Domain

PICTORIAL PRINTING CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Pictorial Printing Co. v. CommissionerDocket No. 10734.United States Board of Tax Appeals12 B.T.A. 1407; 1928 BTA LEXIS 3333; July 20, 1928, Promulgated *3333  On August 13, 1923, petitioner executed and filed a consent agreement, unlimited as to time, for the assessment of taxes for the years 1910 to 1917, inclusive.  On February 2, 1924, it signed and subsequently filed a similar agreement for the years 1910 to 1918, inclusive, pursuant to a request of the respondent for a consent agreement for the year 1918, extending the statutory period of limitation one year after the expiration of any "waivers already on file." Held, that the consent agreement of February 2, 1924, did not supersede the one dated August 13, 1923, and that assessment and collection are not barred.  Paul E. Shorb, Esq., Marion P. Wormhoudt, Esq., and H. Kroehl, C.P.A., for the petitioner.  Alva C. Baird, Esq., and Addison H. Willey, Esq., for the respondent.  ARUNDELL*1407  By this proceeding the petitioner seeks a redetermination of a deficiency of $1,615.60 in income taxes for the year 1916.  The petitioner alleges that assessment and collection of the tax are barred by the statute of limitations.  FINDINGS OF FACT.  The petitioner is an Illinois corporation with principal offices at Aurora, Ill.  Its return for*3334  the calendar year 1916, showing a tax of $1,388.60, was filed with the collector of internal revenue of its district on February 28, 1917.  The corporate name of the petitioner was changed to Pictorial Paper Package Corporation on March 4, 1921.  Under date of August 13, 1923, the petitioner executed and filed with the Commissioner of Internal Revenue, who subsequently signed it, an instrument reading as follows: In pursuance of the provisions of subdivision (d) of Section 250 of the Revenue Act of 1921 Pictorial Paper Package Corp. of Aurora, Ill., and the Commissioner of Internal Revenue, hereby consent to a determination, assessment, and collection of the amount of income, excess-profits, or war-profits *1408  taxes due under any return made by or on behalf of the said corporation for the years 1910 to 1917, inc., under the Revenue Act of 1921, or under prior income, excess-profits, or war-profits tax Acts, or under Section 38 of the Act entitled "An Act to provide Revenue, equalize duties, and encourage the industries of the United States, and for other purposes," approved August 5, 1909, irrespective of any period of limitations.  PICTORIAL PAPER PACKAGE CORP., *3335 Taxpayer.J. W. HUNT, V.P.  By D. H. BLAIR, Commissioner. 4/1/24 The paper does not bear the seal of the petitioner.  The figures "4/1/24" appearing above the Commissioner's name were not on the instrument when it was executed by the petitioner.  At the time the above instrument was signed by the petitioner, Revenue Agent Hodgkins, who was then at the former's place of business making an examination of its returns for the years 1910 to 1919, inclusive, without making any comment as to the statute of limitations, informed the petitioner that the taxes would be assessed immediately; that it would be required to pay the taxes and that the waiver should be executed in order to provide time for an examination of the returns.  The document was thereupon signed by the petitioner.  Thereafter under date of January 26, 1924, the respondent mailed to petitioner his so-called 30-day letter, which set forth the fact that overassessments had been determined for the years 1910, 1911, and 1912, and deficiencies found for the years 1913 to 1918, both years inclusive.  The last paragraph of the communication reads as follows: If in your opinion the additional tax indicated for the*3336  year 1918 is incorrect and you submit a protest against the action taken by this Unit, or an appeal to the Commissioner of Internal Revenue, it is necessary that you properly execute the enclosed form of waiver so that the additional tax indicated may not be placed in jeopardy.  The waiver referred to should have the corporate seal affixed and should be attached to your protest or appeal when submitted to this office.  The consent agreement executed on February 2, 1924, pursuant to the aforementioned request, bearing the corporate seal of the petitioner, reads as follows: In pursuance of the provisions of subdivision (d) of Section 250 of the Revenue Act of 1921 Pictorial Paper Package Corporation, of Aurora, Illinois, and the Commissioner of Internal Revenue, hereby consent to a determination, assessment, and collection of the amount of income, excess-profits, or warprofits taxes due under any return made by or on behalf of the said Pictorial Paper Package Corp. for the years 1910 to 1918, inclusive, under the Revenue Act of 1921, or under prior income, excess-profits or war-profits tax Acts, or under Section 38 of the Act entitled "An Act to provide revenue, equalize duties, *3337  and encourage the industries of the United States, and for other purposes", approved August 5, 1909.  This waiver is in effect from the date it is signed by the taxpayer and will remain in effect for a period of one year after the expiration of the statutory period of limitations as extended by any waivers *1409  already on file with the Bureau, within which assessments of taxes may be due for the year or years mentioned.  Corporate Seal.  PICTORIAL PAPER PACKAGE CORP., Taxpayer.By J. L. PASSAGE, Secr. & Treas.D. H. BLAIR, Commissioner.The above consent agreement was filed with the respondent on February 6, 1924, was subsequently signed by him, and bears the notation "Received Dec. 1, 1924, Special Assessment Section." In a letter to the petitioner, dated August 26, 1924, the respondent stated that: Before consideration can be given your application, there must be a final determination of your net income and statutory invested capital; therefore, it will be necessary for you to advise this office on or before the expiration of fifteen days from the date of this letter of your acquiescence in the following determination of your net income and statutory*3338  invested capital, disclosed by office audit or exceptions, if any, which you may take thereto.  and advised the petitioner that "The computation of tax liability for the years 1910 to 1916 is shown in office letter dated January 26, 1924." The only consent agreements filed by the petitioner with the respondent for the year 1916 were those hereinbefore quoted, dated August 13, 1923, and February 2, 1924.  Under date of April 20, 1925, the respondent advised the petitioner in the so-called 30-day letter form of the determination of a deficiency of $31,533.43 in taxes for the years 1917 and 1918, and made the following request: If you protest against the determination of the deficiency, the Bureau desires to proceed in the regular manner to the consideration of any information submitted by you.  However, the statutory period within which the Commissioner may assess additional taxes for the years involved will expire presently, and in order to avoid the necessity of making an assessment prior to such consideration, it is requested that you sign and return to this office the enclosed form of waiver.  The petitioner declined to execute the waiver as requested and during the course*3339  of a conference on the tax liability for the years 1917 and 1918 held the early part of May, 1925, its counsel informed Samuel J. Melick of the special assessment section of the Bureau that the waivers on file had expired.  In a letter bearing date of November 9, 1925, the respondent advised the petitioner, among other things, that an audit of its return for the year 1916 had resulted in the determination of a deficiency of $1,615.60 in tax for that year and that "In accordance with the provisions of section 274 of the Revenue Act of 1924, you are allowed 60 days from the date of mailing this letter within which to file an appeal to the United States Board of Tax Appeals contesting in whole or in part the correctness of this determination." *1410  No refund, credit or abatement claim in connection with the taxes for the year 1916 has been filed by the petitioner nor has any proceeding been instituted for the collection of such tax.  The petitioner never prepared or filed a protest or held a conference with the respondent on the merits of the additional tax proposed for 1916.  Such protests and conferences as were filed and held after April 20, 1925, had specific reference*3340  to the merits of the determination of additional tax for the years 1917 and 1918 and the consent agreements in so far as they applied to those years.  None of the letters received by the petitioner from the respondent respecting the tax for the year 1916 charged the former with having filed a false or fraudulent return with intent to evade taxes.  In its return for 1916 the petitioner did not claim a deduction for amortization under the provisions of section 214(a)(9) or section 234(a)(8) of the Revenue Acts of 1918 and 1921.  The deficiency in dispute was not assessed prior to the date of the respondent's answer herein, which was filed on March 3, 1926.  OPINION.  ARUNDELL: The material specific questions raised by the parties hereto as to the general issue of whether assessment of tax for the year 1916 is barred by the statute of limitations as extended by consent agreements entered into pursuant to section 250(d) of the Revenue Act of 1921, are: 1.  Is the petition filed herein in form sufficient to entitle the petitioner to obtain the relief it seeks?  2.  Did the consent agreement of February 2, 1924, supersede the one executed August 13, 1923, and if so, when?  *3341  Concerning the first issue, the respondent contends (a) that the petitioner has failed to allege or prove that the assessment has not been made; and (b) assuming that all of the allegations contained in the petition are true, it has failed to negative the exceptions in section 277(a) of the Revenue Act of 1924, as described in section 278(a)(b) and (c) thereof.  In its petition filed herein the petitioner assigns as error on the part of the respondent that: The Commissioner of Internal Revenue erred in assuming authority to make the determination of and proposing the assessment of such tax when such determination and proposed assessment was barred by the Statute of Limitations, namely Section 277(a)(2) and 278(c) Revenue Act of 1924.  (Italics ours.) In its statement of facts as a basis for the proceeding, the petitioner states, inter alia, that "the tax has not been assessed." The respondent admitted in his answer, filed March 3, 1926, that the deficiency in tax asserted for the year 1916 has not been assessed, and does not *1411  now allege that an assessment has been made since then.  From the aforementioned allegations and admission it appears evident that*3342  the deficiency here in question has not been assessed.  The question raised by the respondent with respect to the failure of the petitioner to allege or prove that it does not come within the exceptions to section 277(a) of the Revenue Act of 1924 was decided adversely to his contention here in the case of , and . The major issue is that of whether assessment and collection of the deficiency for 1916 are barred by the statute of limitations.  There are several arguments advanced by petitioner against the validity of the consent of August 13, 1923, among them the contentions, (1) that the statute had run when the consent was executed, (2) it lacks consideration, and (3) that it is indefinite as to time.  These contentions have heretofore been decided adversely to petitioner's claims.  See ; ; . It was also argued that the consent of August 13, 1923, is invalid because it does not bear the corporate seal and because it was signed by*3343  only one officer of the corporation.  It is sufficient to say that the statute does not require the affixing of corporate seals nor does it specify the number of signatures required to make a consent valid.  Furthermore, there is nothing in the record to show that the officer who signed the waiver did not have authority to bind the corporation.  After the waiver of August 13, 1923, was executed and placed on file, the petitioner under date of February 2, 1924, executed another waiver covering all the years 1910 to 1918, inclusive, and filed it with the respondent.  The question presented by these two waivers is this: Did the second one supersede the first, or should they be construed together and the limitation period determined from the two?  The position of the petitioner is that the second waiver superseded the earlier one and that the respondent did not act within the time argeed upon in the second.  Cases are cited in which courts have held that a second contract takes the place of an earlier one as the last expression of the will of the parties.  The cases cited rest on the ground that the second contract was complete in itself or that the two were inconsistent and could*3344  not stand together.  And so even if we attempted to apply the cited cases we find that the second waiver is not in itself complete, referring as it does to "waivers already on file." and we do not find any such inconsistency between the two as to render the construction of the two together impossible.  Moreover, it is doubtful whether these cases are applicable at all.  We are not prepared to grant the claimed analogy between contracts made by individuals and consents to the extension of a statutory period executed by a tax-payer *1412  and accepted by the Commissioner.  See . The petitioner further says that giving effect to the literal terms of the first waiver, it never expired, hence the additional year granted by the second can not be applied.  The error of this argument is that the first waiver did not suspend the running of the statute forever but only for a reasonable time or until termination by either party upon reasonable notice.  . It can not be said that the second waiver was notice of the termination of the first in view of the language of the second referring*3345  to waivers then on file.  If any presumption is to be indulged in, it must be that the petitioner knew the purport of the instrument it was signing.  Looking at the two waivers together, there is one granting the respondent a reasonable time after the expiration of the statutory period to assess and collect, and another adding to the period granted by the first.  If we had only the first waiver before us we could not hold, on the evidence, that the time elapsed between its execution and the final detcrmination was unreasonable, and having another waiver which neither terminates nor supersedes the first, but adds to its time, we are clearly of the opinion that the statutory time as extended by the consent has not expired.  There is some argument made on the fact that in May, 1925, one of counsel for petitioner informed an employee of respondent that in his opinion the waivers on file had expired.  This fact does not operate to bar the tax.  In the first place the parties were conferring in regard to 1917 and 1918 taxes and it does not appear that they even had the year 1916 in mind at that time.  Furthermore, while a consent can be revoked or terminated before the expiration fixed*3346  by its terms, it can be done only on reasonable notice.  See Reviewed by the Board.  Judgment will be entered for the respondent.