Court Opinion

ID: 4590739
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:04:15.803717+00
Date Added: 2024-06-11T07:50:31.962373
License: Public Domain

E. F. STEVENS, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.  H. O. STEVENS, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.  C. R. STEVENS, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.  SADIE A. STEVENS, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.  E. F. STEVENS, EXECUTOR, ESTATE OF W. A. STEVENS, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Stevens v. CommissionerDocket Nos. 25208-25211, 25118.United States Board of Tax Appeals14 B.T.A. 360; 1928 BTA LEXIS 2987; November 19, 1928, Promulgated 1928 BTA LEXIS 2987">*2987  At date of the deficiency letter the Commissioner had authority to assess or collect additional tax.  David H. Spanier, Esq., for the petitioners.  Arthur H. Murray, Esq., for the respondent.  LANSDON 14 B.T.A. 360">*360  The respondent asserts deficiency in income tax for the year 1921 against these several petitioners in the following amounts: E. F. Stevens$701.26H. O. Stevens700.19C. R. Stevens16.14Sadie A. Stevens13.20Estate of W. A. Stevens144.86The only issue is whether the statute of limitations barred the several deficiencies at the dates of the respective deficiency notices.  At the hearing the parties stipulated that the facts are identical in all five proceedings, and all are consolidated for hearing and decision.  The parties filed the following stipulation which is adopted as our FINDINGS OF FACT.  (1) That the petitioner is a member of the partnership of Stevens Bros., of St. Paul, Minn.; (2) That the said partnership of Stevens Bros. kept its books of account and rendered its income and excess-profits tax returns on the basis of a fiscal year ended March 31; (3) Petitioners kept no personal books of1928 BTA LEXIS 2987">*2988  account or records reflecting the receipt or accrual of income on a fiscal year basis; (4) The only income received by petitioners was their distributable share of the income of the partnership of Stevens Bros.; (5) In filing individual income-tax returns for the years 1920 and 1921, petitioners rendered such returns on the basis of a fiscal year ended March 31; 14 B.T.A. 360">*361  (6) For the fiscal year ended March 31, 1921, petitioners filed individual income-tax returns on May 31, 1921, the returns being filed under the provisions of the Revenue Act of 1918; (7) Subsequent to the filing of the said returns for the fiscal year ended March 31, 1921, and subsequent to the passage of the Revenue Act of 1921, no other or further returns were filed by petitioners for the said fiscal year ended March 31, 1921; (8) In determining the deficiency taxes in controversy respondent changed the basis of filing petitioners' returns from the fiscal year ended March 31, 1921, to the calendar year basis ended December 31, 1921; (9) The taxes in controversy are income taxes for the calendar year 1921, and are in the amounts set forth above; (10) The deficiency letters were mailed to petitioners1928 BTA LEXIS 2987">*2989  on January 14, 1927, more than five years after the filing of the said returns for the fiscal year ended March 31, 1921, referred to in paragraph 6 hereof.  OPINION.  LANSDON: In the statement accompanying the deficiency notices which are the bases of these proceedings, the Commissioner says: It is conceded that the assessment of a deficiency in tax on the basis of a fiscal year ended March 31, 1921, is precluded by the provisions of Section 278(e) of the Revenue Act of 1926.  You are advised, however, that a report of the Internal Revenue Agent in Charge at St. Paul Minnesota, dated November 5, 1926, covering an investigation of your books of account and records has 5, 1926, covering an investigation of your books of account and records has been received.  The examining officer has changed the method of filing your income for the fiscal year was income from the partnership.  The examining officer's report has been accepted by this office.  In the light of the above, it appears that the only question submitted for our decision is whether the Commissioner was authorized by law to change the income reporting period of these petitioners from a fiscal to a calendar year basis. 1928 BTA LEXIS 2987">*2990  If there is any statutory authority for such action it is found in the following provision of section 212 of the Revenue Act of 1921: (b) The net income shall be computed upon the basis of the taxpayer's annual accounting period (fiscal year or calendar year, as the case may be) in accordance with the method of accounting regularly employed in keeping the books of such taxpayer; but if no such method of accounting has been so employed, or if the method employed does not clearly reflect the income, the computation shall be made upon such basis and in such manner as in the opinion of the Commissioner does clearly reflect the income.  If the taxpayer's annual accounting period is other than a fiscal year as defined in section 200 or if the taxpayer has no annual accounting period or does not keep books, the net income shall be computed on the basis of the calendar year.  It is clear that if the taxpayers had no established accounting period within the meaning of the law, or kept no books, the action of 14 B.T.A. 360">*362  the Commissioner was authorized and probably required.  In support of their contention that by filing their returns on the basis of a fiscal year ended March 31, in the1928 BTA LEXIS 2987">*2991  previous and other prior years, the petitioners rely on article 25 of Regulations 45, from which they quote the following: * * * Except in the cases of a return for the taxable year 1918 and of a first return for income tax a taxpayer shall make his return on the basis (fiscal or calendar year) upon which he made his return for the taxable year immediately preceding unless, with the approval of the Commissioner, he has changed the basis of computing his net income.  We can not agree that this language determines the question.  It must be presumed that this regulation applies only to returns that have been made and filed in conformity with law.  The respondent has determined that the petitioners had no right to file returns on a fiscal year basis.  Erroneous action of taxpayers in one year establishes no right to commit the same error in the next year.  We are of the opinion that nothing in the record proves that the taxpayers herein had established any regular annual accounting period for reporting their respective incomes.  As the parties have stipulated that none of the taxpayers kept any personal books of account, we conclude that the Commissioner properly changed the basis1928 BTA LEXIS 2987">*2992  of the accounting periods of these several petitioners from a fiscal to a calendar year.  Since the returns filed in May, 1921, covered only three months of the calendar year before us, the period within which the tax for that year must be assessed did not begin to run from the date of such filing.  At January 14, 1927, the Commissioner had authority to assess and collect additional taxes against each of these petitioners for the calendar year 1921.  Cf. ; ; . Decision will be entered for the respondent.