Court Opinion

ID: 4592102
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:07:13.620563+00
Date Added: 2024-06-11T07:50:48.528602
License: Public Domain

GREYLOCK MILLS, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Mills v. CommissionerDocket No. 45465.United States Board of Tax Appeals18 B.T.A. 75; 1929 BTA LEXIS 2128; November 9, 1929, Promulgated 1929 BTA LEXIS 2128">*2128  Proceeding dismissed for lack of jurisdiction.  Sanford Robinson, Esq., for the petitioner.  Frederick R. Shearer, Esq., for the respondent.  LITTLETON18 B.T.A. 75">*75  A petition was filed in this proceeding assigning certain errors on the part of the Commissioner and alleging certain facts in support 18 B.T.A. 75">*76  thereof.  In answer to the petition, the Commissioner filed a motion asking that the proceeding be dismissed for lack of jurisdiction for the reason that the letter on which the proceeding is based does not constitute a notice of the determination of a deficiency as provided by statute.  For the purpose of the motion, the facts as alleged in the petition are admitted, from which, and other facts admitted or record, we make the following findings of fact.  FINDINGS OF FACT.  The petitioner is a Massachusetts corporation, with its principal office at North Adams.  On or about March 15, 1919, and before filing its return, the petitioner, believing that it would be required to file on a calendar year basis as theretofore, estimated its taxes for 1918 to be $375,000 and paid $100,000 for the purpose of the quarterly payment due at that time.  Later, 1929 BTA LEXIS 2128">*2129  the petitioner found that, since it kept its books on the basis of a fiscal year ended June 30, it would be required to file a return for the six-month period ended June 30, 1918, and, accordingly, on June 15, 1919, filed such a return, which showed income and profits taxes due in the amount of $78,005.98.  At the same time the petitioner filed with the return a claim for refund in the amount of $21,994.02 or the difference between $100,000 and $78,005.98.  Thereafter, in or about August, 1919, the Commissioner, without an audit of the petitioner's books or records, and without making any change in the amount of income reported or in the computation of the tax liability, made an assessment on account of the return for the said period in the amount of $156,011.96.  On or about December 12, 1919, the petitioner filed a claim in abatement for $56,011.96, or the difference between $156,011.96 and $100,000.  On August 27, 1925, after an examination of petitioner's books and records, the Commissioner sent the petitioner a letter in which he showed a deficiency for the six-month period in the amount of $14,568.67.  On December 18, 1925, a formal deficiency notice was issued in which the1929 BTA LEXIS 2128">*2130  aforementioned deficiency was affirmed and shown to be arrived at as follows: Original tax, Account #404062$156,011.96Total tax assessable170,580.63Additional tax14,568.67On the basis of the foregoing determination, a petition was filed with this Board, in which it was stated that the deficiency involved for the period January 1, 1918, to June 30, 1918, was $14,568.67.  When the proceeding came on for hearing, the petitioner's motion for a severance of issues was granted and only the issue relating 18 B.T.A. 75">*77  to the statute of limitation considered.  This was decided adversely to the petitioner's contention and, in so far as the period now in controversy is concerned, the proceeding was restored to the general calendar for assignment for hearing upon the merits in due course.  Greylock Mills,9 B.T.A. 1281">9 B.T.A. 1281. Instead, however, of a hearing of the case upon the merits a stipulation was filed with the Board on April 7, 1928, in which it was stipulated and agreed by the parties "That the deficiency in income and profits taxes for the period January 1 to June 30, 1918, is $9,878.13." On April 14, 1928, an order of redetermination was entered1929 BTA LEXIS 2128">*2131  by the Board, to the effect that the deficiency for the period January 1, 1918, to June 30, 1918, was $9,878.13.  The computation by which the aforementioned deficiency was arrived at was not set forth either in the stipulation or in the order of redetermination.  Subsequently, an appeal was had by the petitioner to the Circuit Court of Appeals, Second Circuit, for a review of the Board's decision and on April 17, 1929, the order of the Board, wherein a deficiency of $9,878.13 was determined, was affirmed.  Greylock Mills v. Commissioner, 31 Fed.(2d) 655. On October 21, 1929, the application of the petitioner for a writ of certiorari with respect to the aforementioned decision of the Circit Court of Appeals was denied by the United States Supreme Court. On July 5, 1929, the letter which forms the basis of this proceeding, and which reads as follows, was mailed to the petitioner by the collector of internal revenue at Boston, Mass.Reference is made to our communication addressed to you dated May 8, 1929, in which you were advised that a Treasury Department check issued in your favor in the amount of $10,379.05 had been returned to the Bureau at Washington1929 BTA LEXIS 2128">*2132  for lawful disposition, and that claim therefor should be filed with the General Accounting Office, Claims Division, Washington, D.C.  The check covered a refund of an overpayment of 1917 income and excess profits tax of $8,598.08 together with interest thereon of $1,780.97.  On the same date, May 8, 1929, your attorney, Mr. Sanford Robinson of New York City, addressed a letter to this office in which he stated that on the preceding day he called at the General Counsel's Office in Washington and arranged to have the check returned to this office, so that it might be delivered to you.  Mr. Robinson's letter was acknowledged by this office on May 11th.  You are now advised that a letter has been received in this office from the Commissioner of Internal Revenue, Accounts and Collections Unit, the pertinent part of which reads as follows: This office has made an investigation for the purpose of determining whether the taxes assessed for the year 1918 on the Annual 1919 List are now barred from collection by the Statute of Limitations.  The facts in the case show that this taxpayer filed an unlimited waiver on February 6, 1923 for the years 1917, 1918, 1919 and 1920.  In the case of1929 BTA LEXIS 2128">*2133  the Greylock Mills vs. Commissioner of Internal Revenue tried before the United States Circuit Court of Appeals for the Second Circuit, it was held that 18 B.T.A. 75">*78  this waiver is valid and that it did not expire on April 1, 1924.  In view of this fact, the Bureau will take steps to have the check deposited as a repayment to the appropriation from which drawn.  This office is further directed by the Office of the Commissioner of Internal Revenue to take steps to collect the balance of the 1918 tax after the application of the overassessments of $6,428.58 from the fiscal year ended June 30, 1920 and $8,598.08 from the year 1917.  Your 1918 account has now been adjusted so that it appears as follows: Greylock Mills, 7/5/29Assessed$156,011.96Paid 3/19/19$100,000.00Credit from overpayment fy. 6/30/20, overpaid 1/19/26 Sched. #212886,031.50Credit from interest overpaid fy. 6/30/20 overpaid 1/19/26 Sched. #21288397.08Credit from overpayment 1917, overpaid 10/5/25 Sched. #334638,598.08115,026.6640,985.30Add interest on $40,985.30 at the rate of 6% per annum from 1/26/20 to date23,204.51Add interest on $6,428.58 at the rate of 6% per annum from 1/26/20 to 1/19/262,306.79Add interest on $8,598.08 at the rate of 6% per annum from 1/26/20 to 10/5/252,936.24Total amount due to date69,432.841929 BTA LEXIS 2128">*2134  Interest is due from January 26, 1920, for the reason that on that date notice and demand was issued for payment of the balance outstanding on your 1918 account, and the interest has been accruing at the rate of 6% per annum for the reason that the claim for abatement was timely filed.  In accordance with the instructions given to this office by the office of the Commissioner of Internal Revenue, demand is made upon you for payment of the amount of $69,432.84.  Additional interest is accruing on the amount of $40,985.30 at the rate of 6% per annum from this date to the date on which payment is made.  A copy of this letter is under even date being forwarded to your attorney, Mr. Sanford Robinson, for his information.  In forwarding your remittance to this office, kindly use the reference given at the beginning of this letter and attach the enclosed copy of this communication to your reply.  Whereupon, the petitioner, on August 16, 1929, filed a petition with the Board on the ground that the foregoing letter constituted a notice of the determination of a deficiency and assigned as errors that (1) this was a notice of an additional deficiency after a final determination by the1929 BTA LEXIS 2128">*2135  Board and that (2) the collection of the deficiency is barred by the statute of limitation.  A motion was then filed by the Commissioner asking the dismissal of the proceedings on the ground 18 B.T.A. 75">*79  that the letter in question does not constitute a notice of the determination of a deficiency.  OPINION.  LITTLETON: The effect the issue presented is whether the letter of July 5, 1929, set out in our findings, is merely the statement by the Commissioner of a balance due on the basis of our prior determination in Greylock Mills,9 B.T.A. 1281">9 B.T.A. 1281, or whether it is a notice from the Commissioner of a deficiency determined by him in excess of that determined in 9 B.T.A. 1281">Greylock Mills, supra. A consideration of the entire record, the material parts of which are set forth in our findings, brings us to the conclusion that no additional deficiency is here shown to have been determined.  When the petitioner came before theBoard in 9 B.T.A. 1281">Greylock Mills, supra, jurisdiction was taken in the proceeding because there had been a determination by the Commissioner of a deficiency.  The deficiency as then computed by the Commissioner, recognized by the petitioner as having been so determined1929 BTA LEXIS 2128">*2136  and accepted by the Board for the purpose of jurisdiction, was $14,568.67.  This deficiency was determined by the Commissioner as the difference between the total tax which he found assessable, $170,580.63, and the original tax assessed, $156,011.96.  As the result of jurisdiction taken as indicated above, the Board promulgated a decision on the issue presented to it and thereafter the parties stipulated that the deficiency properly determinable thereunder was $9,878.13.  While the manner in which the deficiency was arrived at was not set forth either in the stipulation or in the order of the Board entered thereunder, we think the only reasonable conclusion to be drawn from the record is that the parties agreed that there was a deficiency of $9,878.13 instead of $14,568.67; that is, the parties agreed that the tax liability of the petitioner was $4,690.54 less than that theretofore determined by the Commissioner.  The petitioner agrees that an amount of $9,878.13 was stipulated as the correct deficiency, but contends that on the basis of the stipulation the deficiency was an amount in excess of that shown by it on its return when filed, $78,005.98, or a total tax liability of $87,884.11. 1929 BTA LEXIS 2128">*2137  We find nothing in the record which supports such a conclusion.  It is true that the starting point in the determination of a deficiency is the amount of importance in such a determination is the amount of tax actually imposed by the appropriate revenue act.  The deficiency is the difference between the two amounts after proper adjustments for intervening assessments, abatements, credits and refunds.  Obviously, if the petitioner's contention as to the starting point is correct, the 18 B.T.A. 75">*80  Commissioner, on the basis of the total tax liability found by him, should have determined his deficiency as the difference between $78,005.98 and $170,580.63, instead of the difference between $156,011.96 and $170,580.63, which would have merely served to have increased the amount of the deficiency shown by him.  But when the parties came before us, at that time no question was raised as to the amount to be deducted from the correct tax liability in order to arrive at the deficiency; in effect what was in issue was the petitioner's correct tax liability as a necessary incident to the correctness of the deficiency then shown, and in no way called into controversy the amount to be deducted from1929 BTA LEXIS 2128">*2138  the correct tax liability in order to arrive at the deficiency.  It will be noted that the letter of July 5, 1929, on which the petitioner asks us to take jurisdiction, does not purport to make any changes in income or tax liability; it merely takes the amount of $156,011.96 which was used as the starting point in his determination of the deficiency involved in the prior proceeding and asks for the payment of the unpaid portion thereof, consideration being given therein for appropriate charges and credits on account of interest accrued and payments made.  The collection of tax finally determined to be due is a matter within the province of the Commissioner and over which we have no control.  And, further, when jurisdiction was taken in the prior proceeding, it was on the basis that the Commissioner was seeking to have the petitioner pay more tax than he had previously paid and not on the theory of a claim for refund on the part of the petitioner.  At that time the petitioner had paid $100,000 on account of its tax liability for the period in question.  Certainly, if the petitioner's contention is correct, the deficiency determined by the Commissioner was an amount in excess of that1929 BTA LEXIS 2128">*2139  shown due by the petitioner upon its return or on the basis of a total tax liability of $92,574.65 ($78,005.98 plus $14,568.67), an amount less than the $100,000 previously paid.  Similarly, on the same basis, it would be said that when the Board entered its order to the effect that there was a deficiency of $9,878.13, it was finding that the petitioner's total tax liability was $87,884.11 ($78,005.98 plus $9,878.13), or an amount which would entitle the petitioner to a refund of $12,115.89 ($100,000 less $87,884.11).  The Board not only took jurisdiction on the basis that a deficiency had been determined by the Commissioner, as shown on the face of the deficiency notice and as contemplated by the statute, but also found, as the result of its consideration, that an actual deficiency existed - not that a refund should be granted.  This action has been affirmed by the Circuit Court of Appeals and the writ of certiorari to the Supreme Court has been denied.  What might have been the result, 18 B.T.A. 75">*81  from a jurisdictional standpoint, had the point now raised been presented in the initial proceeding, it is unnecessary to determine.  Suffice it to say that it is too late now to contend1929 BTA LEXIS 2128">*2140  that the jurisdiction taken and order entered pursuant thereto were erroneous, and to ask that the previous determination be reversed and inquired into a second time.  On the basis of the foregoing, we are of the opinion that the letter of July 5, 1929, is a mere statement of a balance due under a prior determination and not a notice of a final determination of an additional deficiency.  Reviewed by the Board.  Order of dismissal for lack of jurisdiction will be entered accordingly.