Court Opinion

ID: 4620763
Source: CourtListenerOpinion
Date Created: 2020-11-21 02:43:19.667587+00
Date Added: 2024-06-11T07:55:53.105654
License: Public Domain

CHARLES E. HAMMERSLY, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.  ANDREW BANSE, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.  E. C. KNOERSCHILD, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.  WILLIAM F. TIBBS, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.HAMMERSLY v. COMMISSIONERDocket Nos. 20501-20503, 21647.United States Board of Tax Appeals16 B.T.A. 68; 1929 BTA LEXIS 2650; April 18, 1929, Promulgated *2650  TRANSFEREES - ASSESSMENT AND COLLECTION - LIMITATION. - Assessment was proposed on August 18, 1926, under section 280 of the Revenue Act of 1926 against four stockholders of a dissolved corporation, of liabilities asserted in respect to its unpaid income and profits-tax deficiency for 1918, as transferees in that year of certain of its assets.  On the proof found that the tax deficiency of the transferor for 1918 was properly assessed within five years from the filing of the return and prior to the passage of the Revenue Act of 1924, but no proceeding was begun for its recovery within that time and held that such deficiency being barred of collection by the limitation of section 250(d) of the Revenue Act of 1921, and the five-year period for collection not being extended by section 278(d) of the Revenue Act of 1924, the proposed assessment of the liability now, more than one year after the expiration of the period for assessment against the transferor, is barred.  Herbert Mayer, Esq., Morton A. Torke, Esq., and Chas. E. Hammersly, Esq., for the petitioners.  J. A. O'Callaghan, Esq., for the respondent.  TRUSSELL *69  By notices to each*2651  of the above petitioners under date of August 18, 1926, respondent proposed for assessment under section 280 of the Revenue Act of 1926, against such, the sum of $10,407.77 as liabilities incurred by them as transferees of assets of the Electra-Texas Oil Lands Co. for unpaid income and profits taxes due from that company in the sum of $34,664.82 for the calendar year 1918.  The several proceedings were, by agreement, consolidated for hearing and decision.  Similar errors are assigned by each petitioner, that: (a) The Electra-Texas Oil Lands Co. has no unpaid tax liability for 1918, (b) that if such liability exists, it is barred from assessment against petitioners by the limitations provided by the taxing statutes, and (c) that section 280 of the Revenue Act of 1926 under which the assessment is proposed is unconstitutional.  FINDINGS OF FACT.  The Electra-Texas Oil Lands Co. was a Wisconsin corporation organized prior to 1918 to deal in oil and gas lands.  Its authorized capital stock was 1,000 shares of a par value of $100 per share.  This corporation was in active business only during the calendar year 1918.  During that year the capital stock of the corporation was owned*2652  by six individuals, the four petitioners herein and Matt Groff and Max Hopkins, each owning 166 2/3 shares of stock.  Each of these six stockholders received as a distribution by the corporation in that year $10,407.77.  The Electra-Texas Oil Lands Co. filed its return for the calendar year 1918 on May 5, 1919, reporting no net taxable income.  Thereafter, respondent, upon examination of the return, determined a deficiency in income and profits taxes for that year of $34,664.82 and on March 24, 1924, made a jeopardy assessment in this amount against the corporation.  Upon such assessment the collector of internal revenue for Wisconsin issued a warrant for distraint on May 26, 1924, and later, on February 3, 1926, issued another warrant for distraint.  Neither of these warrants was executed by levy but were returned to the collector by the deputy collector, to whom they had been assigned for service, with a memorandum, on April 17, 1926, advising that the corporation was then out of existence and its assets distributed, and giving the names and addresses of the six stockholders.  Thereafter, on August 18, 1926, respondent, under section 280 of the Revenue Act of 1926, notified petitioners*2653  of the proposed assessments against each in the amounts they had each received from the corporation in 1918.  It is stipulated by counsel, and we find accordingly, that the correct amount of the unpaid income and profits taxes of the Electra-Texas Oil Lands Co. for the calendar year 1918 is $13,886.28.  *70  OPINION.  TRUSSELL: The asserted liabilities proposed for assessment and here appealed from are predicated upon an original tax liability of a transferor corporation for the calendar year 1918.  The period of limitation upon assessment and collection of such tax liability as provided by section 250(d) of the Revenue Act of 1918 was five years.  The return of the corporation was filed on May 5, 1919, and the assessment was made on March 24, 1924.  At the time of this assessment the Act of 1921 was in effect and the assessment was seasonably made within five years of the date of the return under section 250(d) of that Act, providing that taxes due under prior acts: * * * Shall be determined and assessed within five years after the return was filed, unless both the Commissioner and the taxpayer consent in writing to a later determination, assessment, and collection of*2654  the tax; and no suit or proceeding for the collection of any such taxes due under this Act or under prior income, excess-profits or war-profits tax Acts, or of any taxes due under section 38 of such Act of August 5, 1909, shall be begun, after the expiration of five years after the date when such return was filed, but this shall not affect suits or proceedings begun at the time of the passage of this Act: * * * By the terms of the section quoted the five-year period in which a suit or proceeding for collection of this deficiency must be begun, expired on May 5, 1924, but no proceeding was brought before that date and there is no evidence of extension of time by waiver.  Not until May 26, 1924, was a warrant for distraint issued.  It therefore follows that on May 26, 1924, when the first proceeding for collection was begun, the bar of the statute had been in effect for 21 days.  It further appears that the assessment was made, and the five-year period for assessment and collection expired, prior to June 2, 1924, the date of the enactment of the Revenue Act of 1924, and consequently section 278(d) of that Act, providing an additional period of six years for collection of assessments*2655  made within the five-year period from the date the return was filed, had no effect to extend that time.  ; . Respondent now proposes to assess, under section 280 of the Revenue Act of 1926, against four of the stockholders of the corporation, the petitioners herein, certain liabilities in respect of its unpaid taxes for 1918, asserted to have been incurred by them as transferees in that year of a portion of its assets.  That section provides a period of limitation for assessment against a transferree of one year after the expiration of the period for assessment against the taxpayer, and the date of the notice of proposed assessment here involved is August 18, 1926, more than two years after May 5, 1924, when the *71  period for assessment against the taxpayer expired.  The assessment here proposed is accordingly barred.  The conclusion reached on this issue makes a consideration of the remaining issues unnecessary.  Judgment will be entered for the petitioners.