Court Opinion

ID: 4593043
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:09:55.534301+00
Date Added: 2024-06-11T07:50:58.659415
License: Public Domain

AMERICAN POWDER MILLS, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.American Powder Mills v. CommissionerDocket No. 5487.United States Board of Tax Appeals12 B.T.A. 305; 1928 BTA LEXIS 3568; June 1, 1928, Promulgated *3568  Collection of the deficiency involved in this proceeding is barred by the statute of limitations.  Kenneth Howes, Esq., for the petitioner.  Harold Allen, Esq., for the respondent.  SMITH *305  The petitioner appeals from an alleged deficiency of $21,741.86 income and profits tax for the fiscal year ended September 30, 1917.  The hearing before the Board was limited to the question as to whether the deficiency was barred by the statute of limitations.  FINDINGS OF FACT.  The petitioner is a Massachusetts corporation.  It filed its income and profits-tax return for the fiscal year ended September 30, 1917, on or before April 1, 1918, with the collector of internal revenue at Boston, Mass.  This return showed taxes due from the petitioner of $161,466.09, which were duly assessed and collected.  On February 12, 1921, the petitioner executed and mailed to the revenue agent in charge at Boston, Mass., a form of consent which had been tendered to it for execution by such revenue agent in charge.  *306  This waiver read as follows: American Powder Mills, a corporation organized under the laws of the State of Massachusetts, in consideration*3569  of the assurance given it by officials of the Income Tax Unit of the Bureau of Internal Revenue that its liability for all Federal taxes imposed by the Act of Congress, approved September 8, 1916, as amended by the Act of Congress, approved October 3, 1917, for the year ended December 31, 1917, on its net income received from all sources in said year, shall not be determined except after deliberate, intensive and thorough consideration, hereby waives any and all statutory limitations as to the time within which assessments based upon such liability may be entered.  It is understood, however, that the above corporation does not, by the execution of this waiver, admit in advance the correctness of any assessment which may be made against it for said year by the officials of the Income Tax Unit.  Executed this 12th day of February 1921.(Signed) AMERICAN POWDER MILLS Corporation.By EDWARD B. DRAKE (Title) Vice Pres. and Treas.This waiver by its terms purported to waive any and all statutory limitation as to the time in which assessments might be entered based upon the petitioner's liability for all Federal taxes imposed by the Act of Congress approved*3570  September 8, 1916, as amended by the Act of Congress approved October 3, 1917, for the year ended December 31, 1917, on the petitioner's net income received from all sources in said year.  The consent contained no specific limitation as to the period during which it should continue in effect.  The consent above referred to is the only one ever executed by or on behalf of the petitioner in connection with any taxes for the year 1917.  By Commissioner's Mimeograph 3085 published April 11, 1923, it expired April 1, 1924.  Under date of February 20, 1924, the petitioner received from the respondent an audit letter advising it of an alleged additional income and excess-profits tax for the fiscal year ended September 30, 1917, of $27,111.99 and requesting the petitioner to file a new form of consent enclosed in said audit letter within 10 days.  This letter stated that unless said consent was so filed the alleged additional tax would be assessed without the usual 30-day notice, but in that event a claim in abatement could be filed by the petitioner.  The petitioner did not file the new consent requested by the respondent in his letter of February 20, 1924, and as a result the respondent*3571  in March, 1924, assessed the alleged additional tax of $27,111.99 against the petitioner for the fiscal year ended September 30, 1917, as a so-called "jeopardy" assessment.  Under date of March 18, 1924, the petitioner filed with the respondent an appeal from his determination as set forth in the audit *307  letter of February 20, 1924, and protested the additional assessment upon several grounds, one being that the statute of limitations had already run against the respondent's right to assess further taxes against the petitioner for the year 1917.  The petitioner likewise set forth its claim with regard to the running of the statute of limitations in its brief filed with the respondent under date of May 28, 1924.  On August 13, 1924, the petitioner received a notice and demand from the collector of internal revenue at Boston for the payment of the additional assessment of $27,111.99 income and profits tax for the fiscal year ended September 30, 1917.  The petitioner, under date of August 13, 1924, filed with the collector at Boston a claim in abatement of the additional assessment incorporating in said claim the same grounds of protest set forth in its letter of March 18, 1924, and*3572  in its brief of May 28, 1924.  On December 23, 1924, the respondent allowed the petitioner's claim in abatment to the extent of $5,370.13 and rejected it to the extent of $21,741.86.  Petitioner first received notice of this action of the respondent on May 20, 1925, when it received from the collector at Boston a certificate of overassessment for $5,370.13 taxes for the fiscal year ended September 30, 1917, and a notice and demand for the payment of $21,741.86, being the amount of the additional assessment of $27,111.99 for the fiscal year in question less the $5,370.13 represented by the certificate of overassessment.  The petitioner filed its appeal with this Board on July 13, 1925.  In February, 1926, the collector at Boston notified the petitioner that he proposed to proceed with the collection of the additional assessment of $21,741.86 for the fiscal year ended September 30, 1917, unless the petitioner would furnish him a surety-company bond.  The petitioner expressed his willingness to furnish him with such bond, conditioned for its payment upon the final determination of its appeal to the United States Board of Tax Appeals.  The collector at Boston was unwilling to accept*3573  such a bond owing to the uncertainty then existing as to whether this Board had jurisdiction over appeals in the case of assessments made prior to June 2, 1924, the date of the enactment of the Revenue Act of 1924.  A summary collection of the tax in question, however, whether legal or not, would have eliminated the deficiency and deprived the petitioner of any right it might have under the then existing law or under the revenue bill then before Congress to have its appeal already filed passed upon by this Board.  Accordingly, the collector advised the petitioner's attorney that if the petitioner would execute a bond based upon the determination of the tax in question by the Commissioner that that bond would only be enforced in accordance with the final determination of the petitioner's appeal *308  by this Board provided it should be subsequently determined by judicial decision or new legislation that the United States Board of Tax Appeals in fact had jurisdiction over appeals in the case of assessments made prior to June 2, 1924.  In view of the above assurance by the collector, the petitioner, under date of Bebruary 18, 1926, executed and tendered to the collector a bond, *3574  providing as follows: INCOME TAX BOND KNOW ALL MEN BY THESE PRESENTS that the American Powder Mills, a corporation organized under the laws of the State of Massachusetts and having a regular place of business at 131 State Street, Boston, County of Suffolk and Commonwealth of Massachusetts, as principal, and Standard Accident Insurance Company, a surety company organized under the laws of the State of Michigan and having a regular place of business in Boston in said County and Commonwealth, as surety, are held and firmly bound unto Thomas W. White, Collector of Internal Revenue for the District of Massachusetts and his successor or successors in office, in the sum of Thirty-seven Thousand Dollars ($37,000.00) lawful money of the United States, for the payment whereof we bind ourselves, our heirs, successors, administrators, executors and assigns, jointly and severally, firmly by these presents, as follows: WHEREAS, an amount of $18,627.87 is outstanding on an assessment of income and excess profits tax levied against the above-bounden principal for the twelve months period ended September 30, 1917, the unpaid assessment appearing on the Commissioner's additional assessment list*3575  for the month of March, 1924; Special 4, Page 10, Line 7, on file in the office of the said Collector; and WHEREAS, the tax liability for the above named period is to be redetermined by the Commissioner of Internal Revenue, for which reason the above-bounden principal desires that the collection of the outstanding tax be withheld pending such redetermination; and WHEREAS, in order to fully protect the interests of the United States of America, the above-bounden principal files this bond with sureties satisfactory to the Collector of Internal Revenue in the District of Massachusetts in the amount as stated above, conditioned for the payment of any part of such tax, together with penalties and interest as may be determined to be due: Now, THEREFORE, the condition of the foregoing obligation is such that if the principal shall on notice and demand, by the Collector duly pay any portion of the above-described tax together with such penalty and interest as may be determined by the Commissioner to be due for the above-named period and shall otherwise well and truly perform all the provisions of law and the regulations, then this obligation is to be void, but otherwise to remain in*3576  full force and virtue.  Witness our hands and seals this 18th day of February, 1926.  In tendering this bond to the collector, the attorney for the petitioner wrote a letter dated February 18, 1926, setting forth the petitioner's understanding of the conditions under which the bond was to be accepted by the collector.  This letter provided in part as follows: In delivering this executed bond to you we desire as attorneys for the American Powder Mills to set forth our understanding of the conditions under which *309  you will hold and enforce the same.  By the terms of the bond payment is conditioned simply on the determination by the Commissioner of the amount of the tax in dispute.  Nevertheless, in the conferences with regard to this bond held between you, Mr. MacHarrie and Mr. Howes of this office it was agreed that since the taxpayer is prosecuting an appeal in this case to the United States Board of Tax Appeals it would be unfair by enforcing payment of the bond prior to the final decision of the Tax Board to thus deprive the taxpayer of the right to have its appeal passed upon by the Board provided it is determined, either by judicial decision or new legislation, *3577  that the Board has jurisdiction of appeals from taxes assessed as in this case, prior to June 2, 1924.  Under the provisions of the new tax bill now in process of passage by Congress the Board of Tax Appeals is expressly given jurisdiction over appeals from taxes assessed prior to June 2, 1924.  Should this provision continue in the bill as finally enacted into law it is our understanding that you will regard the enclosed bond as in effect conditioned on the final decision of the case by the Tax Board the same as would be the case in respect to bonds given under similar circumstances, after the passage of the new law.  We wish to further make it clear that the enclosed bond is not intended in any respects as a waiver by the taxpayer of any existing rights which it may have under Section 250(d) of the Revenue Act of 1921 or Sections 277 and 278 of the Revenue Act of 1924, against the assessment or collection of the additional tax claimed to be due from it for the fiscal year ended September 30, 1917.  If anything herein does not accord with your understanding of this matter we will be obliged if you will communicate at once with Mr. Howes of this office before accepting the enclosed*3578  bond.  The collector at Boston never acknowledged receipt of the letter of February 18, 1926, or otherwise advised the petitioner that he had not accepted the bond in accordance with the conditions under which it was tendered.  No suit has ever been begun against the petitioner for the collection of the $21,741.86 additional income and excess-profits tax for the fiscal year ended September 30, 1917, in controversy in this appeal, nor has any distraint proceeding been begun against the petitioner for the collection of the alleged deficiency in tax.  OPINION.  SMITH: Except for the filing of the bond in this case the material facts are identical with those which obtained in , in which the Board held that collection of the deficiency involved in that proceeding was barred by the statute of limitations.  The respondent has filed no brief in support of his contentions that the deficiency is not barred by the statute of limitations in accordance with prior decisions of the Board.  At the hearing of this proceeding counsel for the respondent placed his defense upon the fact that in the instant case the petitioner had*3579  filed a bond with the collector to secure him in case of an adverse ruling by the Board of Tax Appeals.  The record of this action *310  shows, however, that the bond was filed upon the condition that it should not be considered as in any wise waiving any rights which the taxpayer might have under section 250(d) of the Revenue Act of 1921 or sections 277 and 278 of the Revenue Act of 1924.  The bar of the statute of limitations imposed by section 250(d) of the Revenue Act of 1921 was not raised by the filing of the bond.  . Reviewed by the Board.  Judgment of no deficiency will be entered.