Court Opinion

ID: 4609148
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:44:07.243954+00
Date Added: 2024-06-11T07:53:50.693516
License: Public Domain

J. H. REESE, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Reese v. CommissionerDocket No. 18404.United States Board of Tax Appeals15 B.T.A. 1261; 1929 BTA LEXIS 2692; April 5, 1929, Promulgated 1929 BTA LEXIS 2692">*2692  When a jeopardy assessment of a tax for 1920 is made under the provisions of section 279(a) of the Revenue Act of 1926 just prior to the expiration of the statute of limitation, and before notice has been mailed under the provisions of section 274(a), the tax so assessed may not be collected unless a notice is mailed to the taxpayer under the provisions of subdivision (b) of section 279 within 60 days after such assessment and within five years after the return was filed.  W. A. Bolinger, Esq., for the petitioner.  T. M. Mather, Esq., for the respondent.  LITTLETON15 B.T.A. 1261">*1261  This proceeding involves a deficiency in income tax for 1920 in the amount of $25,087.46, a jeopardy assessment of which was made under the provisions of section 279(a) of the Revenue Act of 1926.  The question to be decided is whether the failure of the Commissioner to mail a notice to the petitioner within 60 days after making such assessment, as provided in section 279(b), and also within the five-year period of limitation, makes such assessment ineffective and thus bars the collection of the tax.  15 B.T.A. 1261">*1262  FINDINGS OF FACT.  Petitioner is a resident of Beaumont, Tex.1929 BTA LEXIS 2692">*2693  , and filed his income-tax return for 1920 on March 15, 1921.  The following facts were stipulated with respect to the making of the assessment: The deficiency of $25,087.46 against the petitioner for the year 1920, as alleged by the Commissioner of Internal Revenue, was actually assessed by the Commissioner as a jeopardy assessment under the provisions of section 279(a) of the Revenue Act of 1926 on March 13, 1926.  Prior to the making of the said jeopardy assessment on March 13, 1926, no notice with respect to the tax to which the jeopardy assessment relatedhad been mailed to the petitioner under subdivision (a) of section 274 of the Revenue Act of 1926.  On May 13, 1926, the 61st day after the Commissioner made the jeopardy assessment, the notice referred to in paragraph 2 of the petitioner's petition was mailed to the petitioner which notice complied in all respects with the notice prescribed by subdivision (b) of section 279 of the Revenue Act of 1926, save and except that it was not mailed within sixty days from the date of making of the jeopardy assessment.  More than five years have elapsed since the petitioner filed his return for the year 1920.  The said jeopardy1929 BTA LEXIS 2692">*2694  assessment of March 13, 1926, and the said notice of May 13, 1926, constitute the only attempt made by the Commissioner of Internal Revenue as a compliance with either the provisions of section 274(a) or section 279(a) and (b) of the Revenue Act of 1926 with respect to the deficiency now asserted by him.  The answer of the Commissioner admits that "On March 20, 1926, the Collector of Internal Revenue at Austin, Texas, served a notice and demand on the petitioner for payment of the additional tax assessed in the amount of $25,087.46, together with interest in the amount of $100.35, whereupon the petitioner filed bond and obtained stay of collection, as provided for by subdivision (f) of section 279 of the 1926 Revenue Act." The following statement appears in the deficiency notice in explanation of the making of the jeopardy assessment: Since the statutory period for making assessments for the year 1920 was about to expire it was necessary to make immediate assessment under the provisions of section 279 of the Revenue Act of 1926.  May 12, 1926, the sixtieth day after March 13, 1926, fell on Wednesday.  In the event the jeopardy assessment and notice referred to above are held1929 BTA LEXIS 2692">*2695  to be sufficient compliance with the statute in those respects, it is agreed that the deficiency may be determined on the basis of the following facts: The petitioner, J. H. Reese, and his wife were living together during the year 1920 (the marital relationship never having been interrupted) and in due time elected to file and did file separate returns for the year 1920, wherein each included in his and her respective return one-half of the total community income as computed by them.  15 B.T.A. 1261">*1263  As community owners of 725 shares stock of the Reese Corriher Lumber Company, a corporation, the petitioner and his wife received community income from the liquidation and distribution of that corporation's assets during the year 1920 in the net amount (after taking into consideration subsequent taxes paid and to be paid for the dissolved corporation) of $26,593.00 which amount was not included in their community income as reported on their returns.  In making the jeopardy assessment as of March 13, 1926 against the petitioner, the Commissioner of Internal Revenue proceeded on the basis that all of the additional community income, $89,991.77 as computed by him at that time, (now agreed1929 BTA LEXIS 2692">*2696  to be only $26,593.00) received by the petitioner and his wife during the year 1920 over what they had reported in their returns should be added to the petitioner's net income and taxed to him, instead of proceeding on the basis of dividing said income and assessing half against the husband and half against the wife.  On the basis of adding the entire amount of the understatement of the community income, to-wit: $26,593.00 to the petitioner's net income, together with other adjustments not in dispute, the amount of the deficiency due from the petitioner (if not otherwise barred for reasons appearing in this stipulation) would be $5,446.45.  On the basis of adding only one-half of the amount of the understatement of the community income, to-wit, $13,296.50, to the petitioner's net income together with other adjustments not in dispute, the amount of the deficiency due from the petitioner (if not otherwise barred for reasons appearing in this stipulation) would be $2,279.45.  OPINION.  LITTLETON: The question here is as to the results which follow from the failure of the Commissioner to mail to the taxpayer a notice, as provided in section 274(a) of the Revenue Act of 1926, within1929 BTA LEXIS 2692">*2697  60 days after the jeopardy assessment of the tax for 1920 and, also, within the 5-year period of limitation for the determination, assessment and collection of a tax for that year.  Subsections (a) and (b) of section 279 of the Revenue Act of 1926 provide: (a) If the Commissioner believes that the assessment or collection of a deficiency will be jeopardized by delay, he shall immediately assess such deficiency (together with all interest, additional amounts, or additions to the tax provided for by law) and notice and demand shall be made by the collector for the payment thereof.  (b) If the jeopardy assessment is made before any notice in respect of the tax to which the jeopardy assessment relates has been mailed under subdivision (a) of section 274, then the Commissioner shall mail a notice under such subdivision within 60 days after the making of the assessment.  In this case the jeopardy assessment was made two days before the 5-year statute of limitation expired and the notice required by the statute was not mailed to the taxpayer until May 13, 1926, which date was the sixty-first day after the making of such assessment and 5 years and 59 days after the return for 1920 was1929 BTA LEXIS 2692">*2698  filed.  The petitioner contends that as a result of the failure of the Commissioner to mail the required notice within 60 days the jeopardy 15 B.T.A. 1261">*1264  assessment is invalidated and, accordingly, bars the collection of the tax at this time.  We are of the opinion that the claim of the petitioner under the facts in this case is correct.  We do not have here a situation where a jeopardy assessment was made within the 5-year period of limitation and the notice was mailed more than 60 days thereafter, but still within the 5-year period.  Nor do we have the situation where the assessment was made within the 5-year period and the notice mailed after the 5-year period but within 60 days after the date of the assessment.  What the result would be in either of these situations we neither discuss nor decide.  It is enough to say that in this case the Commissioner did not act in time to prevent the failing of the bar ofthe statute of limitation against collection.  The mere making of a jeopardy assessment within the 5-year limitation period gives no right of collection when the notice required by the statute is not mailed until after the expiration of the 60-day period and beyond the 5-year1929 BTA LEXIS 2692">*2699  period of limitation for the determination, assessment and collection of the tax.  The mailing of the notice is necessary to make the jeopardy assessment enforceable.  Section 274(a) provides for the mailing by the Commissioner of a notice to the taxpayer of his determination of a deficiency and, further, that "Except as otherwise provided in subdivision (d) or (f) of this section or in section 279, 282, or 1001, no assessment of a deficiency in respect of the tax imposed by this title and no distraint or proceeding in court for its collection shall be made, begun, or prosecuted until such notice has been mailed to the taxpayer, nor until the expiration of such 60-day period, nor, if a petition has been filed with the Board, until the decision of the Board has become final." This section further provides that "the making of such assessment or the beginning of such proceeding or distraint during the time such prohibition is in force may be enjoined by a proceeding in the proper court." Section 278(e) of the Revenue Act of 1926 provides that the 6-year period for collection, after a timely assessment, shall not apply if such assessment or collection is undertaken "contrary to the provisions1929 BTA LEXIS 2692">*2700  of subdivision (a) of section 274 of this Act." None of the provisions of the statute can possibly be construed to give the Commissioner 5 years and 61 days to complete a valid assessment of a deficiency so as to authorize him to make collection thereof.  The situation here is in substance no different from the situation where the Commissioner, not having made a jeopardy assessment, fails to mail a deficiency notice prior to the expiration of 5 years from the date the return was filed.  Reviewed by the Board.  Judgment will be entered holding the deficiency here in controversy barred by the statute of limitations.