Court Opinion

ID: 4620536
Source: CourtListenerOpinion
Date Created: 2020-11-21 02:42:51.550495+00
Date Added: 2024-06-11T07:55:50.693809
License: Public Domain

EDWARD T. FRANKLIN, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Franklin v. CommissionerDocket No. 26969.United States Board of Tax Appeals23 B.T.A. 1325; 1931 BTA LEXIS 1726; August 27, 1931, Promulgated *1726  The petitioner held liable as a transferee under section 280 of the Revenue Act of 1926.  Henry W. Wales, Esq., for the petitioner.  W. F. Wattles, Esq., for the respondent.  TRAMMELL *1325  Under section 280 of the Revenue Act of 1926 the respondent has proposed for assessment against the petitioner as transferee of the assets of the Franklin Tandy Coal Company, Chicago, Ill., deficiencies in the income and profits taxes of that company in the amounts of $856.03 and $6,186.57 for 1919 and 1920, respectively.  The only questions raised by the petition as amended and not waived by the petitioner are (1) whether the provisions of section 280(a) (1) of the Revenue Act of 1926 are constitutional; (2) whether collection of the deficiencies from the Franklin Tandy Coal Company was barred by limitations on the date the respondent notified the petitioner that he proposed to assess the deficiencies against him; and (3) the petitioner's liability as transferee for the payment of the deficiencies.  FINDINGS OF FACT.  The petitioner is a resident of La Grange, Cook County, Ill.  The Franklin Tandy Coal Company, an Illinois corporation, filed its*1727  income-tax returns for the calendar years 1919 and 1920 with the collector of internal revenue on March 14, 1920, and March 14, 1921, respectively.  Under date of January 2, 1925, there was received in the Bureau of Internal Revenue the following waiver, which was thereafter duly signed by the respondent: IT:CA:2442-9 DECEMBER 13, 1924.  (Date) INCOME AND PROFITS TAX WAIVER In pursuance of the provisions of existing Internal Revenue Laws, Franklin Tandy Coal Company a taxpayer, of Chicago, Illinois, and the Commissioner of Internal Revenue, hereby consent to extend the period prescribed by law for a determination, assessment and collection of the amount of income, excess-profits, or war-profits taxes due under any return made by or on behalf of said taxpayer for the year 1919 under the Revenue Act of 1924, or under prior income, excess-profits, or war-profits tax Acts, or under Section 38 of the Act entitled "An Act to provide revenue, equalize duties, and encourage the *1326  industries of the United States, and for other purposes", approved August 5, 1909.  This waiver is in effect from the date it is signed by the taxpayer and will remain in effect for a period*1728  of one year after the expiration of the statutory period of limitation within which assessments of taxes may be made for the year or years mentioned, or the statutory period of limitation as extended by Section 277(b) of the Revenue Act of 1924, or by any waivers already on file with the Bureau.  (SEAL) (Signed) FRANKLIN TANDY COAL CO. Taxpayer.By E. T. FRANKLIN President.ATTEST: HENRY W. WALES SecretaryD. H. BLAIR CommissionerOn February 18, 1926, the respondent assessed against the Franklin Tandy Coal Company deficiencies in tax of $856.03 for 1919 and $6,186.57 for 1920, which are the taxes here in controversy.  During 1921 the Franklin Tandy Coal Company ceased to do business and distributed its assets in liquidation to the petitioner, its sole stockholder.  As a result of such distribution the company became and ever since has been wholly insolvent and without property of any kind or character.  In the distribution of the assets of the company the petitioner received money or property of a sum or value in excess of the taxes here involved with interest allowed by law.  On October 6, 1926, the Superior Court of Cook County, Illinois, *1729  entered a decree dissolving the Franklin Tandy Coal Company and on December 1, 1926, certificate of dissolution was filed with the Secretary of State of the State of Illinois.  On February 25, 1927, the respondent sent the petitioner a notice that he proposed to assess against him the deficiencies in tax of the Franklin Tandy Coal Company here involved.  OPINION.  TRAMMELL: The petitioner did not file a brief and his position with respect to the different issues is determinable only from the petition as amended.  In the petition as amended it is alleged that the provisions of section 280(a)(1) of the Revenue Act of 1926 are unconstitutional and void (1) in that they deny to the petitioner the due process of law guaranteed by the Fifth Amendment to the Constitution and (2) in that they violate section 1 of Article III of the Constitution, which provides for the vesting of the judicial power of the United States in the courts.  The questions raised by these allegations were *1327  disposed of adversely to the petitioner's contention by the Supreme Court in *1730 Phillips v. Commissioner of Internal Revenue,283 U.S. 589">283 U.S. 589. With respect to the question as to whether collection of the deficiencies from the Franklin Tandy Coal Company was barred by limitations on February 25, 1927, when the respondent notified the petitioner that he proposed to assess the deficiencies against him, the facts show that the company's returns for 1919 and 1920 were filed on March 14, 1920, and March 14, 1921, respectively.  The statutory five-year periods for assessment for these years expired on March 14, 1925, and March 14, 1926, respectively.  However, prior to March 14, 1925, the company filed a waiver extending the period for assessing 1919 taxes for one year from the expiration of the statutory period, or until March 14, 1926.  The respondent therefore had until March 14, 1926, within which to make assessment of taxes against the company for 1919 and 1920.  However, prior to this date and on February 18, 1926, the respondent assessed the deficiencies here involved.  He then had six years from that date in which to make collection from the company.  (Section 278(d) of the Revenue Acts of 1924 and 1926.) Clearly collection of the deficiencies*1731  from the company was not barred by limitations on February 25, 1927, when the respondent notified the petitioner of his proposal to assess the deficiencies against him.  But the period of limitations for assessment of the deficiencies of the company against the petitioner is not coextensive with that for collection from the company.  Section 280(b)(1) of the Revenue Act of 1926 limits the period to "within one year after the expiration of the period of limitations for assessment against the taxpayer," which in this case was the company.  The respondent therefore had until March 14, 1927, within which to assess the deficiencies against the petitioner.  Having on February 25, 1927, notified the petitioner that he proposed to assess the deficiencies against him, the respondent acted within the time provided by the law.  The period of limitations upon the assessment of the liability of the petitioner as transferee having been suspended until the expiration of 60 days after our decision becomes final, the assessment of the deficiencies against the petitioner is not barred by limitations.  See section 280(d) of the Revenue Act of 1926.  The remaining question is whether the petitioner*1732  is liable as transferee for the payment of the deficiencies.  The petitioner admits that the company distributed its assets in liquidation to him as its sole stockholder and as a result of such distribution became and thereafter remained wholly insolvent and without property of any kind or character.  He also admits that in such distribution he received *1328  money or property of a sum or value in excess of the deficiencies here involved, together with interest allowed by law.  In view of the foregoing we think the petitioner is liable under section 280 of the Revenue Act of 1926 as transferee of the assets of the Franklin Tandy Coal Company for the payment of the deficiencies.  Judgment will be entered for the respondent.