Court Opinion

ID: 4603319
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:31:42.439984+00
Date Added: 2024-06-11T07:52:49.768106
License: Public Domain

CENTRAL NATIONAL BANK, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Central Nat'l Bank v. CommissionerDocket No. 10927.United States Board of Tax Appeals11 B.T.A. 1017; 1928 BTA LEXIS 3666; May 4, 1928, Promulgated *3666  1.  A national bank which has been liquidated, continues in existence for the purpose of settling its affairs and is a proper party to bring this proceeding involving its tax liability.  2.  Board held to have jurisdiction over years 1918 and 1919, as to which the petitioner was advised that claims for abatement had been denied.  3.  Deficiencies held not barred by statute of limitations.  Henry J. Richardson, Esq., for the petitioner.  Clark T. Brown, Esq., for the respondent.  SIEFKIN*1017  This is a proceeding for the redetermination of deficiencies in income and profits taxes for the calendar years 1917, 1918, and 1919, amounting to $16,580.69 for the year 1917, being a proposed additional tax of $3,181.47, and a rejection of claim for abatement in the amount of $13,399.22; $65,416.56 for the year 1918, being a rejection of claim for abatement to that extent; and $1,150.27 for the year 1919, being a rejection of claim for abatement to that extent.  The amended petition raised issues as to the statute of limitations and failure of respondent to determine the excess profits tax of petitioner under section 210 of the Revenue Act*3667  of 1916, as amended by the Revenue Act of 1917, and under sections 327 and 328 of the Revenue Act of 1918.  By motion of the petitioner the hearing was limited to the question of the bar of the statute of limitations.  FINDINGS OF FACT.  The petitioner was chartered as a national bank in 1906, with principal office at St. Louis, Mo.  On December 31, 1920, it went into voluntary liquidation and T. E. Newcomer was appointed liquidating agent.  By an agreement entered into between the liquidating agent and a committee representing the Liberty Bank of St. Louis and the Liberty Central Trust Co., it was agreed that the agent should transfer all the assets of the petitioner to the Liberty Central Trust Co. in exchange for 10,800 shares of the capital stock of the Liberty Central Trust Co., the latter to assume the liabilities of the petitioner to its depositors and creditors.  *1018  By the same agreement the remainder of the capital stock of the Liberty Central Trust Co., 19,200 shares, was to be issued among the stockholders of the Liberty Bank of St. Louis in proportion to their holdings in that bank.  The petitioner filed its income and excess-profits-tax return for*3668  the calendar year 1917 on March 30, 1918.  This showed a tax liability of $28,150.10, which amount was paid on June 15, 1918.  In July, 1921, the respondent made an additional assessment for the year 1917, against petitioner in the amount of $17,700.37, of which amount $4,301.15 was paid on September 30, 1921, and a claim for abatement of the balance thereof in the amount of $13,399.22 was filed September 29, 1921.  On November 16, 1925, the respondent mailed to petitioner a 60-day letter in which notice was given of the determination of a deficiency in tax of $3,181.47 for the year 1917, and overassessments of $22,919.08 and $403.92 for 1918 and 1919, respectively.  The income and profits-tax return of the petitioner for the calendar year 1918 was filed on June 14, 1919, showing a total tax liability of $42,356.16, payment of which was completed on September 15, 1919.  In July, 1921, the respondent made an additional assessment for the year 1918 in the amount of $88,334.64, and on September 29, 1921, the petitioner filed a claim for abatement for the full amount thereof.  The income and profits-tax return of the petitioner for the calendar year 1919 was filed on April 23, 1920, showing*3669  a total tax liability of $36,386.87, payment of which was completed on December 15, 1920.  In July, 1921, the respondent made an additional assessment against petitioner for the year 1919 in the amount of $1,554.19, and on September 29, 1921, the petitioner filed a claim for abatement of the full amount of the assessment.  A. N. Kingsbury at all times herein material prior to December 31, 1920, was the assistant cashier of the petitioner.  None of the officers of the petitioner, of whom A. N. Kingsbury was one, formally resigned nor was any formal action taken by the board of directors of the petitioner specifically discharging any of the officers.  At all times subsequent to December 31, 1920, and prior to August 7, 1925, A. N. Kingsbury was the cashier of the Liberty Trust Co.  At all times herein material subsequent to August 7, 1925, G. B. Trigg was the cashier of the Liberty Central Trust Co. and subsequent to June 3, 1925, F. E. Gunter was the president of the Liberty Central Trust Co.  On June 28, 1921, the following instrument was executed: KNOW ALL MEN BY THESE PRESENTS, That we, J. L. Johnston, President, and A. N. Kingsbury, Cashier of the Liberty Central Trust*3670  Company, St. Louis, Missouri (said Liberty Central Trust Company being successor to the Central National Bank of St. Louis), have constituted and appointed and do hereby constitute and appoint T. F. Campbell, of the City of St. Louis, State of Missouri, *1019  our true and lawful attorney, empowering him to act for us in matters of Income and Excess Profits taxation before the Bureau of Internal Revenue.  Witness our hands and seal this 28th day of June, 1921.  LIBERTY CENTRAL TRUST COMPANY, By: J. L. JOHNSTON, President.A. N. KINGSBURY, Cashier.On July 29, 1923, a 30-day letter was issued to the petitioner by the respondent in which it was stated: An audit of your income and profits tax return for the calendar years 1917, 1918 and 1919 has resulted in the determination of a deficiency in tax of $3,181.47, for the year 1917, and overassessments of $22,919.08 and $403.92 for 1918 and 1919, respectively.  A statement attached to this letter contained the following: In accordance with the above, your claim for an abatement for $13,499.22 for the year 1917 will be rejected in full.  That portion of your claim for $89,888.83, amounting to $88,334.64 applicable*3671  to 1918 will be rejected for $65,415.56 and that portion amounting to $1,554.19 applicable to 1919 will be rejected for $1,150.27.  In a 60-day letter from respondent to petitioner dated November 16, 1925, it is stated: In accordance with the above findings, the tax liability as set forth in Bureau letter dated July 29, 1925, is sustained.  The following instruments in writing were entered into between the respondent and the Central National Bank: WAIVER (corporation).  Central National Bank, St. Louis, Mo., a corporation in consideration 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 5, 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*3672  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 28th day of February, 1921.  (Signed) CENTRAL NATIONAL BANK OF ST. LOUIS, Corporation.By A. N. KINGSBURY, Assistant Cashier.APPROVED: February 6, 1923.  D. H. BLAIR, Commissioner of Internal Revenue.JANUARY 31, 1924.  INCOME AND PROFITS TAX WAIVER.  In pursuant of the provisions of subdivision (d) of section 250 of the Revenue Act of 1921, Central National Bank of St. Louis, Mo., and the Commissioner *1020  of Internal Revenue, hereby consent to 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 the said Central National Bank for the year 1917, under the Revenue Act of 1921, 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 industries of the United States, and for other purposes," approved August 5, 1909.  This waiver is in effect for one year from the date it is signed*3673  by the taxpayer.  CENTRAL NATIONAL BANK OF ST. LOUIS, Taxpayer.By A. N. KINGSBURY (Cashier).  D. H. BLAIR, Commissioner.With this instrument was sent the following letter: FEBRUARY 6, 1924.  Hon. J. G. BRIGHT, Deputy Commissioner of Internal Revenue, Washington, D.C.:Enclosed herewith please find WAIVER for year 1917, as per your recent request for the Central National Bank, St. Louis, Mo.  Respectfully, CENTRAL NATIONAL BANK OF ST. LOUIS, By T. FRANCIS CAMPBELL, Asst. V.P., Agent with Power of attorney.INCOME AND PROFITS TAX WAIVER ST. LOUIS, Mo., Dec. 15, 1924.In pursuance of the provisions of existing Internal Revenue Laws, Central National Bank, a taxpayer of St. Louis, Missouri, 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 1917, under the Revenue Act of 1924, or under prior income, excess-profits or war-prifits tax Acts, or under section 38 of the Act entitled "An Act to provide revenue, *3674  equalize duties, and encourage the 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 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.  LIBERTY CENTRAL TRUST CO. OF ST. LOUIS, Successor to the CENTRAL NATIONAL BANK OF ST. LOUIS, Taxpayer.By A. N. KINGSBURY.  D. H. BLAIR.  *1021  With this instrument was sent the following letter: DECEMBER 15, 1924.  Mr. J. G. BRIGHT, Deputy Commissioner of Internal Revenue, Washington, D.C.:I am enclosing herewith income and profits tax waiver requested by you in yours of December 13th and covering the year 1917.  (Signed) T. FRANCIS CAMPBELL, Agent, with Power of Atty.INCOME AND PROFITS TAX WAIVER COVERING TAXABLE YEAR THE SUBJECT OF AN APPEAL OR COVERED BY A DEFICIENCY LETTER FROM WHICH AN APPEAL HAS BEEN TAKEN TO THE*3675 U.S. BOARD OF TAX APPEALS.  ST. LOUIS, Mo., Jan. 27, 1926.In pursuance of the provisions of existing Internal Revenue Laws, Central National Bank, a taxpayer of Broadway and Olive Sts., St. Louis, Mo., and the Commissioner of Internal Revenue hereby waive the time prescribed by law for making any assessment 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 1917, under existing revenue acts, or under prior revenue acts.  This waiver of the time for making any assessment as aforesaid shall remain in effect until six months after the date of the final decision of the United States Board of Tax Appeals on any taxable year which is now pending upon appeal to the said Board.  CENTRAL NATIONAL BANK, Taxpayer.G. B. TRIGG, Cashier.By D. H. BLAIR, Comissioner.With this instrument was sent the following letter: JANUARY 29, 1926.  Mr. C. R. NASH, Assistant to Commissioner of Internal Revenue, Washington, D.C.:I am handing you herewith waiver requested in your letter of January 20th.  T. FRANCIS CAMPBELL, Agent, with Power of Atty.TAX COLLECTION WAIVER. *3676 ST. LOUIS, Mo., 9-25-1926.It is hereby agreed by and between Central National Bank (successors Liberty Central Trust Co.), party of the first part, and the Commissioner of Internal Revenue, party of the second part, that the amounts of $13,399.22, $88,334.64, and $1,554.19, representing an assessment of income tax for the years 1917, 1918, and 1919, respectively, made against the said party of the first part, appearing on the July, 1921, assessment list, pages 10 line 9, 11 line 0, and 11 line 1, for the First District of Missouri, may be collected (together with such interest, penalties, or other additions as are provided for by law) *1022  from said party of the first part by distraint or by a proceeding in court begun at any time prior to September 13th 1928.  CENTRAL NATIONAL BANK, (Succeeded by Liberty Central Trust Company), Taxpayer.By F. E. GUNTER, (President of Successor).By LOUIS J. BECKER, Collector of Internal Revenue.DAVID H. BLAIR, Commissioner of Internal Revenue.OPINION.  SIEFKIN: Before proceeding to the principal issue involved in the proceeding it is necessary to consider two questions: First, is the petitioner*3677  the proper party to institute the proceeding, and, second, what years are involved.  The proceeding was brought by the Central National Bank by M. R. Sturtevant as vice president.  It was a national banking institution but was voluntarily liquidated in 1920, when its assets were transferred to the Liberty Central Trust Co.  It is well settled that a national bank which has gone into voluntary liquidation will continue to exist as a body corporate for the purpose of suing or being sued until its affairs are completely settled.  In the case of , the following language is used by the court: It is to be observed that the sections under which the proceedings took place which, it is claimed, put an end to the corporate existence of the bank, do not refer, in terms, to a dissolution of the corporation, and there is nothing in the language which suggests it, in the technical sense in which it is used here as a defense.  The association goes into liquidation and is closed.  It is required to give notice that it is closing up its affairs, and in order to do so completely and effectually, to notify its creditors to present*3678  their claims for payment.  And the redemption of its bonds given to secure the payment of its circulating notes, by the required deposit of money in the treasury, is limited in its effect to a discharge of the association and its shareholders from all liability upon its circulating notes.  The very purpose of the liquidation provided for is to pay the debts of the corporation, that the remainder of the assets, being reduced to money, may be distributed among the stockholders.  That distribution cannot take place, with any show of justice, and according to the intent of the law, until all liabilities to creditors have been honestly met and paid.  If there are claims made which the directors of the association are not willing to acknowledge as just debts, there is nothing in the statute which is inconsistent with the rights of the claimant to obtain a judicial determination of the controversy by process against the association, nor with that of the association to collect by suit debts due to it.  It is clearly, we think, the intention of the law that it should continue to exist, as a person in law, capable of suing and being sued, until its affairs and business are completely settled. *3679  The proceeding prescribed by the law seems to resemble, not *1023  the technical dissolution of a corporation, without any saving as to the commonlaw consequences, but rather that of the dissolution of a copartnership, which, nevertheless, continues to subsist for the purpose of liquidation and winding up its business.  We conclude that the proceeding was properly brought by this petitioner.  The original petition in this proceeding was filed as the result of a 60-day letter advising the petitioner of a deficiency of $3,181.47 for 1917, and overassessments for 1918 and 1919.  The petition stated: The taxes in controversy are income and profits taxes for the calendar year 1917 and are less than $10,000, and also affecting the years 1918 and 1919.  The respondent, in his answer, admitted the above allegation in part, but stated: Except that the taxes in controversy do not involve the years 1918 and 1919 in view of the fact that no deficiencies have been determined for these two years.  The respondent also raised the question of our jurisdiction over the years 1918 and 1919 in the following proposition of law: The Board of Tax Appeals is without jurisdiction to review*3680  for the purpose of determining a different amount of overassessment from that of the Commissioner, the amount of an overassessment so determined for any year.  The original representative of the petitioner was succeeded by present counsel who obtained leave to file and did file an amended petition which alleged: The taxes in controversy are income and profits taxes for the calendar years 1917, 1918 and 1919 and amount to $16,580.69 for the year 1917, being a proposed additional tax of $3,181.47 and a rejection of claim for abatement in the amount of $13,399.22; $65,416.56 for the year 1918 being the rejection of claim for abatement to that extent; and $11,050.27 for the year 1919 being a rejection of claim for abatement to that extent.  The answer to the amended petition denied that the Board had jurisdiction over the years 1918 and 1919, but at the hearing this denial was withdrawn and it was admitted that all three years were in controversy.  From the deficiency letter and from the evidence introduced at the hearing, it is clear that the deficiency letter constituted a final action by the respondent on claims for abatement for the years 1918 and 1919, and gave the Board jurisdiction*3681  as to those years.  See . Turning now to the question as to whether the deficiencies proposed are barred by the statute of limitations.  The petitioner's contentions can be divided into two parts: First, that the various instruments purporting to extend the time for the running of the statute were signed by various persons who were formerly officers of the *1024  petitioner before its liquidation and who, the petitioner contends, were without authority to do any acts which might increase or extend the liability of stockholders of the bank; and, second, the petitioner relies upon the proposition of law laid down in United Statesv. Cabot (Supreme CourtD.C., June 15, 1926), 5 Am.Fed.Tax Rep. 6172; , and our former holding in . With respect to the first contention, the petitioner argues that the officers of a national bank in liquidation have no authority to bind the stockholders by the transaction of any business except that necessarily involved in the winding up of its affairs; that the sole*3682  extent of their authority is one which may be implied in the duty of liquidation unless such authority has been expressly conferred by the shareholders.  If we should follow the petitioner's argument to its necessary conclusion, the result would be that the appeal to this Board might be taken by parties representing the liquidated national bank, but our determination of the deficiency would be limited to an inquiry as to those facts only which were to the benefit of the bank and we would be precluded from inquiring into any facts to the detriment of the bank or ultimately to its stockholders.  The statement of the proposition carries its own refutation.  It is obvious that if the Board has jurisdiction of the proceeding, and we hold that it has, its inquiry may be within the bounds prescribed by the statute which gives us jurisdiction, limited only by the issues which the parties present to us by their pleadings.  It is also difficult to believe that the rule of the courts heretofore referred to in , providing for the continuance of the bank until its affairs are completely settled, and the Act of Congress under which the decision*3683  is laid down, could have contemplated a settlement to the benefit of the bank only.  When the United States is the party with whom the settlement is being made and the subject matter of the settlement is a tax, the arguments in favor of a complete settlement are at least as strong, if not stronger, than where the bank is dealing with private individuals. The evidence shows that prior to the liquidation of the petitioner, Kingsbury, who signed the consents in question, was assistant cashier of the petitioner and was never discharged.  No evidence is submitted to show that he was not authorized to execute such an instrument and we hold that they were binding upon the petitioner and that assessment having been made within the time prescribed by sections 277 and 278 of the Revenue Act of 1924, the Commissioner is allowed six years after assessment within which to make collections.  See section 278(d), Revenue Act of 1924.  *1025  With respect to the petitioner's second point, we adhere to our decision in , which overruled our prior decision in *3684 . The proceeding will be reinstated on the general calendar for hearing in due course.