Ruud Mfg. Co. v. Commissioner

Ruud Manufacturing Company (N. J.), Petitioner v. Commissioner of Internal Revenue, Respondent. Ruud Manufacturing Company (Delaware), Petitioner, v. Commissioner of Internal Revenue, Respondent Ruud Mfg. Co. v. Commissioner Docket Nos. 16454, 16455 United States Tax Court 15 T.C. 374; 1950 U.S. Tax Ct. LEXIS 82; September 29, 1950, Promulgated *82 In Docket No. 16454 decision will be entered of no deficiency. In Docket No. 16455 decision will be entered of no transferee liability. Respondent mailed a statutory notice of deficiency in income tax for the period January 1 to June 30, 1941, to A corporation and a statutory notice of liability for such tax as transferee to corporation B. These corporations filed no appeal with this Court from such deficiency or liability. Subsequent to the expiration of the statutory period of assessment as extended by written agreements executed by the corporations under the provisions of section 276 (b), Internal Revenue Code, further statutory notices were sent to the same addresses of these corporations for an additional deficiency and liability for the same tax for the identical taxable period. Held that the second statutory notices were untimely. Walter W. McVay, Esq., for the petitioners. A. W. Dickinson, Esq., for the respondent. Leech, Judge. LEECH *374 These consolidated proceedings involve a deficiency in income tax in the amount of $ 1,178.91 for the taxable period January 1, 1941 to June 30, 1941, against the Ruud Manufacturing Co. (N. J.), and a similar amount against the Ruud Manufacturing Co. (Delaware), as transferee. The issues are: (1) Whether the issuance of a deficiency notice on August 14, 1947, to each petitioner, asserting an income tax liability for the taxable period involved was contrary to the provisions of section 272 of the Internal Revenue Code. (2) Whether the issuance of such notice was within the statutory*84 period of limitation prescribed by the Internal Revenue Code. (3) Whether, in computing net income for normal tax and surtax of the New Jersey corporation for the taxable period involved, the amount of $ 38,816.86 is the proper deduction attributable to excess profits tax under the provisions of section 23 (c) (2) of the Internal Revenue Code as amended by section 202 (a) of the Revenue Act of 1941. *375 (4) Whether, if it be assumed that Ruud Manufacturing Co. (N. J.) made an overpayment of excess profits tax for the taxable period involved, claim for which was barred by the statute of limitations, such assumed payment can be urged by way of set-off in these proceedings. A stipulation of facts was filed, incorporating herein by reference the entire record of proceedings before this Court in Docket Nos. 11544 and 11545, which were proceedings against these identical petitioners. From those proceedings and the pleadings filed herein, the material facts are summarized as follows: FINDINGS OF FACT. The Ruud Manufacturing Co. (N. J.) (hereinafter referred to as the New Jersey corporation) was incorporated under the laws of the State of New Jersey. It was qualified to do business*85 in the State of Pennsylvania, and had its general offices in the city of Pittsburgh, Pennsylvania. It ceased to do business as of June 30, 1941. On March 14, 1942, it filed its tax returns for the period of 6 months ended June 30, 1941, with the collector of internal revenue for the twenty-third district of Pennsylvania. As of July 1, 1941, the New Jersey corporation merged with the Ruud Manufacturing Co. (Delaware) (hereinafter referred to as the Delaware corporation), and the business was continued in the name of the latter corporation. The Delaware corporation authorized a fiscal year ending June 30th of each year, and filed its tax returns on such basis, commencing business on July 1, 1941. The Delaware corporation is a transferee of the assets of the New Jersey corporation. In a protest, dated August 31, 1945, to a revenue agent's report dated July 7, 1945, the New Jersey corporation made application to have its excess profits tax computed under section 711 (a) (3) (B) of the Internal Revenue Code, and with such protest filed an amended excess profits tax return. Neither petitioner herein filed application on or before June 15, 1943, to have the New Jersey corporation's *86 excess profits tax computed under the provisions of section 711 (a) (3) (B) of the Internal Revenue Code. The New Jersey corporation on January 5, 1945, executed Form 872, consent fixing period of limitation upon assessment of income and profits tax, to June 30, 1946. On March 2, 1946, the Delaware corporation executed Form 977, consent fixing period of limitation upon assessment of liability at law or in equity for income and profits tax against a transferee, to June 30, 1947. These consents were accepted by the respondent on January 6, 1945, and March 5, 1946, respectively. Under date of May 24, 1946, the Commissioner of Internal Revenue duly mailed statutory notices of deficiencies to the New Jersey corporation*376 and to the Delaware corporation as transferee, proposing deficiencies in income tax in the amount of $ 285.39, declared value excess profits tax in the amount of $ 7.82, and excess profits tax in the amount of $ 3,890.40, for the taxable period January 1 to June 30, 1941. On July 15, 1946, each petitioner filed a petition with this Court alleging error in certain respects as to such determinations. The respondent duly filed answers to the respective petitions. *87 Under date of October 4, 1946, the respondent caused to be assessed in the office of the collector of internal revenue at Pittsburgh, Pennsylvania, the deficiency in income tax in the amount of $ 285.39. On April 21, 1947, the above docketed appeals came on for hearing, at which time the respondent filed a motion in each case that * * * the proceeding, in so far as it relates, or purports to relate, to income tax for said taxable year January 1, 1941 to June 30, 1941, be dismissed for lack of jurisdiction. Petitioners opposed the granting of such motions on the ground that while there were no assignments of error relating to the net income as adjusted by respondent, nevertheless the correct determination of income tax deficiency was necessarily involved by the final and correct determination of the excess profits tax liability for the same taxable period. The motions were granted. On April 25, 1947, at Pittsburgh, Pennsylvania, the appeals relating to the other errors assigned in the respective petitions were consolidated and heard upon the merits. At this hearing the respondent conceded that there was no deficiency in excess profits tax for the taxable period January 1 to June 30, *88 1941. On December 16, 1947, this Court entered a decision in Docket No. 11545, that there was no transferee liability on the part of the Delaware corporation for "income, declared value excess profits, or excess profits tax of the Ruud Manufacturing Company, a New Jersey corporation, for its taxable year beginning January 1 and ending June 30, 1941, or for interest on any such taxes." On January 19, 1948, an order was entered vacating such decision "in so far as it refers to income tax." On January 8, 1948, this Court entered a decision in Docket No. 11544, that there was no deficiency in excess profits tax due from the New Jersey corporation for the taxable period January 1 to June 30, 1941. In Docket No. 11544 the New Jersey corporation filed a petition with the United States Circuit Court of Appeals for the Third Circuit to review the decision of the Court entered January 8, 1948. On February 25, 1949 the said Circuit Court issued its mandate affirming the decision of this Court. In the prior proceedings, Docket Nos. 11544 and 11545, the respondent *377 has not requested, by amended answer or otherwise, an increased deficiency in income tax as a result of his concession that*89 there was no deficiency in excess profits tax. Under date of August 14, 1947, the respondent issued a further statutory notice against each petitioner, determining a deficiency in income tax in the amount of $ 1,178.91 and a liability in the same amount for the same taxable period, January 1 to June 30, 1941. On June 20, 1949, at the hearing of these proceedings, the respondent was granted permission to file an amended answer in each proceeding. Petitioners orally waived the filing of a reply. The petitioners have been granted by this Court the right to conform their pleadings to the proof to raise the question of the applicability of section 275 (a) of the Internal Revenue Code as involved in the determinations asserted. OPINION. The primary question presented is whether the second statutory notices issued on August 14, 1947, of the determinations of a proposed deficiency in income tax and a transferee liability for the same taxable period, January 1 to June 30, 1941, against the respective petitioners and relating to the same tax liability disposed of in the prior proceedings, are valid notices. Petitioners contend that the mailing of the second notices was not within the prescribed*90 period of limitations. The facts are not in dispute. On May 24, 1946, and within the period in which the parties had consented to the assessment and collection of income and excess profits taxes, the respondent mailed to the New Jersey corporation a statutory notice of his determinations of deficiencies in income, declared value excess profits and excess profits taxes for the period January 1 to June 30, 1941, in the respective amounts of $ 285.39, $ 7.82 and $ 3,890.40. A similar notice of liability for these taxes was mailed to the Delaware corporation as transferee. The latter corporation concedes its liability for any deficiencies determined against the New Jersey corporation. Each petitioner, within 90 days of the receipt of such letter, filed a petition with this Court. These proceedings are Docket Nos. 11544 and 11545. Answers were duly filed by the respondent, joining issue. When these proceedings came on for hearing on the merits, on April 21, 1947, the respondent moved to dismiss the respective petitions in so far as they related to income tax deficiencies, upon the ground that the petitions raised no issues as to liability for income tax. These motions were granted*91 on April 21, 1947. On April 25, 1947, when the proceedings came on for further hearing on the merits, the respondent conceded that there was no deficiency in excess profits tax for the taxable period involved. Petitioners *378 introduced evidence bearing on the claim of overpayment of excess profits tax. On October 4, 1946, the deficiency in income tax in the amount of $ 285.39 was assessed. Decisions of no deficiency in excess profits tax were entered on December 16, 1947, and January 8, 1948, in Docket Nos. 11544 and 11545, respectively. On August 14, 1947, while the prior proceedings were still pending, the respondent mailed new statutory notices to the same petitioners of his determination of a second and additional deficiency in income tax in the amount of $ 1,178.91, for the identical taxable period, January 1 to June 30, 1941, covered by the prior determinations. Petitions were duly filed with this Court contesting the proposed deficiency and liability on the ground hereinbefore set forth. Had the petitioners, in the prior proceedings, contested the determination of the deficiency in income tax of which they were notified in the original notices of May 24, 1946, we think*92 it clear that respondent's later determination of an additional deficiency relating to the same income tax liability would be barred by section 272 (f), Internal Revenue Code. Agnes McCue, 1 T. C. 986; American Foundation Co., 2 T. C. 502. However, the petitions contesting the first determination did not assign error in respect to the income tax deficiency in the amount of $ 285.39. The filing of a petition for redetermination of the deficiency in excess profits tax did not bring into operation the provisions of section 272 (f), supra, with respect to the deficiency in income tax. We have held that the determination in regard to income tax and the determination in regard to excess profits tax are separate in so far as our jurisdiction is concerned. Will County Title Co., 38 B. T. A. 1396; Hobbs-Western Co., 43 B. T. A. 5; Pioneer Parachute Co., 4 T. C. 27. The respondent contends that since no petition was filed contesting his determination of a deficiency in income tax, he was within his rights in issuing a further notice*93 of deficiency with respect to income tax relating to the same tax period. Gilbert B. Goff, 18 B. T. A. 283; Wilburn Smith, 18 B. T. A. 289; Lewis E. Smoot, 25 B. T. A. 1038. Undoubtedly the respondent may issue as many notices of deficiency covering the same tax for the same tax period as he may desire, within the statutory period prescribed by section 275 (a), supra, and within the further period within which the parties consented in writing as provided in section 276 (b), supra. The period of limitation in the present case was extended pursuant to the latter section in the case of the New Jersey corporation to June 30, 1946, and to June 30, 1947, in the case of the Delaware corporation as transferee. But the *379 second notices of deficiency in income tax and liability as transferee, contested in the instant proceedings, were issued on August 14, 1947, 45 days after the expiration of the last period provided in the written agreements of the parties executed pursuant to section 276 (b), supra. We hold that the second statutory notices determining additional income tax *94 deficiency and liability as transferee for the same taxable period, January 1 to June 30, 1941, sent to the same addresses, were not timely. So holding, the other issues become moot. In Docket No. 16454 decision will be entered of no deficiency. In Docket No. 16455 decision will be entered of no transferee liability.