May Seed & Nursery Co. v. Commissioner

May Seed and Nursery Company, Petitioner, v. Commissioner of Internal Revenue, Respondent May Seed & Nursery Co. v. Commissioner Docket No. 50073 United States Tax Court 24 T.C. 1131; 1955 U.S. Tax Ct. LEXIS 88; September 29, 1955, Filed *88 Decision will be entered for the respondent. In 1943 petitioner filed an application for relief under section 722 of the Internal Revenue Code of 1939 in respect of its fiscal year 1942, in which it did not claim a carry-over of an unused excess profits credit from its fiscal year 1941 based on a constructive average base period net income. Held, petitioner's right to the carry-over is conditioned upon the making of such claim. Lockhart Creamery, 17 T. C. 1123, followed. Denver A. Busby, C. P. A., for the petitioner. Julian L. Berman, Esq., for the respondent. Raum, Judge. RAUM *1131 The respondent, in respect of the fiscal year of the petitioner ended June 30, 1942, determined a deficiency in income tax in the amount of $ 9,730.18 and an overassessment in excess profits tax in*89 the amount of $ 31,387.69. In making the determination respondent refused to allow an unused excess profits credit carry-over based on a constructive average base period net income from the fiscal year 1941 in the amount of $ 18,487.12. As a result of such disallowance, the overassessment of excess profits taxes determined by the respondent was $ 7,181.79 less than the amount claimed by the petitioner, and petitioner's income tax liability was reduced in the amount of $ 2,226.35. The net amount in controversy is thus $ 4,955.44. The sole issue for determination is whether respondent erred in refusing to allow petitioner the benefit of the unused excess profits credit carry-over from its fiscal year 1941 to its fiscal year 1942, based on petitioner's constructive average base period net income. FINDINGS OF FACT. A stipulation of facts filed by the parties is hereby incorporated by this reference as a part of our findings. Petitioner is a corporation organized January 1, 1919, under the laws of the State of Iowa. It has its principal office at Shenandoah, Iowa, where it is engaged in the farm seed and supply business. Its *1132 return for the fiscal year ended June 30, 1942, *90 was filed with the collector of internal revenue for the district of Iowa, at Des Moines, Iowa. Petitioner filed a tentative excess profits tax return for its fiscal year 1942 on September 15, 1942, having previously been granted an extension of time to file its excess profits tax return for that year until October 15, 1942. The excess profits tax return for the fiscal year 1942 was then filed on October 15, 1942. By duly executed consents, the period within which the respondent could assess any deficiencies in income tax, excess profits tax, or war profits tax was extended until June 30, 1947. On September 15, 1943, petitioner filed on Forms 991 applications for relief under section 722 of the Internal Revenue Code of 1939 in respect of its fiscal years 1942 and 1943. In the application in respect of its fiscal year 1942, petitioner claimed a constructive average base period net income of $ 187,871.38. This amount exceeded petitioner's excess profits tax net income for that year, and it did not claim the benefit of an unused excess profits credit carry-over for that year based on a constructive average base period net income from its fiscal year 1941. However, in its application*91 in respect of the fiscal year 1943 it did claim such carry-over. From September 15, 1943, to the end of 1951, numerous examinations were made of petitioner's books and records and a number of conferences held. During that period no constructive average base period net income was allowed, and no request was made that petitioner furnish a computation of any unused excess profits credit for its fiscal year 1941. On April 3, 1952, petitioner agreed to a constructive average base period net income as determined by the Excess Profits Tax Council. The constructive average base period net income so determined was approved by the Coordinator, Excess Profits Tax Council, on June 16, 1952, and was as follows: Amount of constructive Fiscal year ended average base period June 30 net income 1941 (for carry-over purposes) $ 58,200 — 1942 — 96,900 — 1943 — 96,900 — 1944 — 96,900 — 1945 — 96,900 — 1946 — 96,900 The respondent determined, for the fiscal year ending June 30, 1942, a deficiency in income tax in the amount of $ 9,730.18 and an overassessment in excess profits tax in the amount of $ 31,387.69, resulting from the partial allowance of the claim for relief under section 722 *92 of the Internal Revenue Code of 1939. In determining the overassessment in excess profits tax for the fiscal year 1942 respondent did not allow to the petitioner the benefit of an unused excess profits credit carry-over from its fiscal year 1941 based on a constructive average *1133 base period net income. Respondent gave as his reason the fact that no claim therefor had been made as required by the regulations in the application filed by petitioner with respect to its fiscal year 1942. It is this refusal on the part of the respondent which petitioner challenges and which raises the issues to be hereinafter met. OPINION. Petitioner seeks the benefit of an unused excess profits credit carry-over based on a constructive average base period net income from its fiscal year 1941 to its fiscal year 1942, notwithstanding that it made no claim for such carry-over in its application for relief which it filed with respect to 1942. This issue is foreclosed by the decision of this Court in Lockhart Creamery, 17 T. C. 1123, 1140-1143. Cf. St. Louis Amusement Co., 22 T. C. 522; Barry-Wehmiller Machinery Co., 20 T. C. 705. *93 Reviewed by the Special Division. Decision will be entered for the respondent.