Crude Oil Corp. v. Commissioner

Crude Oil Corporation of America, Petitioner, v. Commissioner of Internal Revenue, Respondent Crude Oil Corp. v. Commissioner Docket No. 3362 United States Tax Court 6 T.C. 648; 1946 U.S. Tax Ct. LEXIS 242; April 4, 1946, Promulgated *242 Decision will be entered under Rule 50. Petitioner mailed its capital stock tax return, containing election declaring value for its capital stock, at Tulsa, Oklahoma, in time for it to be received by the collector in Oklahoma City, Oklahoma, within the statutory period for filing. The return could never be found by that office. Held, the Post Office Department was not the agent of the Commissioner of Internal Revenue for delivery of the return, and the presumption of receipt arising from mailing is insufficient to overcome the presumption of correctness of the Commissioner's determination that no election had been filed by the necessary date. W. C. Franklin, Esq., for the petitioner. D. Louis Bergeron, Esq., for the respondent. Disney, Judge. DISNEY *648 The respondent determined deficiencies in income tax against the petitioner for the year 1940 in the amount of $ 864.35, and in declared value excess profits tax for the same year in the amount of $ 7,095.60. The only issue now in controversy is whether the petitioner filed a timely 1940 return of capital stock tax, Form 707, for the year ended June 30, 1940, so as to be entitled to a credit in the computation of the declared value excess profits tax for the calendar year 1940. The parties have agreed that the other issue raised by the petitioner will be settled under Rule 50. FINDINGS OF FACT. Crude Oil Corporation of America, hereinafter referred to as petitioner, is a corporation organized in December 1930 under the laws of the State of Delaware and is engaged in the business of buying and selling oil royalties. Its principal place of business is *649 located in Tulsa, Oklahoma, within the collection district of Oklahoma. During the period herein, petitioner's officers were Harry L. Mourer, president; Wallace C. Franklin, Jr., treasurer; *244 Velma Fitzer, nee Eppard, secretary; and W. C. Franklin, Sr., trustee. Harry L. Mourer was the only officer who could sign checks. The petitioner had for a number of years employed a firm of accountants to prepare its tax returns and handle all of its tax matters. A capital stock tax return was prepared for the petitioner by one of the members of the accounting firm on July 27, 1940, showing capital stock valuation of $ 500,000. The capital stock tax return was placed in an envelope with the name and address of petitioner on the outside left-hand corner of the envelope. The letter was addressed to the collector of internal revenue, Oklahoma City, Oklahoma, it was sealed, and the necessary postage was placed thereon. The secretary and the accountant together went to the United States mail chute on the fifth floor in the Mayo Building, Tulsa, Oklahoma, about the middle of the afternoon, July 29, 1940, where the above mentioned envelope was placed in the mail chute by the secretary. No check for the tax was enclosed. The letter was mailed in time to reach the collector on July 31, 1940. Tulsa, Oklahoma, is approximately 119 miles from Oklahoma City, Oklahoma. The letter was not*245 returned to the petitioner. At the office of the collector of internal revenue to which the above mentioned letter was addressed, the following procedure is used in regard to incoming mail: Mail is brought in from the post office in a regular mail basket on wheels to the mail room, which employs about 12 people. In the room is a long table, 5 feet by 8 feet, with 4 persons seated at each side. An assembly line system of handling the mail item by item is used. One person slits the envelope open, another removes all contents from the envelope and pins the contents together, folding the envelope over the contents, and another rechecks the emptied envelope to see that there is nothing left in the envelope before it is destroyed, thus affording more than a double check on each piece of mail. The next person then places the pinned contents into a mail basket and it is then taken to another room, where more people are employed to sort and route it to the proper division or department. All instruments with checks are routed to the cashier's office. The balance is then sorted to the department to which it belongs, whether it is the income tax, withholding tax, social security tax, or*246 miscellaneous tax department. As to the mail routed to the miscellaneous tax division, it includes all documents and instruments, whether sales, excise, stamp, or capital stock tax returns, representing about 205 different miscellaneous tax *650 items. Upon receipt of the miscellaneous tax documents by the department head, all taxable returns are prepared for assessment and all documents needing action are routed to their respective sections. As the capital stock tax returns are received, the collector's copy is then used to enter on a card called a 715, official record posting card, which is a permanent record of returns filed by various taxpayers. It contains for a 10-year period, 5 years on each side of the card, the name of the petitioner, state where incorporated, kind of business, whether an extension to file return was granted, assessment date, and adjusted declared value of capital stock and tax due, penalty, and interest. The miscellaneous tax division of the collector's office in Oklahoma City handles about 10,000 returns a month. In 3 years in that office only 1 return was lost. The 715 card for petitioner, along with other information, showed the following: Year Date filed Date due Remarks — 1934 — 8-31-34 7-31-34 Delinquent — 1935 — 7-31-35 7-31-35 — 1936 — 7-31-36 7-31-36 — 1937 — 7-31-37 7-31-37 — 1938 — 8- 1-38 7-31-38 — 1939 — 12-21-39 7-31-39 Delinquent — 1940 — 11-29-40 7-31-40 Delinquent — 1941 — 10-29-41 * 10-29-41 — 1942 — 6-28-43 7-31-42 Delinquent *247 By letter dated October 12, 1940, received October 13, 1940, petitioner was advised by the collector that it was delinquent in filing its 1940 return of capital stock tax for the year ended June 30, 1940. Whereupon, the accountant took a copy of the return that was mailed July 29, 1940, and went to the office of the collector at Oklahoma City, where he discussed the fact that a return had been mailed and exhibited a copy of it to an employee at the collector's office. The employee made a search for the return, without success, but stated that the search would continue. On November 29, 1940, at the suggestion of the employee, petitioner's accountant delivered to the collector in Oklahoma City, Oklahoma, its 1940 return of capital stock tax for the year ended June 30, 1940. Under item 10, "Adjusted Value -- Effective Declared Value, Part A, Adjusted Value of Capital Stock," petitioner entered a minus amount of $ 6,501.77, and under part B, "Elective Declared Value of Capital Stock," petitioner entered the amount of $ 500,000. In items 13 and 16 it computed a tax of $ 550 and interest of $ 13.72, or a total of $ 563.72. The return was signed by Harry *248 L. Mourer, as president, and by Wallace C. Franklin, Jr., as treasurer. Delivered with the return was a check dated November 29, 1940, in the amount of $ 563.20 signed by Harry L. Mourer and countersigned by W. C. Franklin. *651 The return, upon receipt by the collector, was stamped "Delinquent." The card 715 was filled in to show that the return was delinquent, disclosing a deficit of $ 6,501.77 in the adjusted value of capital stock, no elective declared value of capital stock, and no tax paid. By letter dated December 14, 1940, petitioner was advised that its capital stock tax return for 1940 was received November 29, 1940, that it was delinquent, that it would not be permitted to establish an elective declared value, and that the adjusted value of $ 6,501.77 deficit must stand. The petitioner's check for $ 563.20 was returned at this time. OPINION. The Commissioner determined in the deficiency notice that the petitioner had failed to elect, in a capital stock tax return filed before the expiration of the statutory filing period on July 31, 1940, to declare a value for its capital stock, under section 1202 (e), Internal Revenue Code, as added by section 301 of the Revenue*249 Act of 1939. In pertinent part that section is set forth in the margin. 1 That determination is presumed to be correct. To overcome it the petitioner proved that the requisite return and election was mailed at Tulsa, Oklahoma, in time, by the usual method of mail delivery, to have reached the place of filing, the collector's office at Oklahoma City, Oklahoma, by the required date; and it relies upon a presumption that having been so mailed, the return was delivered. No reliance is placed upon a return and election filed several months later. There was no positive proof that the return was not received by the collector's office, but it was proven that the return was never found, that the method of handling and examination of the mail was proven, tending to show the small chance of the return being lost after receipt, and that a particular section of that office, the miscellaneous tax division, handles about 10,000 returns a month, and in 3 years had lost only 1 return. *250 The petitioner's position is, in short, that though the Post Office Department is not in general the agent of the Commissioner of Internal Revenue, nevertheless by the promulgation of Regulations 64, article 36, 2 the Commissioner made the Post Office Department his *652 agent, so that mailing of the return in Tulsa was filing; and that, as above suggested, there is a presumption of delivery of the return from the fact of mailing. *251 We can not agree that the regulation above referred to constitutes the Post Office Department the agent of the Commissioner. On its face, it fails to do so, for it merely provides in substance that mailing in ample time (as shown by the postmark -- not shown in this case) to reach the collector's office in due time will prevent attachment of penalty solely by reason of the fact of actual receipt after the requisite time. It says nothing about the situation where there is no delivery at any time. The regulation is too narrow to be a basis for the agency contended for by the petitioner. We hold the Post Office Department not to be the agent of the Commissioner in the matter here involved. This leaves the petitioner to rely upon presumption of delivery, from mailing. That there is such presumption is established by many cases, such as Rosenthal v. Walker, 111 U.S. 185. But by so demonstrating the petitioner has shown only a presumption of delivery, not fact of delivery, and this is insufficient to meet the presumption of correctness of the Commissioner's determination that there was no filing of the election. Shea v. Commissioner, 81 Fed. (2d) 937;*252 City Bank Farmers Trust Co., Executor, 41 B. T. A. 1; Herbert D. Robinson, Executor, 21 B. T. A. 1373; J. Z. Todd, 3 T. C. 643; Herbert L. Danner, 3 T. C. 638; Fremont Canning Co., 17 B. T. A. 484; James Lewis Caldwell McFaddin, 2 T. C. 395 (407); W. D. Johnson, 1 T. C. 1041 (1054). In the last case the presumption unsuccessfully relied on to overcome presumption of correctness of the Commissioner's determination was the same presumption here relied on, i. e., presumption of delivery of mail from fact of mailing. Under the above authority, we hold that the petitioner has shown no error in the determination by the Commissioner. Decision will be entered under Rule 50. Footnotes *. Statutory exception.↩ 1. * * * In the case of any domestic corporation, * * * the year ending June 30, 1940, shall * * * constitute an additional declaration year if with respect to such year (1) the taxpayer so elects * * * in its return before the expiration of the statutory filing period or any authorized extension thereof * * *.↩ 2. * * * (a) General. -- The return shall be filed with the collector for the district in which is located the principal place of business of the corporation * * *. The return must be filed on or before July 31, next following the close of the taxable year, unless the time for filing has been officially extended prior to such date. * * * If a return is placed in the mails, properly addressed and postage paid, in ample time (as shown by the date of the postmark on the envelope in which it is mailed) to reach the office of the collector in due course before the expiration of the statutory filing period or any official extension thereof, no penalty will attach solely by reason of the fact that the return is actually received by the collector after the expiration of the prescribed time. As to additions to the tax in the case of failure to file the return within the prescribed time * * *.↩