City Baking Co. v. Commissioner

CITY BAKING CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. City Baking Co. v. Commissioner Docket No. 10707. United States Board of Tax Appeals 10 B.T.A. 593; 1928 BTA LEXIS 4076; February 7, 1928, Promulgated *4076 Where an assessment was made in 1921 within the five-year period of limitation provided by section 250(d) of the Revenue Act of 1921, and the Revenue Act of 1924 was enacted prior to the expiration of that five-year period, respondent has six years from the date of assessment within which to begin a suit or other proceeding for the collection of such tax under section 278(d) of the Revenue Act of 1924. Collection held not barred. Art Metal Works v. Commissioner,9 B.T.A. 491, followed. Samuel B. Pack, Esq., for the petitioner. A. C. Baird, Esq., for the respondent. MARQUETTE *593 This proceeding is for the redetermination of a deficiency in income and profits taxes for the fiscal year ended January 31, 1920, in the amount of $51,542.06. FINDINGS OF FACT. The petitioner is a West Virginia corporation with its principal office at Baltimore, Md. On April 15, 1920, the petitioner filed an income and profits-tax return for the fiscal year ended January 31, 1920, showing tax due *594 thereon in the amount of $100,989.06, which was duly assessed and paid, and no further or other return was ever filed by the*4077 petitioner for that year. On November 2, 1920, the respondent advised the petitioner by letter that additional taxes were due from it for the fiscal year ended January 31, 1920, in the amount of $51,542.06, and such additional taxes were assessed on January 7, 1921. On January 14, 1921, the petitioner filed a claim for the abatement of said additional taxes and on or about the same date deposited with the collector at Baltimore, Md., United States Liberty bonds in the amount of $52,000, the deposit being made, as shown by the receipt given by the collector therefor, "in support of claim for abatement in the amount of $51,540.06." On August 12, 1925, the respondent mailed to the petitioner the following letter: TREASURY DEPARTMENT. Washington. AUGUST 12, 1925. IT:E:SE SBW-C-20757. CITY BAKING COMPANY, 500 Equitable Building, Baltimore, Maryland. SIRS: Reference is made to your corporation income and profits tax return for the fiscal year ended January 31, 1920. After careful consideration and review, and an examination of all the facts submitted, your application under the provisions of section 327 for assessment of your profits tax under section*4078 328 of the Revenue Act of 1918 has been denied for the reason that no abnormality affecting either your capital or income has been disclosed which would bring your case within the scope of paragraph (d) of section 327. Furthermore, the audit of your case discloses no exceptional hardship, evidenced by gross disproportion between the tax computed without benefit of section 328 and the tax computed by reference to the representative corporations specified in that section. The total tax liability in the amount of $152,531.12 of which you were advised in report of the Revenue Agent dated September 16, 1920, and Bureau letter dated November 2, 1920, is, therefore, sustained. In accordance with the above conclusions, your claim for abatement and refund in the amounts of $30,877.41 and $1.00 respectively, will be rejected in full. The Collector of Internal Revenue for your district will be officially notified of the rejection at the expiration of thirty days from the date of this letter. Upon receipt of notice and demand from that official, payment should be made to this office in accordance with the conditions of his notice. Respectfully, (Signed) J. G. BRIGHT, Deputy*4079 Commissioner. The petitioner by letter dated September 5, 1925, protested against the determination of the respondent as set forth in the letter of *595 August 12, 1925. On September 14, 1925, the respondent replied to the petitioner's letter of September 5, as follows: TREASURY DEPARTMENT. Washington. SEPTEMBER 14, 1925. IT:E:SM SEW-C-2757. THE CITY BAKING COMPANY, Standard Oil Building, Baltimore, Maryland. SIRS: Receipt is acknowledged of your letter of September 5, 1925, protesting the denial of your application for assessment under Section 328 for the year 1920, of which you were advised in Bureau letter of August 12, 1925. In compliance with your request, a conference has been arranged for Thursday, October 8, 1925, at 11 o'clock, in Conference Room 114, Treasury Annex No. 2, 15th Street and Ohio Avenue, N.W., Washington, D.C. All data to be relied upon in connection with your protest, including affidavits as to facts and briefs of argument should be filed at least five days prior to the date fixed for conference. If you are to be represented at the conference by an attorney or accountant, it will be necessary for him to present*4080 power of attorney in the case, signed by an officer of the corporation, attested to by the secretary under the seal of the corporation, and executed before a notary public, or be witnessed before two disinterested individuals. Respectfully, (Signed) J. G. BRIGHT, Dep'y. Com'r. On October 8, 1925, a conference on the petitioner's protest of September 5, 1925, was held in the Bureau of Internal Revenue and on November 13, 1925, the respondent mailed the following letter to the petitioner: TREASURY DEPARTMENT Washington Nov. 13, 1925. Address reply to Commissioner of Internal Revenue, and refer to IT:E:SM SEW:C:20757. THE CITY BAKING COMPANY, Baltimore, maryland. SIRS: Reference is made to your protest dated September 5, 1925, against the denial of your application for assessment of your profits tax for the year ended January 31, 1920, under the provisions of Section 328 of the Revenue Act of 1918, as set forth in Bureau letter dated August 12, 1925. After a careful review of your protest and of all the evidence submitted in support of your contentions in conference in this office on October 8, 1925, you are advised that the Bureau holds that*4081 no abnormalities are present in your invested capital for this year. In view of the foregoing and the fact that the tax assessed against your company is not in excess of that paid by a group of representative concerns *596 engaged in a like or similar business to that of your company, the conclusions set forth in the above-mentioned letter are sustained. Your case is, therefore, deemed closed. A copy of this communication is being furnished your representative, Samuel B. Pack, Washington, D.C., in accordance with the authority conferred by your company in power of attorney. Respectfully, (Signed) C. R. NASH, Assistant to the Commissioner. The petition herein, wherein it is stated that the petitioner "appeals from the determination of the Commissioner of Internal Revenue, set forth in his deficiency letter (IT:E:SM:SEW:C-20757), dated November 13, 1925," was filed with this Board on January 7, 1926. On July 12, 1926, the petitioner and the respondent entered into the following written agreement: Income and Profits Tax Waiver. In order to enable the Bureau of Internal Revenue to give thorough consideration to any claim for abatement or credit filed*4082 by or behalf of City Baking Co., of Baltimore, Maryland, covering any income, excess-profits, or war-profits tax assessed against the said taxpayer under the existing or prior Revenue Acts for the year(s) 1/31/20, and to prevent the immediate institution of a proceeding for the collection of such tax prior to the expiration of the six your period of limitation after assessment within which a distraint or a proceeding in court may be begun for the collection of the tax, as provided in Section 287(d) of the existing Revenue Act, the said taxpayer hereby waives any period of limitation as to the time within which distraint or a proceeding in court may be begun for the collection of the tax, or any portion thereof, assessed for the said year(s), and hereby consents to the collection thereof by distraint or a proceeding in court begun at any time prior to the expiration of this waiver. This waiver is in effect from the date it is signed and will remain in effect until December 31, 1926. (Signed) THE CITY BAKING COMPANY, Taxpayer. BY DUANE R. RICE, President. If this waiver is executed on behalf of a corporation, it must be signed by such officer or officers of the*4083 corporation as are empowered under the laws of the State in which the corporation is located to sign for the corporation, in addition to which, the seal, if any, of the corporation must be affixed. (Signed) D. H. BLAIR, Commissioner of Internal Revenue. (Signed) GALEN L. TAIT, By: Collector of Internal Revenue. On December 4, 1926, the petitioner signed a "Tax Collection Waiver" and on December 15, 1926, mailed it to the "Chief Field *597 Deputy, Internal Revenue Service, Baltimore, Md.," with a letter which is in part as follows: THE CITY BAKING COMPANY Baltimore, Md., December 15, 1926. Mr. A. PARKS PASIN, Chief Field Deputy, Internal Revenue Service, Baltimore, Md. SIR: Referring to your letter of Dec. 4, 1926, regarding tax collection waiver relating to our tax liability for the fiscal year ended January 31, 1920, we hand you herewith, in deplicate, waiver reading as follows: * * * It is expressly understood that this waiver is furnished subject to the following conditions: 1. That it shall not be construed as an admission by us that the tax mentioned therein or any part thereof is due. 2. That it shall not authorize*4084 the assessment or collection of any tax, penalty or interest which at the time of the furnishing of said waiver, or any waiver previously furnished, was outlawed by any statute of limitations. * * * Yours very truly, (Signed) THE CITY BAKING COMPANY DUANE R. RICE, President. Said "Tax Collection Waiver" is as follows: Tax Collection Waiver. DEC. 4, 1926. It is hereby agreed by and between City Baking Company formerly of 500 Equitable Building, now located at 310 N. Gay Street, Baltimore, Maryland, party of the first part, and the Commissioner of Internal Revenue, party of the second part, that the amount of $51,542.06, representing an assessment of income tax for the year ended January 31, 1920, made against the said party of the first part, appearing on the December, 1920, assessment list, serial number December 163, for the District of Maryland, may be collected (together with such interest, penalties, or other additions as are provided for by law), from said party of the first part by distraint or by a proceeding in court begun at any time prior to December 31, 1928. (Signed) THE CITY BAKING COMAPNY, Taxpayer. DUANE R. RICE, President. *4085 (Signed) D. H. BLAIR, Commissioner of Internal Revenue. BY GALEN L. TAIT, Collector of Internal Revenue. OPINION. MARQUETTE: The respondent questions the jurisdiction of the Board to hear and determine this proceeding, on the ground that the letter of August 12, 1925, notified the petitioner of the respondent's final determination of the deficiency in tax for the fiscal year ended January 31, 1920, and that this proceeding was not instituted within *598 60 days from the mailing of said letter. The petitioner contends that the respondent's final determination of a deficiency is evidenced by the letter of November 13, 1925, and that the filing of the petition herein was timely. It also alleges that collection of the deficiency was barred by the statute of limitations prior to the enactment of the Revenue Act of 1926, and that the liability is extinguished by section 1106 of that Act. The hearing had was only as to the two issues mentioned, it being agreed that in the event that we hold that we have jurisdiction of the case and decide the issue relative to the statute of limitations adversely to the petitioner, a further hearing will be granted as to the*4086 other issues raised by the pleadings. We are satisfied from the evidence that the Board has jurisdiction of this case. After the letter of August 12, 1925, was mailed to the petitioner, the respondent entertained a protest against the determination set forth in that letter, and granted a hearing on and received and considered evidence in support of said protest. On November 13, 1925, the respondent, by letter, notified the petitioner of his decision on the protest and the petition herein was filed within 60 days from that date. We are of the opinion that the letter of November 13, 1925, was a final determination of the petitioner's income and profits taxes for the fiscal year ended January 31, 1920, from which it had the right to appeal to this Board, and that we have jurisdiction of this proceeding. ; , and section 283(f) of the Revenue Act of 1926. Our decision on the other issue raised must be in favor of the respondent. In the recent case of *4087 , we held, overruling , that where an assessment of tax was made within the five-year period of limitation provided by section 250(d) of the Revenue Act of 1921, and the Revenue Act of 1924, was enacted prior to the expiration of that five-year period, the respondent has six years from the date of the assessment to begin a suit or other proceeding for the collection of such tax under section 278(d) of the Revenue Act of 1924. The facts of this case bring it squarely within the purview of the decision in Art Metal Works v. Commissioner.The petitioner's income and profits-tax return for the fiscal year ended January 31, 1920, was filed on April 14, 1920, and the additional tax in question was assessed on January 7, 1921. The five-year period of limitation provided by section 250(d) of the Revenue Act of 1921 had not expired on June 2, 1924, the date the Revenue Act of 1924 was enacted. It therefore follows that the period of limitation on collection of the additional tax by suit or *599 other proceeding was extended by section*4088 278(d) of the Revenue Act of 1924 to six years from the date of assessment, to wit, to June 7, 1927. The bar of the statute of limitations had, therefore, not run at the date of the enactment of the Revenue Act of 1926, and the additional tax is not affected by section 1106 of that Act as contended by the petitioner. On the other hand, the respondent's final determination having been made and this proceeding having been begun prior to January 7, 1927, to wit on January 7, 1926 the period within which collection may be made is further extended by section 277 of the Revenue Act of 1924. Order will be entered restoring the proceeding to the calendar for assignment for hearing in due course.