Valentine-Clark Co. v. Commissioner

VALENTINE-CLARK CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Valentine-Clark Co. v. Commissioner Docket No. 19043. United States Board of Tax Appeals 14 B.T.A. 562; 1928 BTA LEXIS 2957; December 5, 1928, Promulgated *2957 At the date of the deficiency letter the Commissioner had authority to determine the deficiency in controversy in this proceeding. George E. Wallace Esq., and C. H. Preston, C.P.A., for the petitioner. A. H. Fast, Esq., for the respondent. LANSDON *562 The respondent asserts a deficiency in income and profits taxes for the fiscal year ended January 31, 1921, in the amount of $5,777.35. The petitioner, among other things, alleges that at the date of the deficiency notice the statute of limitations had run against its additional tax liability, if any, for the year 1921. The parties agreed that the hearing should be limited to the single question of the statute of limitations and that if the Board finds that the Commissioner had authority to determine the deficiency the proceeding shall be restored to the general calendar for a hearing on the merits. All the facts relating to the question submitted to the Board were stipulated. The Board receives such stipulation and adopts it as its findings of fact. FINDINGS OF FACT. During the taxable period involved in this appeal the taxpayer kept its books on the basis of a fiscal year ending*2958 January 31, 1921. On April 14, 1921, the taxpayer filed with the proper collector of internal revenue its return of income for the fiscal year ending January 31, 1921, under the provisions of the Revenue Act of 1918, which return disclosed a net income of $37,527.43. After the enactment of the Revenue Act of 1921 no other or further return for the fiscal year ending January 31, 1921, was filed by the taxpayer. No waiver of the statutory limitation period on assessment or collection of the 1921 income or excess-profits taxes was executed or filed with the Commissioner of Internal Revenue by the taxpayer. On June 3, 1926, the Commissioner of Internal Revenue mailed to the taxpayer the so-called 60-day or deficiency letter provided for in section 274 of the Revenue Act of 1926, showing a net income for the fiscal year ending January 31, 1921, of $46,734.04, and a deficiency in tax due from this taxpayer for such fiscal year in the amount of $5,777.35. Neither the $5,777.35 nor any part thereof has been assessed against this taxpayer prior to or since the mailing of said deficiency letter on June 3, 1926. *563 The return as filed under the Revenue Act of 1918 properly*2959 showed an exemption of $2,000 in computing the tax due. Under the Revenue Act of 1921, this taxpayer would be entitled to no such exemption for the fiscal year ending January 3u, 1921. OPINION. LANSDON: The only question here is whether on June 3, 1926, the statute of limitations had run against the deficiency asserted by the Commissioner on that date. In conformity with the provisions of the Revenue Act of 1918, the petitioner on April 14, 1921, filed its income and profits-tax return for the fiscal year ended January 31, 1921. Thereafter, on November 23, 1921, the Revenue Act of 1921 was enacted. In that Act there is no provision requiring corporations which had theretofore filed returns for a fiscal year ended in 1921 to file any additional returns for such year. It does, however, contain the following provision: SEC. 1303. That the Commissioner, with the approval of the Secretary, is hereby authorized to make all needful rules and regulations for the enforcement of the provisions of this Act. Pursuant to the authority granted by section 1303, Treasury Decision 3305, signed by the Commissioner and approved by the Secretary, was promulgated, and provided as follows: *2960 If any taxpayer has, before November 23, 1921, filed a return for a fiscal year ending in 1921, and paid or become liable for a tax computed under the Revenue Act of 1918, and is subject to additional tax for the same period under the Revenue Act of 1921, the return covering such additional tax may be filed at the same time as the returns of persons making returns for the fiscal year ending February 28, 1922. * * * (Italics supplied.) On March 20, 1922, the Commissioner promulgated Treasury Decision 3310, amending the italicized part of Treasury Decision 3305, supra, to read as follows: and is subject to an additional tax for the same period, under the Revenue Act of 1921, a return covering such additional tax shall be filed. (Italics supplied.) It is stipulated that in the return filed the taxpayer took an exemption in the amount of $2,000 in the computation of tax due under the Act of 1918, and that under the Act of 1921 it was not entitled to any such exemption for the fiscal year ended January 31, 1921. It is obvious, therefore, that an additional tax for the fiscal year ended January 31, 1921, was imposed on this taxpayer by the Revenue Act of 1921. *2961 In such circumstances the Commissioner by his regulations, supra, required an additional return. Such return has never been filed and, therefore, there is no return of this taxpayer for the year ended January 31, 1921, which can be regarded as the return required *564 by law and no date from which the statute of limitations started to run against this petitioner for such taxable year. On June 3, 1926, the Commissioner had authority to assert the deficiency here in controversy. John Wanamaker, Philadelphia,8 B.T.A. 864; Fred T. Ley & Co.,9 B.T.A. 749; Hutchinson Co.,14 B.T.A. 367; Updike v. United States, 8 Fed.(2d) 913. Reviewed by the Board. This proceeding will be restored to the Circuit Calendar to be heard on its merits in due course.