Willingham Loan & Trust Co. v. Commissioner

WILLINGHAM LOAN & TRUST CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Willingham Loan & Trust Co. v. Commissioner Docket No. 18224. United States Board of Tax Appeals 15 B.T.A. 931; 1929 BTA LEXIS 2767; March 18, 1929, Promulgated *2767 1. FISCAL YEARS. - The petitioner corporation having kept its books and closed its accounts annually as of May 31 of each of the years 1920 and 1921, was required, by sections 212(b) and 232 of the Revenue Act of 1918 and the same sections of the Revenue Act of 1921, to make its income and profits-tax returns on the basis of such fiscal years. 2. STATUTE OF LIMITATIONS. - The petitioner corporation, keeping its accounts on a fiscal year basis but making returns on a calendar year basis, the applicable statutes of limitations begin to run on the day following the filing of its last calendar year return covering a portion of its fiscal year period. Paso Robles Mercantile Co.,12 B.T.A. 750, followed. Jeopardy assessments made on the day five or four years respectively from the day on which return was filed are timely made and such assessments having been timely made on March 15, 1926, may be collected at any time within six years from the date of assessment. Revenue Act of 1926, section 278(d). J. C. Murphy, Esq., and C. R. Dawson, Esq., for the petitioner. A. S. Lisenby, Esq., for the respondent. TRUSSELL *931 The*2768 deficiencies involved in this action are (1) for a fiscal year ended May 31, 1920, $2,887.95, and (2) for a fiscal year ended May 31, 1921, $276.82. In its original petition the petitioner alleged error on the part of the respondent in computing taxable income and also that the assessment and collection of any deficiencies for the periods named is barred by the statute of limitations. At the trial all issues other than the statute of limitations were waived and it was agreed that in the event the Board should find that the assessment *932 and collection of deficiencies for the periods named were not barred by the statutes of limitations the amounts of the deficiencies were as computed by the respondent. FINDINGS OF FACT. The petitioner is a corporation organized under the laws of the State of Georgia on or about June 27, 1909, and has been since that time continuously engaged in the business of real estate and real estate loans and at some time prior to the year 1918 the petitioner had established the practice of keeping its books of account on the cash receipts and disbursements basis, of taking off trial balances and trade statements at the end of each month, and of*2769 closing and ruling down its books of account annually as of May 31 of each year. The petitioner had no properties requiring the keeping or making of inventories and the monthly trial balances reflected the petitioner's financial condition at the end of each month. The petitioner had, however, consistently made its income and profits-tax returns on the basis of calendar years, preparing the same from its monthly trial balances. Its calendar year return for the year 1919 was filed with the collector of internal revenue for the district of Georgia on March 13, 1920. Its calendar year return for the year 1920 was filed with the same collector on March 15, 1921, and its calendar year return for the year 1921 was filed with the same collector on March 15, 1922. On or about April 1, 1924, the petitioner was called upon by internal revenue officers to make its income and profits-tax returns on the basis of its fiscal year ending May 31, and on that date the petitioner caused to be prepared corporation income and profits-tax returns for the fiscal year ended May 31, 1920, and for the fiscal year ended May 31, 1921, and filed the same in the office of the collector of internal revenue*2770 for the district of Georgia on April 3, 1924, designating said returns as amended returns. On March 15, 1926, the respondent made jeopardy assessments of deficiencies for the said fiscal periods ended May 31, 1920, and 1921, and thereafter on May 5, 1926, mailed to the petitioner notice of such assessments in accordance with the provisions of section 279(a) and (b) of the Revenue Act of 1926, and on June 28, 1926, petitioner filed with the Board its petition for a redetermination of such deficiencies. OPINION. TRUSSELL: The record of this action establishes the fact that during all the times herein referred to the petitioner had an established practice of keeping its accounts and closing its books on the basis of a fiscal year ending May 31 of each calendar year, although it had been equally consistent in making income-tax returns on the basis of calendar *933 years. Such calendar year returns were proper and lawful returns for all the years prior to the year 1918. The Revenue Act of 1918, however, required corporations to make income-tax returns upon the same basis on which their books of account were kept. Revenue Act of 1918, sections 212(b) and 232. The petitioner*2771 should have changed its practice of making returns from the calendar year basis to its fiscal year basis when it made its returns for the year 1918, and, not having done so, the respondent properly required it to make such change for the periods here under consideration. For the time included in its fiscal year ended May 31, 1920, the petitioner's calendar year returns were filed on March 13, 1920, and March 15, 1921. For the time included in its fiscal year ended May 31, 1921, the petitioner's calendar year returns were filed on March 15, 1921, and March 15, 1922. In the cases of , and , the Board has held that the statute of limitations began to run upon the date of the filing of the last calendar year return covering the period of time included in the respective fiscal years, and, applying the rule of those cases to the instant case, the period within which assessments might be made for the fiscal year ended May 31, 1920, would not begin to run until March 16, 1921, and for the period ended May 31, 1921, the statute would not begin to run until March 16, 1922. *2772 As to the first period, the five-year period of the statute of limitations (Act of 1918, section 250(d) and Act of 1926, section 277(a)(3)) would thus not expire until the close of the day of March 15, 1926, and as to the second fiscal period the four-year period of the statute of limitations (Act of 1921, section 250(d) and Act of 1926, section 277(a)(2)) would not expire until the close of the day of March 15, 1926. , and the cases of ; , and . It thus appears that the jeopardy assessments made on March 15, 1926, were made within the statutory periods of limitation applicable to the several fiscal years involved in this action. The jeopardy assessments involved in this case were made by the Commissioner on March 15, 1926, and pursuant to the provisions of section 279(a) and (b) of that Act. These paragraphs of section 279 provide as follows: (a) If the Commissioner believes that the assessment or collection of a deficiency will be jeopardized by delay, he shall immediately*2773 assess such deficiency (together with all interest, additional amounts, or additions to the tax provided for by law) and notice and demand shall be made by the collector for the payment thereof. (b) If the jeopardy assessment is made before any notice in respect of the tax to which the jeopardy assessment relates has been mailed under subdivision *934 (a) of section 274, then the Commissioner shall mail a notice under such subdivision within 60 days after the making of the assessment. The above quoted provisions of section 279 are in addition to and qualification of section 274(a) of the same Act, and we are of the opinion that the making of the jeopardy assessments within the period of the applicable statutes of limitations, the sending of notice of such assessments within 60 days, and the appeals to the Board made within 60 days of the said notice, give the Board jurisdiction to redetermine the asserted deficiencies, and under the provisions of section 278(d) of the Revenue Act of 1926 providing that - Where the assessment of any income, excess-profits, or war-profits tax imposed by this title or by prior Act of Congress has been made (whether before or after the enactment*2774 of this Act) within the statutory period of limitation properly applicable thereto, such tax may be collected by distraint or by a proceeding in court (begun before or after the enactment of this Act), but only if begun (1) within six years after the assessment of the tax, or (2) prior to the expiration of any period for collection agreed upon in writing by the Commissioner and the taxpayer. the deficiencies as redetermined by the Board may be collected at any time within six years from the date of the timely assessment. Having found that the assessments here in question were made within the applicable periods of the statutes of limitations and that the Board has jurisdiction to redetermine such deficiencies, and the parties having agreed that the computation of such deficiencies has been correctly made, we must conclude that the deficiencies are as follows: for the fiscal year ended May 31, 1920, $2,887.95 and for the year ended May 31, 1921, $276.82. Judgment will be entered for the respondent.