Pantages Theatre Co. v. Commissioner

PANTAGES THEATRE CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Pantages Theatre Co. v. Commissioner Docket No. 9799. United States Board of Tax Appeals 17 B.T.A. 82; 1929 BTA LEXIS 2359; August 6, 1929, Promulgated *2359 Assessment and collection of the deficiencies asserted against the petitioner for the years 1918 and 1919 are not barred by the statute of limitations. J. S. Y. Ivins, Esq., and Joseph D. Brady, Esq., for the petitioner. A. H. Fast, Esq., for the respondent. ARUNDELL *83 This proceeding was instituted to redetermine deficiencies of $52,915.40 and $46,865.09 in income and excess-profits taxes for the years 1918 and 1919, respectively. The issues not abandoned at the hearing are whether assessment and collection of the deficiencies are barred by the statute of limitations, and whether invested capital may be reduced by the amount of taxes due for prior years. FINDINGS OF FACT. The petitioner is a Washington corporation with its principal place of business at Seattle, Wash. The income and profits-tax returns of the petitioner for the years 1918 and 1919 were filed with the collector of internal revenue at Tacoma, Wash., on June 16, 1919, and March 14, 1920, respectively. On January 5, 1924, the petitioner executed an instrument, the material provisions of which are as follows: In pursuance of the provisions of the Revenue Act*2360 of 1918, the PANTAGES THEATRE COMPANY and the Commissioner of Internal Revenue, hereby consent to a determination, assessment, and collection of the amount of income, excess profits, or war-profits taxes due under the return of the above named corporation on its consolidated return for said year embracing its subsidiaries the PANTAGES-VANCOUVER THEATRE COMPANY and the GREATER OAKLAND THEATRICAL ASSOCIATION, for the calendar year 1918 under the Revenue Act of 1918, irrespective of any period of limitation. The document was received by the respondent on January 17, 1924, and now bears the following signature: "D. H. Blair, Commissioner, J.G.B." The petitioner, on December 20, 1924, signed an instrument, the pertinent parts of which read as follows: The Pantages Theatre Company, a corporation organized under the laws of the State of Washington, with its principal place of business at Seattle, hereby consents to the determination, assessment and collection of any and all additional income and profits taxes which is due or may be found to be due on its return of net income for the calendar year 1919 under the Revenue Acts of August 5, 1909, October 3, 1913, September 8, 1916, October 3, 1917 and*2361 the Revenue Act of 1918, specifically waiving its rights under the Statute of Limitation with respect to the time in which such taxes must be assessed under the acts named. The paper was received by the respondent on January 20, 1925. It now bears the following signature: "D. H. Blair, Commissioner, A.B.N." On January 23, 1925, the petitioner executed a document, the material provisions of which are as follows: In pursuance of the provisions of existing Internal Revenue Laws Pantages Theatre Company, a taxpayer of Seattle, Washington, and the Commissioner of Internal Revenue hereby waive the time prescribed by law for making *84 any assessment of the amount of income, excess-profits, or war-profits taxes due under any return made by or on behalf of said taxpayer for the year(s) 1918, under existing revenue acts, or under prior revenue acts. This waiver of the time for making any assessment as aforesaid shall remain in effect until December 31, 1925, and shall then expire except that if a notice of a deficiency in tax is sent to said taxpayer by registered mail before said date and (1) no appeal is filed therefrom with the United States Board of Tax Appeals then said*2362 date shall be extended sixty days, or (2) if an appeal is filed with said Board then said date shall be extended by the number of days between the date of mailing of said notice of deficiency and the date of final decision by said Board. On January 23, 1925, the petitioner signed an instrument identical with the one set forth above, bearing the same date, except that it purported to cover the year 1919 instead of the year 1918. The instruments were received by the respondent on January 28, 1925, and now bear the following signature: "D. H. Blair, Commissioner, W.B." In his determination of the deficiency for the year 1918, the respondent reduced petitioner's invested capital by the amount of $53,572.17, by the proration of taxes due for the year 1917 in the amount of $97,769.21. He also reduced petitioner's invested capital for the year 1919 by the sum of $59,689.22, by the proration of taxes due for the year 1918 in the amount of $141,232.43. The deficiency letter forming the basis of this proceeding was mailed to the petitioner on October 14, 1925. OPINION. ARUNDELL: The returns of the petitioner for the years 1918 and 1919 having been filed on June 16, 1919, and*2363 March 14, 1920, respectively, the period for assessment of taxes for those years expired five years thereafter (section 277(a)(2), Revenue Act of 1924) unless the limitation periods were extended pursuant to the provisions of section 278(c) of the same Act. On the dates set forth in our findings of fact the petitioner executed instruments having for their purpose an extension of the statutory periods for assessment and collection, first for an unlimited time, and then to December 31, 1925. The letter notifying the petitioner of the deficiencies for the taxable years was mailed October 14, 1925, a date within the statutory periods of limitation as extended by the documents signed by the petitioner and delivered to the respondent. The petitioner questions the effectiveness of the several documents introduced into the record by the respondent over the objection of its counsel to extend the statutory periods of limitation, on the ground that it has not been shown that they were signed by *85 the Commissioner or a duly authorized agent prior to the running of the statute. No contention is being made that they were not signed on behalf of the petitioner on the dates shown on*2364 the papers. Neither the original petition filed herein on December 9, 1925, nor the amended petition filed on December 8, 1928, set up as a defense the bar of the statute of limitations. The defense was pleaded for the first time in an amendment to the amended petition filed March 18, 1929. No evidence was offered by either party to the proceeding as to the time the Commissioner's signature was affixed to the instruments or that the signature is not what it purports to be. A short time after the instruments were executed in behalf of the petitioner they were delivered to the Commissioner, in whose custody they remained until the hearing of the case. We have heretofore decided that it is not necessary for the Commissioner to sign consents personally in order to give them validity. ; ; , and . "It is a general principle to presume that public officials act correctly, in accordance with the law and their instructions, until the contrary appears. *2365 " , citing authorities. This rule was applied in , where the taxpayer, like the petitioner here, questioned the validity of the consent on the ground that the evidence did not show when and by whom they were signed on behalf of the Commissioner. In , there was no proof of the date the Commissioner affixed his signature to the consents and in the absence of evidence that it was withdrawn prior to acceptance by the Commissioner, we held the consent to be valid. See also ; ; and . In our opinion the consents are valid and operate to extend the statutory periods of limitation for assessment and collection of the deficiencies beyond the mailing of the deficiency notice. No error was committed by the respondent in reducing invested capital by the amount of taxes due for prior years. Section 1207, Revenue Act of 1926, and *2366 . Judgment will be entered for the respondent.