Menger v. Commissioner

W. O. MENGER, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. H. H. BRICKELL, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Menger v. Commissioner Docket Nos. 21589, 21590. United States Board of Tax Appeals 17 B.T.A. 998; 1929 BTA LEXIS 2206; October 17, 1929, Promulgated *2206 1. Under section 280 of the Revenue Act of 1926 a transferee of the assets of a dissolved corporation held liable for unpaid taxes of the corporation to the extent of the amount the transferee received in liquidation, and the respondent is not required to apportion the taxes among the transferees or to elect as to which one of the transferees the tax should be assessed. 2. The taxpayer filed an income and profits-tax return for the year 1919 on March 15, 1920. On February 19, 1925, the taxpayer and the Commissioner entered into a consent in writing extending the period for assessment. The tax was assessed on October 27, 1925, which was within the period as extended by the written consent. On October 1, 1926, the Commissioner mailed a deficiency notice to the petitioners proposing to assess the said tax against them as transferees of the taxpayer. Held that assessment and collection of the tax against and from the petitioners are not barred. Robert A. Littleton, Esq., for the petitioners. Jeff T. Jones, Esq., for the respondent. MARQUETTE *998 These proceedings, which were duly consolidated for hearing and decision, are for*2207 the redetermination of deficiencies in income and profits taxes in respect of the Yazoo Furniture Co. in the amount of $2,254.30 for the year 1919, and $498.90 for the year 1920. The full amount of the deficiencies has been asserted against each of the petitioners under section 280 of the Revenue Act of 1926, as transferees of the assets of the Yazoo Furniture Co. FINDINGS OF FACT. The petitioner, W. O. Menger, is a resident of Vicksburg, Miss., and the petitioner, H. H. Brickell, is a resident of Yazoo City, Miss. The Yazoo Furniture Co., hereinafter referred to as the taxpayer, was a corporation, and during the years 1919 and 1920 was engaged in business at Yazoo City, Miss. On March 15, 1920, the taxpayer filed an income and profits-tax return for the calendar year 1919, which was signed and sworn to by W. O. Menger as vice president and secretary, and by no other officer. The officers of the taxpayer at that time were the petitioner, H. H. Brickell, president and treasurer, and the petitioner, W. O. Menger, vice president and secretary. *999 Said return showed a tax due thereon in the amount of $92.38, which was thereafter duly assessed and paid. On March 14, 1921, the*2208 taxpayer filed an income and profits-tax return for the year 1920, which was signed and sworn to by W. O. Menger, vice president and secretary, and by no other officer. The officers of the taxpayer at that time were the petitioner, H. H. Brickell, president and treasurer, and the petitioner, W. O. Menger, vice president and secretary. Said return showed that there was no tax due thereon. The returns filed by the taxpayer for the years 1919 and 1920 were not false and fraudulent with intent to evade tax. On February 19, 1925, the taxpayer and the Commissioner of Internal Revenue entered into a consent in writing waiving the time prescribed by law for making any assessment of the amount of income, excess-profits or war-profits taxes due under any return made by or on behalf of the taxpayer for the year 1919, said waiver to remain in effect until December 31, 1925, except that if a notice of a deficiency in tax should be sent to the taxpayer by registered mail before said date and no appeal was filed therefrom with the United States Board of Tax Appeals, said period should be extended 60 days. On July 15, 1925, the Commissioner sent to the taxpayer, by registered mail, notice of*2209 the determination of a deficiency in tax in the amount of $2,254.30 for the year 1919. No appeal was filed by the taxpayer with the United States Board of Tax Appeals. On September 10, 1925, the Commissioner sent the taxpayer, by registered mail, notice of the determination of a deficiency in tax in the amount of $498.80 for the year 1920. The taxpayer filed no appeal from said determination with the United States Board of Tax Appeals. Said deficiency for the calendar year 1919 in the amount of $2,254.30 was assessed October 27, 1925, on the Commissioner's October, 1925, list. Said deficiency for the calendar year 1920 in the amount of $498.80 was assessed December 29, 1925, on the Commissioner's December, 1925, list. Neither of said deficiencies has been paid. The taxpayer discontinued business in January, 1924, and its charter was surrendered on May 11, 1925, pursuant to a decree of the Chancery Court of Yazoo County, Mississippi. Upon discontinuance of business by said taxpayer, all of its assets were sold to H. H. Brickell & Son of Yazoo City, Miss., a copartnership composed of H. H. Brickell, Sr., and Carey M. Brickell, for a net cash consideration of $12,000, after*2210 the payment and discharge of all debts and liabilities of the taxpayer except the tax liability hereinabove set forth. At the time the taxpayer was dissolved, its stockholders were the petitioner, W. O. Menger, who owned 66 2/3 per cent of the capital stock, and the petitioner, H. H. Brickell, *1000 who owned 33 1/3 per cent of the capital stock. The capital stock of the taxpayer was of the par value of $5,000. In liquidation of its capital stock the petitioner, W. O. Menger, received liquidating dividends in the amount of $8,000, and in liquidation of his capital stock H. H. Brickell received liquidating dividends in the amount of $4,000, or its equivalent. On October 1, 1926, the Commissioner mailed to each of the petitioners a deficiency letter proposing for assessment against each petitioner the amount of $2,753.20, as the liability of each petitioner as transferee of the property of the taxpayer. Said amount proposed for assessment against each petitioner is the full amount of the tax heretofore assessed against the taxpayer for the years 1919 and 1920 as above set forth. OPINION. MARQUETTE: The respondent proposed to assess against each of the petitioners*2211 the entire amount of the tax heretofore assessed against the taxpayer for the years 1919 and 1920, under authority of section 280 of the Revenue Act of 1926, which provides that: SEC. 280. (a) The amounts of the following liabilities shall, except as hereinafter in this section provided, be assessed, collected, and paid in the same manner and subject to the same provisions and limitations as in the case of a deficiency in tax imposed by this title (including the provisions in case of delinquency in payment after notice and demand, the provisions authorizing distraint and proceedings in court for collection, and the provisions prohibiting claims and suits for refunds); (1) The liability, at law or in equity, of a transferee of property of a taxpayer, in respect of the tax (including interest, additional amounts, and additions to the tax provided by law) imposed upon the taxpayer by this title or by any prior income, excess-profits, or war-profits tax Act. (2) The liability of a fiduciary under section 3467 of the Revised Statutes in respect of the payment of any such tax from the estate of the taxpayer. Any such liability may be either as to the amount of tax shown on the return*2212 or as to any deficiency in tax. (b) The period of limitation for assessment of any such liability of a transferee or fiduciary shall be as follows: (1) Within one year after the expiration of the period of limitation for assessment against the taxpayer; or (2) If the period of limitation for assessment against the taxpayer expired before the enactment of this Act but assessment against the taxpayer was made within such period, - then within six years after the making of such assessment against the taxpayer, but in case later than one year after the enactment of this Act. * * * The stipulated facts clearly show that the petitioners are transferees of the taxpayer and that each of them received as a transferee assets of a value in excess of the amount of the tax involved *1001 herein. The petitioners contend, however, that a transferee is liable for the tax of the taxpayer only in the proportion the amount of the assets he receives bears to the whole of the assets distributed, and that the respondent should be required to elect against which of the petitioners the deficiency herein should be assessed. They also contend that the period of limitation for assessment*2213 against the taxpayer of the tax for 1919 expired on March 15, 1925, which was more than one year before the deficiency notices were mailed to them, and that assessment of the tax against them is now barred. The first contention made by the petitioners is disposed of by the decisions of this Board in ; ; and , wherein it was held that under section 280 of the Revenue Act of 1926 any one of two or more transferees of the assets of a corporation, who each received property of a greater value than the deficiency in tax due from the corporation, is liable for payment of the entire deficiency. Upon the authority of the cases cited, we resolve this issue in favor of the respondent. We are also of opinion that the second contention made by the petitioners is not well taken. The record discloses that the taxpayer's return for the year 1919 was filed on March 15, 1920, and that before the expiration of the five-year period for assessment provided by section 250(d) of the Revenue Act of 1918, and by section*2214 250(d) of the Revenue Act of 1921, the taxpayer and the respondent executed a written waiver or consent to the determination and assessment of the tax on or before December 31, 1925, or within 60 days thereafter in the event a deficiency letter should be sent to the taxpayer and no appeal taken therefrom. The tax for 1919 was assessed against the taxpayer on October 27, 1925, which was within the period for assessment as extended by the waiver, and the deficiency letters were mailed to the petitioners as transferees on October 1, 1926. The petitioners urge, however, that in this case the "period of limitation for assessment against the taxpayer" referred to in section 280 of the Revenue Act of 1926, means the 5-year period for assessment provided by section 250(d) of the Revenue Act of 1918 and section 250(d) of the Revenue Act of 1921, and not that period as extended by a waiver or consent, and that, therefore, the "period of limitation for assessment" expired on March 15, 1925. We can not subscribe to that view. We think that the clear and logical import of the language of section 280(b) of the Revenue Act of 1926 is that the words "period of limitation for assessment against*2215 the taxpayer" mean the period within which a valid assessment can be made against the taxpayer, and includes any extended period agreed *1002 upon in writing by the taxpayer and the Commissioner. This view was also expressed by the Circuit Court of Appeals for the Second Circuit in the case of . In that case the court said: Statutes of limitation barring the collection of taxes must receive a strict construction in favor of the government. Limitation will not be presumed, in the absence of clear congressional action. * * * The plain purpose of section 278 of the Act of 1926, as that of section 278 of the act of 1924, and section 250(d) of the Act of 1921, was to give the Commissioner additional time to assess taxes if he could obtain the consent of the taxpayer * * * it is perfectly consonant with the language of section 278(c) to say that the words "statutory period of limitation applicable thereto" were intended to include both the five years allowed to make the assessment where no extension had been agreed to, and the five years, plus the extended period, in case a waiver had been signed. Each period*2216 is "statutory" for the statute provides for them both. See, also, . The "period for assessment against the taxpayer" as we interpret that phrase, did not expire in this instance until March 1, 1926, and as the deficiency letters were mailed to the petitioners on October 1, 1926, they were timely and assessment against the petitioners as transferees is not barred. Judgment will be entered for the respondent.