Vitamin Co. v. Commissioner

VITAMIN COMPANY, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Vitamin Co. v. Commissioner Docket No. 24936. United States Board of Tax Appeals 21 B.T.A. 311; 1930 BTA LEXIS 1878; November 12, 1930, Promulgated *1878 Seymour Wells, C.P.A., for petitioner. C. H. Curl, Esq., for the respondent. PHILLIPS *311 Respondent has determined a deficiency in income and profits taxes for the period January 1 to June 30, 1920, in the sum of $924.77. The errors alleged are (1) failure of respondent to determine and *312 assess the tax within the limited period prescribed by the statute, and (2) his failure to determine the tax on the basis of the correct accounting period. The facts were stipulated. FINDINGS OF FACT. The petitioner is a corporation organized June 11, 1917, under the laws of the State of Utah. Its books of account were closed on December 31, 1917, December 31, 1918, and thereafter on June 30 of each year up to and including 1924. The petitioner filed its first income-tax return for the fiscal period commencing June 11, 1917, and ending December 31, 1917. The first return filed under the Revenue Act of 1918 was for the calendar year 1918; and calendar year returns were filed for the years 1919, 1920, 1921, 1922, 1923, and 1924. The income-tax return for the calendar year 1920 was filed with the collector of internal revenue at Salt Lake*1879 City on March 15, 1921. Under date of May 24, 1923, a revenue agent's report was submitted by the revenue agent in charge at Salt Lake City to the Commissioner of Internal Revenue covering an examination to determine the income-tax liability of the taxpayer for the calendar years 1918 to 1921, inclusive. The revenue agent's report disclosed deficiency in taxes for the calendar year 1919 in the amount of $147.46 and for the calendar year 1920 in the amount of $944.80. On September 7, 1923, the Commissioner issued a letter approving the revenue agent's report, and subsequently the taxpayer paid the additional tax set forth above. Under date of October 11, 1926, a revenue agent's report was submitted by the revenue agent in charge at Salt Lake City to the Commissioner of Internal Revenue, covering an examination to determine the income-tax liability of the taxpayer for the fiscal period commencing January 1, 1920, and ending June 30, 1920, and the fiscal year ended June 30, 1921. The revenue agent's report disclosed a deficiency in tax for the fiscal period ended June 30, 1920, amounting to $924.77, computed as follows: Total tax liability, fiscal period January 1, 1920, to June 30, 1920 $1,932.99 Tax paid on original (calendar year) return for 1920 $63.42 Additional taxes paid as set forth in letter from Commissioner dated September 7, 1923 944.80 1,008.22 Net deficiency 924.77 *1880 On January 7, 1927, the Commissioner mailed a notice of deficiency to the petitioner for the period January 1, 1920, to June 30, 1920, disclosing a deficiency in tax for that period of $924.77. The copy of *313 the notice of deficiency attached to the petition is a true copy of said notice. On February 2, 1920, the petitioner wrote the following letter to the Commissioner, which letter was received by the Commissioner: COMMISSIONER OF INTERNAL REVENUE, Washington, D.C. DEAR SIR: From the fact that a great deal of our business is pending at the end of the calendar year and very little is pending as at the end of June, we feel that we can render you a more accurate Income Tax Return by having our fiscal year end June 30th. It is our understanding that we should have permission from you to make such a change. Kindly let us know if this change will meet with your approval. Yours very truly, (Signed) THE VITAMIN COMPANY, By F. L. MONSON. FLM/VE. On February 12, 1920, the petitioner wrote the following letter to the collector of internal revenue at Salt Lake City: COLLECTOR OF INTERNAL REVENUE, Salt Lake City, Utah, DEAR SIR: We are in receipt*1881 of your Form 1120 to be filled in for calendar year 1919. Beg to advise that our fiscal year ends June 30th, and we will be pleased to make report after this date. Our returns therefore will include from period begun June 30th, 1919, and ended June 30th, 1920. Yours very truly, THE VITAMIN COMPANY, By Treasurer. RWC:R. On February 19, 1920, the Commissioner replied to petitioner's letter of February 2, 1920. The following is a true copy of the reply: IT:T:RR ABT THE VITAMIN COMPANY, Logan, Utah. SIRS: Reference is made to your letter of February 2, 1920, in which you request permission to change your accounting period, for the purpose of rendering your income tax returns, from the calendar year to a fiscal year, ending June 30, for the reason that you can render a more accurate income tax return by having your fiscal year end June 30, as there is very little business pending at that time. In reply you are advised that you are hereby granted permission to change your accounting period as the basis for filing your income tax returns from the calendar year to a fiscal year ending June 30th. On or before September 15, 1920, a separate return should*1882 be filed covering the period from January 1, 1920, to June 30, 1920. Thereafter returns must be filed on the basis of a fiscal year ending June 30th. *314 You should attach a copy of this letter to your return for the fractional part of a year as evidence of your authority for making the change. A copy is being sent to the Collector of Internal Revenue for your district. Respectfully, (Signed) G. V. NEWTON, Acting Assistant to the Commissioner. By S. ALEXANDER, Held of Division. On November 10, 1925, the petitioner sent to the collector of internal revenue for submission to the Commissioner, an application on Form 1128 for permission to change its accounting period for filing income-tax returns from a calendar year to a fiscal year ending June 30. On December 1, 1925, the Commissioner wrote the collector of internal revenue at Salt Lake City the following letter: IT:E:RR RCW COLLECTOR OF INTERNAL REVENUE, Salt Lake City, Utah: Reference is made to your letter of recent date enclosing an application from the Vitamin Company, No. 10 Commercial Block, Logan, Utah, requesting permission to change its accounting period and taxable year from*1883 the calendar year to the fiscal year ending June 30. It is noted that the taxpayer has for the past five years kept its books on the basis of a fiscal year ending June 30 and has filed returns on the basis of the calendar year. The taxpayer should be informed that Section 212(b) of the Revenue Acts of 1918, 1921 and 1924 provide that where the annual accounting period is a statutory fiscal year, returns are required to be filed on the basis of such accounting period. Inasmuch as the taxpayer's accounting period is a fiscal year ending June 30, it needs no permission to file returns on the basis of such accounting period, but is required under the law to do so. It will, therefore, be necessary for the taxpayer to amend its returns for the calendar years 1919, 1920, 1921, 1922, 1923 and 1924 by returns for the full fiscal years ended June 30, 1920, 1921, 1922, 1923 and 1924, respectively. Each return should be plainly marked "Amended Return" and accompanied by a statement setting forth the reason for the filing thereof. The should be transmitted through your office at the earliest practicable date, marked for the attention of IT:E:RR-RCW. The return for the calendar year*1884 1924 will not be accepted for audit. It should be replaced by the filing of an original return covering the full fiscal year ended June 30, 1925. Inasmuch as this return is now delinquent, it should be prepared from the best information available and filed with your office at the earliest practicable date accompanied by a statement to the effect that it is filed for the purpose of replacing a return erroneously filed for the calendar year 1924. By direction of the Commissioner. (Signed) C. R. NASH, Assistant to the Commissioner. crh - 7 Thereafter on or about May 5, 1926, the petitioner filed amended income-tax returns for the fiscal year beginning July 1, 1919, and ending June 30, 1920, and for the fiscal years ended thereafter on *315 June 30 for each year up to and including the year ending June 30, 1924. Amended returns were accompanied by a claim for refund in the amount of $658.24. OPINION. PHILLIPS: The assessment and collection of the deficiency are barred by the statute of limitations. ; *1885 ; . Although our decision in the last cited case was reversed by the ) our ruling on the point involved was affirmed. The filing of an amended return did not serve as a waiver or to extend the statute. ; . In view of the above it is not necessary to discuss the second error. Decision will be entered for the petitioner.