Lorie v. Commissioner

E. J. LORIE, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. PHILIP GOLDENBERG, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Lorie v. Commissioner Docket Nos. 27526, 27527. United States Board of Tax Appeals 21 B.T.A. 612; 1930 BTA LEXIS 1825; December 10, 1930, Promulgated *1825 1. The constitutionality of section 280, Revenue Act of 1926, will not be considered in a proceeding brought by one against whom a liability as a transferee has been assessed. 2. Where an assessment for 1920 was made before the passage of the Revenue Act of 1924 and the statutory period for collection expired after its passage and before the enactment of the Revenue Act of 1926, the provision of the 1924 Act extending the period for collection to six years after assessment is inapplicable and the right to collection is not revived by the 1926 Act. 3. A transferee seeking to prove freedom from liability, on the ground that the liability of his transferor is barred by limitation, must establish a prima facie case, which ordinarily means proof of the filing of the statutory return and the expiration of the statutory period. 4. The evidence in this case is too indefinite to support a finding that the return, upon the date of filing which the petitioner relies to start that statutory period, is substantially the return required by the effective statute. Joseph R. Little, Esq., for the petitioners. B. U. Steele, Esq., for the respondent. STERNHAGEN*1826 *612 These proceedings involve petitioners' liabilities as transferees for deficiencies of $487.59 and $585 for the fiscal years ending April 30, 1920, and 1921, respectively, in income and profits taxes of Goldenberg & Lorie, Inc. Petitioners claim that the statute of limitations has barred collection. *613 FINDINGS OF FACT. Petitioners are individuals residing in New York City. Upon the dissolution of Goldenberg & Lorie Inc., a corporation, each of the petitioners received in liquidation of his stock in the corporation certain assets which had a value in excess of $1,072.59. The income and profits-tax return of the corporation for the fiscal year ended April 30, 1920, showing a tax of $12,442.28, was filed July 15, 1920. Additional assessments for 1920 against the corporation were made, $253.60 in September, 1921, and $250.40 in April, 1923. An income and profits-tax return of the corporation for the fiscal year ended April 30, 1921, was filed on or about July 15, 1921. A duplicate return for the same fiscal year showing a net income of $31,264.77 and tax of $7,931.27 was executed May 16, 1925, and filed on July 10, 1925, or later. An additional*1827 assessment of $585 for the fiscal year ended April 30, 1921, was made July 5, 1926. The respondent, on February 25, 1927, mailed to petitioners notice of transferee liability for said assessments. OPINION. STERNHAGEN: 1. The petitioners attack the constitutionality of section 280 of the Revenue Act of 1926 under which the Commissioner acted in determining their liability as transferees. But we may not entertain the issue thus presented, ; cf. , now pending in the Supreme Court on certiorari; and , certiorari denied, . 2. As to 1920, the additional assessments were made before the enactment of the Revenue Act of 1924; the five-year period for their collection expired July 15, 1925, Revenue Act of 1918 and Revenue Act of 1921, section 250; the extension to six years after assessment of the period of collection did not apply, ; and the subsequently enacted Revenue Act of 1926 did not purport to revive the right to collection, which had*1828 lapsed before the Revenue Act of 1926 was passed. There is therefore no liability of these petitioners in respect of the alleged deficiency of the corporation for the year ended April 30, 1920. 3. As to 1921, the evidence is unsatisfactory. Counsel for petitioner stated at the hearing that the only contention relied upon was that the liability of the taxpayer corporation, the transferor, was barred by limitation. He treated the stipulation that each petitioner had received $1,072.59 in liquidation as an admission of the liability of each as transferee. The burden to prove freedom from liability of the taxpayer is on the petitioner, Revenue Act of 1928, *614 section 602. He must make a prima facie case, which ordinarily means proof of the filing of the statutory return and the expiration of the statutory period; whereupon the respondent must go forward with countervailing proof. ; ; . But the return, upon the date of filing which the petitioner relies to start the statutory period, must be substantially the return*1829 required by the effective statute. For the year ended April 30, 1921, the Revenue Act of 1921 provided factors of income different from those of the Revenue Act of 1918 and, although a return under the former act was filed July 15, 1921, there is nothing from which it can be inferred that it showed facts and figures substantially in accord with the requirements of the Revenue Act of 1921. The so-called "duplicate return" in evidence which was filed July 10, probably in 1925, is entirely unexplained. If, as its designation as a duplicate might imply, it is a new copy of the first return filed nunc pro tunc, it indicates that the net income was over $25,000 and that $2,000 credit was taken. This was not a return under the Revenue Act of 1921. If it was a new return filed in an attempt to comply with the Revenue Act of 1921, the date of its filing in 1925 or later began the statutory period. ; cf. ; . Since the evidence as to this is so indefinite, it can not be said to establish prima facie that the statutory period has expired. *1830 As to 1921, the determination by respondent of the transferee liability of petitioners is sustained. Judgment will be entered under Rule 50.