Sargent v. Commissioner

ESTELLE B. SARGENT, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Sargent v. Commissioner Docket No. 20493. United States Board of Tax Appeals 22 B.T.A. 1270; 1931 BTA LEXIS 1976; April 22, 1931, Promulgated *1976 Held that the original return for the calendar year 1917, filed on May 16, 1918, by the husband of the petitioner, who was a resident of and domiciled in the State of New Mexico, in which he reported all the income of himself and wife (petitioner in this proceeding), and the wife filed no separate return, is the joint return required by law and that the statute of limitations began to run on the day following the filing of the original return, and its running can not be in any way affected or suspended by the later filing of amended returns. Belle R. Weaver,4 B.T.A. 15; Mrs. D. Sydney Smith,4 B.T.A. 385, followed. T. Keeley, Esq., for the petitioner. T. M. Mather, Esq., for the respondent. BLACK *1271 In this proceeding the petitioner seeks a redetermination of her income and profits-tax liability for the calendar year 1917, for which year the respondent has determined a deficiency in the amount of $13,543.28. The petition alleges (1) that the deficiency in tax is barred by the statute of limitations and (2) that the respondent, in calculating the amount of the proposed deficiency, has erred in failing*1977 to reduce it by the amount of $2,766.93, which he found to be assessable on petitioner's return filed in 1921 on the community property basis, and which was satisfied by reducing a refund due the husband of the petitioner. FINDINGS OF FACT. The petitioner is an individual residing at Chama, N. Mex. On or about May 16, 1918, the petitioner's husband, Edward Sargent, filed an income tax return for the calendar year 1917 in the District of New Mexico. Both the husband and the petitioner, his wife, had been for many years residents of and domiciled in Chama, N Mex. The original return of the husband included all the income received by him, as well as that of the petitioner as a member of the community existing by virtue of the laws of the State of New Mexico. The petitioner did not file a separate return. Petitioner had no separate property at the time of her marriage, nor has any separate property been acquired by her since. In the return of the husband, informatory questions 4 and 6 were answered as follows: 4. Were you on December 31, 1917, married and living with wife (or husband)? Yes. 6. How many dependent children under 18 (or mentally or physically incapacitated*1978 for self support) had you on December 31, 1917? One. No answers were given to questions 8, 9, 10, and 11, which read as follows: 8. Did your wife (or husband) or dependent children derive income from sources independent of your own? 9. If so, is such income included in this return? 10. If not, was such income from a separate estate? 11. If a separate return has been made by (or for) wife (or husband) give full name and address entered at head of this return. *1272 On August 18, 1921, pursuant to T.D. 3138, dated March 3, 1921, separate amended returns dividing the income of the community between the husband and his wife, the petitioner, were filed. The original return filed by the husband showed a tax of $9,168.27 and the separate returns filed on the community basis, which included the same income reported in the original return of the husband, showed the following tax: Husband $4,861.19 Petitioner 2,766.93 Total 7,628.12 The respondent made a refund of $1,540.15 to the petitioner's husband, which amount represented the difference between the amount of tax computed on the original return filed by the husband and*1979 the amended returns filed in 1921 by husband and wife. The notice of deficiency was mailed to the petitioner on August 26, 1926. OPINION. BLACK: The petitioner's principal contention is that the return filed May 16, 1918, by her husband was a joint return, and that the statute of limitations, in regard to both husband and wife, started to run with the filing of this return. The respondent takes the position that this return was not the return of petitioner, but that, on the contrary, the first return filed by her was the one reporting the same income on a community property basis, filed August 18, 1921, and that the deficiency letter mailed August 26, 1926, was timely. The respondent urges that on account of the husband's failure to state in the informatory questions on the return that it was intended as a joint return, it can not be so considered. There is no doubt from the record that the original return was made with the intention of including all the income from the marital community. The wife had no separate property and she did not earn any separate income during the taxable year. The fact that respondent was fully advised that the return filed by Edward Sargent, *1980 May 16, 1918, was a joint return of himself and wife, Estelle B. Sargent, is shown by certificate of overassessment to Edward Sargent, dated June 21, 1922, in which the Commissioner stated: An audit of your income tax return for 1917, Form 1040, and examination of related claim (if any), indicates that the amount of tax assessed to you for this year was in excess of the amount due: Your claim is based on the statement that you desire to take advantage of the privilege of filing returns on the community property basis in accordance with Treasury Decision 3138. An examination of the joint return shows a net income of $65,447.73 subject to normal tax and surtax, personal exemption of $2,200.00 and a tax liability *1273 of $9,168.27. Your amended return and the return filed by your wife on the community property basis each shows net income of $32,724.37 * * *. (Italics supplied.) The facts in the instant case are practically identical with those in Belle R. Weaver et al.,4 B.T.A. 15, except that in the Weaver cases the husbands reported that no separate returns were filed by the wives. We there said: *1981 The forms of returns filed on May 27, 1921, contain no facts concerning gross income or allowable deductions which were not contained in the returns made on March 15, 1919. The forms last filed purported only to divide the same gross income and the same allowable deductions equally between husband and wife in each case. Such forms of return are simply amendments of the original joint returns and relate back to and become a part of the original joint return. The Board has held in the Appeals of National Refining Co. of Ohio,1 B.T.A. 236; Mabel Elevator Co.,2 B.T.A. 517; and New York Trust Co.,3 B.T.A. 583, that amended returns, not being returns required by law, do not furnish a starting point for the running of the statute of limitations * * *. From a consideration of all the facts, we are of the opinion that the original return of the husband was a joint return and accordingly the rule laid down in Belle R. Weaver et al., supra, should be followed. See also *1982 Mrs. D. Sydney Smith,4 B.T.A. 385; Mrs. W. A. Turner,5 B.T.A. 1006; and Mrs. Fred W. Gooding,4 B.T.A. 388. Petitioner's plea of the statute of limitations against the deficiency asserted by respondent in this proceeding is sustained. In view of our holding that the proposed deficiency is barred by the statute of limitations, we are not called upon to decide whether the respondent has taken into consideration in making his computation the $2,766.93 which was deducted from the original payment of the husband. Decision will be entered for the petitioner.