A. L. Wilson Co. v. Commissioner

THE A. L. WILSON COMPANY, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. A. L. Wilson Co. v. Commissioner Docket No. 19505. United States Board of Tax Appeals 24 B.T.A. 1056; 1931 BTA LEXIS 1560; November 30, 1931, Promulgated *1560 1. Assessment and collection of income and excess-profits taxes for the year in question are not barred by the statute of limitations. 2. Evidence held insufficient to entitle the petitioner to special assessment. George T. Adams, Esq., for the petitioner. L. W. Creason, Esq., for the respondent. MATTHEWS *1056 This is a proceeding for the redetermination of a deficiency in income and excess-profits taxes for the fiscal year ended January 31, 1918, in the amount of $1,661.02. The petitioner alleges first that the respondent erred in refusing to compute its tax liability in accordance with the provisions of sections 327 and 328 of the Revenue Act of 1918, and, second, that the assessment of the tax is barred by the statute of limitations. FINDINGS OF FACT. The petitioner is a corporation, organized in 1893 under the laws of the State of Florida, with its principal office at Quincy. It is engaged in the general merchandise business. During the fiscal year ending January 31, 1918, A. L. Wilson was president of petitioner; A. J. Key, vice president; H. J. Davis, treasurer; and A. L. Hinson, secretary. All of these officers*1561 were stockholders in the petitioner, Wilson owning about $10,000 par value of stock of the total $25,000 issued; Davis and Key, about $6,000 each; and Hinson, $3,000. Each of these officers was in charge of one branch of the merchandise business. They devoted all of their time to the business and did all the work except for that done by a few employees receiving very low salaries. The amount paid to these officers during the fiscal year as salaries was $4,800, each being paid a salary of $100 monthly. The sales for that year amounted to approximately $213,000. The petitioner usually bought from $35,000 to $75,000 worth of fertilizer to be sold during the fall, and in order to pay for this it was necessary to borrow money. Its borrowings averaged from $5,000 to $25,000. The petitioner gave its notes secured by the personal endorsement of its four officers for the money borrowed. The petitioner filed a corporation income and excess-profits tax return for the fiscal year February 1, 1917, to January 31, 1918, on *1057 March 30, 1918. On January 19, 1923, there was executed by the petitioner and D. H. Blair, Commissioner of Internal Revenue, and unlimited income and*1562 profits-tax waiver, in which the parties "hereby consent to a determination, assessment and collection of the amount of income, excess profits or war profits taxes due * * * for the years January 31, 1917 to 1920, inclusive, * * * irrespective of any period of limitations." On December 28, 1923, there was executed by the same parties an income and profits-tax waiver for the year ended January 31, 1918. This waiver was in effect for one year from the date executed. On February 22, 1924, there was executed by the same parties a waiver covering the fiscal years ended January 31, 1917, 1918 and 1919. This waiver provided that it was in effect from the date it was signed by the taxpayer for a period of one year after the expiration of the statutory period of limitations, or the statutory period of limitations as extended by waivers already on file. A waiver was executed by the same parties for the year ended January 31, 1918. This waiver provided that it should remain in force until December 31, 1925. It was not dated, but bore a stamp showing that it was received by the Special Assessment Section on March 31, 1925. On October 20, 1925, a waiver was executed by these parties*1563 which read in part as follows: In pursuance of the provisions of existing Internal Revenue Laws the A. L. Wilson Company, a taxpayer of Florida, and the Commissioner of Internal Revenue hereby waive 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 said taxpayer for the (years) Fiscal year ended 1/31/17, 1/31/18, and 1/31/19 under existing revenue acts, or under prior revenue acts. This waiver was effective until December 31, 1926. Beginning in 1922, or shortly prior thereto, up until the date of the deficiency notice, June 24, 1926, the petitioner was in correspondence with the various officials in the office of the Commissioner of Internal Revenue relative to the amount of tax to be assessed. On August 28, 1924, the petitioner received a 30-day letter from the Deputy Commissioner of Internal Revenue, asserting a deficiency in tax for the fiscal years ending January 31, 1918 and 1919. The total tax for the fiscal year ending January 31, 1918, was $7,084.98, of which the amount of $6,922.91 had been previously assessed, leaving the amount of $162.07 to be assessed. *1564 In a statement attached to this letter the writer set forth that the petitioner's application for *1058 the assessment of its profits tax as prescribed by section 328 of the Revenue Act of 1918 had been allowed and the tax was based upon a comparison with a group of representative corporations. On March 7, 1925, the petitioner wrote to the Commissioner of Internal Revenue requesting that its case be referred to the Solicitor of Internal Revenue. On June 24, 1926, the respondent mailed a deficiency notice to the petitioner asserting a deficiency for the fiscal years ending January 31, 1917, 1918, 1919 and 1920. The deficiency for the fiscal year ending January 31, 1918, was in the amount of $1,823.09. In a statement attached to this notice the action indicated in the letter dated August 28, 1924, with respect to the year 1918, was reversed, the respondent holding that the petitioner was not entitled to have its tax computed under sections 210 of the Revenue Act of 1917 and 328 of the Revenue Act of 1918. OPINION. MATTHEWS: We will first consider the petitioner's allegation that the assessment and collection of the tax for the fiscal year ended January 31, 1918, hereinafter*1565 referred to as the taxable year, is barred by the statute of limitations. The return was filed on March 30, 1918; hence, the statutory period for assessment and collection, unless otherwise extended by waivers, expired on March 30, 1923. (Sec. 250(d), Act of 1921.) The respondent, in order to show that the statutory period had not expired, has introduced a series of waivers, the terms and dates of which are fully set forth in our findings of fact. These waivers, if valid, clearly extended the statutory period for assessment and collection to December 31, 1926, which is later than the date of the mailing of the deficiency notice. The petitioner contends, however, that the waiver dated October 20, 1925, was not effective to extend the limitation period except as to a deficiency in the amount of $160.07, which was the amount determined to be due in the respondent's thirty-day letter of August 28, 1924. Counsel for the petitioner testified that about October 10, 1925, he had a conference with a Mr. Cavanaugh of the Solicitor's office relative to the year in question; that Cavanaugh asked him to have a waiver executed for that year for a deficiency of $162.07; that he wanted to have*1566 the tax assessed at once, but Cavanaugh thought it would be a big help if the Department could keep all the years in question in the same file and assess all the taxes at the same time; and that for this reason he had the corporation execute a *1059 waiver for the year "ended January 31, 1918, to cover the additional tax of $162.07 for that year." The waiver referred to, however, clearly provides for the waiving of 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 years ended January 31, 1917, 1918, and 1919. In the case of , the petitioner filed consents extending the statutory period for assessment and collection. While the last of these consents was in full force and effect, certain agents of the Commissioner requested further consents for the years 1918 and 1919, and prior years, stating that they were going to recommend the cancellation of the taxes outstanding, but that it was necessary to have the waivers executed and that if the petitioner would sign the waivers they would submit*1567 their report, which would undoubtedly be approved and would in effect relieve the petitioner from any additional liability for 1919 taxes. Relying upon this representation, a consent was executed covering the years 1919 to 1921 on the regular income and profits-tax-waiver form. The Commissioner later made a determination and assessed a deficiency in tax for the year 1919. In holding that the assessment was not barred by the statute of limitations, we said: * * * The petitioner contends that the agents represented to their secretary, the corporate officer who, for the petitioner, executed the consent of October 19, 1925, that consents were not desired for the years 1918 and 1919, but that inasmuch as the agents did not have with them sufficient blanks to prepare a consent for each year one blanket consent would be given which would enable the Commissioner to straighten out deficiencies for all years 1909 to 1921, inclusive. It is further contended that the agents represented that they were recommending to the Commissioner that the petitioner's claims for the years 1918 and 1919 be allowed and that they would undoubtedly be allowed and that the taxes assessed against them for those*1568 years would be abated. The consent bearing date of October 19, 1925, makes no reference to such an understanding. It does not except from the period of years covered by the consent the years 1918 and 1919, which could easily have been excepted if the agents or the petitioner had desired to except thereto. A properly executed instrument in writing must be considered to express the intent of the parties signing the same. It is a well established rule of the common law, which has been embodied in statutes in a number of states, that when any * * * contract, agreement, or undertaking has been reduced to writing, and is evidenced by a document, or series of documents, the contents of such documents cannot be contradicted, altered, added to or varied by parol or extrinsic evidence. (22 C.J. 1070). *1060 The authorities giving expression to the principle are so many as to prohibit any attempt at selective citation. See ; ; *1569 ; ; . In , the Supreme Court said: In the absence of fraud, accident, or mistake the rule is the same in equity as at law, that parol evidence of an oral agreement alleged to have been made at the time of drawing, making or indorsing a bill or note cannot be permitted to vary, qualify, or contradict, or to add to or subtract from, the absolute terms of the written contract. . (Italics supplied.) See also ; J. W. Solof, 1. B.T.A. 776; . The findings of fact state the circumstances under which the consent of October 19, 1925, was given. We think, however, that that evidence is not competent to vary the terms of the consent given. * * * The instant proceeding presents a somewhat similar situation. The testimony of counsel for the petitioner can not change the terms of the waiver which clearly extends the period*1570 for the assessment of the tax. The respondent has the right at any time prior to the expiration of the statutory period of limitations to increase the amount of tax proposed to be assessed. . The assessment and collection of the tax for the taxable year are not barred by the statute of limitations. With regard to the remaining assignment of error, that the respondent erred in refusing to grant special assessment, we are of the opinion that the evidence is insufficient to establish the petitioner's claim. Counsel for the petitioner argues that the petitioner is entitled to relief upon the ground of abnormality caused by inadequate salaries paid to officers and by the fact that it borrowed money. The only evidence is the testimony of Key, vice president of petitioner, to the effect that he was told by others that the salaries paid was less than those paid by other similar concerns and that it was necessary for the petitioner to borrow money. There is absolutely no evidence that there was an abnormality, and clearly the petitioner is not entitled to special assessment. Judgment will be entered for the respondent.*1571