Ethel D. Co. v. Commissioner

ETHEL D. COMPANY, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Ethel D. Co. v. Commissioner Docket No. 32032. United States Board of Tax Appeals 27 B.T.A. 25; 1932 BTA LEXIS 1138; November 8, 1932, Promulgated *1138 The deficiency asserted for 1919 is barred by the statute of limitations. M. K. Wild, Esq., Robert A. Littleton, Esq., and Vincent K. Butler, Jr., Esq., for the petitioner. F. R. Shearer, Esq., and E. L. Updike, Esq., for the respondent. LANSDON *25 The respondent has asserted a deficiency in income and profits taxes for 1919 in the amount of $54,498.50. The only issue pleaded by the petitioner is that at the date of the deficiency notice the statute of limitations had barred assessment and collection of the tax. FINDINGS OF FACT. The petitioner is a California corporation, with its principal office in San Francisco. On March 6, 1920, the petitioner filed what purported to be an income and profits tax return for the calendar year 1919 with the collector of internal revenue for the first district of California. The return was executed and acknowledged by C. J. Berry, president and J. R. Murphy, assistant secretary, of petitioner. J. R. Murphy held the official position of assistant secretary, although he performed duties of the treasurer or assistant treasurer as well as those of assistant secretary. The petitioner's treasurer, *1139 D. S. Ewing, was away from his office a great part of the time, and to facilitate the handling of petitioner's financial matters the board of directors, by resolution adopted at its meeting on October 11, 1917, authorized "J. R. Murphy its auditor" to sign checks on petitioner's bank accounts. Murphy prepared petitioner's financial statements and submitted them to the board of directors. All of petitioner's financial matters were handled by Murphy and Ewing, the latter giving most of his time to the duties of general manager of petitioner. The purported income tax return filed by petitioner on March 6, 1920, did not contain a balance sheet showing its affairs as of the beginning and end of the taxable year. Instructions contained in Form 1120, on which the return was made, specifically request the balance sheet. On or about April 1, 1925, the petitioner filed with the collector of internal revenue for the first district of California an undated waiver, hereinafter referred to as the first waiver, which provides *26 that the petitioner and the Commissioner of Internal Revenue "hereby consent to the determination, assessment and collection * * * irrespective of any period*1140 of limitations." The waiver was stamped as having been received in the Bureau of Internal Revenue on April 13, 1925. On that date a letter was mailed to petitioner inclosing a new form of waiver which the petitioner was requested to execute and return. On April 21, 1925, the petitioner mailed a letter to respondent which stated: This will acknowledge receipt of yours under date of April 13th in which you enclose waivers that you wish executed regarding tax returns for the year 1919. In harmony therewith you will find herewith enclosed waivers signed and executed. We did, however, on April 2nd, 1925, file a waiver for 1919 with the Collector of Internal Revenue of this district. The waiver inclosed, which is hereinafter referred to as the second waiver, provides that "this waiver of the time for making any assessment as aforesaid shall remain in effect until December 31, 1925, and shall then expire * * *." The above mentioned waivers were duly signed by the Commissioner and were retained in his file. The second waiver is stamped as having been received in the special assessment section of the income tax unit on April 28, 1925. The first waiver was received by that section*1141 on April 17, 1925. A notice of deficiency from which this appeal was taken was mailed to the petitioner on September 26, 1927. The deficiency notice contains the following statement: After careful review of your protest and of all the evidence in the case, the Bureau holds that the statute of limitations has not run as contended in your protest; that a waiver was executed by you, same being recorded in this office April 1st, 1925, whereby you consent to a determination, assessment and collection of the amount of income, excess profits or war profits taxes due irrespective of any period of limitation. OPINION. LANSDON: Petitioner contends that the return filed on March 6, 1920, was a sufficient compliance with the statute to start the running of the statute of limitations and that the statutory period as extended by the waivers filed expired on December 31, 1925, as provided in the second waiver. The respondent contends, first, that the document filed by petitioner on March 6, 1920, which purported to be an income tax return for the calendar year 1919, was not a sufficient return to start the running of the statute of limitations, and, second, that in any event the unlimited*1142 waiver filed with the collector of internal revenue on *27 April 1, 1925, was valid and effective at the time the notice of deficiency was mailed. The respondent's position is that the alleged return filed on March 6, 1920, was not sworn to "by the treasurer or assistant treasurer," as required by section 239 of the Revenue Act of 1918, and that the balance sheets as of the beginning and end of the taxable year were not attached to and made a part of the return as required by paragraph 14 of the general instructions accompanying Form 1120. The facts are clear that, while J. R. Murphy held the official position of assistant secretary and signed the return as such, he, in fact, was the person responsible for petitioner's financial matters. We think he was a proper person to execute and acknowledge the return along with the president of the corporation. , and . The facts presented here do not come within the language of the Supreme Court in *1143 . The court there held that the requirement of the Revenue Act of 1918, that returns of corporations shall be acknowledged, is not subject to waiver. In that case the return was unsupported by oath. Here the only irregularity is that the return is sworn to by the president and assistant secretary instead of the assistant treasurer, and we have found that to all intents and purposes the assistant secretary was the assistant treasurer. The petitioner does not explain why the balance sheets requested were not attached to the return, but shows that the respondent accepted and acted upon the return as made and that such return contained the essential facts relative to income and deductions. In our opinion the omission did not make the return void. It contained the basic facts upon which the respondent determined the deficiency involved and is sufficient, we think, to start the statute running. ; ; *1144 ; affd., ; ; and . The statute of limitations started to run on March 6, 1920, and under the provisions of section 250(d) of the Revenue Act of 1918 the respondent had five years from that date to assess and collect any additional tax found to be due. The statutory period expired on March 6, 1925. Thereafter, on April 1, 1925, the petitioner filed an unlimited waiver of the statute of limitations, which, being prior to the passage of the Revenue Act of 1926, was effective to revive and extend the statute which had theretofore tolled. ; ; . An unlimited *28 waiver extends the statutory period for a reasonable time, or until termination by either party upon reasonable notice. *1145 ; ; affd., ; certiorari denied, ; ; ; and . The second waiver, which was requested immediately upon receipt of the first, fixed a definite date for the termination of the statutory period and in our opinion was a reasonable and sufficient notice to effect a termination of the unlimited waiver as of that date. If the first waiver remained in effect after the execution of the second, the latter could have had no meaning. Since the respondent required the second waiver after his receipt of the first, it is clear that he must have intended that it should be substituted for the unlimited waiver, which we think was abrogated by the request for and the execution of the second waiver. The statute of limitations had run on September 26, 1927, and the respondent was barred from making any further determination with reference to petitioner's tax liability. Reviewed by the Board. Decision will*1146 be entered for the petitioner.