Groves v. Commissioner

GEORGE S. GROVES, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Groves v. Commissioner Docket No. 87585. United States Board of Tax Appeals 38 B.T.A. 727; 1938 BTA LEXIS 831; October 6, 1938, Promulgated *831 1. During the taxable year a taxpayer made numerous withdrawals from and payments to a corporation of which he was president and 90 percent shareholder, later giving notes for the balance due, which he eventually paid in full with interest. Held, the withdrawals were not distributions of corporate profits, but loans. 2. Attorneys' fees paid by an individual taxpayer for services directly relating to his business activities, which were largely devoted to the conduct of numerous corporations themselves carrying on business, held deductible by him as ordinary and necessary business expenses. 3. At the end of the taxable year, a taxpayer, president of a corporation, instructed the bookkeeper to adjust the corporate books so that they would show as a loan salary which had been paid or credited to him during the year. Held, the salary was income taxable to him. 4. Amounts paid by a debtor taxpayer on a running account with his controlled corporation and not appropriated by the creditor to interest although other amounts were identified on its books as such, held not deductible by the debtor. 5. A taxpayer who knowingly receives an extension of time within*832 which to file his return and tells his secretary thereof is not relieved of a 25 percent addition to the tax for failure to file a return on the date specified by reason of his secretary's misunderstanding of the period of extension. Albert S. Lisenby, Esq., for the petitioner. Eugene G. Smith, Esq., for the respondent. STERNHAGEN *728 Respondent determined a deficiency of $89,023.78 in petitioner's income tax and a penalty of $22,255.94 for 1932. Petitioner assails (1) the addition to income of a distribution of corporate profits; (2) the disallowance of deductions for legal fees; (3) the inclusion in income of dividends not reported; (4) salary not reported and (5) other income; (6) the disallowance of a deduction claimed for interest paid and (7) contributions; and (8) the addition of 25 percent for failure to file his return on time. FINDINGS OF FACT. Petitioner is an individual, with office and principal place of business at 1335 Empire State Building, New York, New York. During 1931, 1932, and 1933 he was president and 90 percent shareholder of a corporation first called Franklin Management Bureau, Inc., and later called Domestic*833 Management Bureau, Inc., as herein it will be called. 1. During the years 1931 through 1933 petitioner had an account with the Domestic corporation entitled "Special a/c Receivable, George S. Groves", on which the balance shown as due from Groves January 1, 1932, was $102,594.54. During the calendar year 1932 the account showed gross charges of $134,098.44 and credits of $62,999.26. Included in these charges were: Wallace Groves, $8,000; Takoma Park office, $5,434.28; interest, $8,795.06; Wired Royal Bank of Canada, $14,000; S. C. Taylor, $350, an aggregate of $36,579.34, leaving $97,519.10 as charges "On Account." The credits were: Interest adjustment, $230.16; reimbursement funds wired, 9/19/32, $1,719.10; reimbursement fund advanced 9/13/32, $7oo; a cash payment of $15,000; interest adjustment, $1,000; an advance of $1,000 by Groves to Samuel Taylor, an employee; and $43,350 as credits "On Account." The $230.16 applies to a special account of Albert A. Sommerwerck, an employee, for advances made to Lillian Wallace. Among the credits on the account is $22,500 which was a cash dividend of $25 a share declared by Domestic, and credited on January 5, 1932. This was the only*834 dividend declared in 1932, and petitioner reported it as income on his tax return. Petitioner advanced $15,000 in cash to Domestic on February 20, 1932, and $10,000 on February 29, 1932, both without interest. The $10,000 was returned to him on March 3, 1932, and the $15,000 was credited to his account on December 31, 1932. The balance on February 29, 1933, was $180,108.15. There were no advances thereafter. There were interest charges regularly during 1933. From January 1 to December 31, 1932, petitioner advanced $5,195.25 to employees, on behalf of Domestic. *729 At a special meeting of the board of directors of Domestic held on February 17, 1932, the following resolution was adopted: RESOLVED, that the proper officers of this corporation be and are hereby authorized to loan to George S. Groves funds of this Corporation from time to time, and does hereby ratify all loans made to George S. Groves on open account. On March 1, 1932, the balance on Domestic's accounts due from petitioner was $88,760.36. Domestic's original income tax return filed June 15, 1932, for the fiscal year ended February 29, 1932, showed no notes receivable, but did show accounts receivable*835 of $133,548.84. On August 15, 1933, petitioner gave Domestic a 6 percent demand note, for $156,122.89, the balance then shown by Domestic's books as due. Each month regularly until September 1, 1933, he paid $780.60 interest in cash. On September 1, 1933, Domestic transferred the note to the Groves Holding Co., of which petitioner owned the shares, for 100 shares of its class A preferred stock of no par value, and the Groves Holding Co. set the note up on its books as an asset. Domestic carried the 100 Groves Holding Co. shares at $156,122.89. On February 28, 1935, the amount due on the note was reduced by the Groves Holding Co. to $121,822.50, by a credit of a $34,690.69 note of the Sevorg Corporation, which was endorsed without recourse by petitioner. The Sevorg note, dated February 22, 1935, was given to petitioner for 20,000 shares of common stock of the Phoenix Securities Corporation, at the list price on the New York Curb Exchange. On February 28, 1935, the $156,122.89 note was canceled, petitioner giving a new 6 percent note for $121,822.50. The Groves Holding Co. continued to hold the note and petitioner paid $609.11 interest on it every month. The note was then*836 transferred to the Reliance Industrial Bankers for 1,000 shares of its 7 percent $100 par value stock. The interest of $609.11 was paid regularly each month from March 30, 1935, through November 30, 1936, to the Reliance company. The deal with the Reliance company was canceled and the Groves Holding Co. reacquired the $121,822.50 note on November 30, 1936. Petitioner paid interest thereon regularly through December 22, 1937, when he paid the note. Domestic has not been dissolved or liquidated. On its later income tax return for the fiscal year ended February 29, 1932, Domestic reported as assets at the end of its taxable year notes receivable of $60,422.53, this being the balance due on petitioner's account, less $25,000, on account of the loans of $15,000 on February 20, 1932, and $10,000 on February 29, 1932, to Domestic by petitioner. On its return for the fiscal year ended February 28, 1933, Domestic reported as assets at the end of its taxable year notes receivable in the amount of $180,108.15, this being the balance due on petitioner's account. *730 2. During 1932 petitioner paid to his brother, Wallace Groves, a lawyer, $25,000 for services. He also paid*837 the law firm of Battle, Levy, Van Tine & Fowler $275 for services. Wallace Groves was employed by petitioner in January 1932, to perform services consisting of consultation and advice and other activities in connection with petitioner's business. During the year two proceedings in equity were instituted against petitioner and several of the corporations in which petitioner was interested. In connection with this litigation Wallace Groves performed substantial services in petitioner's behalf, reasonable compensation for which was $25,000. In connection with one of the suits petitioner consulted the law firm of Battle, Levy, Van Tine & Fowler, for which service he paid to that firm reasonable compensation of $275. 3. Petitioner owned 1,683 shares of the preferred stock of Personal Industrial Bankers, Inc. This ownership existed certainly as late as December 10, 1931. Thereafter, in 1932, petitioner continued to be the record holder of such shares. During 1932 Personal Industrial Bankers, Inc., paid four dividends of which petitioner received by checks issued to him by Personal Industrial Bankers, Inc., not less than $13,860.75. These checks were all deposited in petitioner's*838 personal bank account with the Bank of Manhattan Trust Co. The first check received in 1932 was for $4,628.25 for a dividend declared on December 19, 1931, to stockholders of record December 15. On December 10, 1931, Wallace Groves, George S. Groves, and Albert A. Sommerwerck constituted the entire board of directors of the Wagegro Corporation. Among the minutes of directors' meetings of that corporation is one of December 10, 1931, at 5:30 in the afternoon, at which it appears that: Mr. George S. Groves stated to the Board that he would be willing to sell 1683 shares of the Preferred stock of Personal Industrial Bankers, Inc., to the Corporation for $164,600. and would apply the same toward payment of obligations owed the Corporation. Thereupon, he submitted to the Board the following proposal: I will sell to you 1,683 shares of Preferred stock of Personal Industrial Bankers, Inc., a Maryland corporation, for $164,600. Please notify me immediately of your acceptance or rejection of this offer. Upon motion duly made, seconded and carried (Mr. George S. Groves not voting), it was RESOLVED, that the Corporation purchase from George S. Groves 1683 shares of the Preferred*839 stock of Personal Industrial Bankers, Inc. for $164,600. The $164,600 represented an amount shown on Wagegro's books as due to that corporation from George S. Groves. During 1932 petitioner continued to hold the Personal Industrial shares. On his 1931 income tax return no reference appears to any sale by petitioner of *731 Personal Industrial shares. On Wagegro's books appears a dividend account showing dividends of $4,628.25 as received upon 1,683 shares of Personal Industrial Bankers, Inc., on each of June 1, July 1, and October 3, 1932. 4. During 1932 the petitioner received from Domestic Management Bureau, Inc., $45,000 in cash and $15,000 by way of credits upon his running account, the entire $60,000 being salary when it was thus received. At the end of the year 1932 petitioner instructed the Domestic bookkeeper to adjust the corporation's accounts so as to reflect an obligation by him in this amount. This was done by an entry of $20,000 shown as "Four months salary paid to Mr. Groves to be charged to his personal a/c September, October, November, December", and another entry of $40,000 "to charge January 1932 to September 1932 salary to Mr. Groves' personal a/c. *840 " This amount of $60,000 appears on Domestic's books as part of the $134,098.44 charged to petitioner in 1932, referred to in issue No. 1 above. The board of directors of Domestic, consisting of petitioner, Edna Hilliard, the head bookkeeper, and Albert Sommerwerck, the secretary, on December 24, 1931, authorized salary for petitioner of $50,000 for the period March 1 to December 31, 1931, which had been paid. No specific authorization was made by the board of directors for salary to petitioner for 1932. Much of petitioner's time and attention during 1932 was occupied with the litigation referred to in issue No. 2. 5. The respondent's concession of error as to this item of $28,220 makes findings of fact unnecessary. 6. Of the charges made by Domestic in petitioner's running account, heretofore considered in issue No. 1, was "interest $8,795.06." Among the credits made to the account in 1932 were: Feb. 29 Interest: Geo. S. Groves Spec. a/c $1,000 To adjust interest on Mr. Groves' account to new basis. * * * July 16 Interest: a/c Rec.-Geo. S. Groves 230.16 Total up interest on Mr. Groves #2 a/c and Mr. A. A. Sommerwerck, credit $257.48 - 27.32 adj. as of May 31, 1932 230.16 *841 7. No evidence was introduced on this issue as to the petitioner's charitable contributions. 8. Petitioner filed a tentative return for 1932 with the collector of the third district of New York on March 31, 1933. He then asked for a 90-day extension to June 15, 1933, within which to file his return, *732 and the extension was granted. On June 14, through his secretary, he orally requested an additional extension of 30 days. This was then covered by a written request dated June 14, and in response thereto the following letter was received from the collector, dated June 21, 1933: Reference is made to recent request for a further extension of time to file income tax return for the calendar year 1932. An additional extension to September 15th, 1933, is hereby granted. Interest at the rate of 6% per annum is collectible. This is the FINAL EXTENSION and return must be filed on or before September 15th, 1933. Unless this letter is attached to your return when filed a penalty for delinquency will be assessed. Petitioner read this letter some time in June 1933, and noticed the date of expiration of the additional extension as September 15, 1933. His secretary*842 misunderstood his statement of the period of the extension and believed it to be until December 21. No return was filed on or before September 15. Petitioner began to prepare his return about December 19 or 20. He verified it on December 20 and filed it on December 21, 1933, together with the following letter to the collector: I enclose my personal income tax return for the year 1932, together with my check in amount $169.02 which covers the following: $130.43 Total tax for 1932 5.98 Interest from March 15 to December 20, 1933 32.61 Penalty - 25% delinquency I filed a tentative return originally and asked for an extension which was granted to September 15. However, I was under the impression that the extension was granted to December 31 of this year, and am, therefore, including penalty in my remittance. With the letter he sent his check for $169.02. Petitioner was absent from his office much of the time between June and December 1933. His failure to file his return before September 15, 1932, was not due to reasonable cause but was due to willful neglect. OPINION. STERNHAGEN: 1. The Commissioner, in the notice of deficiency, included in the petitioner's income*843 for 1932, $74,098.44, which he called "distribution of corporate profits." This figure is the remainder of the $134,098.44 charged to petitioner's account on the Domestic corporation's book, the other $60,000 being treated as salary and considered in a separate item. The Commissioner said: "There is no evidence to substantiate your contention that these drawings were loans; no notes or other evidence of indebtedness were given at the time the money was drawn; no interest was paid." He also gave as a reason for treating the $74,098.44 as distribution of profits, the assumed *733 fact that "the corporation has been liquidated", which was incorrect. In the present proceeding the petitioner has introduced substantial evidence which apparently was not before the Commissioner for consideration in determining the deficiency. It appears that in the taxable year 1932 the corporation declared and paid only one dividend, of which the petitioner received $22,500, or $25 a share. This the petitioner returned as dividend income, and it is not here in controversy. The Commissioner, however, argues that since petitioner was the president and controlling shareholder of the corporation, *844 his contention that these withdrawals were loans rather than distributions must be examined with the closest scrutiny. In this the Commissioner is unquestionably correct. The evidence has been carefully considered in conformity with this general doctrine. While the maze of corporations used by this petitioner as instruments of his complicated business makes it extremely difficult to distinguish between actual occurrences and the simulation of occurrences found in complicated bookkeeping accounts and intercompany fictions, we think the petitioner's evidence as to the $74,098.44 is sufficient to show that the respondent's determination is in error as to the entire amount. Clearly the $8,795.06 which was charged to Domestic as interest due from petitioner on the account can not under any circumstances be treated as an amount received by petitioner from the corporation. Several of the items were advances made by Domestic to its own employees on petitioner's account. The petitioner did, after 1932, cover the balance in the account by a note upon which there were regular interest charges. Ultimately the entire amount remaining of both the principal and interest seems to have been*845 discharged. It is true that the so-called payments and repayments consisted largely of intercompany transactions and credits; but they are, if believed, enough to support the petitioner's statement that the amounts charged to him were not by way of distributions, as the Commissioner has held, but were to be repaid, as the petitioner has treated them. The respondent's inclusion of $74,098.44 in the petitioner's income for 1932 is reversed. 2. The Commissioner disallowed a deduction by the petitioner of $30,275 as attorneys' fees, and the petitioner contests the disallowance. The petitioner now admits, however, that $5,000 thereof paid to Robb, Clark, and Bennitt was properly disallowed. The disallowance of the remainder is stated by the Commissioner to be based upon the ground that the amount paid was not an ordinary and necessary expense of carrying on trade or business, as the deduction is stated in Revenue Act of 1932, section 23(a), because the petitioner *734 was "not engaged in any trade or business as an individual." It is argued that the petitioner did not have a trade or business and that his income was entirely from salary, rents, and dividends. This is the*846 only ground which the respondent relies upon to support his disallowance. He raises no question that the attorneys' services were in fact performed, that they were paid for in the amounts stated, or that the amounts paid were reasonable compensation for the services so performed. It must be held, upon the evidence, that the petitioner was in fact actively engaged in business, notwithstanding that his activities were largely devoted to the conduct of numerous corporations which were themselves engaged in carrying on various small loan businesses. Even if petitioner had been but the active president of an operating corporation upon a salary, his activities would have been recognized as carrying on a trade or business within the meaning of the statute, (on review, C.C.A., 2d Cir.). Here the individual's activities went much further than the performance of services for a vusiness corporation at a salary, and included the protection and promotion of elaborate interests in various corporations represented both by shareholdings and by salary contracts. Although we can not give much weight to the testimony that Wallace Groves*847 performed substantial services in procuring for his brother service contracts of $25,000 and $15,000, respectively, with the Franklin Plan Corporation and the Community Finance Corporation, in view of the relation between petitioner and those corporations, there is in the evidence sufficient to support the petitioner's contention that the amounts paid both to Wallace Groves and the firm of Battle, Levy, Van Tine & Fowler were ordinary and necessary expenses paid by petitioner during the taxable year in carrying on his business and are therefore deductible. The Commissioner's determination is reversed. 3. The Commissioner, finding the $13,860.75 deposited by petitioner in his bank account and identifying it as dividends received from Personal Industrial Bankers, Inc., included it in petitioner's income as "dividends not reported, $13,860.75", and said that the claim that the shares have been sold to Wagegro, to which the dividends therefrom belonged, was not supported by sufficient proof of sale. The petitioner, assailing this, puts in evidence only the oral testimony of Wallace Groves and George Groves, together with a copy of the minutes of the board of directors of Wagegro*848 of December 10, 1931. Bearing in mind that the alleged transaction is claimed to have occurred between a corporation and its principally interested shareholder, involving shares of stock in a corporation in which the participants were likewise principally, if not entirely, the interested persons, it is again necessary, as in the earlier issue, that the evidence relied *735 upon by the petitioner to support his contention be subjected to close scrutiny. It appears in this record as well as in other proceedings before the Board and the courts, of which we may take judicial notice, 1 that this petitioner and his brother were, in carrying on their business, accustomed to account for their financial transactions with an intricacy of detail well-nigh overwhelming to one seeking to find the kernel of reality. In such a customary method of conduct one may reasonably be skeptical of the existence of a transaction said to involve $164,600 on the one side and 1,683 shares of stock on the other, the proof of which is not found in the records of the corporations which the brothers controlled, but is found in its most important parts only in the oral statements of the individuals. *849 It appears from the Wagegro minutes that George S. Groves "would be willing to sell" the 1,683 shares and Wagegro resolved to purchase them. These are not the words of a present sale, but leave entirely open the question as to when the proposed sale was to be consummated. One might expect from these persons a more definitive use of language to apply to a present sale. But failing that, it is not unreasonable to expect that the certificates would be endorsed and transferred at once had it been recognized that a sale was presently taking place. It is not shown that they were ever transferred. Failing that, one might expect that the transfer would have been effectively recorded upon the books of Personal Industrial Bankers, Inc., as soon as the next dividend was decided upon. All of these niceties of detail having been omitted, one might expect that the alleged "turning over" by George Groves of the dividends to Wagegro when paid by the Personal Industrial Bankers would have been*850 evidenced more clearly than by George Groves' oral statement that "when they [the dividend] did come to me, I promptly turned them over to Wagegro - the money, with the exception of the first dividend." Since the checks were substantial in amount and were deposited in George Groves' personal account in the bank, it is difficult to believe that he immediately "turned over - money", that is, currency, and, if not money, there is no evidence that he drew checks on his own account payable to Wagegro. While the absence of any one of these several steps would perhaps of itself not seriously weaken a taxpayer's claim, the cumulative effect of all of them may properly serve to do so. Lacking, therefore, the reasonable conviction, despite the oral statements of the petitioner and his brother, that the dividends actually received by petitioner belonged to or were actually transmitted to the Wagegro Corporation, as alleged, we have omitted to find this to be the fact. Since *736 petitioner in fact actually received the dividends in 1932, and was at the time the record owner of the shares upon which the dividends were declared, the Commissioner's determination that the amount of*851 $13,860.75 is within petitioner's income as dividends is sustained. 4. The Commissioner added to petitioner's income $60,000 as "salary not reported", which he said was received by petitioner from the Domestic Management Bureau, Inc. On the books of that corporation this amount appears in petitioner's account, considered in the first issue, in which $134,098.44 appears as the gross charges to the petitioner in 1932. As shown by the findings, this item of $60,000 was placed in the account at the end of the year 1932 at direction of petitioner, who controlled the operations of the corporation, in order to treat as loans the amounts which he had theretofore admittedly received as salary. It is not disputed by the petitioner that of this amount of $60,000 he actually received $45,000 in cash and was given credit in his running account of $15,000 as salary at the rate of $5,000 each for the months of January, February, and March. The point which the petitioner now makes in attacking the Commissioner's determination is that it was never intended that the corporation should pay him this amount as salary, and that his instruction to change the bookkeeping at the end of the year is*852 sufficient to characterize the amounts received as loans. There is, however, in our opinion, no support for this view either in fact or in law. The petitioner was an officer of the corporation and as such it may be reasonably supposed that he would be compensated. He had been compensated in 1931 in the amount of $50,000. In 1932 he continued to receive $5,000 per month and was apparently aware of the fact, although he says that he was so occupied with litigation that he did not realize it was being accounted for as salary. There is nothing in the evidence to show that he received the amount wrongfully or otherwise incurred any abligation to repay it, and his mere instruction to the bookkeeper at the end of the year to account for the amount as if it had been a loan is insufficient to establish such a legal obligation. The Commissioner's determination that the $60,000 should be included within the petitioner's 1932 income as salary is sustained. 5. The Commissioner included in petitioner's income $28,220, consisting of several items which the respondent held had not been satisfactorily explained to him by the taxpayer. At the trial, respondent's counsel conceded that the*853 inclusion of the amount in petitioner's income was erroneous. 6. The petitioner seeks a deduction of $7,564.90 as interest paid to Domestic on his running account. This figure is the remainder of $8,795.06 which had been charged as interest in that year. By reason of the two specific credits of $230.16 and $1,000, petitioner treats *737 only the remainder as interest properly deductible. His argument is that although the $7,564.90 can not be identified upon Domestic's books as interest, it must be so regarded upon the doctrine that, when both principal and interest are due on an account, unidentified payments on the account must first be appropriated to interest. This doctrine, however, is not applicable when from the circumstances it may reasonably be inferred that the parties did not intend such unidentified payments to be appropriated to interest. ; ; 21 Ruling Case Law 99, sec. 105; 48 Corpus Juris 662, sec. 119. The books of Domestic, it must always be remembered, were in the direct control of George Groves, and may therefore be said to reflect the intent of both the debtor and the*854 creditor. They show that both by way of charges and by way of credits to the account during the year in question and in subsequent years interest items were always identified as such, as were most of the other items. Some items which were not identified on the books have been shown in the testimony to represent adjustments of noninterest items. The books themselves, therefore, afford no support for the inference that any interest was paid. George Groves' testimony on the subject is of no greater weight than the books, if indeed it is of any weight whatever on this subject. He said, when asked whether interest upon his account was included in the $156,000 note given on August 15, 1933: Before I gave that note in 1932, I borrowed - I forget - I borrowed a large sum and I paid back a large sum and I paid interest on my account, as the books will show. Then when I gave that $156,000 note the board of directors held a meeting, they authorized me giving the note, the balance of that loan account with the note - the board of directors. Thus the witness appears to have no greater knowledge than what "the books will show"; and the books will show no payment of interest and only*855 credits of the adjustments of $1,000 in February and $230.16 in July. In 1933 they show several credits which are expressly called "interest." It seems reasonable, therefore, to believe that, if any payments made by the petitioner to Domestic in 1932 had been intended by the parties to the account to be applied against the interest charge, they would have been so designated by Domestic on its books. Under these circumstances it is not sufficient to support the deduction that if there had been a dispute between the parties any unidentified payments on the account might first have been treated as payments of interest. In summary, the evidence shows only that on Domestic's books petitioner was debited with $8,795.06 interest throughout the year and credited thereon with $1,230.16, and this is insufficient to justify a holding that the remaining $7,564.90 is to be regarded as paid by the petitioner, or *738 that the deficiency should be reduced on the theory that petitioner mistakenly failed to take the deduction on his return. 7. The Commissioner disallowed a deduction of $200 for charitable contributions, on the ground that there were no records to substantiate the deduction. *856 The petitioner introduced no evidence to support the allegation that such contributions were made, and in his brief explains the omission as de minimis. The disallowance by the respondent is therefore sustained. 8. The respondent added to the deficiency 25 percent under section 291, Revenue Act of 1932, 2 because of petitioner's failure to file his return within the time as extended. This time, as shown by the facts, expired September 15, 1933. The petitioner assails this determination and seeks to establish that the delay was "due to reasonable cause and not due to willful neglect." The evidence, however, does not support the contention. Petitioner himself not only saw the collector's letter when it arrived in June 1933, but was cognizant of the fact at that time that the period was extended only until September 15. No misunderstanding by his secretary will serve to excuse him from acting upon his own knowledge of this fact. It has been held frequently that the duty of filing a return is the personal duty of the taxpayer himself, and that he can not excuse himself from the proper performance of this duty because of the error of an employee. *857 ; ; ; certiorari denied, ; ; . This has been held when the taxpayer claimed to be unaware of the date when his return was due, and a fortiori it is true here when the taxpayer knew the date. A misunderstanding by an employee of the clear and unmistakable language of the collector's letter, or a misunderstanding by him of the statement of its contents made to him by the taxpayer, is not reasonable cause for failure to file the return, and for the purposes of the statute it may properly be regarded as willful neglect. The addition to the deficiency of 25 percent is therefore sustained. *858 Judgment will be entered under Rule 50. Footnotes 1. ; affd., ; ; Wagegro Corporation,↩ Docket No. 82077. 2. SEC. 291. FAILURE TO FILE RETURN. In case of any failure to make and file a return required by this title, within the time prescribed by law or prescribed by the Commissioner in pursuance of law, 25 per centum of the tax shall be added to the tax, except that when a return is filed after such time and it is shown that the failure to file it was due to reasonable cause and not due to willful neglect no such addition shall be made to the tax. The amount so added to any tax shall be collected at the same time and in the same manner and as a part of the tax unless the tax has been paid before the discovery of the neglect, in which case the amount so added shall be collected in the same manner as the tax. The amount added to the tax under this section shall be in lieu of the 25 per centum addition to the tax provided in section 3176 of the Revised Statutes, as amended. ↩