Wilkens & Lange v. Commissioner , 9 B.T.A. 1127 ( 1928 )

WILKENS & LANGE, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Wilkens & Lange v. Commissioner

Docket Nos. 10649, 29037.

United States Board of Tax Appeals

9 B.T.A. 1127; 1928 BTA LEXIS 4291;

January 10, 1928, Promulgated

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Assessment and collection of a deficiency determined by the Commissioner for the year 1920 is not barred by the statute of limitation.

William S. Hammer, Esq., for the petitioner.

D. D. Shepard, Esq., for the respondent.

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LITTLETON

The Commissioner determined a deficiency of $12,169.91 for the calendar year 1920. The first deficiency notice which was mailed within the five-year period of limitation through error stated this deficiency to be for 1919. Petitioner appealed to the Board from this deficiency notice stating that the notice "states a deficiency for 1919 (although 1920 is meant)." This petition was filed January 5, 1926. Thereafter, on May 21, 1927, the Commissioner mailed another notice of the same deficiency, stating it to be for 1920. Within 60 days petitioner filed an appeal based upon this deficiency notice. In the petition based upon the second deficiency notice petitioner alleged that the assessment and collection of the deficiency for 1920 had become barred on March 14, 1926. Subsequently petitioner, by amendment to its original petition based upon the first deficiency notice mailed November 25, 1925, claimed that assessment and collection of any deficiency for 1919 was barred.

The proceedings were consolidated and heard together upon the question whether the statute of limitation had barred assessment and collection of the tax.

FINDINGS OF FACT.

For some years immediately preceding 1920 a partnership known as Wilkens & Lange conducted a wholesale grocery business in Galveston, Tex. By a trust instrument effective January 1, 1920, this business was transferred and assigned to Alvin T. Lange, Henry Wilkens, and Ballinger Mills, as trustees, who continued to conduct the same character of business with principal office in Galveston, Tex.

The trust instrument provided that the capital of the organization should be represented by 2,000 shares of stock of a par value of $100 each; that a vote of a majority of the trustees would be controlling; shares to be transferable; officers to be elected and minutes of meetings to be kept. The organization was formed for the purpose of conducting a business enterprise, under corporate methods, and this was done. The articles of association, among other things, provided:

Under no circumstances, and in no event shall this instrument, or any of its provisions be deemed or constructed to create a partnership, nor anything except a fiduciary or trust estate. The rights and obligations of the certificate holders and the Trustees hereunder shall be construed in accordance with the law and decisions of the Commonwealth of Massachusetts. The accounts and books of the trust estate shall be open to the inspection of certificate holders at all reasonable times.

For the calendar year 1920, the petitioner, on March 15, 1921, filed a fiduciary tax return, executed by the vice president and treasurer, showing the items of gross income and the statutory deductions. In December, 1924, a deputy collector investigated petitioner's tax liability and executed a corporation income and profits-tax return for the calendar year 1920 in behalf of the petitioner under the provisions of section 3176, Revised Statutes, United States. This return was filed with the Commissioner and shows the gross income, deductions, net income and invested capital of the petitioner and the assets and liabilities at December 31, 1920.

On November 10, 1925, the Commissioner mailed to petitioner a notice of a deficiency in tax, stating in part:

An audit of your income and profits tax return for the calendar year 1919 has resulted in the determination of a deficiency in tax in the amount of $12,169.91, as outlined in Bureau letters dated April 3, 1925, and August 20, 1925.

This deficiency was in fact for the year 1920. The Commissioner's letters of April 3, 1925, and August 20, 1925, referred to in the deficiency notice showed this fact, together with the details of the computation of the deficiency.

The statement accompanying the deficiency notice likewise erroneously stated the deficiency as being for 1919 but referred to petitioner's brief dated October 17, 1925, concerning only the deficiency of which it had theretofore been advised for the year 1920, conference held in the Bureau, October 22, 1925, and the Commissioner's letters dated April 3, 1925, and August 20, 1925, all concerning the deficiency for 1920.

A duplicate of the deficiency notice mailed November 10, 1925, in the files of the Commissioner and in evidence in this proceeding is identical with the original mailed to the petitioner with the exception that the year 1919 has been changed to 1920.

In proceeding Docket No. 10649, instituted January 5, 1926, the petitioner stated in its petition filed with the Board that "The deficiency letter, copy of which is hereto attached, states a deficiency of $12,169.91 for the calendar year 1919 (although 1920 is meant)."

The Commissioner's answer filed with the above petition on February 24, 1926, "admits that the deficiency letter was mailed November 10, 1925, and states a deficiency tax for the year 1920 in the amount of $12,169.91; admits that the taxes in controversy are income and profits taxes for the calendar year 1920."

On May 21, 1927, the Commissioner mailed petitioner another deficiency notice stating in part:

The audit of your income and profits tax return for the calendar year 1920, disclosed a deficiency in tax in the amount of $12,169.91, as shown in the enclosed statement and in office letters dated April 3, 1925 and August 20, 1925.

The petitioner appealed from this notice and filed a petition with the Board on June 8, 1927, Docket No. 29037, in which the statute of limitation is pleaded.

The Commissioner's letter of April 3, 1925, referred to in the deficiency notices dated November 10, 1925, and May 21, 1927, related to the calendar year 1920 and contained a statement of a deficiency for the year 1920 in the amount of $12,169.91. This letter stated "An audit of your income tax returns for the years 1920 to 1923, inclusive, discloses a deficiency in tax amounting to $12,169.91 for the year 1920 as shown in the attached statement." It makes no mention of any tax for the year 1919. The Commissioner's letter to petitioner of August 20, 1925, stated "An audit of your income and profits tax return for the year 1920 has resulted in the determination of a deficiency in tax of $12,169.91 as shown in Bureau letter dated April 3, 1925." The statement attached to the deficiency notice showed the same as being for the year 1920 and, among other things, stated "that the deficiency in tax of $12,169.91, of which you were advised in Bureau letter dated April 3, 1925, is therefore sustained." Petitioner's brief dated October 17, 1925, referred to in the statement attached to the deficiency notice mailed November 10, 1925, relates only to the tax for 1920 and, in the matter of the income taxes of Wilkens & Lange for the year 1920, states "The above-named trust * * * has received from the Treasury Department a letter dated August 20, 1925, * * * in which it is stated our plea for special assessment under section 328 of the Revenue Act of 1918 has been denied."

On June 8, 1926, the petitioner and the Commissioner entered into the following written consent:

In pursuance of the provisions of existing Internal Revenue Laws, Wilkens & Lange, A Trust Estate, a taxpayer of Galveston, Texas 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 year 1920 under existing revenue acts, or under prior revenue acts. This waiver of the time for making any assessment as aforesaid shall remain in effect until December 31, 1927, and shall then expire except that if a notice of a deficiency in tax is sent to said taxpayer by registered mail before said date and (1) no appeal is filed therefrom with the United States Board of Tax Appeals then said date shall be extended sixty days, or (2) if an appeal is filed with said Board then said date shall be extended by the number of days between the date of mailing of said notice of deficiency and the date of final decision by said Board.

(Seal) WILKENS & LANGE,

Taxpayer.

BY ALVIN T. LANGE,

President.

D. H. BLAIR,

Commissioner.

OPINION.

LITTLETON: No deficiency has been determined by the Commissioner for the year 1919 and there is no allegation in the pleadings to that effect. The Commissioner erroneously stated in his deficiency notice mailed November 10, 1925, that the deficiency set forth was for the year 1919 but petitioner was not misled thereby. It filed a petition within 60 days for a redetermination and alleged that although the deficiency notice referred to 1919 the deficiency determined by the Commissioner was for the year 1920. On February 24, before the expiration of five years from the date petitioner filed its fiduciary return, if that return may be considered a proper return under the statute, which it is not necessary for the Board here to decide, the Commissioner filed his answer with the Board alleging that the deficiency appealed from was for the year 1920, and admitted the allegations of the petition to that effect. This answer was forthwith served upon petitioner by the Board by registered mail. We are of the opinion that assessment and collection of the deficiency for 1920 is not barred.

Reviewed by the Board.

Order restoring the proceeding to the calendar for hearing in due course will be entered.