January 6, 1936.
J. Nelson Anderson, of Washington, D.C., for plaintiff.
J.W. Hussey, of Washington, D.C., and Frank J. Wideman, Asst. Atty. Gen., for the United States.
Before BOOTH, Chief Judge, and GREEN, LITTLETON, WILLIAMS, and WHALEY, Judges.
Action by the American Natural Gas Company against the United States.
Plaintiff seeks to recover $29,071.63 with interest, additional income tax and interest assessed for 1922 on January 21, 1928, and collected February 7, 1928.
Plaintiff contends that the period for assessment, as extended by a waiver, expired December 31, 1927.
Special Findings of Fact.
1. Plaintiff, a Pennsylvania corporation, filed a tentative return for 1922 on March 13, 1923, and filed its completed return for that year on April 25, 1923, within the time as extended, showing a tax of $78,852.07 which was paid in four quarterly installments during 1923.
January 27, 1927, plaintiff and the Commissioner of Internal Revenue signed a waiver for 1922 on form 872 (revised, October, 1926), waiving "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 1922 under existing revenue acts, or under prior revenue acts." A final paragraph in this waiver stated that "this waiver of the time for making any assessment as aforesaid shall remain in effect until December 31, 1927, and shall then expire."
2. December 7, 1927, the Commissioner of Internal Revenue mailed to plaintiff a deficiency notice under section 274 of the Revenue Act of 1926 showing his determination of a deficiency of $22,918.37 for 1922, which notice advised the plaintiff of its right to appeal to the United States Board of Tax Appeals within sixty days thereafter. This notice also contained the following statement: "Waiver, on file for the year 1922, expires December 31, 1927. * * * Due to the fact that the statute of limitations will presently bar any assessment of additional tax against you for the year 1922, the Bureau will be unable to afford you an opportunity under the provisions of the Treasury Decision 3867 to discuss your case before mailing of the formal notice of its determination as provided in section 274(a) of the Revenue Act of 1926 [ 44 Stat. 58]. It is therefore necessary at this time, in order to protect the interests of the Government, to issue this formal notice of deficiency." There was inclosed with this deficiency notice a waiver form under which plaintiff could indicate its acquiescence, in whole or in part, in the determination made by the Commissioner and consent to an immediate assessment. January 4, 1928, plaintiff executed this waiver of appeal to the Board of Tax Appeals and filed the same with the Commissioner January 7, 1928. This waiver, which was entitled "Waiver of Right to File a Petition with the United States Board of Tax Appeals," provided that: "The undersigned taxpayer hereby waives the right to file a petition with the United States Board of Tax Appeals under section 274(a) of the Revenue Act of 1926, and consents to the assessment and collection of a deficiency in tax for the year 1922 aggregating $22,918.37." A note appearing at the bottom of the above-mentioned waiver stated that: "This waiver does not extend the statute of limitations for refund or assessment of tax, and is not an agreement as provided under section 1106 of the Revenue Act of 1926, but its execution and filing at the address shown in the accompanying letter will expedite the adjustment of your income-tax liability as indicated above."
January 21, 1928, the Commissioner assessed a deficiency in the amount mentioned, together with interest of $6,153.26, and the total assessment of $29,071.63 was paid February 7, 1928.
3. January 16, 1930, plaintiff filed a claim for refund of $29,071.63 for 1922, as follows: "We attach hereto copy of waiver executed January 24, 1927, expiring December 31st, 1927, covering additional taxes for the year 1922. The amount of assessment was $22,918.37, plus interest $6,153.26, total $29,071.63 and this amount was paid under protest on February 7, 1928. We claim that as this assessment was made January 21, 1928, it was barred by the statute of limitations and therefore should be refunded, plus interest."
The Commissioner rejected the refund claim on May 23, 1930, giving as his reasons therefor the following: "This office concedes the provisions of the waiver but holds that in accordance with the provisions of section 277(b) of the Revenue Act of 1926 ( 44 Stat. 58) that the running of the statute of limitations was extended in accordance with the provisions of that section. A sixty-day letter was mailed under the date of December 7, 1927. Therefore, the running of the statute of limitations provided under section 277(b), or under section 278, on the making of assessment and the beginning of distraint or for the proceeding in court for collection in respect of a deficiency, was suspended for the period during which the Commissioner was prohibited from making the assessment or beginning distraint or a proceeding in court and for sixty days thereafter. This office holds, therefore, that the assessment and collection of the above amount were within the statutory period of limitations applicable thereto."
Section 277(a) of the Revenue Act of 1926 ( 44 Stat. 58) provided a limitation of four years after the filing of a return for the assessment of tax for 1922, and subdivision (b) of that section and section 278 provided that the limitation on the making of assessment and the beginning of distraint or a proceeding in court for collection in respect of any deficiency should, after the mailing of a deficiency notice under subdivision (a) of section 274, be suspended during the period for which the Commissioner was prohibited in making the assessment and the beginning of distraint or a proceeding in court and for sixty days thereafter. Section 278(c) provided that "where both the Commissioner and the taxpayer have consented in writing to the assessment of the tax after the time prescribed in section 277 for its assessment the tax may be assessed at any time prior to the expiration of the period agreed upon." Subdivision (d) provided that where the assessment had been made within the statutory period of limitation properly applicable thereto, the tax might be collected by distraint or a proceeding in court within six years after the assessment or prior to the expiration of any period for collection agreed upon in writing by the Commissioner and the taxpayer.
Plaintiff contends that, inasmuch as the Commissioner did not assess the deficiency on or prior to December 31, 1927, the expiration date of the waiver extending the statutory period of limitation, the mailing by him of a deficiency notice under section 274(a) prior to the expiration date of the waiver did not give him the period of one hundred and twenty days provided in section 277(b) for making the assessment. It is further contended that the Commissioner could have made a jeopardy assessment of the deficiency before the expiration of the limitation period of four years, as extended by the waiver to December 31, 1927, and that the provisions of section 274(a) prohibiting the assessment of a deficiency for sixty days after the mailing of the deficiency notice and the granting of an additional sixty days thereafter by section 277(b) are therefore not applicable.
Without the waiver filed by plaintiff the statutory period of limitation for assessing the tax would have expired April 25, 1927, but the mailing of a deficiency notice on or before that date would have given the Commissioner one hundred and twenty days additional within which to make the assessment, where no petition was filed with the United States Board of Tax Appeals. By the waiver executed by plaintiff and the Commissioner this period of four years was extended to December 31, 1927. However, the provisions of subdivision (b) of section 277 remained applicable to the period as extended, and, inasmuch as the Commissioner mailed a sixty-day deficiency notice under section 274(a) prior to the expiration of the period of limitation as extended by the waiver, he had one hundred and twenty days thereafter, or until April 5, 1927, within which to make the assessment. The assessment of the tax on January 21, 1928, was therefore timely. Loewer Realty Co. v. Anderson (C.C.A.) 31 F.2d 268, 269; Sunshine Cloak Suit Co. v. Commissioner, 10 B.T.A. 971, 977.
Whether a jeopardy assessment could or should have been made before December 31, 1927, was a matter for the Commissioner to determine, and we cannot say that his failure to make such an assessment deprived him of the additional period granted by section 277(b) within which to make a valid assessment after the mailing of the deficiency notice within the limitation period as extended. Cf. W.P. Brown Sons Lumber Co. v. Burnet, 282 U.S. 283, 286, 51 S.Ct. 140, 75 L.Ed. 343; Manz Corporation v. United States, 54 F.2d 177, 74 Ct.Cl. 5.
It was not necessary that the waiver extending the limitation period of four years to December 31, 1927, contain a provision that the running of the period of limitation, as extended, should be suspended for a period of one hundred and twenty days after the mailing of a deficiency notice under section 274, if no appeal was filed with the Board of Tax Appeals, or until the decision of the Board should become final if such an appeal was filed. These statutory provisions were applicable to the period as extended by the waiver; they became a part of the waiver and must be read into it, De Laval Steam Turbine Co. v. United States, 284 U.S. 61, 73, 52 S. Ct. 78, 76 L.Ed. 168, and any action by the Commissioner within such extended period had the same effect, in so far as his right to assess and collect was concerned, as if there had been no waiver and he had taken such action within the limitation period of four years after the return was filed. As was said by the court in Loewer Realty Co. v. Anderson, supra: "It is perfectly consonant with the language of section 278(c) to say that the words `statutory period of limitation applicable thereto' were intended to include both the five years allowed to make the assessment where no extension had been agreed to, and the five years, plus the extended period, in case a waiver had been signed. Each period is `statutory,' for the statute provides for them both."
We are of opinion that the tax sought to be recovered was timely assessed and collected.
The plaintiff is therefore not entitled to recover, and the petition is dismissed.