Opinion
August 1, 1929.
James H. Hayes, of New York City (Alvah H. Combs, of New York City, of counsel), for plaintiff.
Charles H. Tuttle, U.S. Atty., of New York City (Leon E. Spencer, Asst. U.S. Atty., of New York City, of counsel), for defendant.
At Law. Action by the Parish-Watson Company, Inc., against Charles W. Anderson, individually and as United States Collector of Internal Revenue for the Third Collection District of New York. Decree for defendant.
Action at law to recover excess income taxes for the calendar year 1918, claimed to have been assessed and collected after expiration of the statutory period of limitation. Upon the trial, by stipulation, a jury of one was impaneled, and thereupon all of the facts were agreed, and motions made for the direction of a verdict in favor of each party. The facts are as follows:
On March 14, 1919, plaintiff filed with the collector its tentative return and estimate of corporation income and profits tax for the calendar year 1918, and on March 24, 1919, paid to the collector one-quarter of the tax estimated thereon. On June 16, 1919, plaintiff filed its complete return, and in November, 1920, filed an amended return for said year. On January 21, 1924, plaintiff executed and delivered to the Commissioner of Internal Revenue a waiver reading as follows:
"January 21, 1924.
Income and Profits Tax Waiver.
"In pursuance of the provisions of subdivision (d) of section 250 of the Revenue Act of 1921, Parish-Watson Co., Inc., of New York, N.Y., and the Commissioner of Internal Revenue, hereby consent to a determination, assessment, and collection of the amount of income, excess-profits, or war-profits taxes due under any return made by or on behalf of the said Parish-Watson Co., Inc., for the year 1918 under the Revenue Act of 1921, or under prior income, excess-profits, or war-profits tax acts, or under section 38 of the act entitled `An act to provide revenue, equalize duties and encourage the industries of the United States, and for other purposes,' approved August 5, 1909. This waiver is in effect from the date it is signed by the taxpayer and will remain in effect for a period of one year after the expiration of the statutory period of limitation, or the statutory period of limitation as extended by any waivers already on file with the Bureau, within which assessments of taxes may be made for the year or years mentioned.
"Parish-Watson Co., Inc. "[Signed] M. Parish Watson, Pres., "Taxpayer. "[Signed] D.H. Blair, "Commissioner."
On February 5, 1925, a notice of deficiency tax for the calendar year 1918 was mailed by the Commissioner of Internal Revenue to the plaintiff, and received by it, in which notice attention was called to plaintiff's right to file an appeal with the United States Board of Tax Appeals within 60 days. On March 26, 1925, plaintiff filed such an appeal, which was determined adversely to plaintiff by order entered December 29, 1925. On February 3, 1926, the Commissioner of Internal Revenue assessed an additional tax of $14,959.58 for the year 1918 on his special No. 3 list, notice of which assessment was thereafter received by the taxpayer from the collector. The taxes thus assessed were later paid, with interest, and, claim for refund having been rejected, this suit is brought to recover the payment made and collected pursuant to the assessment of February 3, 1926.
Computing the limitation period as extended by agreement for one year from the filing date of the tentative return — White, Collector, v. Hood Rubber Co. (C.C.A. 1st, June 25, 1929) 33 F.2d 739; Brandon Corp. v. Jones, Collector, (D.C.E.D.S.C., March 30, 1929) 33 F.2d 969; opinion of Gilbert, J., in Rasmussen v. Brownfield-Canty Carpet Co., 31 F.2d 89 (C.C.A. 9th) — it is apparent that within the extended period which by agreement of the parties was to expire March 14, 1925, notice of deficiency was given to the taxpayer pursuant to the act of 1924. Under the provisions of the Revenue Act of 1924 (sections 277, 278 [ 26 USCA § 1057, note, and section 1058 et seq.]) this notice and the taxpayer's appeal thereafter taken had the effect of further extending the time for assessment by the number of days between the notice and final decision by the board, and upon computation it appears that the assessment was made within the period thus extended.
But plaintiff insists that the 1924 act can have no effect in this case, because the time for assessment and collection fixed by contract between the parties could not be further extended by statute enacted after the date of the agreement. In support of this contention Hood Rubber Co. v. White (D.C.) 28 F.2d 54, is cited, but in that case the taxpayer did not appeal to the Board of Tax Appeals under the provisions of the Revenue Act of 1924.
A case which is precisely in point is Insley Manufacturing Co. v. Thurman, Collector (C.C.A. 7th, decided May 17, 1929) 33 F.2d 441. There it was held that an appeal taken by the taxpayer under the 1924 act had the effect of extending the time previously fixed by agreement of the parties within which an assessment could be made, and it was said, of section 277(b) of the 1924 act ( 26 USCA § 1057, note): "The section has application only when the taxpayer avails himself of the newly provided right of appeal to the Board of Tax Appeals, and in effect merely imposes a reasonable and necessary condition to the assertion of that right." This confirms the views expressed from the bench at the conclusion of the trial, and I am constrained to grant the defendant's motion and deny the motion of the plaintiff.
The parties may appear before me in room 3, twelfth floor, Woolworth Building, upon two days' notice, at which time a verdict will be directed accordingly.