Opinion
No. 42482.
June 1, 1936.
Francis R. Lash, of Washington, D.C. (Raymond A. Lash, of Washington, D.C., on the brief), for plaintiff.
J.H. Sheppard, of Washington, D.C., and Robert H. Jackson, Asst. Atty. Gen., for the United States.
Before BOOTH, Chief Justice, and GREEN, LITTLETON, WILLIAMS, and WHALEY, Judges.
Action by John Amicon against the United States.
Judgment for defendant.
This case having been heard by the Court of Claims, the court, upon the evidence adduced, makes the following special findings of fact:
The plaintiff, John Amicon, is now, and, at all times hereinafter mentioned, was a member of a partnership trading and doing business under the name of John Amicon Bro. Co., hereinafter referred to as the partnership, owning 50 per cent. interest therein. Said partnership was engaged in the wholesale fruit and produce business, having its principal office and place of business at Columbus in the state of Ohio.
On March 15, 1921, the plaintiff filed with the then Collector of Internal Revenue for the Eleventh District of Ohio his individual income tax return on form 1040 for the calendar year ended December 31, 1920, showing a tax due thereon of $1,385.61, which amount was paid in quarterly installments during the year 1921.
On March 15, 1922, plaintiff filed with the Collector of Internal Revenue his individual income tax return on form 1040 for the calendar year ended December 31, 1921, showing a tax due thereon of $1,101.90, which amount was paid in installments during the calendar year 1922.
Thereafter, the Commissioner of Internal Revenue caused to be made an examination of the books of account and records of the plaintiff and the partnership in connection with the audit of the plaintiff's returns for the years 1920 and 1921. By letter dated August 12, 1925, the plaintiff was advised of the result of this examination. Plaintiff thereupon protested the determination, and as a result thereof a supplemental examination was made, of which plaintiff was duly advised.
December 4, 1925, the Commissioner was notified by a letter written in behalf of the plaintiff that he consented to the assessment of a deficiency in tax aggregating $13,693.28 resulting from the report of the revenue agent set out in the preceding paragraph. On January 18, 1926, plaintiff was advised by the Commissioner that the supplemental report had been approved and that the determination showed a deficiency of $4,497.12 for 1920 and $9,196.16 for 1921, and that an aggregate deficiency of $13,693.28 would be immediately entered for assessment. These assessments having been entered on the February, 1926, list and approved March 6, 1926, a notice and demand for payment thereof was made by the collector March 22, 1926, and the plaintiff on May 15, 1926, filed an "Application for extension of time for the payment of a deficiency in tax under section 274(k) of the Revenue Act of 1926 [ 44 Stat. 57]." June 4, 1926, the collector received a letter on behalf of the plaintiff asking the privilege of making divided payments on the amount assessed during the next four months ensuing.
On July 6, 1926, the Commissioner advised the collector that said application would be approved on the filing of a surety bond by the plaintiff guaranteeing the payment of $15,681.82 on or before September 10, 1926, plus interest at the rate of 0.5 per cent. a month from March 22, 1926. About August 17, 1926, the plaintiff filed a bond accordingly in the sum of $16,000, conditioned upon the payment of the "deficiency in tax found to be due by the Commissioner, plus penalty and interest, in accordance with the terms of the extension granted."
Payments were thereafter made as follows:
------------------------------------------------------------- | Additional | | Additional Date paid | tax | Interest | Interest | | | ---------------------|-------------|----------|-------------- 1920 | | | Sept. 29, 1926 ..... | $4,497.12 | ........ | ............. Oct. 25, 1926 ...... | ........... | $5.85 | $159.14 | ----------- | -------- | ------------- Total ........... | 4,497.12 | 5.85 | 159.14 | =========== | ======== | ============= 1921 | | | Sept. 21, 1926 ..... | 5,000.00 | ........ | ............. Sept. 29, 1926 ..... | 502.88 | ........ | ............. Oct. 8, 1926 ....... | 2,500.00 | ........ | ............. Oct. 25, 1926 ...... | 1,193.28 | 1,982.69 | 385.24 | ----------- | -------- | ------------- Total ........... | 9,196.16 | 1,982.69 | 385.24 | | | -------------------------------------------------------------
The foregoing amounts of interest, to wit, $5.85, $159.14, $1,982.69, and $385.24, totaling $2,532.92, which were paid on October 25, 1926, were assessed by the Commissioner of Internal Revenue on the collector's October — 530140 — 1926 list, and approved by the Commissioner of Internal Revenue November 24, 1926.
On September 27, 1930, plaintiff filed a claim for refund, in the amount of $4,497.12 for the year 1920 and a claim in the amount of $9,196.16 for the year 1921. On July 24, 1931, the plaintiff was advised that the claims for refund were disallowed and that the disallowance appeared on a schedule dated July 24, 1931.
No contention is made that the claims for refund were not in proper form.
Conclusion of Law.
Upon the foregoing special findings of fact, which are made part of the judgment herein, the court decides, as a conclusion of law, that the plaintiff is not entitled to recover, and it is therefore ordered that his petition be dismissed.
Judgment is rendered against the plaintiff in favor of the United States for the cost of printing the record in this case, the amount thereof to be ascertained by the clerk and collected by him according to law.
The plaintiff seeks to recover the amount of certain deficiency assessments of income tax assessed against him for the years 1920 and 1921, together with certain items of interest that were also assessed against him on these deficiencies for the same years. His action is based upon the fact that no "sixty-day letter" was sent to him notifying him of the proposed assessment and his right to take an appeal to the Board of Tax Appeals, and also that the taxes in controversy were collected after the expiration of the applicable statutory period of limitation.
We are clear that the suit is without merit. While no "sixty-day letter" was sent, the plaintiff was notified that after audit of his books a deficiency had been found and would be entered for assessment. On March 6, 1926, the Commissioner approved the February, 1926, certificate and assessment list of the deficiencies in controversy for the years 1920 and 1921, and, upon notice and demand made March 22, 1926, by the collector to pay these deficiencies, the plaintiff filed an application for extension of time for the payment thereof. This application was granted by the Commissioner on condition that the plaintiff would file a bond guaranteeing payment of the deficiencies. Accordingly, on August 17, 1926, plaintiff filed a bond in the sum of $16,000 for the payment of these deficiencies, and in the latter part of 1926 paid the additional tax, with interest, which had also been assessed thereon.
It is not contended that the taxes in controversy were not assessed within the statutory period as provided by the 1926 act, and the plaintiff is in no position to object to their validity on the ground that he did not receive a 60-day letter. The statutory requirements in respect to this matter could be waived and while the plaintiff filed no formal waiver he did file what amounted to a waiver of the 60-day letter and his right to appeal to the Board when he filed his written consent to the assessment of the deficiency. Further, when the plaintiff was notified that the assessments had been entered in accordance with his consent and a notice and demand for payment thereof was made, he filed and obtained an extension of time and also the privilege of making divided payments on the amount assessed. It will thus be seen that the plaintiff not only advised the Commissioner that he agreed to the assessment, but further informed the Commissioner that he would pay it if given time, and he finally set a seal to this agreement by filing a bond for the payment of the tax.
In Thomaston Cotton Mills v. Rose (C.C.A.) 62 F.2d 982, it was held that the failure of the Commissioner to send a 60-day letter to the taxpayer was a mere irregularity of which the taxpayer could not complain after payment of the tax, and in Atkinson v. United States (D.C.) 4 F. Supp. 398, it was held that where the taxpayer was notified in writing of the deficiency assessment and the application of an overassessment for another year thereon, but took no steps to perfect any appeal to the Board of Tax Appeals, or to require the Commissioner to furnish the notice contemplated by the statute, and delayed until four years after to bring a suit on an implied contract for a recovery of the deficiency, he had waived any defect in failing to give the 60-day notice, and also that by consenting to the assessment had made a further waiver. The instant case is even stronger against the plaintiff than the one cited.
There is another matter which is fatal to plaintiff's right of recovery in this case. He filed a bond for the payment of the taxes in controversy and afterwards made payment as required by the bond. In many cases it has been held that where a bond has been executed in order to obtain time to pay an assessed tax, the tax must be paid after the delay has been enjoyed. See Maryland Casualty Co. v. United States (C.C.A.) 76 F.2d 626, and cases cited therein.
In United States v. John Barth Co., 279 U.S. 370, 49 S.Ct. 366, 367, 73 L.Ed. 743, it was held that: "The making of the bond gives the United States a cause of action separate and distinct from an action to collect taxes which it already had."
In the instant case, plaintiff paid the taxes assessed and therefore it was not necessary to proceed against the bond, but this does not alter the fact that the making of the payments was the condition of the bond. In Bryant-Link Co. v. Hopkins (C.C.A.) 47 F.2d 1068, it was held that the fact that the plaintiff paid the tax on demand and thus rendered a suit on the bond unnecessary did not affect the question of law decided in the John Barth Co. Case, supra, where it was held in effect that the taxpayer substituted for his tax liability his contract under the bond.
It is also contended on behalf of plaintiff that even if he cannot recover the taxes paid for 1920 and 1921 he is entitled to a refund of the interest paid thereon which was not assessed within the statutory period as a part of the tax and not collected within such period.
It has already been noted that in the John Barth Co. Case, supra, it was held that the taxpayer substituted for his tax liability his contract under the bond; and in the Bryant-Link Co. Case, supra, it was held (following the rule in the John Barth Co. Case) that the bond constituted an independent valid promise to pay the tax found by the Commissioner to be due. In the instant case the condition of the bond was that the plaintiff should pay the tax found to be due by the Commissioner, plus penalty and interest. The interest being covered by the bond, the same rules would apply with reference to its collection as have already been laid down with reference to the collection of the deficiencies in the taxes.
It follows that plaintiff's petition must be dismissed, and it is so ordered.