McDonnell v. United States

59 F.2d 295 | Ct. Cl. | 1932

LITTLETON, Judge.

This suit was instituted by the former partners of the dissolved partnership of McDonnell & Truda to recover $29,748.40, being excess profits tax of $24,863.28 for the calendar year, and interest of $4,885.12 thereon paid September 29, 1926. Refund claims were timely filed and were rejected within two years immediately preceding institution of this suit. It is alleged that the tax and interest were collected after the expiration of tile statute of limitation of five years, and this contention is predicated upon the claim that the partnership return of income, form 1065, filed April 1,193.8, was a sufficient compliance with the statute, and that, the filing of the excess profits tax return, form 1102, was not necessary.

Plaintiffs further insist that the invested capital of the partnership was nominal, and that it was taxable at 8 per cent, under section 209 of the Revenue Act of 1917.

The Commissioner of Internal Revenue held, and we think correctly, that the partnership was required to file a profits tax return, .form 1102, and that the balance sheet, which the partnership attached to its income tax return, form 10G5, was not a sufficient compliance with the statute and the regulations. The hooks and records of the partnership were examined and investigated by the Commissioner through a revenue agent, with the result that it was determined that the partnership actually had a large invested capital within the meaning of section 207 of the Revenue Act of 1917 (40 Stat. 306), and the facts establish that the partnership had more than a nominal invested capital. March 18, 3 923, the Commissioner made a jeopardy assessment of excess profits tax against the" partnership in the amount of $300,005.14. The partnership protested this additional assessment, and requested that the profits tax be computed and determined under the special relief provisions of section 210 of the Revenue Act of 1917. Upon the recommendation of the Committee on Appeals and Review, to which it was sent by the Commissioner after the claim of the partnership that the tax should be determined under section 209 of the Revenue Act of 1937 had been denied, the Commissioner tentatively computed the profits tax of the partnership under the special relief provisions, which, computation showed an overassessment of $75,141.86. Each change or proposed change in the partnership’s tax liability naturally affected the income tax liability of the individual partners, and was reflected in the determination of their taxes. When the jeopardy assessment of $100,005.14 was made against the partnership, overassessments were allowed the individual partners in the amounts of $9,500 each. When the jeopardy assessment was reduced to $24,863.28, an additional assessment of about $6,800 was proposed against each partner, Ultimately the tax liability of the partnership and the two partners was reconciled and closed out together.

Upon the facts in this ease, we are of opinion that the partnership of McDonnell & Truda was required to file an excess profits tax return, form 1102, and that in the circumstances the filing of the return of income, form 1065, was not a sufficient compliance with the statutes and the regulations. Updike v. United States, 271 U. S. 661, 46 S. Ct. 473, 70 L. Ed. 1138; Beam v. Hamilton (C. C. A.) 289 F. 9; Rockland & Rockport Lime Corp. v. Ham (D. C.) 38 F.(2d) 239; Morris County Crushed Stone Co. v. Com’r of Internal Revenue, 6 B. T. A. 800. Assessment and collection of the tax in question were not therefore barred at the time made. Lucas, Commissioner, v. Pilliod Lumber Co., 281 U. S. 245, 50 S. Ct. 297, 74 L. Ed. 829, 67 A. L. R. 1350; Updike v. United States, supra.

The petition is dismissed. It is so ordered.