Docket No. 3274. | B.T.A. | Apr 16, 1926
Lead Opinion
TRUssell : Upon the record of facts admitted and proved as above set forth, the taxpayer rests its appeal.
Respecting the assessments for the years 1919 and 1920, it appears that on or about December 29,1924, the Commissioner made so-called jeopardy assessments for which the taxpayer filed claims for abatement but omitted the furnishing of a bond as required by section 279 (a) of the Revenue Act of 1924; that up to the date of the hearing of this appeal such claims had not been acted upon by the Commissioner nor had the taxes assessed been collected. Under similar statements of fact the Board has held in the Appeals of Oakdale Coal Co., 1 B. T. A. 773, and California Associated Raisin Co., 1 B. T. A. 1251, that the Board is without jurisdiction to consider and determine appeals, and, in accordance with the views of the Board as set forth in the cases just cited, the taxpayer’s petition,in so far as it relates to deficiencies asserted for the periods ended April 30, 1919, and April 30, 1920, is hereby dismissed.
As to the asserted deficiency for the period ended April 30, 1918, notice of which was conveyed to the taxpayer by a deficiency letter dated February 17, 1925, the taxpayer pleads both the statute of limitations as a complete bar, and the allegation that, during the time covered by the alleged deficiency, the taxpayer ivas affiliated with the American Naval Stores Co., and that under the consolidated return made for the two companies no liability to income and profits taxes could be’found.
The Commissioner has specificially admitted that, within 45 days after the 15th of March, 1919, a consolidated income and profits-tax return was made and filed for and on behalf of this taxpayer, together with the American Naval Stores Co. It thus appears that such consolidated return was filed with the proper collector not later than May 1, 1919, and that such return was made in accordance with the requirements of sections 239 and 240 (a) of the Revenue Act of 1918, and article 633 of Regulations 45, as first published, the same being Treasury Department regulations then existing respecting the making and filing of consolidated returns, which article is as follows:
*1221 When corporations abe affiliated. — Corporations will be deemed to be affiliated (a) when one domestic corporation owns directly or controls through closely affiliated interests or by a nominee or nominees substantially all the stock of the other or others, or (S) when substantially all the stock of two or more domestic corporations is owned or controlled by the same interests. The words “substantially all the stock” can not be interpreted as meaning any particular percentage, but must be construed, according to the facts of the particular ease. The owning or controlling of 95 per cent or more of the outstanding voting capital stock (not including stock in the treasury) at the beginning of and during the taxable year will be deemed to constitute an affiliation within the meaning of the statute. Consolidated returns may, however, be required even though the stock ownership is less than 95 per cent. When the stock ownership is less than 95 per cent, but in excess of 50 per cent, a full disclosure of affiliations should be made, showing all pertinent facts, including the stock owned in each subsidiary or affiliated corporation and the percentage of such stock owned to the total stock outstanding. Such statement should preferably be made in advance of filing the return, with a request for instructions as to whether a consolidated return should be made. In any event such a statement should be filed as a part of the return. The words “ the same interests” shall be deemed to mean the same individual or partnership or the same individuals or partnerships, but when the stock of two or more corporations -is owned by two or more individuals or by two or more partnerships a consolidated return is not required unless the percentage of stock held by each individual or each partnership is substantially the same in each of the affiliated corporations.
It thus appears that not later than May 1, 1919, there was made and filed, on behalf of this taxpayer and the American JSTaval Stores Co., a return which complied in all substantial respects with the provisions of law and the Department regulations then in force respecting the making of income and profits-tax returns. Such a return was the return required by law and the statute of limitations began to run on the day following the filing of such return. The date of the Commissioner’s deficiency letter in the instant case is more than five years after the filing of such return, and, in accordance with the views of the Board in the Appeal of F. A. Hall Co., 3 B. T. A. 1172, we are of the opinion that on February 17, 1925, the Commissioner was without authority to assess any deficiency in income and profits taxes for the taxpayer’s period ended April 30, 1918.
The testimony taken at the hearing has established the fact that the taxpayer paid to the collector of its district in March, 1919, the sum of $3,500 as and for income and profits taxes for the period covered by the calendar year 1918. It does not appear, however, from the record of this appeal that the Board has jurisdiction to make any finding as to the Commissioner’s duty in respect to accounting for the amount of such payment.
Order of redetermination will be entered on 15 days’ notice, under Bule 50.
Dissenting Opinion
dissenting: I am unable to concur in the foregoing opinion for the reason that section 239 requires every corporation to file a return. This is modified by section 240, which is applicable only to affiliated corporations. These corporations were not affiliated and it is not claimed in this proceeding that they were affiliated. • The fact that they considered that they were when the consolidated return was filed is not material. The taxpayer does not now contend that the action of the Commissioner in rejecting the consolidated return was not in accordance with law. Not coming within the scope of section 240, the corporations are required by section 239 to file a return. The taxpayer, not having filed a return as required by law, the period of limitation provided in section 277 (a) (2) does not have application. The limitation does not begin to run until a return as required by law is filed by the taxpayer.