Opinion
No. 43130.
Decided January 8, 1940.
Ellsworth C. Alvord and Floyd F. Toomey, both of Washington, D.C. (Alvord Alvord, of Washington, D.C., on the brief), for plaintiff.
George H. Foster, of Washington, D.C., and Samuel O. Clark, Jr., Asst. Atty. Gen. (Robert N. Anderson and Fred. K. Dyar, Sp. Assts. to Atty. Gen., on the brief), for defendant.
Before WHALEY, Chief Justice, GREEN, LITTLETON, WILLIAMS, and WHITAKER, Judges.
Suit by the Midpoint Realty Company, Inc., against the United States to recover an admitted overpayment of income taxes for the year 1924.
Judgment for the plaintiff.
This is a suit to recover an admitted overpayment of income taxes for the year 1924. The defendant defends on the ground that no claim for refund was filed within the statutory period. The plaintiff insists such a claim was filed and that it was a sufficient claim; and it also insists that, even if no valid claim were filed, that certain transactions between it and the defendant resulted in an account stated, and that a part of the amount for which it sues was paid less than four years prior to the statement of the account, and that for this reason it is entitled to recover this amount, in any event.
A stipulation of facts entered into by the parties is all the evidence introduced. On the basis of this stipulation the Court makes the following special findings of fact:
1. The plaintiff is a corporation organized under the laws of the State of New York, with its principal office and place of business in that State. During the calendar year 1924 the plaintiff was affiliated with and was a subsidiary of Salmon Realty Corporation (now known as the Woodside Improvement Company), a Delaware corporation.
2. On June 15, 1925, plaintiff filed a separate income tax return for the calendar year 1924 disclosing a total tax liability of $15,355.55, which was paid as follows:
On March 13, 1925 ........ $ 4,000.00 On June 15, 1925 ......... 3,677.78 On September 14, 1925 .... 3,840.00 On December 10, 1925 ..... 3,837.77 __________ Total ................. $15,355.55
On the same date, a consolidated return for the calendar year 1924, disclosing a total tax liability of $86,519.80, was filed by Salmon Realty Corporation for itself and various affiliated corporations, not including the plaintiff. Said amount was paid on or before December 10, 1925.
3. On June 9, 1927, the Commissioner of Internal Revenue requested information relating to the question whether the Salmon Realty Corporation and various of its affiliated corporations, including the plaintiff, were "affiliated" within the meaning of section 240(c) of the Revenue Act of 1924, 43 Stat. 288.
4. Pursuant to that request, on July 29, 1927, the Salmon Realty Corporation, for itself and its affiliated corporations, including the plaintiff, filed with the Bureau of Internal Revenue a statement, sworn to by Albert T. Hunter, Secretary of the Salmon Realty Corporation, in part, as follows:
"State of New York, County of New York, ss:
Albert T. Hunter, being duly sworn, deposes and says:
That he is Secretary of Salmon Realty Corporation; that he makes this affidavit as requested in and in reply to a letter addressed to the Salmon Realty Corporation, dated June 9, 1927, from the office of the Commissioner of Internal Revenue, Washington, D.C.
I. At least ninety-five per cent (95%) of the voting capital stock of the following corporations was acquired on the dates set opposite their names:
Midpoint Realty Co., Inc. — Prior to January 1, 1924.
Bryant Park Building, Inc. — Prior to June 1, 1925.
Hamilton Leasing Co., Inc. — Prior to June 1, 1925.
As to Midpoint Realty Co., Inc., through a misunderstanding this return was not included in our consolidated income-tax return prior to the year 1925; but we are now preparing a revised statement to be filed for the years 1922, 1923, and 1924, showing proper adjustment for its inclusion.
* * * * * *
(Signed) Albert T. Hunter.
Sworn to before me this 29th day of July 1927.
(Signed) R.M. Geiger."
5. Thereafter, the Commissioner of Internal Revenue determined that the plaintiff was affiliated with Salmon Realty Corporation and its various other subsidiary corporations for the calendar year 1924, and proceeded to determine the tax liability of the group for that year in accordance with section 240 of the Revenue Act of 1924.
6. As a result of the foregoing, on July 19, 1929, the Commissioner of Internal Revenue transmitted a letter to the Salmon Realty Corporation and its affiliated corporations, including the plaintiff, setting forth his determination of the correct income-tax liability of said corporations for the calendar year 1924 on the basis of treating the plaintiff as a member of the affiliated group of which the Salmon Realty Corporation was the parent. There was forwarded with said letter a statement showing that the correct tax liability of the plaintiff for the calendar year 1924 was $6,139.93; that the tax previously assessed was $15,355.55; and that there was an overassessment of $9,215.62. With that letter there was transmitted Form 866, being "Agreement As to Final Determination of Tax Liability."
7. Upon receipt of the above-mentioned letter of July 19, 1929, the officers of the Salmon Realty Corporation and its affiliated corporations, including the plaintiff, examined the same and found that the aggregate overassessment of $28,908.51 agreed with their own figures, but the aggregate of the "Tax Previously Assessed" and the "Corrected Tax Liability" as found by the Commissioner differed from their figures. On August 8, 1929, a conference was held at the Bureau of Internal Revenue, at which these differences were discussed.
8. The Commissioner of Internal Revenue adopted plaintiff's figures and on September 9, 1929, transmitted a letter to Salmon Realty Corporation and its various affiliated corporations, including the plaintiff, setting forth his determination of the tax liability of the affiliated group for the calendar year 1924. There was forwarded with said letter a revised statement showing that the correct tax liability of the plaintiff for the calendar year 1924 was $6,139.93; that the tax previously assessed was $15,355.55; and that there was an overassessment of $9,215.62. Said statement concluded as follows: "Certificates of Overassessment for the amounts shown above will be issued through the office of the Collector of Internal Revenue for your district, and will be applied by that official in accordance with the provisions of Section 284(a) of the Revenue Act of 1926, 44 Stat. 66." Said letter enclosed a new form of "Agreement as to Final Determination of Tax Liability" (Form 866).
9. Salmon Realty Corporation and its various affiliated corporations, including the plaintiff, duly executed and transmitted to the Commissioner of Internal Revenue by letter dated October 11, 1929, said form of "Agreement as to Final Determination of Tax Liability" (Form 866). Said letter read as follows:
"We return herewith duly signed, as requested in your letter of September 9, 1929 (Symbols IT:AR-D, Law), Form 866-CR, being agreement as to a determination of tax liability for this company and its subsidiary and affiliated companies for the years 1923, 1924, and 1925 in an aggregate amount of $271,031.94, with the understanding, however, that this agreement is not to be in any way effective unless and until approved by the Secretary or Under Secretary in accordance with the provisions of Section 606 of the Revenue Act of 1928 and also with the understanding that refund or credit will be made of the overassessments in the aggregate amount of $28,908.51, as set forth in the schedule accompanying the Department's letter IT: AR:D Law, of September 9, 1929."
This particular form was not approved by the Secretary of Treasury by reason of the fact that it was determined by the Commissioner that a different form should be used.
10. Thereafter, by letter dated September 11, 1931, the Commissioner of Internal Revenue advised Salmon Realty Corporation, and its various affiliated corporations, that the refund of certain of the overassessments set forth in said letter of September 9, 1929, including the amount of $9,215.62 overpaid by the plaintiff, was barred by the statute of limitations.
11. On June 5, 1933, a new Form 866 was mailed to the plaintiff based in part upon the determination of the Commissioner of Internal Revenue set forth in his said letter of September 9, 1929, that there was an overassessment of income taxes paid by the plaintiff for the calendar year 1924 in the amount of $9,215.62. Said form was duly executed by Salmon Realty Corporation and its affiliated corporations, including the plaintiff, Midpoint Realty Company, Inc., and was transmitted by a duly authorized agent of said corporations to the Commissioner of Internal Revenue by letter dated August 1, 1933.
12. On November 22, 1933, the Secretary of the Treasury approved the form of "Agreement as to Final Determination of Tax Liability" (Form 866) transmitted with said letter of August 1, 1933, approval thereof appearing on schedule 7037. Thereafter, the Disbursing Officer of the Treasury prepared a check drawn on the Treasury of the United States in payment of the full amount of $9,215.62 overpaid by the plaintiff Midpoint Realty Company, Inc., for the year 1924, as set forth in the Commissioner's letter of September 9, 1929, together with interest thereon as provided by law.
13. On receipt of said check for approval the Comptroller General disallowed $5,377.85 of the principal amount set forth in said letter of September 9, 1929, as an overpayment by the plaintiff for the year 1924, on the theory that a timely claim for refund had not been filed with respect to that part of said overpayment.
14. On February 9, 1934, the sum of $3,837.77, with interest thereon to January 23, 1934, was refunded to the plaintiff. Likewise, on February 9, 1934, the Commissioner of Internal Revenue mailed to the plaintiff, Midpoint Realty Company, Inc., a Certificate of Overassessment (No. 2286066; Schedule IT:51921), setting forth that the overassessment of the plaintiff for the calendar year 1924 was in the amount of $9,215.62, but that of such amount only $3,837.77 was refundable, refund of the remainder being asserted to be barred by limitation. No part of the balance of $5,377.85 has been refunded or credited to the plaintiff.
It is not controverted that the plaintiff overpaid its taxes for 1924 in the amount of $9,215.62. Of this amount $3,837.77 has been refunded, but the defendant denies liability for the balance on the ground that a timely claim for the refund thereof was not filed. Payments were made as follows: $4,000 on March 13, 1925; $3,677.78 on June 15, 1925; $3,840 on September 14, 1925, and $3,837.77 on December 10, 1925. To entitle plaintiff to recover, a claim for refund thereof must have been filed within four years from the date of payment, unless plaintiff's alternative position, later discussed, is correct. Section 284(b) of the Revenue Act of 1926, 44 Stat. 66.
The plaintiff says a certain affidavit made by the Secretary of the Salmon Realty Corporation, plaintiff's parent corporation, on July 29, 1927, set out in finding 4, was such a claim. If this be true, plaintiff is entitled to recover, because this was well within time; but it seems obvious to us this was not a claim for refund. It merely stated that the Salmon Realty Corporation owned at least ninety-five percent of the voting stock of certain corporations, including the Midpoint Realty Company, that the Midpoint Realty Company had not been included in the consolidated return through a misunderstanding, and that they were preparing a revised statement including it. There was not even a suggestion that this revised statement would show an over-payment of tax, much less a demand for a refund.
There was no written claim for refund filed until the letter from the Salmon Realty Corporation on October 11, 1929. (For letter see finding 9.) This was written more than four years after all the payments were made, save that on December 10, 1925. This payment made on December 10, 1925, has been refunded, as stated above.
It follows that plaintiff is not entitled to recover the other payments made, unless it is correct in saying that the Commissioner's letter of September 9, 1929, amounts to an account stated, this suit having been filed exactly six years after the date of this letter.
Previously, on July 19, 1929, the Commissioner of Internal Revenue wrote the Salmon Realty Corporation, plaintiff's parent corporation, a letter stating the "corrected tax liability" of all the companies to be $199,391.97, the "tax previously assessed," $228,300.48, and the overassessment, $28,908.51. He stated the "correct tax liability" of the Midpoint Realty Company to be $6,139.93, the "tax previously assessed" to be $15,355.55, and the overassessment to be $9,215.62. Upon examination of the Commissioner's figures, the Salmon Realty Corporation, acting for itself and others, including plaintiff, agreed on the aggregate overassessment, but disagreed with the Commissioner's statement of the "correct tax liability" and the "tax previously assessed" as to certain corporations other than plaintiff. It was thought that each had been understated by the same amount, so that when they should be revised the overassessment would remain the same.
In order to have these errors corrected, representatives of the plaintiff had a conference with the Commissioner's representatives on August 8, 1929, at which time the alleged errors were pointed out. Following that conference the Commissioner wrote the Salmon Realty Corporation on September 9, 1929, adopting plaintiff's figures. The letter of September 9, 1929, made no change in the "correct tax liability," the "tax previously assessed," or the overassessment of the Midpoint Realty Company.
The plaintiff says that on that date there was an account stated between the parties. We agree there was an account stated between them not later than that date. In fact, as to the plaintiff, we think there was an account stated on August 8, 1929, because on that date there was an agreement between them as to the account of the Midpoint Realty Company. Daube v. United States, 59 F.2d 842, 1 F. Supp. 771, 75 Ct.Cl. 633; Id., 289 U.S. 367, 53 S.Ct. 597, 77 L.Ed. 1261; Shipley Construction Supply Company v. United States, 7 F. Supp. 492, 79 Ct.Cl., 736. From all the facts it is apparent that the Salmon Realty Corporation did not disagree with the Commissioner's figures as to the plaintiff company, as set out in his letter of July 19, 1929. The Commissioner's figures in his letters of July 19, 1929, and September 9, 1929, were identical as to it. The Commissioner was undoubtedly notified of this agreement at the conference on August 8, 1929.
It is true that after receipt of the Commissioner's letter of September 9, 1929, the Salmon Realty Corporation replied on October 11, 1929, enclosing the "Agreement as to Final Determination of Tax Liability," and that its letter enclosing the agreement stipulated that "this agreement is not to be in any way effective unless and until approved by the Secretary or Under Secretary in accordance with the provisions of the Revenue Act of 1928 * * *." This letter was written more than four years after all payments were made except the one in December; but this was not the first time the taxpayer had assented to the Commissioner's statement as to the Midpoint Realty Company. This, as we have said, was on August 8, 1929. This date was prior to the expiration of four years from the date of the payment of $3,840 on September 14, 1925.
Nor can we say that the condition imposed by the letter of the Salmon Realty Corporation in its letter of October 11, 1929, that the agreement enclosed should not become effective until approved by the Secretary or the Under Secretary, prevented the account from becoming an account stated for lack of unequivocal acceptance by both parties. There was no disagreement as to the amount due the plaintiff, nor did the condition imposed express a disagreement as to the amount due. That condition related only to the circumstances under which section 606 of the Revenue Act of 1928, 26 U.S.C.A. § 1660, should become effective. That section made agreements between the taxpayer and the Commissioner, which were approved by the Secretary or the Under Secretary, final and conclusive, and prevented a reopening of the case for any cause by either the taxpayer or by the Government, except for fraud. Such an agreement is something more than an account stated, which may be reopened for mistake as well as fraud. We do not regard its execution as necessary to the consummation of an account stated. The essential elements thereof are an agreement between the parties on the statement of the account and a promise, express or implied, on the part of the debtor to pay the balance. There was such an agreement on August 8, 1929, and the taxpayer's letter of October 11, 1929, in our opinion, did not withdraw its assent thereto. Certainly it affords no justification for the Commissioner to refuse to fulfill his implied promise to pay the balance due as set out in his letters of July 19, 1929, and September 9, 1929, a duty cast upon him by statute. Section 284 of the Revenue Act of 1926.
It results that the plaintiff is entitled to recover the sum of $3,840. Judgment will be entered accordingly. It is so ordered.