Opinion
No. 41902.
June 1, 1936.
Fred E. Fuller, of Toledo, Ohio (Richard S. Doyle, of Washington, D.C., and George D. Welles and Harley A. Watkins, both of Toledo, Ohio, on the brief), for plaintiff.
John W. Hussey, of Washington, D.C., and Frank J. Wideman, Asst. Atty. Gen., for the United States.
Before BOOTH, Chief Justice, and GREEN, LITTLETON, WILLIAMS, and WHALEY, Judges.
Suit by the T.W. Warner Company, a Delaware corporation, against the United States.
Judgment for plaintiff in accordance with opinion.
This case having been heard by the Court of Claims, the court, upon the report of a Commissioner and the evidence, makes the following special findings of fact:
1. T.W. Warner Company (not the plaintiff) was incorporated on April 15, 1911, under the laws of the state of Indiana. Its place of business was at Muncie, Ind. It manufactured automobile transmissions and steering gears until November 17, 1919, at which time it leased all its physical property to the General Motors Corporation. This company will hereafter be referred to as the "Indiana corporation."
2. T.W. Warner Company, plaintiff, was incorporated on November 16, 1920, under the laws of the state of Delaware. Its place of business was at Toledo, Ohio. This company will be hereafter referred to as the "Delaware corporation."
3. On December 9, 1920, plaintiff, the Delaware corporation, purchased all of the assets and assumed all of the liabilities of the Indiana corporation, and on that date the title of all such property was transferred to plaintiff by a bill of sale. The Indiana corporation then became inactive. Payment for these assets was made by plaintiff issuing to the stockholders of record of the Indiana corporation one share of the stock of the Delaware corporation (plaintiff) in exchange for each share of stock of the Indiana corporation.
On January 22, 1921, plaintiff, T.W. Warner Company, by bill of sale transferred all the physical properties of said company to General Motors Corporation.
4. Subsequent to the sale of December 9, 1920, the Indiana corporation began proceedings looking to its voluntary dissolution. On January 16, 1921, the secretary of state of Indiana certified that the necessary steps to dissolution had been taken, and on September 10, 1921, the Indiana corporation was finally dissolved pursuant to the laws of the state of Indiana.
5. The name T.W. Warner Company was used occasionally by both the Indiana corporation and the Delaware corporation without clearly distinguishing identifications. T.W. Warner was the major stockholder, as well as president, of each of the corporations.
On December 9, 1920, the officers of the Delaware corporation were: T.W. Warner, president; Nettie M. Warner, vice president; and E.H. Witker, secretary and treasurer.
Prior to December 9, 1920, E.H. Witker was not a stockholder, officer, or director of the Indiana corporation, although he had been associated with that company for several years. On December 9, 1920, Witker became secretary of the Indiana corporation, and continued as such secretary until the company was dissolved. On December 9, 1920, the books and records of the Indiana corporation were transferred to the Toledo office of the Delaware corporation, and on December 10, 1920, the Delaware corporation opened an account in its name with the First National Bank of Toledo, Ohio.
6. On March 15, 1921, T.W. Warner Company filed on behalf of itself and its predecessor corporation an income and excess profits tax return for the year 1920 with the collector of internal revenue at Indianapolis, Ind., in which district the Indiana corporation had previously filed its return. The return covered the transactions of the Indiana corporation from January 1, 1920, to December 9, 1920, and the transactions of the Delaware corporation from December 9, 1920, to December 31, 1920, both inclusive. The return made no segregation of income of the two corporations. The return was executed under date of March 5, 1921, by "T.W. Warner, president," and "Edward H. Witker, treasurer." On March 5, 1921, T.W. Warner was president of both corporations, and on that day Edward H. Witker was treasurer of the Delaware corporation only. On March 5, 1921, Edward H. Witker was in Ohio, and T.W. Warner was in California. The return bore no corporate seal and was notarized in California. The heading on the return was as follows: "T.W. Warner Co., Toledo, Ohio, formerly Muncie, Indiana." On page 3 of the return, under the title "Predecessor business," appear the following unanswered questions: "16. Did the corporation file a return under the same name for the preceding taxable period? Answer `Yes' or `No' ____. If not, was the corporation in any way an outgrowth, result, continuation, or reorganization of a business or businesses in existence during this or the preceding taxable period? Answer `Yes' or `No' ____. If answer is `Yes,' give name and address of each predecessor business."
The return is of record as Plaintiff's Exhibit 9 and is by reference hereby made a part of this finding.
7. The tax return so filed on March 15, 1921, disclosed a total net income tax for the calendar year 1920 of $14,787.05, which amount was assessed and paid by the Delaware corporation to the collector of internal revenue at Indianapolis, Ind. It was paid in quarterly payments, the last payment, in the sum of $3,696.77, being made on December 15, 1921.
The payments were made by checks drawn on the First National Bank of Toledo, Ohio, and signed "T.W. Warner Company, E.H. Witker, secy. and treas." When these four checks were issued, E.H. Witker was secretary and treasurer of the Delaware corporation but was not such officer of the Indiana corporation. Entries reflecting the four payments were spread on the books of the Delaware corporation. The account on which the checks were drawn consisted of deposits of moneys payable to the Delaware corporation.
8. In August, 1923, a revenue agent examined the books and records of the T.W. Warner Company for the years 1917 to 1920, both inclusive. He recommended that deficiencies be assessed for the years 1917, 1918, and 1919, and, further, that an overassessment in the amount of $14,787.05 be allowed for the year 1920. A copy of the report was furnished attorneys for plaintiff. This report dated August 22, 1923, contained a statement that the assets and liabilities of the Indiana corporation were taken over by the Delaware corporation, and that the Indiana corporation was dissolved on September 10, 1921.
On August 1, 1924, the revenue agent again examined the books and records for the same years and recommended revised deficiencies for the years 1917, 1918, and 1919. His report again recommended the allowance of $14,787.05 as an overassessment for the year 1920. A copy of this report was furnished attorneys for plaintiff.
9. The Delaware corporation filed its income and excess profits tax returns for the calendar years 1920, 1921, 1922, 1923, and 1924, and paid its taxes to the collector of internal revenue at Indianapolis, Ind. — the same collector to whom the Indiana corporation had prior thereto made its returns and paid its taxes.
The Delaware corporation filed its income and excess profit tax returns for the calendar years 1925, 1926, 1927, and 1928, and paid its taxes to the collector of internal revenue at Toledo, Ohio.
The Delaware corporation filed its income and excess profits tax returns for the calendar year 1929 and each succeeding year thereafter and paid its taxes to the collector of internal revenue at Los Angeles, Cal.
On March 3, 1925, the unpaid tax accounts of T.W. Warner Company for the years 1917 to 1920 were transferred by the collector of internal revenue at Indianapolis, Ind., to the collector of internal revenue at Toledo, Ohio. On April 19, 1926, the unpaid accounts were retransferred to the collector of internal revenue at Indianapolis, Ind. On July 19, 1926, these unpaid accounts were again transferred to the collector of internal revenue at Toledo, Ohio.
10. There was originally assessed against the Indiana corporation on its return for 1917 the sum of $50,336.20. The Indiana corporation paid that amount on June 19, 1918. In 1919 an additional assessment of $10,629.65 was made for the year 1917, which sum the Indiana corporation paid soon thereafter. In March, 1924, an additional assessment of $166,810.50 was made for the year 1917. On April 8, 1926, of this latter amount the sum of $82,997.65 was abated. The Indiana corporation did not pay the balance, contending that it was barred by the statute of limitations. The assessment list opposite the sum of $166,810.50 and in the column headed "Remarks" indicates that "waiver" had been filed.
11. On February 7, 1923, T.W. Warner Company filed a waiver "irrespective of any period of limitations." It was signed "T.W. Warner Co.," and covered the year 1917. On January 18, 1924, T.W. Warner Company filed a waiver purporting to extend the statutory period applicable to 1917, in which appears the following language: "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."
The last-mentioned waiver was signed "T.W. Warner Company, Ind., by E.H. Witker, Secretary," and to it was affixed the seal of the Indiana corporation.
12. On April 5, 1924, the Indiana corporation, by letter, advised the collector at Indianapolis that it had been "dissolved some years ago." On April 9, 1924, the collector at Indianapolis in a letter to the attorneys for T.W. Warner Company stated that he had apprised the Department of the dissolution of the Indiana corporation. On September 17, 1924, the Indiana corporation executed its power of attorney over its seal to the law firm of Tracy, Chapman, and Welles, of Toledo, Ohio.
The law firm of Tracy, Chapman, and Welles, of Toledo, Ohio, or some one or more of its individual members, represented the Indiana corporation from some time in the year 1919 up to time of its dissolution, and has represented the Delaware corporation since its incorporation, November 16, 1920.
13. On March 3, 1926, the Commissioner of Internal Revenue approved the findings of the revenue agent for the year 1920, and executed Schedule of Overassessments No. I.T.A.-19451, which disclosed an overassessment in favor of T.W. Warner Company for the full tax assessment against it for the year 1920, to wit, $14,787.05. The Commissioner forwarded same to the Indianapolis collector, with instructions to determine whether that amount should be refunded or applied as a credit against any taxes due and unpaid.
On March 17, 1926, the collector at Indianapolis noted on Certificate of Overassessment No. 881112, which accompanied Schedule of Overassessment No. I.T.A.-19451 that the full amount of the overassessment was refundable. The collector on March 26, 1926, returned the schedule of overassessments to the Commissioner, in which the collector certified that the net amount of $14,787.05 should be refunded. On March 30, 1926, the collector transmitted to the Commissioner Schedule of Refunds and Credits No. I.T.R.-19451, which certified that the net amount of $14,787.05 was refundable to T.W. Warner Company for the taxable year 1920.
14. On March 15, 1926, T.W. Warner Company, the Delaware corporation, filed with the collector at Toledo, Ohio, a claim for the refund of $14,787.05 income and excess profits taxes. This claim bore no corporate seal; carried at its top "State of Ohio, County of Lucas, S.S."; was executed on March 12, 1926, in California; and was signed "T.W. Warner Co. T.W. Warner, prest."
On April 27, 1926, the Commissioner of Internal Revenue approved Schedule of Refunds and Credits No. I.T.R.-19451, which showed the refund for the year 1920 as $14,787.05, plus interest in the sum of $4,068.37, being a total of $18,855.42.
Under date of March 12, 1926, there appeared the following indorsement on the claim of T.W. Warner Company: "Refund allowed on I.T.A.-19451." It was the general practice in the Bureau of Internal Revenue to stamp on the face of claims for refund the schedule on which it was allowed.
On April 27, 1926, the Commissioner directed the disbursing clerk, Treasury Department, on Schedule of Refunds and Credits No. I.T.R.-19451, to make payment to T.W. Warner Company in the sum of $18,855.42, as shown thereon. On May 15, 1926, the disbursing clerk prepared and transmitted a check in that amount to the collector at Indianapolis, with instructions to deliver same to the taxpayer.
15. On May 20, 1926, T.W. Warner Company received at its office in Toledo, Ohio, a letter from the Indianapolis collector which was mailed pursuant to the direction of the Commissioner of Internal Revenue. This letter advised the T.W. Warner Company that the collector was holding a check drawn in favor of the T.W. Warner Company on account of an overpayment on tax per schedule I.T.A.-19451, in the amount of $18,855.42, and requested the company to state that there were no outstanding internal revenue taxes against it due and payable at his office or the office of any other collector of internal revenue, and to state whether it had taken credit in its income tax return filed during the current year for any amount representing an overpayment of tax on account of a prior year's account.
On June 12, 1926, after advising with its attorneys, T.W. Warner Company, the Delaware corporation, wrote the Indianapolis collector, in the name of the dissolved Indiana corporation, but on behalf of itself, the Delaware corporation, advising him that there were no outstanding taxes against the Indiana corporation which were not barred by the statute of limitations. The letter was signed as follows: "T.W. Warner Company (Indiana corporation) By E.H. Witker (last secretary)."
16. Inasmuch as the transcript of accounts forwarded by the Toledo collector to the Indianapolis collector reflected an outstanding deficiency of $94,846.29 for the year 1917, the Indianapolis collector refused to deliver Treasury check No. 891565 in the amount of $18,855.42 to T.W. Warner Company, but returned same under date of June 16, 1926, to the Accounts and Collection Unit of the Treasury Department.
17. On June 25, 1926, the Commissioner of Internal Revenue acknowledged receipt of the check, stating that the amount of the check would be deposited as a repayment to the appropriation on which it was drawn, and directed the Indianapolis collector to apply the principal amount ($14,787.05) of the tax overpayment, without interest, as a credit to the outstanding 1917 taxes of the Indiana corporation.
On June 28, 1926, the Indianapolis collector entered the sum of $14,787.05 on his books as a credit upon the deficiency assessed on March 10, 1924, for the year 1917. The Indianapolis collector physically changed Certificate of Overassessment No. 881112 from showing a refund of taxes in the amount of $14,787.05, and interest in the amount of $4,068.37, to show a credit of $14,787.05 against a tax liability for the year 1917. On July 28, 1926, the physically changed certificate was for the first time delivered to T.W. Warner Company. The total assessment was $166,810.50. Of this sum $82,997.65 had previously been abated. The application of the credit left an unpaid balance of $69,025.80.
On July 22, 1926, the Toledo collector forwarded to T.W. Warner Company, care of Tracy, Chapman, and Welles, a statement of taxes assessed against the Indiana corporation for 1917, showing the credit of $14,787.05. On July 26, 1926, Tracy, Chapman, and Welles protested to the Toledo collector against the right of defendant to so apply the $14,787.05. On November 3, 1926, Tracy, Chapman, and Welles again protested to the Toledo collector against the right of defendant to so apply the $14,787.05, asserting that the collection of the alleged additional tax was barred by the statute of limitations.
18. On November 4, 1926, the Commissioner of Internal Revenue issued a sixty-day deficiency letter to the Delaware corporation, as transferee of the assets of the Indiana corporation, proposing to assess against the Delaware corporation as such transferee a deficiency of $69,025.80, the unpaid balance of the deficiency assessment of $166,810.50 made in March 1924 against the Indiana corporation.
No suit or other proceeding for the collection of the additional 1917 taxes was ever instituted against the Indiana corporation, and no claim or demand was asserted and no assessment made against the Indiana corporation for the additional 1917 taxes prior to December 9, 1924.
On December 24, 1926, the Delaware corporation appealed to the United States Board of Tax Appeals from the proposed transferee deficiency assessment. On May 8, 1930, the Board of Tax Appeals held that the Delaware corporation as transferee was not liable for the proposed transferee deficiency assessment, for the reason that the alleged waivers were a nullity, and the assessment and collection of the alleged tax were barred by the expiration of the statute of limitations both as to the transferor, Indiana corporation, and the transferee, Delaware corporation. The United States formally acquiesced in the decision of the United States Board of Tax Appeals, and the proposed deficiency was abated on Schedule IT 40280, dated November 17, 1930.
19. On June 4, 1930, the attorneys for T.W. Warner Company requested the Indianapolis collector to return the amount of the overpayment, with interest, covering the calendar year 1920.
On June 12, 1930, the Indianapolis collector advised the attorneys that he had returned the check to Washington on June 16, 1926, and suggested they write the General Accounting Office at Washington, D.C.
On June 13, 1930, the attorneys wrote the General Accounting Office at Washington, D.C., requesting the remittance of the amount of the overpayment with interest.
On September 5, 1930, the General Accounting Office advised the attorneys that the check had been canceled and the proceeds thereof had been placed to the credit of an appropriation entitled "Refunding taxes illegally collected 1927 and prior years," that being the appropriation from which it had been drawn.
20. On November 10, 1930, the attorneys for T.W. Warner Company wrote the Indianapolis collector, requesting refund of the $14,787.05, plus interest. The letter contained the following sentence: "We also enclose herewith powers of attorney showing our authority to act for both T.W. Warner Company of Indiana, which was in business in 1917, and its successor and assignee, T.W. Warner Company of Delaware."
On January 23, 1931, these attorneys by telegram requested the Commissioner of Internal Revenue to reply to their letter of November 10, 1930.
On January 26, 1931, the Commissioner wrote the attorneys, advising them that the return for 1920 was under review and upon conclusion of same they would be advised.
On February 9, 1931, the Commissioner of Internal Revenue wrote the attorneys a letter reading in part as follows:
"An examination discloses that the 1917 tax liability to which the overassessment for the year 1920 was credited was held to be barred from collection on March 30, 1923. A further examination discloses, however, that your income tax return for 1920 was filed March 15, 1921. The schedule of overassessment allowing $14,787.05 was signed by the Commissioner of Internal Revenue April 27, 1926. This allowance was, therefore, barred by the provisions of section 284 of the Revenue Act of 1926 and could not, therefore, be legally made. In this connection your attention is called to the recent decision by the United States Supreme Court in the case of Boston Buick Company [United States v. Boston Buick Co., 282 U.S. 476, 51 S.Ct. 206, 75 L.Ed. 470]. Since your return for 1920 was due and, as a matter of fact, was filed on March 15, 1921, the certificate of overassessment approved by the Commissioner April 27, 1926, was not within five years from the due date of the return as required by section 284 of the Revenue Act of 1926.
"Your attention is, therefore, called to the fact that while the outstanding tax liability for the year 1917 against which the overassessment for the year 1920 was applied was barred from collection; the overassessment for the year 1920 was likewise barred from allowance. No portion of the above overassessment for the year 1920 is, therefore, allowable."
21. Pursuant to a request of the attorneys, conferences were held in the Audit Review Division of the Bureau of Internal Revenue on July 10, 1931, and August 13, 1931.
At the conference of July 10, 1931, they discussed the rights of the T.W. Warner Company, the Delaware corporation, to the refund of the overpayment for 1920, based on an account stated and upon the claim for refund.
On July 10, 1931, the Audit Review Division prepared a conference report on the conference, which was signed by the conferee, auditor, and chief conferee.
On July 29, 1931, the attorneys for the Delaware corporation sent a letter to the Commissioner of Internal Revenue, setting forth their views with respect to the claim for refund and payment of the 1920 overpayment, and on August 3, 1931, the Commissioner acknowledged the letter and advised the attorneys that careful consideration would be given to the same, and that they would be further advised relative thereto at the earliest practicable date.
On August 13, 1931, after considering the letter of July 29, 1931, from the attorneys for the Delaware corporation, the Audit Review Division of the Office of the Commissioner of Internal Revenue prepared a supplemental conference report in which there is discussed the timeliness of the allowance of the overassessment and overpayment for 1920, the claim for refund, and the account stated theory, and it was therein recommended that a further conference be granted with a representative of the general counsel's office present.
22. Shortly after August 13, 1931, the case was referred to the general counsel's office for review, and from August 22, 1931, to May 26, 1932, the general counsel's office reviewed the case and all papers in the case, including the claim for refund, and gave consideration to the contentions of the attorneys for the Delaware corporation that there should be refunded to the taxpayer the overpayment of income and excess profit taxes for the calendar year 1920, on the basis of an account stated, the implied promise to pay, and upon the merits of the claim for refund, and numerous and frequent conferences were had between the representatives of the general counsel's office and the attorneys for the Delaware corporation with respect thereto. The computation of the overassessment was not considered, but the fact that there was an overpayment for the year 1920 was conceded by the representatives of the general counsel's office, the only issue being whether the plaintiff was entitled to have it refunded.
23. On March 14, 1932, T.W. Warner Company, the Delaware corporation, filed its petition in the Court of Claims.
On May 26, 1932, general counsel for the Bureau of Internal Revenue advised attorneys for plaintiff that "After due consideration of the case it is deemed advisable for the Government to defend the action in the Court of Claims."
24. From May 26, 1932, to April 1, 1933, numerous conferences were held between attorneys for the Delaware corporation and the representatives of the general counsel's office. On July 7, 1932, a conference was held with representatives of the general counsel's office. At these conferences consideration was given to refund of overpayment of 1920 taxes on an account stated, on an implied promise to pay, and on the claim for refund theories.
On September 19, 1932, counsel for plaintiff filed a memorandum brief in re "Claim for payment of Certificate of Overassessment No. 881112, T.W. Warner Co., Toledo, Ohio, taxable year 1920, Schedule No. I.T.A.-19451." The brief contained the following language:
"The capital structure of the Delaware Company was identical with the Indiana Company, as was its assets and liabilities, so, that under the rulings of the Income Tax unit, what in fact occurred, in so far as income tax purposes are concerned, was a transfer of domicile of the corporation from the State of Indiana to the State of Delaware and a transfer of the main place of business of the corporation from Muncie, Indiana, to Toledo, Ohio.
"The books of the Indiana corporation and of the newly organized Delaware corporation are in possession of counsel for the plaintiff and disclose no interruption at the time of sale, each account being kept continuously in the same ledger following the transfer as before, the successor corporation utilizing the books of account and the records of the original corporation."
On April 1, 1933, the attorneys for plaintiff were advised that the Interpretative Division had finally prepared an adverse recommendation, addressed to the Civil Division, and transmitted the case back to the Civil Division for defense in the Court of Claims.
25. The Commissioner of Internal Revenue, by letter dated November 24, 1933, wrote one of the attorneys for plaintiff as follows: "Without admitting or conceding that the questions set forth in your letter were in any manner considered or agreed to be considered by any officer or representative of the government, you are informed that this office is advised that the General Counsel's office, after considering the case, deemed it unnecessary to refer the alleged claim for refund for the year 1920 to this office for consideration. This office sees no reason for considering the claim at this time."
On April 11, 1934, the Commissioner of Internal Revenue wrote one of the attorneys for plaintiff as follows:
"Please be advised that the alleged claim for refund improperly filed by T.W. Warner Company has never been officially rejected or allowed by this office.
"You are further advised that inasmuch as T.W. Warner Company has a suit pending in the United States Court of Claims seeking a recovery of the full amount claimed in the alleged claim for refund for the year 1920, it is deemed unnecessary and inadvisable for this office to take any action on the alleged claim, and accordingly this office respectfully declines to consider the alleged claim."
April 24, 1934, plaintiff filed herein its amended petition.
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 entitled to recover $14,787.05, with interest.
It is therefore adjudged and ordered that the plaintiff recover of and from the United States the sum of $14,787.05, with interest at 6 per cent. per annum as provided by law.
The findings in this tax case are many and in great detail. The court gives them because of the insistence of the parties that they are essential to the presentation of their respective contentions. The court is of the opinion that but one issue is involved, i.e., the validity or invalidity of the waivers filed extending the statute of limitations as to assessment and collection of the taxes hereafter set forth and discussed. This suit is for the recovery of an alleged overpayment of income and profits taxes for the calendar year 1920.
Two corporations must be referred to. The first one is the T.W. Warner Company, incorporated under the laws of Indiana on April 15, 1911, and having its place of business at Muncie, Ind., hereafter referred to as the Indiana corporation. The second one of precisely the same name, i.e., T.W. Warner Company, was incorporated under the laws of Delaware on November 16, 1920, and its place of business was Toledo, Ohio. T.W. Warner owned substantially all the stock in both companies, was the president of the Indiana corporation, and later president of the Delaware corporation.
On December 9, 1920, the Delaware corporation purchased all the assets of the Indiana corporation and assumed all its outstanding liabilities. The consideration for the sale was an even exchange of stock in the old company for stock in the new one. Subsequent to the sale, on September 10, 1921, the Indiana corporation was dissolved under the laws of Indiana.
March 15, 1921, the Delaware corporation filed its income and profits tax return with the collector of internal revenue at Indianapolis, Ind., for the calendar year 1920. This return disclosed the tax liability of the company by including the transactions of the Indiana corporation from January 1, 1920, to and including December 9, 1920, when it was acquired by the Delaware corporation, and the transactions of the Delaware corporation to the close of the year. The company stated its tax liability to be $14,787.05 and this sum was paid to the collector at Indianapolis.
In August, 1923, a revenue agent examined the books and records of the company for the years 1917 to 1920, inclusive. The agent recommended the assessment of deficiencies against the Indiana corporation for the years 1917, 1918, and 1919, and an overassessment in favor of the Delaware corporation for the year 1920 of $14,787.05. The Indiana corporation paid the original deficiency assessments. However, in March, 1924, an additional deficiency was assessed against the corporation for 1917 amounting to $166,810.50. Later the Commissioner abated $82,997.65 of this assessment, leaving an unpaid tax of $83,812.85.
Without going into additional detail, it is sufficient to state that the Commissioner, after executing his original schedule of overassessment of the Delaware corporation for 1920 and directing in the established manner the refund of the overpayment for that year to the corporation, upon later information as to the unpaid additional deficiency of the Indiana corporation for 1917 recalled the issued refund check for the overpayment, changed his records, and on November 4, 1926, issued a sixty-day deficiency letter to the Delaware corporation, assessing against it as transferee a deficiency tax of $69,025.80, i.e., the balance unpaid of additional deficiency tax of the Indiana corporation.
The Commissioner determined the additional tax due from the Indiana corporation by applying as a credit the overpayment of the Delaware corporation for 1920. The computation of the tax submitted to the plaintiff was as follows: Additional deficiency assessment against the Indiana corporation for 1917 of $166,810.50, less $82,997.65 abated, leaving an unpaid balance of $83,812.85. By the application of the $14,787.05 overpayment of the Delaware corporation for 1920, plaintiff's tax liability as a transferee was determined in the sum of $69,025.80.
December 24, 1926, the Delaware corporation appealed to the Board of Tax Appeals, and on May 8, 1930, the Board decided that the waivers filed by the taxpayers were invalid, and hence the Delaware corporation was not liable as a transferee for the payment of the tax. 19 B.T.A. 872. The Commissioner acquiesced in this decision but refused to refund to the Delaware corporation the $14,787.05 overpayment previously allowed it for 1920 on the ground that under section 284 of the Revenue Act of 1926 ( 44 Stat. 66) such a refund could not be lawfully allowed. The Commissioner, at the time he refused to refund the overpayment for 1920, expressly stated and called the attention of the taxpayer to the fact that the outstanding tax liability for the additional taxes for the year 1917 was barred from collection by the statute of limitations (Finding 20).
It is conceded that the additional deficiency assessment against the Indiana corporation for 1917 was barred by the statute of limitations unless a waiver executed by the company on February 7, 1923, extended the time for assessment beyond the period of March, 1924. Another waiver executed by the company on January 18, 1924, appears of record and is set forth in Finding 11.
The plaintiff contends that, irrespective of other available legal rights to recover a judgment for the tax involved, the decision of the Board of Tax Appeals holding both of the above waivers invalid, a decision from which the Commissioner did not appeal, is res adjudicata, and that the defendant may not attack the correctness of that decision collaterally in this court. The defendant insists that the decision is not binding on this court and is not res adjudicata.
The case of the Old Colony Trust Co. v. Commissioner, 279 U.S. 716, 49 S.Ct. 499, 73 L.Ed. 918, determined the jurisdiction of the Board of Tax Appeals, and the conclusiveness of its decision unappealed from. One quotation from this exhaustive opinion expresses the established rule of law. "The complete purpose of Congress to provide a final adjudication in such proceedings, binding all the parties, is manifest, and demonstrates the unsoundness of the objection." 279 U.S. 716, at page 727, 49 S.Ct. 499, 503, 73 L.Ed. 918. Since the decision in the Old Colony Case was announced, a long line of cases has arisen and we find no one case which seeks to apply a different rule.
In the case of Tait v. Western Maryland Railroad Co., 289 U.S. 620, 53 S.Ct. 706, 77 L.Ed. 1405, the Supreme Court held, quoting from the syllabus: "It will not be inferred that Congress, merely by adopting the scheme of annual tax periods, and without express declaration of purpose, intended to abolish the doctrine of res judicata in tax cases and thus to deprive Government and taxpayer of relief from redundant litigation of identical questions as to the liability of the same taxpayer under the same taxing provisions. United States v. Stone Downer Co., 274 U.S. 225 [ 47 S.Ct. 616, 71 L.Ed. 1013], respecting res judicata in tariff cases, distinguished."
It is not essential to review the numerous cases cited in the brief. The Revenue Act of 1926 enlarged the jurisdiction of the Board, and it has been repeatedly held that where a taxpayer resorts to the Board, the remedy available to both the taxpayer and the Commissioner in the event of an adverse holding is by way of appeal to the federal courts mentioned. Bankers' Reserve Life Co. v. United States, 44 F.2d 1000, 71 Ct.Cl. 279, certiorari denied 283 U.S. 836, 51 S.Ct. 485, 75 L.Ed. 1448. It may be that if the Board of Tax Appeals had had the decision of the Supreme Court in Helvering v. Newport Co., 291 U.S. 485, 54 S.Ct. 480, 78 L.Ed. 929, before it an entirely different judgment would have been reached, but there is nothing said in the case which warrants the existence of a collateral attack upon the Board's judgment, which became final when not appealed from. Art Metal Construction Co. v. United States, 13 F. Supp. 756, decided by this court March 2, 1936.
In Helvering v. Newport Co., supra, the parties pursued the statutory remedies, whereas in the Board of Tax Appeals case now challenged by the defendant the Commissioner acquiesced in the judgment and thereafter sought by his own interpretation of the statute of limitations, applicable to the allowance of an overpayment for a given year, to withhold from plaintiff the payment of the same. See section 284(d) of the Revenue Act of 1926. The case of Kieckhefer v. United States (Ct.Cl.) 8 F. Supp. 734, is clearly distinguishable from this case upon the facts found, and in addition to this the suit in the Court of Claims related exclusively to the years 1918 and 1920 and the suit before the Board of Tax Appeals related to the year 1919, and the taxable periods were not the same. See section 272(g) of the Revenue Act of 1928 ( 26 U.S.C.A. § 272 and note).
The plaintiff's refund claim was timely filed, and we are of the opinion that the court has jurisdiction.
The Board of Tax Appeals had before it the precise issue involved in this case. The same facts and the same tax adjustments made by the Commissioner are determinative of the issue in both cases, and in our opinion the decision of the Board became final and not open to collateral attack in this case.
The plaintiff is entitled to a judgment for $14,787.05, with interest as provided by law. It is so ordered.