*762OPINION.
Ivins:1We believe the decision of the division dismissing this appeal to have been erroneous. The basis of that decision was the proposition that there was no “ deficiency ” in tax involved, but that the Commissioner had merely rejected claims in abatement and proposed to collect the taxes shown on the taxpayer’s returns to be due. A “ deficiency,” as defined by section 273 of the Revenue Act of 1924, is:
(1) The amount by which the tax imposed by this title exceeds the amount shown as the tax by the taxpayer upon his return; but the amount so shown on the return shall first be increased by the amounts previously assessed (or collected without assessment) as a deficiency, and decreased by the amounts previously abated, credited, refunded, or otherwise repaid in respect of such tax; or
(2) If no amount is shown as the tax by the taxpayer upon his return, or if no return is made by the taxpayer, then the amount by which the tax exceeds the amounts previously assessed (or collected without assessment) as a deficiency; but such amounts previously assessed, or collected without assessment, shall first be decreased by the amounts' previously abated, credited, refunded, or otherwise repaid in respect of such tax.
*763The determination of a deficiency involves two elements: (1) The tax — that is, the correct tax — and (2) the amount shown as the tax Toy the taxpayer upon Ms return, or the fact that no amount is shown by the taxpayer upon' his return, or no return is made by the taxpayer. Without both of these elements there can be no “ deficiency.”
The Commissioner and the Division assumed that the amounts of $4,064.59, $3,104.34, and $2,747.24 were shown as the tcoxes by the taxpayer in its returns for the taxable periods concerned. But were they?
The taxpayer believed itself to be a personal service corporation, and as such not subject to any tax. Certain decisions adopted by the Commissioner ivere to the contrary, and the existing regulations required taxpayers with respect to which certain conditions were true to make returns on Form 1120. The taxpayer was one of these.
In compliance of these regulations, although it believed them to be erroneous, but under duress of the penalties which might be imposed if it should prove unable to establish the accuracy of its belief, and to avoid the expense of attempting to establish it otherwise than by filing claims in abatement, the taxpayer caused Form 1120 to be prepared and filed for each of the taxable periods. On such returns it gave the answers to the various questions, including the computation of tax. But it annexed to each return a statement or protest to the effect that it was a personal service corporation and that no tax was due from it. And it submitted with each return a claim in abatement based upon the same proposition.
The statements or protests annexed to the returns were just as much a part of the returns as are the schedules ordinarily annexed to tax returns. The returns should be read as a whole, including the protests. If not so read they should not be treated as returns at all. The Commissioner had no more right to ignore the protests than he would have to ignore a schedule of deductions claimed. Read as a whole the returns show no amount as the tax or shore the tax to be zero.
Or if treated as no returns at all they certainly constitute no basis for the collection of a tax without the determination of a deficiency.
The theory of section 273 is that a deficiency is the difference between the correct tax and (with adjustment for amounts previously assessed or collected) the amount admitted by the taxpayer on his return to be the correct tax (or zero if no return is filed). Here the taxpayer admitted no tax due; claimed that its tax was zero. The mere filling in of a blank is not an admission of tax due when there is annexed to and made part of it a protest that liability for tax is denied.
*764The Commissioner in rejecting the claims for abatement and proposing to collect the taxes made a determination of a deficiency — the difference between what he believes to be the correct tax and nothing (i. e., the amount shown on the returns as the tax or zero, the proper subtrahend where no return is filed). From that determination the taxpayer is entitled to an appeal for the purpose of obtaining this Board’s judgment on the correct amount of the tax.
Arundell not participating.This decision was prepared by Mr. Ivins during his term of office.