Pittsburgh Terminal Coal Corp. v. Commissioner

Matthews,

dissenting: As I read the pleadings in this case, the real question raised by petitioner’s motion for judgment of no deficiency on the ground that the deficiencies are for years prior to the year in which the petitioner first came into being, is whether the notice and petition relate to deficiencies in taxes due from the Pittsburgh Terminal Coal Corporation, as the taxpayer, or relate to deficiencies in taxes of the Meadow Lands Coal Company asserted against the Pittsburgh Terminal Coal Corporation, as transferee.

The Pittsburgh Terminal Coal Corporation is the successor of the Meadow Lands Coal Company, received the property of the latter company, and, under the Pennsylvania statute authorizing the merger and consolidation of certain corporations, became liable for all debts of the predecessor corporation. The Pittsburgh Terminal Coal Corporation is, therefore, liable at law for the debts of the predecessor corporation and is a transferee of property of the Meadow Lands Coal Company within the meaning of the Revenue Act of 1926.

*255Under the provisions of section 280, the Commissioner was required to assert the liability for taxes due from the Meadow Lands Coal Company against the Pittsburgh Terminal Coal Corporation:

Sec. 280. (a) The amounts of the following liabilities shall * * * T>e assessed, collected, and paid in the same manner and subject to the same provisions and limitations as in the case of a deficiency in a tax imposed by this title * * *:
(1) The liability, at law * * * of a transferee of property of a taxpayer, in respect of the tax * * * imposed upon the taxpayer by this title or by any prior income, excess-profits, or war-profits tax Act.

The notice of deficiency mailed to the Pittsburgh Terminal Coal Corporation fully advised it in what capacity the Commissioner proposed to assert against it the deficiencies in taxes for the years 1917, 1918, and 1919 of the Meadow Lands Coal Company, and that was as successor of the Meadow Lands Coal Company. The petition filed shows that the Pittsburgh Terminal Coal Corporation fully understood the notice to be of its liability for taxes due from its predecessor because it petitioned in its capacity as successor of the Meadow Lands Coal Company and alleged in paragraph 1 that it succeeded to all the rights and liabilities of the Meadow Lands Coal.Company, In paragraph 4, petitioner alleged that the Commissioner committed certain errors going to the merits of the'tax liability of the Meadow Lands Coal Company and in paragraph 5 stated the facts relied upon as sustaining the allegations of error. In his answer, respondent admitted the allegations in paragraph 1. The effect of the pleadings was that petitioner admitted that it was a transferee of property of the taxpayer and thus left the Commissioner only the burden of proving the amount of property received by the transferee.

It was not necessary for the Commissioner to call the Pittsburgh Terminal Coal Corporation a transferee, or to refer to section 280, in order to constitute the notice a notice of transferee liability. As transferee, the Pittsburgh Terminal Coal Corporation had the right to appeal to the Board. It did appeal in that capacity. The motion for judgment of no deficiency, on the ground that petitioner was not in existence in the years involved, appears to have been an afterthought. Whether or not the Commissioner intended the notice to be a notice of transferee liability, it is in form a notice of the transferee liability of the Pittsburgh Terminal Coal Corporation for taxes due from the Meadow Lands Coal Company, and the Pittsburgh Terminal Coal Corporation, having appealed as transferee, should not now be heard to deny that it filed its petition as such.

One of the provisions with respect to deficiencies in income tax imposed by the Eevenue Act of 1926 is that in section 274 (a) which authorizes the Commissioner to send a notice of deficiency to the taxpayer and which gives the taxpayer 60 days in which to file a *256petition with the Board of Tax Appeals. The authority to assert the taxpayer’s liability for taxes against the transferee of property of the taxpayer is derived from section 280, but the notice to the transferee and the right of the transferee to appeal are derived from section 274 (a).

That the notice of the liability proposed to be asserted against a transferee is made under the authority of section 274 (a) seems clear from the language used in section 280 (d) :

The running of the period of limitation upon the assessment of the liability of a transferee or fiduciary 'shall, after the mailing of the notice under subdivision (a) of section 274 to the transferee or fiduciary, be suspended for the period during which the Commissioner is prohibited from making the assessment in respect of the liability of the transferee or fiduciary, and for 60 days thereafter.

In terms, section 274 (a) refers only to notices of deficiencies in income tax imposed by the Revenue Act of 1926, asserted against the taxpayer, but by virtue of the provisions of section 283, notices of deficiencies in taxes under prior acts are to be considered notices under section 274 (a), and by virtue of section 280, notices of transferee liability are also notices under section 274 (a).

All notices of deficiencies or liabilities for income tax, therefore, are made under the authority of section 274 (a) as enlarged by sections 280 and 283. It is only from such a notice that an appeal lies to the Board of Tax Appeals. The effect of section 280 is merely to authorize the Commissioner to proceed against the transferee in the same manner as he is authorized to proceed against the taxpayer, and to give the transferee the same rights with respect to the tax as the taxpayer had. If the notice purports to assert the liability at law of a transferee of property of a taxpayer, and an appeal is made by such person, as transferee, all of the requirements of the Act have been met.

Teussell and AeuNdell agree with this dissent.