*2963 1. The action of the respondent in reducing the amount of deductions taken for officers' salaries for the fiscal years 1920 and 1921 approved because of insufficient evidence.
2. Held that during the fiscal years 1920 and 1921 there did not exist such abnormal conditions affecting capital or income as to bring the petitioner within the purview of section 327 of the Revenue Acts of 1918 and 1921.
3. Petitioner's returns for the fiscal years ended June 30, 1920, and June 30, 1921, were filed on September 15, 1920, and September 15, 1921, respectively. The tax as computed and reported by the petitioner on the returns for 1920 and 1921 was assessed on November 8, 1920, and November 10, 1921, respectively. With the exception of the last quarterly installment for each year, the tax was paid within the time provided by law. The respondent determined that the petitioner's tax liability for each year was in excess of the amounts reported on the returns and previously assessed and mailed notices of the deficiencies to the petitioner. The petitioner appealed to the Board and in an amended petition alleged that collection of the unpaid quarterly installments of the tax was barred*2964 by expiration of the period of limitations. Held that the Board has jurisdiction to determine whether collection of the unpaid installments of tax is barred. Peerless Woolen Mills,13 B.T.A. 1119">13 B.T.A. 1119.
4. Held, that under section 277(d) of the Revenue Acts of 1924 and 1926 the respondent had 6 years from the time of assessment within which to make collection of the unpaid installments of 1920 and 1921 tax. Art Metal Works,9 B.T.A. 491">9 B.T.A. 491.
5. Held, that as these appeals were pending before the Board on February 26, 1926, the date of the enactment of the Revenue Act of 1926 and as the 6-year period for collection had not expired on that date, the running of the period of limitations for collection has been suspended since that date and collection is not barred.
*547 These proceedings, which were consolidated for hearing are for the redetermination of deficiencies in income and profits taxes for the fiscal years 1920 and 1921. The deficiencies as determined by the respondent are as follows:
| Docket No. | Fiscal year ended - | Deficiency |
| 11678 | June 30, 1920 | $7,489.25 |
| 9345 | June 30, 1921 | 6,139.88 |
*2965 The petitioner as amended alleges, however, that the total amount in controversy for both years is $53,975.58. This amount is the total of $30,731.11 representing the unpaid quarterly installment of tax reported by the petitioner on its return for the fiscal year 1920, the deficiency of $7,489.25 for that year as determined by the respondent, $9,615.34 representing the unpaid quarterly installment of the tax reported by the petitioner on its return for the fiscal year 1921 and *548 the deficiency of $6,139.88 as determined by the respondent for that year.
The matters in controversy are whether the respondent erred (1) in reducing the amount of the deductions taken for officers' salaries by $6,000 for each of the years, (2) in refusing to determine the petitioner's profits-tax liability under the provisions of section 328 of the Revenue Acts of 1918 and 1921, and (3) in attempting to collect the last and unpaid quarterly installments of the taxes reported by the petitioner on its tax returns for each of the years. With respect to the controversy relating to the determination of the profits-tax liability under the provisions of section 328, the trial was limited to the*2966 question of whether the petitioner comes within the purview of section 327.
FINDINGS OF FACT.
The petitioner, a Delaware corporation, with its principal office at Los Angeles, Calif., was organized in April, 1917, by John J. Troy, H. J. Coger, and David H. Howie, to engage in the business of buying and selling automobiles and accessories in Southern California and in the State of Arizona. During the years involved in this proceeding, the petitioner was engaged in distributing Nash and Lafayette automobiles and accessories in the above-mentioned territory. The Lafayette automobiles were manufactured by a subsidiary of the Nash Motors Co., which manufactured the Nash automobiles. While the petitioner conducted its business on both a wholesale and retail basis, most of the business was at wholesale.
For more than 8 years prior to the organization of the petitioner, Coger had been employed by C. S. Howard, who was distributor of Buick automobiles for the Pacific Coast region. Coger's duties with Howard were those of district sales manager for Southern California and Arizona. In this capacity, he built up a sales organization in this territory and handled many trainloads of*2967 automobiles. During this time Coger became acquainted with C. W. Nash, who at that time was general manager of the Buick factory and who later became president of the Nash motors Co. It was also while Coger was district sales manager for Howard that he met Troy in Arizona.
Howie was an agent for and private secretary to James J. Storrow, who was the senior member of Lee, Higginson & Co., of Boston, and also chairman of the board of directors of the Nash Motors Co. Storrow had reared Troy and acted as his guardian.
During the years involved in this proceeding Troy was president and treasurer of the petitioner, Coger was vice president, secretary, and general manager, and Howie was one of the directors. Troy's duty was to keep in touch with the manufacturers in order to get all the automobiles he could in excess of the number allotted to the *549 petitioner under its contracts with the manufacturers. In doing this, he was required to spend a great deal of his time in the East. Troy devoted his entire time to the petitioner's business. Coger's services consisted of promoting the sales of the company, building a sales organization, assisting in getting shipments from*2968 the factory and handling transportation problems. He devoted his entire time to the business. The services rendered by Howie were in an advisory capacity, for which he received no salary.
During each of the years involved herein, the salaries of Troy and Coger were $12,000 each, which amounts were actually paid to them. In addition, each of these officers was credited on the books of the petitioner with additional salaries of $3,000 for each of the years. Under date of June 30, 1920, a journal entry was made for the fiscal year 1920 charging general salaries with the amount of $6,000 and crediting Troy and Coger each with $3,000, with the explanation that the amounts constituted additional salaries authorized by resolutions adopted June 9, 1920. Under date of June 30, 1921, a journal entry was made charging the surplus account with the amount of $6,000 and crediting Troy and Coger with $3,000 each. The credits of $3,000 for each of the years were never paid but remained in the accounts of Troy and Coger until March 31, 1922, at which time the respective accounts were charged with $6,000 each and credits were made to the petitioner's surplus account. In 1922 Coger sold his*2969 stockholdings to Troy and in the statement used as the basis for the sale, these unpaid salaries were transferred to surplus. On acquiring Coger's stock, Troy became the owner of all the stock of the petitioner with the exception of 50 shares. During the years here involved, the petitioner's books were kept and its returns made on the accrual basis.
In its return for each year the petitioner took a deduction of $30,000 as compensation of officers, representing $15,000 to each Troy and Coger. In an audit of the return the respondent reduced the amounts taken from $15,000 to $12,000.
The petitioner's entire authorized capital stock of $100,000, divided into 1000 shares of a par value of $100 each, was issued at par and paid for in cash at the time of incorporation. No additional stock has ever been issued and no other money or property has ever been paid in for stock. The stock was originally issued 250 shares to Troy, 250 shares to Coger, and 500 shares to Howie. At July 1, 1919, the beginning of the first period in controversy, Troy held 296 shares; Coger, 296 shares; and Howie, 408. There was no further change in stockholdings until February 26, 1920, when Troy's and*2970 Coger's holdings were each increased to 375 shares and Howie's holdings were reduced so that individually he held 20 shares and as attorney he *550 held 230. The stock continued to be held in the foregoing amounts until July 7, 1920, when Troy became the holder of 575 shares, there being transferred to him 200 of the 230 shares held by Howie as attorney. There was no further change in stockholdings during the years here involved.
Storrow, the chairman of the board of directors of the Nash Motors Co., provided all of the $100,000 which was paid in for stock of the petitioner and with which it began business. This money was provided in the form of a check drawn by Lee, Higginson & Co., and was accompanied by a letter of introduction to the Farmers & Merchants Bank of Los Angeles, which was a correspondent bank of Lee, Higginson & Co.
Troy and Coger each gave his promissory note to Howie, who was an agent for Storrow, in the amount of $25,000, in payment of the shares of stock issued to them. These notes were secured by pledges of the stock issued to Troy and Coger and an agreement was entered into between Howie, of the one part, and Troy and Coger of the other, to the*2971 effect that Howie was a holder of the stock until paid for. The stock so pledged was held until paid for and was released as paid for. In May, 1919, Troy and Coger started purchasing Howie's stock and by the beginning of the period here involved they had paid their notes and executed their portion of the agreement.
After the closing of the petitioner's fiscal year ended June 30, 1920, and prior to December 31, 1920, the price of Nash automobiles was reduced, the reductions ranging from $50 to $150 per automobile. There were also some reductions in the price of Lafayette automobiles. Subsequent to June 30, 1921, and during the month of November of that year, the price of Nash automobiles was reduced $50from to $200 per automobile, and that of Lafayette automobiles was reduced from $800 to $1,200 each.
The contracts between the petitioner and the Nash Motors Co. whereby the petitioner was given the right to act as distributor of that company's products were made annually. In the contract entered into between them in July, 1919, for the ensuing year, the petitioner agreed to carry in stock at all times parts of a value of at least $20,000 and in the contract entered into in*2972 June, 1920, for the following year the petitioner agreed to carry in stock parts having a value of at least $35,000. These agreements were at all times complied with by the petitioner.
During the petitioner's fiscal years 1920 and 1921, the demand for automobiles exceeded the supply and the chief concern of the petitioner's officers was in obtaining automobiles to fill the orders received. The petitioner received more automobiles than were allotted to it in the territorial contracts with the Nash Motors Co. and in *551 order to get these, Troy and Coger made trips to the factory. During each of the years, Coger made three trips to the factory of the Nash motors Co., each time obtaining some extra automobiles, and on one occasion obtained a train of more than 80 carloads of automobiles.
Automobiles were shipped from the factories to the petitioner on sight draft with bill of lading attached. Automobiles intended for dealers were diverted en route and rebilled and the petitioner's draft was drawn on the dealer. The draft on the dealer was accepted by the petitioner's bank, which would in turn pay the draft drawn by the factory on the petitioner. The policy of the factories*2973 to ship automobiles with sight draft and bill of lading attached prevailed among manufacturers of automobiles prior to the organization of the petitioner and remains practically the same at the present time. From the time of the petitioner's organization it had followed the policy theretofore and then generally followed of drawing sight draft with bill of lading attached on the dealers.
About one-half of the dealers paid for automobiles in advance of shipment from the factory in order to be assured that they would get automobiles from the petitioner as soon as it had them available, and to save exchange.
With respect to sales at wholesale for the fiscal year 1920, amounting to $1,569,990.21, dealers' accounts selected at random and amounting to $463,377.53 disclosed that, of the latter amount, $215,890.85 represented payments made in advance of shipment. Of the amount of $215,890.85, $181,856.43 represented cost and $34,034.42 represented gross profit.
For the fiscal year 1920 the petitioner's sales and cost of goods sold were as follows:
| At wholesale | $1,569,990.21 |
| At retail | 718,853.61 |
| Secondhand automobiles | 106,278.94 |
| Automobile and truck parts | 99,673.21 |
| Sundry stock | 33,596.74 |
| Gas and oil | 2,679.66 |
| Total | 2,531,072.37 |
| Cost of goods sold | 2,021,594.78 |
*2974 For the fiscal year 1920 the respondent determined the petitioner's net income to be $300,447.41, its invested capital to be $139,921.91, and its excess-profits tax liability to be $111,743.34.
The petitioner's sales for the fiscal year 1921 amounted to $2,363,867.59 and cost of goods sold amounted to $1,971,443.92. For this year the respondent determined the net income to be $124,010.39, invested capital to be $234,196.67 and the excess-profits tax liability to be $35,889.14.
*552 In determining the deficiencies herein involved, the respondent determined that no abnormality had been disclosed affecting either capital or income within the scope of section 327(d) of the Revenue Acts of 1918 and 1921, and that there was no exceptional hardship evidenced by gross disproportion between the tax computed without the benefit of section 328 and the tax computed by reference to the representative corporations specified in that section.
On September 15, 1920, the petitioner filed with the collector of internal revenue for its district its income and profits-tax return for the fiscal year ended June 30, 1920, and reported thereon a tax of $122,924.50, which amount was entered*2975 by the collector on the September, 1920, list and appears on an assessment certificate signed by the Commissioner of Internal Revenue on November 8, 1920. The petitioner filed its return for the fiscal year ended June 30, 1921, on September 15, 1921, and reported thereon a tax of $38,461.39, which amount was entered by the collector on the September, 1921, list and appears on an assessment certificate signed by the Commissioner on November 10, 1921.
The first three quarterly payments of the tax reported for 1920 were made in the time required by law. The last quarterly installment, in the amount of $30,731.11, which was assessed as a part of the tax reported on the return by the petitioner, has never been paid.
However, a claim for the abatement of this amount was filed on June 10, 1921. The last quarterly installment of the tax for 1921, amounting to $9,615.34 and assessed as a part of the tax reported by the petitioner on its return, has never been paid. However, on June 15, 1922, a claim for the abatement of this amount was filed. Against the unpaid quarterly installment for 1921 has been credited the amount of an overassessment of $182.37 for 1923, which leaves $9,432.97*2976 as the unpaid portion of the tax assessed for 1921.
On November 19, 1925, the petitioner executed the following instrument:
NOVEMBER 19, 1925.
INCOME AND PROFITS TAX WAIVER.
In order to enable the Bureau of Internal Revenue to give thorough consideration to any claims for abatement or credit filed by or on behalf of TROY MOTOR SALES COMPANY of LOS ANGELES, CALIF. covering any income, excess-profits or war-profits tax assessed against the said taxpayer under the existing or prior Revenue Acts for the year(s) FIS. YR. 6-30-20 and to prevent the immediate institution of a proceeding for the collection of such tax prior to the expiration of the six year period of limitation after assessment with which a distraint or a proceeding in court may be begun for the collection of the tax, as provided in Section 278(d) of the existing Revenue Act, the said taxpayer hereby waives any period of limitation as to the time within which distraint or a proceeding in court may be begun for the collection of the tax, or any *553 portion thereof, assessed for the said year(s), and hereby consents to the collection thereof by distraint or a proceeding in court begun at any time prior to*2977 the expiration of this waiver.
This waiver is in effect from the date it is signed and will remain in effect until December 31, 1926.
TROY MOTOR SALES CO.,
Taxpayer.
By (Signed) W. A. SELLMAN,
Asst. Sec'y.
(Seal)
If this waiver is executed on behalf of a corporation, it must be signed by such officer or officers of the corporation as are empowered under the laws of the State in which the corporation is located to sign for the corporation, in addition to which, the seal, if any, of the corporation must be affixed.
SEPT., 1920, 402411.
On October 19, 1926, the petitioner executed and filed with the collector at Los Angeles a "Tax Collection Waiver" dated September 1, 1926, wherein it consented to the collection of the unpaid quarterly installment of tax for 1920 by distraint or by a proceeding in court begun at any time prior to December 31, 1927" only should the Superior Court in its decision on appeal of N.Y. & Albany Lighterage Co., Docket #366, rule that the tax from said appellant is collectible." At the time the petitioner filed this consent it also filed similar consents for the years 1917 and 1921, which contained the above quoted provision relating*2978 to the New York & Albany Lighterage Co. decision. In December, 1926, the consents for 1917 and 1921 were returned to the petitioner by the collector with the statement that they were rejected as invalid because of the provisions contained in them. The petitioner was requested to submit new consents in writing for these years eliminating the provision relating to the New York & Albany Lighterage Co. decision. The consent for 1920 was not returned to the petitioner.
At first the petitioner refused to file the written consent requested for 1921, but after being informed that a distraint warrant which was then shown would be executed if it were not filed, the petitioner executed and filed with the collector on December 17, 1926, the following instrument, instructions for executing being omitted:
TAX COLLECTION WAIVER
DECEMBER 17, 1926.
It is hereby agreed by and between TROY MOTOR SALES CO. of 1056 S. Figueroa St., Los Angeles, Calif. party of the first part, and the Commissioner of Internal Revenue, party of the second part, that the amount of $9,615.34, representing an assessment of income tax for the year(s) F.Y. 6-30-21 made against the said party of the first part, appearing*2979 on the September 1921 Account 402186 Assessment list, page , line , for the 6th district of California, may be collected (together with such interest, penalties, or other additions as are *554 provided for by law) from said party of the first part by distraint or by a proceeding in court begun at any time prior to December 31, 1927.
TROY MOTOR SALES CO., INC.,
(Taxpayer.)
By (Signed) W. A. SELLMAN, A. Secy.
(Signed) D. H. BLAIR,
Commissioner of Internal Revenue.
By (Signed) GALEN H. WELCH,
Collector of Internal Revenue.
(Seal)
Attached to the instrument when filed by the petitioner was a letter of protest.
On January 4, 1927, the Farmers & Merchants National Bank of Los Angeles addressed the following letter to the collector:
Please be advised that there has been deposited with us by the Troy Motor Sales Co., Inc., of Los Angeles, California, the sum of Forty six thousand five hundred fourteen Dollars nineteen cents ($46,514.19) to be held by us for your account and subject to your demands in connection with abatement claims appearing on their December, 1921 assessment list, page 37, line 8, amount $278.35; and September 1920 Account No. *2980 402411, amount $30,731.11.
The amounts above stated are to be paid to you should the said Troy Motor Sales Co., Inc. default in the payment thereof, together with interest on any additions as are provided for by law; the above amount so deposited being 150% of the above taxes as assessed and to be held subject to your order, unless the above taxes be paid or eliminated by operation of law.
On January 5, 1927, the collector acknowledged to the petitioner receipt of the above letter, advised that certain liens docketed against the petitioner had been released of record, and returned to the petitioner personal bonds which had been furnished by Troy and one Breyer in connection with the assessments.
On December 8, 1927, the petitioner filed with the collector a "Tax Collection Waiver," dated December 1, 1927, wherein it consented to extend until December 31, 1928, the time within which the unpaid quarterly installment of tax for 1920 might be collected. Accompanying the consent was the following letter, dated December 8, 1927:
In accordance with your request, we herewith tender to you and attach herewith under protest in duplicate, tax collection waivers on Form A & C Mim. *2981 3459 dated December 1, 1927, covering the following assessments:
Assessment appearing on the Sept. 1920 List Account #402411 in the 6th District of California in the amount of $30,731.11 representing an assessment of income tax for Fiscal Year June 20, 1920.
Assessment appearing on the Sept. 1921 List Account #402186 in the 6th District of California in the amount of $9,432.93 representing an assessment of income tax for Fiscal Year June 30, 1921.
These waivers attached hereto are being filed under duress inasmuch as warrants of distraint have been issued and threats have been made for seizure of property should the same not be filed.
Under the decision of Supreme Court of U.S. in the case of Frank K. Bowers versus N.Y. & Albany Lighterage Company, Docket #366, decided by the Supreme Court on February 21, 1927, these taxes are not collectible at this *555 time inasmuch as the Statute of Limitation has already barred the collection of same.
It is further understood that these waivers shall in no way prejudice our rights existing by virtue of our appeal before the United States Board of Tax Appeals for the same fiscal years, said appeals bearing docket #9345 and*2982 #11678.
It is further understood that the filing of these waivers under protest said filing not being our voluntary act but being under duress and threats of seizure of property, shall in no way grant the Commissioner of Internal Revenue or his Agents any right to collect the provisions of the Statute of Limitations of the Revenue Acts now in force or herebefore or hereinafter enacted provide that said assessments are uncollectible. In other words, these involuntary waivers are not to be considered extension agreements as contemplated by Section 278 (d)(2) of Revenue Act of 1926 or like provisions of any other Revenue Act.
At the bottom of the petitioner's retained copy of the written consent is the following notation in handwriting: "Received above unconditional waiver signed by W. A. Sellman as Sect. Dec. 8-1927. Geo. M. Donovan Deputy Collector 6th Dist. of Calif." A similar consent and letter covering 1921 were filed with the collector on the same day.
The petitioner's representative who filed the consents on its behalf with the collector on December 8, 1927, was Maurice J. Cramer. On December 21, 1927, one Saxer from the office of the collector called at Cramer's office*2983 with consents in writing dated December 21, 1927, and requested that they be filed. He informed Cramer that the consents with letters of protest attached which had been filed on December 8, 1927, were refused by the Commissioner and that new ones without a protest letter would have to be filed. After Cramer refused to file them or to have them filed, Saxer informed him that if they were not signed the petitioner's property would be distrained and sold for the tax and showed Cramer a document which he stated was a distraint warrant. Cramer thereupon communicated with Saxer's superior in the collector's office and obtained his consent to take up the matter with him. On the morning of December 23, 1927, Cramer had the consents which had been left by Saxer signed by the petitioner, and he returned to his office, from which he telephoned to Saxer to call for them. When Saxer called for them that afternoon, Cramer delivered them to him and stated that they were being filed under protest and because of threats to sell the petitioner's property. On the morning of December 24, 1927, Cramer mailed to the collector a letter dated and written on the 23d. On December 29, 1927, in response*2984 to a telephone call at his office, Cramer went to the collector's office, where he was asked to withdraw his letter of December 23. When he refused to do so he was informed that unless he did warrants of distraint which had been issued would be executed and the property of the petitioner sold. *556 He again refused to withdraw the letter, but after again being informed that if he did not the petitioner's property would be distrained, he withdrew the letter under protest.
OPINION.
TRAMMELL: With respect to the first allegation of error, the petitioner contends that the additional salaries were incurred as a result of a resolution of the board of directors adopted June 9, 1920, and that thereafter and throughout the years involved it was legally obligated to pay to Troy and Coger the amounts in controversy. The resolution of June 9, 1920, was not introduced in evidence, nor is there any testimony as to what was contained in it. The entry made under date of June 30, 1920, by which Troy and Coger were credited with the additional amounts for 1920, purports to have been made in accordance with the resolution, but the record is silent as to the authority for the credits*2985 made for 1921. The fact that the additional amounts were credited to the officers on the petitioner's books does not of itself warrant the conclusion that additional salaries were authorized or were incurred as a result of the resolution in question, or that the petitioner was definitely obligated to pay them. So far as the record shows, the resolution might have made the payment of the amounts conditional. It may be that it was on account of some condition contained in the resolution that the amounts were never actually paid but resulted in their being transferred to surplus in March, 1922. The action of the respondent in disallowing the additional salaries is therefore approved because of insufficient evidence.
With respect to the second assignment of error, the trial was limited to the question of whether there existed such an abnormal condition affecting capital or income within the purview of section 327 of the Revenue Acts of 1918 and 1921 as would entitle the petitioner to have its tax liability determined under the provisions of section 328 of these Acts.
The petitioner contends that the ownership and possession of the territorial contracts for the distribution of*2986 Nash and Lafayette automobiles under which it operated, and which were acquired in a manner which prevented their inclusion in invested capital, created an abnormal condition affecting capital.
The contracts with the Nash Motors Co. were the standard territorial contracts under which all distributors of Nash automobiles operated. They were for periods of only one year. There is nothing in the record to indicate that these contracts were materially different from those under which distributors of automobiles in general *557 operated. The contracts are not shown to have had any bonus value. They were obtained without any capital outlay or the issuance of stock and apparently the form of contract made by the manufacturers with distributors generally. The petitioner happened to be operating under the contract in question during a period of unusual and abnormal demand for the products. What was abnormal was the demand - nothing abnormal is shown about the asset, that is, the contract, or the capital of the petitioner in so far as it is concerned. Would the fact that a corporation had a contract which, under ordinary and usual business conditions, would not have created*2987 an abnormal condition affecting capital, create an abnormal condition affecting capital merely because of unusual or abnormal business conditions wholly aside from the contract which created demands for the product? We think not. If an unusually large income were produced under these conditions, it would seem that the situation came within that provision of section 327(d) to the effect that that subdivision shall not apply to any case in which the tax is high merely because the corporation earned a high rate of profit upon a normal invested capital. It appears that the large income here was attributable to the business conditions of the period. The business was abnormal, but every fortunate circumstance or advantage in business operations is not an abnormality affecting capital within the meaning of section 327. The business of distributing automobiles presupposes that the distributors will at least have a source of supply and that unless they manufacture the automobiles they will obtain them under some form of agreement or contract with those who do manufacture them. This being true, we are unable to conceive how a contract which is not shown to be materially different from*2988 the contracts for obtaining automobiles under which distributors in general operate creates an abnormality.
Another ground relied upon is that the petitioner's bank accepted the drafts on the dealers as cash deposits and about one-half of the dealers paid for automobiles in advance of their shipment from the factory. The petitioner contends that it was able to transact the volume of business it did on the small amount of invested capital it had largely on this account. It is contended that because of these facts, the petitioner was during the year 1920 supplied with approximately $730,000 of borrowed capital. There is no direct evidence as to the total payments for automobiles in advance of shipment, and the amount of $730,000 as stated by the petitioner in its contentions results from the application to all of the petitioner's sales at wholesale of the findings made by a certified public accountant during an investigation of certain dealers' accounts selected at random. There is nothing in the record to show or even approximate the average *558 amount for the year of money paid in advance. However, dividing the amount of $730,000 by 12 would give an average monthly*2989 amount of $60,833.33. If this amount be considered as borrowed money, it is not shown that the actual borrowing of such an amount is unusual or abnormal in this business. We are without evidence on the question. It may well be the usual and ordinary thing for distributors to do business on the same basis this distributor did, or to actually borrow as large or even larger percentage of its actual capital investment.
In drawing sight drafts with bills of lading attached on dealers, the petitioner was following a policy which it had followed from the time of its organization, and for all the record discloses the policy then generally followed by distributors of automobiles or a policy engaged in generally. There is nothing, however, in the record to show that if the petitioner had not drawn drafts on dealers, and that if it had not received payments from them in advance of shipments it would not have made the sales that it did. On the contrary, the record clearly shows that during these years the demand for automobiles exceeded the supply, and that the chief concern of the petitioner's officers was in obtaining automobiles to fill the orders received and not in making sales.
*2990 A further ground relied upon by the petitioner is that during the years in question its income resulted primarily from the services of Troy and Coger, its two officers, for which they were paid salaries of $12,000 a year each. It is contended that, for 1920, $50,000 each would have been reasonable compensation for the services rendered by them. There is, however, not sufficient evidence that the salaries paid were inadequate, that these officers could have obtained more elsewhere for the same services, or that others equally effective could not have been obtained for the same salaries.
From a consideration of all the evidence in connection with the various contentions raised by the petitioner, we are not convinced that during the years here involved there existed any abnormalities in income or capital which would entitle the petitioner to have its profits-tax liability computed under the provisions of section 328 of the Revenue Acts of 1918 and 1921.
The remaining assignment of error involves the question of the collectibility of the last and unpaid quarterly installments of the taxes computed and reported by the petitioner on its returns. This question was not raised by*2991 the original petitions but was raised for the first time in an amended petition filed in May, 1927. The petitioner has raised no question as to whether the assessment and collection of the deficiencies of $7,489.25 and $6,139.88 for 1920 and 1921 as proposed by the respondent are barred, and therefore that question is not involved in these proceedings.
*559 Petitioner has suggested in its brief that there might be some doubt as to whether we have jurisdiction to determine whether the collection of the unpaid portions of the original assessments in these cases is barred. The same question was presented and decided in the case of , where we held that where the respondent determined a deficiency and a portion of the tax reported and assessed on the return remained unpaid, we had jurisdiction to determine whether collection of the unpaid portion was barred. We are therefore of the opinion that we have jurisdiction of the matter raised by the petitioner in the instant case.
Section 250(d) of the Revenue Act of 1921 provided that no suit or proceeding for the collection of any income, excess-profits or warprofits taxes*2992 due under that Act or under prior income, excess-profits or war-profits tax acts should be begun after the expiration of 5 years after the date when the return was filed. As the petitioner filed its returns on September 15, 1920, and September 15, 1921, the time for collection of the tax due on such returns would expire on September 15, 1925, and September 15, 1926, under the Act of 1921, but prior to either of the foregoing dates and on June 2, 1924, the Revenue Act of 1924 was enacted. Section 278(d) of that Act provides in part as follows:
Where the assessment of the tax is made within the period prescribed in section 277 or in this section, such tax may be collected by distraint or by a proceeding in court, begun within six years after the assessment of the tax. * * *
The petitioner does not contend that the unpaid amounts of $30,731.11 and $9,615.34 for 1920 and 1921 were not assessed within the proper periods of limitation applicable to the respective years or that the 5-year period of limitation for collection had expired when the Revenue Act of 1924 was enacted, but contends that section 278 (d) of that Act did not operate to extend the time for collection beyond the*2993 5-year period provided in the Revenue Act of 1921. We have heretofore considered this question and have held that where the Revenue Act of 1924 was enacted prior to the expiration of the 5-year period for collection of a tax previously assessed the respondent had 6 years from the date of the assessment within which to begin a suit or other proceeding for the collection of such tax under section 278 (d) of the Revenue Act of 1924. ; . We think our former holdings are applicable to the instant case and therefore conclude that section 278(d) of the Revenue Act of 1924 extended the time for making collection of the unpaid portion of the tax for 1920 until November 8, 1926, and until November 10, 1927, for the unpaid portion of the tax for 1921. Since section 278(d) of the Revenue Act *560 of 1926 also provided for a similar period of 6 years after assessment for collection, no modification in the foregoing dates was made by that Act.
The petition for the redetermination of the deficiency for the fiscal year 1920 was filed with the Board on February 6, 1926, the notice of the*2994 deficiency having been mailed on December 12, 1925. It thus appears that not only the deficiency notice was mailed but that this proceeding was instituted within the period of 6 years from the date of the assessment of the tax shown by the return.
The question then to be determined first is whether under the facts of this case the collection of the tax became barred while this proceeding was pending before the Board. If it did not, then it is unnecessary to determine the validity of any of the consents or alleged consents in writing for any extension of time within which collection might be made. If collection of the tax for either 1920 or 1921 is barred, it became barred while these proceedings were pending. The real question is whether the Commissioner was, while these proceedings were pending, prohibited from beginning distraint or proceedings in court for collection as provided in section 277(b) of the Revenue Act of 1926.
If he was so prohibited, then the running of the statute of limitations was suspended during the period of such prohibition.
The Revenue Act of 1926 was approved February 26, 1926. That Act specifically prohibited the Commissioner from collecting*2995 the tax while a proceeding involving the deficiency was pending before the Board. The 6-year period for collection of the 1920 tax did not expire until November 8, 1926, and the 6-year period for the collection of the 1921 tax did not expire until November 10, 1927. Both proceedings were pending before the Board when the Revenue Act of 1926 was approved. From that date at least the prohibitory provisions of the statute relating to the collection of taxes while the proceedings were before the Board were effective.
The question as to whether the Commissioner was prohibited from collecting the unpaid amount of tax shown due on the return while a case was pending before the Board, was considered and decided by the Circuit Court of Appeals for the Fifth Circuit in the case of . The court stated as follows:
The district judge, being of opinion that the Board of Tax Appeals acquired jurisdiction only of the assessment for the deficiency, held that R.S. § 3324 prohibits a suit to enjoin the collection of the original assessment. In that opinion it was also held that appellant was liable for the full amount of the*2996 deficiency assessment, but that the original assessment was barred by the *561 statute of limitations. The correctness of those rulings on the merits is not now before us for consideration, but it is proper that we should at this time pass upon the appeal from the district court.
On the question of jurisdiction of the Board of Tax Appeals, we are of opinion that the conclusion of the district judge was wrong. That Board was given the power by the act creating it to determine the correctness of deficiency assessments made by the commissioner of internal revenue. Revenue Act of 1924 §§ 274, 279, 308, 312, 900. It is not bound by the assessment, but has power to raise or lower it, or to hold that there was no deficiency. In order to act intelligently and determine the total amount of tax due, it had the right to inquire whether any part of the tax was erroneously found to be due. By the Revenue Act of 1926 it is provided in § 284(d) that if the taxpayer appeal to the Board, he cannot sue to recover any part of the tax, but under sub-division (e) of that section the Board was given jurisdiction, if it should find that there was no deficiency, and that the taxpayer had*2997 made an over-payment of the tax, to determine the amount of such over-payment and direct that it be credited or refunded. Therefore, since the passage of the Revenue Act of 1926, the Board has jurisdiction not only to re-determine a deficiency, but also where there is no deficiency to ascertain and order that credit be given for any over-payment of the tax. We are of opinion that it results from these statutory provisions that, while the Board has no jurisdiction where there is no deficiency assessment, yet if there is a deficiency assessment, the jurisdiction of the Board extends to the whole controversy, to the end that it may determine or re-determine the correct amount of the tax.
The jurisdiction of the Board having been shown to exist, § 274(a) of the Revenue Act of 1926 is applicable. That section prohibits a proceeding by distraint until the decision of the Board has become final, and confers upon the District Courts of the United States jurisdiction to enjoin collection of the tax, notwithstanding the provisions of R.S. § 3224. Under the admitted facts, we are of opinion that it was error to refuse to issue an injunction.
In our opinion the court has clearly and*2998 concisely set forth the law as it affects this case. If the Commissioner could and should have been enjoined from collecting the unpaid amount of tax shown on the return while the case was pending before the Board, the right of the Commissioner to collect was extended until after the decision of the Board had become final.
In view of the foregoing, it is our opinion that the statute of limitations applicable to the collection of the unpaid amounts shown on the returns for the fiscal years 1920 and 1921 has not expired.
Since the 6-year period for the collection of the tax had not expired when the deficiency notices were mailed or when these proceedings were instituted, the statute has not now run, without reference to any extensions which might have been agreed upon by the taxpayer and the Commissioner, and it becomes unnecessary to discuss the so-called waivers or consents in writing.
Reviewed by the Board.
Judgment will be entered under Rule 50.