*1368 The only return filed for the fiscal year ended April 30, 1921, was one filed July 16, 1921. A credit of $2,000 was taken in this return as allowed by the Revenue Act of 1918. Thereafter the Revenue Act of 1921 was approved, under which the taxpayer owed additional tax since it was not entitled to the full credit of $2,000. Held, that the return filed did not start the statutory period of limitations.
*96 The Commissioner determined a deficiency in the income-tax liability of Zellerbach Paper Company for the fiscal year ended April 30, 1921. He also determined a deficiency in the liability of National Paper Products Company for the same period. He determined, further, that Zellerbach Paper Company was liable as transferee of the A. S. Hopkins Company for a deficiency in that company's tax liability for the period November 1, 1920, to April 30, 1921. The parties have stipulated the correct amount of the deficiency in each case, and the only question in controversy is whether or not the deficiencies are barred by*1369 the statute of limitations.
FINDINGS OF FACT.
The parties entered into the following stipulations:
| Docket No. 39701 Zellerbach Paper Company. | |
| The following statement shows the petitioner's tax liability for the fiscal year ended April 30, 1921: | |
| Correct tax | $127,303.66 |
| Tax assessed (allocated) | 58,189.64 |
| Deficiency in tax if not barred by the statute of limitations | $69,114.02 |
*97 During the fiscal year involved in this appeal the petitioner kept its books on the basis of the fiscal year ended April 30, 1921. On July 16, 1921 the petitioner filed with the Collector of Internal Revenue its return of income for the fiscal year ended April 30, 1921 under the provisions of the Revenue Act of 1918, which return disclosed a net income of the petitioner in excess of $500,000. After the enactment of the Revenue Act of 1921 no other or further return for the fiscal year ended April 30, 1921 was filed by the petitioner. The return as filed by the petitioner under the Revenue Act of 1918 properly showed an exemption of $2,000 in computing the tax due. Under the Revenue Act of 1921 this petitioner would be entitled to no such exemption for the fiscal*1370 year ended April 30, 1921.
A paper entitled "Income and Profits Tax Waiver" dated February 27, 1925, signed by the petitioner and the respondent, is attached hereto and marked Exhibit "A".
The deficiency letter from which this appeal was taken, covering the fiscal year ended April 30, 1921, was mailed to the petitioner on May 11, 1928, and the petitioner filed its appeal from said deficiency letter with the United States Board of Tax Appeals on July 9, 1928.
The net income of the petitioner and also the total net income of the petitioner and its affiliated companies for the fiscal year ended April 30, 1921, upon which the deficiency was determined and which is now in controversy, is in excess of $500,000.00.
| Docket No. 39715 National Paper Products Co. | |
| The following statement shows the petitioner's tax liability for | |
| the fiscal year ended April 30, 1921: | |
| Correct tax | $57,919.10 |
| Tax assessed (allocated) | 24,928.92 |
| Deficiency in tax if not barred by the statute of limitations | $32,990.18 |
During the fiscal year involved in this appeal the petitioner kept its books on the basis of the fiscal year ended April 30, 1921. On July 16, 1921 the petitioner*1371 filed with the Collector of Internal Revenue its return of income for the fiscal year ended April 30, 1921 under the provisions of the Revenue Act of 1918, which return disclosed a net income of the petitioner in excess of $200,000. After the enactment of the Revenue Act of 1921 no other or further return for the fiscal year ended April 30, 1921 was filed by the petitioner. The return as filed by the petitioner under the Revenue Act of 1918 properly showed an exemption of $2000 in computing the tax due. Under the Revenue Act of 1921 this petitioner would be entitled to no such exemption for the fiscal year ended April 30, 1921.
A paper entitled "Income and Profits Tax Waiver" dated February 27, 1925, signed by the petitioner and the respondent, is attached hereto and marked Exhibit "A".
The deficiency letter from which this appeal was taken, covering the fiscal year ended April 30, 1921, was mailed to the petitioner on May 11, 1928, and the petitioner filed its appeal from said deficiency letter with the United States Board of Tax Appeals on July 9, 1928.
The net income of the petitioner and also the total net income of the petitioner and its affiliated companies for the*1372 fiscal year ended April 30, 1921, upon which the deficiency was determined and which is now in controversy, is in excess of $300,000.00.
*98 [The two exhibits A mentioned in the above stipulations each waive the time for making assessment of taxes due for the fiscal year ended April 30, 1921 until December 31, 1925.]
| Docket No. 39704 Zellerbach Paper Company, Transferee of A. S. Hopkins Co. | |
| The liability for federal income and profits taxes for the period from November 1, 1920 to April 30, 1921, of A. S. Hopkins Company, dissolved, is as shown below: | |
| Correct tax | $1,744.37 |
| Tax assessed | none |
| Deficiency in tax if not barred by the statute of limitations | $1,744.37 |
| together with statutory interest thereon to the date of payment. |
It is further stipulated and agreed that the aforesaid deficiency in tax and interest for the period ended April 30, 1921, is now due from this petitioner as transferee under Section 280 of the Revenue Act of 1926 of the assets of said A. S. Hopkins Company, unless the collection of said tax is now barred by the statute of limitations. Should the Board find that the collection of the said tax is not barred by the statute*1373 of limitations the Board may enter an order finding that in law and in equity there is a deficiency in federal income and profits taxes for the period ended April 30, 1921 in the amount of $1,744.37. together with statutory interest thereon to date of payment, due from the petitioner as transferee under Section 280 of the Revenue Act of 1926 of the assets of said A. S. Hopkins Company, a dissolved corporation.
A. S. Hopkins Company was affiliated with the Zellerbach Paper Company, the National Paper Products Company and the Sanitary Products Corporation during the period from November 1, 1920 to April 30, 1921, under the provisions of Section 240 of the Revenue Acts of 1918 and 1921. The Zellerbach Paper Company (parent), the National Paper Products Company and the Sanitary Products Corporation (subsidiaries) kept their books on the basis of the fiscal year ended April 30, 1921 and filed their return on the basis of the fiscal year ended April 30, 1921. On March 15, 1921, Zellerbach Paper Company designated itself, Zellerbach Paper Company, successors to A. S. Hopkins Company, filed a return in the name of A. S. Hopkins Company for the calendar year 1920 and included in said*1374 return the income of said A. S. Hopkins Company for the months of November and December, 1920. The income of A. S. Hopkins Company earned subsequent to December 31, 1920, was included as part of the income of Zellerbach Paper Company in the return filed July 16, 1921, by the Zellerbach Paper Company (parent), the National Paper Products Company and the Sanitary Products Corporation (subsidiaries) under the provisions of the Revenue Act of 1918 covering the fiscal year ended April 30, 1921, which return disclosed a net income in excess of $700,000.00. After the enactment of the Revenue Act of 1921 no other or further return for the fiscal year ended April 30, 1921, was filed by the Zellerbach Paper Company (parent), the National Paper Products Company, the Sanitary Products Corporation or the A. S. Hopkins Company (subsidiaries). No returns other than those referred to in this stipulation covering the fiscal year ended April 30, 1921 or any portion thereof, have been filed by the Zellerbach Paper Company (parent), the National Paper Products Company, the Sanitary Products Corporation and A. S. Hopkins Company (subsidiaries).
*99 The said return filed by the Zellerbach Paper*1375 Company (parent), the National Paper Products Company and the Sanitary Products Corporation (subsidiaries) (in which was included the income of the A. S. Hopkins Company earned subsequent to December 31, 1920 to April 30, 1921) properly showed an exemption of $2000 in computing the tax due. Under the Revenue Act of 1921 the said affiliated companies would be entitled to no such exemption for the fiscal year ended April 30, 1921.
The deficiency letter from which this appeal was taken, covering the period from November 1, 1920 to April 30, 1921, was mailed to the petitioner on May 11, 1928 and the petitioner filed its appeal from said deficiency letter with the United States Board of Tax Appeals on July 9, 1928.
The net income of the said affiliated companies referred to herein for the fiscal year ended April 30, 1921, upon which the deficiency was determined and which is now in controversy is in excess of $1,000,000.
The A. S. Hopkins Company maintained its own set of books and records until December 31, 1920. Thereafter, it maintained no separate set of books, and its operations were mingled with those of Zellerbach Paper Company as if it were a branch of the latter company.
*1376 On the return for the A. S. Hopkins Company for the calendar year 1920, at page 3, the following question and answer appears:
12. Is over 50 per cent of your outstanding voting capital stock owned by another corporation or by two or more corporations that are affiliated?
The entire capital stock of this Corporation has been bought by the Zellerbach Paper Co., and its entire net assets transferred as of December 31, 1920.
Since the answer to question 12 was in the affirmative, question 14 should have been answered. A proper answer to this question would have shown how the situation changed during the year. This information was not furnished. In the affidavit on this return it was stated to be a return made pursuant to the Revenue Act of 1918.
On the return for the fiscal year ended April 30, 1921, there is no answer to the question, "Is this a consolidated return?"; but the names of the following companies appear at the head of the return: Zellerbach Paper Company, National Paper Products Company, Sanitary Products Corporation. Questions 11, 12, and 13 were not answered. In question 14, pertaining to affiliations with other corporations, the following question was*1377 answered "Yes":
Did substantially the same conditions as are set out in the questionnaire filed for 1919 or prior years, obtain during the entire taxable period 1920?
In the schedules attached to this return, information and figures pertaining to each of the three separate companies above named were set out, but no separate information or figures appear in the return pertaining to the A. S. Hopkins Company. This return did not in any way indicate that the A. S. Hopkins Company was one of the affiliated companies for which the return was made, nor in any way *100 inform the Commissioner that its income was included in the return. The statement appears in the affidavit supporting this return that it is a return made pursuant to the Revenue Act of 1918.
OPINION.
MURDOCK. The Board has consistently held in situations like the one here present, that a return filed pursuant to the Revenue Act of 1918 is not sufficient to start the period of limitation. The first case of this kind was C. A. Lawton Co.,13 B.T.A. 8">13 B.T.A. 8, where the Board cited *1378 John Wanamaker Philadelphia,8 B.T.A. 864">8 B.T.A. 864, in which a somewhat similar question had been discussed. The other decisions are Hutchinson Co.,14 B.T.A. 367">14 B.T.A. 367; Valentine-Clark Co.,14 B.T.A. 562">14 B.T.A. 562 (reversed), 52 Fed.(2d) 346); Gus Holstine Dry Goods Co.,16 B.T.A. 1124">16 B.T.A. 1124; Isaac Goldmann Co.,17 B.T.A. 1103">17 B.T.A. 1103 (reversed, 51 Fed.(2d) 427); Myles Salt Co., Ltd.,18 B.T.A. 742">18 B.T.A. 742 (reversed, 49 Fed.(2d) 232); Adams, Cushing & Foster, Inc.,19 B.T.A. 89">19 B.T.A. 89; G. Corrado Coal & Coke Interests, Inc.,19 B.T.A. 691">19 B.T.A. 691; and E. J. Lorie et al.,21 B.T.A. 612">21 B.T.A. 612. Cf. Hill Goldwater,21 B.T.A. 73">21 B.T.A. 73, and particularly National Paper Products Company et al.,26 B.T.A. 92">26 B.T.A. 92. The Board's reasons for its position are fully set forth in the above opinions and need not be repeated here. Those decisions are supported by Updike v. United States, 8 Fed.(2d) 913. With all due respect to the Courts of Appeal which have reversed the Board, we adhere to our original position, because we still feel that it is*1379 the correct one.
The Commissioner would support his determination in these cases on another ground. The A. S. Hopkins Company was affiliated with the other companies from November 1, 1920, until the end of the fiscal period April 30, 1921. The Commissioner contends that its income was never properly reported for this period, since its income for November and December, 1920, was reported in a separate return, and its income from January 1, 1921 to April 30, 1921, was included in that of Zellerbach Paper Company without even disclosing that it was so included and without setting forth separately its income and deductions from those of the Zellerbach Paper Company. He cites Commissioner v. Colmer-Green Lumber Co., 49 Fed.(2d) 234, in support of his contention that the statute has not barred him from proceeding further against the Zellerbach Paper Company as a taxpayer and also as a transferee of the assets of A. S. Hopkins Company. The case cited may not be distinguishable from the present case in this connection, but the Board has consistently held that no such segregation in the return is necessary to start the running of the period of limitations. *1380 Its first decision to this effect has been affirmed by the Circuit Court of Appeals for the Third Circuit. *101 Stetson & Ellison,11 B.T.A. 397">11 B.T.A. 397; affd., 43 Fed.(2d) 553. See also Peerless Iron Pipe Exchange, Inc.,23 B.T.A. 900">23 B.T.A. 900.
Reviewed by the Board.
Judgment will be entered under Rule 50.
VAN FOSSAN, dissenting: I am unable to agree with the prevailing opinion in these cases. The conclusions of the Board have been tested by appeal to the courts on three occasions and in each case the Board has been reversed. Valentine-Clark Co.,14 B.T.A. 562">14 B.T.A. 562; reversed, 52 Fed.(2d) 346; Isaac Goldmann Co.,17 B.T.A. 1103">17 B.T.A. 1103; reversed, 51 Fed.(2d) 427; Myles Salt Co.,18 B.T.A. 742">18 B.T.A. 742; reversed, 49 Fed.(2d) 232. I believe the position taken by the Board in these and like cases has been erroneous and that in the instant case the petitioners should prevail.
MARQUETTE agrees with this dissent.