*1280 1. STATUTE OF LIMITATIONS. Collection from transferees of tax asserted against a corporation, dissolved on September 17, 1917, under provisions of the Revenue Act of October 3, 1917, for part of year during which the corporation was in existence, held not barred by the statute of limitations where the corporation filed no return under the act and proceedings against transferees were instituted within six years after assessment.
2. TRANSFEREE LIABILITY. Held, petitioner Roth is not liable as a transferee of the dissolved corporation because he was never a stockholder thereof and received no assets upon dissolution. Held, petitioner Stockham is not liable in equity as a transferee, because of respondent's failure to affirmatively prove the value of assets received upon dissolution, and is not liable at law upon his contract to assume then existing liabilities of the corporation, because liability for the deficiency here asserted did not exist at the time the contract was made, having arisen under a revenue act enacted subsequently thereto.
*631 The Commissioner has asserted against the petitioners as transferees of the assets of the E. Stockham Grain Company, a dissolved corporation, liability for unpaid income and profits taxes for the period July 1, 1916, to May 31, 1917, in the following amounts:
| Docket No. | Petitioner | Amount |
| 22568 | Gorton Roth | $3,500.00 |
| 22569 | Elijah Stockham | 13,788.36 |
Upon motion the proceedings were consolidated for hearing. Three issues are raised, namely: (a) whether the assessment and collection of the tax is barred by the statute of limitations; (b) whether petitioners are liable as transferees under section 280 of the Revenue Act of 1926; (c) whether the invested capital of the corporation should be computed upon the basis of the full 12-month period, or prorated for a fractional part thereof.
*632 FINDINGS OF FACT.
Petitioners are residents of the State of Nebraska. The E. Stockham Grain Company (hereinafter called the company) was a corporation, organized under the laws of the state of Nebraska in June, 1915, and was engaged within that state in the grain and feed business*1282 until its dissolution, which occurred on September 17, 1917.
The company having previously obtained permission to file returns on a fiscal year basis, on July 25, 1917, filed its income-tax return for the 11-month period ending May 31, 1917. A nontaxable return was filed (date of filing undisclosed) covering the period June 1, 1917, to October 1, 1917, and an excess-profits-tax return on Form 1095 (period covered not disclosed) was filed and the liability disclosed thereby in the amount of $2,068.79 was paid on September 27, 1917. No return, as required under the provisions of the Act of October 3, 1917, was ever filed by the company. Such a return on Form 1103 was prepared for the company by the collector of internal revenue, District of Nebraska, signed by him because of the refusal of the former officers of the company to sign the same, and filed as delinquent on January 20, 1923. An assessment in the amount of $13,788.36 for the period here involved was made against the company on March 16, 1923. The notices of deficiency against which the petitions herein were filed were issued on November 20, 1926.
At the time of the dissolution of the company its outstanding capital*1283 stock was 500 shares having a par value of $100 each, issued 349 shares to petitioner Stockham, 100 shares to L. M. Stockham (petitioner's wife), 1 share to A. W. Stockham (petitioner's brother), and 50 shares to petitioner Roth. Under date of September 17, 1917, petitioner Stockham made a written proposal to take over all the assets of the company, assume all its liabilities "existing as of this date;" and to pay into the company money sufficient to enable it to retire its outstanding stock at $70 per share. This offer was accepted by the directors and by the stockholders of the company at meetings held that same day, whereupon Stockham took over all assets of the company, assumed all its then existing liabilities, and paid in at least $3,500. Neither the value of the assets so taken over by petitioner, nor the amount of the liabilities so assumed by him is disclosed by the record.
The stock of the company standing in the name of petitioner Roth was owned by Nelson B. Updike, by whom Roth was employed as personal secretary. Immediately upon issue, the stock was indorsed in blank by Roth and by him delivered to Updike, who thereafter retained possession of it. Roth owned no*1284 stock in the company, nor did he receive any distribution, liquidating or otherwise, from the company upon dissolution or at any other time. Updike received *633 the sum of $3,500, paid into the company by Stockham, upon surrender by him of the 50 shares of stock standing in the name of Roth.
OPINION.
GOODRITH: Petitioners plead the bar of the statute of limitations, urging that the returns filed by the company required under the revenue acts in force during that part of the year 1917 in which the company was in existence, and reflecting its business done in that period, were sufficient to start the running of the statute and that, consequently, collection of the liability now asserted became barred on July 25, 1922, under the provisions of section 250(d) of the Revenue Act of 1921, and the liability itself was extinguished by section 1106(a) of the Revenue Act of 1926. This contention has been decided heretofore adversely to them in cases which so clearly and so squarely raise this precise issue that discussion is unnecessary. *1285 ; ; ; ; ; affd., ; ; affd., ; affd., .
Section 602 of the Revenue Act of 1928 lays upon respondent the full burden of proof with respect to the liability of a petitioner as a transferee of property of a taxpayer. From the facts it is obvious that petitioner Roth is not a transferee of property of the company, for he was not a stockholder therein and received no assets or distributions whatsoever therefrom. Consequently, he is in nowise liable for the deficiency now asserted against the company. It is conceded that petitioner Stockham is a transferee of the company, but respondent has failed to show us the nature and value of the property he received upon its liquidation. The rule that the burden of proof upon respondent includes showing the value of the property*1286 received by a transferee and, consequently, the extent of his liability, needs no citation. The only evidence on this matter submitted to us is disclosed by the joint return filed by Stockham and his wife for the year 1917, reporting a loss in the amount of $3,125 sustained from the sale of elevators to Updike Grain Company. The sale price is reported as $15,375, the original cost as $18,500, and an explanation is given as follows:
These elevators purchased of Updike Gr. Co. by E. Stockham Gr. Co. July 1, 1915. After liquidation and dissolution of E. S. Gr. Co. Inc. Sept. 17th E. Stockham having taken these over at list price sold to Updike Gr. Co.
This is not enough to prove the value of property received by Stockham transferee. He assumed the then existing liabilities of *634 the company. The elevators may have been encumbered with debt; his wife may have been interested in this sale because of her ownership of 100 shares of stock in the company; he may have discharged liabilities of the company in excess of the value of property received - we do not know, for there is no evidence as to these matters sufficient to disclose the value of the assets transferred. Therefore, *1287 respondent has failed to show affirmatively the extent of Stockham's liability in equity as a transferee.
But it is urged that, by assuming the liabilities of the Grain Company, Stockham, upon his contract, is liable at law for the tax asserted against the company, regardless of the value of the property received by him as transferee of the corporation. With that we do not agree. On September 17, 1917, Stockham by contract assumed all the liabilities of the company "existing as of this date." While the income of the company upon which the present tax was levied had then been earned, it was not until October 3, 1917, that the revenue act under which this deficiency is asserted was enacted. Can it be said that the tax liability upon the income earned prior to September 17, 1917, as determined under an act passed subsequent thereto was a liability existing on that date, and, as such, was assumed by Stockham under his contract? We think not. We must assume that, in making his offer to take over the then existing liabilities of the company, Stockham had in mind certain definite and present liabilities and that in accepting his offer the company accepted it as thus limited. At that*1288 time there was no present liability under the Act of October 3, 1917, for that act did not then exist. Neither Stockham nor the company had knowledge that Congress would subsequently pass the act increasing the taxes imposed upon the company's income already earned, nor were they required to speculate as to what Congress might do in the future. We think it clear that the subsequent act did not have the effect of creating, as a present, existing liability on September 17, 1917, a liability which on that date was, in fact, nonexistent. Cf. ; ; . Stockham might have included in his contract the assumption of liabilities arising as a result of future Congressional enactment, but, as is apparent from the plain terms of his offer, he did not do so. Since no liability for the tax here in question was specifically assumed by the contract, it can not be construed as one made for the benefit of the United States as to the assumption of tax liability which did not exist at that time. Cf. *1289 ; affd., . Consequently, petitioner is not liable at law for the present claim under his agreement to assume the existing liabilities of the company.
*635 In this view of the case it is unnecessary to consider the remaining issue and there will be entered in each proceeding,
Judgment of no transferee liability.