*2115 1. Held, petitioner is a transferee of the assets of the New Savoy Hotel Company and liable for the tax involved in this proceeding.
2. Where the taxpayer filed a return for its fiscal year ended January 31, 1921, on May 13, 1921, and thereafter the tax was duly assessed, held, that a deficiency letter which was mailed to the transferee on February 25, 1927, was not barred by the statute of limitations from collection.
*477 This proceeding involves the liability of the petitioner as transferee of the assets of the New Savoy Hotel Company which respondent *478 has asserted against him under the provisions of section 280 of the Revenue Act of 1926. The respondent has determined the liability of the petitioner as transferee to be $9,601.30. The pleadings raise two questions - (1) whether the petitioner is liable as transferee of the assets of the New Savoy Hotel Company, and (2) whether the taxes here involved are barred by the statute of limitations. The proceeding was submitted on a stipulation of facts, from which we make the*2116 following findings of fact.
FINDINGS OF FACT.
The New Savoy Hotel Company, the taxpayer, was a corporation existing under the laws of the State of Colorado, with a capital stock of $100,000. During the periods here under consideration the stock of the corporation was owned as follows:
| J. G. Nicholas (the petitioner) | $49,499 |
| Minnie M. Nicholas | 1 |
| E. T. Williams | 49,500 |
| Martin McGrath | 1,000 |
On May 15, 1921, by resolution of the directors of the New Savoy Hotel Company, the president and secretary were authorized and directed to offer for sale the assets of the corporation and to sell the same for not less than $35,000. Pursuant to this resolution, J. G. Nicholas reported a sale of the property to Nicholas and Williams, stockholders, for $37,283. This sale was ratified by the stockholders. No consideration whatever was paid to the company by or on behalf of the purchasers in connection with said purported sale and the stipulation does not show that any formal transfer of assets took place. At the time of this transfer, if it did occur, the assets were of a value in excess of $35,000.
On June 21, 1921, an agreement was entered into in writing between*2117 the New Savoy Hotel Company, as party of the first part, E. T. Williams and J. G. Nicholas, as parties of the second part, and the Shirley Hotel Company, as party of the third part, whereby the party of the first part and the parties of the second part agreed to sell all of the assets of the New Savoy Hotel Company to the party of the third part for a consideration of $97,500, to be paid as follows:
The sum of $52,500 was to be paid to the party of the first part contemporaneously with the execution and delivery to the party of the third part of a satisfactory lease upon the Savoy Hotel Building for a term of twelve years and nine months, which was then held by the New Savoy Hotel Company. Provisions were made for extending the time of payment of this amount under certain conditions *479 until June 30, 1921. If the payment of the $52,500 was timely made on or before June 30, 1921, a further payment of $45,000 was to be made on or before July 15, 1921, whereupon possession of the leased property and the other property of the New Savoy Hotel Company was to be turned over to the party of the third part. Said agreement was performed and payment of the sum of $97,500 was duly*2118 made by the party of the third part, as in said agreement provided.
E. T. Williams and J. G. Nicholas were practically the sole owners of all of the stock of the New Savoy Hotel Company and were equal distributees of the proceeds of the sale made to the Shirley Hotel Company, pursuant to the terms of the above mentioned agreement.
It was also agreed that a sufficient portion of the consideration would be delivered to E. J. Sullivan, as trustee, to be used in the payment of certain Federal, State and county taxes. Under this agreement $12,500 was deposited with E. J. Sullivan for the purpose of paying the above stated taxes. Thereupon Sullivan paid certain taxes not including those here in controversy and returned the balance to Nicholas and Williams pro rata.
After the transfer and the distribution of cash received by reason of such transfer of assets to petitioner and E. T. Williams, the New Savoy Hotel Company was left without assets and continued to be without assets until it was dissolved on February 23, 1922. Demand was duly made upon the taxpayer and J. G. Nicholas for the taxes herein involved, but the same remain unpaid.
The New Savoy Hotel Company filed its*2119 return for the fiscal year ended January 31, 1921, on May 13, 1921. The taxes shown to be due by said return were $22,523.76 and were thereafter duly assessed but the date of such assessment was not proved. A claim for abatement was filed by the taxpayer on May 13, 1921, which claim was allowed in part and rejected for the amount of $9,601.30, which is the amount here in controversy. Notice and demand for payment of said tax was made on taxpayer June 10, 1926. A notice of deficiency was mailed to the petitioner herein on February 25, 1927.
OPINION.
BLACK: From the record it seems clear that the petitioner is a transferee of the assets of the New Savoy Hotel Company and this proceeding has been properly brought under section 280 of the Revenue Act of 1926. It is difficult to determine from the stipulation whether the assets were transferred to the petitioner at the time a sale of the same for $37,283 was approved by the directors, or whether the transfer took place when they were subsequently sold by the New Savoy Hotel Company, petitioner, and E. T. Williams to *480 the Shirley Hotel Company and the proceeds distributed pro rata to the petitioner and the other principal*2120 stockholder, Williams. This latter transaction is in itself sufficient to render the petitioner liable as transferee, as the company was left without assets with which to pay the tax.
The taxpayer corporation distributed to petitioner cash considerably in excess of the total amount of the tax liability involved in this proceeding. The fact that petitioner was a stockholder of the corporation and contends that he received the money in liquidation of his stock does not make him any less liable as a transferee. A stockholder may not receive the assets of a corporation in payment of his stock and leave it insolvent and thus defeat the claim of creditors. The claim of creditors must first be satisfied before distribution can be made to stockholders. Cf. , and , and cases there cited. The petitioner's liability is not limited to his pro rata share of the assets distributed, since the amount received by him exceeds the tax here involved. *2121 , and .
We can not agree with the petitioner's second contention that the tax is barred by the statute of limitations.
The stipulation recites that the return for the fiscal year ended January 31, 1921, was filed on May 13, 1921, and that the amount shown due thereon "was thereafter duly assessed." Taxpayer's fiscal year having ended January 31, 1921, the statute of limitations provided in the Revenue Act of 1921 governs. That statute provides a period of four years from the date of filing the return within which assessment of the tax may be made and a period of five years from the date of filing the return within which collection of the tax may be made. Taxpayer's return was filed May 13, 1921, and the statute of limitations would run in favor of the taxpayer as to assessment unless otherwise arrested, on May 13, 1925, and as to collection, on May 13, 1926. But the Revenue Act of 1924 provided that where assessment of the tax was timely made, collection of the tax might be made within six years from the date of such assessment.
*2122 In , it was held that in the case of assessments made under the 1918 and 1921 Acts, prior to June 2, 1924, the six year extension of time for collection provided in the 1924 Act does not apply. In other words, it holds that only those assessments made after June 2, 1924, (which was the effective date of the Revenue Act of 1924) serve to extend the time of collection of the tax six years from the date of the assessment.
*481 In , it was held that where assessments levied under prior acts were timely made, after the effective date of the Revenue Act of 1924, to wit, June 2, 1924, under both the Revenue Acts of 1924 and 1926 collection might be made at any time within six years from the date of making such assessment. On the point as to when assessment was made, the stipulation says:
Taxpayer filed an income tax return for the fiscal year ending January 31, 1921, said return being filed May 13, 1921, said return showing a tax due and then payable of $22,523.76, which said sum was thereafter duly assessed. (Italics supplied. *2123 )
We are given no information as to the date when such assessment was made. If the assessment was made after June 2, 1924, it is clear the respondent would have six years in which to make collection (;, and under section 280(b)(2) would have six years from the date of the assessment in which to assert liability against petitioner as transferee of assets of the taxpayer. .
Even assuming that the date of the assessment of the tax against the New Savoy Hotel Company, transferor, was on May 13, 1921, the day it filed its income tax return for the taxable year involved in this proceeding, and the provisions of section 278(d) of the Revenue Act of 1924 do not apply, the statute of limitations would not have run against the collection of the tax. The five-year period provided in the Revenue Act of 1921 and subsequent acts for the collection of the tax would not have expired until May 13, 1926. Prior to the expiration of said period, the Revenue Act of 1926 was passed*2124 February 26, 1926, which contained section 278(d), reading as follows:
(d) Where the assessment of any income, excess-profits, or war-profits tax imposed by this title or by prior Act of Congress has been made (whether before or after the enactment of this Act) within the statutory period of limitation properly applicable thereto, such tax may be collected by distraint or by a proceeding in court (begun before or after the enactment of this Act), but only if begun (1) within six years after the assessment of the tax, or (2) prior to the expiration of any period for collection agreed upon in writing by the Commissioner and the taxpayer.
Petitioner's liability as transferee of the assets of the taxpayer corporation is not barred by the statute of limitations.
Decision will be entered for the respondent.