*2191 Where a trustee filed a return, but the deficiency notice was addressed to the beneficiary and referred throughout to the deficiency as that of the beneficiary, the Board has no jurisdiction over a proceeding brought by the trustee.
*162 This is a proceeding for the redetermination of a deficiency in income tax for the year 1922 in the amount of $238,275.95.
In the petition the following errors are alleged: (1) The respondent has erroneously determined petitioner's gross income for the year 1922 in that he has incorrectly computed the profit realized in that year upon the sale of 6,000 shares of the common stock of the Corn Products Refining Co., such profit having been computed by using as a basis the cost of said stock to petitioner's grantor pursuant to the provisions of section 202(a)(2) of the Revenue Act of 1921, instead of its fair market value on the date it was acquired by petitioner; (2) in so far as section 202(a)(2) of the Revenue Act of 1921 purports to authorize respondent to tax to petitioner an alleged*2192 profit upon the sale of such stock, computed by using as a basis the cost of said stock to petitioner's grantor, said section is unconstitutional and void; (3) in the event the Board finds that section 202(a)(2) of the Revenue Act of 1921 is unconstitutional and that the basis used by respondent in computing the profit was correct, then respondent erred in computing the tax upon said profit at the full normal and surtax rates instead of at the rate of 12 1/2 per cent in accordance with section 206 of the Revenue Act of 1921.
At the hearing the question of jurisdiction of the Board was raised for the first time and the petition was amended to read, in part, as follows:
The notice of deficiency (a copy of which is attached and marked Exhibit A) was mailed to Erard Matthiessen on March 12, 1927. * * *
The respondent has erroneously determined Erard Matthiessen's gross income for the year 1922 in so far as section 202(a)(2) of the Revenue Act of 1921 purports to authorize respondent to tax to petitioner or Erard Matthiessen an alleged profit upon the sale.
* * *
That *163 said Erard Matthiessen is not liable as a matter of law for any income tax on any profit derived*2193 on the sale of said Corn Products Refining Company's stock.
FINDINGS OF FACT.
The evidence in this case consisted entirely of stipulations of the parties and exhibits.
The petitioner is a corporation duly organized under the banking law of the State of New York, with its principal office at 100 Broadway, New York City.
On April 27, 1906, Conrad Henry Matthiessen acquired 6,000 shares of the common stock of the Corn Products Refining Co. at an admitted cost of $141,375, which cost exceeded the value of said shares on March 1, 1913.
On December 24, 1921, Conrad Henry Matthiessen, by a written instrument, transferred the 6,000 shares of the common stock of the Corn Products Refining Co. to petitioner in trust to collect the income and dividends therefrom and accumulate the same until such time as his son, Erard A. Matthiessen, should attain the age of 21 years, at which time petitioner was directed to pay over all such accumulated income to said son. Thereafter and until said Erard A. Matthiessen should attain the age of 25 years, petitioner was directed to pay the income of the fund to him currently, and upon his reaching such age, to pay over the principal to him. In*2194 the event that said Erard A. Matthiessen should die before reaching the age of 25 years, it was provided that petitioner should pay over the principal in equal shares to two other sons of the grantor.
On December 24, 1921, the Commercial and Financial Chronicles shows quotations for the common stock of the Corn Products Refining Co. as follows: High, 96 1/2; low, 96, and actual sales were made at those prices on the New York Stock Exchange on that date.
During the year 1922 the petitioner sold the 6,000 shares of the common stock of the Corn Products Refining Co. for $603,385. In computing the profit realized by the petitioner upon the sale referred to, the respondent used as a basis the cost of such stock to Conrad Henry Matthiessen, instead of its fair market value at the date it was acquired by the petitioner. Erard Matthiessen had not reached the age of 21 during the year 1922 and the trustee was liable for any tax due on the sale of such stock.
On March 15, 1922, the petitioner filed a return captioned as follows:
The New York Trust Company,
as Trustee for Erard A. Matthiessen (a minor)
100 Broadway
New York City.
*164 The letter transmitting report*2195 of the field examination to the Commissioner had only one line for the name of the taxpayer and the employee at New York filled it in thus:
Erard Matthiessen (a minor)
N.Y. Trust Co. Trustee,
100 Broadway
New York, N.Y.
When the letter of February 8, 1927, respondent's 30-day letter, was mailed, it was addressed as follows:
Mr. Erard Matthiessen,
c/o New York Trust Co., Trustee,
100 Broadway,
New York, N.Y.
This letter was received by the petitioner, which answered it on February 16, 1927, requesting a hearing with regard to the tax. In answer to petitioner's letter of February 16, a letter dated February 25, 1927, denying a postponement of the hearing, was addressed to:
The New York Trust Company, Trustee,
Erard Matthiessen Trust,
100 Broadway,
New York, N.Y.
A hearing was later held, at which the petitioner was represented by counsel. After the hearing the deficiency letter dated March 12, 1927, was mailed, addressed in the same way as the letter of February 8, 1927. This deficiency letter began as follows:
Sir:
The determination of your income tax liability for the taxable year 1922, as set forth in office letter dated February 8, 1927, disclosed*2196 a deficiency in tax amounting to $238,275.96, as shown in the attached statement.
In the statement attached to the deficiency letter the following paragraphs appear:
Under date of February 8, 1927, you were advised that the report of the Internal Revenue Agent in Charge at New York, N.Y., a copy of which was furnished you under date of May 22, 1926, had been reviewed in this office and approved as submitted.
The deficiency in tax of $238,275.95 resulted from the adjustment of income from sale of 6,000 shares of Corn Products Refining Company stock assigned by Conrad H. Matthiessen in 1921 to the New York Trust Company, as Trustee, for your benefit.
This deficiency letter was received by the petitioner and a petition filed which was captioned "The New York Trust Company, as Trustee under Trust Indenture, dated December 24, 1921, by and between Conrad Henry Matthiessen and said The New York Trust Company Petitioner."
*165 Erard A. Matthiessen did not file a return for the year 1922, nor was he liable for any tax for that year. He did not reside at 100 Broadway, New York, N.Y., nor use that as his address for any purpose at any time.
OPINION.
MCMAHON: The first*2197 question to be considered is that of the jurisdiction of the Board. The pertinent provisions of the statute, the Revenue Act of 1926, are as follows:
SEC. 2. (a) When used in this Act -
* * *
(9) The term "taxpayer" means any person subject to a tax imposed by this Act.
SEC. 274 (a). If in the case of any taxpayer, the Commissioner determines that there is a deficiency in respect of the tax imposed by this title, the Commissioner is authorized to send notice of such deficiency to the taxpayer by registered mail. Within 60 days after such notice is mailed (not counting Sunday as the sixtieth day), the taxpayer may file a petition with the Board of Tax Appeals for a redetermination of the deficiency. * * *
We have held in a number of cases that a proceeding before the Board must be based on two elements, namely, the determination by the Commissioner of a deficiency, and the sending of a notice thereof to the person liable for the tax. See ; ; *2198 ; .
Since the Board is a body of limited jurisdiction, all requirements of the statute giving it jurisdiction must be strictly complied with. See , and , Ill. 231.
In , the Commissioner, in auditing returns of two affiliated corporations, determined a deficiency in the case of one and an overassessment as to the other. The notice of deficiency was sent to the company in whose case the overassessment was determined and that company filed a petition contesting the correctness of the deficiency. It was held that the Board did not have jurisdiction; that the other company against which the deficiency was determined had no right of appeal to the Board, as it had not been notified of the determination and was not a party to the proceeding; and that the words "a consolidation" following the name of the petitioner company in the caption of the petition did not make the other company a party to the proceedings. *2199 See also .
In , a deficiency letter was mailed to the Van Cleave Oil Co., an unincorporated association, and the petition for the redetermination of the deficiency was filed by the *166 Van Cleave Trust, to which the Oil Co. had transferred all its assets. Counsel for both parties submitted and argued the case on the hypothesis that the Van Cleave Oil Co. and its successor, the Van Cleave Trust, although different legal entities, nevertheless were, in fact one and the same business unit, and therefore, notwithstanding the fact that the deficiencies in taxes for the years 1920, 1921, and 1922 were assessed against the Van Cleave Oil Co., and the deficiency notices mailed to that organization, nevertheless, by reason of the fact that the Van Cleave Oil Co. had not been in existence since August 14, 1920, and the Van Cleave Trust had exercised the management and control of the property and business formerly owned and managed by the Van Cleave Oil Co. and received for itself all the income from said business, the Van Cleave Trust had a right in its own name and behalf to respond*2200 to the deficiency notice mailed by the Commissioner to the Van Cleave Oil Co. and defend in this proceeding.
We said in that case:
It is clear that the Van Cleave Oil Co. and the Van Cleave Trust are two separate and distinct legal entities, and being such, the situation here is that the entity against which the taxes in question were assessed, and to which the deficiency notices were mailed, has not appealed to the Board, and is not before the Board.
In view of and following the doctrine announced by the Board in a number of cases, we must hold that for the years 1920, 1921, and 1922 the Board is without jurisdiction to adjudicate the issues involved, and, therefore, as to those three years, the proceeding is dismissed for lack of jurisdiction. See , . . .
In each of the other Board cases cited above a return was filed by a corporation, a deficiency letter was addressed to it, and, after the corporation had been dissolved, a proceeding before the Board was brought*2201 by another entity, either a successor corporation or a stockholder. In the present case the trustee filed the return, the trustee is the person liable for the tax, and the trustee filed the petition with the Board. However, the deficiency letter was addressed to the beneficiary instead of to the trustee, and it referred throughout to the deficiency as that of the beneficiary and treated it as being due from the beneficiary instead of the trustee.
In , the petitioner was an unincorporated association managed by trustees and the deficiency notice, instead of being addressed to the trustees, was addressed as follows: "Employees Savings and Profits Sharing Pension Fund, c/o Sears Roebuck and Co., Chicago, Illinois." The Board said:
*167 It is urged that, as the deficiency notice was addressed to the Fund and not to the trustees, and that as the fiduciaries are the persons properly taxable as to the trusts, no notice was given as required by the statute. We are not impressed by this argument. The notice evidently reached the trustees, for in response thereto a petition was*2202 filed with this Board within the time allowed by statute. In , the Board held that a deficiency notice which erroneously stated the year involved but did not mislead the taxpayer was not invalid. In the present proceeding it is not claimed that anyone has been misled, nor that any rights have been jeopardized, nor that any different proof would have been required or offered, because of the manner in which the deficiency letter was addressed. The petitioner's contention, as to this point, can not be sustained.
In this case, while it is true that the trustee filed a return and had several conferences relative to the tax liability with the Commissioner, the deficiency letter was addressed to the beneficiary and referred throughout to the deficiency as that of the beneficiary. The fact that the trustee received it and brought a proceeding before the Board is not sufficient to give the Board jurisdiction, since the technical requirement of the statute - that the taxpayer against whom the Commissioner has determined the deficiency has filed a petition with the Board, has not been met. In the Sears-Roebuck case, supra, although*2203 the deficiency letter was addressed to the Fund, the deficiency was that of the trustees, since the fund, itself, was not a taxable entity. That case was one in which a clerical error was made. In the instant proceeding the deficiency letter, by referring to the deficiency as that of the beneficiary, would seem to establish that the Commissioner meant to assert the deficiency against the beneficiary and not against the trustee. The proceeding will be dismissed for lack of jurisdiction.
Reviewed by the Board.