*2058 1. The filing of a separate return by a taxpayer corporation constitutes a binding election under section 240(a), Revenue Act of 1921, and its tax must be computed upon the basis of that return.
2. The discretion of the Commissioner to permit a change in such basis to be used consistently in the future does not include a discretion to change the tax once properly established by retroactively permitting an amended return.
*417 Respondent determined a deficiency in income tax for 1923 of $61.49. Petitioner attacks this and assigns as error that respondent refused to consolidate the income of itself and another corporation.
FINDINGS OF FACT.
For 1922 and 1923 petitioner and George Freese's Sons Co. each filed separate corporation returns. Thereafter, on July 3, 1924, petitioner first made application to respondent for permission to file consolidated amended returns in respect of the two corporations. By letter from the respondent dated July 28, 1924, petitioner was advised that permission was granted to petitioner and George Freese's Sons Co. *2059 to file amended consolidated returns. By letter of the Assistant to the Commissioner dated June 7, 1926, petitioner was again notified that amended consolidated returns for these two corporations would be accepted "in accordance with the provisions of section 240 of the Revenue Act of 1921." Amended consolidated returns for 1922 and 1923 were prepared and filed about June or July, 1924. In the notice of deficiency the tax for 1923 was determined on a nonconsolidated basis.
Stock in the two corporations was held as follows:
| George Freese's Sons Co. | George Freese's Sons | |
| George Freese | 80 | 150 |
| Bennett Freese | 200 | 525 |
| Edward Freese | 280 | 525 |
| J. Fred Freese | 280 | 525 |
| George Fales | 280 | 525 |
| Karl Freese | 80 |
Karl Freese received his 80 shares of stock as a present from Bennett Freese. After the gift the control and management remained as before.
OPINION.
STERNHAGEN: By the Revenue Act of 1921, section 240, corporations, if affiliated, were permitted to elect to file either separate or consolidated returns. The election was binding until permission to change was granted by the Commissioner. Even if affiliated, *418 petitioner as a matter of*2060 law elected to file separate returns for 1922 and 1923, by which it is bound, notwithstanding that the directors were not conscious of their right to file consolidated returns or of the wisdom of so doing. , affirming ; .
Since petitioner's voluntary filing of a separate return was a binding election establishing finally the basis on which its statutory liability was fixed for the year in question, there is nothing in the statute authorizing a change in such liability after it has thus become fixed. The discretion of the respondent to permit a change in the basis to be used consistently in the future neither expressly nor, we think, impliedly includes a discretion to change the tax once properly established by retroactively permitting an amended return. This would go beyond the necessities of administration and is not within the fair intendment of the statute giving the Commissioner power to prescribe regulations, nor of the regulations so prescribed. Regulations 62, article 632. Thus the letters of the Deputy Commissioner and*2061 of the Assistant to the Commissioner purporting to assure petitioner that amended returns on a consolidated basis would be accepted can have no weight against respondent's proper determination of a deficiency upon the basis of the separate return which petitioner elected to file.
Judgment will be entered for the respondent.