*3888 1. The liability for the additional taxes for the fiscal years ended May 31, 1917, and May 31, 1919, involved herein, is extinguished by section 1106(a) of the Revenue Act of 1926, and there are no deficiencies for those years.
2. The fair market value of the petitioner's property on March 1, 1913, determined.
*1398 These proceedings, which were consolidated for hearing and decision, are for the redetermination of deficiencies in income and profits taxes asserted by the respondent in the amounts of $4,607.84 for the fiscal year ended May 31, 1917, $17,356.83 for the fiscal year ended May 31, 1918, $33,264.84 for the fiscal year ended May 31, 1919, and $154,122.72 for the fiscal year ended May 31, 1920.
FINDINGS OF FACT.
The petitioner is a Wyoming corporation organized in the year 1904 and dissolved on August 15, 1922. Its authorized capital stock was $1,000,000, divided into 10,000 shares of the par value of $100 each. Eleven hundred and twenty-eight*3889 shares were sold for cash at par, 8,372 shares were issued in payment for 1,943.56 acres of coal land, and 500 shares for surface lands located about 10 miles north of Sheridan, Wyo., in what is known as the Sheridan Coal Field. These properties were developed as a coal mine in the years 1904 and 1905, and the production of coal began in the latter year. The vein of coal, which subsequently became known as the Carney vein, was 16 feet thick, separated about 4 1/2 feet from the top by a clay parting, and was of a jointed structure. The vein cropped out on the north side of the Tongue River, about 15 feet above water level, and extended into the hill at a gradually rising elevation. The location and structure of the vein made it particularly advantageous and valuable. Because of the elevation of the vein as it extended into the hill, the mine was self-draining and the coal could easily be hauled out of the mine. The parting of the clay formed a natural roof in the entire workings, which materially lowered the cost of mining and made possible an almost complete recovery of the coal above it, and the coal thus recovered was almost entirely lump. The jointed structure of the vein*3890 added materially to the production of a high percentage of lump coal, as did the fact that the coal was of a greater density or consistency than the coal contained in the other veins in the Sheridan Field.
The development of the petitioner's mines was rapid and profitable from 1905 to 1913, and the production gradually increased during that period. During the three-year period from June 1, 1907, to May 31, 1910, the total production was 732,487 tons, an average annual production of 244,162 tons. During the period from June 1, 1910, to March 1, 1913, the total production was 745,337 tons, an average annual production of 271,030 tons. The average net earnings per ton for all coal produced prior to March 1, 1913, was more than 47 cents per ton, exclusive of depreciation and depletion.
During the period from March 1, 1913, to December 31, 1913, 223,058 tons of coal were produced from the petitioner's mine, which on an annual basis would reflect a yearly production of 267,668 tons. *1399 During the period January 1, 1914, to May 31, 1916, 539,199 tons of coal were mined, or an average annual production of 223,117 tons. The total production for the fiscal year ended May 31, 1916, was*3891 220,472 tons.
The petitioner's mining property was sold on December 31, 1919, for $1,250,000 in cash. On March 1, 1913, the property consisted of about 2,000 acres of coal land owned in fee and containing 20,425,000 tons of coal recoverable within a period of 40 years. These were also 2 tipples and 2 entries to the mine, in fact, 2 complete mines capable of a maximum production of 4,000 tons of coal per day. In addition there were machine shops, a power house, a screening and rescreening plant, timber yards, a railroad yard connecting with the Chicago, Burlington & Quincy Railroad, and a village, called Carneyville, containing houses sufficient to house 500 miners and their families, stores, churches, a post office, a water supply system, and everything necessary to make it a complete and modern village. The March 1, 1913, fair market value of this property was $1,500,000.
On March 26, 1918, the petitioner filed an income and excess-profits-tax return for the fiscal year ended May 31, 1917. Taxes for that year were assessed in July, 1917, in the amount of $3,811.58, and in February, 1918, in the amount of $11,767.66, apparently on the basis of tentative returns. The amounts*3892 so assessed were paid by the petitioner. In September, 1918, additional taxes in the amount of $938.41 were assessed for the fiscal year ended May 31, 1917, and were paid. On January 25, 1921, and June 21, 1921, the petitioner and the respondent entered into written agreements, identical in form and substance, as follows:
Carney Coal Company, a corporation organized under the laws of the State of Wyoming, in consideration of the assurance given it by officials of the Income Tax Unit of the Bureau of Internal Revenue that its liability for all Federal taxes imposed by the Act of Congress, approved September 8, 1916, as amended by the Act of Congress, approved October 3, 1917, for the year ended December 31, 1917, on its net income received from all sources in said year, shall not be determined except after deliberate, intensive and thorough consideration, hereby waives any and all statutory limitations as to the time within which assessments based upon such liability may be entered. It is understood, however, that the above corporation does not, by the execution of this waiver, admit in advance the correctness of any assessment which may be made against it for said year by the*3893 official of the Income Tax Unit.
These written agreements or waivers expired April 1, 1924. In July, 1923, additional tax was assessed against the petitioner for the fiscal year ended May 31, 1917, in the amount of $6,418.72. On August 4, 1923, the petitioner filed a claim for abatement of said additional tax and on August 28, 1925, the respondent allowed the claim to the extent of $1,810.88, disallowed the remainder of the claim and *1400 determined that there is a deficiency for the fiscal year ended May 31, 1917, in the amount of $4,607.84.
On June 14, 1919, the petitioner filed an income and profits-tax return for the fiscal year ended May 31, 1918. Taxes for that year were assessed in July, 1918, in the amount of $115,930.60, apparently on the basis of returns filed under the Revenue Act of 1917, and in June, 1919, in the amount of $50,511.11, and were paid by the petitioner. Later in the year 1918, or early in 1919, a revenue agent audited the petitioner's books and records for the calendar years 1909 to 1914, inclusive, and the fiscal years ended May 31, 1915, 1916, 1917 and 1918, respectively, and made a report relative thereto under date of February 15, 1919. *3894 On August 11, 1919, the petitioner was advised by letters signed "J. H. Callan (typed) Assistant to the Commissioner, By C. R. Trobridge, Acting Head of Division," that the "Revenue Agent's report has been approved," that an examination thereof had resulted in certain changes in the petitioner's net income and tax liability for the fiscal year ended May 31, 1918, and that additional tax was due for that year in the amount of $2,892.87.
On November 1, 1922, E. H. Batson, Deputy Commissioner, advised the petitioner by letter that an audit had been made of its return for the fiscal year ended May 31, 1918, and the March 1, 1913, value of its coal lands reduced from $885,254 to $363,120, depletion recomputed on the basis of the value so determined, the tax computed without reference to invested capital, under section 210 of the Revenue Act of 1917 and section 328 of the Revenue Act of 1918, and additional taxes found due in the amount of $18,738.14. Said additional tax eas assessed in July, 1923. On July 13, 1923, the petitioner filed a protest and brief against the assessment of such additional tax, and on October 26, 1923, it was advised by letter as follows:
IT:NR:G-2
WDW
*3895 CARNEY COAL COMPANY.
SIRS: Reference is made to your appeal to the Committee on Appeals and Review, filed July 13, 1923. Careful consideration has been given to your contentions set forth therein that the fiscal years 1917 and 1918 had been previously closed by office letter dated August 11, 1919, and should not be reopened. Your contentions on this point have been conceded by the Unit.
Your appeal covering the years 1919 and 1920 is being transmitted to the Committee on Appeals and Review for consideration. A copy of the transmittal letter will be mailed you at an early date.
Respectfully,
(Signed) J. G. BRIGHT,
Deputy Commissioner.
BY A. ALEXANDER,
Head of Division.
*1401 However, no other action was taken by the respondent with regard to the additional tax assessed in July, 1923, until August 28, 1925, to the additional tax assessed in July 1923, until August 28, 1925, when it was abated to the extent of $1,381.31 and a deficiency determined in the amount of $17,356.83.
On August 15, 1919, the petitioner filed an income and profits-tax return for the fiscal year ended May 31, 1919, and on the basis of the return taxes were assessed in the*3896 amount of $80,758.87. On November, 1, 1922, the petitioner was advised by letter that an audit of its books and its returns disclosed additional tax liability for the fiscal year ended May 31, 1919, in the amount of $34,368.59. On July 13, 1923, a protest was filed by the petitioner against the assessment of the proposed additional taxes. They were assessed, however, on November 10, 1923, and notice and demand for payment thereof were made on November 16, 1923. On November 28, 1923, the respondent sent the following telegrams to the collector at Chicago:
1919 and 1920 additional assessments Carney Coal Company in error stop File your abatement claim for total amount.
Regarding additional taxes against Carney Coal Company 1919 and 1920 please submit your claim in abatement stop Assessment made prematurely.
The collector filed a claim for the abatement of said additional taxes and the claim was allowed by the respondent on or about November 24, 1924. On January 26, 1925. the respondent advised the collector at Chicago that the additional taxes assessed for the fiscal year ended May 31, 1919, and May 31, 1920, had been abated through error and instructed him to reverse his*3897 entry eliminating the amounts shown to have been abated. On May 18, 1925, the respondent mailed a deficiency notice to the petitioner advising it that the additional tax assessed for the fiscal year ended May 31, 1919, had been abated to the extent of $1,121.75, and that there was a deficiency in tax for that year in the amount of $33,264.84.
In determining the petitioner's tax liability for the fiscal year ended May 31, 1919, the respondent reduced the March 1, 1913, value of its coal lands from $885,254 to $363,120, recomputed depletion on the basis of the value so determined, and computed the tax without reference to invested capital under section 328 of the Revenue Act of 1918.
The petitioner's income and profits-tax return for the fiscal year ended May 31, 1920, was filed on July 23, 1920, and on the basis of the return, taxes were assessed in the amount of $26,459.46. On July 21, 1920, the petitioner requested Commissioner Roper to make an examination of its tax liability for the fiscal years ended May 31, 1919, and May 31, 1920. An examination of the petitioner's books was made by revenue agents in May, 1921, and a report filed by them on June 18, 1921. The petitioner*3898 was dissolved as a corporation on *1402 August 15, 1922. On November 1, 1922, the petitioner was advised by letter that an audit of its return for the fiscal year ended May 31, 1920, disclosed additional tax in the amount of $191,208.06. The said additional tax was assessed on November 10, 1923, and notice and demand for payment thereof given on November 16, 1923. The additional tax was abated by the respondent on or about November 24, 1924, as above set forth. On May 18, 1925, the petitioner was advised that the additional tax had been abated to the extent of $37,085.34; that there was a deficiency in tax in the amount of $154,122.72. The deficiency was assessed on July 17, 1925. In computing the petitioner's income for the fiscal year ended May 31, 1920, the respondent reduced the March 1, 1913, fair market value of the petitioner's coal lands from $885,254.45 to $363,120, and computed depletion on the reduced value, and also determined that the petitioner realized a profit from the sale of its property on December 31, 1919, computed as follows:
| Fair market value of coal land March 1, 1913, as established | $363,120.00 | |
| Total value of surface at $2.50 per acre | 4,850.00 | |
| Purchase, February 15, 1916 | 4,170.00 | |
| 372,140.00 | ||
| Less depletion allowable to date of sale, 1,848.528 X .024095 | 44,540.28 | |
| $327,599.72 | ||
| Plant | 574,968.80 | |
| Less depreciation | 201,721.45 | |
| 373,247.35 | ||
| Other assets as reported | 67,026.79 | |
| Value of property | 767,873.86 | |
| Sale price | 1,250,000.00 | |
| Net profit on sale | 482,126.14 |
*3899 The tax for the fiscal year ended May 31, 1920, was computed under section 328 of the Revenue Act of 1918.
OPINION.
MARQUETTE: It is the contention of the petitioner that (1) collection of the additional taxes involved herein for the fiscal years ended May 31, 1917, 1918, and 1919, respectively, is barred by the statute of limitations, and that there are no deficiencies for those years; (2) that the March 1, 1913, fair market value of its properties was $1,500,000, which should be used for the purposes of determining depreciation, depletion and invested capital, and whether or not profit was realized from the sale of the property on December 31, 1919; and (3) that the March 1, 1913, value of its properties had been finally *1403 determined and fixed by Commissioner Roper and that the present Commissioner, in the absence of a showing of fraud, misrepresentation, or gross error, is without authority to reverse or set aside that determination.
Upon consideration of the record herein we are of the opinion that the petitioner's first contention must be sustained as to the fiscal years ended May 31, 1917, and May 31, 1919. The evidence shows that the petitioner's return*3900 for the fiscal year ended May 31, 1917, was filed on March 26, 1918. The five-year period for assessment and collection provided by section 250(d) of the Revenue Act of 1921 began on the date the return was filed and expired on March 26, 1923. However, waivers were filed by the petitioner on January 25, and June 21, 1921, and the additional taxes in question were assessed in July 1923, pursuant to the waivers. These waivers expired April 1, 1924, (Proclamation of Commissioner, Mim. 3085, C.B. 11-1, p. 174), and collection of the tax not having been made prior to the expiration of the waivers, it became barred on that date. Since collection of the tax had become barred prior to the enactment of the Revenue Act of 1924, the bar was not removed by either that Act or the Revenue Act of 1926. On the contrary, the liability was extinguished by section 1106(a) of the Revenue Act of 1926, which provides that "The bar of the statute of limitations against the United States in respect of any internal-revenue tax shall not only operate to bar the remedy but shall extiguish the liability * * *." There is no deficiency for the fiscal year ended May 31, 1917. *3901 , and .
The petitioner's income and profits-tax return for the fiscal year ended May 31, 1919, was filed on August 15, 1919. On November 10, 1923, additional tax for that year was assessed in the amount of $34,368.59. On November 28, 1923, the respondent sent two telegrams to the collector at Chicago advising that the additional assessment had been made prematurely and through error, and directing him to file a claim for the abatement of such taxes. The claim was filed by the collector and was allowed by the respondent on or about November 24, 1924. Subsequently, on January 26, 1925, more than five years after the date the petitioner's return for the fiscal year ended May 31, 1919, was filed, the respondent attempted to reverse or rescind the abatement and to reinstate the assessment of November, 1923. In our opinion this latter action was of no force of effect. The respondent's action on November 24, 1924, was just as effective and as much a valid exercise of his authority as any other official act, and it operated to wipe out the assessment, *3902 and from that time on the assessment was dead and as though it had never been made. *1404 The subsequent attempted reversal or rescission of the abatement did not, in our opinion, operate to reinstate or revivify the assessment as of a prior date. There was not, therefore, any assessment of the additional taxes claimed for the fiscal year ended May 31, 1919, outstanding after November 24, 1924, and more than five years having elapsed since the return was filed, the respondent could not then, and can not now, legally make a new assessment except with the consent of the petitioner, which has not been given. We conclude that there was no existing assessment of the tax in question, that the period within which assessment might be made expired on August 15, 1924, and that the liability has been extinguished by section 1106(a) of the Revenue Act of 1926.
In regard to the petitioner's contention that collection of the additional tax for the fiscal year ended May 31, 1918, is likewise barred by the statute of limitations, the answer must be in the negative. The petitioner's return for that year was filed on June 14, 1919, and the tax herein was assessed in July 1923, which was*3903 within the five-year period for assessment provided by the Revenue Act of 1921. The five-year period did not, however, expire until subsequent to the enactment of the Revenue Act of 1924 and by section 278(d) of that Act the time within which collection might be made was extended to six years from the date of the assessment. On this point we sustain the respondent. .
The petitioner urges, however, that even if collection of the additional tax is not barred by the statute of limitations, there was a final determination of the tax liability for the fiscal year ended May 31, 1918, made by Commissioner Roper, which involved the determination and fixing of the value of the petitioner's property for purposes of computing depletion, depreciation and invested capital, and that the respondent is without authority to set aside that determination or to disturb or change that valuation.
Without passing on the merits of the legal question raised, we are of the opinion that the petitioner's contention is not well taken. It may be stated at the outset of this discussion that a valuation of property made by a Commissioner of Internal Revenue for*3904 the purposes of computing depletion, depreciation and invested capital for any given year, does not preclude him or his successor in office from determining a different value for the same property to be used in the same way in the computation of the tax for another year. . In that case we said:
We have heretofore held that our findings of fact as to one year are not conclusive as to any other year, and we have no hesitation in applying the same rule as to conclusions of fact made by the Commissioner. To hold otherwise *1405 would be to perpetuate the error of fact if one were made, and this we will not do.
Therefore, any determination, if one was made by Commissioner Roper or any other Commissioner, as to the value of the petitioner's property for the purposes of computing depreciation, depletion and invested capital for any given year, does not preclude the respondent from determining a different valuation for the year in question. We are unable to perceive where either Commissioner Roper or the respondent made any final determination of the petitioner's tax liability for the fiscal year ended May 31, 1919, or*3905 fixed a value for its property until August 28, 1925, the date the deficiency was finally determined and the deficiency letter mailed to the petitioner. It is true that on August 11, 1919, the petitioner was advised by the assistant to the then Commissioner that a revenue agent's report relative to an audit of the petitioner's books and records had been approved and that upon the basis of that report additional taxes had been found due for the fiscal year ended May 31, 1918, and would be assessed. However, there is nothing in that letter to indicate that it was considered to be a final determination and closing of the petitioner's liability to tax for the year mentioned, or that it involved any valuation of the petitioner's property. The report was made five months before the petitioner's return was filed and it, so far as the record shows, purported only to determine the tax liability upon the basis of the figures shown by the petitioner's books. We do not consider the approval of the revenue agent's report and the assessment of tax based thereon as a final determination of the petitioner's tax liability for the years covered by the report or the fixing of a value for the petitioner's*3906 property. The only official action of either the present Commissioner or his predecessor that, in our opinion, even remotely approaches a final determination of the tax liability for the fiscal year ended May 31, 1918, was the letter of October 26, 1923, in reply to the petitioner's protest of July 13, 1923, against the additional tax assessed in that month, wherein it was stated that "careful consideration has been given to your contentions * * * that the fiscal years 1917 and 1918 had been previously closed by office letter dated August 11, 1919, and should not be reopened. Your contentions on this point have been conceded by the Unit." Regardless, however, of the opinion that may have been entertained at that time by the officials of the Unit, the fact remains that no action was taken with reference to the tax that had been assessed in July, 1923, until August 28, 1925, when it was abated in part and the deficiency determined. Then, and not until then, was there any final determination made or action taken in regard to the year in question.
*1406 The same issue has been raised by the petitioner as to the fiscal year ended May 31, 1920. We are unable, however, to find*3907 from the evidence that any action was taken by Commissioner Roper or the respondent prior to May 18, 1925, that is susceptible of being construed as a final determination of the petitioner's tax liability for the fiscal year ended May 31, 1920, or a valuation of its property for the purposes of computing depreciation, depletion or invested capital for that year. The evidence shows that on July 21, 1920, two days before its return for the fiscal year 1920 was filed, the petitioner requested Commissioner Roper to make an examination of its tax liability for the fiscal years ended May 31, 1919, and May 31, 1920. An examination of the petitioner's books was made by revenue agents in 1921 and a report filed by them on June 18, 1921. However, there is nothing to indicate that any action was taken on that report until November 1, 1922, when the petitioner was advised that the additional tax involved herein for the fiscal years mentioned had been found to be due and would be assessed, and final action was not taken thereon until May 18, 1925, when the deficiency was determined.
The only other question for decision is as to the value of the petitioner's property on March 1, 1913. In*3908 support of its contention as to this issue the petitioner introduced three witnesses, R. E. Gildroy, S. W. Farnum, and Harry N. Taylor.
Gildroy, a graduate engineer, with more than 30 years practical mining experience in the western States, who was the engineer in charge of the operation of the petitioner's properties from 1906 until they were sold on December 31, 1919, and who remained with the purchasers until late in 1921, testified that in his opinion the properties were more valuable on March 1, 1913, than on December 31, 1919, when they were sold for $1,250,000. When asked how much more valuable the properties were on March 1, 1913, he answered, "from $200,000 to $300,000 more." When asked why he thought they were more valuable on March 1, 1913, and what elements he had taken into consideration, he answered, "The market conditions were much more favorable at that date than they were at a later period. There was the constantly growing competition, both locally and outside of the State. There was the beginning of other developments, and the use of oil, and the use and development of hydro-electric power."
Taylor testified that he had been connected with the operation and*3909 management of coal mines for about 42 years; that he is president of the United States Distributing Corporation, the Sheridan-Wyoming Coal Co., the United States Trucking Corporation, and a number *1407 of smaller corporations, and had been president of the Illinois Coal Operators Association, the Southwestern Coal Operators Association, and the National Coal Association, representing the entire bituminous coal industry in America; that he had purchased, developed, and operated coal properties in the States of Indiana, Illinois, Missouri, Kansas, Arkansas, Oklahoma, and Wyoming, and had knowledge of and was familiar with the petitioner's properties and with the conditions in and surrounding the Sheridan Field since 1905 of 1906; that the Sheridan-Wyoming Coal Co., of which he is president, purchased the petitioner's properties on December 31, 1919, for $1,250,000; that in his opinion they had a fair market value of $1,500,000 on March 1, 1913, and that he would have been willing to pay $1,500,000 for them in 1913, whereas he was willing to pay only $1,250,000 on December 31, 1919.
Farnham, an engineer of some 30 years' experience, testified that he was chief engineer in charge*3910 of the operations of the 37 mines owned by the Missouri Pacific Railroad until 1901, that since 1901 he has been engineer for the Goodman Manufacturing Co., and in addition thereto engaged in consultation and advisory work in connection with the appraisal, purchase, operation and management of coal-mining properties not only in the United States, but also in European and Asiatic counteries, including Russia, India, France, England and Belgium; that he was consulted by the petitioner as to the manner and method of opening and developing its properties in 1904, and had been continuously in touch with the operations and management thereof since that time, and was familiar with conditions in the Sheridan Field in 1913 as well as in 1919; that he considered the properties more valuable in 1913 than in 1919 when sold for $1,250,000. That in his opinion the properties had a March 1, 1913, value of at least $1,500,000, and that he would have recommended its purchase for that price on March 1, 1913.
We are satisfied from the evidence that the fair market value of the petitioner's property on March 1, 1913, was $1,500,000, and that amount should be used as the basis for computing depletion*3911 and depreciation for the taxable years involved herein, and for determining whether or not any gain was realized from the sale of the properties erties on December 31, 1919.
Other assignments of error were set forth in the petition field herein, but no evidence was introduced in support thereof.
Reviewed by the Board.
Judgment will be entered on 15 days' notice, under Rule 50.