*2272 Petitioner is not entitled to a credit in his individual tax return for the calendar year 1917 of an amount paid by a corporation as a tax upon his individual income erroneously reported by the corporation in a return filed by it for that year.
*608 This proceeding involves a deficiency for the calendar year 1917 in the amount of $10,157.44. The only question is whether the petitioner is entitled to a credit in his tax return for the calendar year 1917 of an amount assessed and paid upon the return of a corporation of which he was the principal owner.
In an amended petition filed by the petitioner error is alleged on the part of the respondent in his selection of representative corporations, partnerships, and individuals engaged in like trade or business to that of petitioner for use as comparatives in computing petitioner's tax liability for the year 1917, under the provisions of section 210 of the Revenue Act of 1917. Upon motion of counsel for the respondent the hearing had in this proceeding was limited to other issues as provided in*2273 Rule 62 of the rules of practice of the Board.
FINDINGS OF FACT.
The petitioner is an individual residing at Harrisburg, Ill. During the year 1917 and prior thereto he conducted, as a sole proprietorship in connection with the operation of a chain of retail *609 stores, a wholesale department under the trade name of Harrisburg Wholesale Grocery Co. On December 24, 1917, the Harrisburg Wholesale Grocery Co. was incorporated under the laws of Illinois. It had a capital stock of 500 shares, 480 of which were issued to the petitioner and 10 each to his wife and his son. The business was incorporated on account of the advantages to be had in purchasing at wholesale for the retail stores. It was operated in practically the same manner after incorporation as before.
In April, 1918, the Harrisburg Wholesale Grocery Co., hereinafter referred to as the corporation, filed a corporation income-tax return for the calendar year 1917, upon which a tax of $3,446.99 was paid by the corporation on May 1, 1918, with its own check. The petitioner likewise filed an individual income-tax return for the calendar year 1917. In its return the corporation reported as income the earnings*2274 of the wholesale grocery business for the entire calendar year 1917. After payment had been made by the corporation of the tax found to be due on the corporation return filed by it the respondent ruled that the income reported therein properly should have been reported in the petitioner's individual return for that year, and made adjustments accordingly. Thereafter, he notified the petitioner that a deficiency of $21,432.60 had been determined in his individual return for the calendar year 1917. Under date of November 17, 1924, the respondent mailed to the petitioner a letter stating in part as follows:
Reference is made to your protest submitted under date of March 8, 1924, against the suggested deficiency in tax of $21,432.60 as outlined in office letter of February 9, 1924.
* * *
In regard to the allowance of $3,446.99, the amount paid by you on the return of the Harrisburg Wholesale Grocery Company, erroneously filed as a corporation, you are advised that a Certificate of Overassessment has been prepared for this amount, which will reach you in due course of business through the office of the Collector of Internal Revenue for your district.
Under date of February 17, 1925, the*2275 respondent mailed to the petitioner a letter stating in part as follows:
Reference is made to your protests filed under date of November 29, 1924 and December 7, 1924, against the proposed adjustment of your 1917, 1918, 1919 and 1920 income tax returns.
The following adjustments have been made as the result of a conference held in this office on January 16, 1925:
* * *
In regard to the credit for tax paid in error by the Harrisburg Wholesale Grocery Company, you are advised that the matter will be adjusted by a Certificate of Overassessment at the time the additional taxes are listed for assessment.
*610 In his deficiency notice to the petitioner dated February 27, 1926, the respondent states in part as follows:
It is noted you also claim that the tax of $3,446.99 assessed on the corporation return of the Harrisburg Wholesale Grocery Company, a company which existed for only four days in the year 1917, should be applied against the additional assessment on your individual return.
You are advised that inasmuch as you and the corporation are two separate and distinct entities, you are not entitled to a claim as a credit against taxes due under your personal return*2276 an amount of tax overpaid by the corporation.
You are also advised that no refund can be made to the Harrisburg Wholesale Grocery Company since claim therefor was not filed by the corporation within five years from the time the return was due or within four years from the time the tax was paid and no claim can now be filed by the corporation since the waiver executed by the corporation was not renewed on or before April 1, 1924 as provided in Section 281(e) of the Revenue Act of 1924 as amended by the Revenue Act of 1925.
OPINION.
SMITH: The petitioner claims a credit in his individual tax return for the year 1917 of $3,446.99, representing the amount of the tax assessed upon the corporation return filed by the Harrisburg Wholesale Grocery Co. for that year and paid by the corporation. It is the petitioner's contention that the corporation had no taxable income for the calendar year 1917 and that it filed a return for that year by mistake; that the amount paid as a tax upon such return was in fact paid by the petitioner himself upon his income for that year and should, therefore, be allowed as a credit in his individual tax return of that year.
The evidence shows that*2277 the income reported in the tax return filed by the corporation for the year 1917 was the income of the petitioner individually and that the corporation probably had no income in the year 1917, it having been incorporated December 24 of that year and not having actually taken over the business until January 1, 1918. Granting, however, that the corporation erroneously filed a return for the year 1917 and paid the tax computed thereon by mistake, we fail to see how the amount so paid can be allowed as a credit against the tax due on the petitioner's individual return for that year. The evidence shows that the corporation and not the petitioner actually paid the amount in dispute with its own check. At the time the corporation filed the return and paid the amount assessed thereon it was in every respect a complete entity. These were unquestionably the acts of the corporation to which the petitioner herein was not legally a party. The corporation is not a party to this proceeding and we are not called upon to determine its tax liability for any year. If, as appears to be the fact, the *611 corporation has paid as a tax an amount which it did not owe the Government, it must*2278 seek its remedy in its own right.
From the statement contained in respondent's deficiency letter of February 27, 1926, above quoted, it appears that no claim for a credit or refund in respect of any overpayment of taxes for the year 1917 was filed by the corporation within the five-year period from the date of filing the return as provided in section 252 of the Revenue Acts of 1918 and 1921. So far as the evidence shows, the respondent did not represent to the petitioner prior to the expiration of the five-year period that any such credit or refund would be allowed the corporation. Under these circumstances it can not be said that the petitioner herein or the corporation was misled by any promise made by the respondent.
In the facts shown we do not find sufficient reason for denying the existence of separate taxable entities in the petitioner and the corporation for the year before us as the petitioner asks us to do. The evidence fails to show that the petitioner herein paid the amount in question as a tax upon his income and we, therefore, must hold that he is not entitled to any credit in respect thereof.
Reviewed by the Board.
Further proceedings herein will be*2279 had under Rule 62(c) and (d).