*2147 Deficiency determined for the calendar year 1918 held to be barred by the statute of limitations.
*1285 The Commissioner determined a deficiency in income and profits tax for the calendar year 1918 in the amount of $60,728.77. It is alleged that he erred: (1) In that he failed to allow any invested capital in connection with the assignment of a valuable contract to the Yocona Cooperage Co., a corporation affiliated with the petitioner under the provisions of section 240 of the Revenue Act of 1918, which contract had at date of assignment, March 9, 1917, an actual cash value of not less than $303,234.42; (2) in failing to permit a deduction from income of $40,977.62, representing a reasonable allowance for exhaustion of the value of said contract; (3) in selecting improper comparatives in determining the profits tax under the provisions of section 328 of the Revenue Act of 1918; (4) in allocating all of the taxes on the consolidated net income to petitioner and none to the Yocona Cooperage Co., instead of allocating*2148 said taxes on the basis of the net income of the respective corporations so affiliated; (5) in attempting to collect any income or profits tax from the petitioner in respect to the calendar year 1918 because such collection is now barred by the running of the statute of limitations contained in section 250(d) of the Revenue Act of 1921.
On September 14, 1928, an order was entered herein, limiting the hearing in the first instance to the issues other than special assessment, as provided in the Board's Rule No. 62.
The record consists of three depositions, oral testimony taken at the hearing and an agreed statement of facts.
*1286 The plea of the statute of limitations relied on is the issue to be first decided.
FINDINGS OF FACT.
The petitioner is an Illinois corporation. It and the Yocona Cooperage Co. were in 1918 manufacturers of slack barrel staves. The petitioner had a mill at Rives, Mo., and the other company a mill at Crowder, Miss. The Atlas Hoop Corporation made cooperage hoops. The J. D. Hollingshead Co., a jobbing company, acted as the fiscal and selling agent of all three companies. All four were corporations and had their offices in the same room*2149 and building in Chicago, Ill.
In 1915 L. C. Hollingshead, president of the J. D. Hollingshead Co., procured for the petitioner a certain timber contract with the Wisconsin Lumber Co., which provided for the delivery of cooperage logs over a 10-year period. The petitioner operated under this contract in 1918. September 22, 1916, L. C. Hollingshead procured the execution by the J. D. Hollingshead Co. and the Estate of R. J. Darnell of Memphis, Tenn., of a contract for the delivery of cooperage logs to the J. D. Hollingshead Co. for a period of not less than 8 nor more than 10 years, from September 1, 1916. The Yocona Cooperage Co., which was organized in November, 1916, built a mill at Crowder, Miss., and was operating under said contract in 1918.
On March 15, 1919, the petitioner, the Yocona Cooperage Co., J. D. Hollingshead Co., and the Atlas Hoop Corporation each filed with the collector for the first district of Illinois, at Chicago, tentative tax returns for the calendar year 1918 on Form 1931-T, and requests for extension of time to file complete returns.
The tentative returns of petitioner and the Yocona Cooperage Co. were signed by L. C. Hollingshead for F. Grismore*2150 as president and himself as treasurer.
On June 17, 1919, the four aforementioned corporations filed a consolidated return of their income and capital. Included as a part of said return were four schedules: A-2, Cost of Goods Sold; A-12, Ordinary Expenses; C, Consolidated Balance Sheets, and D, Surplus Account. Said return was subscribed and sworn to by L. S. Hollingshead as president and A. H. Zimmerman as treasurer of the parent corporation, J. D. Hollingshead Co. With said consolidated return were filed information returns on United States Internal Revenue Service Form 1122 by the petitioner, the Yocona Cooperage Co., and the Atlas Hoop Corporation, showing they had reported their income in the consolidated return filed by the parent company, the J. D. Hollingshead Co. On the consolidated return, in answer to questions propounded therein, it was stated that it did not own or control through closely affiliated interests, over 50 per *1287 cent of the stock of another corporation, but exactly 50 per cent, and that not over 50 per cent of its capital stock was owned or controlled by the same individual or partnership. The names and addresses called for in schedules or*2151 forms prepared for such filing were omitted. The consolidated return showed only the items of gross income and deductions of the four corporations as a group. There were no statements or schedules attached from which the gross income or the deductions or credits of the petitioner alone might have been determined and the separate tax liability of the petitioner could not have been determined from an audit of the return.
With said consolidated return were filed information returns on United States Internal Revenue Service Form 1122 by the petitioner, the Yocona Cooperage Co., and the Atlas Hoop Corporation. The information returns of the petitioner and the Yocona Cooperage Co. were each signed by its treasurer, L. C. Hollingshead, but not by its president. As No. 9 on Form 1122 appears the question, "State amount of income and profits taxes for the taxable year apportioned to the subsidiary or affiliated corporation making this return." This was answered on each return - "Not yet apportioned."
The consolidated return filed June 17, 1919, showed a total income and profits-tax liability in the amount of $39,370.53, which was paid by the J. D. Hollingshead Co. as fiscal agent for*2152 the group of four corporations aforesaid.
The Commissioner in the latter part of 1920 determined that the four corporations were not affiliated, but should be divided into two groups, ruling that the J. D. Hollingshead Co. and the Atlas Hoop Corporation were affiliated and the Yocona Cooperage Co. and the petitioner were affiliated.
On January 15, 1921, the petitioner and the Yocona Cooperage Co. filed with the Commissioner a recomputation on Form 1120, showing both the separate and the consolidated net income and the invested capital of petitioner and the Yocona Cooperage Co. which the Commissioner had held to be affiliated in one group. With said return were filed schedules showing both the separate and the consolidated cost of goods sold, expense items, surplus, intercompany eliminations and consolidated accounts.
On February 7, 1924, the Commissioner sent by registered mail to the petitioner a 30-day letter which the petitioner never received. This letter proposed a deficiency in the consolidated tax liability of the petitioner and its affiliated company in the amount of $94,523.41, all of which was asserted against the petitioner.
On March 7, 1924, the Commissioner*2153 made a jeopardy assessment on Special List No. 5, page 10, line 7, against the petitioner of the amount of $94,523.41, as income and profits-tax liability for the calendar year 1918.
*1288 On March 15, 1924, the petitioner received from the collector a notice and demand for the payment of the $94,523.41. On the same date the petitioner and the Yocona Cooperage Co. filed jointly a claim for abatement of taxes for 1918, the only ground assigned being, "That effect of affiliation and special relief claim should result in refund." This claim was signed on behalf of both companies by G. P. Bartlett, secretary. On March 22, 1924, the petitioner and the Yocona Cooperage Co. jointly executed and filed a claim for abatement of the additional tax asserted for 1918 in the amount of $94,523.41, assigning as reasons, that the assessment was made in noncompliance with section 250(d) of the Revenue Act of 1921 and without giving an opportunity to appeal or to have an oral conference. George P. Bartlett, secretary, signed same for both companies.
No protest against the allocation of the entire consolidated tax liability to the petitioner was made by the petitioner or the Yocona Cooperage*2154 Co. to the Commissioner at any time prior to the mailing of the 60-day letter of January 13, 1926. The first request to the Commissioner to allocate the consolidated tax liability according to the respective net incomes of the petitioner and the Yocona Cooperage Co. was made by a letter of the attorneys for the two companies addressed to the Commissioner under date of February 9, 1926.
Neither L. C. Hollingshead nor the J. D. Hollingshead Co. paid anything for the contract with the R. J. Darnell Estate acquired by the Yocona Cooperage Co., nor was there any stock issued or other consideration paid by the Yocona Cooperage Company for the assignment of the contract to it.
In 1918 and 1919 the officers of the J. D. Hollingshead Co. were:
L. C. Hollingshead, president. P. L. Dysart, vice president. A. H. Zimmerman, treasurer.In 1918 and 1919 the officers of the petitioner and the Yocona Cooperage Co. were:
F. Grismore, president. L. C. Hollingshead, treasurer.On or shortly after January 12, 1921, the petitioner and the Yocona Cooperage Co. filed with the Commissioner a request for special relief for the year 1918 under sections 327 and 328 of the Revenue Act*2155 of 1918. This was signed by L. C. Hollingshead as secretary-treasurer on behalf of both companies. It contained the following statements:
(b) Facts proving abnormalities: * * * The fact is that when these corporations were organized, the thing of greatest value which the corporation acquired, was not capitalized at all. In the case of the Converse Company, *1289 there was given to it at organization a contract which had previously been secured by Mr. L. C. Hollingshead, one of the incorporators, for certain timber off of 60,000 acres of land. This was a ten year contract with the Wisconsin Lumber Company, a highly responsible corporation closely affiliated with the International Harvester Company, and was highly advantageous. In the case of the Yocona Cooperage Company, there was put into the corporation, at its organization, near the end of 1916, a contract somewhat similar to the first, covering timber from 40,000 acres. This was a ten year contract with the R. J. Darnell Estate. * * * Since organization, each of these two companies has been steadily operating on material derived from these two contracts.
On May 15, 1924, the Commissioner mailed a letter to the*2156 petitioner. This letter read as follows:
An examination of your income tax return together with the information on file with the Bureau has been made, the results of which are outlined in the attached statement and schedules.
Before consideration can be given to your request that your tax be computed under Sections 327 and 328 of the Revenue Act of 1918, there must be a final determination of your net income, and you are therefore requested to advise this office of your acquiescence in the determination of net income as disclosed by this letter, or your exceptions thereto, if any.
The statement attached disclosed an overassessment of $18,186.48 in favor of the petitioner alone.
On May 22, 1924, the petitioner and the Yocona Cooperage Co. mailed a letter to the Commissioner in answer to the Commissioner's letter of May 15, 1924. This letter read as follows:
We hereby acknowledge receipt of your letter dated May 15th, 1924, enclosing statement of returns examined and resulting tax liability.
We have no further adjustments of invested capital or net income to claim at this time so for the purposes of obtaining consideration of our application for special relief we hereby*2157 acquiesce in the determination which shows a net income of $104,573.95 and an invested capital of $83,361.11.
Our understanding is that our case will now be transferred to the Special Assessment Section for consideration under Sections 327 and 328 of the Revenue Act of 1918. We wish to reserve the right to file certain supplemental data relating to the above figures and matter of special relief.
On or about September 5, 1924, the petitioner and the Yocona Cooperage Co. filed with the Commissioner an additional memorandum and letter dated September 3, and August 30, 1924, respectively, requesting special assessment. This brief was signed on behalf of both the petitioner and the Yocona Cooperage Co. by G. B. Bartlett, secretary. The letter of transmittal stated in part that "the taxpayer has already acquiesced to the invested capital and net income as determined by the Consolidated Returns Division."
On September 14, 1925, the Commissioner mailed a letter to the petitioner advising that special assessment had been allowed and giving the result of the audit under the special relief sections.
*1290 On October 10, 1925, a protest was submitted by the petitioner and*2158 the Yocona Cooperage Co. on the results of the determination contained in the Commissioner's letter of September 14, 1925. This protest was based solely on the rate of profits tax determined under section 328.
On January 13, 1926, the Commissioner mailed a letter to the petitioner, which advised that on a review of the protest submitted an overassessment of $33,794.64 was determined in favor of the petitioner.
On or about September 3, 1924, the petitioner as sole principal and the Globe Indemnity Co. as surety filed a bond with the collector of internal revenue for the first district of Illinois, at Chicago. The sum of $76,336.93 named in the recitals of said bond as having been assessed against the principal represents the "total tax" found due as disclosed on the second page of the statement accompanying the Commissioner's letter of May 15, 1924. The bond reads as follows:
KNOW ALL MEN BY THESE PRESENTS, That CONVERSE COOPERAGE COMPANY, Chicago, Illinois, as principal, and GLOBE INDEMNITY COMPANY, Newark, New Jersey, as surety, are held and firmly bound unto the COLLECTOR OF INTERNAL REVENUE. FIRST DISTRICT OF ILLINOIS, in the sum of ONE HUNDRED THOUSAND ($100,000.00) *2159 DOLLARS, lawful money of the United States, for the payment whereof we bind ourselves, our heirs, executors, administrators, successors and assigns, jointly and severally, firmly by these presents.
WHEREAS, the above bounden principal has been assessed by the Commissioner of Internal Revenue Seventy Six Thousand Three Hundred Thirty Six and 93/100 ($76,336.93) Dollars as taxes, penalties and interest under the Internal Revenue Laws, on the List, and
WHEREAS, the above bounden principal has filed, or is about to file a claim for abatement in order to be relieved of the taxes and penalties assessed until the entire amount due at the time of final payment is cancelled; and
WHEREAS, the Revenue Act of 1917 and Revenue Act of 1918 and Revenue Act of 1921 and the rules and regulations prescribed for the enforcement of the provisions of the said acts provide that when the collection of such tax shall be delayed or suspended by the filing of a claim for abatement or credit, or the tendering of an offer in compromise, or in any other manner, at the request of the taxpayer, the Collector of Internal Revenue may require the filing of a bond in sufficient sum to cover the amount of the*2160 tax plus penalty and interest thereon with sureties satisfactory to the Collector conditioned for the payment of such tax found due plus penalty and interest and it appears that the amount of this bond is in excess of tax plus penalty and interest thereon.
Now THEREFORE, the condition of the foregoing obligation is such that if the principal shall on notice and demand by the Collector of Internal Revenue duly pay such tax found by the Commissioner to be due, plus any penalty and interest at the rate prescribed by law from the time such tax would have been due had there been no such claim for abatement or credit filed or offer in compromise tendered, and shall otherwise well and truly perform and observe all the provisions of law and the regulations, then this obligation to be void, but otherwise to remain in full force and virtue.
*1291 On March 9, 1917, the Estate of R. J. Darnell had already cut and delivered to the Yocona Cooperage Co. 3,000,000 feet, board measure, of the timber covered by the contract.
The petitioner was incorporated on March 12, 1915, and the Yocona Cooperage Co. was incorporated on November 16, 1916. In 1916, after the incorporation of the Yocona*2161 Cooperage Co., and in 1917, the stock of J. D. Hollingshead Co. was held as follows:
| Stockholders | Shares | Per cent |
| Paul L. Dysart | 530 | 26 1/2 |
| L. B. Hollingshead | 200 | 10 |
| C. L. Allen | 200 | 10 |
| H. T. Hollingshead | 500 | 25 |
| L. C. Hollingshead | 500 | 25 |
| C. B. Eggleston | 40 | 2 |
| W. S. Henry | 10 | 1/2 |
| E. M. Ashby | 5 | 1/4 |
| C. E. Hartke | 5 | 1/4 |
| A. L. Poessel | 10 | 1/2 |
None of the foregoing stockholders was related to F. Grismore, who owned 50 per cent interest in the petitioner and the Yocona Cooperage Co. The holdings of stock in the J. D. Hollingshead Co. in 1918 were by substantially the same interests in substantially the same proportion.
From 1909 to 1916 Paul L. Dysart operated the Keokuk Barrel Co., Inc., at Keokuk, Iowa, owning four-fifths of the stock and L. C. Hollingshead the other one-fifth.
In the fall of 1916 Dysart was approached by L. C. Hollingshead, of the J. D. Hollingshead Co., with reference to investing in that company, with a view to furthering operations under a contract with the R. J. Darnell estate for timber located near Crowder, Miss. He made a trip to Crowder, looked over the timber and milling facilities, and investigated the responsibility*2162 of the Darnell estate. He then sold his business at Keokuk for about $53,000, which he invested in the J. D. Hollingshead Co. At this time he knew that the company was practically insolvent, considering the two contracts as excluded from consideration.
At the time of investing in the J. D. Hollingshead Co., Dysart knew that one Fred Grismore, a mill operator of financial responsibility was going to be associated in the enterprise, but he did not know whether Grismore was to come into the J. D. Hollingshead Co. or some other company to be organized to operate the Darnell contract.
Dysart joined the enterprise with the idea of investing in the jobbing and sales end of the business. He did not know whether he was to invest in a company owning 100 per cent of the contract or in one having an equity of only 50 per cent in it.
The contract with the Darnell estate dated September 22, 1916, was to run for not less than 8 nor more than 10 years. Delivery was to start on December 1, 1916; it leased a mill site for a term *1292 of 10 years, beginning September 1, 1916, with a privilege of renewal for another 10 years.
The J. D. Hollingshead Co. agreed under the contract*2163 to erect a cooperage plant and complete it by January 1, 1917; to guarantee to the Darnell estate all rentals for tenement houses, and to collect for the purchase price of houses sold to employees; not to assign the lease without consent; not to permit liens to attach to the premises; and not to buy logs from other sources.
Work was started on the mill which was to be built to handle the logs under the Darnell contract shortly after it was signed; it started operations in December, 1916, or January, 1917.
No change took place in the functioning of the business of the Yocona Cooperage Co. on or about March 9, 1917; the records of deliveries of logs prior to March 9, 1917, and subsequent to March 9, 1917, are identical.
All of the said $94,523.41 was assessed against the petitioner and no assessment of any part of said amount, and no assessments of any income or profits taxes for 1918, have been made by the Commissioner against the Yocona Cooperage Co., affiliated with the petitioner in that year. No formal agreement was ever entered into or filed with the Commissioner between the petitioner and Yocona Cooperage Co., agreeing among themselves to the allocation, assessment and*2164 collection of all the income and profits taxes found to be due on the consolidated net income of petitioner and Yocona Cooperage Co. to the petitioner.
The Commissioner has not levied any distraint or started any proceeding in court for the collection of the deficiency of $60,728.77.
J. D. Hollingshead, founder of the J. D. Hollingshead Co., died in 1910 or 1911. His son, L. C. Hollingshead, who negotiated the contract with the Wisconsin Lumber Co., induced Paul L. Dysart to sell his mill at Keokuk, Iowa, and to place its entire savings of approximately $53,000 in stock of the J. D. Hollingshead Co. This investment was made after Dysart had investigated the financial condition of the J. D. Hollingshead Co. and found that while it was otherwise bankrupt, it had obtained the contract with said Darnell estate and also a practically similar contract with the Wisconsin Lumber Co., operating at Rives, Mo. The latter contract was negotiated by L. C. Hollingshead for the J. D. Hollingshead Co., but was drawn as between the Wisconsin Lumber Co. and the petitioner, dated March 15, 1915, and covered annual deliveries of 4,000,000 feet of cooperage logs for a period of 10 years at gradually*2165 increasing prices, starting at $7 in the first year and ending at $8.25 in the last year.
The Darnell estate was a valuable one and largely interested in the lumber business. It was well and favorably known to lumber *1293 operators, and it was found to the interest of the estate to clear its lands of all timber at the time logs were being cut for lumber purposes, in order that such lands when so cleared might be sold and utilized for farming purposes. The Darnell estate had the facilities necessary for the removal and delivery to the plant of the Yocona Cooperage Co. of the logs to be supplied it under its contract.
The delivery of the logs to the plant of the Yocona Cooperage Co. over the logging railroads already owned by the Darnells eliminated the necessity for investment in logging equipment, with the various risks attendant thereon, including the rise in the price of equipment and labor, and it also eliminated the uncertainty of regular supply of timber, which constituted the worst feature of the cooperage business.
One Fred Grismore of Memphis, Tenn., had been engaged in the cooperage business, operating several mills of his own, and also had become associated*2166 with L. C. Hollingshead in the operation of the petitioner's plant at Rives, No. He was an expert stabe-mill operator and had considerable capital. L. C. Hollingshead was endeavoring to induce Grismore to invest in the Yocona Cooperage Co. at the same time he was persuading Dysart to invest in the stock of the J. D. Hollingshead Co. Grismore's help was needed to supervise the operation of the stave mills and also help finance the operations of the contract, since neither J. D. Hollingshead Co. nor the Hollingshead family had sufficient capital. At the time Dysart invested in the Hollingshead Co. it was not known who would become the owner of the Darnell contract or exactly how it would be handled. A number of conferences were held between L. C. Hollingshead and Grismore prior to March 9, 1917, but not before that date could they reach an agreement as to the basis upon which Grismore would be allowed to participate in the profits of the Yocona Cooperage Co. or upon the basis of which the Yocona Cooperage Co. would receive the benefits of the Darnell contract. On March 9, 1917, the J. D. Hollingshead Co. formally assigned to the Yocona Cooperage Co. all its rights in said Darnell*2167 contract, no stock being issued therefor. The R. J. Darnell estate acquiesced in this assignment and thereafter rendered their bills for logs direct to the Yocona Cooperage Co.
The Darnell contract had a cash value of not less than $200,000 on March 9, 1917, when assigned to the Yocona Cooperage Co., and a life of not less than 7.4 years on the date of its assignment.
L. C. Hollingshead was not president of either petitioner or the Yocona Cooperage Co. A. H. Zimmerman was not the treasurer of either.
Forms 1122, filed in the name of the petitioner and the Yocona Cooperage Co., were not signed and sworn to by their president, F. Grismore.
*1294 No waiver of the statute of limitations against assessment or collection was filed by the petitioner or the Yocona Cooperage Co.
OPINION.
LITTLETON: It is the contention of the petitioner that the collection of the additional tax asserted against it for the calendar year 1918 is barred by the statute of limitations. If such is true, it will be unnecessary to consider other issues.
There is insistence on behalf of the Commissioner that the consolidated tax return filed by or for the petitioner on June 17, 1919, was*2168 not filed in good faith, in the sense in which that term is used in the statute. We are of the opinion, however, from the facts and circumstances disclosed by the evidence and set forth in our findings of fact that such charge is not sustained.
It is argued for the Commissioner that said return is not such a return as is required by the Revenue Act of 1918; is not a "substantial" compliance with the law and regulations relative to the filing of such returns and did not, therefore, start running the statute of limitations and that the , is dispositive of this issue.
In behalf of the petitioner it is insisted that the consolidated return of June 17, 1919, set in motion the statute of limitations and that the instant case is controlled by .
It appears that on March 15, 1919, the petitioner, the Yocona Cooperage Co., J. D. Hollingshead Co., and the Atlas Hoop Corporation, corporations, each filed with the collector for the first district of Illinois, at Chicago, a tentative tax return and request for extension of time for the calendar year 1918 on Form 1031-T.
On June 17, 1919, the*2169 four corporations mentioned, filed a consolidated tax return of their consolidated income and capital.
The consolidated return showed a total income and profits-tax liability in the amount of $39,370.53, which was paid by the J. D. Hollingshead Co. as fiscal agent for the group of four corporations aforesaid.
In the latter part of 1920 the Commissioner determined that the four corporations were not affiliated, but that J. D. Hollingshead Co. and the Atlas Hoop Corporation constituted one affiliated group, and the Yocona Cooperage Co. and the petitioner another affiliated group.
On January 15, 1921, the petitioner and the Yocona Cooperage Co. filed with the Commissioner a consolidated return on Form 1120, showing both the separate and the consolidated net income and invested *1295 capital of the two companies. With said return were filed schedules showing both the separate and the consolidated cost of goods sold, expense items, surplus, intercompany eliminations, and consolidated accounts.
On February 7, 1924, the Commissioner sent by registered mail to the petitioner a 30-day letter proposing a deficiency in the consolidated tax liability of the petitioner and its*2170 affiliated company in the amount of $94,523.41, all of which was asserted against the petitioner. This letter was not received by the petitioner.
On March 7, 1924, the Commissioner made a jeopardy assessment against petitioner of the amount of $94,523.41, as its income and profits-tax liability for the calendar year 1918.
On March 15, 1924, the petitioner received from the collector a notice and demand for the payment of the $94,523.41 and on the same date the petitioner and the Yocona Cooperage Co. filed jointly a claim for abatement of the assessment and for $20,000, refund of taxes for 1918.
It is insisted on behalf of the Commissioner that the test of "substantial" compliance with the law and regulations relative to the filing of the returns, which was held by us in , and followed in , is contrary to the great weight of authority.
The facts in this case are not identical, but in many respects similar to those in the Stetson & Ellison case, supra, in which we held the return filed was in "substantial" compliance with the requirements of the statute. In that*2171 case it was found among other facts:
* * * That return included the gross income, deductions and credits in total for the consolidated group, including the gross income, deductions and credits of the petitioner. Although the gross income, deductions and credits of the petitioner were included in the totals consolidated in the return, its figures, like those of the other affiliated companies, could not be separately identified from the face of the return.
In our opinion in that case we stated:
We have held that the 1918 Act did not contemplate the filing of separate returns by each corporation when said corporation was included in a consolidated return. . Section 240 of that Act provides that corporations which are affiliated shall make a consolidated return of net income and invested capital. Where corporations in good faith have filed such a consolidated return in substantial compliance with the statute and regulations, although it subsequently develops that all the corporations included therein are not affiliated within the meaning of the Act, that return starts the running of the limitation period. *2172 National Tank & Export Co., supra; Mattewan Manufacturing Co., supra; Kellogg Commission Co., supra.
*1296 The consolidated return in question in this case was filed in good faith.
In the Colmer-Green Lumber Co., case, supra, the Commissioner contended that because he could not determine the separate income and deductions from the face of the consolidated return, it was not such return as is required by law and would not start running the statute of limitations.
In that case we said:
* * * The statute does not require that such a return include the separate income and deductions of each corporation. The regulations of the Commissioner, approved by the Secretary, however, do provide that statements and schedules shall be filed giving details of the items of gross income and deductions. Whether the regulations were complied with, the Commissioner had the opportunity to determine. The respondent had an opportunity to audit the return and to determine whether it set forth the data and information in sufficient detail and to determine whether a consolidated or separate returns should have been filed, as he subsequently did. The period of limitation prescribed*2173 by statute is one of repose and it should not lightly be construed to permit the respondent to reopen cases upon the ground that the return filed in good faith was not the return required by statute. * * *
In , in which the return was filed on June 14, 1919, and the additional tax was assessed on May 29, 1924, we held the return was properly executed, though not executed by the treasurer, but by a person who exercised the functions of the treasurer. No action being taken by the Commissioner for the collection of the tax within five years from June 14, 1919, and the filing of a bond on April 17, 1926, not being a valid consent within the meaning of the statute, the same was held barred by the statute of limitations. The assessment on May 29, 1924, of the tax claimed to be due did not operate to extend the period for collection. .
We are of the opinion that the consolidated return filed June 17, 1919, in the instant case, should, under all the facts and circumstances shown by the evidence, be considered the return required by law. It appears to have been so accepted*2174 by the Commissioner, and so indicated by the jeopardy assessment on March 7, 1924, with a view to prevent the running of the statute of limitations.
Neither the jeopardy assessment of March 7, 1924, of the tax then claimed to be due, nor the filing of the bond in September, 1924, operated to extend the period for collection by distraint. The statute of limitations is effective, and the deficiency is barred. .
Judgment that the deficiency is barred by the statute of limitations will be entered.