*2119 1. TRANSFEREE - LIABILITY. - Where the transferree corporation purchased all of the assets of the transferor corporaton, which assets had a net value in excess of the amount of the taxes due, and paid therefor stock of the transferee, which was issued and paid directly to the stockholders of the transferor, leaving the transferor without assets, the transferee is liable to the extent of the taxes legally due.
2. WAIVER. - Where waivers (consents in writing) are signed by a corporate officer and the corporate seal affixed, and respondent's name is signed thereto, by a subordinate having authority to sign such consents in writing for the Commissioner, such waivers are valid.
3. RES JUDICATA. - Where the petitioner was not a party to a proceeding before this Board to redetermine taxes instituted by its transferor, and the proceeding as to the taxable years here involved was not heard or determined on its merits and there was no final decision on the merits, the petitioner is not bound thereby and may question the correctness of the liability proposed against it, in a transferee proceeding under section 280 of the Revenue Act of 1926.
4. LIMITATION. - Taxes for 1917 not barred; *2120 1920 barred.
5. No liability against transferee for 1924 exists because payment is shown of all taxes for that year assessed or asserted against the transferor.
*401 The taxes in controversy in this proceeding are income and excessprofits taxes alleged to be due from petitioner as transferee of the American Auto Trimming Company of Detroit, Mich., under section 280 of the Revenue Act of 1926, and are as follows: 1917, $17,395.17; 1920, $39,334.05; and 1924, $9,602.83, amounting in all to $66,332.05.
A large number of errors are relied upon, which may be summarized as follows; (1) the constitutionality of section 280 is attacked; (2) the liability of petitioner as transferee is denied; (3) the statute of limitations is pleaded as to taxes for 1917 and 1920, and in connection therewith the validity of certain waivers is questioned; (4) no liability for 1924 taxes because they were paid by transferor; (5) error by respondent in assessing entire tax of affiliated group on one corporation.
Respondent on his part raises*2121 the question of the right of petitioner to contest the determination of respondent against transferor taxpayer where such determination had been appealed from to the Board of Tax Appeals and the appeal dismissed prior to a hearing on the merits.
*402 FINDINGS OF FACT.
The petitioner is a corporation organized under the laws of the State of Michigan in 1924 as the Gotfredson Corporation. Its name was subsequently changed to Wayne Body Corporation. The American Auto Trimming Company of Detroit, Mich., was a Michigan corporation organized in 1909 and engaged in the business of building, trimming and painting automobile bodies. It will hereafter be referred to as the Detroit Company. The American Auto Trimming Company of Cleveland, Ohio, was a similar company affiliated for a period of time with the Detroit Company. It will hereafter be referred to as the Ohio Company.
By proper corporate action at meetings held February 24, 1925, and March 2, 1925, the petitioner purchased all of the assets as of January 1, 1925, of the American Auto Trimming Company of Detroit, Michigan, subject to its liabilities, which were assumed by petitioner. In consideration therefor the*2122 petitioner issued and paid direct to the stockholders of the Detroit Company 135,536 shares of its no-par-value stock according to their respective holdings.
At the close of business, December 31, 1924, the assets and liabilities of the American Auto Trimming Company of Detroit, Mich., as shown by its books, were as follows:
| ASSETS | |||
| CURRENT: | |||
| CASH - | |||
| On hand and on deposit | $13,548.55 | ||
| ACCOUNTS RECEIVABLE - | |||
| Due from customers | $113,448.79 | ||
| Less: Allowance for doubtful | 29,500.00 | 83,948.79 | |
| INVENTORY - | |||
| Raw material and work in process | 287,446.04 | ||
| $384,943.38 | |||
| INTER-COMPANY ACCOUNTS: | |||
| Gotfredson Truck Corporation, Detroit | 765,263.88 | ||
| Gotfredson Truck Corporation, Ltd., Walkerville | 84,881.36 | ||
| Gotfredson Body Corporation, Wayne | 210,457.95 | ||
| American Auto Trimming Company, Ltd., Walkerville | 11,513.57 | ||
| Capital stock - Gotfredson Truck Corporation, Detroit | 500,000.00 | ||
| Capital stock - Gotfredson Truck Corporation, Ltd., Walkerville | 250,000.00 | ||
| 1,822,116.76 | |||
| OTHER ASSETS: | |||
| Capital stock in other corporations | $12,660.98 | ||
| Less: Allowance to reduce to market value | 5,367.17 | ||
| $7,293.81 | |||
| Officers' accounts | 245,133.20 | ||
| Sundry accounts and notes receivable | 3,814.64 | ||
| Vendors' Debit Balance | 10,986.05 | ||
| Gotfredson Land Company - Current Account | 58,299.06 | ||
| Real estate not used in operations at Wayne | 16,355.75 | ||
| Advances to Reading Corporation | $23,459.72 | ||
| Less: Allowance for doubtful portion | 13,459.72 | ||
| 10,000.00 | |||
| $351,882.51 | |||
| PERMANENT: | |||
| AT DETROIT - | |||
| Land, buildings, machinery and equipment, as appraised by the Coats and Burchard Company at June 15, 1924, with subsequent additions at cost and less accrued depreciation | 1,482,857.60 | ||
| AT WAYNE: | |||
| Land, buildings, machinery and equipment as appraised by the Coats and Burchard Company at June 15, 1924, with subsequent additions at cost | 841,445.09 | ||
| 2,324,302.69 | |||
| DEFERRED: | |||
| Unexpired insurance premiums | 4,200.00 | ||
| Prepaid taxes | 26,723.62 | ||
| Prepaid interest | 1,991.00 | ||
| 32,914.62 | |||
| 4,916,159.96 | |||
| LIABILITIES | |||
| CURRENT: | |||
| NOTES PAYABLE - | |||
| To banks | 950,000.00 | ||
| ACCOUNTS PAYABLE - | |||
| Purchases, expenses, etc | $206,516.84 | ||
| Unpaid pay roll | 16,565.88 | ||
| Unclaimed wages | 1,884.60 | ||
| 224,967.32 | |||
| ACCRUED: | |||
| Interest | 12,686.00 | ||
| 1,187,653.32 | |||
| INTER-COMPANY ACCOUNTS: | |||
| The American Auto Trimming Co., Cleveland | $69,957.09 | ||
| LAND CONTRACTS PAYABLE: | |||
| Purchase of Wayne Plant - payable $25,500.00 semiannually on January 28 and July 28 | 303,500.00 | ||
| RESERVE FOR CONTINGENCIES: | |||
| Provision for possible additional federal income taxes for prior years - estimated | 85,000.00 | ||
| NOMINAL: | |||
| CAPITAL STOCK - | |||
| Authorized and outstanding | $2,000,000.00 | ||
| SURPLUS - | |||
| Profit and loss - surplus | $340,524.38 | ||
| Appreciation of properties | 929,525.17 | ||
| 1,270,049.55 | |||
| 3,270,049.55 | |||
| 4,916,159.96 |
*2123 *404 The assets received by petitioner from the Detroit Company had a net value in excess of the taxes involved in this proceeding. The stockholders and officers of the petitioner were mainly those of the companies which it succeeded. The Detroit Company, by reason of such transfer of assets to petitioner, was lfet insolvent and without assets and was dissolved in August, 1925.
1917
For the year 1917 the Detroit Company filed its return on March 1, 1918, and thereafter the two following consents in writing were executed in behalf of the Detroit Company and the Commissioner of Internal Revenue:
INCOME AND PROFITS TAX WAIVER
Feb. 21, 1923.
In pursuance of the provisions of subdivision (d) of section 250 of the Revenue Act of 1921, American Auto Trimming Co. of Detroit, Mich., and the Commissioner of Internal Revenue, hereby consent to a determination, assessment, and collection of the amount of income, excess-profits, or war-profits taxes due under any return made by or on behalf of the said American Auto Trimming Co. for the years 1917 under the Revenue Act of 1921, or under prior income, excess-profits, or war-profits tax Acts, or under Section 38 of the Act*2124 entitled "An Act to provide revenue, equalize duties, and encourage the industries of the United States, and for other purposes", approved August 5, 1909, irrespective of any period of limitations, provided assessment is made 1 year from March 1st, 1923.
AMERICAN AUTO TRIMMING CO.,
Taxpayer.
(Signed) By M. H. COLEMAN, Secretary.
D. H. BLAIR, Commissioner.
[SEAL.]
*405 INCOME AND PROFITS TAX WAIVER
Jan. 18, 1924.
In pursuance of the provisions of subdivision (d) of Section 250 of the Revenue Act of 1921. American Auto Trimming Company of Detroit, Mcih., and the Commissioner of Internal Revenue, hereby consent to a determination, assessment, and collection of the amount of income, excess-profits, or war-profits taxes due under any return made by or on behalf of the said American Auto Trimming Company for the year 1917 under the Revenue Act of 1921, or under prior income, excess-profits, or war-profits tax Acts, or under Section 38 of the Act entitled "An Act to provide revenue, equalize duties, and encourage the industries of the United States, and for other purposes", approved August 5, 1909. This waiver is in effect from the date it is signed*2125 by the taxpayer and will remain in effect for a period of one year after the expiration of the statutory period of limitation, or the statutory period of limitation as extended by any waivers already on file with the Bureau, within which assessments of taxes may be made for the year or years mentioned.
,
Taxpayer.
(Signed) By M. H. COLEMAN,
Secretary-Treasurer.
D. H. BLAIR,Commissioner.
L.L.
[SEAL.]
Upon audit of Detroit Company's 1917 return the Commissioner consolidated the Detroit and Cleveland companies for profit tax purposes and determined the net income of the Detroit Company to be $184,763.33; the net income of the Cleveland Company to be $11,059.30; the consolidated net income of the two companies for excess profits tax purposes to be $195,822.63; the invested capital of the Detroit Company to be $715,909.82; the invested capital of the Cleveland Company to be $46,804.85; and the consolidated invested capital of the two companies to be $762,714.67.
Based on said determinations, the Commissioner computed a total excess profits tax on the Detroit and Cleveland companies of $33,748.78, of which $262.04 was allocated to the Cleveland*2126 Company and the balance of $33,486.74 to the Detroit Company. He then computed a total income and profits tax liability against the Detroit Company of $42,563.33. Against this he credited all the tax liability assessed against the Detroit Company in the amount of $25,967.79, thus arriving at a deficiency in tax for 1917 against the Detroit Company of $16,595.54. Petitioner contends that $1,046.21 of the excess profits tax computed on the consolidated return of the two corporations should have been apportioned to the Ohio corporation under article 78, Regulations 41, instead of $262.04 that was apportioned by the Commissioner and that this change in apportionment would decrease the deficiency asserted against the Detroit Company for 1917 by $784.17 and that petitioner as transferee, if liable at all, is only liable for the corrected amount.
*406 By letter mailed February 11, 1925, the Commissioner notified the Detroit Company of a deficiency in tax for 1917 of $16,596.54. On April 9, 1925, the Detroit Company and subsidiary companies filed a petition with the United States Board of Tax Appeals appealing from said determination of a deficiency for 1917 (and other years) *2127 and the proceeding received Docket No. 3430 in the Board's files.
When the case was called for trial October 6, 1926, the Detroit Company moved to withdraw its appeal as to 1917 and 1920. This motion was objected to by counsel for respondent, especially as to 1920, and was taken under submission and on February 16, 1927, the Board granted it and entered the following order:
At the hearing of this appeal on October 6, 1926, counsel for the petitioners moved to withdraw from the petition any objections made to the deficiencies found by the respondent for the years 1917 and 1920. Objection to such withdrawal was made by counsel for the respondent upon the ground that there was a question of affiliation involved and the motion was taken under advisement. It is hereby -
ORDERED that the motion be granted.
In the findings of fact and opinion promulgated by this Board in Docket No. 3430, reported in , we said: "At the hearing of the appeal the petitioners moved to withdraw their appeal so far as it related to the years 1917 and 1920 and such withdrawal has been allowed by the Board." No further action of any kind has ever been taken by the Board with*2128 respect to 1917. Thereafter on April 9, 1927, the Commissioner signed a schedule assessing against the Detroit Company the 1917 deficiency of $16,595.54, together with interest, $1,116.90, total $17,712.44. The Collector demanded payment and the Detroit Company paid $712.44 of said amount, leaving an unpaid balance of $17,000 which is still due and outstanding. Further interest of $395.17 makes the total of $17,395.17, which is stated in the notice of deficiency to petitioner as the 1917 deficiency due from the Detroit Company.
1920
On or before March 15, 1921, the Detroit Company filed with the Collector, at Detroit, Michigan, a consolidated income and profits-tax return for 1920 for itself and four other subsidiary corporations. The Commissioner ruled that the Detroit and Cleveland companies were affiliated for 1920 and computed their tax liability on that basis. Upon audit of said return the Commissioner determined the net income of the Detroit Company to be $559,513.77; the net income of the Cleveland Company to be $78,880.12; the consolidated net income to be $638,393.89; the consolidated invested capital to be $1,404,750.69; and the total tax liability of the two companies*2129 to be $221,951.76. He credited against said tax the total assessments *407 theretofore made against the Detroit Company of $182,785.10 and paid by it, and arrived at a deficiency in tax of $39,166.66.
On January 28, 1925, respondent issued and mailed the Detroit Company a letter, usually referred to as the 30-day letter, notifying it of an additional tax of $39,166.66 and granting 30 days to present a protest against this proposed determination of a deficiency. On April 9, 1925, the Detroit Company and others filed Docket No. 3430, already heretofore referred to, appealing from determinations of deficiencies for the years 1917, 1918, and 1919, in all of which deficiency notices had been issued and mailed and also attempted to include in said appeal deficiency for 1920, although no deficiency letter had at that time been issued for 1920, by making the following allegation:
That the taxes in controversy are income and profits taxes for the years 1917, 1918, 1919, and 1920, as follows:
| 1917 American Auto Trimming Company | $16,595.54 |
| 1918 American Auto Trimming Company | 42,224.56 |
| 1919 American Auto Trimming Company | 20,770.90 |
| 1919 Kolb-Gotfredson Horse Company | 1,632.85 |
| 1919 Kolb-Gotfredson Realty Company | 129.54 |
| 1920 Kolb-Gotfredson Realty Company | 50.04 |
| 1920 American Auto Trimming Company (not finally determined). |
*2130 On May 16, 1925, respondent issued a notice of deficiency to the Detroit Company determining a deficiency of $39,166.66 (same as asserted in the 30-day letter) but from this deficiency letter no appeal was ever taken. The tax was assessed against the transferor Detroit Company on March 26, 1926, while Docket No. 3430 was pending, and as above set forth, the Detroit Company moved to withdraw its appeal relative to 1920 on October 6, 1926, which was granted February 16, 1927, and the order which we have already set out in these findings of fact was entered. None of the asserted deficiency against the Detroit Company for 1920 has been paid. The respondent notified petitioner of its liability as transferee on December 29, 1927, and included therein alleged deficiencies of the American Auto Trimming Company for the years 1917, 1920, and 1924 in the amounts set out in the preliminary statement preceding these findings of fact.
1924
The facts with reference to the liability asserted against the petitioner for the year 1924 will be found fully stated in the opinion which follows.
In making its various returns the taxpayer, American Auto Trimming Company of Detroit, Mich., filed*2131 a consolidated return with the Ohio Company and several others. It was determined by the respondent that the Detroit and Ohio companies were affiliated for 1917 and 1920 but the others were not and the entire deficiency *408 of the Detroit and Cleveland companies for 1917 and 1920 was assessed against the Detroit Company as the parent company. There was no agreement between or with the affiliated corporations authorizing the assessment of the entire tax against the Detroit Company.
OPINION.
BLACK: The petitioner attacks the constitutionality of section 280 of the Revenue Act of 1926, under which the Commissioner acted in determining its liability as transferee. But we may not entertain the issue thus presented, ; cf. , now pending in the Supreme Court on certiorari; and ; certiorari denied, . While there has been a great mass of testimony taken on the question of the liability of the petitioner as transferee of the American Auto Trimming Company of Detroit, Mich., the facts as to transferee*2132 liability are very simple. The transferor Detroit Company, as of January 1, 1925, transferred all of its assets, having a net value considerably larger than the amount of the taxes involved in this proceeding, in exchange for shares of stock of petitioner, which were issued and transferred directly to the stockholders of the Detroit Company. The taxpayer was denuded of its assets, received nothing in exchange therefor, and was shortly thereafter dissolved. The case falls squarely within the rule stated in the recent case of , where we said:
The petitioner contends that it is not liable in law or in equity as a transferee of the assets of Gideon-Anderson Lumber and Mercantile Company as it paid full value for such assets.
While we recognize the general and well settled rule that where one corporation in good faith sells or transfers all of its assets to another for a fair consideration the transferee corporation is not liable for the debts and the liabilities of the transferor, *2133 , we do not think this is such a case.
It is well settled that where one corporation exchanges or transfers its assets to another corporation for stock of the latter which is issued directly to the stockholders of the seller, thus leaving the seller without assets of any kind to satisfy its creditors, the purchaser is liable to the creditors of the seller to the extent of the value of the property received, the sale being in fraud of creditors and the purchaser being a party to the transaction. ; ; ; ; ; .
Under authority of these cases we hold that the petitioner is liable as transferee and we will now consider the extent of the liability as to the respective taxable years.
Limitation is pleaded as to the years 1917 and 1920. They will be considered separately.
*2134 *409 For the year 1917, two consents in writing were introduced which, taken together, extend the time for determination, assessment and collection of income and profits taxes against the Detroit Company until March 1, 1925, but the validity thereof is questioned on the ground that the respondent did not sign them in person, and it is not shown that the corporate officer signing in behalf of the taxpayer had authority. It was shown by the evidence that the signature of respondent was made by an authorized representative and in the regular course of governmental business, and the signer in behalf of the taxpayer acknowledged his signature and the corporate seal, and it was shown that he was the secretary-treasurer of the taxpayer and there is nothing to indicate that he did not have full authority to sign the consents in writing for the taxpayer corporation. Under these circumstances we hold the consents valid. ; ; *2135 ; .
For the year 1917 the various events fixing or relieving petitioner of liability have been fully stated in our findings of fact and need not be repeated here.
Under sections 274, 277, and 278 of the Revenue Act of 1926 it is provided in substance that the running of the statute of limitations shall be suspended during the pendency of an appeal before the Board of Tax Appeals and for 60 days thereafter, and that likewise during the same period no steps shall be taken by respondent to assess or collect taxes.
Section 280(b), Revenue Act of 1926, provides:
(b) The period of limitation for assessment of any such liability of a transferee or fiduciary shall be as follows:
(1) Within one year after the expiration of the period of limitation for assessment against the taxpayer; or
(2) If the period of limitation for assessment against the taxpayer expired before the enactment of this Act but assessment against the taxpayer was made within such period, - then within six years after the making of such assessment against the taxpayer, but in no case later*2136 than one year after the enactment of this Act.
By section 277, Revenue Act of 1924, limitation applicable to taxes for 1917 and 1920 was fixed at five years. The original five years for assessment under the 1917 return expired March 1, 1923, but this was extended by consents in writing to March 1, 1925. By letter mailed February 11, 1925, the Commissioner notified the Detroit Company of a deficiency in tax for 1917 and within 60 days thereafter, April 9, 1925, the Detroit Company filed a petition with the United States Board of Tax Appeals appealing from said determination of a deficiency for 1917 (and for years). The statute of limitations was therefore suspended while that appeal, *410 Docket No. 3430, was pending and for 60 days thereafter. In other words, the appeal as to 1917 was filed in time and was entirely legal and was pending before the Board until February 16, 1927, the date the Board entered an order granting the Detroit Company permission to withdraw its appeal as to the year 1917. The assessment against the transferor taxpayer, on April 9, 1927, was made within 60 days from the date of the Board's order, and was in time, as was the notice against petitioner*2137 as transferee dated December 29, 1927, and it follows that the taxes for 1917 and liability of petitioner are not barred by limitation. Cf. ; ; ; and .
The petitioner complains that the apportionment of excess profits tax for 1917 computed on the consolidated returns of the Detroit and Ohio companies was not made in accordance with the statute and regulations and that too large an apportionment of said tax was made to the Detroit Company. Respondent contends that petitioner is precluded from raising this question because the order entered by the Board, February 16, 1927, granting the Detroit Company's motion to dismiss its appeal for 1917 was under the statute equivalent to a judgment affirming the amount of the deficiency as determined by the Commissioner and that the correctness of such determination can not now be questioned by petitioner, the transferee of the Detroit Company.
Section 906(c) of the Revenue Act of 1926, provides:
(c) If a petition for a redetermination of a deficiency has been*2138 filed by the taxpayer, a decision of the Board dismissing the proceeding shall, for the purposes of this title and of the Revenue Act of 1926, be considered as its decision that the deficiency is the amount determined by the Commissioner. An order specifying such amount shall be entered in the records of the Board unless the Board can not determine such amount from the pleadings.
No order was in fact entered by the Board in Docket No. 3430 specifying the amount of deficiency for 1917 against the Detroit Company, but respondent treated the order which we have set out in full in our findings of fact of February 16, 1927, as equivalent to an order approving the deficiency as originally determined by the Commissioner. On April 9, 1927, he assessed the tax against the Detroit Company in accordance therewith. We hold this assessment was legal against the transferor corporation. However, in Docket No. 3430 there was no trial on the merits as to 1917, and since the present proceeding is one under section 280 of the Revenue Act of 1926, against petitioner as the transferee of the Detroit Company, we hold that petitioner is not precluded from inquiring into the correctness of the tax*2139 assessed against the Detroit Company for 1917.
*411 This Board has held that in a proceeding against a transferee under section 280, no prior assessment of the tax against the transferor is necessary. . Likewise we have held that even where assessment of the tax has been made against the transferor, the transferee on appeal to this Board may inquire into the correctness of the tax.
The exception to the rule which freely permits the transferee, on appeal from a proceeding under section 280, to contest the correctness of the amount of tax originally determined against the transferor, is where the transferor appealed to this Board in the original proceeding for a deficiency and the cause was heard on its merits and final determination was made. We have held in such a case, in a subsequent appeal by a transferee from a proceeding under section 280, the transferee is precluded from contesting the correctness of the tax against transferor. . We have no such case before us in this proceeding; there was no hearing on the merits as to 1917. We therefore hold that petitioner*2140 is not precluded from inquiring into the correctness of the amount of the tax assessed against the Detroit Company for 1917.
Article 78 of Regulations 41, governing the year 1917, provides in part as follows:
In cases where consolidated returns are accepted, the total (excess profits) tax will be computed in the first instance as a unit upon the basis of the consolidated return and will be assessed upon the respective affiliated corporations in such proportions as may be agreed among them. If no such agreement is made, the tax will be assessed upon each such corporation in accordance with the net income and invested capital properly assignable to it.
Inasmuch as there was no agreement between the corporations for the apportionment of the tax, it should be apportioned in accordance with the law and regulations appropriate to the taxable year. ; . The petitioner is liable for so much of the tax as is correctly apportioned to the Detroit Company for 1917, but not that of the Ohio Company for the notice of the liability as transferee does not refer to or mention that company.
*2141 For the year 1920 the return was filed March 15, 1921, and on January 28, 1925, respondent issued a preliminary letter to petitioner's transferor, the Detroit Company, commonly known as the 30-day letter. On April 9, 1925, an appeal was filed before the Board, Docket No. 3430, involving 1917, 1918, and 1919, and taxpayer attempted to include 1920 although no final determination of any deficiency had then been made and no notice of deficiency had been issued.
*412 We have held in a number of cases that an appeal from a 30-day letter (preliminary letter) does not give the Board jurisdiction. Only the final determination of a deficiency can give us jurisdiction. ; . It is true that, if at the time petitioner took its appeal in Docket No. 3430, the 60-day deficiency notice for the year 1920 had been actually issued and by mistake or inadvertence petitioner had appealed from the 30-day letter, it would have been permitted to amend and show that it was in fact appealing from the 60-day letter and not from the 30-day letter. *2142 ; ; . But where, as in Docket No. 3430, hereinbefore referred to, the deficiency notice for 1920 had not been issued at the time the appeal was filed, to wit, April 9, 1925, and was not issued until May 16, 1925, the Board acquired no jurisdiction over 1920 in such appeal and the statute of limitations was not suspended thereby.
For the year 1920 no waivers have been shown. The return was filed March 15, 1921, and the five-year limitation for assessment against the transferor corporation expired March 15, 1926. The assessment for the year 1920 deficiency against transferor taxpayer was made March 26, 1926, which was too late. The one year additional time in which assessment might be made against the transferee under section 280 of the Revenue Act of 1926 expired on March 15, 1927. The notice to petitioner was issued December 29, 1927, and was too late. Taxes for 1920 and liability of petitioner as transferee are barred by the statute of limitations. *2143 .
Section 504, Revenue Act of 1928, provides:
SEC. 504. SUSPENSION OF RUNNING OF STATUTE OF LIMITATIONS.
(a) Section 277(b) of the Revenue Act of 1926 is amended to read as follows:
"(b) The running of the statute of limitations provided in this section or in section 278 on the making of assessments and the beginning of distraint or a proceeding in court for collection, in respect of any deficiency, shall (after the mailing of a notice under subdivision (a) of section 274) be suspended for the period during which the Commissioner is prohibited from making the assessment or beginning distraint or a proceeding in court (and in any event, if a proceeding in respect of the deficiency is placed on the docket of the Board. until the decision of the Board becomes final), and for 60 days thereafter."
(b) Subsection (a) of this section shall apply in all cases where the period of limitation has not expired prior to the enactment of this Act.
Limitation as to 1920 expired prior to the enactment of the 1928 Act. Hence, we hold the above quoted provision of the 1928 Act has no application to the present proceeding.
*413 *2144 The remaining question relates to the liability of petitioner for an alleged deficiency of the Detroit Company for 1924. The liability letter of respondent against petitioner as transferee addressed to the petitioner, dated December 29, 1927, reads as follows:
WAYNE BODY CORPORATION,
3601 Gratiot Avenue,
Detroit, Michigan.
SIRS: As provided in Section 280 of the Revenue Act of 1926, there is proposed for assessment against you, the amount of $66,332.05 constituting your liability as a transferee of the assets of the American Auto Trimming Company (whose name was subsequently changed to the Gotfredson Corporation) of Detroit, Michigan, for income and profits taxes in the amount of $66,332.05 due from the American Auto Trimming Company for the years 1917, 1920 and 1924 as shown in the attached statement.
* * *
| TAX LIABILITY. | ||
| Company | Years | Deficiency |
| American Auto Trimming Co | 1917 | $17,395.17 |
| 1920 | 39,334.05 | |
| 1924 | 9,602.83 | |
| Total | 66,332.05 |
Petitioner in its amended petition denied liability for 1924 in the following language:
Respondent is erroneously attempting to assess and collect a tax from petitioner on account of taxes alleged*2145 to be due from the American Auto Trimming Company of Detroit, for the year 1924, in the amount of $9,602.83, when there are no taxes due from said Detroit Company for the year 1924, and when there were none due on December 29, 1927, the date when the deficiency letter was issued.
We think the facts clearly sustain petitioner in the above contention. The Revenue Act of 1928 provides:
In proceedings before the Board the burden of proof shall be upon the Commissioner to show that a petitioner is liable as a transferee of property of a taxpayer but not to show that the taxpayer was liable for the tax.
The respondent's assertion of liability against petitioner, shown above, is, under the statute, prima facie correct. Do the facts brought out in the hearings overcome this presumption? We think they do and will state our reasons for so concluding. To establish the deficiencies against transferor corporation, the Detroit Company, for the years 1917 and 1920, and thus establish liability against petitioner as transferee, respondent introduced in evidence the assessment lists on which the deficiencies for the above years were assessed against the Detroit Company. The assessment*2146 of the deficiency for 1917 was made April 9, 1927, and deficiency for 1920 was assessed March 26, 1926. Respondent did not show that any deficiency has ever been assessed against the Detroit Company for 1924, but introduced *414 in evidence the assessment of the original tax against the Detroit Company as shown on its return for 1924. This assessment was made November 2, 1925, and assessed a total tax, including interest, of $15,538.70.
Petitioner introduced in evidence a certificate from the Collector of Internal Revenue, Detroit Mich., dated January 2, 1930, showing that this tax for 1924 was paid in full as follows:
The records of this office disclose the following income tax payments made by American Auto Trimming Company, Detroit, Mich.
| Liability | $15,538.70 | ||
| Year | Date paid | Amount | |
| 1924 | 3-23-25 | $3,031.25 | |
| 4-22-25 | 1,390.53 | ||
| 6-18-25 | 3,349.70 | ||
| 9-10-25 | 124.87 | ||
| 9-16-25 | 3,883.61 | ||
| 12-15-25 | 3,758.74 | ||
| Total payments | 15,538.70 | ||
| Balance due | ,000000.00 |
Petitioner also introduced a notice of deficiency mailed by the respondent to the Detroit Company, May 31, 1927, covering the years 1921 to 1924, inclusive, which shows*2147 that not only was there no deficiency for 1924, but, on the contrary, there was an overassessment for 1924 of $6,558.04 which was credited to the 1921 deficiency of the said Detroit Company. The following statement taken from the deficiency notice of May 31, 1927, shows what was done as to 1924:
| TAX LIABILITY | |||
| Company | Year | Deficiency | Overassessment |
| American Auto Trimming Company | 1921 | $21,694.29 | |
| 1922 | $4,664.89 | ||
| 1923 | 1,200.65 | ||
| 1924 | 6,558.04 | ||
| 21,694.29 | 12,422.98 | ||
| Net additional tax | 9,271.31 |
That there was no deficiency against the Detroit Company for 1924 is further proved by the fact that its original return for the year 1924 reposing in respondent's files was introduced in evidence and shows that an overassessment was computed thereon of $6,558.04. Petitioner introduced in evidence a notice of deficiency mailed to American Auto Trimming Company, Cleveland, Ohio, dated December 31, 1926, asserting a deficiency against the Ohio Company for the year 1924 of $8,580.78 and determining that it was not affiliated with any other company during the year 1924.
*415 It is clear that this deficiency of $8,580.78 against the Ohio*2148 Company, plus interest of $1,022.05 to the date of the liability letter sent to petitioner, December 29, 1927, makes up the total of $9,602.83 asserted against petitioner for 1924. The deficiency notice sent to petitioner December 29, 1927, and upon which the appeal in the instant case is based, does not assert any liability against petitioner as the transferee of the assets of the American Auto Trimming Company, Cleveland, Ohio.
Hence we hold that respondent has not shown any liability of petitioner as transferee for the year 1924.
Reviewed by the Board.
Decision will be entered under Rule 50.