*2592 A document entitled "income and profits-tax return for the fiscal year ended November 30, 1918," purporting to be a return of the petitioner but which was neither signed nor sworn to by any person, was filed in the office of the collector on April 16, 1919. Thereafter, on November 13, 1922, a return covering the same fiscal year properly signed and sworn to by petitioner's officers was filed with the collector. Held, the return filed November 13, 1922, was the return required by statute and that the Commissioner had 5 years from the date of the filing of such return within which to determine a deficiency in income and profits tax.
*413 This is a proceeding for the redetermination of a deficiency in income and profits tax for the fiscal year ended November 30, 1918, of $3,043.58. Three issues are raised by the petition as follows:
(1) Taxes were barred by limitation at the time the assessment was made.
(2) The Commissioner erred in failing to allow as a deduction from gross income the amount of $1,563 for interest paid at 5 per cent on*2593 the capital stock issued and outstanding on November 30, 1918.
(3) The Commissioner erred in reducing invested capital by the amount of $289.07 for the preceding year's tax prorated.
At the hearing held on March 24, 1927, the third issue was withdrawn inasmuch as the question involved in that issue was stated by the petitioner to have been settled by the provisions of the Revenue Act of 1926.
FINDINGS OF FACT.
On April 16, 1919, there was filed in the name of the petitioner with the collector of internal revenue for the district of South Dakota, a document entitled "income and profits-tax return for the fiscal year ended November 30, 1918," which return showed an income and profits-tax liability for the year of $405.03. This return was prepared by an auditing company employed for the purpose of auditing petitioner's books of account. The return was neither signed by the petitioner nor by any of its officers, nor by any other individual, and was not sworn to.
The tax shown to be due by this return was $405.03. Of this amount $98.46 was paid upon the submission of a tentative return, *414 Form 1031 T, at some date prior to April 18, 1919. The balance of the*2594 tax shown to be due, namely, $306.57, was paid on April 18, 1919. On November 13, 1922, the petitioner filed a corporation income and profits-tax return showing items of income and deductions allowed by law covering the same fiscal year, which return was executed and signed by A. Hoffman, president, and H. C. Cunningham, treasurer, and sworn to before a notary public on November 10, 1922. This return showed the same net income but a total tax liability of $389.99. A claim for the refund of $6.04, the excess amount of tax paid on the filing of the original return, was duly filed.
In response to a request made by the respondent there was filed on behalf of the petitioner, on February 11, 1924, a so-called "income and profits tax waiver" for the fiscal year ended November 30, 1918, which consent purported to extend 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 filed with the Bureau, the period during which assessment of taxes might be made for such fiscal year. This consent was executed by "Equity Union Creamery & Mercantile Exchange" by B. M. Norum, general manager. *2595 The consent also bore the corporate seal of the petitioner and was approved by D. H. Blair, Commissioner of Internal Revenue.
On April 13, 1925, an additional tax of $3,400.36 was assessed against the petitioner and notice and demand for payment thereof was served upon the petitioner by the collector at Aberdeen, S. Dak., on April 17, 1925. On November 12, 1925, the Commissioner addressed a letter to the petitioner advising it of the allowance of the abatement claim in the amount of $356.78 and of the rejection thereof in the amount of $3,043.58.
The so-called "income and profits tax waiver," signed by B. M. Norum, general manager, was signed by him at the instance of the auditing concern which prepared the original return for the fiscal year ended November 30, 1918. It was signed by the general manager because there was not time to send it to the officers of the corporation for execution, the officers not being available on the instant for the signing thereof. The general manager had executed a similar "income and profits tax waiver" for the preceding fiscal year.
Section 7 of article 11 of the by-laws of the petitioner provides:
The Board of Directors shall apportion*2596 the earnings by first paying interest on paid-up capital stock, not exceeding 5 per cent per annum, then setting aside not less than 10 per cent of the net profits, after the interest on account of paid-up capital stock has been deducted, for the reserve fund, until an amount has accumulated in said reserve fund equal to 30 per cent of the paid-up capital stock, and not exceeding one per cent of the net earnings for an educational *415 fund, to be used in teaching cooperation, and the remainder of the net profits sahll be figured as a per cent of the business furnished by the stockholders each year and be paid back as a partronage dividend, provided the Directors shall pay no money to stockholders for patronage until he has two shares fully paid. He shall be given shares instead.
The capital stock issued and outstanding at the close of the fiscal year ended November 30, 1918, amounted to $31,260. In accordance with the provisions of section 7 of article 11 of the by-laws, above quoted, the amount of $1,563 was paid to the stockholders during the taxable year, this amount being 5 per cent of the capital stock outstanding at November 30, 1918, and this amount was claimed*2597 as a deduction from gross income in the petitioner's income and profits-tax return. The deduction of this amount was disallowed by the Commissioner in determining the deficiency in tax herein complained of.
OPINION.
SMITH: The deficiency herein complained of was assessed by the respondent against the petitioner in April, 1925. Claim for abatement was duly filed and upon the rejection of a portion of the abatement claim the petitioner filed its appeal with this Board. The Board has jurisdiction to redetermine the deficiency under section 283(b) of the Revenue Act of 1926.
It is the contention of the petitioner that the collection of the rejected portion of the abatement claim is barred by the statute of limitations; that more than 5 years had elapsed from the date of the filing of the petitioner's return for the fiscal year ended November 30, 1918, to the date of the final adjudication of the abatement claim; and that the "income and profits tax waiver" filed on February 11, 1924, was invalid on the ground that the general manager did not have authority to execute the consent.
Section 239 of the Revenue Act of 1918 provides:
That every corporation subject to taxation*2598 under this title * * * shall make a return, stating specifically the items of its gross income and the deductions and credits allowed by this title. The return shall be sworn to by the president, vice president, or other principal officer and by the treasurer or assistant treasurer. * * *
The only return filed by the petitioner for the fiscal year ended November 30, 1918, complying with the above quoted portion of the statute, was filed on November 13, 1922. . Five years had not elapsed from that date to the adjudication of the abatement claim by the Commissioner on November 12, 1925, or to the date of the filing of the petition with this Board, namely, December 28, 1925. In view of this situation the statute of limitations had not operated to bar the collection of the *416 deficiency and it is not necessary to consider the merits of the contentions of the petitioner with respect to the invalidity of the consent filed on February 11, 1924.
The petitioner claims the right to deduct from gross income a dividend of 5 per cent paid upon the capital stock of the petitioner during the taxable year. Claim is made that this*2599 represented interest for the use of money. This point must be ruled adversely to the claims of the petitioner in view of the decisions of the Board in , and .
Judgment will be entered for the respondent.
Considered by LITTLETON, TRUSSELL, and LOVE.