*181 Decision will be entered for the respondent.
1. Where the taxpayer's failure to file proper gift tax returns was due largely to erroneous advice on the part of his accountant, held, respondent was not estopped to determine a deficiency many years later by reason of the taxpayer's having filed a return in the wrong year and the respondent's having requested additional information with reference thereto.
2. Held, further, where no proper gift tax return was ever filed, the penalty for failure to file was mandatory regardless of whether the original failure to file was or was not due to reasonable cause and not to willful neglect.
*274 Respondent determined deficiencies*182 and penalties in the gift taxes of petitioner as follows:
| Delinquency | ||
| penalty, | ||
| sec. 3612(d)(1), | ||
| Year | Deficiency | I. R. C. 1939 |
| 1937 | $ 1,669.95 | $ 417.49 |
| 1948 | 1,089.84 | 272.46 |
The principal issue for decision is whether respondent, by having had filed with him petitioner's gift tax return for 1935 and subsequently requesting additional information as to that return, was estopped to assert in 1953 that the return should have been filed and the tax paid in 1937.
An additional question is raised as to the propriety of the respondent's imposition of the penalty for failure to file gift tax returns for 1937 and 1948.
The stipulated facts are found as facts and are incorporated herein by reference.
FINDINGS OF FACT.
The petitioner is an individual. No returns for the periods herein involved were filed.
On November 13, 1935, petitioner created four separate, revocable inter vivos trusts, one for each of the following beneficiaries: Beatrice Ginsberg, Rhoda Ginsberg, Arnold Ginsberg, and Martin Ginsberg. At the same time he transferred to each trust for no consideration 600 shares of the common stock of National Container Corporation.
During the calendar year *183 1935, petitioner transferred to his wife, Sophie Ginsberg, individually, for no consideration, 403 shares of the common stock of National Container Corporation.
The gifts made by petitioner during the year 1935 were discussed by him with his accountant toward the end of that year at which time the trust indentures were exhibited to the accountant.
Petitioner's accountant was in 1935 and prior thereto a certified public accountant, having been licensed by the State of New York in 1927. He graduated from the Columbia University School of Business in 1921 with the degree of Bachelor of Science. Since 1924 and during the years 1935, 1936, 1937, and 1948, he has done general accounting work in the City of New York and elsewhere, including the preparation of income, gift, and other tax returns. He has also given tax advice on matters which his clients brought to his office in connection with their business or in connection with their personal affairs. His work has on occasion demanded that he examine tax statutes and regulations. He has held a Treasury card since the late 1920's and is a member of the American Institute of Accountants and the New York State Society of Certified Public*184 Accountants.
*275 Petitioner's accountant, being of the opinion that petitioner would have to file a gift tax return covering the gifts made by him in 1935 and that a Federal gift tax return was due for that year, prepared a Federal gift tax return for petitioner for the year 1935.
The accountant was also of the opinion that the donees of the gifts made by petitioner during the year 1935 would be required to file donee returns which he prepared for them.
On March 19, 1936, the Bureau of Internal Revenue received the gift tax return filed by the petitioner on Treasury Department Form 709 for the calendar year 1935, reporting as gifts thereon the transfer of 600 shares of the common stock of National Container Corporation to each of the four separate trusts and the transfer of 403 shares of the common stock of National Container Corporation to petitioner's wife, Sophie Ginsberg.
Petitioner paid the gift tax shown to be due on the gift tax return with the filing of the return.
Sophie Ginsberg, as an individual, and as trustee under the aforementioned trusts, filed two separate returns entitled "Donee's or Trustee's Information Return of Gifts" on Treasury Department Form 710, which*185 the Bureau of Internal Revenue received on March 19, 1936, reporting the transfers as described.
Petitioner's Federal income tax return for the year 1935 was prepared by the office of petitioner's accountant under his supervision and control.
Petitioner answered affirmatively to question No. 11 printed at the top of his 1935 Federal income tax return, which question read as follows: "Did you transfer to or receive from any one person money or property in excess of $ 5,000, during the calendar year 1935, without an adequate and full consideration in money or money's worth? If so, did you file a gift tax return on Form 709 or an information return on Form 710?"
In the fall of 1936 petitioner's accountant was contacted by a Federal internal revenue agent with respect to an examination of petitioner's 1935 income tax return. The agent questioned two items, one concerning certain business expenses and the other regarding a deduction listed as "stock transfer."
Petitioner's accountant explained to the agent that the stock transfer item represented the cost of Federal and State stamps which petitioner was required to affix to the stock certificates which he had given to the four trusts*186 and to his wife. The agent requested the original trust instruments which were exhibited to him and he subsequently informed the accountant that the deduction for stock transfer stamps was allowable. The revenue agent did not examine the gift tax return for 1935.
*276 On or about December 16, 1936, petitioner received from the Treasury Department a letter as follows:
TREASURY DEPARTMENT
WashingtonOffice of Commissioner of Internal Revenue
December 16, 1936RECEIVED FILES
MARCH 3, 1937
ESTATE TAX
Address reply to
Commissioner of Internal Revenue
and refer to
MT-ET-GT-598-35-1st New York
Donor -- Harry Ginsberg
Mr. Harry Ginsberg,
2108 63rd Street,
Brooklyn, New York.
Sir:
Reference is made to your Federal gift tax return, Form 709, filed for the calendar year 1935.
It appears from an examination of the return that trusts were created for the benefit of your four children.
In order that the audit of your return can be completed you are, therefore, requested to furnish this office with copies of the trusts referred to.
Please furnish the required information within twenty days from the date of this letter, and in your reply refer to MT-ET-GT-598-RCM.
Respectfully,
*187 (Signed) D. S. Bliss
Deputy Commissioner.
On or about March 3, 1937, the petitioner's accountant forwarded to the Treasury Department a copy of the trust instrument naming Rhoda Ginsberg beneficiary, together with the letter of December 16, 1936, with his notation at the bottom thereof that the trust agreement for Rhoda Ginsberg was identical with the agreements for Beatrice, Arnold, and Martin Ginsberg.
Among the provisions of the trust agreements were the following:
The said Trustee shall hold and retain the property so turned over and such other property as may take its place, and shall collect and receive all sums becoming due and payable upon said shares of stock and/or upon such other property, and shall accumulate same for the benefit of (name of Donee) (daughter-son) of the parties hereto, until such beneficiary shall arrive at the age of twenty-one years, at which time the said Trustee shall pay over unto the said beneficiary the corpus hereof as the same may then be constituted, together with all such accumulations of income.
* * * *
This Trust is hereby made revocable at the sole will and election of the said Donor.
* * * *
*277 The said Trustee shall hold and *188 retain the property so turned over and such other property as may take its place, and shall collect and receive all sums becoming due and payable upon said shares of stock and/or upon such other property, and shall accumulate same for the benefit of
(NAMED BENEFICIARY)
son (daughter) of the parties hereto, until such beneficiary shall arrive at the age of twenty-one years, at which time the said Trustee shall pay over unto the said beneficiary the corpus hereof as the same may then be constituted, together with all such accumulations of income.
During the examination of petitioner's 1935 Federal income tax return, the agent suggested that from an income standpoint it was possible that at some future time petitioner might be taxed with the income from the securities in the trusts because the trusts were revocable and he suggested to petitioner's accountant that if the trusts were made irrevocable no such question could arise. Thereafter the accountant told petitioner of the agent's recommendation and suggested the advisability of making the trusts irrevocable.
On May 6, 1937, the trusts which petitioner had created in 1935 were amended, which amendments, among other things, made the*189 trusts irrevocable. At the same time the trusts were amended petitioner added 400 shares of the common stock of National Container Corporation to each of the trusts.
Petitioner's accountant was of the opinion that the 1937 amendments to the original trusts making the trusts irrevocable had no effect on petitioner's gift tax liability and he so advised petitioner. The accountant was also of the opinion that the value of the 400 additional shares of stock transferred to each trust in 1937 was less than the annual exclusion and he so advised petitioner.
In 1948 petitioner made additional gifts in trust and advised his accountant of this fact. The accountant reviewed the transactions, prepared no gift tax return for petitioner for the year 1948, and advised petitioner that no gift tax was due for that year.
February 1953 was the first time that the Commissioner had determined deficiencies for gift tax for the years 1937 and 1948.
OPINION.
The principal question in this case is whether respondent is estopped to determine a deficiency in gift tax against the petitioner for the year 1937.
Petitioner contends that his failure to file a gift tax return and pay a gift tax for 1937 was induced*190 by the actions of the respondent and that respondent is estopped to deny that the statute of limitations bars assessment of a deficiency in gift tax for 1937.
Petitioner's contention is based essentially on the fact that he filed a gift tax return in 1935, reporting as gifts certain transfers to *278 revocable trusts, and that the respondent subsequently wrote petitioner requesting copies of the trust instruments. After complying with the request, petitioner heard nothing further regarding his gift tax liability for 1935 until respondent in 1953 determined a deficiency in gift tax for 1937, based largely on the petitioner's making irrevocable in 1937 the trusts created in 1935. Petitioner argues that the acts of the respondent were equivalent to a statement that the gifts were properly reported in 1935.
We are of the opinion that no estoppel operates against respondent in this case and that the deficiencies were properly determined.
It is well settled that no estoppel can arise against the Commissioner from his accepting the taxpayer's returns and failing to correct the taxpayer's errors therein. Niles Bement Pond Co. v. United States, 281 U.S. 357">281 U.S. 357,*191 wherein the Supreme Court said:
failure of the Commissioner to correct the returns in these respects is as attributable to his error or oversight or lack of information as to any opinion on his part as to the propriety of the deductions in the years made.
See also Mt. Vernon Trust Co. v. Commissioner, 75 F.2d 938">75 F. 2d 938.
The mere fact that respondent sent petitioner a letter in 1936 requesting copies of the trust instruments has no particular significance, nor does the fact that a revenue agent investigating petitioner's income tax returns asked certain questions about the gifts so as to determine the deductibility of expenses incident thereto for income tax purposes.
We think it must be regarded as fundamental that to constitute estoppel there must be a false representation or wrongful, misleading silence relied on by the party claiming estoppel and the error must originate in a statement of fact and not in an opinion or a statement of law. United States v. Scott & Sons, 69 F. 2d 728; Estate of George Kingdon, 9 T. C. 838, 844. See Sturm v. Boker, 150 U.S. 312">150 U.S. 312.*192
In the case before us, the failure to file a gift tax return for 1937 was clearly due not to any misrepresentation of fact or other inducement on the part of the Commissioner but to an erroneous interpretation of the law on the part of petitioner's accountant. It is plain that the accountant chose the wrong year in which to report the gift and he should have known that the gifts became complete not in 1935 but in 1937 when the trusts were made irrevocable. The Supreme Court had made this abundantly clear in 1933 in the case of Burnet v. Guggenheim, 288 U.S. 280">288 U.S. 280.
Petitioner cites as squarely governing this case the holding of the Court of Appeals for the District of Columbia in Stockstrom v. Commissioner, 190 F. 2d 283, reversing a decision of this Court reported at 14 T.C. 652">14 T. C. 652. Without deciding at this time whether in an appropriate case we will follow the decision of the Court of Appeals, we think it clear that the facts in that case are plainly distinguishable and have no application to the case before us.
*279 In the Stockstrom case the taxpayer, in failing to file a timely*193 gift tax return, relied on a series of Court decisions acquiesced in by the Commissioner.
Stockstrom's representative conferred with the head of the Federal estate and gift tax section of the office of the Bureau of Internal Revenue in St. Louis, Missouri, who stated to them that no gift tax for the year involved was due.
Several years later the Commissioner determined a deficiency in gift tax based on decisions of the Supreme Court which reversed the earlier decisions on which Stockstrom had relied.
The Court of Appeals held, with one of the three Judges dissenting, that under the circumstances of that case Stockstrom's omission to file a gift tax return and pay a gift tax for 1938 had been induced by the Commissioner and that he was therefore estopped to assert liability arising from that omission.
In the case before us, there was no conference with revenue officials, nor did petitioner rely on Court decisions in concluding that the gift tax was payable in 1935 rather than in 1937. Indeed, as we have previously pointed out, that conclusion seems to have been based rather on a lack of awareness of the decisions of the Supreme Court.
Although the petition herein asserts that the *194 gifts giving rise to the deficiencies were of present interests entitled to the applicable gift tax exclusions and that respondent erred in treating them as gifts of future interests, this assertion of error was not mentioned by counsel for the petitioner either at the hearing or on brief and it is deemed to have been abandoned. That being the case, there is no question as to the amounts of the deficiencies for either of the years 1937 or 1948 and, since the petitioner has failed to show that the Commissioner was estopped to determine the deficiency for 1937, it follows that the deficiencies for both years must be sustained as determined.
An additional question is raised as to penalties for failure to file imposed by the respondent. We are of the opinion that the penalties must be sustained. The wording of the statute 1 makes the penalty mandatory except where a return has subsequently been filed. In the absence of such filing, there is no purpose in considering whether the *280 original failure to file was or was not due to reasonable cause rather than willful neglect. Chas. F. Roeser, 2 T.C. 298">2 T. C. 298; William Fleming, 3 T. C. 974.*195 Although this result may appear harsh, particularly as regards that part of the penalty stemming from transfers on which a tax had been prematurely paid in 1935, we have no alternative in light of the statute and decisions. It may be noted that under section 6651 of the Internal Revenue Code of 1954 a showing of reasonable cause will prevent imposition of the penalty for failure to file gift tax returns on time whether or not a return has subsequently been filed.
*196 Decision will be entered for the respondent.
Footnotes
1. SEC. 3612. RETURNS EXECUTED BY COMMISSIONER OR COLLECTOR.
(d) Additions to Tax. --
(1) Failure to file return. -- In case of any failure to make and file a return or list within the time prescribed by law, or prescribed by the Commissioner or the collector in pursuance of law, the Commissioner shall add to the tax 25 per centum of its amount, except that when a return is filed after such time and it is shown that the failure to file it was due to a reasonable cause and not to willful neglect, no such addition shall be made to the tax: Provided↩, That in the case of a failure to make and file a return required by law, within the time prescribed by law or prescribed by the Commissioner in pursuance of law, if the last date so prescribed for filing the return is after August 30, 1935, then there shall be added to the tax, in lieu of such 25 per centum: 5 per centum if the failure is for not more than 30 days, with an additional 5 per centum for each additional 30 days or fraction thereof during which failure continues, not to exceed 25 per centum in the aggregate.